Internet retailers help drive Macfarlane profits higher

A busy run-up to Christmas capped off a sixth successive year of profit growth at Macfarlane Group, with internet retailing now accounting for 25 per cent of sales.

Macfarlane unwrapped a 21% jump in annual profits
Macfarlane unwrapped a 21% jump in annual profits

The Glasgow-based company, which has been expanding in the supply of packaging for delivery of online goods, posted a 21 per cent jump in pre-tax profits to £6.8 million during 2015.

A combination of organic growth and acquisitions lifted turnover to £169.1m, up from £153.8m previously.

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Chief executive Peter Atkinson said Macfarlane successfully negotiated another busy end to the year, during which the company must rent additional storage space and hire extra drivers to meet the surge in demand for festive deliveries.

It works directly with retailers such as Home Retail Group, The Hut and Selfridges, as well as through Clipper, DHL and other logistics firms.

“The last quarter of the year is critical to us, and in reality it is the last six weeks of the year that are really critical to us,” Atkinson said.

The group’s dominant packaging distribution business increased sales by 13 per cent to £143m, with organic growth of 6 per cent driven by internet retailing and continued expansion into national accounts covering multiple UK sites for clients such as O2 and Thermo Fisher Scientific.

The division also benefited from acquisitions, particularly the full-year contribution from Network Packaging of Wolverhampton. That business was purchased in September 2014 for a maximum consideration of £7.5m, and brought with it new clients such as House of Fraser.

Finance director John Love said Macfarlane remains on the lookout for further acquisitions, with the main focus on specialists in protective packaging, and firms with turnover of between £3m and £10m.

Sales in the manufacturing operation – which makes labels as well as specialist packaging for fragile, high-value products – were down 3 per cent.

Exchange rates and weak demand overseas hampered high-value packaging, while labelling was impacted by a shift away from standard self-adhesives in favour of higher-value resealable packaging to keep meats, cheeses and other foods fresh.

The change in product mix marginally lifted operating profits in the manufacturing division to £1m, up from £900,000 previously. The board has proposed a final dividend of 1.29p, making a total payout of 1.82p for the year – up 10 per cent.