Macfarlane Group looks to buy as profits rise

MACFARLANE Group, the UK's largest packaging distributor, is back on the acquisition trail after growing operating profits at its main division.

Peter Atkinson, chief executive of the Glasgow-based company, said he was running the rule over a number of potential targets but added that no takeover announcement was imminent.

Atkinson said Macfarlane also plans to push ahead into the consumer packaging market this year and also aims to grow its online business.

At present, the company primarily sells distributive packaging – which is used while products are being stored in warehouses or moved about in lorries – but said it aims to grow its consumer display packaging business from 1 per cent of turnover to up to 15 per cent in the next three years.

The company already makes display packaging for clients including luxury homeware retailer the White Company, with the packaging made in China.

Atkinson said that the new push would be driven by the acquisition of Allpoint Packaging, which Macfarlane took over in late 2008 and which already has a presence in the customer-facing sector.

News of the expansion into consumer packaging came as Macfarlane unwrapped a 6 per cent slide in group revenue in 2009 to 123.6 million.

But Atkinson said the company had cut its costs – including axing 10 per cent of its workforce to take its headcount down to about 700 staff – to cope with the recession.

He told The Scotsman: "We always knew 2009 was going to be a challenging year with the UK recession.

"We saw the signs and our restructuring was to make sure our cost base was in line with how we saw our revenues changing in these difficult times."

The company took a 700,000 hit from restructuring costs, taking operating profits down from 4.7m to 3.7m. Pre-tax profits from continuing operations fell from 3.7m to 2.5m, in line with forecasts.

Macfarlane recommended the final dividend be held at 1p, taking the total pay-out for the year to 1.5p.

In the packaging distribution business – which accounts for 80 per cent of revenues and a 20 per cent slice of the UK market – operating profits rose from 2.9m to 3.9m, even though sales fell by 5 per cent.

Atkinson said new business revenue at the packaging distribution division had risen by 53 per cent year-on-year, with new clients including range maker Aga, drug giant AstraZeneca and supply chain firm Wincanton.

Ben Bourne, an analyst at house broker Oriel Securities, said: "The group's ongoing improvement and ability to pay a generous dividend leads us to upgrade from 'add' to 'buy'."