Profits surge at Glasgow packaging group Macfarlane

Packaging and distribution specialist Macfarlane Group is on the hunt for more acquisitions after revealing a surge in first-half profits.
Macfarlane saw its first-half profits motor ahead almost 27%. Picture: ContributedMacfarlane saw its first-half profits motor ahead almost 27%. Picture: Contributed
Macfarlane saw its first-half profits motor ahead almost 27%. Picture: Contributed

The Glasgow-based firm said pre-tax profits for the six months to the end of June jumped 26.6 per cent to £2.5 million, as recent takeovers and strong demand from customers in the online retailing sector helped sales grow 10.2 per cent to £89.8m.

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Following the boost to earnings, shareholders will receive a 9.1 per cent hike in their interim dividend to 0.6p a share, to be paid on 12 October.

Chief executive Peter Atkinson told The Scotsman: “This is a continuation of the strategy we embarked upon around seven years ago, which was about organic growth driven mainly through the e-commerce sector, supplemented by selective high-quality acquisitions.”

The group has made six takeovers since 2014, including last year’s purchase of the packaging arm of fellow Glasgow business Edward McNeil, and Atkinson said it has a “very strong pipeline” of further opportunities.

He added: “We are very hopeful that we will complete another acquisition in 2017. We’re looking for high-quality businesses within the packaging distribution area to give us improved geographic coverage, or improved penetration into particular customer sectors, or businesses that allow us to strengthen our current franchise in a particular geography.”

Atkinson said that Macfarlane, which employs about 800 people, has “pretty good coverage” across the UK, but is “probably slightly under-represented” in Scotland, where its workforce stands at about 120.

“The focus is on finding the right quality businesses, more so than the geographic piece,” he added. “But if there was an opportunity in Scotland, we would obviously consider that.”

Packaging distribution sales were up 12 per cent on a year earlier, helped by its string of recent deals, with operating profits rising 18 per cent to £2.7m.

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Although sales at its manufacturing operations dipped 1 per cent, operating profits climbed 29 per cent to £300,000 as the group continues to focus on higher-margin products such as resealable labels.

Looking ahead to the second half, Atkinson said: “The final quarter of the year is a very busy period for our customers. Because of the volatility in the way e-commerce works and customers’ variety of choices, retailers depend on someone like Macfarlane to give them that flexibility of supply.

“We started work on planning for that final quarter in January, to make sure we’ve got all our operations effectively resourced to meet the needs of our customers.”

Macfarlane chairman Graeme Bissett added: “The strong performance in the first six months of 2017, supplemented by the expected seasonal uplift from the e-commerce sector in the second half of the year, gives the board confidence that its full-year expectations for 2017 will be achieved.”

Bissett also said that the process to appoint his successor was “well advanced” following his decision to step down after more than five years at the helm. He has been on the board since 2004 and felt that “the time was right to make the change and to enable an orderly transition”.