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Macfarlane unveils strong year of growth

Graeme BissettPackaging group Macfarlane delivered a sharp rise in profits on strong growth in 2015 with a 10% rise in sales to £169.1m (2014: £153.8m).

Profit before tax at the Glasgow-based company came in 21% higher at £6.8m (2014: £5.6m).

The company said it had maintained the positive trends achieved in recent years, achieved through organic sales growth, the contribution from recent acquisitions, an improved gross margin and effective control of costs.

Trading

The Packaging Distribution business increased sales by 13% to £143.0m (2014: £126.9m). This was achieved through organic growth of 6%, with particular success in the expanding internet retail sector and increased penetration of National Accounts.

Organic sales growth was enhanced by the contributions from One Packaging, acquired in August 2015, and the full year contribution from the acquisitions of Lane Packaging and Network Packaging, concluded in 2014. The growth in sales, combined with an improved gross margin, translated into Packaging Distribution achieving a 17% increase in operating profit to £6.8m (2014: £5.8m).

Sales in manufacturing operations at £26.1m (2014: £26.9m) were 3% down on the previous year. This was partly due to management actions to rebalance the mix of products in our Labels business and the impact of exchange rates and demand weakness, particularly in export markets, in the Packaging Manufacture and Design business.

Despite the lower sales, the division increased operating profit to £1.0m (2014: £0.9m) through the benefits of the better balanced product portfolio and improvements in operational efficiency..

The board is proposing a final dividend of 1.29p per share, making a full year dividend of 1.82p, a 10% increase on the prior year’s dividend of 1.65p. This dividend will be paid on 9 June to those shareholders on the register at 13 May.

Net Debt and Pension Scheme

As a consequence of the acquisition undertaken during 2015, the Group’s net bank debt at 31 December 2015 increased to £11.6m from £10.1m at the prior year-end. The Group’s existing bank facilities with Lloyds Banking Group have been extended until June 2019 and have been increased to £25.0 million which will accommodate normal working capital requirements and support acquisition funding. A further option is available to extend the facilities to £30.0m in the period to June 2019.

The Group’s pension deficit reduced broadly in line with the deficit reduction contributions made in the year. At 31 December 2015, the deficit was £11.5m, a reduction of £2.4m from the previous year (2014: £13.9m).

Outlook

Graeme Bissett (pictured), chairman, said: “The 21% increase in pre-tax profits represents the sixth consecutive year of profit growth for Macfarlane Group.

“We will continue to focus on opportunities in sectors with strong growth prospects, including internet retail, third party logistics and National Accounts and deliver high standards of service to all customers.

“We will also maintain our programme of acquiring good quality businesses to augment organic growth. This strategy has served all stakeholders in our business well in recent years and will continue to do so.

“The positive trends seen in 2015 have been sustained in the early part of 2016 and Macfarlane Group has started the year well.”

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