Macfarlane eyes bolt-ons amid strong growth
Squeeze on margins, but strong first half
Packaging company Macfarlane Group continues to look out for acquisition opportunities as it builds on strong first half growth.
The Glasgow-based business saw pre-tax profit for the period rise 39% on the corresponding six months last year to £3.5m. Group sales of £102m, were 14% ahead.
Stuart Paterson, chairman, said: “This strong performance in the first six months of 2018, 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 2018 will be achieved.”
Packaging Distribution grew its sales by 14% in the first half of 2018, with 5% achieved from organic growth and the remainder from the 2017 acquisition of Greenwoods, which is performing well. Gross margin in Packaging Distribution rose to 29.3%, (2017: 29.0%). Operating profit for the division at £3.7m was £1.0m ahead of 2017, an increase of 39%.
Sales in Manufacturing Operations were 11% above 2017, with strong demand for composite packs for export markets. Both manufacturing businesses experienced lower gross margins as a result of increased raw material prices and unfavourable sales mix, resulting in operating profit of £0.2m, slightly below that achieved in 2017.
After charging net interest of £0.4m, (2017: £0.4m), the Group profit before tax grew by 39% to £3.5m (2017: £2.5m).
Net debt at 30 June 2018 was £11.1m, £3.6m below the level of £14.7m at 31 December 2017. The group is operating well within its existing bank facility of £30m.
Consistent with the normal pattern, the company expects to be strongly cash generative from trading in the second half. It acquisitions – Nelsons for Cartons and Packaging Limited and Greenwoods Stock Boxes – made in earlier years are continuing to trade strongly.
In the past six weeks the company concluded the acquisitions of Tyler Packaging (Leicester) and Harrisons Packaging for an estimated £3.5m.
The pension scheme deficit reduced to £9.4m at 30 June 2018 from £11.8m at 31 December 2017, mainly due to the continued payment of deficit reduction contributions during the six month period.
The board is declaring an 8% increase in the interim dividend to 0.65p per share to be paid on 11 October to shareholders on the register as at 21 September (2017: 0.60p per share).
Mr Paterson said: “Our strategy is to deliver sustainable profit growth by focusing on added value products and services in our target market sectors, combined with the execution of value-enhancing acquisitions.
“Macfarlane Group’s performance in the first half of 2018 reflects the successful implementation of our strategy and we are confident that the Group will continue to make further progress in the remainder of 2018.”