Firm remains profitable
Macfarlane sees lockdown impact on demand
Stuart Paterson: the business remains profitable
Packaging group Macfarlane said that the lockdown measures will see demand in the second quarter fall to between 75% and 80% of normal levels year on year.
The reduction in demand will see profit fall “well below that achieved in the first quarter”, said the chairman Stuart Paterson in a statement issued after the AGM.
Customers in the hygiene, household essentials, medical and food sectors continue to demonstrate strong demand.
“All our sites remain operational, we are fully engaged with customers and offering an increasingly flexible service in response to their fast-changing needs.
“Some sectors we serve, such as automotive, aerospace and certain retail segments, have been materially impacted by the lockdown and their business has reduced significantly as a result.”
In line with the UK Government’s aim to preserve employment the company has furloughed approximately 30% of staff.
The company has a strong balance sheet and liquidity headroom. Net bank debt, which at 31 December 2019 was £12.7 million, has now reduced below £6.0 million, albeit with the benefit of taxation deferrals, board salary reductions and bonus deferrals which in total amount to £4.0m.
Following the actions taken, there remains significant headroom on the Group’s principal bank facility of up to £30.0 million with Lloyds Banking Group, which is available until June 2022. The company is in compliance with the covenants for the facility.
As a key measure to conserve cash, the board took the decision not to propose the 2019 final dividend at today’s AGM, which will reduce cash outflows by £2.8 million in the second quarter of 2020.
The company has been a regular dividend payer for a number of years and the board said it remains committed to providing dividend income to shareholders.
“Once trading has recovered in line with more normal levels and we have more clarity about the longer-term outlook, the board’s intention is to recommence dividend payments either by augmenting regular dividends or by declaring a special dividend.”
Mr Paterson said that based on actions taken to date and current levels of trading, “we expect the business to remain profitable in 2020 and to operate within the current borrowing facility.”