MACFARLANE Group has hailed a strong year for its core packaging distribution division and the impact of acquisitions as it lifted profits by 11 per cent to £5.6 million in 2014.

Glasgow-based Macfarlane, which earns 80 per cent of sales from packaging distribution, said profits were driven by organic sales growth and deals to acquire two businesses south of the Border.

It served up pre-tax profits of £5.1m in 2013, before exceptional items linked to the exit from long-standing property leases.

Macfarlane said it had grown business with retailers The Hut and ASOS, and brought Selfridges on board as a customer, in a period which saw packaging distribution revenues increase by nine per cent to £126.9m.

Business was boosted by the acquisition of Lane Packaging and Network Packaging, which were taken over in May and September respectively.

Asked to comment on the 2014 results, which included a seven per cent increase in group turnover to £153.8m, Mr Atkinson said: "It is a pleasing set of results. Broadly this is what we expected to do in the year and we delivered on it. From our point of you, in the nicest sense, it was a big kick from 2014 and we move on to 2015."

"Packaging distribution is our major activity - it represents 80 per cent of our sales - and it made a particularly strong year, with good sales growth from an organic perspective of around four to five per cent. We also benefited from the acquisitions we made earlier on in the year.

"[Trading] was particularly strong in our internet retail sector, which is one of our key areas of focus."

The Lane and Network deals marked the return of Macfarlane to the acquisition trail, having put takeover activity on hold after the recession struck. Those deals boosted its overall headcount to around 720.

Further deals are likely this year, with chief executive Peter Atkinson revealing that the next acquisition is on track to be concluded in the first half.

He said Macfarlane has a strong pipeline of potential deals, noting: "This was just the start of our acquisition programme in 2014. We have a number of other acquisition opportunities that we are evaluating, and we would hope to announce our next acquisition sometime in the first half of the year, assuming everything goes to plan. Discussions are well advanced with a number of parties."

Macfarlane said its packaging distribution arm had grown its business with key customers ASOS and The Hut by two and three times respectively, and start trading with Selfridges - its major business win for the period.

Mr Atkinson signalled that scope for growth with existing and new clients remained strong.

However, the group's manufacturing division saw revenue narrow to £26.9m from £27.6m in light of challenging conditions in the retail sector, which meant a "difficult year" for Macfarlane's labels operation.

Mr Atkinson said: "It is simply an effect of the pressure the retailers are under as they fight against the discounters. Clearly, part of their reaction is to put pressure on their suppliers. We are obviously suppliers to their suppliers, so that pressure gets pushed down the line.

"That's the challenge we are facing in that particular business at the moment."

Macfarlane, which employs about 130 staff across its labelling and distribution sites in Kilmarnock and Linwood, proposed a final dividend of 1.15p per share. This takes its full year dividend to 1.65p per share - a three per cent increase on last year.

Mr Atkinson added: "We exited the year with organic growth in excess of five per cent - our Q4 figure for organic was five per cent plus - so we strengthened during the year."

Shares in Macfarlane closed down 0.75p at 40p.