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Packaging and labels firm sees fifth year of growth

PACKAGING and labels firm Macfarlane Group has seen its shares surge 11% after announcing a fifth consecutive year of underlying profit growth.

PLAN: Macfarlane boss Peter Atkinson said the firm's facility with Lloyds gives it the firepower to snap up targets with the immediate focus on enhacing operations in the UK. Picture: James Galloway
PLAN: Macfarlane boss Peter Atkinson said the firm's facility with Lloyds gives it the firepower to snap up targets with the immediate focus on enhacing operations in the UK. Picture: James Galloway

Further to that the Glasgow company has secured a new £20 million financing facility with Lloyds Banking Group which will be used to fund acquisitions and to continue to reduce its pension deficit.

Turnover in 2013 edged up 1.5% from £141.8m to £143.9m helped by growth in the internet retail sector.

The packaging and distribution arm saw revenue rise from £114.8m to almost £116.3m while the manufacturing side increased from around £27m to £27.6m.

Group profit before tax and exceptional items grew 13% from £4.5m to £5.1m.

After taking off exceptional items - including lease termination and adjusted carrying charges of a property - pre-tax profits came in at £4.7m, against £5.5m in 2012 when Macfarlane booked a net exceptional credit of £1m.

Macfarlane narrowed its net debt from £6.8m to £5.9m while its pension deficit reduced from £18.9m to £15.9m.

As a result of the financial performance it plans to increase its annual dividend from 1.55p to 1.6p, the first increase for three years.

Peter Atkinson, chief executive, said: "While in overall terms sales were a little bit slower than we would have liked we had a good exit from 2013 and flow through to 2014 so that is encouraging.

"We have recognised the economy is going to continue to be difficult. If green shoots come, and we are not seeing them yet, then that will be of incremental benefit to us.

"We have to keep growing our profits regardless of what is happening in the economy. Five consecutive years of good profit growth is reflecting the fact we can not only grow sales but continue to chip away at the cost base at the same time."

Mr Atkinson said activity in the second half of the financial year had been boosted by big customer wins in the internet retail sector.

Those included online department store The Hut, clothes retailer Asos and beauty products business Feel Unique.

According to Mr Atkinson the company has subsequently sealed contracts with other large businesses in the internet retail sphere.

While he chose not to name the new clients he said one was a household brand name.

The re-sealable labels arm was said to have experienced strong growth in Europe but Mr Atkinson acknowledged a re-organisation in the labels division, including the move to a new site in Ireland, meant sales growth did not filter through to the bottom line. He said: "We see that as a short term issue and going forward we are in a far better state with our manufacturing capability, particularly in Ireland."

Macfarlane, which employs in the region of 180 people in Scotland and has a total workforce of more than 700, has previously signalled it is getting back into the market for acquisitions.

Mr Atkinson said the new banking facility gives it the "firepower" to snap up targets with the immediate focus on enhancing operations in the UK.

"We have been doing a lot of work and have got a number of conversations ongoing at the moment. So we are very enthusiastic about the fact we will be doing something in 2014 on the acquisition front.

"There are geographic gaps in our network we would like to fill and there's capacity we have got in our network we would like to utilise more effectively.

"Those will be the two key priorities in terms of the acquisition targets. We have a lot of effort going into that at the moment."

Macfarlane's house broker Arden Partners upped its target price on the shares to 50p.

It said better trading trends seen at the end of last year and into the early weeks of this year "clearly bode well" for performance in 2014.

Macfarlane shares closed the day up 4p to 39p.

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