MACFARLANE Group has made its first acquisition since before the recession and revealed it is in talks which could lead to further deals this year.

The Scottish packaging and labelling company has acquired PSD Industrial Holdings, owner of Reading-based Lane Packaging, in a deal which could ultimately be worth £1.1 million.

Macfarlane, which has a long-standing connection with Lane, will pay an initial £0.7m in cash up front, plus a deferred component of £0.4m in the second quarter of 2015. This will depend on certain trading targets being met in the year to April 30, 2015.

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The acquisition was funded by a £20m financing facility agreed with Lloyds Banking Group which, as previously announced, will also be used to reduce its pension deficit and fund further acquisitions.

Lane generates annual sales of £2.7m and Macfarlane said its acquisition will fill a gap in its geographical coverage in the Thames Valley area.

Speaking after the company's annual general meeting in Glasgow, where all of the resolutions proposed by the board were carried, chief executive Peter Atkinson said: "It's a small step. We started out at the end of last year saying we wanted to get back on the acquisition trail.

"We bought three companies just before the UK went into economic difficulties and we sort of postponed our programme because of those difficulties.

"So for us this is a first step and we hope as the year progresses and we move into next year we will have more positive announcements to make. There are a number of other discussions taking place with potential acquisition candidates and this is a nice start for us."

The Lane Packaging acquisition was revealed as Macfarlane reported that group sales were up by 2.4% in the first four months of the year compared with the same period in 2013.

Sales in packaging distribution, which accounts for 80% of group sales, were running 2.5% ahead of 2013, with the division winning new business from clients such as ASOS, The Hut, Screwfix, and Selfridges in the last six months.

On the manufacturing side, sales were 1.8% ahead of the same period last year.

Macfarlane said that competition in the UK retail sector was affecting its label business, but declared its confidence that its investment in sales and resource would ensure the performance of its manufacturing business this year will be broadly in line with 2013.

Macfarlane shareholders yesterday voted to approve the directors' annual remuneration report, the re-appointment of Mr Atkinson and finance director John Love to the board, and an increased final dividend of 1.10p a share, to be paid on June 5.

Mr Atkinson said he was "surprised" that shareholders had not quizzed the board about the referendum on Scottish independence. Asked whether the board had taken a definitive view on the poll, he said: "No, we don't.

"Our view is: let the politicians come to their conclusions and then I'm sure we as Macfarlane Group will be able to organise and manage our business accordingly.

"We've not taken a position. We're neutral on it and we will see what happens and plan accordingly. To be honest, there is very little debate or discussion about it. Our customers are not asking us about it, our shareholders are not asking us about it, so for us it is a business-as-usual type issue.

"It's not really getting in the way of anything."

Shares in Macfarlane Group closed down 2.12p at 46.88p.