MACFARLANE Group is hopeful of making another acquisition before the end of the year and signalled it expects profitability to pick up as well.

The Glasgow packaging, distribution, manufacturing and labels company saw revenue between January and the end of June grow three per cent from £68.1 million to £71.1m.

However underlying pre-tax profits slipped from £1.4m to £1.2m as a result of margin pressures, particularly in its labels arm, and raw material price increases.

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Macfarlane indicated it is suffering from supermarket price wars with its customers, which are under price pressure from the grocers, increasing the frequency of label printing requests but reducing volumes. That means printing is less efficient than if done in larger runs.

Chief executive Peter Atkinson said a recently installed £750,000 printing press at the label making facility in Kilmarnock would help improve margins.

He said: "That allows us to more effectively manage these small order volumes.

"There has been some retraining of staff but from our point of view it has been a fairly easy implementation."

Manufacturing revenue in the period was up from £15.1m to £15.8m but operating profit fell from £626,000 to £221,000.

In the larger packaging distribution arm turnover was at almost £57m, up from £54.9m, although operating profit was slightly down from £1.6m to £1.5m.

Mr Atkinson said improving sales trends have been seen throughout the year with trading currently tracking five per cent ahead.In the coming months he expects a large contribution from Macfarlane's growing presence in the internet retail sector, which is heavily weighted towards Christmas.

He said: "We saw weaker margins in [the first quarter], a degree of margin recovery in Q2 and as we started the second half of the year it has improved again. We have seen good sales growth in the first half and it has improved during the period [since] as well."

Macfarlane has added clients in internet retail, automotive and engineering in the period although Mr Atkinson did not divulge the names of the new customers.

The business bought Reading based Lane Packaging in a £1.2m deal in May and that contributed around £500,000 of revenue and £19,000 profit.

Mr Atkinson said: "It is slightly ahead of expectations so we are very pleased with that."

Mr Atkinson confirmed he had been working closely with finance director John Love to look at more acquisitions and further deals are anticipated.

He said: "We are very hopeful we will be announcing another in the second half of the year."

Mr Love added that holding the interim dividend at 0.5p should be seen as a sign of the group's confidence of meeting its full-year targets.

He also noted the pension deficit had reduced by £2.7m since December and stood at £13.2m at the end of June.

Net debt widened from £7.2m to £11.6m mainly as a result of pension scheme contributions, the acquisition of Lane and provision of additional working capital.