MACFARLANE Group has highlighted the impact made by its most recent acquisition as it lifted profits by 19 per cent to £9.3 million in 2017.
It was the eighth successive year of “strong profits growth” for the Glasgow-based packaging company, which derives the bulk of its revenue from providing e-commerce packaging solutions to brands such as Selfridges and Feel Unique.
Macfarlane lifted its full year dividend by eight per cent, to 2.1p per share, while cutting net debt and its pension deficit.
And it grew turnover by nine per cent to £196m, driven by sales growth of 10 per cent at its dominant packaging distribution arm.
The division booked sales of £171.8m for the year, with seven per cent of its growth generated by the £16.75m acquisition of English packaging firm Greenwoods Stock Boxes in September. Macfarlane has acquired seven packaging companies since 2014 and remains active in the pursuit of other deals as part of its growth strategy.
However, growth was harder to come by for the company’s packaging design and manufacturing business, which provides solutions to transport high value products for the aerospace, medical equipment, electronics and automotive sectors.
Citing “volatile demand” in certain sectors, chief executive Peter Atkinson said the division had faced some “operational challenges” in the final quarter as part of the process involved in bringing two new clients aboard.
He said this is “not unusual when you bring in complicated customers”. However, Mr Atkinson noted that the division has a “strong pipeline” of new business.
Mr Atkinson, meanwhile, said its labels operation was continuing to make the transition to high-value resealable products from its self-adhesive labels range, with sales in 2017 broadly comparable to those in 2016.
Observing that the market for self-adhesive labels has become “commoditised”, he pointed to growing demand for resealable packaging from food manufacturers, driven by the ageing population and the need to keep food fresh for longer.
Elsewhere, Mr Atkinson said there has been no effect on Brexit on Novupak, the European sales alliance it belongs to alongside continental firms Moonen and Boxon. He stated that the biggest concern was the uncertainty caused by the “lack of information” over what the UK’s exit from the EU will entail.
Despite that uncertainty, he expects Novupak to increase in importance over the next 12 to 18 months, given the demands from Macfarlane customers which are looking to operate on the European mainland.
The company said it closed the year with debt of £14.7m, down from £16.1m at the end of 2016, while its pension deficit was cut to £9.8m from £12.1m.
Macfarlane chairman Stuart Paterson, who succeeded Graeme Bissett in September, said: “The 19 per cent increase in pre-tax profits in 2017 represents the eighth consecutive year of profit growth for Macfarlane Group. Group profitability in the year to date is ahead of the same period in 2017. Our strategy continues to be the delivery of sustainable profit growth by focusing on added value products and services in our target market sectors, combined with efficiency improvements and the identification and completion of value-enhancing acquisitions. This strategy, which continues to be refined, has served all stakeholders well in recent years and we remain confident that it will continue to do so. Macfarlane Group’s performance in 2017 reflects the successful implementation of this strategy and we are confident that the Group will demonstrate further progress in 2018.”
Macfarlane has begun the search for a successor for Mike Arrowsmith, who is stepping down as a non-executive director later this year. It added James Baird to the board in January.
Shares closed down 3.5 per cent at 83p.
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