THE prospect of a no-deal Brexit has strengthened the resolve of Macfarlane Group to enhance its position on the European mainland, its chief executive revealed, as the company unveiled details of two further acquisitions.
Peter Atkinson said the Glasgow-based packaging firm has “accelerated” plans to support its activities within Europe after Brexit as the prospect of the UK crashing out without a deal appears to be moving closer.
His comments came as Macfarlane reported a bumper 39 per cent hike in pre-tax profits to £3.5 million for the six months to June 30, sending shares up nearly four per cent. Its performance gave the board the confidence to recommend an 8% increase in the interim dividend to 0.65p per share.
Asked whether the uncertainty around Brexit had led the firm to put its European expansion plans on hold, Mr Atkinson replied: “If anything, those activities have accelerated, because clearly to have a European presence to complement our UK presence is clearly a help if the situation with Brexit goes in the wrong direction. While we are not yet in any position to make any grand announcements, there’s some really good progress being made with customers outside the UK, and plans are being worked on in terms of creating a European presence.”
Macfarlane currently has a presence on the European mainland through its participation in the Novupak sales alliance with continental firms Moonen and Boxon.
Mr Atkinson said Macfarlane was currently developing three key customer relationships over providing a service for those companies in Europe, which could be achieved via Novupak, “the most obvious option”, or some form of partnership.
While he said it is “too early to be precise at the moment”, he stated: “I don’t want to give the impression that because of Brexit we are slowing down our European activity. If anything, it is accelerating.”
With a no-deal Brexit appearing more and more likely, Mr Atkinson said the company has been responding to concerns raised by UK customers worried about continuity in the supply chain.
With around 15% of goods supplied by Macfarlane in the UK imported from Europe, the Middle East and Asia, Mr Atkinson said the firm has lined up alternative, UK-based suppliers which will be brought in “if Brexit goes wrong”.
He said: “We were able to give our customers a high degree of confidence that whatever happens with Brexit, their supply chain will be in place and unaffected.”
The company’s first half-results again highlighted the success of a model which generates growth both organically and through acquisitions, with the arrival of English firm Greenwoods last year making a key contribution to a strong first half by Macfarlane’s dominant packaging distribution division.
A 14% rise in packaging distribution sales was achieved with a 5% rise in organic sales and the balance of the growth powered by Greenwoods.
Strong growth was achieved within the industrial sector, which accounts for about 70% of packaging distribution sales, thanks to growth with customers such as Bosch and Thermo Fisher.
Operating profit for packaging distribution, which derives around 20% of sales from the e-commerce sector, increased by £1m, or 39%, to £3.7m, compared with the first half of last year.
The company revealed it completed two further acquisitions, on July 31, and August 2, taking its total to nine since 2014 with the promise of more, albeit not in the current financial year.
The latest firms to join Macfarlane are Tyler Packaging of Leicester and Harrisons Packaging for a combined maximum consideration of £3.5m.
Finance director John Love said Macfarlane had been tracking both companies for some time, describing them as “good quality” companies which generate “good profits and cash”.
Both firms have a strong presence in the industrial sector, and arrived with customers bases which are “complementary” to that of the Glasgow firm.
Mr Love also highlighted the prospect of making savings in terms of purchasing.
Tyler and Harrisons have been running under the company for about a month, and will continue to operate as before under the Macfarlane banner. They have brought an additional 22 staff in total to the firm, increasing its overall headcount to “just over 100”.
Mr Atkinson said further acquisitions this year are unlikely, as the fourth quarter is Macfarlane’s busiest because of its involvement in the e-commerce sector. But he hopes to announce further deals in 2019.
Shares in Macfarlane closed up 4p, or 3.92 per cent, at 106p.
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