By Scott Wright

Deputy Business Editor

MACFARLANE Group, the Glasgow-based packaging specialist, has reported a “strong recovery” from the first coronavirus lockdown, revealing it is on course to match last year’s profits despite the disruption stemming from the crisis.

The update came as the company announced that longstanding finance director John Love will retire from the post on December 31. He will be replaced by long-serving Macfarlane executive Ivor Gray.

Macfarlane said yesterday that sales revenues increased by a “better than expected” four per cent in the four months to October 31, compared with the same period last year. Sales rebounded following a 5.2% fall in the second quarter, which the company said was “due to the impact of the Covid-19 pandemic”.

With revenue and profit before tax in the second half currently ahead of last year, Macfarlane is confident its full-year profits will be “broadly in line” with 2019.

The news provides a timely boost to the company amidst the busiest time of year for its dominant packaging distribution division, which provides e-commerce solutions for retailers such as Halfords, Lakeland and Dunelm. Consumers are likely to carry out an even bigger part of their Christmas shopping online this year, notably in west and central Scotland where non-essential retail stores will be closed for three weeks from today in a bid to drive down Covid-19 infection rates.

Macfarlane said: “We have continued to achieve good sales growth in the internet retail, household essentials and medical sectors, and seen improving sales in the industrial sectors.

“However, sales in the aerospace, high street retail and foodservice sectors will take some time to recover to pre-Covid-19 levels. The performance of the business in challenging market conditions clearly demonstrates the benefits of having a broad customer base across a variety of market sectors.”

Macfarlane told investors that cash generated by the business in the four months to October 31 had fully funded the repayment of £5.4 million from various government support and tax referral programmes, which were introduced by ministers to support companies through the coronavirus crisis. Cash generated also allowed it to pay the maximum earn-out from its acquisition of Buckinghamshire-based Ecopac in a £3.9m deal last year, as well an interim dividend of £1.1m.

The company reduced its 900-strong headcount around the UK by 62 roles as a result of the impact on demand arising from the pandemic. Nearly 90% of the cuts came through voluntary redundancy. The rationalisation came as the company reported a 5.5% fall in first-half profits to £3.6m, amid “challenging market conditions”.

Chairman Stuart Paterson said yesterday: “The Macfarlane Group performance in the second half of 2020 has been robust in the face of significant challenges.

“This has only been achieved due to the outstanding commitment and hard work of our people. We have focused on ensuring they can service our customers effectively by creating safe environments in which they can work. The health and wellbeing of our employees continues to be paramount.

“There remain uncertainties and concerns over future economic conditions. However, with our diversified customer base, strong added value sales proposition and highly capable and committed team, Macfarlane Group has demonstrated it is well positioned to manage the challenges facing the business in the remainder of 2020 and beyond.”

Meanwhile, Mr Paterson paid tribute to outgoing finance chief John Love, who will fully retire from the board on March 31 following a handover to Mr Gray.

Mr Love joined Macfarlane in 1996, and has held the role of group finance director since 1999.

The company said Mr Love has “worked tirelessly and effectively in helping lead the Group through recovery, repositioning and into its current growth phase.”

It added: “The strong financial and market position the business has today is in large part down to his efforts.”

Mr Gray, a chartered accountant, has worked for Macfarlane for 24 years in a variety of financial and commercial roles, including financial director of Macfarlane Labels, general manager of Macfarlane USA, and commercial director of Macfarlane Packaging Distribution.

Mr Paterson said: “The board would like to record their gratitude to John Love for his long, dedicated and valued contribution and specifically for his part in helping to steer the company through the current pandemic. We wish him a long and happy retirement.

“The Board also welcomes Ivor Gray to his new role. His extensive knowledge and experience of the business will enable an effective and orderly transition and help ensure Macfarlane Group continues to progress.”

Shares closed down 0.5p at 94p.