By Scott Wright

MACFARLANE Group, the Glasgow-based packaging firm, has hailed a “resilient” performance amid the pandemic, posting a near-10 per cent rise in pre-tax profits to £13 million for 2020.

The group took advantage of the massive shift to online activity seen during the pandemic, which helped drive a 2.6% rise in sales at its dominant packaging distribution arm to £201.7m. That helped lift turnover across the group, which employs more than 900 people in the UK, grow by 2.1% to £230m.

Investors responded positively, sending shares up by nearly 9% to 92p.

Macfarlane’s packaging distribution arm lifted its operating profit by 12.8% to nearly £12m amid increased demand from the e-commerce, household essentials and medical sectors. It also reaped the benefits of the acquisitions of Ecopac and Leyland Packaging in 2019, and Armagrip in January 2020. This helped to offset weaker conditions in the automotive, aerospace, high street retail sectors.

The company’s packaging design and manufacture division, however, reported a 0.9% fall in sales to £28.3m for the year, dragged lower by weaker demand from the aerospace and automotive sectors. Sales fell sharply in the immediate aftermath of the pandemic taking hold as business activity plunged, with profits at the division falling to £381,000 from £1.08m.

However, it is expected that the division, which had seen strong demand for its labelling from the food, medical and household essentials sector last year, will recover in 2021.

Chief executive Peter Atkinson told The Herald that the company’s performance had been “resilient” in the face of challenging conditions.

“The fact we have come out with a result with respectable sales growth and good profit growth reflects the resilience of the business and how robust the business model is,” he said.

Mr Atkinson said revenue had recovered and began to trend ahead of 2019 as the year progressed, adding: “The good news as we start in 2021 [is] that the level of sales growth has been maintained, so we are seeing high single digit sales growth in the early part of 2021.

“Clearly it has been driven by the strength we have in the retail sector, particularly e-commerce. As our purchasing behaviour has changed as consumers, it has just driven far stronger e-commerce sales, and we have been a big beneficiary of that.”

Mr Atkinson expects e-commerce will continue to growth, but at a slower pace. “There are consumers wo want to get back to buying in shops, rather than online,” he said.

Macfarlane continues to have aspirations to grow on the European mainland. Restrictions on travel arising from the pandemic meant prospective acquisitions could not be explored last year, however the company is keen to restart efforts in this area. Mr Atkinson hopes to complete the firm’s first European acquisition in 2022 or 2023. “Europe is part of the agenda going forward,” he said.

Mr Atkinson added that he hopes Macfarlane will return to the acquisition trail in the UK this year.

Meanwhile, asked if Brexit had brought any challenges, new finance chief Ivor Gray said the impact has been confined to an additional paperwork. Some hold-ups have come when the firm has tried to export products alongside those from other suppliers in “groupage” consignments bound for the EU, which can be problematic if fellow exporters have not completed the new paperwork properly.

Mr Gray, who succeeded John Love, said he ultimately expects companies to get used to the extra bureaucracy.

With the Budget coming up next week, Mr Atkinson said he would prefer not to see an increase in capital gains tax as it could impede Macfarlane’s acquisition hopes if it deters those selling businesses. He would like to see measures to stimulate investment in products and solutions that can drive environmental sustainability.

The company highlighted progress in reducing net debt during the year, which was cut to£500,000 from £12.7m. Its pension deficit was reduced to £1.5m from £6.5m.

The Macfarlane board declared a final dividend of 1.85p per share, amounting to a full-year pay-out of 2.55p. It reaffirmed that it has returned all support received under furlough and tax deferral schemes to Government.

Shares closed up 7.4p at 92.8p.