Strong performances from recent acquisitions helped Macfarlane Group overcome a dip in revenues to achieve a small increase in annual profits as the packaging industry continues to weather weak customer demand.

The group, which employs about 30 of its 1,000 employees at its headquarters in Glasgow, said the outlook for the coming year remains challenging as it continues with its strategy of securing new business to offset sluggish demand among retailers in its dominant packaging distribution business.

This will include more deals via a "well-developed pipeline of potential acquisitions". The company's firepower has been further bolstered by an additional £1.25 million in cash per year that is no longer being paid into the Macfarlane pension scheme which is now in surplus.

"We have got a strong pipeline of acquisition opportunities where we've got engagement and are building up relationships both in the UK and in Europe," chief executive Peter Atkinson said. "We are mainly buying privately-owned business so a big part of the acquisition programme is building relationships with private owners.

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"We did three acquisitions in 2023 and we would expect to do something similar in 2024 - we are well-advanced with a number of opportunities."

Revenues for the year to December 31 came in at £280.7 million, down 3% from 2022. However, pre-tax profit rose by 2% to £20.3m, up from £19.9m previously.

The profit figure would have been higher but for a £1.5m deferred contingent payment linked to the May 2022 acquisition of German-based PackMann, which delivered a stronger operating performance than previously anticipated. In total, Macfarlane funded £16.6m of acquisition and capital investment activity through its existing bank facilities during the year.

Revenues from the packaging distribution business - which provides protective shipping materials to the retail, food and logistics sectors - decreased by 6% to £244.9m amid weak demand from customers in the UK and Ireland and sales price deflation. This was partially offset by a stronger new business performance, good sales momentum in Europe, and the benefits of the acquisitions of PackMann followed by that of Gottlieb last year.

The design and manufacturing division delivered a 16% increase in revenues to £35.8m, with last year's acquisition of Suttons and B&D Group making a strong contribution.

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"The reason we acquired B&D is they have got a particular presence in the space sector, and that is a growing sector," Mr Atkinson said.

"They are providing protective packaging for space components, working with a number of the major international aerospace companies who have a space division, so it is a really exciting acquisition in a sector of the market which has got really high growth potential."

The board is proposing a final dividend of 2.65p per share payable on May 30, taking the total dividend for 2023 to 3.59p per share, up 5% on 2022. The stock closed yesterday's trading in London 0.5p higher at 123.5p.