By Scott Wright
MACFARLANE Group, the Glasgow-based packaging company, has warned there will be no escape from inflationary pressure and slower demand from e-commerce customers in the second half of the year.
But the company said it remains on course to meet profit expectations for the year – despite anticipating sustained upward pressure on utility, raw material and labour costs.
Macfarlane reported yesterday that pre-tax profits had risen by three per cent to £8.9 million in the six months to June 30. Profits were driven by a 14% rise in sales from continuing operations grew to £139.2m, with a strong six months at its manufacturing operation helping to offset an anticipated slowdown in e-commerce sales at its dominant packaging distribution arm.
Sales in packaging distribution, which peaked during lockdown, increased by 11% to £123.5m, while sales from manufacturing operations surged by 40% to £15.7m.
Chief executive Peter Atkinson told The Herald that profit expectations for the full year had not changed. House broker Shore Capital is guiding on full-year profits before tax of £19.2m, up from £18.7m in 2021.
READ MORE: Crieff Hydro chief warns of closures as cost rises hit hard
Mr Atkinson expects the second half to be“ very similar” to the first.
He said: “All the headwinds are in place and will continue. But we are not changing our forecast for the year – our numbers are going to be strong and we are very confident that the team we have got, and our experience and knowledge of our market and closeness to our customers, will allow us to address whatever headwinds that come.”
Mr Atkinson said the first-half performance had been “solid” and declared that Macfarlane had managed cost inflation across the board “really well”, adding that gross margins “remained stable at the top end of the range”.
He underlined the benefit of the acquisitions such as Carters Packaging in March 2021 and Germany company PackMann in May, noting that the latter had “raised the profile of Macfarlane in Europe”. Macfarlane acquired German firm PackMann in May and hopes to make a further acquisition before the year ends.
Mr Atkinson said: “The pipeline of acquisitions that we have both in the UK and in Europe is stronger than it has ever been. There is certainly an appetite for people to look to sell their businesses and mainly for genuine reasons – retirement tends to be the major force for people looking to sell.”
READ MORE: Scott Wright: Time is running out to save firms from financial disaster
Alongside its efforts to manage costs, Mr Atkinson highlighted Macfarlane’s investment in a new distribution centre in north-west England, which has meant the closure and consolidation of two sites, and in new software programmes for sales, operations and stock, to improve efficiencies.
“Despite the headwinds, we continue to execute the strategy that we have put in place,” Mr Atkinson said.
Asked if Macfarlane had increased employee pay in response to the cost-of-living crisis, he said the company typically reviews salaries annually at the beginning of the year. A salary uplift was out in place at the start of 2022.
Macfarlane employs more than 1,000 people at 37 sites, mostly in the UK. It also has sites in Ireland, Germany and the Netherlands.
Mr Atkinson said: “During the year we made some adjustments where we realised we were out of line with the market and to remain competitive. We will take account of the market conditions as we move towards the end of this year and adjust in our annual rise to remain competitive and ensure our employees are well rewarded.”
New clients secured by Macfarlane in the first half included Moonpig, Lloyds Pharmacy and Neal’s Yard.
READ MORE: Scott Wright: Scottish property market hit by 'sharp pricing corrections'
Macfarlane, meanwhile, announced Aleen Gulvanessian, who joined the board in October 2021 and chairs the remuneration, as successor to Stuart Paterson as chairman.
Mr Atkinson praised the strong contribution Mr Paterson has made during his nine years on the board, as non-executive and chairman, and said Ms Gulvanessian brings extensive corporate and legal experience to the post. Mr Atkinson said: “She has been very impressive in the first 12 months and I am really looking forward to working with her.”
Mr Paterson, who will step down on September 30, said: “I wish Aleen, the board and all of Macfarlane’s employees continued success in the future and thank them for their excellent support during my tenure as chairman and non-executive director of Macfarlane Group.”
The company increased its interim dividend to 0.9p per share from 0.87p, which will be paid on October 13.
Shares closed down 3.5% at 110p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here