Macfarlane Group chief executive Peter Atkinson is hoping to complete another acquisition by the end of this year as part of the company's "self-help" programme amid weak demand for its packaging products.

Speaking after the Glasgow-based group posted its financial results for the first six months of this year, Mr Atkinson said Macfarlane had anticipated economic headwinds at the start of 2023 and that turned out to be the case. Activity is not expected to pick up from these subdued levels until some time in 2024.

“We have got a pretty healthy acquisition pipeline both in the UK and in Europe," he said. "We made our first European acquisition last year in Germany, a company called PackMann, and we are very hopeful that we will complete one more acquisition this year.

“And then we will be looking to do more acquisitions as we go into 2024, and that’s part of the self-help programme. If the market isn’t helping us from an organic point of view, then we’ll just put more emphasis on our acquisition programme.”

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Macfarlane made a pre-tax profit of £10 million in the first six months of 2023, up 13% on the same period a year earlier. Revenues were 2% higher at £141.6m.

The company's dominant packaging distribution business - which provides protective shipping materials to the retail, food and logistics sectors - grew revenues by £400,000 to £124m. This included a "good contribution" from PackMann and Manchester-based Gottlieb, which Macfarlane acquired in April of this year in a deal worth up to £3.55m. 

The design and manufacturing division delivered a 13% increase in revenues to £17.7m, bolstered by the February acquisition of Cambridgeshire-based Suttons in a deal worth up to £9m. The division provides specialist packaging for fragile and high-value products to customers in the electronics, defence, medical, automotive and aerospace sectors.

“Where it’s automotive-related, or related to general industrial, those sectors are generally weak," Mr Atkinson said.

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"The strongest sectors for us would be aerospace, because obviously we are all getting back to normality with travel plans, so aerospace is still quite robust. Also, anything related to diagnostic equipment or medical equipment, that is remaining quite robust.”

All sectors in packaging distribution are "generally weak", with e-commerce the worst affected. This is the combined result of coming off of elevated levels of online sales in 2022 amid lingering Covid restrictions, plus the downturn in consumer spending in the current cost-of-living crisis.

Inflationary pressures added nearly £1m to Macfarlane's payroll bill compared to the first half of last year, and energy costs also increased by about £1m. This was offset by productivity improvements and improved pricing from suppliers.

“With the overall market demand very weak at the moment, our manufacturers and suppliers have got capacity, so what we have been able to do is to tap into that spare capacity and in doing that reduce our input prices, and that has allowed us to offset energy prices and labour costs quite effectively," Mr Atkinson said.

READ MORE: Macfarlane Group acquires Manchester firm Gottlieb

He added: “We think demand will be quite subdued for the remainder of this year and probably into 2024. That’s why from our point of view we are just assuming the economy and the market is not going to help us, so everything that we are doing to improve revenues and improve profitability, that’s self-help.”

Net bank debt at the end of June was £3.3m after £11.4m of investment in acquisitions and £1.4m of capital expenditure. The group its is operating well within its bank facility of £35m, which was increased from £30m at the end of 2022.

Macfarlane's pension scheme surplus has increased from £10.2m to £12.8m. The group currently employs more than 1,000 people across 37 sites, principally in the UK, as well as in Ireland, Germany and the Netherlands.

The interim dividend has been raised from 0.9p to 0.94p and is due to be paid on October 12. Shares in Macfarlane closed yesterday's trading a penny lower at 109p.