It is one of Scotland’s steadiest stock market performers and reliable dividend payers.

But even Macfarlane Group, which can trace its history back to 1949, is not immune from the turbulent economic backdrop.

Challenging market conditions were cited by Macfarlane this morning as it reported a fall in revenue and profits in the first half, with the company highlighting the effects of price deflation and weak customer demand at its dominant packaging distribution arm, which works with the likes of Boots and IKEA. These headwinds were partially offset by contributions from two fairly recent acquisitions, Gottlieb which was snapped up in April 2023, and Allpack Direct which came on board in March this year.

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Macfarlane had warned conditions would be tough this year when it reported a 9.5% fall in first-quarter sales in May, so the City may have anticipated a fall in profits for the first half to some extent. But the fact its share price dropped sharply today – shares were trading down nearly 4% around 1pm - may indicate that investors had been hoping for better than the 3% fall in profits to £9.7 million booked by the firm.

The City may also had been hoping for more optimism over the outlook from the company. Macfarlane said its performance over the remainder of the year would be in line with expectations, as it highlighted the benefit of actions taken in the first half such as controlling costs, managing price deflation, and improving new business growth.

Speaking to The Herald today, chief executive Peter Atkinson was cautious when asked about the group’s prospects for the second half, but did express some optimism that the months ahead could see conditions improve on the packaging distribution front.

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“Our second half of 2023 was relatively soft, so we would expect our like for likes to be better,” he said. “There are indications, and it is only indications, that Christmas trading might be stronger, so that will hopefully be a benefit to us.”

There are other reasons for Macfarlane to be upbeat. Mr Atkinson said the prospects for its manufacturing operations business, which designs protective packaging for high-value and fragile products, look bright, adding that it will start to see the benefit of the acquisition of Polyformes in the second half. He also said the firm was confident of making further acquisitions early next year, which will provide a further platform for growth.

Macfarlane maintained its progressive dividend policy, announcing an interim dividend of 0.96p per share, up from 0.94p at the same stage last year.

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DOWN The FTSE-100 index at 1:45pm was down 1.57 at 8,281.86.