The Glasgow-headquartered packaging company reported sales of £129.6m for the six-month period ended 30 June 2024, down 8% on the £141.6m achieved a year ago, and pre-tax profit of £9.7m, down 3% on the £9.99m figure it posted at the same stage last year.

The group made two further acquisitions in the period, of Allpack Packaging Supplies in March and Polyformes in July.

Macfarlane Group’s Packaging Distribution arm saw revenue drop by 11% to £110.9m (H1 2023: £124m). This was attributed to continued weak customer demand and price deflation, although these were partially offset by the benefit of the acquisitions of Gottlieb in April 2023 and Allpack in March this year.

The company said adjusted operating profit decreased by 1% to £9.3m (H1 2023: £9.4m) through effective management of input pricing and control of operating expenses.

Manufacturing Operations, meanwhile, achieved revenue growth of 6% to £18.7m (H1 2023: £17.7m).

The company said contributions from B&D Group and Suttons, both acquired in 2023, have been partially offset by price deflation.

Adjusted operating profit decreased by 5% to £3.2m (H1 2023: £3.4m) due to higher operating expenses. The acquisition of Polyformes last month will be earnings enhancing in H2 2024, Macfarlane added.

Speaking to Printweek today (22 August), Macfarlane Group chief executive Peter Atkinson said: “We indicated as we came into 2024 that H1 was going to be difficult, and it has been difficult. I think in the circumstances, the performance that we’ve achieved is pretty respectable.”

He added there were various current market difficulties, including underlying weak demand; “macroeconomic factors just causing customers not to be buying the amount of volume that we would normally expect to be buying”.

“The second feature is the sustainability agenda – clearly people are getting up to speed on that and trying to use less packaging. That’s a factor that will continue, and that’s a good thing for obvious reasons.

“And then the third thing, which is just part of the normal cycle, is that we’ve seen price deflation in the first half of the year. Around about 5% of our revenue decline is price related; just selling at lower prices because of what's been happening in the in the broader markets.”

He said profit had stayed relatively strong for the group because it had taken actions and grown new business, particularly in the health and beauty sector, with some further success in the industrial market around automotive and general industrial engineering.

“Our new business is 10% ahead of where it was this time last year. We’ve done a really good job on margins, ensuring that we’re managing our people pricing in line with our sales pricing. We’ve kept a real tight control of costs. And obviously we benefited from our acquisition program.”

The group had net bank funds on 30 June 2024 of £0.8m, reflecting a cash inflow of £0.3m since 31 December 2023, after £3.6m of investment in acquisitions and £1.4m of capital expenditure. The group said it is operating well within its bank facility of £35m, which runs until 31 December 2025.

Its pension scheme surplus increased to £10.2m as at 30 June 2024 (31 December 2023: £9.9m). The improvement is due to an increase in the discount rate, offset by lower investment returns in H1 2024.

Effective management of working capital resulted in net cash inflow from operating activities of £14m (H1 2023: £20.3m).

Macfarlane said the actions taken in H1 2024 and continuing through the remainder of the year should enable the performance of the group to be “broadly in line with market expectations” for 2024.

“While we’ve seen price deflation in the first half of the year, we will start to see price inflation in the second half of the year because paper prices are going up, and that means corrugate box prices are going up, so we'll need to translate those price increases to our customers. So expect to see sales grow through price inflation,” said Atkinson.

“We’ve clearly got the momentum of the acquisitions that we’ve made, with Polyformes particularly coming on strongly in the second half of the year. And then we’ve obviously got that new business momentum, which we expect to get stronger in the second half of the year as well. So we would expect to be exiting 2024 on a good trajectory for 2025.”

Basic and diluted earnings per share were 4.55p per share (H1 2023: 4.74p per share) and 4.51p per share (H1 2023: 4.70p per share) respectively.

The interim dividend of 0.96p per share (H1 2023: 0.94p per share) – will be paid on 10 October 2024 to shareholders on the register as at 13 September 2024 (ex-dividend date 12 September 2024).

1,000-plus staff Macfarlane Group’s share price was down 4.38% on yesterday’s close at the time of writing at lunchtime today at 114.75p (52-week high: 147.50p, low: 98.38p).