In its interim results, released this morning, the Glasgow-headquartered company reported a half-year turnover of £78.6m, up 12% from £70.1m for the six months to June 30, compared to the same period last year. Pre-tax profits are up by 52% to £1.83m.
The growth represents improved performance over the full 2014 financial year, which showed a 7% rise in sales to £153.8m (2013: £143.9m) and in line with its statement to its AGM in May.
Macfarlane Group chief executive Peter Atkinson told PrintWeek about half of the growth was organic and half from Macfarlane’s acquisitions. The company bought Network Packaging in a £7.5m deal in September and Lane Packaging in May 2014.
“It’s a good set of first-half-year results. We’ve got some good momentum as you can see in these numbers.”
The major driver for growth has been Macfarlane’s packaging distribution business, which represents the majority of the company’s trade. It has seen a profit rise of 16% on the same period in 2014, with volumes up 6%, supported by new client wins at the end of 2014, including Selfridges and Home Retail Group.
The company has also won a contract with Cousins in the past six months, described by Atkinson as “a major customer”.
“The key growth areas for us are in the home retail sector. We started working with Home Retail Group at the end of 2014 and that’s grown significantly in 2015.”
A relationship with internet retailer The Hut established three years ago is also bearing fruit, Atkinson said. “We’re seeing significant growth from The Hut.” The company is expecting good sales in the run up to Christmas.
“Our customers are very confident about the final quarter. Our business is primarily UK-based so we aren’t impacted by international issues”, he said, such as the Chinese market slump.
The company has benefitted from the two acquisitions of packaging companies it completed last year. A further buy, One Packaging in Nottinghamshire was announced earlier this month.
In its labels business, where it produces and prints labels for the fast moving consumer goods (FMCG) market, Macfarlane has seen a drop in sales of 8% on 2014, from £15.8m to £15m.
But the company said it had made the decision not to join a drive to the bottom price-wise and has therefore seen an increase in operating profit, from £221,000 to £256,000.
“We’ve been focused on ensuring that the business we grow is from the bigger margin customers, the customers that are prepared to pay the right price,” Atkinson said.
“Most of the customers in this business are supplying into the major supermarkets in the UK FMCG sector. We all know how difficult the UK retail sector is.
"The area we are most enthused about at the moment is the Reseal-it range, rather than our standard self-adhesive labels. We’ve got better margins from that business because there is added value.”
The company hopes to grow market share with this product range by improved geographic penetration, extending Reseal-it to new product sectors, improve operational efficiency at its Kilmarnock site, accelerate packaging design and so create more sales and target sales growth in key sectors such as defence, aerospace and medical.
It is looking for one more packaging company acquisition this year.
Earnings per share are up 50%, from 84p to £1.26.
The 750-staff firm has decided to pay an increased interim dividend of 53p, a 6% increase on last year’s 50p payment.
