In its preliminary results posted this morning (23 February) for the year ended 31 December 2022, the Glasgow-headquartered packaging giant recorded turnover of £290.4m, up from the £264.5m it achieved in its 2021 results.

Its pre-tax profit was £19.9m, up from the £18.7m figure it recorded for 2021.

The company said that its performance was achieved “against a background of a marked slowdown in spend from the e-commerce sector, following strong growth during the 2021 Covid-19 lockdown periods, and inflationary pressures on operating costs”.

Packaging Distribution recorded sales of £259.7m, up 8% year-on-year. The company said organic revenue growth in the UK and Ireland of £8.4m was achieved through recovery in some industrial sectors, particularly in aerospace, engineering, and hospitality, and inflation in pricing offset by a marked reduction in demand from e-commerce customers, most of which benefited from the Covid-19 lockdowns in the first half of 2021.

The company’s ‘Follow the Customer’ strategy in Northern Europe achieved £2.9m of incremental sales through the group subsidiary in the Netherlands, with the business now generating profits.

Sales growth of £8.8m, meanwhile, was achieved via the acquisitions of Carters Packaging in Cornwall, in March 2021 and PackMann in Germany in May 2022. The PackMann pre-acquisition costs of £0.2m were expensed in 2022.

New business in 2022 at £8.9m was lower than 2021.

The company was able to broadly maintain gross margin in Packaging Distribution at 32.1%, versus 32.4% in 2021.

Sales in Macfarlane’s manufacturing operations division jumped by 23% to £30.8m, including organic growth of 15%, due mainly to recovery in the aerospace (defence and commercial) sector and inflation in pricing.

Sales growth of £4.4m, meanwhile, was achieved from the acquisition of GWP in February 2021, which Macfarlane said has benefitted from strong demand from its industrial customers and inflation in pricing.

Macfarlane chief executive Peter Atkinson told Printweek: “From our point of view, a good performance in 2022 against an exceptional performance in 2021. It was always difficult to replicate our 2021 results, but I think the results we’ve achieved are actually very good.”

He said the group has also made “a good start to 2023 – the early numbers show both sales and profit growth”.

Commenting on new business in its Packaging Distribution arm, Atkinson added: “We delivered £9m worth of new business during the year, which was a little bit lower than we were expecting – our salespeople were very focused on making sure we got input price recovery.

“And also I think customers, having gone through a very difficult lockdown and Covid period where supply was difficult for them, were less keen to start switching suppliers until they had got a bit more confidence in the market.

“But in terms of new customers, we’ve had MyEnergi, Moonpig, LloydsPharmacy, and there’s a lot of new business coming through from Siemens. We’ve got some very good new business coming through and I think that will only strengthen in 2023.”

The group’s net bank debt on 31 December 2022 was £3.4m, a net cash outflow of £5.9m from 31 December 2021, including £8.7m of investment in acquisitions and a higher level of capital expenditure of £3.3m related primarily to the fit-out of the new distribution centre in the North West of England (£1.3m).

The group said it is operating well within its existing bank facility of £30m, which runs until 31 December 2025.

The group’s pension scheme surplus increased to £10.2m at 31 December 2022, compared to a deficit of £8.3m at 31 December 2021.

The business said this improvement is due to continued contributions from Macfarlane Group and an increase in the discount rate offset by a decline in the value of investments during the year. It said this is against the backdrop of considerable volatility in the markets, in particular government gilt yields.

Basic and diluted earnings per share for 2022 were 9.89p (2021: 7.98p per share) and 9.78p per share (2021: 7.90p per share) respectively.

The board is proposing a final dividend of 2.52p per share, amounting to a full year dividend of 3.42p per share (2021: 3.20p per share), an increase of 7%.

The company’s share price was up by 3.63% at the time of writing just before lunchtime today to 109.85p.

Looking ahead, the group said it anticipates that 2023 will be another challenging year with uncertainty over the impact of the increase in the cost of living on customer demand, rising operating costs, particularly related to labour and energy, and increasing interest costs.

However, it said that with the effectiveness of its strategy, the resilience of its business model, and the experience and commitment of its people, it is expecting to continue to deliver further growth in 2023.

“We would expect to continue to grow the business organically and then we’ve got a very strong acquisition pipeline,” said Atkinson.

“We would hope to deliver at least two acquisitions in 2023 – the timing of those you can never actually be sure of but we’d be disappointed if we don’t complete at least one acquisition in the first half of the year.”