In results posted this morning (21 February), the Glasgow-headquartered packaging giant showed an 11% increase in turnover to £217.3m for the year to 31 December 2018, while profit before tax was boosted by 17% to £10.9m.
Pre-tax profits were hit by an exceptional charge of £330,000, which related to a High Court ruling on historic Guaranteed Minimum Pension (GMP) equalisation of pension benefits for men and women in relation to GMP. Without the charge, profit would have grown 20% to £11.2m.
The company’s packaging distribution division, which represents around 90% of the business, saw sales increase by 11% to £189.8m, buoyed by the acquisitions of Leicester-based Tyler Packaging and Leyland, Lancashire outfit Harrisons Packaging in the second half of 2018.
Both acquisitions are currently subject to an earn-out period of one year, after which Macfarlane will pay the owners a second fee based on the first-year performance of each firm. Still in the middle of this period, neither firm has undergone significant changes beyond “soft integration” into the group, according to chief executive Peter Atkinson.
He said: “Tyler and Harrisons are both good businesses that would continue to do well no matter what. However, we have worked with Harrisons to win a major new client that will bring in £1m this year and helped both firms to bring in new supplies and get better deals on existing supplies due to our greater clout.
“Both of these factors mean the firms are absolutely operating to expectations and may actually perform better than forecast in 2019.”
Packaging distributions in total saw a boosted performance over the year thanks to the continued improvement of conditions in the industrial sector, though this was affected by expected headwinds in retail.
According to Atkinson, suffering sales over the Christmas period hit Macfarlane’s retail income, though he added this had appeared to resolve itself in the first part of 2019.
Brexit preparations have also been a key factor in Macfarlane’s outlook for the coming year, with motions in place to mitigate for problems in the supply chain as well as dilemmas facing the group's circa-30 EU workers.
Atkinson said: “In terms of mitigating Brexit impact, we have worked with suppliers to make sure their supply is clean and determine the bottlenecks where we need to get extra stock in ahead of time, and we have also consulted our own customers to do so for them.
“Within an employee base of 1,000 people, we have around 30 non-UK citizens and we have been working with the relevant authorities to make sure they can retain their position.
“We do not know what we do not know, so we are not making any predictions so far. But 90% of our customers are in the UK and they largely serve UK customers themselves, so exporting is part of our business, but it is limited. We have exposure, but narrower than other companies.”
Focusing on growth in its strongest markets in 2019, Macfarlane is continuing to bolster is burgeoning labels wing, which saw a 15% increase in sales, by installing a new Mark Andy press in the Republic of Ireland, as well as an HP Indigo digital press in Kilmarnock that will bring digital printing services in-house for the group’s labelling business.
According to Macfarlane finance director John Love, this charge will not have an ongoing effect on the business.
Concluding, Atkinson said: “Continuous good growth in all sectors is what we are now focused on – we hope to be talking next year about more acquisitions, the benefits from our investment in labels and progress with new European customers as we answer UK client demand to broaden our services into Germany and the Benelux countries.
“After nine years of consecutive growth with a broadly consistent strategy, we would be crazy to make a u-turn now when we could be building on this success.”
