The Glasgow-headquartered packaging company reported sales of £139.2m from continuing operations for the six-month period ended 30 June 2022, an increase of 14% on the restated £122.1m figure recorded a year ago, and pre-tax profit of £8.86m, up 3% on the restated H1 2021 figure of £8.59m.

Stuart Paterson, chairman of Macfarlane Group, said the group had achieved “a solid performance” in the first half, “especially when compared to a strong trading period in H1 2021” and that this had been achieved “against the backdrop of a slowdown in spend from the e-commerce sector and significant inflationary pressure on operating costs”.

He said the business has also made strategic IT investments and incurred start-up costs on its new North West of England distribution centre. The site, based at Heywood, near Rochdale, is set to open by the end of Q3.

As set out in its Annual Report 2021, after over nine years on the board, Paterson is standing down from the board, effective 30 September 2022, and has announced his successor as chair will be Aleen Gulvanessian.

She joined the board in October 2021 as chair of the Remuneration Committee.

Paterson said that in a short time “she has made a significant contribution through her corporate legal background and extensive commercial and governance experience”.

Gulvanessian was selected after an extensive process involving “a number of very capable external candidates”, and an announcement on a new chair of the Remuneration Committee will be made shortly.

Macfarlane Group’s Packaging Distribution arm achieved sales growth of 11% to £123.5m (H1 2021: £111m), with recovery of input price increases and the benefits from the acquisitions of Carters Packaging in March 2021 and German business PackMann in May 2022 offsetting lower demand from e-commerce customers after the sector experienced a strong H1 last year due to Covid-19 restrictions.

Manufacturing Operations, meanwhile, also delivered strong growth, with sales up by 40% to £15.7m (H1 2021: £11.2m) and operating profit before amortisation increasing by 44% to £2.5m (H1 2021: £1.7m). Macfarlane said there was a continued strong performance from GWP, acquired in February 2021, while recovery in the aerospace sector benefited the Macfarlane Design and Manufacture business.

The group sold its Labels division to Reflex Group in December 2021. Labels generated a loss before tax of £0.1m in H1 2022 (H1 2021: Loss £0.8m) after finalisation of the net asset position.

Macfarlane Group chief executive Peter Atkinson told Printweek the slowdown in e-commerce had been anticipated by the group.

“Clearly during lockdown periods, a lot of people didn’t have much to do so buying stuff online became a sort of hobby. And now people have returned back to something like normality, those purchasing behaviours just aren’t continuing. There was an expectation on our part that the spike in e-commerce that we saw during Covid would return to normality in some point in time and that’s what’s happened.”

He added: “The key cost pressures on us at the moment are obviously the continuing inflationary changes in terms of raw materials, and we’re doing a pretty good job in recovering those price increases from our customers.”

Other major costs included labour costs and transportation, both of which he said the group was managing well.

Atkinson also said the acquisition of PackMann “was an exciting development for us and gives us great growth potential going forward in Europe”.

“We’ve got a strong acquisition pipeline in Europe and also in the UK, and we would like to complete one more acquisition this year, more likely to be UK than Europe but certainly going forwards, we will be looking to complete more acquisitions in Europe to strengthen our position there.”

The group’s net bank debt on 30 June 2022 was £9.7m – a cash outflow of £12.1m from 31 December 2021, including £9.1m of net investment in acquisitions and disposals. The group said it is operating well within its existing bank facility of £30m which runs until 31 December 2025.

Its pension scheme surplus increased to £8.8m at 30 June 2022 (31 December 2021: £8.3m).  The improvement is due to continued contributions from the group and an increase in the discount rate, offset by lower investment returns in H1 2022.

An additional contribution of £0.7m was paid into the pension scheme in H1 2022 to satisfy the debt on exit of the Labels business.

Macfarlane said it is expecting to experience a continuing challenging environment with inflationary pressure on its operating costs and slower demand from its e-commerce customers.

Overall, the group is confident that the effectiveness of its strategy, the diversity of the customers and sectors it serves, the quality of its people, and the resilience of its business model will ensure 2022 will be another year of growth for Macfarlane. Its expectations for the full year 2022 are unchanged.

The interim dividend has increased to 0.90p per share (H1 2021: 0.87p per share).

1,000-plus staff Macfarlane Group’s share price was down by 3.11% on yesterday’s close at the time of writing today (25 August) at 110.45p.