Macfarlane on hunt for more deals as profit drives up 15%

● Seventh year in a row of profit gains for Glasgow firm ● Further deals in the pipeline, says chief executive

Packaging and distribution group Macfarlane is on the hunt for more acquisition opportunities after unveiling a seventh year running of profit growth.

The firm, which last year took over three businesses, including the packaging arm of fellow Glasgow-based company Edward Mcneil in a £1.7 million deal, told investors yesterday that it remained hungry for further deals.

Chief executive Peter Atkinson said: “All the acquisitions we’ve done to date have been high quality. We’re not in the business of finding something that’s broken and trying to fix it, and we’re working on a good pipeline of opportunities.

“Realistically, there’s unlikely to be anything in the first half of the year, but we’d be very hopeful as we move into the second half of being able to make some announcement around acquisitions.”

His comments came as Macfarlane posted a pre-tax profit of £7.8m for 2016, up 15 per cent from the £6.8m figure reported for the previous year, on turnover 6 per cent higher at £179.8m. A final dividend of 1.4p was proposed, to be paid on 8 June, lifting the full-year payout by 7 per cent to 1.95p. Macfarlane said sales at its manufacturing arm fell 9 per cent on 2015 at £23.9m as it ended work with lowermargin customers to focus on higher-value resealable labels. Profits dipped to £900,000, from £1m a year earlier.

Sales at its packaging distribution operation grew by 9 per cent to £155.9m, with organic growth recovering after a “challenging” start to the year. Helped by acquisitions, operating profits at the division jumped 16 per cent to £7.8m.

Atkinson said: “It’s really the distribution business, which is more than 80 per cent of the group’s activities, that’s driving the growth and internet retailing has played a key part in that performance.”

The string of takeovers has seen Macfarlane’s net bank borrowing rise to £15.3m, from £11.6m at the end of 2015, and the group said its existing £25m facility with Lloyds, which has the potential to be expanded to £30m, is available until June 2019 to accommodate working capital and acquisition funding.

Chairman Graeme Bissett added: “The 15 per cent increase in pre-tax profits in 2016 represents the seventh consecutive year of profit growth for Macfarlane and the group has started 2017 well.”

Analysts at Arden, which has a “buy” rating, said: “We anticipate earnings growth of 13 per cent in 2017 and note the potential for further acquisition earnings uplift.”