finance

Glasgow packaging group reports 'resilient' results



Glasgow-headquartered packaging business Macfarlane Group has reported “resilient performance” ahead of expectations, despite challenging market conditions due to the pandemic.

The 2020 preliminary results showed a 2.1% increase in sales to £230m – up from £225m in 2019 – with profit before tax increasing to £13m – up from £11.9m – and 9.6% ahead of 2019.

Packaging distribution increased sales by 2.6% in 2020 to £201.7m – from £196.7m – with sales revenue from existing customers benefitting from e-commerce, household essentials and medical sectors.

This was partially offset by weaker demand from sectors most affected by Covid-19, namely automotive, aerospace, high street retail and hospitality.

Sales also benefited from the 2019 acquisitions of Ecopac and Leyland Packaging, as well as the January 2020 acquisition of Armagrip.

Growth in sales and margin was partially offset by an increase in bad debt and end of lease property provisions totalling £1.9m, which resulted in packaging distribution achieving a 12.8% increase in operating profit to £14m – up from £12.4m in 2019.

Sales in manufacturing operations at £28.3m were down marginally from £28.5m in 2019, but demand from the food, medical and household essentials sectors in the labels business was more than offset by weaker demand from the aerospace and automotive sectors in the packaging design and manufacture business.

Operating profit for this area decreased to £0.4m last year, from £1.1m the year before.

After net finance costs of £1.4m, group profit before tax totalled £13m, which was £1.1m ahead of 2019.

The board is therefore proposing a final dividend of 1.85 pence per share, amounting to a full year dividend of 2.55p pence per share.

This is compared to the prior year dividend of 0.69 pence per share, which was impacted by the cancellation of the proposed final dividend of 1.76 pence per share, as one of the key Covid-19 cash conservation measures.

The group’s net bank borrowing at the end of 2020 reduced to £0.5m, from £12.7m at the previous year-end. The improved cash position has been achieved primarily through effective management of working capital.

The full benefit of all government support and deferral programmes – totalling £5.4m – was repaid during the year.

Deferred considerations on the Ecopac and Leyland acquisitions in 2019 totalling £1.8m were also paid during 2020.

Group pension deficit also reduced to £1.5m, from £6.5m in 2019.

“There are still significant uncertainties about the duration of disruption caused by lockdowns and the consequential impact on demand levels which means that 2021 will be another challenging year,” read a statement.

“However the board is confident that, given the resilience seen in 2020, the strength of our business model and the commitment of our people, Macfarlane Group will progress in 2021 and is well positioned to benefit when the UK economy begins to recover.”

The group employs more than 850 people at 31 sites, principally in the UK, but also in Ireland, Sweden and Holland.

It has more than 15,000 customers in the UK, Europe and the US, providing more than 600,000 lines to industry sectors including: consumer goods; food manufacturing; logistics; internet retail; mail order; electronics; defence and aerospace.

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