MACFARLANE Group, the Glasgow-based packaging firm, has reinforced its confidence of winning work in Europe despite the clock counting down to a no-deal Brexit.
Unveiling its results for 2018, which revealed a ninth consecutive year of profits growth, chief executive Peter Atkinson said the company is working on deals with four key clients to expand their presence in northern Europe this year.
The work is progressing despite the political deadlock at Westminster, with the UK Government so far unable to win support from Parliament on a withdrawal deal. The UK is scheduled to leave the European Union (EU) on March 29 amid fears that without a deal Scottish GDP and exports will be hammered.
READ MORE: Macfarlane ramps up Euro expansion plans
Macfarlane currently has a presence in the European mainland through its membership of the Novupak sales alliance with continental firms Moonen and Boxen, and Mr Atkinson said: “We had our European strategy in place way before Brexit appeared on the horizon.
“Our approach is very much customer-driven, because we have UK customers who either have foreign subsidiaries, or UK customers that are headquartered outside the UK, and they are wanting us to extend our reach and service into Europe.
“Currently we have got four key customers that we are working with to provide with a service in Europe, mainly the Benelux countries and Europe. We would expect a number of those to come to fruition in 2019.”
READ MORE: Glasgow firm makes it eight in a row
Asked whether the company has been stockpiling materials in anticipation of a no-deal Brexit, Mr Atkinson replied: “Like a lot of companies, we have worked with our customers, worked with our suppliers [and] done some strategic stockbuilding. We still have some strategic stockbuilding to do. Clearly, we are assuming it is going to be
difficult [and] challenging, so we are planning and preparing accordingly.”
Macfarlane, which provides protective packaging to e-commerce retailers such as Dunelm, Urban Outfitters and Body Shop, highlighted the impact made by recent
acquisitions as pre-tax profits increased by
17 per cent to £10.9 million in a year.
The results, which revealed an 11% rise in revenue to £217.3m, featured a full-year contribution from Greenwoods, a Nottingham firm acquired by Macfarlane in 2017. The period also saw it bring English firms Tyler and Harrison, acquired in 2018, on board.
Mr Atkinson noted all three firms were performing well within the Macfarlane Group and confirmed the firm had a “pipeline” of further acquisitions to assess. He hopes to conclude its next deal “within the next three months”, noting that is likely to involve another company south of the Border.
Macfarlane’s dominant packaging
distribution arm, which provides solutions to e-commerce retailers and the medical and automotive sectors, saw revenue increase by 11% to £189.8m. It noted that 4% of the figure had been generated by organic growth, and 7% from the three companies it acquired over 2017 and 2018.
Asked whether the firm had any concerns about the wider challenges facing the UK high street, Mr Atkinson observed that Macfarlane generates around 20% of its business from the retail sector, with most of that coming from online activity.
“So, to a certain extent we are not exposed to the high street retailer which is where most of the trials and tribulations are at the moment,” he said. “But, clearly, we are watching the sector… but because we are e-commerce-biased, I think we have got less vulnerability than other suppliers into that sector.” He added: “We continue win business in e-commerce retail and alongside that industrial is still 80% of our business and we continue to win business there. I think the balance for us is about right.”
Macfarlane's performance gave the board the confidence to propose a final dividend of 1.65 per share, amounting to a full-year
dividend of 2.3p per share – 10% up on last year.
Speaking generally on trading in 2018, Mr Atkinson said: “Macfarlane is 70 years old this year, [and] to deliver another strong performance both in terms of revenue growth and profits growth is obviously very pleasing. This is our ninth consecutive year of profits growth in the business, and across those nine years we have managed around 15 per cent of profit growth.”
Shares in Macfarlane Group closed down 1.5p, or 1.6%, at 91.5p.
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