Macfarlane Group PLC delivered strong growth in 2015 with sales of £169.1m (2014: £153.8m) up 10% on the previous year and profit before tax of £6.8m (2014: £5.6m), 21% up on the previous year. The strong trading performance, which maintained the positive trends achieved in recent years, was achieved through good organic sales growth, the contribution from recent acquisitions, an improved gross margin and effective control of costs.
Trading
The Packaging Distribution business increased sales by 13% to £143.0m (2014: £126.9m). This was achieved through organic growth of 6%, with particular success in the expanding internet retail sector and increased penetration of National Accounts. The good organic sales growth was enhanced by the contributions from One Packaging, acquired in August 2015, and the full year contribution from the acquisitions of Lane Packaging and Network Packaging, concluded in 2014. The growth in sales, combined with an improved gross margin, translated into Packaging Distribution achieving a 17% increase in operating profit to £6.8m (2014: £5.8m).
Sales in our Manufacturing Operations at £26.1m (2014: £26.9m) were 3% down on the previous year. This was partly due to management actions to rebalance the mix of products in our Labels business and the impact of exchange rates and demand weakness, particularly in export markets, in our Packaging Manufacture and Design business. Despite the lower sales, the Division increased operating profit to £1.0m (2014: £0.9m) through the benefits of the better balanced product portfolio and improvements in operational efficiency.
After charging interest, the Group profit before tax amounted to £6.8m (2014: £5.6m).
Dividend
The Board remains committed to providing shareholders with an appropriate return on investment and is proposing a final dividend of 1.29 pence per share, making a full year dividend of 1.82 pence per share, a 10% increase on the prior year’s dividend of 1.65 pence per share. Subject to the approval of shareholders at the Annual General Meeting on 10 May 2016, this dividend will be paid on 9 June 2016 to those shareholders on the register at 13 May 2016.
Net Debt and Pension Scheme
As a consequence of the acquisition undertaken during 2015, the Group’s net bank debt at 31 December 2015 increased to £11.6m from £10.1m at the prior year-end. The Group’s existing bank facilities with Lloyds Banking Group have been extended until June 2019 and have been increased to £25.0 million which will accommodate normal working capital requirements and support acquisition funding. A further option is available to extend the facilities to £30.0m in the period to June 2019.
The Group’s pension deficit reduced broadly in line with the deficit reduction contributions made in the year. At 31 December 2015, the deficit was £11.5m, a reduction of £2.4m from the previous year (2014: £13.9m).
Outlook
The Board is confident that our strategy to position the business to serve key growth markets continues to be effective.
Commenting on the 2015 results, Graeme Bissett, Chairman, said:
“The 21% increase in pre-tax profits represents the sixth consecutive year of profit growth for Macfarlane Group. We will continue to focus on opportunities in sectors with strong growth prospects, including internet retail, third party logistics and National Accounts and deliver high standards of service to all customers. We will also maintain our programme of acquiring good quality businesses to augment organic growth. This strategy has served all stakeholders in our business well in recent years and will continue to do so.
The positive trends seen in 2015 have been sustained in the early part of 2016 and Macfarlane Group has started the year well.”
