MACFARLANE Group, the Glasgow-based packaging company, warned there would be no escape from inflationary pressure and slowing demand from e-commerce customers in the second half of the year.
But the company said it remained on track to meet profit expectations for the year – despite expecting continued upward pressure on utility, raw material and labor costs. -work.
Macfarlane announced yesterday that pre-tax profits rose 3% to £8.9million in the six months to June 30. Profits were driven by a 14% rise in sales from continuing operations to £139.2m, with a strong six months at its manufacturing facility helping to offset an anticipated slowdown in e-commerce sales in its main branch of packaging distribution.
Sales in packaging distribution, which peaked during the lockdown, rose 11% to £123.5m, while sales in manufacturing operations jumped 40% to £15.7m sterling.
Chief executive Peter Atkinson told the Herald earnings expectations for the full year have not changed. Property broker Shore Capital expects annual pre-tax profits of £19.2m, up from £18.7m in 2021.
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Mr Atkinson expects the second half to be “very similar” to the first.
He said: “All headwinds are in place and will continue. But we are not changing our outlook for the year – our numbers are going to be solid and we are very confident that the team we have, our experience and knowledge of our market and our proximity to our customers, will allow us to cope to any headwinds that come.
Mr Atkinson said first-half performance had been “solid” and said Macfarlane had “managed cost inflation very well”, adding that gross margins “remained stable at the high end of the range”.
He highlighted the benefit of acquisitions such as Carters Packaging in March 2021 and German company PackMann in May, noting that the latter had “raised Macfarlane’s profile in Europe”. Macfarlane acquired German company PackMann in May and hopes to make another acquisition before the end of the year.
Mr Atkinson said: “The acquisition pipeline we have in the UK and Europe is stronger than it has ever been. There’s certainly an appetite for people looking to sell their businesses and mostly for real reasons – retirement tends to be the main driving force for people looking to sell.
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Alongside his efforts to manage costs, Mr Atkinson highlighted Macfarlane’s investment in a new distribution center in the North West of England, which has resulted in the closure and consolidation of two sites, and in new software for sales, operations and inventory to improve efficiency.
“Despite the headwinds, we continue to execute the strategy we have in place,” Atkinson said.
When asked if Macfarlane had raised employee pay in response to the cost of living crisis, he said the company typically reviews pay annually at the start of the year. A salary increase was implemented in early 2022.
Macfarlane employs over 1,000 people at 37 sites, primarily in the UK. It also has sites in Ireland, Germany and the Netherlands.
Mr Atkinson said: “During the year we made some adjustments where we realized we were out of step with the market and staying competitive. We will take into account market conditions as we approach the end of this year and adjust our annual increase to remain competitive and ensure that our employees are well rewarded.
New clients Macfarlane secured in the first half included Moonpig, Lloyds Pharmacy and Neal’s Yard.
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Macfarlane, meanwhile, announced Aleen Gulvanessian, who joined the board in October 2021 and chairs compensation, as successor to Stuart Paterson as chairman.
Mr. Atkinson praised Mr. Paterson’s strong contribution over his nine years on the board, as a non-executive and chairman, and said Ms. Gulvanessian brings extensive legal and corporate experience. at this post. Mr Atkinson said: “She has been very impressive for the first 12 months and I really look forward to working with her.”
Mr. Paterson, who will step down on September 30, said: “I wish Aleen, the Board and all Macfarlane employees continued success in the future and thank them for their excellent support during my tenure as Chairman and Non-Executive Director of the Macfarlane Group. .”
The company has increased its interim dividend to 0.9 pence per share from 0.87 pence, which will be paid on October 13.
The shares closed down 3.5% at 110p.