Momentum is continuing at Macfarlane Group Plc as evidenced by the Group’s interim results announced on 27th August. Shard has been keeping an eye on developments following our note at the end of July. https://www.shardcapitalstockbrokers.com/downloads/MacfarlaneJuly2015.pdf
Macfarlane Group (LON:MACF) is a market leading packaging group with a 20% share of the market. The company is also a niche manufacturer of labels and protective packaging.
The positive headline to the half yearly report was an increase in first half profit before exceptional items to £1.85m from £1.22m during the same period last year. Group sales were 12% up to £78.6m for the first half 2015; with the largest business within the group, Packaging Distribution, up 16%. Organic growth counted for 7% of this rise with the balance coming from acquisitions. The dividend increased to 0.53p per share. The figures also highlighted an historic millstone around the company’s neck being well managed, with the pension deficit down by £1.8m to £12.1m.
The outlook statement within these results stated that “the Board is confident that its full year expectations will be met”. With second half margins typically stronger; Broker Arden Partners estimate for 2015 sales of £163m and adjusted profit before tax of £7.1m, with net debt dropping to £10m.
Last year’s acquisitions have enhanced a steady and rising organic growth. The UK economy is a driver to Macfarlane’s growth but the company has positioned themselves well to benefit from this and importantly the increase in online retail. Sales to internet retailers accounted for 19% of revenues in the first half 2015 up from 16% in the full year 2014. If online retail continues to grow as it has been then more retailers will be seeking solutions from Macfarlane.
The company’s strategy is to build group revenues to over £180m over the next two years. Further opportunistic earnings enhancing acquisitions may well help, but Macfarlane’s organic growth is noted as they move towards this goal.
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