Macfarlane Group confident despite fall in revenue, earnings

Macfarlane Group reported an 8% drop in first-half group revenue on Thursday, to £129.6m, down from £141.6m in the first six months of 2023.

The London-listed company said it managed to mitigate the impact of challenging market conditions, with group profit before tax coming in at £9.7m - a slight decrease from £10m in the same period last year.

Its adjusted operating profit margin improved to 9.7% of revenue, up from 9.1% a year ago, as a result of effective cost management.

However, earnings per share saw a minor decline, with basic and diluted earnings per share at 4.55p and 4.51p, respectively, compared to 4.74p and 4.70p in the first half of 2023.

In the packaging distribution segment, revenue fell 11% to £110.9m, primarily due to weak customer demand and price deflation.

Despite that, the acquisitions of Gottlieb in April last year and Allpack Direct in March this year helped to cushion the revenue decline.

Adjusted operating profit in the segment saw a modest decrease of 1% to £9.3m, driven by disciplined input pricing and expense management.

The manufacturing operations segment experienced 6% revenue growth, reaching £18.7m, bolstered by contributions from B&D Group and Suttons, both acquired in 2023.

However, higher operating expenses led to a 5% drop in adjusted operating profit to £3.2m.

The recent acquisition of Polyformes, completed in July, was expected to enhance earnings in the second half.

Macfarlane said its management of working capital generated a net cash inflow from operating activities of £14m, though that was lower than the £20.3m recorded in the first half of last year.

The company ended the period with net bank funds of £0.8m, remaining well within its £35m bank facility, which was secured until December 2025.

Its pension scheme surplus increased slightly to £10.2m as of 30 June, up from £9.9m at the end of 2023.

The board declared an interim dividend of 0.96p per share, to be paid on 10 October.

Looking ahead, Macfarlane Group said it expected its actions in the first half of the year to keep the company's performance broadly in line with market expectations for the full year 2024.

“As outlined in our AGM trading update in May, the challenging market conditions experienced in the latter part of 2023 have continued in 2024,” said chair Aleen Gulvanessian.

“The management team has responded effectively through an improvement in new business growth, the management of price deflation and actions to control operating costs.

“In addition, the group continues to execute its strategy, making two further high-quality acquisitions.”

Gulvanessian said the strength of the firm’s balance sheet, as well as the cash-generative nature of the business, underpinned its ongoing investment in actions to grow sales both organically and through acquisition, and increase the interim dividend.

“Despite market headwinds, our operational and strategic performance is progressing, and the group is well-positioned to benefit as the macroeconomic outlook improves.”

At 1047 BST, shares in Macfarlane Group were down 4.32% at 114.82p.

Reporting by Josh White for Sharecast.com.