Revenue down but profits up at Macfarlane
By Josh White
Date: Thursday 27 Feb 2025
(Sharecast News) - Packaging supplier Macfarlane reported a 4% decline in revenue to £270.4m for 2024 on Thursday, but delivered a 3% increase in pre-tax profit to £20.9m, in line with market expectations.
The London-listed company said its operating profit rose 7% to £23.6m, supported by effective cost management and improved margins, while diluted earnings per share grew 4% to 9.74p.
Its board proposed a final dividend of 2.7p per share, bringing the total dividend for the year to 3.66p, up 2% on 2023.
The packaging distribution division saw revenue decline 7% to £228.8m due to weak customer demand and selling price deflation.
However, gross margins improved to 37.1% from 35.7%, and operating expenses were reduced by 3%.
While adjusted operating profit in the division fell 4% to £20.2m, reported operating profit increased 5% to £17.3m due to changes in the fair value of deferred contingent consideration.
In contrast, manufacturing operations delivered 16% revenue growth to £41.7m, driven by contributions from recent acquisitions, including B&D Group, Suttons and Polyformes.
Adjusted operating profit rose 10% to £7.2m, while reported operating profit increased 13% to £6.3m.
Gross margins remained strong at 43.2%, though slightly lower than the prior year's 44.5% due to selling price deflation.
Macfarlane said it generated £25.4m in net cash from operating activities, down from £33.5m in 2023 as supply chain conditions normalised.
Net bank debt stood at £1.9m at year-end, following £15million acquisitions and capital expenditure.
The company said it secured an improved £40m banking facility, committed until 2027 with options to extend to 2029.
It said its pension scheme surplus remained stable at £9.6m , with no further contributions required.
Looking ahead, Macfarlane said it was focussed on improving profitability and driving efficiencies while integrating its recent acquisitions.
"We expect 2025 to be another challenging year within the markets in which we operate, particularly with increased employment costs resulting from the recent UK Budget and the introduction by the UK Government of Extended Producer Responsibility (EPR) fees," said chair Aleen Gulvanessian.
"Management is taking actions to mitigate these incremental costs and we are working with our customers to help them manage the impact of EPR."
Gulvanessian said the company was starting 2025 with new business momentum as customers increasingly recognised the added-value the company offers both on an environmental and cost-savings basis.
"The recently-announced purchase of the Pitreavie Group demonstrates our continued ability to identify and execute high-quality acquisitions and we have a strong pipeline of opportunities.
"We are well positioned to continue our profitable growth in 2025."
At 1120 GMT, shares in Macfarlane Group were down 1.86% at 105.5p.
Reporting by Josh White for Sharecast.com.
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