Macfarlane knew back in 2009 that it wasn't likely to receive any help from a struggling UK economy, so decided to help itself. The packaging materials group is now feeling the benefit and using spare cash to repay debt. Its sizeable pension deficit has been trimmed, too, making the generous dividend far less vulnerable - all of which leaves the shares looking attractive.
Weak demand and price deflation caused a small drop in sales during the period, yet profit before tax and one-offs grew nearly two-thirds to £1.5m. A tight grip on costs meant gross margin at the core packing materials division jumped by 120 basis points, driving underlying operating profit there up 33 per cent. Macfarlane is doing more third-party logistics work, too, supplying the materials and expertise to transport companies such as DHL and Eddie Stobart. Margins improved at the much smaller manufacturing division, which makes labels and bespoke packaging for automotive and aerospace parts, and profits there rose to £0.29m from £61,000. Generating £1.4m of cash from operations was impressive and more is promised in the traditionally busier second half, suggesting that borrowing will keep falling.
Broker Oriel Securities has pencilled in adjusted full-year pre-tax profit of £5.2m, giving adjusted EPS of 3.5p (£4.3m and 3p in 2011).
MACFARLANE (MACF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 20p | MARKET VALUE: | £22.7m | |
| TOUCH: | 19.5-20.5p | 12-MONTH HIGH: | 23.5p | Low: 17p |
| DIVIDEND YIELD: | 7.8% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 22p* | NET DEBT: | 31% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 68.5 | 0.92 | 0.62 | 0.5 |
| 2012 | 68.0 | 3.17 | 2.03 | 0.5 |
| % change | -1 | +245 | +227 | - |
Ex-div: 12 Sep Payment: 11 Oct *Includes intangible assets of £25.9m, or 23p a share | ||||
