Macfarlane (MACF), the leading UK provider of protective packaging materials, requires a strong second-half performance to make up for these soft half-year figures. Having dogged the company for a few years, pricing pressure continued to drag down margins at Macfarlane's smallest division, labels, despite good sales growth of 5 per cent. At the packaging design and manufacturing division, meanwhile, sales fell by 6 per cent, mainly because a big customer relocated its facility offshore.
The good news was that trading in Macfarlane's core packaging distribution business was solid. Revenues climbed nearly 4 per cent, most of which was organic, although the small acquisition of Lane Packaging in May was beneficial. Nonetheless, pre-tax profits in the division were only held steady as a result of margin pressure.
Looking ahead, Macfarlane's chairman Graeme Bissett reiterated his confidence in previous full-year guidance. He said trading in July and August had been "encouraging", with margins boosted by lower raw material prices and a new printing press. The business is usually somewhat second-half weighted, because roughly 20 per cent of Macfarlane's customers are in the internet retail sector, where Christmas shopping makes up for a large proportion of orders.
Broker Arden Partners forecasts adjusted pre-tax profit of £5.7m this year, giving EPS of 3.8p, rising to £6.1m and 4p in 2015 (from £5.4m and 3.6p in 2013).
MACFARLANE (MACF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 40p | MARKET VALUE: | £46m | |
| TOUCH: | 39-41p | 12-MONTH HIGH: | 49p | LOW: 33p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 22p* | NET DEBT: | 46% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 68.1 | 1.6 | 1.0 | 0.5 |
| 2014 | 70.1 | 1.2 | 0.8 | 0.5 |
| % change | +3 | -25 | -19 | - |
Ex-div: 9 Oct Payment: 16 Oct *Includes intangible assets of £26.9m, or 24p a share | ||||
