On one side of its business, Macfarlane (MACF) is the UK’s leading distributor of protective packaging materials, by market share. This segment saw 12 per cent sales growth in the first half, 3 percentage points of which was organic, the remainder being the continuing contribution of recent acquisitions. But the gross margin for this segment fell by 20 basis points to 29 per cent, reflecting higher input prices for paper-based products, which the company is still working to recover from its customers. But the operating margin rose by the same proportion to 3.4 per cent, due in part to a “strong cost control ethos”.
Sales were little changed at the group’s manufacturing operations business. But operating profit rose by 29 per cent to £278m, again on the back of falling costs. Within this business, the packaging design and manufacture sales division saw turnover fall 1 per cent, because of slower demand in some market sectors. The labels division delivered a higher gross margin, while sales were broadly flat.
Total net debt fell to £14.6m, down from £16.1m at the year-end, and well within the existing bank facility of £25m. Management expects the second half to see good cash generation, in line with its traditional weighting. The company also reduced its pension deficit from £14.5m to £13.4m through scheduled contributions.
Analysts at Arden Partners forecast adjusted pre-tax profits of £10.4m and EPS of 6.0p, up from £8.9m and 6.4p in 2016.
| MACFARLANE GROUP (MACF) | ||||
| ORD PRICE: | 67p | MARKET VALUE: | £92m | |
| TOUCH: | 67-68p | 12-MONTH HIGH: | 69p | LOW: 53p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 29p* | NET DEBT: | 37% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 81.5 | 2.00 | 1.35 | 0.55 |
| 2017 | 89.8 | 2.54 | 1.53 | 0.60 |
| % change | +10 | +27 | +13 | +9 |
| Ex-div: | 21 Sep | |||
| Payment: | 12 Oct | |||
| *Includes intangible assets of £43m, or 32p a share | ||||
