Macfarlane (MACF) weathered a weak retail backdrop and economic uncertainty to deliver full-year profit growth for the 10th consecutive year. The packaging distributor and manufacturer’s gross margin grew 9.2 per cent, with falling raw material input costs helping Macfarlane’s dominant distribution business lift its margin from 29.4 per cent to 31.1 per cent. “We’ve been able to hold on to those price reductions for a longer period than we would normally do before returning those to customers,” said chief executive Peter Atkinson.
The increase in overhead costs is largely linked to the acquisitions it made during the year. But acquisitions also supported 4 per cent sales growth in packaging distribution, offsetting weaker demand from existing customers and price deflation, contributing £5.7m in the year. The group conducted two deals in 2019 and acquired another business in Teesside, which it is consolidating with existing Teesside businesses.
Macfarlane typically funds acquisitions of less than £5m with debt and conducts a placing for anything above this threshold. It raised about £17m through placings in 2014, 2016 and 2017. Finance director John Love did not rule out a placing for this year, depending on which acquisitions the company plucks from its pipeline.
Macfarlane is cutting back on its geographic footprint as part of a bid to control operating costs, rowing back from its current 30 sites to around 12-15. It closed its Enfield site in the year, which is expected to boost 2020 profits by around £500,000.
House broker Arden Partners forecasts adjusted pre-tax profits and EPS of £15.9m and 8.4p in 2020, rising to £17.1m and 9p in 2021.
| MACFARLANE (MACF) | ||||
| ORD PRICE: | 98p | MARKET VALUE: | £155m | |
| TOUCH: | 96-100p | 12-MONTH HIGH: | 116p | LOW: 91p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 44p* | NET DEBT: | 56%** | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 169 | 6.8 | 4.4 | 1.8 |
| 2016 | 180 | 7.8 | 4.7 | 2.0 |
| 2017 | 196 | 9.3 | 5.2 | 2.1 |
| 2018 | 217.3 | 11.2 | 5.6 | 2.3 |
| 2019 | 225.4 | 12.0 | 6.2 | 2.45 |
| % change | +4 | +7 | +11 | +7 |
| Ex-div: | 14 May | |||
| Payment: | 04 Jun | |||
| *Includes intangible assets of £62.7m, or 39.7p a share **Includes lease liabilities of £26m | ||||
