Macfarlane Group PLC 2024 Preliminary Results

MACFARLANE GROUP PLC

(“MACFARLANE GROUP”, “THE COMPANY”, “THE GROUP”)

ANNUAL RESULTS 2024

Group profit in line with market consensus

FINANCIAL HIGHLIGHTS

• See notes to the financial information below for reconciliation of Alternative Performance Measures to Statutory Measures.
• Group revenue reduced by 4% to £270.4m (2023: £280.7m).
• Group profit before tax increased by 3% to £20.9m (2023: £20.3m).
• Group adjusted operating profit as a percentage of revenue improved to 10.1% (2023: 9.8%).
• Basic and diluted earnings per share were 9.76p per share (2023: 9.44p per share) and 9.74p per share (2023: 9.34p per share) respectively.

Packaging Distribution

• Packaging Distribution revenue decreased by 7% to £228.8m (2023: £244.9m).
• Continued weak customer demand and selling price deflation have been partially offset by a strong new-business performance and the benefit of the acquisitions of Gottlieb in April 2023 and Allpack Direct in March 2024.
• Gross margins increased to 37.1% (2023: 35.7%) reflecting effective management of input-price changes.
• Operating expenses reduced by 3% through management action.
• Adjusted operating profit decreased by 4% to £20.2m (2023: £21.0m).
• Operating profit increased by 5% to £17.3m (2023: £16.5m) due to the net effect of changes to the fair value of deferred contingent consideration related to acquisitions.

FINANCIAL HIGHLIGHTS

Manufacturing Operations

• Manufacturing Operations achieved revenue growth of 16% to £41.7m (2023: £35.8m) reflecting:
  • contributions from B&D Group, Suttons and Polyformes, acquired across 2023 and 2024; and
  • marginally lower organic sales due to selling price deflation.
• Gross margins have remained strong at 43.2% (2023: 44.5%) with some attrition due to selling price deflation.
• Operating expenses are being well controlled with the 14% increase due to the impact of acquisitions.
• Adjusted operating profit increased 10% to £7.2m (2023: £6.6m).
• Operating profit increased 13% to £6.3m (2023: £5.6m).

Group

• Net cash inflow from operating activities of £25.4m (2023: £33.5m) reflects the unwinding of opening working capital through 2023 due to the easing of supply-chain constraints and stability through 2024.
• Net bank debt was £1.9m on 31 December 2024, following a net cash outflow of £2.4m in the year, after £15.0m (2023: £16.6m) of investment in acquisitions and capital expenditure.
• The Group negotiated an improved banking facility of £40.0m during 2024 which is committed until November 2027, with options to extend to November 2029.
• The pension scheme surplus was £9.6m at 31 December 2024 (31 December 2023: £9.9m) with the Group not required to make further contributions.
• Board proposes a final dividend of 2.70p per share (2023: 2.65p per share) payable on 13 June 2025, taking the total dividend for 2024 to 3.66p per share (2023: 3.59p per share) up 2% on 2023.

CHAIR’S STATEMENT

The markets in which Macfarlane Group PLC operates have been challenging throughout 2024 and the management team has responded effectively, enabling the business to produce a profit performance for the year in line with market consensus.

We have also made good progress on implementing our sustainability agenda which has resulted in a further reduction in our carbon footprint.

The performance of the Group in 2024 has been achieved through the hard work and commitment of our people and I thank them for all their efforts, energy and enthusiasm.

Financial

The Group has delivered resilient financial results through improvement in new-business development, the completion of two high-quality acquisitions and effective control of operating costs. These actions have enabled us to offset sales price deflation and weaker demand.  Management’s effective response to the difficult trading conditions is demonstrated through the improvement in the operating profit margin.

The Group’s strong operating cash flows enabled the continued allocation of capital to invest in the business, fund good-quality acquisitions, progressive dividend payments as well as maintaining a low level of net bank debt.

The Group has negotiated an improved borrowing facility of £40m with Bank of Scotland PLC and HSBC UK Bank plc.  This facility, which is available until November 2027, provides options to extend it by a further two years and by an additional £20m.  It will support the continuing investment in the Group’s organic growth and acquisition strategy in the medium term.

The pension scheme remains in surplus and, following conclusion of the latest triennial valuation, the company is no longer making contributions to the scheme.

Sustainability

In 2024, the Group achieved a reduction in its Scope 1 and 2 carbon emissions and completed the mapping of its Scope 3 emissions.  The Group is committed to reducing its direct impact on the environment through further electrification of our delivery fleet and expanding the use of renewable energy.

We continue to support our customers to help them navigate packaging regulations and to ensure their products are effectively protected using the minimum amount of packaging, made from the most sustainable materials and packed using the most cost-effective processes.

Board Changes

On 1 January 2025, David Stirling was appointed to the Board as an independent Non-Executive Director following the retirement of Bob McLellan on 31 December 2023.  Having previously been Group CEO of Zotefoams plc, David brings extensive listed-company and protective packaging industry experience which will be of significant benefit to the Board.

Proposed Dividend

The Board proposes a final dividend of 2.70 pence per share, amounting to a full-year dividend of 3.66 pence per share (2023: 3.59 pence per share), an increase of 2% on 2023.  Subject to the approval of shareholders at the Annual General Meeting on Tuesday 13 May 2025, the final dividend will be paid on Friday 13 June 2025 to those shareholders on the register on Friday 16 May 2025 (ex-dividend date 15 May 2025).

Outlook

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.  Management is taking actions to mitigate these incremental costs and we are working with our customers to help them manage the impact of EPR.

We start 2025 with new-business momentum as customers increasingly recognise the added-value we can offer both on an environmental and cost-savings basis. The recently-announced purchase of The Pitreavie Group Limited (“Pitreavie”) 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.

Legal Entity Identifier (LEI): 213800LVRYDERSJAAZ73