Overall sales decline mitigated by rise in margins
Packaging firm Macfarlane Group has posted a 65 per cent rise in pre-tax profits for the first half of the year to June 30 though turnover was flat at £68 million.
The Glasgow-based group said the rise in profits was the result of an overall improvement in margins.
Profits after tax, including a one-off credit of £1.3 million, came in at £2.3 million for the first half compared with £0.7 million at the same point last year.
The group has also reduced its net debt to £7.8 million, 25 per cent down on the £10.4 million reported for the first half of last year, and its pension deficit by £3.2 million to £17.3 million, despite “further substantial and adverse impact from bond yield movements in the six-month period, over which the group has no control”.
The group has also posted a gain of £1.65 million in the first half as a result of Pension Increase Exchange (PIE) changes made to its defined pension scheme.
Operating profits at the group's packaging distribution business rose 30 per cent on a year ago to £1.7 million, despite demand levels remaining weak in the UK market and price deflation impacting on sales.
Macfarlane said continued volatility with supplier price movements had been “actively managed” resulting in higher gross margins, despite sales flatlining at £55 million.
Gross margins rose from 29.2 per cent last year to 30.4 per cent at the end of the first half of 2012, and new business revenue was “ahead of 2011” the group said.
Chairman Graeme Bissett said the improved profits had come “through the effective management of supplier price movements, improved productivity and a more favourable customer and product mix”.
The board has confirmed it will pay an interim dividend of 0.50 pence per share, in line with last year, but added it remains “cautious” with respect to the full-year dividend, citing the impact of bond yield movements.
Trading in July and August is reported to have been “satisfactory” and in line with expectations, but the company added it expects demand to remain subdued in the second half of this year.
This will be mitigated by expanding its focus on specific industry sectors and “working closely both with our suppliers and customers to maintain gross margins in the remainder of the year”.
Operating profits at the group's manufacturing arm, which makes self-adhesive labels, rose to £0.3 million from £0.1 million last year, despite a five per cent drop in revenue, though gross margins rose from 33.4 per cent to 38.5 per cent over the same period.
Macfarlane Group employs more than 700 people across 22 sites, principally in the UK and Ireland.