27.02.2025
This morning’s announcement by the protective packaging solutions specialist, the Macfarlane Group (LON:MACF), of its Annual Results for December 2024 were up to expectations.
The markets in which the group operates were challenging throughout 2024 and it reported that its management team had responded effectively, enabling the business to produce a profit performance for the year in line with market consensus.
The group reported revenues were down 4% at £270.4m (£280.7m), while adjusted pre-tax profits were 3% lower at £24.97m (£25.85m), with earnings some 5% easier at 11.56p (12.21p) per share.
The Business
The £173m-capitalised Macfarlane Group, which was founded over 75 years ago and has been listed since 1973, is a prominent company specialising in the design, manufacture, and distribution of protective packaging products.
Its headquarters is located in Glasgow, with a network of regional distribution centres to support its operations.
It operates primarily in the UK, Ireland, and Continental Europe.
Macfarlane Group's business is divided into two main segments:
1. Packaging Distribution: This segment accounts for 85% of the group's sales and involves distributing protective packaging materials to various business sectors
2. Packaging Design and Manufacture: This segment makes up 15% of the group's sales and focuses on creating bespoke packaging solutions for high-value items
Outlook
The group stated that it expects 2025 to be another challenging year within the markets in which it operates, particularly with increased employment costs resulting from the recent UK budget and the introduction by the UK Government of Extended Producer Responsibility fees.
Its Management is taking actions to mitigate these incremental costs and is working with group customers to help to manage the impact of EPR.
It noted that it started 2025 with new-business momentum as customers increasingly recognised the added value that the group can offer both on an environmental and on a cost-savings basis.
The recently-announced purchase of The Pitreavie Group demonstrates the group’s continued ability to identify and execute high-quality acquisitions and it still has a strong pipeline of opportunities.
Confidently the Management declared that the group is well-positioned to continue its profitable growth in 2025.
Analyst’s View
Analysts Robin Speakman and Akhil Patel, at Shore Capital Markets, have a 150p per share cash flow analysis-supported valuation on the group’s shares.
Their estimates for the current year revenues to end-December 2025 are for £301.1m, with £25.8m adjusted pre-tax profits, generating 12.1p in earnings and paying a 3.7p dividend per share.
Sales of £320.6m next year could see £26.4m profits, 12.3p earnings and a 3.8p dividend per share.
The analysts stated that much strategic progress had been made, resulting in Macfarlane becoming a more diverse, resilient, profitable and higher-quality business.
In My View
These shares are trading well-below their value at the current 106p, and I now see a gradual move up to the 120p/130p range within months.
Comments