24.02.2025
This Thursday morning will see Macfarlane Group (LON:MACF) announcing its Final Results for the year to end-December 2024.
The protective packaging products group suffered ‘headwinds’ last year, which could well have eased fractionally its sales and profits for the year.
However, the current year should be showing a noticeable improvement, boosted by the mid-January announced acquisition.
The Business
Headquartered in Glasgow, the Macfarlane Group, which was established way back in 1899, went public in 1973.
The £172m-capitalised group employs over 1,000 people at 40 sites, principally in the UK, as well as in Ireland, Germany and the Netherlands.
It supplies more than 20,000 customers, principally in the UK and Europe.
In partnership with 1,700 suppliers, it distributes and manufactures some 600,000 lines supplying to a wide range of sectors, including: retail e-commerce; consumer goods; food; logistics; mail order; electronics; defence; medical; automotive; and aerospace.
It has two main divisions enabling the group to service a broad range of business customers, supplying them with high-quality protective packaging products which help them to reduce supply chain costs, improve operational efficiencies and sustainability and enhance their brand presentation.
The divisions are:
Packaging Distribution - Macfarlane Packaging Distribution is the leading UK distributor of a comprehensive range of protective packaging products; and
Manufacturing Operations - Macfarlane Design and Manufacture is a UK market leader in the design and production of protective packaging for high-value and fragile products, it assembles timber, corrugated, and foam-based packaging materials and also recovers waste-paper and corrugated boards for recycling.
Recent Acquisition
On Monday 13th January this year, the group announced the £18m acquisition of The Pitreavie Group, in an earnings-enhancing deal.
Pitreavie designs, manufactures and distributes protective packaging, supplying to customers in the food and drink, energy, electronics and industrial sectors, primarily in Scotland.
The acquisition, which employs 159 employees across four locations in Scotland, operates a corrugate box manufacturing plant, newly opened in 2020; a specialist protective packaging manufacturing and assembly facility; a protective packaging distribution business; and a temperature-controlled packaging operation, all supported by in-house design capability.
Effectively a ‘mini-me’ operation, the blend of businesses that Pitreavie operates complements both the Distribution and Manufacturing operations of Macfarlane.
Macfarlane CEO Peter Atkinson stated that:
"Pitreavie is a fast-growing, well-invested company with an experienced management team that is fully committed to the business.
The acquisition represents a unique and exciting opportunity to grow our business in Scotland and provide in-house supply to our businesses in the North of England.
We look forward to working with the team at Pitreavie to support its continued growth and develop opportunities for us to work together to provide our customers with a broader portfolio of protective packaging solutions."
Management Comment
With the end-November issued Trading Update, guiding that this week’s results will be broadly in line with expectations, Aleen Gulvanessian, Chair of the Macfarlane Group, stated that:
Analyst Views
Analysts Robin Speakman and Akhil Patel, at Shore Capital Markets, have a valuation of 150p on the shares, which they state is well supported by cash flow analysis, reflecting positive visibility on cash generation.
The analysts rated the Pitreavie purchase as earnings-enhancing and highly complementary.
Their estimates for the year to end-December 2024, are for slightly lower revenues at £271.4m (£280.7m), with £25.0m (£25.8m) of adjusted pre-tax profits and 11.8p (12.8p) earnings, but with an increased dividend of 3.7p (3.6p) per share.
For the current year, the analysts look for £310.7m sales, £26.6m profits, 12.4p earnings and a 3.8p per share dividend.
Next year, they reckon that the group will see £321.2m of revenues and £27.1m of profits, with 12.6p of earnings and a 4.1p per share dividend.
In My View
Importantly, the recent Pitreavie acquisition opens ‘cross-selling’ opportunities within the food and drink sectors.
The shares are currently just 107.50p, from which level I see the potential of them trading up to the 125p-135p price range within months.
Could this Thursday morning’s announcement help the forward progress?
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