PETER Atkinson, the chief executive of Glasgow-based Macfarlane Group, said the packaging business was poised to make its third acquisition this year as it continues its strategy of consolidating the fragmented UK marketplace.
“The UK packaging distribution market that we operate in is worth about £800 million per annum,” Mr Atkinson explained to shareholders at the group’s annual meeting in Glasgow. ”We are the most significant individual player with 20 per cent market share. But the market is very fragmented and, in terms of growth opportunities, there is still 80 per cent to go for.”
Following the acquisitions of Teesside-based Colton Packaging and Glasgow-based Edward McNeil in recent months, Mr Atkinson said the company was ‘well advanced’ with a third acquisition that should complete early in the second half of the year.
“We’ll probably have a pause at that point,” he continued. “But then we have a pipeline of opportunities that we’re working on to take us into 2017 and beyond.”
Distributing protective packaging such as cardboard boxes, bubble wrap and air pillows to customers including Asos, Lakeland, Bosch, Superdry, DHL and Selfridges now accounted for 80 per cent of the group’s business, Mr Atkinson said.
“As we as consumers buy more and more products over the web, the greater the need for protective packaging,” he added. “In terms of market trend, there is no evidence that’s going to change over the next three to seven years. Ecommerce is predicted to grow at 12 to 15 per cent per annum probably for the next seven to eight years – and that’s a significant opportunity for Macfarlane.”
In a trading update, the company said group sales in the year to date had grown by 3 per cent, reflecting ‘subdued market conditions’ that were ‘more than offset’ by the benefit of the acquired businesses.
“From this base and recognising the influence of the ecommerce sector in the second half of the year, the board is confident that Macfarlane Group will perform in line with its expectations for 2016,” said chairman Graeme Bissett.
Sales in packaging distribution were ahead 4 per cent compared to 2015. But manufacturing sales – covering Macfarlane’s labels and packaging design and manufacture operations – fell 3 per cent compared to the same period in 2015 – partly due to weaker demand.
Macfarlane said its new £300,000 packaging innovation lab in Milton Keynes had been well received by its customers and should help accelerate a ‘strong new business pipeline’ in the rest of 2016.
Net debt is up from the 31 December 2015 year end, reflecting the ‘normal seasonal uplift in working capital and recent acquisitions’. “The group continues to operate well within its existing bank facilities,” Mr Bissett said.
Source : heraldscotland.com