According to Macfarlane chief executive Peter Atkinson, the true test of a business comes when times are tough. If a company can do well against weak economic conditions, rising prices and falling demand from customers, that business is worth supporting.
Atkinson knows of what he speaks. At the helm of this Glasgow-based packaging firm for 20 years, Atkinson has steered Macfarlane through downturns, crises and commodity cycles. Through it all, he and his team have delivered consistent growth in profits and dividends, keeping old customers happy, winning new ones and controlling costs.
Macfarlane designs and sells packaging for a range of businesses, from retailers such as Dunelm and Ikea, to industrial or healthcare giants such as Siemens and Thermo Fisher Scientific.
Competition is fierce but Atkinson prides himself on working closely with customers, saving them money by designing boxes that fit products snugly and protect them. The group has also opened two innovation laboratories to ensure it leads on the packaging front.
This part of the business accounts for around three-quarters of its profits. The rest comes from a manufacturing division, which specialises in packaging for high-end, often fragile, products that need care – from eye-testing kit to brake lines for aircraft.
Going places: Macfarlane is expanding and has started to move into Europe
Most Macfarlane customers are feeling the effects of slow economic growth and consumer caution. This translated into a 3 per cent fall in 2023 sales to £281 million. But the group still increased its pre-tax profits by 10 per cent to £26 million and raise the dividend by 5 per cent to 3.59p.
Economic conditions are improving but many businesses remain concerned about the future so Atkinson does not expect a surge in demand any time soon. He is optimistic, however, expecting to deliver continued growth by investing in innovation, working closely with customers and pursuing new ones in resilient markets such as aerospace.
Acquisitions boost returns too and last week, Atkinson unveiled his latest purchase, East Anglia-based Allpack, for a price of £3.25 million. More deals are likely, both here and across the Channel. Macfarlane earns most of its money in Britain but has started to move into northern Europe.
Brokers expect a small increase in sales and profits this year, accompanied by a rise in the dividend to 3.8p. Longer term, Atkinson is deeply ambitious, eyeing up group sales of £500 million over the next few years.
Midas verdict: Midas first recommended Macfarlane in 2012, when the shares were 27p. By 2019, they were 92p and today they are £1.34. Founded 75 years ago from a single room in Glasgow, the business now employs more than 1,000 people and is a top player in its field. Showcasing British resilience at its best, Macfarlane has proved it can deliver for shareholders. A robust, long-term investment.
Traded on: Main Market Ticker: MACF Contact: macfarlanegroup.com
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