According to Peter Atkinson, CEO of Macfarlane, the true test of a business comes when times are tough. If a company does well in weak economic conditions, rising prices and falling customer demand, that business is worth supporting.
Atkinson knows what he’s talking about. At the helm of the Glasgow-based packaging company for 20 years, Atkinson has steered Macfarlane through recessions, crises and commodity cycles. Through it all, he and his team have achieved consistent growth in profits and dividends, keeping old customers happy, winning new ones, and controlling costs.
Macfarlane designs and sells packaging for a variety of companies, 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 itself on working closely with customers, saving them money by designing boxes that perfectly fit and protect products. The group has also opened two innovation laboratories to ensure its leadership in the packaging field.
This part of the business represents around three quarters of its profits. The rest comes from a manufacturing division, which specializes in packaging for high-end, often fragile products that need care, from eye test kits to aircraft brake lines.
Going places: Macfarlane is expanding and has started moving into Europe
Most Macfarlane customers are feeling the effects of slow economic growth and consumer caution. This translated into a 3 per cent drop in sales in 2023 to £281 million. But the group still increased its pre-tax profits by 10 per cent to £26m and increased the dividend by 5 per cent to 3.59p.
Economic conditions are improving, but many companies remain concerned about the future, so Atkinson does not expect an increase in demand in the short term. However, he is optimistic and hopes to achieve continued growth by investing in innovation, working closely with customers and seeking new customers in resilient markets such as aerospace.
Acquisitions also increase profitability and last week Atkinson unveiled its latest purchase, East Anglia-based Allpack, for a price of £3.25 million. More deals are likely to follow, both here and across the English Channel. Macfarlane earns most of his money in Britain, but has begun to move to northern Europe.
Brokers expect a small rise in sales and profits this year, accompanied by a rise in the dividend to 3.8p. Longer term, Atkinson is deeply ambitious, forecasting group sales of £500m in the coming years.
Midas Verdict: Midas first recommended Macfarlane in 2012, when the shares were at 27p. In 2019, they cost 92p and today they cost £1.34. Founded 75 years ago in a single room in Glasgow, the company now employs more than 1,000 people and is one of the leading companies in its field. Showcasing British resilience at its finest, Macfarlane has proven it can deliver on shareholder objectives. A solid, long-term investment.
Traded in: Major Market ticker: MACF Contact: macfarlanegroup.com
