MACFARLANE Group has said it expects to remain profitable this year but due to the current uncertainty and concerns around the pace of the potential recovery, it is not possible to provide ‘meaningful guidance’ on trading for the financial year due to end on December 31.
Addressing the group AGM in Glasgow, chairman Stuart Paterson stated, “As previously reported in our Covid-19 update on 30 March 2020, the first quarter of 2020 delivered a strong trading performance with group sales growth of 2% and profitability well ahead of the same period in 2019. The acquisitions made in 2019 both performed to expectations in this period.
“As a result of government actions to address the Covid-19 crisis, we expect demand levels in the second quarter to reduce to between 75% and 80% of those seen in the second quarter of 2019. We are managing our cost base in line with the reduced levels of activity and we would expect the second quarter to be a profitable period of trading albeit well below that achieved in the first quarter.”
Paterson added that customers in the hygiene, household essentials, medical and food sectors continue to demonstrate ‘strong demand’. He said, “These customers play a vital role in helping to meet the challenges of Covid-19 and we continue to support them. All our sites remain operational, we are fully engaged with customers and offering an increasingly flexible service in response to their fast-changing needs. Some sectors we serve, such as automotive, aerospace and certain retail segments, have been materially impacted by the lockdown and their business has reduced significantly as a result.”
Paterson revealed the firm’s intention is to protect the health and wellbeing of its people. Home working programmes have been implemented along with distancing and enhanced hygiene protocols. Around 30% of staff have been furloughed through the Coronavirus Job Retention Scheme.
Net bank debt, which was £12.7 million at the end of last year, has reduced below £6 million, albeit with the benefit of taxation deferrals, board salary reductions and bonus deferrals which in total amount to £4 million.
Paterson added, “Following the actions taken, there remains significant headroom on the group’s principal bank facility of up to £30 million with Lloyds Banking Group, which is available until June 2022. The company is in compliance with the covenants for the facility.
“As a key measure to conserve cash, the board took the decision not to propose the 2019 final dividend at today’s AGM, which will reduce cash outflows by £2.8 million in the second quarter of 2020. The company has been a regular dividend payer for a number of years and the board remains committed to providing dividend income to shareholders. Once trading has recovered in line with more normal levels and we have more clarity about the longer-term outlook, the board’s intention is to recommence dividend payments either by augmenting regular dividends or by declaring a special dividend.”
Paterson concluded his statement by revealing that further announcements will be made on the anticipated 2020 performance when the board has more clarity.