REG - Macfarlane Group PLC - Annual Results 2025
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RNS Number : 4455U Macfarlane Group PLC 26 February 2026
26 February 2026
MACFARLANE GROUP PLC
("MACFARLANE GROUP", "THE COMPANY", "THE GROUP")
ANNUAL RESULTS 2025
Group profit in line with revised market consensus
FINANCIAL HIGHLIGHTS
2025 2024 Increase/
£000 £000
%
(Decrease)
£000 £000 %
Statutory measures
Revenue 300,810 270,437 11%
Gross profit 112,171 105,372 6%
Operating profit 12,495 23,597 (47%)
Profit before tax 8,050 20,896 (61%)
Profit for the year 6,316 15,530 (59%)
Interim and proposed final dividend (pence) 3.66p 3.66p -
Diluted earnings per share (pence) 3.98p 9.74p (59%)
Alternative performance measures (1)
Adjusted operating profit 19,689 27,402 (28%)
Adjusted profit before tax 15,573 24,969 (38%)
Adjusted diluted earnings per share (pence) 7.62p 11.56p (34%)
(1 ) See below for reconciliation of Alternative Performance
Measures to Statutory Measures.
Key Financial Highlights
· Group revenue increased by 11% to £300.8m (2024: £270.4m) and
operating profit reduced to £12.5m (2024: £23.6m).
· Group adjusted operating profit reduced by 28% to £19.7m (2024:
£27.4m).
· Group adjusted operating profit as a percentage of revenue decreased
to 6.5% (2024: 10.1%).
· No provision has been made in respect of the outcome of the
investigation into the Pitreavie incident.
· Basic and diluted earnings per share were 3.99p per share (2024:
9.76p per share) and 3.98p per share (2024: 9.74p per share) respectively.
· The Board proposes to maintain the final dividend at 2.70p per share
(2024: 2.70p per share) payable on 12 June 2026, taking the total dividend for
2025 to 3.66p per share (2024: 3.66p per share).
· Packaging Distribution generated revenues of £229.2m (2024:
£228.8m) with adjusted operating profit of £11.4m (2024: £20.2m).
· Manufacturing Operations generated revenues of £78.5m (2024:
£47.5m) with adjusted operating profit of £8.3m (2024: £7.2m).
· Net cash inflow from operating activities of £24.8m (2024: £25.4m)
reflects continued effective management of working capital.
· Net bank debt was £16.2m on 31 December 2025, following a net cash
outflow of £14.2m in the year, after £25.3m (2024: £21.1m) attributable to
acquisitions, the share buyback, dividends and net capital expenditure.
· The Group is operating well within its bank facility of £40.0m which
runs until November 2028, with an option to extend to November 2029.
· As we prepare the pension scheme for buy-in, a non-recurring charge
of £1.9m was accrued in 2025 to recognise an increase in the expected cost of
historic equalisation of pensions. The pension scheme surplus, after
reflecting the charge, was £6.0m at 31 December 2025 (31 December 2024:
£9.6m).
CHAIR'S STATEMENT
2025 was a difficult year for the Group, however revenue increased 11% and
profit, although below 2024, was in line with the revised market expectations.
We were deeply saddened to report in October 2025 the loss of one of our
colleagues in a tragic incident at the corrugate manufacturing facility of The
Pitreavie Group Limited ("Pitreavie"), acquired in early 2025. Our thoughts
remain with all those affected and we continue to provide support to ensure
their wellbeing. The incident remains under investigation by the authorities.
During the year we experienced economic headwinds and uncertainty creating a
particularly competitive trading environment and material increases in
operating costs which, together with the impact of the Pitreavie incident,
resulted in a marked impact on the Group's financial performance.
Trading Performance
Packaging Distribution profits were significantly below 2024 as the business
experienced weaker-than-expected demand, delays in new business decision
making, pressure on gross margins from a more intense trading environment and
increased labour and property-related costs. The business continued to
invest in strengthening its management and sales teams during 2025.
Manufacturing Operations, excluding Pitreavie, performed well. The performance
was driven by a good contribution from the acquisition of Polyformes Limited
("Polyformes") in July 2024 combined with stronger demand from customers,
particularly in the defence, space and aerospace sectors.
Pitreavie was acquired to strengthen our business in Scotland and offer
in-house corrugate supply. We expected Pitreavie to be a significant
contributor to the Group in 2025, but its performance was well below
expectations, mainly due to the impact of the tragic incident. The recently
announced £1.2m investment in new equipment will return the business to full
operational capacity in Q2 2026, helping to accelerate the process of recovery
and support future growth.
Cash Flow and Bank Borrowings
The Group's strong operating cash flows enabled the allocation of capital to
invest in the business, fund acquisitions, purchase shares and to support our
dividend policy with a low level of net bank debt. The Group extended its
borrowing facility of £40m with Bank of Scotland PLC and HSBC UK Bank plc to
November 2028 and retains options to extend by one further year and to
increase the facilities by up to £20m.
Pension Scheme
The Group is positioning the pension scheme for a possible buy-in to reduce
future risk and minimise any further requirement for cash contributions. As
part of this process, a non-recurring charge of £1.9m was accrued in 2025 to
recognise an increase in the expected cost of historic equalisation of
pensions.
Capital Allocation
The Board proposes to maintain the final dividend at 2.70 pence per share,
amounting to a full-year dividend of 3.66 pence per share (2024: 3.66 pence
per share). Subject to the approval of shareholders at the Annual General
Meeting on Tuesday 12 May 2026, the final dividend will be paid on Friday 12
June 2026 to those shareholders on the register on Friday 15 May 2026
(ex-dividend date 14 May 2026).
The Group has spent £2.1m by 31 December 2025 of the £4m share buyback
programme which commenced in June 2025.
Sustainability
In 2025, the Group achieved a reduction in its Scope 1 and 2 carbon
emissions. The Group is committed to reducing its direct impact on the
environment through electrification of our delivery fleet and expanding the
use of renewable energy through the installation of solar panels at more of
our operating locations.
We continued to work with our customers to reduce the environmental impact of
their packaging operations with a particular focus in 2025 on supporting our
customers in the retail sector to navigate the challenges of the Extended
Producer Responsibility ("EPR") regulations that came into effect during the
year.
Outlook
In 2026 we anticipate markets and the competitive environment to remain
challenging.
Management is focused on actions to improve the performance of Packaging
Distribution, to recover the Pitreavie business and to continue the
development of our specialist Manufacturing Operations. Management priorities
for 2026, which are expected to accrue benefits weighted towards the second
half of the year, are to:
· Focus new business development primarily in industrial markets to
optimise the benefits of our product/ service offer for customers
· Improve operational efficiency through targeted cost savings
· Refine our sourcing model to reduce input pricing
· Recover the Pitreavie performance, benefitting from the recently
announced replacement investment in corrugate production capacity
Whilst acquisitions are not anticipated in the short term, the Group continues
to work on the acquisition pipeline for the future.
The Board is confident that effective execution of the key priorities
identified will create forward momentum for the Group.
The table below reconciles alternative performance measures to statutory
financial measures.
Alternative Performance Measures Amortisation £000 Goodwill Impairment Deferred Contingent Consideration Adjustments IAS19 Past Service Cost Adjustment Tax Statutory Measures
£000 £000 £000 £000 £000 £000 £000
Year to 31 December 2025
Adjusted operating profit 19,689 (5,171) (1,625) 1,532 (1,930) - 12,495 Operating profit
Adjusted profit before tax 15,573 (5,171) (1,625) 1,203 (1,930) - 8,050 Profit before tax
Adjusted diluted earnings per share (pence) 7.62p (3.26)p (1.03)p 0.76p (1.22)p 1.11p 3.98p Diluted earnings per share (pence)
Year to 31 December 2024
Adjusted operating profit 27,402 (4,610) - 805 - - 23,597 Operating profit
Adjusted profit before tax 24,969 (4,610) - 537 - - 20,896 Profit before tax
Adjusted diluted earnings per share (pence) 11.56p (2.89)p - 0.34p - 0.73p 9.74p Diluted earnings per share (pence)
Further enquiries: Macfarlane Group Tel: 0141 333 9666
Aleen Gulvanessian Chair
Peter Atkinson Chief Executive
Ivor Gray Finance
Director
Spreng Thomson
Callum Spreng Mob: 07803 970103
Legal Entity Identifier (LEI): 213800LVRYDERSJAAZ73
Notes to Editors:
· Macfarlane Group PLC has been listed on the Premium segment of the
Main Market of the London Stock Exchange (LSE: MACF) since 1973 with over 75
years' experience in the UK packaging industry.
· Through its two divisions, Macfarlane Group services a broad range of
business customers, supplying them with high quality protective packaging
products which help customers reduce supply chain costs, improve operational
efficiencies and sustainability and enhance their brand presentation. The
divisions are:
o Packaging Distribution - Macfarlane Packaging Distribution is the leading UK
distributor of a comprehensive range of protective packaging products; and
o 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.
· Headquartered in Glasgow, Scotland, Macfarlane Group employs over
1,200 people at 42 sites, principally in the UK, as well as in Ireland,
Germany and the Netherlands.
· Macfarlane Group supplies more than 20,000 customers, principally in
the UK and Europe.
· In partnership with over 2,000 suppliers, Macfarlane Group
distributes and manufactures to a wide range of sectors, including: logistics;
electronics; defence; medical; automotive; aerospace; retail e-commerce; and
food.
BUSINESS REVIEW
Group
Group revenue increased by 11% and adjusted operating profit reduced by 28% in
2025. This reflects:
· the challenging economic conditions in our Packaging Distribution
business,
· the under performance of the Pitreavie business acquired in January
2025 and the impact of the tragic incident at its manufacturing site in
Cumbernauld,
· a strong performance from our Manufacturing Operations underpinned by
the Polyformes acquisition in 2024.
The Group has also made good progress against its ESG objectives, details of
which will be set out in the Annual Report and Accounts 2025.
Revenue Adjusted operating Operating Revenue Adjusted operating Operating
profit profit profit profit
Group performance (1)
2024
2025
£000
2025 £000 2025 2024 2024
£000 £000 £000 £000
Segment
Packaging Distribution 229,150 11,373 6,678 228,763 20,158 17,331
Manufacturing Operations 71,660 8,316 5,817 41,674 7,244 6,266
Group total 300,810 19,689 12,495 270,437 27,402 23,597
% of Revenue 6.5% 4.2% 10.1% 8.7%
(1) See above for reconciliation of Alternative Performance Measures to
Statutory Measures.
BUSINESS REVIEW
Macfarlane Group's trading activities comprise Packaging Distribution and
Manufacturing Operations.
Macfarlane's Packaging Distribution business is the UK's leading specialist
distributor of protective packaging materials, with a growing presence in
Europe. Macfarlane operates in the UK, Ireland, the Netherlands and Germany
from 26 Regional Distribution Centres ("RDCs") and three satellite sites,
supplying industrial and retail customers with a comprehensive range of
protective packaging materials on a local, regional, national and
international basis.
Competition in the packaging distribution market is from local and regional
protective packaging specialist companies as well as national and
international distribution generalists who supply a range of products
including protective packaging materials.
Macfarlane competes effectively on a local basis through its strong focus on
customer service, its breadth and depth of product offering and through the
recruitment and retention of high-quality staff with good local market
knowledge. On a national and international basis, Macfarlane has market focus,
expertise and a breadth of product and service knowledge, all of which enable
it to compete effectively against non-specialist packaging distributors.
Packaging Distribution benefits its customers by enabling them to ensure their
products are cost-effectively protected in transit and storage through the
supply of a comprehensive product range, single source stock-and-serve supply,
just-in-time delivery, tailored stock management programmes, electronic
trading and independent advice on both packaging materials and packing
processes. Through the 'Significant Six' (1) sales approach we reduce our
customers' 'Total Cost of Packaging', improve their sustainability performance
and reduce their carbon footprint. This is achieved through supplying
effective packaging solutions, optimising warehousing and transportation,
reducing damages and returns and improving packaging efficiency.
(1) "Significant Six" represents the six key costs in a customers' packing
process being transport, warehousing, administration, damages and returns,
productivity and customer experience.
Packaging Distribution 2025 2024 2025
£000 £000 Change
Revenue 229,150 228,763 -
Cost of sales (148,372) (143,890) 3%
Gross margin 80,778 84,873 (5%)
Operating expenses (69,405) (64,715) 7%
Adjusted operating profit (2) 11,373 20,158 (44%)
Amortisation (2,803) (3,082)
Deferred contingent consideration (128) 255
IAS19 past service cost (1,764) -
Operating profit 6,678 17,331 (61%)
(2) See above for reconciliation of Alternative Performance Measures to
Statutory Measures.
The main features of Packaging Distribution's performance in 2025 were:
· Organic revenue marginally ahead of 2024, despite weak customer demand
across most sectors, more tactical buying behaviour from customers and the
impact of the EPR legislation on our retail customers.
· New business, at £11.9m, 20% lower than 2024 despite a strong
pipeline, reflecting delays in customer decision-making.
· A reduction in gross margin to 35.3% from elevated levels in 2024 of
37.1% due to competitive pressure on selling prices and one of the Group's
second-tier suppliers going into administration.
· Adjusted operating expenses at 30.3% of revenue (2024: 28.3%) due to
investment in the quality of our sales team, launch of the new website, the
well-documented increases in National Insurance and National Minimum Wage,
additional property costs relating to higher-than-expected rent increases and
excess costs associated with the East Midlands consolidation completed in H2
2025.
· Reduction in adjusted operating profit as a percentage of revenue to
5.0% (2024: 8.8%).
BUSINESS REVIEW
Future
The priorities for Packaging Distribution in 2026 are focused on growing
revenue and improving profitability through the actions set out below:
· Reduce operating costs through efficiency programmes in sales,
logistics and administration.
· Accelerate and convert new business momentum in industrial sectors
where we can most effectively implement the benefits of our leading sales
tools, processes, World Class Sales training and the recent sales recruitment
programme.
· Refine our sourcing model to reduce input pricing.
· Realise the benefits of the new distribution centre in the East
Midlands.
· Accelerate the progress we have made in Europe through our "Follow the
Customer" programme.
· Support our customers to manage the impact of Extended Producer
Responsibility legislation and reduce their carbon footprint through offering
more sustainable packaging solutions.
· Strengthen our key supplier relationships, both nationally and locally.
· Develop both sales and cost synergies through the relationship with our
Manufacturing Operations.
· Achieve benefits from information technology investments and our
relaunched web-based solutions offer to provide customers with more effective
online access to our full range of products and services.
· Continue to develop a pipeline of high-quality acquisitions in the UK
and Europe to be well-positioned to recommence acquisitions from 2027 onwards.
· Maintain our focus on working capital management to facilitate future
investment and manage effectively the ongoing risk within the current weak
economic environment.
Manufacturing Operations comprises our 11 Macfarlane Packaging Design and
Manufacture business units which are focused on the design, manufacture and
assembly of bespoke protective packaging solutions for customers requiring
cost-effective methods of protecting high value products in storage and
transit.
The main materials we use are corrugate, timber and foam and we also design
specialist cases. The businesses supply both directly to customers and through
the national RDC network of the Packaging Distribution business.
Key market sectors are aerospace, space, defence, medical equipment,
electronics, automotive, e-commerce retail, household equipment and food and
drink. The markets we serve are highly fragmented, with a range of locally
based competitors. We differentiate our market offering through technical
expertise, design capability, industry accreditations and national coverage
through the Packaging Distribution business.
BUSINESS REVIEW
Manufacturing Operations Excluding Manufacturing 2024 2025
Pitreavie Pitreavie Operations
2025 2025 2025
£000 £000 £000 £000 Change
Revenue 53,308 25,164 78,472 47,458 65%
Inter-segment revenue (5,277) (1,535) (6,812) (5,784) 18%
External revenue 48,031 23,629 71,660 41,674 72%
Cost of sales (24,671) (15,596) (40,267) (21,175) 90%
Gross margin 23,360 8,033 31,393 20,499 53%
Operating expenses (14,890) (8,187) (23,077) (13,255) 74%
Adjusted operating profit (1) 8,470 (154) 8,316 7,244 15%
Amortisation (1,775) (593) (2,368) (1,528)
Deferred contingent consideration - 1,660 1,660 550
Goodwill impairment - (1,625) (1,625)
IAS19 past service cost (166) - (166) -
Operating profit 6,529 (712) 5,817 6,266 (7%)
(1) See above for reconciliation of Alternative Performance Measures to
Statutory Measures.
The main features of Manufacturing Operations performance in 2025 were:
· An improvement in adjusted operating profit of £1.2m, excluding
Pitreavie, due to:
· An increase in revenue of £5.8m, £4.5m from Polyformes acquired in
2024 and £1.3m organic growth.
· Improvement in gross margin to 43.8% (2024: 43.2%).
· Higher operating expenses, due to the impact of the Polyformes
acquisition and inflation in employee costs, primarily National Insurance and
National Minimum Wage.
· An increase in adjusted operating profit of 16.9% and improvement in
adjusted operating profit as a percentage of revenue to 15.9% (2024: 15.3%).
· An adjusted operating loss of £0.2m from Pitreavie due to:
· The impact of weaker demand from customers and resultant pressure on
gross margins.
· The tragic incident in October 2025 which has resulted in one-off costs
of £0.4m and a material reduction in gross margin due to the outsourcing of
manufacturing to third party suppliers.
The priorities for Manufacturing Operations in 2026 are to:
· Install and commission new equipment at Pitreavie in Q2 2026 with
£1.2m of committed investment to restore the business to full operational
capacity and accelerate the recovery back to profit.
· Continue strengthening the relationship with our Packaging Distribution
businesses to create both sales and cost synergies.
· Increase momentum of new business growth in target sectors, e.g.,
medical, defence, aerospace and space.
· Work with our customers to effectively manage raw material price
changes.
· Achieve both sales and cost synergies through closer working with the
acquired businesses.
BUSINESS REVIEW
RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group and the factors
mitigating these risks are detailed below. These risks are addressed within an
overall governance framework including clear and delegated authorities,
business performance monitoring and appropriate insurance cover for a wide
range of potential risks. There is a dependence on good quality local
management, which is supported by an investment in training and development
and ongoing performance evaluation.
Risks are identified and assessed through a range of "top down" and "bottom
up" analyses that are updated on a regular basis. This in turn provides the
basis for making informed risk-based decisions regarding the scope and focus
of assurance work, as described in the report of the Audit Committee in the
Annual Report 2025. Details on how the Group is managing the Provision 29
requirements of the Corporate Governance Code 2024 and the associated
Directors' declaration on risk management and internal control, which come
into effect from 1 January 2026, and how they relate to the Principal Risks
and Uncertainties are set out in the report of the Audit Committee in the
Annual Report 2025. In addition to scheduled updates from Finance, Health
and Safety, IT, Sales, Procurement, Sustainability and other business
functions, the Board and Audit Committee may seek assurance work in other
areas relevant to the Principal Risks and Uncertainties from time to time,
either from internal sources or through externally commissioned work.
We continue to evolve our risk management processes to ensure they are robust,
effective, and integrated within our decision-making and governance and
internal control processes. We have included a brief description of how we
assess that each risk level has changed in the last year. For risks shown as
[ç è] the risk level is broadly similar between 2024 and 2025. If the risk
is shown as [é ê] the risk level has increased or decreased respectively
during 2025 and is being addressed accordingly through mitigating actions by
management.
We recognise the need to constantly review the risks and uncertainties faced
by the Group and ensure that any emerging risks are being identified and
actions being taken to mitigate them as appropriate. The Group's risk in
relation to health and safety has been elevated from a key divisional risk to
a key corporate risk following the fatal incident at Pitreavie during 2025.
Risk Description Mitigating Factors Change in Risk Level
Uncertain economic environment · To mitigate this risk, executive management monitors monthly revenue Increase é
and cost performance and market trends closely and has action plans to respond
Given the range of prolonged geopolitical and economic uncertainties within to any significant or prolonged trading pressures. · Although inflationary pressures are softening, the UK and EU
the UK and other markets, there is an ongoing risk this will adversely affect
economies have continued to experience challenging economic conditions during
our ability to deliver upon agreed strategic initiatives. We may also need · We have a strong customer proposition that enables us to provide them 2025, and the Group has experienced weakened demand for its products across
to adapt our business quickly to limit the impact upon the Group's results, with more effective cost saving support during uncertain economic times. The many of the markets in which it operates.
prospects and reputation. benefit of our 'stock-and-serve' model is also important for customers as it
aids their effective management of working capital. · The Group has experienced challenges in the Distribution business
This risk is monitored through regular review of trading forecasts and market
where management is responding through control of operating costs, effective
conditions, considered at executive management and Board level. · In the event of a significant and sustained reduction in customer management of input prices, investment in quality sales resource to accelerate
demand the Group would take rigorous actions to reduce operating costs and new business performance and a focus on stable and growing industrial markets.
working capital investment.
· Our cost base can be flexed subject to demand however we will
· The Group has scope to curtail capital expenditure and acquisition continue to target reductions in fixed costs during 2026 to improve this
investment, reduce dividends and pause/suspend share buybacks to preserve flexibility.
cash, if required.
· The Group has secured an extension to its £40m banking facility for
· Mitigating factors set out in the financial liquidity, debt covenants one year to November 2028.
and interest rates risk set out below also apply to the uncertain economic
environment risk.
Risk Description Mitigating Factors Change in Risk Level
Impact of environmental changes · Sustainability is central to our value proposition, utilising our No change ç è
resource, expertise and business assets to support customers to use less and
The markets we operate in are changing, with: better-performing packaging and provide more sustainable alternatives through · The Group recognises the significance of our environmental obligations
our Significant Six selling proposition and customer engagement through our and has continued to make progress, including:
· customers increasingly aware of the environmental impact of their Innovation Labs.
packaging;
· extending the introduction of fully electric trucks to our fleet to
· The Group has a sustainability strategy setting out the key 10 in 2025 (2024: 9);
· environmental regulatory requirements for packaging suppliers, such priorities that are most relevant to the business and which will be key to
as the Plastic Tax introduced in 2022 and the introduction of the Extended mitigating both the transition and physical risks in this area, as set out in · appointing a Supply Chain Compliance Manager to support growing
Producer Responsibility ("EPR") levy during 2025; the Sustainability Report in the Annual Report 2025. compliance demands and to support data quality improvement across the Group;
· possibility of disruption to the operations of the Group through · The Group has a Head of Sustainability who chairs the Environment, · utilising the Innovation Labs to support customers in meeting their
extreme weather events such as flooding, storm damage and water stress, Social and Governance ("ESG") committee consisting of senior leaders from specific sustainability requirements and providing educational seminars
impacting the business directly and disrupting supply chains; across the Group. focused on key environmental issues, including new regulations such as EPR;
· investors looking to invest in companies that demonstrate strong · Regular reviews of our sustainability strategy are carried out at · ongoing actions to support our customers to reduce their CO2
environmental credentials; and Board level to challenge performance against key milestones, as well as to emissions, including using our 'Packaging Optimiser' tool;
ensure that priorities are aligned with stakeholder objectives. This is
· UK Government's commitment to net zero carbon emissions by 2050 and overseen via Key Performance Indicators and regular reporting from the Head of · the Group's Head of Sustainability leading on the impact of
the profound changes that are likely to drive across the economy. Sustainability to the Executive on progress against our priorities. environmental regulatory change, focusing on preparing the business for
compliance with the UK's EPR regulations and building the Group's capability
If the Group is not proactive and transparent in how it is responding to this · The ESG committee oversees progress against the strategy and the to support customers.
agenda, this could lead to a loss of employees, customers and investors. associated targets, addressing challenges proactively. The committee reports
Additionally, there is a transition risk, i.e. that we do not progress our directly to the Board. See the detailed Sustainability Report in the Annual Report 2025.
strategy at the right pace, or we take actions that prove to be incorrect as
technology advances and markets transition. · Compliance readiness for EPR and other regulations is supported by a
dedicated working group;
The Executive interact with investors twice per annum giving them the
opportunity to assess the Group's progress against their expectations. · Progress is monitored through Scope 1, 2 and 3 emissions reporting
and TCFD-aligned disclosures.
The key measure the Group monitors is Scope 1, Scope 2 and Scope 3 CO2
emissions.
Risk Description Mitigating Factors Change in Risk Level
Strategic changes in the market · The Group maintains a well-diversified customer base, providing No change ç è
resilience against changes in specific industry sectors, as well as a flexible
Failure to respond to strategic shifts in the market, including the impact of business model with a strong value proposition to meet the changing needs of · Group businesses, particularly Distribution, have continued to be impacted
weaknesses in the economy as well as disruptive behaviour from competitors, customers. by weak demand for packaging in a number of key markets. Competitive
changing customer needs (e.g. changing customer priorities between online and
pressures have intensified during 2025, including from corrugate manufacturers
physical buying) and the increasing regulatory interventions targeted at · The Group strives to maintain high service levels for customers ensuring entering the distribution space as well as increasing benchmarking activity
improving sustainability could limit the Group's ability to continue to grow that customer needs are met. While enhancing its service offering and range from major customers.
revenues or potentially contribute to a failure to meet market expectations. of products, the Group continues to invest in design, testing and information
technology. These tools are intended to strengthen our business model by · Regulatory interventions such as the Plastic Tax and Extended Producer
Emerging trends such as automation, AI-driven solutions and returnable supporting customer service teams in managing the complex and changing needs Responsibility (EPR) have added complexity to the trading environment.
packaging also present challenges and opportunities that require timely of customers and to respond to the increasingly competitive and dynamic
adaption. operating environment. · During 2026, the Group expects to grow revenues with a strong new
business pipeline supported by investment in new UK National and European
We monitor this through Net Promoter Score, an annual customer satisfaction · The Group maintains strong partnerships with key suppliers to ensure that sales resource, World Class Sales training and continued development of our
survey and regular interaction with customers including at our Innovation a broad range of products is available to respond to customers' requirements, sales tools which demonstrate our value proposition.
Labs. including any changes in their environmental and sustainability priorities.
Maintaining close relationships with key suppliers in the protective packaging · The Group will also focus on strong cost control and continue the
In addition, the Board monitors strategic market developments including market enables us to understand and evaluate key trends and adapt our business effective management of changes in input prices.
significant regulatory changes. model accordingly
· The Group is responding to strategic changes in the market through:
Strategic changes in the market related to sustainability are covered above.
· developing supply chain security as we continue to see consolidation
in our supply base. This includes identifying new suppliers, strategic
partnerships and increasing the level of in-house sourcing.
· refining our acquisition pipeline to support future growth
opportunities;
· continued focus on our 'Follow the Customer' programme in Europe; and
· the continued development of our website to drive growth in our
online offering.
Risk Description Mitigating Factors Change in Risk Level
Supply Chain · The Group works closely with its supplier and customer base to No change ç è
effectively manage the scale and timing of price changes and any resultant
The Group's businesses are impacted by disruption to our supply chains as well impact on profit. Our IT systems monitor and measure effectiveness in these · Group businesses have been impacted by a sustained period of inflation.
as inflationary pressures. changes. This has led to numerous commodity-based raw material price increases and
additional manufacturer uplifts related to fuel/energy and other inflationary
In particular, changes to commodity-based raw material prices, manufacturer · Where possible, alternative supplier relationships are maintained to pressures.
energy costs, foreign exchange movements as well as increased bureaucracy, minimise supplier dependency.
freight and tariff costs related to imports lead to increases to supplier
· However, the strength of our gross margin performance demonstrates the
input pricing and the potential for erosion of profitability within the · We continue to benchmark our supplier base to ensure we have a broad view effectiveness of our price management disciplines.
Group's businesses, if we are unable to pass these onto customers. across the packaging sector.
· Future pricing trends remain uncertain due to the general weak market
This risk is monitored through our procurement teams interacting with key · We work with customers to redesign packs and reduce packing cost to demand.
suppliers and management regularly reviewing the effectiveness of our price mitigate the impact of cost increases, including switching to alternative
change programmes by monitoring gross margins by customer. products to minimise the impact of packaging regulation including the Plastics · There has been significant consolidation and change in
Tax and EPR legislation. ownership/leadership within the supply chain in 2025. We expect the effects of
this to continue to be felt in 2026. To address this we are prioritising the
· The Group has a well-established supplier relationship management process identification of new suppliers, strengthen relationships with our key
which is subject to periodic management review and internal audit. strategic suppliers as well as developing our in-house capabilities.
· We continue to support our customers on Total Cost Management as the
method to add value/reduce costs.
Risk Description Mitigating Factors Change in Risk Level
Health and safety · Health and safety induction undertaken for all new employees, agency Increase é
workers and contractors.
The business is exposed to significant health and safety risks across its
The fatal incident at our Pitreavie site has underlined that the risk to the
manufacturing and distribution operations. A recent fatality at Pitreavie's · Health and safety audit plan ensures all sites are assessed business from health and safety remains significant.
corrugate manufacturing site has highlighted the critical importance of cyclically, or in the event of a specific risk arising.
reinforcing safety culture and operational controls.
The Group has established mitigating factors - including comprehensive
· Health and safety risk reporting system in place - which includes the training, structured inductions, machinery guarding, risk assessments and safe
As people are our most valuable resource, failure to protect their health, reporting and review requirements for incidents, near misses and other safety operating procedures. In addition, our operations are primarily people-led,
safety, and wellbeing could lead to severe human, legal, financial, and related observations. making behavioural safety and cultural engagement essential to risk reduction.
reputational consequences.
· Investigation and review procedures are in place. We continue to cooperate fully in relation to the ongoing investigation into
The Group has zero tolerance for health and safety breaches and is committed
the fatality at Pitreavie. We continue to integrate human factors into all
to achieving industry-leading standards to protect its people. · Onsite reviews conducted regularly by senior managers with monthly aspects of our processes, while continuing to engineer out hazards wherever
inspections that are documented. possible to reduce risk. A full post incident review of all manufacturing
machinery operating across the Group was undertaken and action taken to reduce
· During 2026, two key initiatives are planned to add to our existing potential risks identified.
mitigations. Firstly, we plan to replace our health and safety reporting
system to improve the visibility of hazards and to strengthen the proactive
identification of risk. Secondly, we plan to embed a new Maintenance
Management system to track all statutory and planned preventative maintenance
across our machinery and equipment.
Risk Description Mitigating Factors Change in Risk Level
Cyber security · The Group continually invests in its IT infrastructure to protect against No change ç è
cyber security threats. This includes regular testing of IT Disaster
The increasing frequency and sophistication of cyber attacks is a risk which Recovery Plans. · With increasing geo-political uncertainties, the frequency and
potentially threatens the confidentiality, integrity and availability of the
sophistication of cyber attacks is anticipated to continue to evolve, and the
Group's data and IT systems. · We engage the services of a cyber security partner to perform penetration Group is committed to continually investing in upgrading its infrastructure to
tests to assess potential vulnerabilities within our security arrangements. respond to the changing threats.
These attacks could also cause reputational damage and fines in the event of
personal data being compromised. · This is complemented by a program of cyber security awareness training to · The Group continues to invest in prevention/detection software and
ensure that all staff are aware of the potential threats caused by deliberate education programmes to mitigate the risks of cyber security attacks.
This risk is monitored through an ongoing program of compliance and controls and unauthorised attempts to gain access to our systems and data.
auditing with input from external advisors.
· The Group was awarded Cyber Essentials Plus by the National Security
Centre during 2025, which builds on our Cyber Essentials award during 2024
This demonstrates the Group's commitment to continuous improvement.
· The Group continues to perform regular assessments of its cyber security
resilience and make changes to our defences.
Risk Description Mitigating Factors Change in Risk Level
Acquisitions · The Group carefully reviews potential acquisition targets, ensuring that No change ç è
the focus is on high-quality businesses which complement the Group's existing
The Group's growth strategy has included a number of acquisitions in recent profile and provide good opportunities for growth. · The Group has made 21 acquisitions since 2014, including two in 2024 as
years. There is a risk that such acquisitions may not be available on
well as concluding the Pitreavie acquisition in January 2025.
acceptable terms in the future. · Having completed a number of acquisitions in recent years, the Group has
well-established due diligence and integration processes and procedures. · Pitreavie has performed well below expectations with strong actions in
It is possible that acquisitions will not be successful due to the loss of key
place to recover profits back to the levels expected when the business was
people or customers following acquisition or acquired businesses not · The Group strengthened its European management team with the appointment acquired.
performing at the level expected. This could potentially lead to impairment of a Managing Director in January 2025, with significant experience running
of the carrying value of the related goodwill and other intangible assets. European operations and successfully executing acquisitions. · The Group will continue to develop strong pipeline of potential
protective packaging acquisition opportunities in both the UK and Northern
Execution risks around the failure to successfully integrate acquisitions · The Group's management information system enables effective monitoring of Europe. However, the focus in 2026 will be on the recovery of the Pitreavie
following conclusion of the earn-out period also exist. post-acquisition performance, with earn-out mechanisms also mitigating risk in business.
the post-acquisition period.
This is monitored through regular reporting of acquisition prospects and
· European acquisitions are inherently higher risk due to the potential
post-acquisition performance by executive management, with reporting to the · Goodwill and other intangible assets are tested annually for impairment. effects of cultural differences, challenges in realising operational synergies
Board.
and having less depth in local management and support compared to UK-based
acquisitions. However, there are also important strategic opportunities for
the Group in terms of extending service coverage with our organic "Follow the
Customer" programme as well as other integration synergies.
· Our bank funding arrangements provide flexibility for the potential
funding of future acquisitions alongside debt and shareholder funding options.
Risk Description Mitigating Factors Change in Risk Level
Property · The Group adopts a proactive approach to managing property costs and Increase é
exposures.
The Group has a property portfolio comprising 1 owned site, 1 long leasehold
· Our property consolidation strategy has continued during 2025. There is
and 55 short leasehold sites. This multi-site portfolio gives rise to risks · Where a site is non-operational the Group seeks to assign, sell or no outstanding work on finalising exit costs following the expiry of leases.
in relation to ongoing lease costs, dilapidations, and fluctuations in value. sub-lease the building to mitigate the financial impact. Provisions have been established to cover all known and anticipated exit
costs.
There is a risk that properties aligned with the strategy and business needs · If this is not possible, rental voids are provided on vacant properties
of the Group may not be available both from a timing and commercial taking into consideration the likely period of vacancy and incentives to · The Group currently has no vacant or sub-let properties.
perspective. re-let.
· The Group is managing its exposure to dilapidations and similar property
This risk is monitored on a regular basis and reported to the Board through · The Group engages with external property advisers to assess the level of costs. However, the risk to the Group's future strategy and performance in
internal reporting and input from external advisors. provisioning required for dilapidations and negotiate to minimise the final relation to property matters is increasing. The availability of suitable
costs. properties of the size and quality that the Group requires is becoming
increasingly challenging.
· In addition, rent reviews on existing properties have ranged from 8% to
61% during 2025, resulting in increases to operating costs. Additionally,
local authorities are continuing to recover funds through substantial rates
increases. These are particularly difficult to forecast and quoted increases
are approximately 20%.
Risk Description Mitigating Factors Change in Risk Level
Financial liquidity, debt covenants and interest rates · The Group's borrowing facility comprises a committed facility of £40m No change ç è
plus an additional 'accordion' facility of £20m if required, available until
The Group needs access to funding to meet its trading obligations, to support November 2028 with an option to extend a further year, which finances our · The Group continued to generate strong operating cash flows in 2025,
organic growth and execute acquisitions. There is a risk that the Group may trading requirements and supports controlled expansion, providing a which were invested in replacement and value-adding capital expenditure,
be unable to obtain funds and that such funds will only be available on medium-term funding platform for growth. The Pitreavie business also has a earnings accretive acquisitions, dividends to shareholders and a share buyback
unfavourable terms. £3.25m invoice discounting facility renewed annually. programme with the Group operating well within its bank facilities throughout
the year.
The Group's borrowing facility comprises a committed facility of £40m. This · A twice yearly viability assessment and sensitivity analyses is performed
includes requirements to comply with specified covenants, with a breach by management. · The £40m banking facility plus additional £20m if required, was
potentially resulting in Group borrowings being subject to more onerous
extended one year during 2025 to November 2028. This facility combined with
conditions and the potential for immediate repayment of outstanding loans. · Compliance with covenants is monitored on a monthly basis and sensitivity the conservative management of cash means the risk of not having available
analysis is applied to forecasts to assess the impact on covenant compliance. funds or breaching covenants is relatively low.
The Group regularly monitors net bank debt and forecast cash flows to ensure
that it will be able to meet its financial obligations as they fall due. · The Board reviews the Group's capital allocation strategy and policy on a · The main risk to the availability and cost of funding is maintaining a
regular basis. strong and consistent rolling 12-month EBITDA and continuing to effectively
manage working capital.
· As at 31 December 2025 the rolling 12-month EBITDA was £19.9m, with net
borrowings of £16.2m (gross borrowing £30.5m being £28.0m drawn down on the
£40m Group facility and £2.5m on the £3.25m Pitreavie facility) and
therefore operating well within the available facilities and covenant
requirements.
· Interest rates payable by the Group have reduced in 2025 but are expected
to remain high for some time.
Risk Description Mitigating Factors Change in Risk Level
Working capital · Inventory levels and order patterns are regularly reviewed and risks No change ç è
arising from holding bespoke stocks are managed by obtaining contract or order
The Group has a significant investment in working capital in the form of trade cover from customers. · Although the risk level is broadly similar to 2024, this remains a high
receivables and inventories. There is a risk that this investment is not
risk given the high level of bespoke customer solutions we provide as well as
fully recovered. · Customers who operate in sectors that are likely be significantly the varied customers and industries we service, given the ongoing challenging
impacted by the current economic challenges, particularly those exposed to UK economic trading environment.
This risk is monitored through detailed reporting to local and executive reduced consumer demand and increases in operating costs, are closely
management, which is reviewed in summary form by the Board. monitored. Where necessary, actions are taken to reduce our exposure to · Excluding the impact of the Pitreavie acquisition, aged stock over 6
potential bad debts or stock write-offs. months old has decreased in 2025. The Group is continually working to reduce
stock over 6 months and has adequate provisioning to cover any potential stock
· Credit risk is controlled by applying rigour to the management of trade obsolescence.
receivables by the Head of Credit Control and the credit control team and is
subject to additional scrutiny from the Group Finance Director and Group · Bad debt write-offs in 2025 were below 2024 and remain at a relatively
Financial Controller in line with the Group's credit risk process. low level. The Expected Credit Loss allowance reflects the low level of
historic bad debts in the Group.
· All aged debts are assessed using the Expected Credit Loss model, and
appropriate provisions are made. · The economic environment is expected to remain challenging in 2026.
Management will continue to take all appropriate steps to mitigate this risk
and limit the need for additional provisions or write-offs.
Risk Description Mitigating Factors Change in Risk Level
Defined benefit pension scheme · The scheme was closed to new members in 2002. Benefits for active No change ç è
members were amended by freezing pensionable salaries at April 2009 levels.
The Group's defined benefit pension scheme is sensitive to a number of key The scheme was closed to future accrual during 2022. · The IAS 19 valuation of the Group's defined benefit pension scheme as
factors including volatility in bond/gilt markets, the discount rates and
at 31 December 2025 estimated the scheme surplus to be £6.0m, compared to a
inflation assumptions used to calculate the scheme's liabilities. · A Pension Increase Exchange option is available to offer flexibility surplus of £9.6m at 31 December 2024 due primarily to a non-recurring cost
to new pensioners in both the level of pension at retirement and the rate of for historic equalisation in 2025.
Small changes in these assumptions could cause significant movements in the future increases.
pension surplus.
· The triennial actuarial valuation at 1 May 2023 was completed in
· The investment profile is regularly reviewed to ensure continued February 2024. Due to the positive funding position of the scheme, there is
This risk is monitored through regular input from external pension advisors, matching of investments with the scheme's liability profile. no requirement for the Group to make further deficit repair contributions.
including six monthly IAS19 reviews and triennial actuarial valuations.
· The scheme invests in Liability Driven Investments ("LDI") which · The Group is working with trustees to prepare the scheme for a
There is potential for increased defined benefit obligations as a result of hedge the scheme against movements in the discount rate and inflation. These possible buy-in. As part of this process, a revision of estimated
the Virgin Media case although this is now expected to be mitigated by pending are leveraged instruments which require active investments and divestments to obligations due to historic equalisation has been charged as a non-recurring
legislation. This is monitored through specific interaction with external maintain the level of leverage. cost in 2025.
advisors.
· The Group uses external advisers to provide guidance and support, · Approval will be required from the Group's Board before a decision to
Given the well-funded position of the Scheme the associated risks have reduced where required. proceed with a possible buy-in. The decision at that time will be based on any
significantly. However, given the complexity and age of the Scheme there
requirement for:
remains some likelihood of unknown events that could result in a reassessment · Based on legal opinion provided, the Group has an unconditional right
of the Scheme's defined benefit obligations (particularly as the Scheme is to a refund of surplus assets assuming the full settlement of plan liabilities · Additional cash contributions which will be dependent largely
being prepared for a possible buy-in as a precursor to buy-out) when the in the event of a wind up of the Scheme. Furthermore, in the ordinary course on market pricing.
Scheme's liabilities are audited and adjusted, if the basis of any previous of business the trustees have no rights to unilaterally wind up the Scheme, or
estimations are reassessed. The revision of estimated obligations due to otherwise augment the benefits due to members of the Scheme. Based on these · Indemnities required to cover any uncertainties.
historic equalisation is an example of such reassessment. rights, any net surplus in the Scheme is recognised in full.
There are a number of other risks that we manage which are not considered key
risks. These are mitigated in ways common to all businesses and not specific
to Macfarlane Group.
BUSINESS REVIEW
Viability statement
The Board is required to formally assess that the Group has adequate resources
to continue in operational existence for the foreseeable future and as such
can continue to adopt the going concern basis of accounting. The Board is
also required to state that it has a reasonable expectation that the Group
will continue in operation and meet its longer-term liabilities as they fall
due.
To support this statement, the Board is required to consider the Group's
current financial position, its strategy, the market outlook and its principal
risks. The Board's assessment of the principal risks facing the Group and
how these risks affect the Group's prospects are set out on pages 28 to 39.
The review also includes consideration of how these risks could prevent the
Group from achieving its strategic plan and the potential impact these risks
could have on the Group's business model, future performance, solvency, and
liquidity over the next three years (starting from 1 January 2026).
The Board considers the Group's viability as part of its ongoing programme to
manage risk. Each year the Board reviews the Group's strategic plan for the
forthcoming three-year period and challenges the Executive team on the plan's
risks. The plan reflects the Group's businesses, which have a broad spread
of customers across a range of different sectors. The assessment period of
three years is consistent with the Board's review of the Group strategy,
including assumptions around future growth rates for our business and
acceptable levels of performance.
Financial modelling and scenarios
The Group's existing bank facilities comprise a £40m committed facility with
Bank of Scotland PLC and HSBC UK Bank plc, which is available until November
2028 with an option to extend to November 2029. The Group has experienced
challenging market conditions and been impacted by the Pitreavie incident,
resulting in a marked reduction in profit during 2025, notably in the
Distribution and Pitreavie businesses. The profit expectations for 2026 to
2028 have been reset, based on the lower 2025 profit and reflecting gradual
improvement in the Distribution business, a return to profitability in the
Pitreavie business and stability in the balance of Manufacturing Operations.
The Directors have also considered the longer-term economic outlook for the
UK. Given the current uncertainty of the economic outlook we have modelled a
'severe but plausible downside' scenario as described below. In forming
conclusions, the Directors have also considered potential mitigating actions
that the Group could take to preserve liquidity and ensure compliance with its
financial covenants.
A detailed financial model covering a three-year period is maintained and
regularly updated. This model enables sensitivity analysis, which includes
flexing the main assumptions, including future revenue growth, gross margins,
operating costs, finance costs, working capital management and relevant
contingent liabilities. The results of flexing these assumptions, both
individually and in aggregate, are used to determine whether additional bank
facilities will be required during the three-year period and whether the Group
will remain in compliance with the covenants relating to the current facility.
Whilst the current facilities are committed until November 2028 we have
assumed the Group will take up the option to extend the existing facility for
a further year which will be on the same terms currently in place.
We have modelled a range of scenarios, including a base case, a downside
scenario, a severe but plausible downside and a reverse stress test, over the
three-year horizon. The 'severe but plausible downside' scenario is
conservative in assuming, compared to the base case, revenue reductions of 5%
and gross margin reductions at the rate of 2% in each of the three years, with
no reduction in operating expenses. In this scenario, the Group's management
would take reasonable mitigating actions to reduce operating expenses in
isolation by c 2.2% or c 1.5% in combination with a 25% curtailment of capital
allocated to capital expenditure and dividends to remain in compliance with
all financial covenants throughout the three-year period and not require any
additional sources of financing.
The Group has also modelled a reverse stress test scenario. This models the
decline in revenue that the Group would be able to absorb before breaching any
financial covenants. Such a scenario, and the sequence of events that could
lead to it, is considered to be unlikely, as it requires revenue reductions of
c 8% (a 60% additional decrease to the 'severe but plausible downside'
scenario of a 5% reduction in revenue), compared to the base case, before
there is a breach in financial covenants in the period under review and is
calculated before reflecting any mitigating actions.
BUSINESS REVIEW
Viability statement
Conclusions
Even in the severe but plausible scenario, Macfarlane Group is forecast to
have sufficient liquidity to continue trading, comfortably meeting its
financial covenants and operating within the level of its facilities for the
foreseeable future. However, in this scenario, management would also be able
to take significant mitigating actions to reduce its costs and conserve cash.
For this reason, the Board considers it appropriate for the Group to adopt the
going concern basis in preparing its financial statements.
The Board also has a reasonable expectation that the Group will continue in
operation and meet its longer-term liabilities as they fall due.
Cautionary Statement
The Chair's Statement and the Business Review set out above have been prepared
to provide additional information to members of the Company to assess the
Group's strategy and the potential for the strategy to succeed. It should not
be relied on by any other party or for any other purpose.
This report and the financial statements contain certain forward-looking
statements relating to operations, performance and financial status. By their
nature, such statements involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future. There are
a number of factors, including both economic and business risk factors, that
could cause actual results or developments to differ materially from those
expressed or implied by these forward-looking statements.
These statements are made by the Directors in good faith based on the
information available to them up to the time of their approval of this report.
Nothing in this Preliminary Announcement should be construed as a profit
forecast or an invitation to deal in the securities of the Group.
Responsibility Statement of the Directors
The responsibility statement below has been prepared in connection with the
Company's full annual report for the year ending 31 December 2025. Certain
parts of the full Annual Report are not included within this announcement.
The Directors of Macfarlane Group PLC are
A. Gulvanessian
Chair
P.D. Atkinson Chief Executive
I. Gray
Finance Director
J.W.F. Baird Non-Executive
Director and Senior Independent Director
D.L. Whyte Non-Executive
Director
D.B. Stirling Non-Executive
Director
To the best of the knowledge of the Directors (whose names and functions are
set out above):
· The financial statements, prepared in accordance with UK adopted
International Financial Reporting Standards, give a true and fair view of the
assets, liabilities, financial position and profit for the Company and the
undertakings included in the consolidation taken as a whole;
· The Strategic Report, incorporated into the Directors' Report in the
Annual Report, includes a fair review of the development and performance of
the business and the position of the Company and the undertakings included in
the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face; and
· Pursuant to Disclosure and Transparency Rules, Chapter 4, the
Directors consider that the Company's annual report and financial statements,
taken as a whole, are fair, balanced and understandable and provide
information necessary for the shareholders to assess the Company's and the
Group's position and performance, business model and strategy.
Peter
Atkinson
Ivor Gray
Chief Executive
Finance Director
26 February 2026
26 February 2026
Macfarlane Group PLC
Consolidated income statement
For the year ended 31 December 2025
Note
2025 2024
£000 £000
Continuing operations
Revenue 3 300,810 270,437
Cost of sales (188,639) (165,065)
Gross profit 112,171 105,372
Distribution costs (13,464) (11,165)
Administrative expenses (86,212) (70,610)
Operating profit 3 12,495 23,597
Net finance costs 4 (4,445) (2,701)
Profit before tax 8,050 20,896
Tax 5 (1,734) (5,366)
Profit for the year 6,316 15,530
Earnings per share from continuing operations
Basic 7 3.99p 9.76p
Diluted 7 3.98p 9.74p
Consolidated statement of comprehensive income
For the year ended 31 December 2025
2025 2024
Note £000 £000
Items that may be reclassified to profit or loss
Foreign currency translation differences - foreign operations 282 (150)
Items that will not be reclassified to profit or loss
Remeasurement of pension scheme liability 10 (1,943) (362)
Tax recognised in other comprehensive income
Tax on remeasurement of pension scheme 11 486 91
liability
Other comprehensive expense for the year, net of tax (1,175) (421)
Profit for the year 6,316 15,530
Total comprehensive income for the year 5,141 15,109
Macfarlane Group PLC
Consolidated statement of changes in equity
For the year ended 31 December 2024
Capital
Share Share Redemption Revaluation Own Translation Retained
Capital Premium Reserve Reserve Shares Reserve Earnings Total
Note £000 £000 £000 £000 £000 £000 £000 £000
At 1 January 2024 39,738 13,981 - 70 (16) 171 60,632 114,576
Comprehensive income
Profit for the year - - - - - - 15,530 15,530
Foreign currency translation differences on overseas subsidiaries - - - - - (150) - (150)
Remeasurement of pension scheme surplus 10 - - - - - - (362) (362)
Tax on remeasurement of pension scheme surplus 11 - - - - - - 91 91
Total comprehensive income - - - - - (150) 15,259 15,109
Transactions with shareholders
Dividends 6 - - - - - - (5,750) (5,750)
New shares issued 162 515 - - (21) - (656) -
Purchase of own shares - - - - (392) - - (392)
Share-based payments - - - - - - (270) (270)
Total transactions with shareholders 162 515 - - (413) - (6,676) (6,412)
At 31 December 2024 39,900 14,496 - 70 (429) 21 69,215 123,273
Macfarlane Group PLC
Consolidated statement of changes in equity
For the year ended 31 December 2025
Capital
Share Share Redemption Revaluation Own Translation Retained
Capital Premium Reserve Reserve Shares Reserve Earnings Total
Note £000 £000 £000 £000 £000 £000 £000 £000
At 31 December 2024 39,900 14,496 - 70 (429) 21 69,215 123,273
Comprehensive income
Profit for the year - - - - - - 6,316 6,316
Foreign currency translation differences on overseas subsidiaries - - - - - 282 - 282
Remeasurement of pension scheme surplus 10 - - - - - - (1,943) (1,943)
Tax on remeasurement of pension scheme surplus 11 - - - - - - 486 486
Total comprehensive income - - - - - 282 4,859 5,141
Transactions with shareholders
Dividends 6 - - - - - - (5,822) (5,822)
Purchase of own shares (581) - 581 - (47) - (2,083) (2,130)
Share-based payments - - - - 116 - (16) 100
Total transactions with shareholders (581) - 581 - 69 - (7,921) (7,852)
At 31 December 2025 39,319 14,496 581 70 (360) 303 66,153 120,562
Macfarlane Group PLC
Consolidated balance sheet at 31 December 2025
Note 2025 2024
£000 £000
Non-current assets
Goodwill and other intangible assets 104,933 97,970
Property, plant and equipment 14,945 10,607
Right of Use assets 56,257 41,077
Other receivables 35 35
Deferred tax assets 11 276 145
Retirement benefit obligations 10 6,036 9,636
Total non-current assets 182,482 159,470
Current assets
Inventories 21,234 19,049
Trade and other receivables 58,193 55,015
Current tax asset 1,502 469
Cash and cash equivalents 9 14,383 12,928
Total current assets 95,312 87,461
Total assets 3 277,794 246,931
Current liabilities
Trade and other payables 55,592 50,263
Provisions 138 1,044
Current tax liability 604 1,035
Lease liabilities 9 9,904 7,223
Bank borrowings 9 30,544 14,846
Total current liabilities 96,782 74,411
Net current assets (1,470) 13,050
Non-current liabilities
Deferred tax liabilities 11 11,092 10,937
Deferred contingent consideration - 2,330
Provisions 441 327
Lease liabilities 9 48,917 35,653
Total non-current liabilities 60,450 49,247
Total liabilities 3 157,232 123,658
Net assets 120,562 123,273
Equity
Share capital 12 39,319 39,900
Share premium 12 14,496 14,496
Capital redemption reserve 581 -
Revaluation reserve 70 70
Own shares (360) (429)
Translation reserve 303 21
Retained earnings 66,153 69,215
Total equity 3 120,562 123,273
Macfarlane Group PLC
Consolidated cash flow statement
For the year ended 31 December 2025
Note
2025 2024
£000 £000
Profit before tax 8,050 20,896
Adjustments for:
Amortisation of intangible assets 5,238 4,610
Depreciation of property, plant and equipment and ROU assets 12,831 10,757
Deferred contingent consideration adjustment (1,532) (805)
Goodwill impairment 1,625 -
Loss on disposal of property, plant and equipment 229 39
Share-based credit - (270)
Net finance costs 4,445 2,701
Operating cash flows before movements in working capital 30,886 37,928
Increase in inventories (929) (646)
Decrease in receivables 1,297 1,883
Increase/(decrease) in payables 1,345 (2,233)
Decrease in provisions (980) (359)
Other non-cash movements 325 (150)
Pension scheme administration costs and past service charge 2,180 361
Cash generated by operations 34,124 36,784
Deferred contingent consideration paid - (1,492)
Income taxes paid (4,878) (6,773)
Net finance costs paid (4,466) (3,091)
Cash inflow from operating activities 24,780 25,428
Investing activities
Acquisitions, net of cash acquired 8 (12,897) (10,600)
Proceeds on disposal of property, plant and equipment 187 45
Purchase of software development (81) -
Purchases of property, plant and equipment (4,573) (2,925)
Cash outflow from investing activities (17,364) (13,480)
Financing activities
Dividends paid 6 (5,822) (5,750)
Purchase of own shares (2,130) (392)
Drawdown bank borrowings 68,500 8,386
Repayment of bank borrowings (57,243) -
Repayments of leases (9,266) (8,251)
Cash outflow from financing activities (5,961) (6,007)
Net increase in cash and cash equivalents 1,455 5,941
Cash and cash equivalents at beginning of year 12,928 6,987
Cash and cash equivalents at end of year 14,383 12,928
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
1. General information
The financial information set out herein does not constitute the Company's
statutory accounts as defined in Section 435 of the Companies Act 2006 and has
been extracted from the full statutory accounts for the years ended 31
December 2025 and 2024.
The financial statements for 2025 were approved by the Board of Directors on
26 February 2026. The auditor's report on the statutory financial statements
for the year ended 31 December 2025 was unqualified pursuant to Section 498 of
the Companies Act 2006 and did not contain a statement under sub-section 498
(2) or (3) of that Act.
The financial information for 2024 is derived from the statutory accounts for
2024 which have been delivered to the registrar of companies. The auditor has
reported on the 2024 accounts; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
2. Basis of preparation
The Group's business activities, together with the factors likely to affect
its future development, performance and financial position are set out above.
The Group's principal financial risks in the medium term relate to liquidity
and credit risk. Liquidity risk is managed by ensuring that the Group's
day-to-day working capital requirements are met by having access to committed
banking facilities with suitable terms and conditions to accommodate the
requirements of the Group's operations. Credit risk is managed by applying
considerable rigour in managing the Group's trade receivables. The Directors
believe that the Group is adequately placed to manage its financial risks
effectively, despite any economic uncertainty.
The Group's has a committed borrowing facility of £40m with Bank of Scotland
PLC and HSBC Bank UK plc in place until November 2028. The facility bears
interest at normal commercial rates and carries standard financial covenants
in relation to interest cover and leverage.
The Directors are of the opinion that the Group's cash forecasts and revenue
projections, which they believe are based on appropriate market data and past
experience taking account of reasonably possible changes in trading
performance given current market and economic conditions, show that the Group
should be able to operate within the current facility and comply with its
banking covenants. The Directors have modelled a range of scenarios, including
a base case, a downside scenario, a severe but plausible downside and a
reverse stress test, over the three-year horizon, as set out in the Viability
Statement above.
After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence at least for the next twelve months. For this reason, they continue
to adopt the going concern basis in preparing the financial statements for the
year ended 31 December 2025.
Key sources of estimation uncertainty
The preparation of financial statements requires management to make estimates
and assumptions that affect the amounts reported for assets and liabilities as
at the balance sheet date and the amounts reported for revenues and expenses
during the year. Due to the nature of estimation, the actual outcomes may well
differ from these estimates. The Directors have assessed the impact of climate
change and consider that this does not have a significant impact on these
financial statements. The key sources of estimation uncertainty that have a
significant effect on the carrying amounts of assets and liabilities in the
next twelve months are discussed below:
Retirement benefit obligations
The determination of any defined benefit pension scheme liability is based on
assumptions determined with independent actuarial advice. The key assumptions
used include discount rate, inflation rate and mortality, for which a
sensitivity analysis is provided in Note 10. The Directors consider that those
sensitivities represent reasonable sensitivities which could occur in the next
financial year.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
2. Basis of preparation (continued)
Key sources of estimation uncertainty (continued)
Valuation of deferred contingent consideration
The valuation of deferred contingent consideration at both acquisition date
and the balance sheet date is measured at fair value. This involves the
assessment of forecast future cash flows against earn-out targets agreed with
the sellers of acquired businesses over a period of up to two years. This
assessment is based on the Directors' best estimate using the information
available at the relevant dates. However, there remains a risk that the actual
payment differs from the amount assumed as consideration within the PPA
accounting as detailed in note 8 and from the amount recorded as a liability
at the balance sheet date. Deferred contingent considerations are recognised
as a liability in trade and other payables and are remeasured to fair value of
£2.5m at the balance sheet date, all due within one year, based on a range of
outcomes between £Nil and £3.6m. Trading in the post-acquisition period
supports the remeasured value of £2.5m.
Goodwill impairment
The determination of the value in use of the Pitreavie CGU is based on
assumptions that have inherent uncertainty. At 31 December 2025 the under
performance of the business post-acquisition has resulted in an impairment
charge of £1.6m against the carrying amount of goodwill of Pitreavie. The
Directors have identified the following assumptions as key sources of
uncertainty within the Pitreavie CGU.
Assumption Used at 31 December 2025 Sensitivity
2026 revenue growth rate (1) 11.3% Increase or decrease of 1% in the 2026 revenue growth rate would decrease or
increase the impairment charge by £0.9m respectively
2027 to 2030 revenue growth rate 4.0% Increase or decrease of 1% in the 2027 to 2030 revenue growth rate would
decrease or increase the impairment charge by £1.6m and £2.5m respectively
Growth rate in perpetuity 1.0% Increase or decrease of 1% in the growth in perpetuity would decrease or
increase the impairment charge by £1.2m and £1.0m respectively
WACC rate 12.25% Increase in the WACC rate by 1% would increase the impairment charge by £1.4m
(1) The 2026 revenue growth of 11.3% reflects the recovery of the
Pitreavie CGU post the incident (note 27) supported by £1.2m of investment in
new equipment due to be installed and commissioned in Q1 2026.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
2. Basis of preparation (continued)
Critical accounting judgements
Property provisions of £0.6m have been recognised as at 31 December 2025
(2024: £1.4m), representing the Directors' best estimate of dilapidations on
property leases. The Directors have made the judgement that no provision is
required for certain property leases where there is no intention to exit,
having considered a number of factors including the extent of modifications to
the property, the terms of the lease agreement, and the condition of the
property.
As detailed in note 15 based on information available to date and taking into
account there is very limited information from which to estimate the possible
magnitude or timing of any resultant payments, management currently believes
that the foregoing is not expected to have a material adverse impact on the
Group's Financial Statements. Consequently, no provision has been recognised
in these financial statements in respect of this matter.
Goodwill and other intangible assets acquired through business combinations
have been allocated, for impairment testing purposes, to groups of cash
generating units (CGUs). The identification of the groups of CGUs used for
impairment testing is considered a critical accounting judgement. The
grouped CGUs are Distribution, Manufacturing (excluding Pitreavie), and
Pitreavie. This is also the lowest level at which the Group monitors the value
of goodwill and other intangible assets for internal management purposes.
Changes to the Group's organisational structure, integration of acquisitions,
or changes in management reporting may require the reassessment of CGU groups.
No other significant critical judgements have been made in the current or
prior year.
Alternative performance measures
In measuring the financial performance and position, the financial measures
used in certain limited cases are derived from the reported results in order
to eliminate factors which due to their unusual nature and size distort
year-on-year comparisons to a material extent and/or provide useful
information to stakeholders. Where such items arise, the Directors will
classify such items as separately disclosed and provide details of these items
to enable users of the accounts to understand the impact on the financial
statements.
To the extent that a measurement under Generally Accepted Accounting
Principles ("GAAP") is adjusted for a separately disclosed item, this is
referred to as an Alternative Performance Measure ("APM"). We believe that the
APMs defined below, and the comparable GAAP measurement, provides a useful
basis for measuring the underlying financial performance and position of the
Group and its businesses when compared to similar companies.
Adjusted operating profit is defined as operating profit before customer
relationships and brand values amortisation, goodwill impairment, deferred
contingent consideration adjustments and IAS19 past service costs.
Adjusted profit before tax is defined as profit before tax, customer
relationships and brand values amortisation, goodwill impairment, deferred
contingent consideration adjustments and IAS19 past service costs.
Adjusted diluted earnings per share is defined as diluted earnings per share
before, customer relationships and brand values amortisation per share,
goodwill impairment per share, deferred contingent consideration adjustments
per share, IAS19 past service costs per share and related tax per share.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
2. Basis of preparation (continued)
Alternative performance measures (continued)
Alternative Performance Measures Amortisation £000 Goodwill Impairment Deferred Contingent Consideration Adjustments IAS19 Past Service Cost Adjustment Tax Statutory Measures
£000 £000 £000 £000 £000 £000 £000
Year to 31 December 2025
Adjusted operating profit 19,689 (5,171) (1,625) 1,532 (1,930) - 12,495 Operating profit
Adjusted profit before tax 15,573 (5,171) (1,625) 1,203 (1,930) - 8,050 Profit before tax
Adjusted diluted earnings per share (pence) 7.62p (3.26)p (1.03)p 0.76p (1.22)p 1.11p 3.98p Diluted earnings per share (pence)
Year to 31 December 2024
Adjusted operating profit 27,402 (4,610) - 805 - - 23,597 Operating profit
Adjusted profit before tax 24,969 (4,610) - 537 - - 20,896 Profit before tax
Adjusted diluted earnings per share (pence) 11.56p (2.89)p - 0.34p - 0.73p 9.74p Diluted earnings per share (pence)
Net bank funds/(debt) also represents an APM as defined and reconciled to the
statutory measure in note 9.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
3. Segmental information
The Group's principal business segment is Packaging Distribution, comprising
the distribution of packaging materials and supply of storage and warehousing
services in the UK. This comprises 76% of Group revenue and 53% of Group
operating profit. The Group's Manufacturing Operations segment comprises the
design, manufacture and assembly of timber, corrugated and foam-based
packaging materials in the UK. This comprises 24% of Group revenue and 47% of
Group operating profit.
2025 2024
£000 £000
Packaging Distribution
Total and external revenue 229,150 228,763
Cost of sales (148,372) (143,890)
Gross profit 80,778 84,873
Net operating expenses (69,405) (64,715)
Adjusted operating profit 11,373 20,158
Amortisation (2,803) (3,082)
Deferred contingent consideration adjustments (128) 255
IAS19 past service charge (1,764) -
Operating Profit 6,678 17,331
2025 2024
£000 £000
Manufacturing Operations
Total revenue 78,472 47,458
Inter-segment revenue (6,812) (5,784)
External revenue 71,660 41,674
Cost of sales (40,267) (21,175)
Gross profit 31,393 20,499
Net operating expenses (23,077) (13,255)
Adjusted operating profit 8,316 7,244
Amortisation (2,368) (1,528)
Deferred contingent consideration adjustments 1,660 550
Goodwill impairment (1,625) -
IAS19 past service charge (166) -
Operating profit 5,817 6,266
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
3. Segmental information (continued)
2025 2024
Group Total £000 £000
Packaging Distribution 6,678 17,331
Manufacturing Operations 5,817 6,266
Operating profit 12,495 23,597
Finance costs (4,445) (2,701)
Profit before tax 8,050 20,896
Tax (1,734) (5,366)
Profit for the year 6,316 15,530
Assets Liabilities Net assets
£000 £000 £000
Group segments
Packaging Distribution 193,825 (131,331) 62,494
Manufacturing Operations 83,969 (25,901) 58,068
Net assets 2025 277,794 (157,232) 120,562
Assets Liabilities Net assets
£000 £000 £000
Packaging Distribution 189,768 (110,832) 78,936
Manufacturing Operations 57,163 (12,826) 44,337
Net assets 2024 246,931 (123,658) 123,273
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
4. Net finance costs
2025 2024
£000 £000
Interest on bank borrowings 1,767 950
Interest on leases 2,872 1,921
Net interest income on retirement benefit obligation (see note 10) (523) (438)
Finance charge relating to deferred contingent consideration 329 268
Net finance costs 4,445 2,701
5. Tax 2025 2024
£000 £000
Current tax
United Kingdom corporation tax at 25.0% (2024: 25.0%) 3,540 5,363
Foreign tax 276 795
Adjustments in respect of prior years (215) (58)
Total current tax 3,601 6,100
Deferred tax
Current year (1,867) (899)
Adjustments in respect of prior years - 165
Total deferred tax (see note 11) (1,867) (734)
Total tax charge 1,734 5,366
The standard rate of tax based on the UK average rate
of corporation tax is 25.0% (2024: 25.0%). Taxation for other jurisdictions is
calculated at the rates prevailing in these jurisdictions.
The actual tax charge for the current and previous
year varies from the standard rate of tax on the results in the consolidated
income statement for the reasons set out in the following reconciliation:
2025 2024
£000 £000
Profit before tax 8,050 20,896
Tax on profit at 25.0% (2024: 25.0%) 2,012 5,224
Factors affecting tax charge for the year:-
Deferred contingent consideration adjustments not allowable for tax (301) (134)
Goodwill impairment not deductible for tax 406 -
Non-deductible expenses 224 100
Non-taxable income (398) -
Difference on overseas tax rates 6 69
Changes in estimates related to prior years (215) 107
Tax charge for the year 1,734 5,366
Effective rate of tax for the year 21.5% 25.7%
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
6. Dividends 2025 2024
£000 £000
Amounts recognised as distributions to equity holders
in the year:
Final dividend for the year ended 31 December 2024 of 2.70 per share (2023
- 2.65p per share)
4,302 4,221
Interim dividend for the year ended 31 December 2025 of 0.96p per
share (2024 - 0.96p per share)
1,520 1,529
5,822 5,750
A proposed dividend of 2.70p per share totalling £4,246,000 will be paid on
12 June 2026 to those shareholders on the register at 15 May 2026 (ex-dividend
date 14 May 2026). This is subject to approval by shareholders at the Annual
General Meeting on 12 May 2026 and therefore has not been included as a
liability in these financial statements.
7. Earnings per share
The calculation of the basic and diluted earnings per
share is based on the following data:
2025 2024
£000 £000
Earnings for the purposes of earnings per share
Profit for the year 6,316 15,530
Number of shares in issue for the purposes of calculating basic and diluted 2025 2024
earnings per share
No. of No. of
shares '000 shares '000
Weighted average number of shares in issue 158,774 159,461
Less shares held by the EBT (287) (278)
Weighted average number of shares in issue for the
purposes of basic earnings per share 158,487 159,183
Effect of Long-Term Incentive Plan awards in issue 116 340
Weighted average number of shares in issue for the purposes of calculating
diluted earnings per share
158,603 159,523
Basic Earnings per share 3.99p 9.76p
Diluted Earnings per share 3.98p 9.74p
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
8. Acquisitions
On 10 January 2025, MGUK acquired 100% of The Pitreavie Group Limited
("Pitreavie"), for £10.6m as set out below. In addition, there is potential
contingent consideration of £4.0m payable in the first quarters of 2026 and
2027, subject to certain trading targets being met in the twelve-month period
ending on 31 December 2025 and 31 December 2026 respectively.
The impact of the acquisition of Pitreavie on 2025 results and if the
acquisitions had been completed on the first day of 2025 are set out below:
From date of acquisition If completed 1 January 2025
Revenue Loss Revenue Loss
£000 £000 £000 £000
Pitreavie 25,164 (668) 25,533 (668)
Fair values assigned to net assets acquired and consideration paid and payable
are set out below:
Prior Year 2025
Pitreavie Acquisitions Total
£000 £000 £000
Net assets acquired
Other intangible assets 6,937 - 6,937
Tangible assets (inc. ROU assets) 7,490 - 7,490
Inventories 1,256 - 1,256
Trade and other receivables 4,475 - 4,475
Current tax asset 111 111
Cash and bank balances (note 9) 1,093 - 1,093
Bank borrowings (note 9) (4,441) - (4,441)
Trade and other payables (4,486) - (4,486)
Lease liabilities (note 9) (4,477) - (4,477)
Deferred tax liabilities (note 11) (2,377) - (2,377)
Net assets acquired 5,581 5,581
Goodwill arising on acquisition (note 9) 6,557 - 6,557
Total consideration 12,138 - 12,138
Contingent consideration on acquisitions
Current year (1,577) - (1,577)
Prior years - 3,429 3,429
Total cash consideration 10,561 3,429 13,990
Net cash outflow arising on acquisitions
Cash consideration (10,561) (3,429) (13,990)
Cash and bank balances acquired 1,093 - 1,093
Net cash outflow - acquisitions (9,468) (3,429) (12,897)
Per Cash Flow Statement
Net cash outflow from investing activities (9,468) (3,429) (12,897)
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
9. Analysis of changes in net debt
Cash & cash Bank Lease Net
equivalents borrowing liabilities debt
£000 £000 £000 £000
At 1 January 2025 12,928 (14,846) (42,876) (44,794)
Cash movements 362 (11,257) 9,266 (1,629)
Non-cash movements
New leases - - (9,397) (9,397)
Acquisitions 1,093 (4,441) (4,477) (7,825)
Disposal - - 990 990
Lease modifications - - (12,271) (12,271)
Exchange movements - - (56) (56)
At 31 December 2025 14,383 (30,544) (58,821) (74,982)
Due within one year 14,383 (30,544) (9,904) (26,065)
Due after more than one year - - (48,917) (48,917)
At 31 December 2025 14,383 (30,544) (58,821) (74,982)
Net bank debt 2025 14,383 (30,544) (16,161)
Net bank debt 2024 12,928 (14,846) (1,918)
Cash and cash equivalents (which are presented as a single class of asset on
the face of the balance sheet) comprise cash at bank and other short-term
highly liquid investments with maturity of three months or less. Total
financing liabilities are equal to £89,365,000 (2024: £57,722,000).
10. Pension scheme
Macfarlane Group PLC sponsors a defined benefit pension scheme for former UK
employees - the Macfarlane Group PLC Pension & Life Assurance Scheme
(1974) ("the Scheme"). One of the trading subsidiaries, Macfarlane Group UK
Limited is also a sponsoring employer of the Scheme. The Scheme is currently
in surplus and disclosure of the respective proportions of the Group surplus
are included and disclosed in the financial statements of each of the two
participating employers.
The Scheme is an HMRC registered pension scheme, administered by a Board of
Trustees composed of employer-nominated representatives and member-nominated
Trustees which is legally separate from the Group. The Scheme's investments
are held separately from those of the Group in managed funds under the
supervision of the Trustees. The Trustees are required by law to act in the
interest of all classes of beneficiary in the Scheme and are responsible for
investment policy and the administration of benefits. Macfarlane Group PLC,
based on legal opinion provided, has an unconditional right to a refund of
surplus assets assuming the full settlement of plan liabilities in the event
of a wind up of the Scheme. Furthermore, in the ordinary course of business
the trustees have no rights to unilaterally wind up the Scheme, or otherwise
augment the benefits due to members of the Scheme. Based on these rights, any
net surplus in the Scheme is recognised in full.
The Scheme provides qualifying employees with an annual pension of 1/60 of
pensionable salary for each completed years' service on attainment of a normal
retirement age of 65. Pensionable salaries were frozen for the remaining
active members at the levels current at 30 April 2009 with the change taking
effect from 30 April 2010. As a result no further salary inflation applies for
active members who elected to remain in the Scheme. Active members' benefits
also include life assurance cover, with the payment of these benefits at the
discretion of the Trustees of the Scheme. The Scheme was closed to new
entrants during 2002. The Scheme was closed to future accrual on 30 November
2022 with the 3 remaining active members transferring to the Group's defined
contribution pension scheme.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
10. Pension scheme (continued)
On leaving active service a deferred member's pension is revalued from the
time of withdrawal until the pension is drawn. Revaluation in deferment is
statutory and since 2010 has been revalued on the Consumer Price Index ("CPI")
measure of inflation. Revaluation of pensions in payment is a blend of fixed
increases and inflationary increases depending on the relevant periods of
accrual of benefit. For pensions in payment, the inflationary increase is
currently based on the Retail Price Index ("RPI") measure of inflation or
based on Limited Price Indexation ("LPI") for certain defined periods of
service.
During 2012, Macfarlane Group PLC agreed with the Board of Trustees to amend
benefits for pensioner, deferred and active members in the Scheme by offering
a Pension Increase Exchange ("PIE") option to pensioner members and a PIE
option to all other members at retirement after 1 May 2012.
In June 2023, the UK High Court issued a ruling in the case of Virgin Media
Limited v NTL Pension Trustees II Limited and other ("the Virgin Media case")
relating to the validity of certain historical pension changes. The ruling
was upheld at the Court of Appeal in July 2024. After seeking external legal
advice in 2024 the Group concluded that they are not aware of any issues that
would require any adjustment to the defined benefit obligations and no further
action is required at this stage. Further, the Department of Work and
Pensions announced in 2025 that it will introduce legislation to allow
retrospective confirmation of historic benefit changes which will
significantly reduce the impact of the Virgin Media case on pension schemes.
The legislation is expected to be enacted during 2026.
Balance sheet disclosures
The Scheme's qualified actuary from Aon carries out triennial valuations using
the Projected Unit Credit Method to determine the level of deficit/surplus.
For the most recent triennial valuation at 1 May 2023, the results of this
valuation showed that the market value of the relevant investments of the
Scheme was £71,900,000 and represented 109% of the actuarial value of
benefits that had accrued to members.
The investment classes held by the Scheme and the Scheme surplus, based on the
results of the actuarial valuation as at 1 May 2023, updated to the year-end
are as shown below:
2025 2024
£000 £000
Investment class
Multi-asset diversified funds - 2,879
Liability-driven investment funds 37,216 32,589
Multi-asset credit funds 3,048 10,234
Securitised credit funds 16,157 16,895
Other (cash and similar assets) 5,779 1,511
Fair value of Scheme investments 62,200 64,108
Present value of Scheme liabilities (56,164) (54,472)
Scheme surplus 6,036 9,636
All investments are quoted except cash.
The Trustees review the investments of the Scheme on a regular basis and
consult with the Company regarding any proposed changes to the investment
profile. Liability-Driven Investment Funds are intended to provide a match of
100% against the impact of movements in inflation on pension liabilities and
against the impact of movements in interest-rates on pension liabilities.
During 2025 adjustments were made between investments to maintain the overall
allocations in line with the Trustees' strategic asset allocation.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
10. Pension scheme (continued)
The ability to realise the Scheme's investments at, or close to, fair value
was considered when setting the investment strategy. 100% (2024: 100%) of the
Scheme's investments can be realised at fair value on a daily or weekly basis.
The remaining investments have monthly or quarterly liquidity. However, whilst
the regular income from these helps to meet the Scheme's cash flow needs, they
are not expected to be realised at short notice from a strategic perspective.
The present value of the Scheme liabilities is derived from cash flow
projections and the expected return of the assets over a long period and is
thus inherently uncertain.
The Scheme's liabilities were calculated on the following bases as required
under IAS 19:
Assumptions 2025 2024
Discount rate 5.45% 5.50%
Rate of increase in salaries 0.00% 0.00%
Inflation assumption (RPI) 2.90% 3.20%
Inflation assumption (CPI) 2.60% 2.80%
Life expectancy beyond normal retirement age of 65
Male currently aged 55 (years) 22.7 22.3
Female currently aged 55 (years) 24.2 24.1
Male currently aged 65 (years) 22.2 21.8
Female currently aged 65 (years) 23.5 23.4
2025 2024
Movement in scheme surplus £000 £000
At 1 January 9,636 9,921
Administration costs incurred (250) (361)
Net finance income (see note 4) 523 438
Past service cost (1,930) -
Remeasurement of pension scheme surplus (1,943) (362)
At 31 December 6,036 9,636
Pre-2012 Barber Equalisation
Following the Barber judgement in 1990 to equalise normal retirement ages for
men and women the Macfarlane Group PLC Pension & Life Assurance Scheme
(1974) ("the Scheme") initially adopted the service credit method to equalise
pensions for those members with service in the Barber window (17 May 1990 and
19 June 1995). After taking legal advice in 2011, the better of the service
credit or tranching approach ("better off approach") was adopted for all
retirements after 1 June 2012. In preparing the pension scheme for a
potential buy-in legal advice was received in 2025 that advised the trustees
to correct the benefits of any members who retired prior to 1 June 2012 with
service in the Barber window where the better off approach would have resulted
in a higher benefit than the service credit approach. As a result, an
estimated liability of £1,930,000, comprising £1,360,000 to adjust historic
pensions paid and £570,000 to adjust future benefit payments, has been
assessed which has been charged as a non-recurring charge in 2025.
Funding
UK pension legislation requires that pension schemes are funded prudently.
Following the triennial actuarial valuation of the Scheme at 1 May 2023, the
Company agreed with the Pension Scheme Trustees, that no contributions were
required. The next triennial actuarial valuation is due at 1 May 2026.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
10. Pension scheme (continued)
Sensitivity to key assumptions
The key assumptions used for IAS 19 are discount rate, inflation and
mortality. If different assumptions were used, then this could have a material
effect on the results disclosed. Assuming all other assumptions are held
static then a movement in the following key assumptions would affect the level
of the deficit as shown below:
2025 2024
Assumptions £000 £000
Discount rate movement of +1.0% 5,152 4,997
Inflation rate movement of +0.25% (181) (176)
Mortality movement of +1 year in age rating (2,311) (2,241)
Positive figures reflect a reduction in the Scheme liabilities and therefore a
reduction in the Scheme deficit or increase in the Scheme surplus. The
sensitivity information has been prepared using the same method as adopted
when adjusting the results of the latest funding valuation to the balance
sheet date and is consistent with the approach adopted in previous years.
The sensitivities shown reflect average movements in the assumptions in the
last three years. All information assumes that the average duration of Scheme
liabilities is twelve years.
11. Deferred tax 2025 2024
£000 £000
At 1 January (10,792) (9,137)
Transfer to Corporation Tax
Acquisitions (note 8) (2,377) (2,480)
Credited in income statement (see note 5) 1,867 734
Credited in other comprehensive income
Remeasurement of pension scheme 486 91
liability
At 31 December (10,816) (10,792)
Deferred tax assets
On accelerated capital allowances/timing differences 276 145
Disclosed as deferred tax assets 276 145
Deferred tax liabilities
On accelerated capital allowances/timing differences (2,044) (1,406)
On retirement benefit obligations (1,509) (2,409)
On other intangible assets (7,539) (7,122)
Disclosed as deferred tax liabilities (11,092) (10,937)
At 31 December (10,816) (10,792)
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
12. Share capital 2025 2024
£000 £000
Allotted, issued and fully paid:
At 1 January 39,900 39,738
Issued during the year - 162
Cancelled during the year (581) -
At 31 December 39,319 39,900
Share premium
At 1 January 14,496 13,981
Issued during the year - 515
At 31 December 14,496 14,496
Capital redemption reserve
At 1 January - -
Cancelled during the year 581 -
At 31 December 581 -
The Company has one class of ordinary shares of 25p each, which carry no right
to fixed income. Each ordinary share carries one vote in any General Meeting
of the Company.
The decrease in share capital relates to the £4,000,000 share buyback
programme launched on 15 May 2025 with the programme to be completed in four
quarterly tranches of £1,000,000 starting from 2 June 2025 and all shares
purchased being cancelled. In the period to 31 December 2025 £2,083,234 was
spent on purchasing of 2,325,509 shares, at an average price per share of
89.58p.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed.
Details of individual and collective remuneration of the Company's Directors
and dividends received by the Directors for calendar year 2025 will be
disclosed in the Group's 2025 Annual Report and Accounts.
The Directors are satisfied that there are no other related party transactions
occurring during the year which require disclosure.
The Group will continue to monitor the progress of the investigation and will
recognise a provision if and when it becomes probable that an outflow of
economic benefits will be required to settle an obligation, and a reliable
estimate can be made.
14. Post balance sheet events
There are no post balance sheet events to be disclosed.
Macfarlane Group PLC
Notes to the financial information
For the year ended 31 December 2025
15. Contingent liability
One of the Group's subsidiaries, Pitreavie Packaging Limited ("Pitreavie"), is
subject to an ongoing investigation by the authorities in relation to an
incident on 7 October 2025 at its Cumbernauld manufacturing facility, which
tragically resulted in the death of an employee. The investigation is in its
early stages and Pitreavie management has not received any notification or
indication of the likely outcome. The authorities have the power to issue
enforcement notices or to initiate legal prosecution for breach of health and
safety law which, if found to apply in this case, could result in significant
fines.
Based on information available to date and taking into account there is very
limited information from which to estimate the possible magnitude or timing of
any resultant payments, management currently believes that the foregoing is
not expected to have a material adverse impact on the Group's Financial
Statements.
The Group will continue to monitor the progress of the investigation and will
recognise a provision if and when it becomes probable that a material outflow
of economic benefits will be required to settle an obligation, and a reliable
estimate can be made.
16. Posting to shareholders and Annual General Meeting
The Annual Report and Accounts will be sent to shareholders on Friday 10 April
2026 and will be available to members of the public at the Company's
Registered Office from Friday 1 May 2026.
The Annual General Meeting will take place at 12 noon on Tuesday 12 May 2026.
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