27 February 2020 ANNUAL RESULTS 2019 2019 2018 Increase€¦ · Macfarlane Group PLC achieved sales of £225.4m in 2019, (2018: £217.3m) a 4% increase on 2018, with 2019 profit before

1

27February2020

ANNUALRESULTS2019

FinancialHighlights 2019 2018 Increase

Turnover £225.4m £217.3m +4%Profitbeforetax £12.0m £10.9m +10%Proposedfullyeardividend 2.45p 2.30p +7%Basicearningspershare 6.17p 5.55p +11%

MacfarlaneGroupPLCachievedsalesof£225.4min2019,(2018:£217.3m)a4%increaseon2018,with2019 profit before tax growing to £12.0m (2018: £10.9m), 10% ahead of 2018. Thismarks the tenthconsecutiveyearofprofitgrowth. Theperformance in2019was in linewithmarketexpectationsandwasachievedagainstawell-publicisedbackdropofeconomicuncertaintyresultinginweakerdemand.

PackagingDistribution increasedsalesby4%in2019to£196.7m(2018:£189.8m). Salesrevenuefromexistingcustomerswasimpactedbybothweakerdemandandsalespricedeflationduring2019butthiswas offset by good growth in new business and the benefit of £5.7m from acquisitions. The 2019acquisitions of Ecopac (U.K.) Limited (“Ecopac”) and Leyland Packaging Company (Lancs) Limited(“Leyland”)havebothperformedwellsinceacquisition.GrossmargininPackagingDistributionat31.1%showedimprovementontheprioryear(2018:29.4%)andreflectedeffectivemanagementofinputpricemovements. The growth in sales and gross margin, combined with good cost control, resulted inPackagingDistributionachievingan11%increaseinoperatingprofitbeforeexceptionalitemsto£12.4m(2018:£11.2m)aftertheimpactofIFRS16“Leases”.

Sales inManufacturingOperationsat£28.7m (2018:£27.5m)grewby4%on thepreviousyear. Grossmargin increasedto39.8%in2018comparedto38.4%in2018andoperatingprofitbeforeexceptionalitemsin2019increasedto£1.2m(2018:£0.8m)aftertheimpactofIFRS16“Leases”.

Afternetfinancecostsof£1.6m(2018:£0.8m),Groupprofitbeforetaxtotalled£12.0m,anincreaseof10%on2018.Basicanddilutedearningspersharefor2019were6.17p(2018:5.55p)and6.16p(2018:5.55p)respectively.

IFRS16“Leases”

IFRS16 ‘Leases’ requires theGroup to recognise right-of-useassetsand lease liabilitieson thebalancesheet and depreciation on the assets and interest on the lease liabilities in the income statement.Previously,operatingleaseswereoffbalancesheetandleasingcostswerereportedinoverheads. IFRS16hasbeenapplied from1 January2019,withnorequirement to restatecomparative figures. Whilsttherewasnomajorimpactonprofitbeforetax,netassetsorcashflowsfromapplyingthenewstandard,therearechangesinclassificationsindicatedinnote1.

Dividend

TheBoardisproposingafinaldividendof1.76pencepershare,amountingtoafullyeardividendof2.45pence per share, a 7% increase on the prior year’s dividend of 2.30 pence per share. Subject to theapprovalofshareholdersattheAnnualGeneralMeetingonTuesday12May2020,thisdividendwillbepaidonThursday4June2020tothoseshareholdersontheregisteratFriday15May2020.

NetBankDebt

TheGroup’snetbankborrowingat31December2019decreasedby£0.5mto£12.7mfrom£13.2matthepreviousyear-end.TheGroup’sbankfacilityof£30.0millionwithLloydsBankingGroupisavailableuntil June 2022 and accommodates normal working capital requirements as well as supportingacquisitionfunding.

2

PensionScheme

TheGroup’spensiondeficitat31December2019decreasedby£3.3mto£6.5m(2018:£9.8m).Althoughthe discount rate decreased, which increased the value of the pension liabilities, this was offset byincreasesinthevalueofthescheme’sholdinginliability-driveninvestmentsanditsotherinvestments.

Following the High Court judgement involving Lloyds Banking Group pension schemes on 26 October2018,achargeof£0.3mwasmadein2018asanexceptionalitem.ThisrepresentedpastservicecostinrespectoftheequalisationofGuaranteedMinimumPensions(“GMP”)benefitsbetween1990and1997.Whenwerefertoitemsbeforeexceptionalitems,itexcludesthesecharges,whichwebelieveprovidesamoremeaningfulbasisformeasuringourfinancialperformancein2018.

Outlook

Commentingonthe2019results,StuartPaterson,Chairman,said:

“Continued profit growth over a ten year period confirms the Board’s confidence that its consistentstrategy of positioning the business to serve key growth markets in the protective packaging sectorremainsappropriateandcontinuestobeeffective.

2020hasstartedwellandprofitabilityintheyeartodateisaheadofthesameperiodin2019.

Thebusinesswillremainfocusedonthedeliveryofcontinuedprofitgrowththroughtheprovisionforourcustomersofadded-valueprotectivepackagingproductsandservicesintargetmarketsectors,combinedwithefficiencyimprovementsandthecompletionofvalue-enhancingacquisitions.Wewillalsofocusonensuringthatwesupportourcustomersinachievementoftheirsustainabilityobjectives.

MacfarlaneGroup’sperformancein2019reflectsthesuccessfulimplementationofourstrategyandweareconfidentthattheGroupwilldeliverfurtherprogressin2020.”

Furtherenquiries: MacfarlaneGroup Tel:01413339666 StuartPaterson Chairman PeterAtkinson ChiefExecutive JohnLove FinanceDirector SprengThomson Tel:01415485191 CallumSpreng Mob:07803970103

LegalEntityIdentifier(LEI):213800LVRYDERSJAAZ73

NotestoEditors:• MacfarlaneGroupPLCislistedontheLondonStockExchange(LSE:MACF)intheIndustrialsSector• The company is headquartered in Glasgow, Scotland and has more than 60 years’ experience in the UK

packagingindustry• MacfarlaneGroup’sbusinessesare:

o Macfarlane Packaging is the leading UK distributor of a comprehensive range of protective packagingproducts

o Labelsdesignsandprintshighqualityself-adhesiveandresealablelabels,principallyforFMCGcompanieso Packaging Design and Manufacture designs and produces protective packaging for high value, fragile

products

• MacfarlaneGroupemploysover925peopleat31sites,principallyintheUK,butalsoinIrelandandSweden. • Thecompanyhas20,000+customersintheUK,EuropeandtheUSAproviding600,000+linestoawiderangeof

industry sectors including: consumer goods; food manufacturing; logistics; internet retail; mail order;electronics;defenceandaerospace.

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BusinessReview Operating OperatingGroupperformanceSegment

Revenue2019£000

profit2019£000

Revenue2018£000

profit2018£000

PackagingDistribution 196,706 12,406 189,835 11,172ManufacturingOperations 28,683 1,224 27,455 853

Revenue 225,389 217,290

Operatingprofitbeforeexceptionalitem 6.0% 13,630 5.5% 12,025Exceptionalitem - (330)

Operatingprofit 13,630 11,695

Macfarlane Packaging Distribution is the leading UK specialist distributor of protective packagingmaterials. MacfarlaneoperatesaStockandServesupplymodel from25RegionalDistributionCentres(RDCs) and 3 satellite sites, supplying industrial and retail customers with a comprehensive range ofprotectivepackagingmaterialsonalocal,regionalandnationalbasis.Competition in the packaging distribution market is from local and regional protective packagingspecialist companies as well as national/international distribution generalists who supply a range ofproducts, including protective packaging materials. Macfarlane competes effectively on a local basisthroughitsstrongfocusonandregularmonitoringofcustomerservice,itsbreadthanddepthofproductofferandthroughtherecruitmentandretentionofhigh-qualitystaffwithgoodlocalmarketknowledge.OnanationalbasisMacfarlanehasfocus,expertiseandabreadthofproductandserviceknowledge,allofwhichenablesittocompeteeffectivelyagainstnon-specialistpackagingdistributors.Macfarlane benefits its customers by enabling them to ensure their products are cost-effectivelyprotected in transit and storage through the supply of a comprehensive product range, single sourceStockandServesupply,JustInTimedelivery,tailoredstockmanagementprogrammes,electronictradingandindependentadviceonbothpackagingmaterialsandpackingprocesses.PackagingDistribution Base

BusinessImpactof2019

Acquisitions

2019

2018

2019 £000 £000 £000 £000 Growth

Sales 190,976 5,730 196,706 189,835 3.6%Costofsales (135,525) (133,843)

Grossmargin 61,181 55,992 9.2%Netoperatingexpenses (48,775) (44,820) 8.8%

Operatingprofitbeforeexceptionalitem

11,771

635

12,406

11,172

11.0%

Exceptionalitem - (270)

Operatingprofit 12,406 10,902 13.8%

MacfarlanePackagingDistributiongrewsalesby3.6%in2019.Whilstexistingbusinesswasimpactedbyweaker demand conditions and sales price deflation, this was partly compensated for by good newbusiness growth, 11% ahead of levels achieved in 2018. Gross margin in Packaging Distribution was31.1%,(2018:29.4%)withtheimprovementdemonstratingourabilitytoeffectivelymanageinputpricechangesonpaper-basedproductswithourcustomers.Wealsocontinuedtodeliverthebenefitfromacquiringhighqualitypackagingdistributionbusinesses-the acquisitions of Ecopac at the start of May 2019 and Leyland at the end of August 2019 bothperformedwellandwebenefitedfromafullyearcontributionfromthe2018acquisitions.During 2019we continued tomake steadyprogress in extendingour service into Europe to support anumberofourpan-Europeancustomers.WealsosuccessfullytransitionedourbusinessinLondonfromahighcostsiteinEnfieldtoanewlowercostfacilityinHarlow,supportedbyadditionalspaceinSudbury.Cost control remained strong and operating profit for Packaging Distribution at £12.4m grew 13.8%versus2018,representingareturnonsalesof6.3%(2018:5.9%).

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BusinessReview(continued)FuturePlans2020plansarefocusedoncontinuingtogrowsalesandimprovingprofitabilitybythefollowingactions:

l Prioritisingour salesactivityon thegrowthpotential forprotectivepackaging inkeymarkets–NationalAccounts in the industrial sector, thee-commerce sector in the retail spaceandThirdPartyLogistics(“3PL”)operators;

l Demonstrating our ability to add value for customers through further development of our“Significant Six” sales approach to reduce their “Total Cost of Packaging” and support theirsustainabilityobjectives;

l Continuingtoeffectivelymanagetheimpactofinputpricechangesonpaper-basedproducts;l Rollingoutournewweb-basedsolutionstoallowcustomersaccesstoourfullrangeofproducts

andservices;l Acceleratingour“FollowtheCustomer”programmeinEurope;l Improvingoursourcingthroughstrengtheningourrelationshipswithkeystrategicsuppliers;l ImplementingfurtheroperationalsavingsinlogisticsbyexpandingtheuseoftheParagonvehicle

managementsystemandextendingourwarehousebestpracticeprogramme;l Reducingoperatingcostsbyconsolidatingourpropertyfootprint;l Maintainingthefocusonworkingcapitalmanagementtofacilitatefuturegrowth;andl Supplementingorganicgrowththroughcompletionoffurthersuitablequalityacquisitions.

ManufacturingOperationscomprisesourPackagingDesignandManufactureandourLabelsbusiness.

TheprincipalactivityofthePackagingDesignandManufacturebusinessisthedesign,manufactureandassembly of custom-designed packaging solutions for customers requiring cost-effective methods ofprotectinghighvalueproducts instorageandtransit. Theprimaryrawmaterialsarecorrugate, timberand foam. Thebusinessoperates fromtwomanufacturing sites inGranthamandWestbury, supplyingbothdirectlytocustomersandalsothroughtheRDCnetworkofthePackagingDistributionbusiness.Key market sectors are defence, aerospace, medical equipment, electronics and automotive. Themarkets in which we operate are highly fragmented with a range of locally based competitors. Wedifferentiate ourmarket offering through technical expertise, design capability, industry accreditationsandnationalcoveragethroughthePackagingDistributionbusiness.Our Labels business designs and prints self-adhesive labels for major Fast-moving Consumer Goods(“FMCG”)customersintheUKandEuropeandresealablelabelsformajorcustomersintheUK,EuropeandtheUSA. Thebusinessoperates fromproductionsites inKilmarnockandWicklowandasalesanddesignofficeinSweden,whichfocusesonthedevelopmentandgrowthofourresealablelabelsbusiness,Reseal-it.TheLabelsbusinesshasahighlevelofdependenceonasmallnumberofmajorcustomers.Managementworks closelywith these key customers to ensure high levels of service and to introduce product andservicedevelopmentinitiativestoachievecompetitivedifferentiation. 2019 2018 £000 £000

Sales 28,683 27,455Costofsales (17,731) (16,906)

Grossmargin 10,952 10,549Operatingexpenses(recurring) (9,728) (9,696)

Operatingprofitbeforeexceptionalitem 1,224 853Operatingexpenses(exceptional) - (60)

Operatingprofit 1,224 793

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BusinessReview(continued)PackagingDesignandManufacture(continued)

2019 sales for Packaging Design and Manufacture were 2% below 2018 due to demand weaknessparticularlyintheautomotivesector.Howeveractionstoimproveoperationalperformanceandmarginsresultedinprofitabilityin2019beingwellabovethatin2018.Oursalesteamhascontinuedtodevelopastrongpipelineofnewcustomerrelationships,whichshouldbenefitthebusinessin2020.Labels’salesincreasedby8%intheyearaspenetrationofourresealablerangeimprovedandanumberof new businesswinswere achieved. Despitemargin being impacted by the increasingly competitiveconditionsintheretailsector,profitsintheLabelsbusinessweresimilarto2018.

FuturePlansPrioritiesfortheManufacturingOperationsin2020areto:

l RestoreDesign&Manufacturesalesgrowthintargetsectors,Defence,AerospaceandMedical;l ContinuetoimproveoperationalefficiencyatbothDesign&Manufacturesites;l Prioritisenewsalesactivityonourhigheradded-valuebespokecompositepackproductrange;l ContinuetostrengthentherelationshipbetweenourDesign&Manufactureoperationsandour

PackagingDistributionbusinesstocreatebothsalesandcostsynergies;l Accelerate theReseal-it growthmomentum for resealable labels through improved geographic

penetration,extendingtheproductrangeandintroducingReseal-ittonewproductsectors;andl Achieve efficiency benefits from recent investments in additional printing capacity and digital

printingcapabilitytoimproveLabels’grossmargins.

2020Outlook

Our sales efforts in 2020will focus on those segments of the protective packagingmarket, such as e-commerce,whichareforecasttoshowaboveaveragegrowthratesandthoseindustrialmarketswherecustomers recognise the added value brought to their operations by a specialist national protectivepackagingdistributor.

WewillcontinuetoaddvalueforcustomersthroughourSignificantSixSalesApproachandsupporttheminachievingtheirsustainabilityobjectives.

In2020weplantoacquirefurthergoodqualityprotectivepackagingbusinesses,improveourgeographiccoverage, develop new products introduced by recent acquisitions, work more closely with strategicsuppliersandimproveoperationalefficiencybyleveragingourpropertyandlogisticsfootprint.

Macfarlanebusinessesallhavestrongmarketpositionswithdifferentiatedproductandserviceofferings.Wehaveaflexiblebusinessmodelandaclearstrategicplanincorporatingarangeofactions,whicharebeingeffectivelyimplementedandreflectedinourconsistent,profitablegrowthoveraten-yearperiod.Our future performance is largely dependent on the successful execution of actions to grow sales,increaseefficienciesandbringhigh-qualityacquisitions intotheGroup. Weexpect2020tobeanotheryearofprogressforMacfarlaneGroup.

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BusinessReview(continued)The principal risks and uncertainties faced byMacfarlaneGroup and factorsmitigating these risks aredetailedbelow.Theserisksarecomplementedbyanoverallgovernanceframeworkincludingclearanddelegated authorities, business performance monitoring and appropriate insurance cover for a widerangeofpotentialrisks.Thereisadependenceongoodqualitylocalmanagement,whichissupportedbyaninvestmentintraininganddevelopmentandongoingperformanceevaluation.

RiskDescription MitigatingFactorsRawmaterialpricesçèThe Group’s businesses are impacted bycommodity-based raw material prices andmanufacturer energy costs, with profitabilitysensitive to supplier price changes includingcurrency fluctuations. The principal componentsare corrugatedpaper, polythene films, timber andfoam,withchangestopaperandoilpriceshavingadirectimpactonthepricewepaytooursuppliers.

TheGroupworkscloselywithsupplierstomanagethescale and timingof supplierpricemovements toend-userseffectively.OurITsystemsmonitorandmeasureeffectiveness in recovering these changes. Wherepossible, alternative supplier relationships aremaintained to minimise supplier dependency. Wework with customers to redesign packs and reducepackingcosttomitigatetheimpactofcostincreases.

PropertyçèGiven the multi-site nature of its business, theGrouphasapropertyportfoliocomprising3ownedsitesand37leasedsitesofwhich3aresublet.Thisportfolio gives rise to risks in relation to ongoingleasecosts,dilapidationsandfluctuationsinvalue.

Where a site is non-operational the Group seeks toassign, sell or sub-lease the building to mitigate thefinancialimpact.Ifthisisnotpossible,rentalvoidsareprovided on vacant properties taking intoconsideration the likely period of vacancy andincentivestore-let.

WorkingcapitalçèTheGrouphas a significant investment inworkingcapital in the form of trade receivables andinventories. There is a risk that this investment isnotfullyrecovered.

Credit risk is controlled by applying rigour to themanagement of trade receivables by the Creditmanagerandthecreditcontrolteam,andissubjecttoadditionalscrutinyfromtheGroupFinanceDirector.Inventory levels and order patterns are regularlyreviewedandrisksarisingfromholdingbespokestocksaremanagedbyobtainingordercoverfromcustomers.

Financialliquidity,debtcovenants,interestratesçèTheGroupneedscontinuousaccessto fundingtomeetitstradingobligationsandtosupportorganicgrowth and acquisitions. There is a risk that theGroupmaybeunabletoobtainfundsorthatsuchfunds will only be available on unfavourableterms.The Group’s borrowing facility comprises acommitted facility of up to £30m. This includesrequirementstocomplywithspecifiedcovenants,with a breach potentially resulting in borrowingsbeingsubjecttomoreonerousconditions.

The Group seeks to maintain an appropriate level ofcommitted bank facilities that provide sufficientheadroom above peak projected borrowingrequirements.TheexistingfacilityisinplaceuntilJune2022.The Group regularly monitors net debt and forecastcash flows to ensure that it will be able to meet itsfinancialobligationsastheyfalldue.Compliancewithdebt covenants is monitored on a monthly basis andsensitivityanalysisisappliedtoforecaststoassesstheimpactoncovenantcompliance.

7

BusinessReview(continued)

RiskDescription MitigatingFactorsDefinedbenefitpensionschemeêThe Group’s defined benefit pension scheme issensitive to a number of key factors; investmentreturnsandthediscountratesaswellasmortalityassumptions used to calculate scheme liabilities.TheIAS19valuationoftheGroup’sdefinedbenefitpensionschemeasat31December2019estimatedthe scheme deficit to be £6.5m, a decrease of£3.3m during 2019. Small changes in theseassumptionscouldmeanthatthedeficitincreases.

Theschemewasclosedtonewmembersin2002.Benefitsforactivememberswereamendedbyfreezingpensionablesalariesat30April2009levels.APensionIncreaseExchangeoptionisavailabletoofferflexibility to new pensioners in the current level ofpensionbenefitsandtherateoffutureincreases.TheGroupmakesDeficitReductionContributionseachyear.Theinvestmentprofileisconstantlyreviewedtoensurecontinued matching of investments with the liabilityprofileofthescheme.

DecentralisedstructureçèThePackagingDistributionbusinessmodel reflectsa decentralised approach with a dependency oneffectivelocaldecision-making.Thereisariskthatthe decentralised management control is lesseffectiveandlocaldecisionsdonotmeetcorporateobjectives.

TheGroupensuresthatourstaffhavetherightworkingenvironment, information and sales tools to enablethem tomeet corporateobjectives. A comprehensivemanagement information system is maintained withkey performance indicators monitored and actionstakenwhenrequired.

AcquisitionsçèThe Group’s growth strategy includes acquisitionsasdemonstratedinrecentyears.Thereisariskthatsuch acquisitions may not be available onacceptabletermsinthefuture.It isalsopossiblethatacquisitionswillnotsucceeddue to the loss of key people or customersfollowing acquisition or the acquired business notperforming at the level expected. This couldpotentiallyleadtoimpairmentinthecarryingvalueoftherelatedintangibleassets.Execution risks around the failure to successfullyintegrate the acquired business after theconclusionoftheearn-outperiodalsoexist.

The Group carefully reviews potential acquisitiontargets, ensuring that the focus is on high-qualitybusinesses which complement the existing Groupprofile and provide opportunities for growth. Havingcompletedanumberofacquisitionsinrecentyears,theGroup has well-established due diligence andintegrationprocessesandprocedures.The Group has a comprehensive managementinformation system to enable effective monitoring ofpost-acquisition performance. Earn-out mechanismsalsomitigateriskinthepost-acquisitionperiod.Goodwill and other intangible assets are testedannually for impairment as set out in the AnnualReport.

Forhighlightedrisksshownasçètherisklevelhasremainedbroadlysimilarbetween2018and2019.Inrespectofthepensionschemewhichismarkedêtheriskisconsideredtohavereducedintheyear,giventhebalancedstructureoftheinvestmentprofileandrecentchangesinmortalitytables.

MacfarlaneGrouphascarriedoutanimpactanalysisandevaluatedthepotentialshorttomedium-termimplicationsofano-dealBrexit includingreversiontoWorldTradeOrganisationtariffsat31December2020. Wherepractical,wewouldput inplacecontingencymeasures to try tomitigateany immediateeffectsonthesupplychain.AsabusinesswiththemajorityofitstradeintheUK,theprincipalimpactonMacfarlane Group of a no-deal Brexit would be reduced levels of business caused by any significantdownturnintheUKeconomy.There are a number of other risks thatwemanagewhich are not considered key risks. TheGroup issubject to the impact of general economic conditions, including any economic uncertainty thecompetitiveenvironment and risks associatedwithbusiness continuity including cyber-security. ThesearemitigatedinwayscommontoallbusinessesandnotspecifictoMacfarlaneGroup.

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BusinessReview(continued)ViabilitystatementTheBoardhasconsideredtheGroup’sviabilityaspartoftheongoingprogrammetomanagerisk.EachyeartheBoardreviewstheGroup’sstrategicplanfortheforthcomingthree-yearperiodandchallengestheExecutiveteamontheplan’srisks.ThestrategicplanreflectstheGroup’sbusinesses,whichhaveabroadspreadofcustomersacrossarangeofdifferentsectorswithsomelongertermcontractsinplace.Theassessmentperiodofthreeyears isconsistentwiththeBoard’sreviewofGroupstrategy, includingassumptionsregardingfuturegrowthratesforourbusinessandacceptablelevelsofperformance.Adetailedfinancialmodelcoveringathreeyearperiodismaintainedandregularlyupdated.Themodelissubjecttosensitivityanalysiswhichflexesanumberofthemainassumptions, includingfuturerevenuegrowth,grossmargins,operatingcosts, financecostsandworkingcapitalmanagement. The resultsofflexingtheseassumptions,bothindividuallyandinaggregate,areusedtodeterminewhetheradditionalbankfacilitieswillberequiredduringthethreeyearperiod.Theresultsoftheexerciseindicatedthatnoadditionalfacilitiesshouldberequired.TheBoardhascarriedoutathoroughassessmentoftheprincipalrisksfacingtheGroupandhowtheserisks affect the Groups’ prospects and the strategic plan. The review includes consideration of theprincipalrisksfacingtheGroupasdescribedonthecurrentandpreviouspage,whichcouldpreventtheGroup fromachieving its strategicplanandthepotential impact theseriskscouldhaveon theGroup’sbusinessmodel,futureperformance,solvencyandliquidityoverthenextthreeyears.TheDirectors’assessmenthasbeenmadewithreferencetotheresilienceoftheGroupandthestrengthofitsfinancialposition,theGroup’scurrentstrategy,theBoard’sriskappetiteandtheGroup’sprincipalrisks includinghowthesearemanaged. TheBoard isconfident that theGroup’smajorbanking facilitywhichrunsuntil30June2022wouldberenewedontermssimilartothosecurrentlyinplace.GoingConcernThe Directors, in their consideration of going concern, have reviewed the Group’s future cash flowforecastsandprofitprojections,whicharebasedontheDirectors’pastexperienceandtheirassessmentofthecurrentmarketoutlookforthebusiness.TheGroup’sbusinessactivities,togetherwiththefactorslikelytoaffectitsfuturedevelopment,performanceandfinancialpositionaresetoutintheChairman’sStatementandBusinessReviewonpages1to8.TheGroup’sprincipalfinancialrisksinthemediumtermrelatetoliquidityandcreditrisk.LiquidityriskismanagedbyensuringthattheGroup’sday-to-dayworkingcapitalrequirementsaremetbyhavingaccesstobankingfacilitieswithsuitabletermsandconditionstoaccommodatetherequirementsoftheGroup’soperations. Credit risk is managed by applying considerable rigour in managing the Group’s tradereceivables. The Directors believe that the Group is adequately placed to manage its financial riskseffectively,despiteanyeconomicuncertainty.TheGroup’sprincipalbankingfacilityisinplaceuntilJune2022.TheDirectorsareoftheopinionthattheGroup’scashforecastsandrevenueprojections,takingaccountofreasonablypossiblechangesintradingperformance given current market and economic conditions, show that the Group should be able tooperatewithinitscurrentfacilitiesandcomplywithitsbankingcovenants.Aftermakingenquiries, theDirectorshavea reasonableexpectation that theCompanyand theGrouphaveadequateresourcestocontinue inoperationalexistenceforat leastthenexttwelvemonths. Forthisreasontheycontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.

9

CautionaryStatementThe Chairman’s Statement and the Business Review on pages 1 to 8 have been prepared to provideadditionalinformationtomembersoftheCompanytoassesstheGroup’sstrategyandthepotentialforthestrategytosucceed.Itshouldnotbereliedonbyanyotherpartyorforanyotherpurpose.This report and the financial statements contain certain forward-looking statements relating tooperations, performance and financial status. By their nature, such statements involve risk anduncertaintybecausetheyrelatetoeventsanddependuponcircumstancesthatwilloccurinthefuture.Thereareanumberoffactors,includingbotheconomicandbusinessriskfactorsthatcouldcauseactualresultsordevelopments todiffermaterially from thoseexpressedor impliedby these forward-lookingstatements.ThesestatementsaremadebytheDirectorsingoodfaithbasedontheinformationavailabletothemupto the time of their approval of this report. Nothing in this Preliminary Announcement should beconstruedasaprofitforecastoraninvitationtodealinthesecuritiesoftheGroup.

ResponsibilityStatementoftheDirectorsThe responsibility statement below has been prepared in connection with the company’s full annualreportfortheyearending31December2019. CertainpartsofthefullAnnualReportarenot includedwithinthisannouncement.TheDirectorsofMacfarlaneGroupPLCareS.R.Paterson ChairmanP.D.Atkinson ChiefExecutiveJ.Love FinanceDirectorR.McLellan Non-ExecutiveDirectorandSeniorIndependentDirectorJ.W.F.Baird Non-ExecutiveDirectorA.M.Dunstan Non-ExecutiveDirectorTo the best of the knowledge of the Directors (whose names and functions are set out above), thefinancialstatements,preparedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEU,giveatrueandfairviewoftheassets,liabilities,financialpositionandprofitfortheCompanyandtheundertakingsincludedintheconsolidationtakenasawhole;TheStrategicReport,incorporatedintotheDirectors’ReportintheAnnualReport,includesafairreviewof the development and performance of the business and the position of the Company and theundertakingsincludedintheconsolidationtakenasawhole,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthattheyface;andPursuant to Disclosure and Transparency Rules, Chapter 4, the directors consider that the Company'sannual report and financial statement, taken as a whole, are fair, balanced and understandable andprovide information necessary for the shareholders to assess the Company’s and theGroup’s positionandperformance,businessmodelandstrategy.

PeterAtkinson JohnLoveChiefExecutive FinanceDirector27February2020 27February2020

10

MacfarlaneGroupPLC

Consolidatedincomestatement

Fortheyearended31December2019

Note

2019£000

BeforeExceptional

Items£000

Exceptional

Items£000

2018£000

Revenue 3 225,389 217,290 - 217,290Costofsales (153,256) (150,749) - (150,749)

Grossprofit 72,133 66,541 - 66,541Distributioncosts (8,441) (8,604) - (8,604)Administrativeexpenses (50,062) (45,912) (330) (46,242)

Operatingprofit 3 13,630 12,025 (330) 11,695Financecosts 4 (1,606) (809) - (809)

Profitbeforetax 12,024 11,216 (330) 10,886Tax 5 (2,293) (2,201) 56 (2,145)

Profitfortheyear 7 9,731 9,015 (274) 8,741

Earningspershare

Basic 7 6.17p 5.72p (0.17p) 5.55p

Diluted 7 6.16p 5.72p (0.17p) 5.55p

Consolidatedstatementofcomprehensiveincome


Note

2019£000

2018 £000

Itemsthatmaybereclassifiedtoprofitorloss Foreigncurrencytranslationdifferences-foreignoperations (62) (6)Itemsthatwillnotbereclassifiedtoprofitorloss Remeasurementofpensionschemeliability 10 537 (32)Taxrecognisedinothercomprehensiveincome Taxonremeasurementofpensionschemeliability 11 (92) 6

Othercomprehensiveincome/(expense)fortheyear,netoftax 383 (32)Profitfortheyear 9,731 8,741

Totalcomprehensiveincomefortheyear 10,114 8,709

11

MacfarlaneGroupPLC

Consolidatedstatementofchangesinequity


Note

ShareCapital£000

SharePremium

£000

RevaluationReserve

£000

TranslationReserve

£000

RetainedEarnings

£000

Total£000

At1January2018 39,387 12,975 70 299 4,479 57,210

Comprehensiveincome Profitfortheyear - - - - 8,741 8,741Foreigncurrencytranslationdifferences

-

-

-

(6)

-

(6)

Remeasurementofpensionliability

10

-

-

-

-

(32)

(32)

Taxonremeasurementofpensionliability

11

-

-

-

-

6

6

Totalcomprehensiveincome - - - (6) 8,715 8,709

Transactionswithshareholders Dividends 6 - - - - (3,387) (3,387)

Totaltransactionswithshareholders - - - - (3,387) (3,387)

At31December2018 39,387 12,975 70 293 9,807 62,532

Comprehensiveincome

Profitfortheyear - - - - 9,731 9,731Foreigncurrencytranslationdifferences

-

-

-

(62)

-

(62)

Remeasurementofpensionliability

10

-

-

-

-

537

537

Taxonremeasurementofpensionliability

11

-

-

-

-

(92)

(92)

Totalcomprehensiveincome - - - (62) 10,176 10,114

Transactionswithshareholders Dividends 6 - - - - (3,689) (3,689)Creditforshare-basedpayments - - - - 75 75Issueofsharecapital 12 66 173 - - - 239

Totaltransactionswithshareholders 66 173 - - (3,614) (3,375)

At31December2019 39,453 13,148 70 231 16,369 69,271

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MacfarlaneGroupPLC

Consolidatedbalancesheetat31December2019

Note 2019£000

2018£000

Non-currentassets Goodwillandotherintangibleassets 62,663 58,648Property,plantandequipment 9,621 8,533RightofUseassets 25,855 -Otherreceivables 35 162Deferredtaxassets 11 1,224 1,851

Totalnon-currentassets 99,398 69,194

Currentassets Inventories 15,813 16,940Tradeandotherreceivables 52,044 51,360Cashandcashequivalents 9 3,310 4,611

Totalcurrentassets 71,167 72,911

Totalassets 3 170,565 142,105

Currentliabilities Tradeandotherpayables 48,530 47,891Currenttaxpayable 1,084 1,029Leaseliabilities 9 6,321 101Bankborrowings 9 15,984 17,769

Totalcurrentliabilities 71,919 66,790

Netcurrentassets (752) 6,121

Non-currentliabilities Retirementbenefitobligations 10 6,465 9,765Deferredtaxliabilities 11 3,242 2,993Tradeandotherpayables 22 25Leaseliabilities 9 19,646 -

Totalnon-currentliabilities 29,375 12,783

Totalliabilities 3 101,294 79,573

Netassets 69,271 62,532

Equity Sharecapital 12 39,453 39,387Sharepremium 12 13,148 12,975Revaluationreserve 70 70Translationreserve 231 293Retainedearnings 16,369 9,807

Totalequity 3 69,271 62,532

13

MacfarlaneGroupPLC

Consolidatedcashflowstatement


Note 2019£000

2018£000

Cashinflowfromoperatingactivities 9 19,497 11,832 Investingactivities Acquisitions,netofcashacquired 8 (6,162) (5,638)Proceedsondisposalofproperty,plantandequipment 185 73Purchasesofproperty,plantandequipment (2,648) (1,452)

Cashoutflowfrominvestingactivities (8,625) (7,017) Financingactivities Dividendspaid 6 (3,689) (3,387)(Repayment)/drawdownonbankborrowingfacility (1,785) 1,423Repaymentsofleases 9 (6,699) (253)

Cashoutflowfromfinancingactivities (12,173) (2,217)

Net(decrease)/increaseincashandcashequivalents 9 (1,301) 2,598 Cashandcashequivalentsatbeginningofyear 4,611 2,013

Cashandcashequivalentsatendofyear 9 3,310 4,611

14

MacfarlaneGroupPLC

Notestothefinancialinformation


1. GeneralinformationThefinancial informationsetouthereindoesnotconstitutetheCompany'sstatutoryaccountsasdefinedinSection435oftheCompaniesAct2006andhasbeenextractedfromthefullstatutoryaccountsfortheyearsfortheyearsended31December2019and2018.Thefinancialstatementsfor2019wereapprovedbytheBoardofDirectorson27February2020.Theauditor’sreportonthestatutory financialstatements fortheyearended31December2019was unqualified pursuant to Section 498 of the Companies Act 2006 and did not contain astatementundersub-section498(2)or(3)ofthatAct.

Thefinancialinformationfor2018isderivedfromthestatutoryaccountsfor2018whichhavebeendeliveredtotheregistrarofcompanies.Thepreviousauditorhasreportedonthe2018accounts;theirreportwas(i)unqualified,(ii)didnotincludeareferencetoanymatterstowhichtheauditordrew attention by way of emphasis without qualifying their report and (iii) did not contain astatementundersection498(2)or(3)oftheCompaniesAct2006.

AdoptionofnewIFRSsTheonlymajorchangefromtheadoptionofnewIFRS’sin2019isinrespectoftheadoptionofIFRS16 ‘Leases’. This is the first set of Group financial statementswhere IFRS 16 ‘Leases’ has beenapplied,withaninitialapplicationdateof1January2019. IFRS16introducessignificantchangestolesseeaccountingbyremovingthedistinctionbetweenoperatingandfinanceleases,requiringtherecognitionofaright-of-useassetandaleaseliabilityatcommencementforallleases,exceptforshort-termleasesandleasesoflowvalueassets.The Group has a large number of property and equipment leases. Details of the Group’saccounting policies under IFRS 16 are set out below, followedby a description of the impact ofadopting IFRS16. Judgementsapplied intheadoptionof IFRS16 includeddeterminingthe leaseterm for those leases with termination or extension options and determining an incrementalborrowingratewheretherateimplicitinaleasecouldnotbereadilydetermined.AccountingpoliciesunderIFRS16‘Leases’TheGroup recognises a right-of-use asset and a corresponding lease liabilitywith respect to allleasearrangementsinwhichitisthelessee,exceptforshort-termleases(definedasleaseswithaleasetermof12monthsorless)andleasesoflowvalueassets.Fortheseshort-termorlowvalueleases, the Group recognises the lease payments as an operating expense disclosed inadministrativeexpensesonastraight-linebasisoverthetermofthelease.For all other leases, the lease liability is initially measured at the present value of the leasepayments thatarenotpaidat thecommencementdate,discountedbyusing the rate implicit inthelease.Ifthisratecannotbereadilydetermined,theGroupusesitsincrementalborrowingrate.Leaseliabilitiesarepresentedontwoseparatelinesintheconsolidatedbalancesheetforliabilitiesduewithinoneyearandliabilitiesdueaftermorethanoneyear.Theleaseliabilityissubsequentlymeasured by increasing the carrying amount to reflect interest on the lease liability (using theeffectiveinterestmethod)andbyreducingtheliabilitybypaymentsmade.TheGroupremeasurestheleaseliability(andadjuststherelatedright-of-useasset)whenevertheleasetermhaschangedoraleasecontractismodifiedandtheleasemodificationisnotaccountedforasaseparatelease.TheGroupdidnotmakeanysuchadjustmentsduringtheperiodpresented.Right-of-use assets comprise the initial measurement of the corresponding lease liability, leasepayments made at, or before, the commencement day and any initial direct costs. They aresubsequentlymeasuredatcostlessaccumulateddepreciationandimpairmentlosses.Right-of-use assets are depreciated over the shorter period of lease term and useful life of theunderlying asset. If a lease transfers ownership of the underlying asset or the cost of theright-of-use asset reflects that the Group expects to exercise a purchase option, the relatedright-of-useassetisdepreciatedovertheusefullifeoftheunderlyingasset.Depreciationstartsatthecommencementdateofthelease.

15

MacfarlaneGroupPLC



1. Generalinformation(continued)As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, andinsteadaccountforanyleaseandassociatednon-leasecomponentsasasinglearrangement.TheGrouphasnotusedthispracticalexpedientandhasseparatedoutthenon-leasecomponentsforits leases. These non-lease components, typically servicing and maintenance costs, have beenrecognisedasanexpenseonastraight-linebasisanddisclosed inadministrativeexpenses in theconsolidatedincomestatement.ApproachtotransitionTheGrouphasappliedIFRS16usingthemodifiedretrospectiveapproach,withoutrestatementofthe comparative information. For leases previously treated as operating leases, the Group haselectedtofollowtheapproachinIFRS16.C8(b)(ii),wherebyrightofuseassetsaresetequaltothelease liability, adjusted for prepaid or accrued lease payments, including un-amortised leaseincentives.The Group’s incremental borrowing rates applied to lease liabilities as at 1 January 2019 rangebetween2.75%and4.0%.PracticalexpedientsadoptedontransitionAspartoftheGroup’sadoptionofIFRS16andapplicationofthemodifiedretrospectiveapproachtotransition,theGroupelectedtousethefollowingpracticalexpedients:• asinglediscountratehasbeenappliedtoassetswithreasonablysimilarcharacteristics;and• hindsighthasbeenusedindeterminingtheleaseterm.ImpactondisclosuresFormeroperatingleases

IFRS16changesaccountingforleasespreviouslyclassifiedasoperatingleasesunderIAS17,whichwere off-balance sheet. Applying IFRS 16, for all leases, theGroup now recognises right-of-useassetsandleaseliabilitiesintheconsolidatedbalancesheet,initiallymeasuredasdescribedabove.Lease incentivesare recognisedaspartof themeasurementof the right-of-useassetsand leaseliabilities, whereas under IAS 17 they resulted in the recognition of a lease incentive liability,amortisedasareductionofrentalexpensesonastraightlinebasis.Right-of-useassetswillbetestedforimpairmentinaccordancewithIAS36ImpairmentofAssets.Under IFRS 16 the Group recognises depreciation of right-of-use assets and interest on leaseliabilities intheconsolidated incomestatement,whereasoperating leasespreviouslygaverisetoleasingcostsinadministrativeexpenses.TheGroupnowseparatesthetotalcashpaidforonbalancesheet leases intoaprincipalportion(partoffinancingactivities)andinterest(partofoperatingactivities)intheconsolidatedcashflowstatement.UnderIAS17operatingleasepaymentswerepresentedasoperatingcashoutflows.FormerfinanceleasesThischangehasnothadamaterialeffectontheGroup’sconsolidatedfinancialstatements.

16

MacfarlaneGroupPLC



1. Generalinformation(continued)FinancialimpactofIFRS16‘Leases’The table below sets out the adjustments recognised at 1 January 2019, the date of initialapplication.£000 Aspreviously

reported31December

2018£000

ImpactofIFRS16£000

At

1January2019£000

Assets ROUAssets - 27,476 27,476Tradeandotherreceivables 51,360 487 52,009

Impactontotalassets 27,963

Liabilities Financeleaseliabilities 101 (27,963) (28,064)

Impactontotalliabilities (27,963)

Netassets/Shareholders’funds 62,532 - 62,532

The table below presents a reconciliation from operating lease commitments disclosed at 31December2018toleaseliabilitiesrecognisedat1January2019. £000

Operatingleasecommitmentsdisclosedat31December2018underIAS17 (35,575) Non-leasecomponentsexpensedunderIFRS16 2,805 Short-termandlowvalueleases 942 Effectofdiscounting 3,865 Leaseliabilitiesrecognisedat31December2018 (101) Totalleaseliabilitiesrecognisedat1January2019 (28,064)

Movementsinleaseliabilitiesaresetoutinnote9.

The application of IFRS 16 resulted in a decrease in other operating expenses and an increase indepreciationandinterestexpensecomparedtoIAS17.During2019,forallleasestheGrouprecognisedthefollowingamountsintheconsolidatedincomestatement. 2019

£0002018£000

Depreciation 6,223 -Interestexpense 810 -

Operatingleasepaymentsmadein2019 6,806 - DecreaseinprofitfromapplyingIFRS16in2019 227

17

MacfarlaneGroupPLC



2. BasisofpreparationTheGroup’sbusinessactivities, togetherwith the factors likely toaffect its futuredevelopment,performanceandfinancialpositionaresetoutonpages1to9.TheGroup’sprincipalfinancialrisksinthemediumtermrelatetoliquidityandcreditrisk.LiquidityriskismanagedbyensuringthattheGroup’sday-to-dayworkingcapitalrequirementsaremetbyhavingaccesstocommittedbankingfacilitieswithsuitabletermsandconditionstoaccommodatethe requirements of the Group’s operations. Credit risk is managed by applying considerablerigour in managing the Group’s trade receivables. The Directors believe that the Group isadequatelyplacedtomanageitsfinancialriskseffectively,despiteanyeconomicuncertainty.TheGroup’shasa committedborrowing facilityof£30millionwithLloydsBankingGroupPLC inplaceuntilJune2022.Thefacilitybearsinterestatnormalcommercialratesandcarriesstandardfinancial covenants in relation to interest cover and levels of headroom over certain tradereceivablesoftheGroup.TheDirectorsareof theopinion that theGroup’s cash forecastsand revenueprojections,whichtheybelievearebasedonprudentmarketdataandpastexperiencetakingaccountofreasonablypossiblechangesintradingperformancegivencurrentmarketandeconomicconditions,showthatthe Group should be able to operate within the current facility and comply with its bankingcovenants.Aftermaking enquiries, the directors have a reasonable expectation that the Company and theGrouphaveadequate resources tocontinue inoperationalexistence forat least thenext twelvemonths.Forthisreasontheycontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatementsfortheyearended31December2019.Keysourcesofestimationuncertainty

Thepreparationoffinancialstatementsrequiresmanagementtomakeestimatesandassumptionsthat affect the amounts reported for assets and liabilities as at the balance sheet date and theamountsreportedforrevenuesandexpensesduringtheyear.Duetothenatureofestimation,theactualoutcomesmaywelldifferfromtheseestimates.Nosignificantjudgementshavebeenmadeinthecurrentorprioryear.

Thekeysourcesofestimationuncertaintythathaveasignificanteffectonthecarryingamountsofassetsandliabilitiesarediscussedbelow:

Retirementbenefitobligations

The determination of any defined benefit pension scheme liability is based on assumptionsdeterminedwith independent actuarial advice. The key assumptions used include discount rate,inflationrateandmortalityassumptions,forwhichasensitivityanalysisisprovidedinNote10.Thedirectors consider that those sensitivities represent reasonable sensitivitieswhich couldoccur inthenextfinancialyear.

ValuationoftradereceivablesTheprovisionheldagainsttradereceivablesisbasedonapplyinganexpectedcreditlossmodelandrelated estimates of recoverable amounts. Whilst every attempt is made to ensure that theprovisionheld against doubtful trade receivables is as accurate as possible, there remains a riskthat the provisionmay notmatch the level of debt, which ultimately proves uncollectable. Anincreaseintheaveragedefaultrateoftradereceivablesbeyondtermsfrom1.04%to3.12%abovethehistoriclossratesobservedwouldleadtoanincreaseintheprovisionrecognisedof£600,000.

18

MacfarlaneGroupPLC



3. Segmentalinformation

TheGroup’s principal business segment isPackagingDistribution, comprising thedistributionofpackagingmaterials and supply of storage andwarehousing services in the UK. This comprisesover 85% of Group revenue and profit. The Group’s Manufacturing Operations segmentcomprisesthedesign,manufactureandassemblyoftimber,corrugatedandfoam-basedpackagingmaterials in the UK, the design, manufacture and supply of self-adhesive labels to a variety ofFMCGcustomersintheUK&Europeandthedesign,manufactureandsupplyofresealablelabelstoavarietyofFMCGcustomers intheUK,EuropeandtheUSA. Noneofthe individualbusinesssegmentswithinManufacturingOperationsrepresentsmorethan10%ofGrouprevenueorprofit.

2019

£0002018£000

Groupsegment–totalrevenue PackagingDistribution 196,706 190,227ManufacturingOperations 34,016 32,189Inter-segmentrevenue PackagingDistribution - (392) ManufacturingOperations (5,333) (4,734)

Externalrevenue 225,389 217,290

Operatingprofit PackagingDistribution 12,406 10,902ManufacturingOperations 1,224 793

Operatingprofit 13,630 10,089Financecosts (1,606) (809)

Profitbeforetax 12,024 10,886Tax (2,293) (2,145)

Profitfortheyear 9,731 8,741

Assets Liabilities Netassets £000 £000 £000Groupsegments

PackagingDistribution 151,115 90,508 60,607ManufacturingOperations 19,450 10,786 8,664

Netassets2019 170,565 101,294 69,271

PackagingDistribution 125,060 71,173 53,887ManufacturingOperations 17,045 8,400 8,645

Netassets2018 142,105 79,573 62,532

19

MacfarlaneGroupPLC



3. Segmentalinformation(continued)

2019£000

2018£000

PackagingDistribution Revenue 196,706 190,227Costofsales (135,525) (134,235)

Grossprofit 61,181 55,992Netoperatingexpenses (48,775) (44,820)

Operatingprofitbeforeexceptionalitem 12,406 11,172Exceptionalitem - (270)

Operatingprofit 12,406 10,902

ManufacturingOperations Revenue 34,016 32,189Costofsales (23,064) (21,640)

Grossprofit 10,952 10,549Netoperatingexpenses (9,728) (9,696)

Operatingprofitbeforeexceptionalitem 1,224 853Exceptionalitem - (60)

Operatingprofit 1,224 793

Exceptionalitem GuaranteedMinimumPension(“GMP”)equalisationAs reported in the 2018 Annual Report, following the High Court judgement involving LloydsBankingGroup inOctober 2018, theDirectorsmade the judgement that theestimatedeffect ofGuaranteedMinimumPension (“GMP”)equalisationontheGroup’spension liabilitieswasapastservice cost for pensionable service between 1990 and 1997 that should be reflected as anexceptional item. Anysubsequentchangeinestimatewillberecognisedinothercomprehensiveincome. The judgement was based on the fact that pension liabilities for the Group’s pensionschemeat31December2017didnotincludeanyamountsforGMPequalisation.Accordingly,anexceptionalcostof£330,000wasrecognisedinthe2018financialstatementsasapastservicecostinrespectoftheequalisationofGMPbenefits.Webelievethatthisclassificationas an exceptional cost provides a more meaningful basis for measuring the 2018 financialperformance.

20

MacfarlaneGroupPLC



4. Financecosts

2019£000

2018£000

Interestonbankborrowings 573 530Interestonleases 802 17Netinterestexpenseonretirementbenefitobligation(seenote10) 231 262

Totalfinancecosts 1,606 809

Interest on leases in 2019 includes the interest on all leases following the transition to IFRS 16‘Leases’.Interestin2018onlyincludestheinterestonfinanceleasesunderIAS17‘Leases’.

5. Tax 2019£000

2018£000

Currenttax UnitedKingdomcorporationtaxat19.0% 2,057 1,953 Foreigntax 104 98 Adjustmentsinrespectofprioryears (53) (42)

Totalcurrenttax 2,108 2,009

Deferredtax Currentyear 185 136

Totaldeferredtax(seenote11) 185 136

Totaltaxcharge 2,293 2,145

ThestandardrateoftaxbasedontheUKaveragerateofcorporationtaxis19.0%.Taxationforotherjurisdictionsiscalculatedattheratesprevailinginthesejurisdictions.Theactualtaxchargeforthecurrentandpreviousyearvariesfromthestandardrateoftaxontheresults in the consolidated income statement for the reasons set out in the followingreconciliation:- 2019

£0002018£000

Profitbeforetax 12,024 10,886

Taxonprofitat19.0% 2,285 2,068Factorsaffectingtaxchargefortheyear:- Non-deductibleexpenses 47 107 Differenceonoverseastaxrates 14 12 Changesinestimatesrelatedtoprioryears (53) (42)

Taxchargefortheyear 2,293 2,145

Effectiverateoftaxfortheyear 19.1% 19.7%

21

MacfarlaneGroupPLC



6. Dividends 2019£000

2018£000

Amountsrecognisedasdistributionstoequityholdersintheyear: Finaldividendfortheyearended31December2018of1.65ppershare (2017–1.50ppershare)

2,600

2,363

Interimdividendfortheyearended31December2019of0.69ppershare (2018–0.65ppershare)

1,089

1,024

3,689 3,387

Aproposeddividendof1.76ppersharewillbepaidon4June2020tothoseshareholdersontheregisterat15May2020.ThisissubjecttoapprovalbyshareholdersattheAnnualGeneralMeetingon12May2020andthereforehasnotbeenincludedasaliabilityinthesefinancialstatements.

7. Earningspershare Thecalculationofthebasicanddilutedearningspershareisbasedonthefollowingdata:

2019£000

2018£000

EarningsforthepurposesofearningspershareProfitfortheyearbeforeexceptionalitems

9,731

9,015

Profitfortheyear 9,731 8,741

Numberofsharesinissueforthepurposesofcalculatingbasicanddilutedearningspershare

2019No.ofshares‘000

2018No.ofshares‘000

Weightedaveragenumberofsharesinissueforthepurposesofbasicearningspershare

Weightedaveragenumberofsharesinissue 157,636 157,548 EffectofLong-TermIncentivePlanawardsinissue 393 -

Weightedaveragenumberofsharesinissueforthepurposesofcalculatingdilutedearningspershare

158,029

157,548

Earningspersharebeforeexceptionalitem 6.17p 5.72p

Earningspershareafterexceptionalitem 6.16p 5.55p

8. AcquisitionsOn2May2019,theGroup’ssubsidiary,MacfarlaneGroupUKLimitedacquired100%oftheissuedsharecapitalofCarnweatherLimited,theparentcompanyofEcopac,foramaximumconsiderationof approximately £3.9 million. £3.1 million was paid in cash on acquisition. The deferredconsiderationof£0.8millionispayablein2020,subjecttocertaintradingtargetsbeingmetinthetwelvemonthperiodendingon30April2020.On30August2019,MacfarlaneGroupPLCacquired100%of the issuedsharecapitalofLeyland,for amaximumconsiderationof approximately£3.05million. £2.00millionwaspaid in cashonacquisition with shares to the value of £0.25m issued to the Vendors on acquisition. Deferredconsiderationof£0.8million ispayable2020, subject to certain trading targetsbeingmet in thetwelvemonthperiodendingon31August2020.

22

MacfarlaneGroupPLC



8. Acquisitions(continued)Contingent considerations are recognised as a liability in trade and other payables and areremeasuredtofairvalueof£1.6millionatthebalancesheetdatebasedonarangeofoutcomesbetween £Nil and £1.6 million. Trading in the post-acquisition periods to 31 December 2019supportstheremeasuredvalueof£1.6m.In2018,MacfarlaneGroupUKLimitedacquired100%ofTylerPackaging(Leicester)Limitedforaconsiderationofapproximately£2.1million.£1.5millionwaspaidincashonacquisition,withthedeferredconsiderationof£0.6millionpaid in2019,as trading targetsweremet in full. In2018MacfarlaneGroupUKLimitedalsoacquired100%ofHarrisonsPackagingLimitedforamaximumconsiderationofapproximately£2.8million. £1.8millionwaspaidincashonacquisition. Ofthemaximum deferred consideration of £1.0 million, £0.6 million was paid in 2019, reflecting theresultsinthetradingyearafteracquisitionand£0.4millionwasreleasedtotheincomestatement.Theimpactoftheacquisitionsonthe2019resultsissetoutintheStrategicReportonpage3.AllthebusinessesdetailedabovearepartofthePackagingDistributionsegment.GoodwillarisingontheacquisitionsisattributabletotheanticipatedfutureprofitabilityofthedistributionofGroupproduct rangesandanticipatedoperating synergies from future combinationsof activities in thePackagingDistributionnetwork.Fairvaluesassignedtonetassetsacquiredandconsiderationpaidandpayablearesetoutbelow:-

Carnweather(incEcopac)

£000

LeylandPackagingCompany

£000

PreviousYears’

Acquisitions£000

2019£000

2018£000

Netassetsacquired Otherintangibleassets 1,561 1,752 - 3,313 2,112Property,plantandequipment 685 509 - 1,194 85Inventories 395 484 - 879 283Tradeandotherreceivables 1,196 601 - 1,797 831Cashandbankbalances 211 (111) - 100 1,733Tradeandotherpayables (974) (684) - (1,658) (1,075)Currenttaxliabilities (91) (144) - (235) (161)Leaseliabilities (549) (430) - (979) (12)Deferredtaxliabilities (287) (312) - (599) (371)

Netassetsacquired 2,147 1,665 - 3,812 3,425Goodwillarisingonacquisition 1,704 1,389 - 3,093 1,546

Totalconsideration 3,851 3,054 - 6,905 4,971

Contingentconsiderationonacquisitions

Currentyear (800) (800) - (1,600) (1,600)Prioryears - - 1,207 1,207 4,000

Sharesissued - (250) - (250) -

Cashconsideration 3,051 2,004 1,207 6,262 7,371

Netcashoutflowarisingonacquisition Cashconsideration (3,051) (2,004) (1,207) (6,262) (7,371)Cashandbankbalancesacquired 211 (111) - 100 1,733

Netcashoutflow (2,840) (2,115) (1,207) (6,162) (5,638)

23

MacfarlaneGroupPLC



9. Notestothecashflowstatement 2019£000

2018£000

Profitbeforetax 12,024 10,886Adjustmentsfor: Amortisationofintangibleassets 2,391 2,244 Depreciationofproperty,plantandequipment(inc.ROUassets) 7,816 1,593 Loss/(gain)ondisposalofproperty,plantandequipment 5 (32) Share-basedpayments 75 - Financecosts 1,606 809

Operatingcashflowsbeforemovementsinworkingcapital 23,917 15,500

Decrease/(increase)ininventories 2,006 (1,192) Decreaseinreceivables 1,718 2,183 (Decrease)/increaseinpayables (1,487) 122 Adjustmentforpensionschemefunding (2,994) (2,352)

Cashgeneratedbyoperations 23,160 14,261 Incometaxespaid (2,288) (1,882) Interestpaid (1,375) (547)

Cashinflowfromoperatingactivities 19,497 11,832

Cashand

Cashequivalents

£000

Bank

borrowing£000

Lease

Liabilities£000

TotalDebt£000

At1January2018 2,013 (16,346) (342) (14,675) Cashmovements 2,598 (1,423) 253 1,428Non-cashmovements Acquisitions - - (12) (12)

At31December2018 4,611 (17,769) (101) (13,259) Cashmovements (1,301) 1,785 6,699 7,183Non-cashmovements IFRS16transitionon1January2019 - - (27,963) (27,963) Newleases - - (3,623) (3,623) Acquisitions - - (979) (979)

At31December2019 3,310 (15,984) (25,967) (38,641)

Netbankdebt2019 3,310 (15,984) (12,674) Netbankdebt2018 4,611 (17,769) (13,158)

Cashandcashequivalents(whicharepresentedasasingleclassofassetonthefaceofthebalancesheet)comprisecashatbankandothershort-termhighlyliquidinvestmentswithmaturityofthreemonthsorless.

24

MacfarlaneGroupPLC



10. PensionschemeMacfarlaneGroupPLCsponsorsadefinedbenefitpensionschemeforcertainactiveandformerUKemployees–theMacfarlaneGroupPLCPension&LifeAssuranceScheme(1974)(“thescheme”).The scheme is administered by a separate Board of Trustees composed of employer nominatedrepresentatives and member nominated Trustees and is legally separate from the Group. Theassets of the scheme are held separately from those of theGroup inmanaged funds under thesupervisionoftheTrustees.TheTrusteesarerequiredbylawtoactintheinterestofallclassesofbeneficiary in the scheme and are responsible for investment policy and the day-to-dayadministrationofbenefits.Theschemewasclosedtonewentrantsduring2002.Theschemeprovidesqualifyingemployeeswithanannualpensionof1/60ofpensionablesalaryforeachcompletedyear’s serviceonattainmentofanormal retirementageof65. Pensionablesalarieswerefrozenfortheremainingactivemembersatthelevelscurrentat30April2009withthechangetakingeffect from30April2010andasaresultnofurthersalary inflationapplies foractive members who remained in the scheme. Active members’ benefits also include lifeassurancecover,albeitthepaymentofthesebenefitsisatthediscretionofthescheme’sTrustees.Onwithdrawing from active service a deferredmember’s pension is revalued from the time ofwithdrawaluntil thepension isdrawn. Revaluation indeferment isstatutoryandsince2010hasbeenrevaluedontheConsumerPriceIndex(“CPI”)measureofinflation.Revaluationofpensionsin payment is a blend of fixed increases and inflationary increases depending on the relevantperiodsofaccrualofbenefit.Forpensionsinpayment,theinflationaryincreaseiscurrentlybasedontheRetailPriceIndex(“RPI”)measureof inflationorbasedonLimitedPriceIndexation(“LPI”)forcertaindefinedperiodsofservice.During 2012, Macfarlane Group PLC agreed with the Board of Trustees to amend benefits forpensioner, deferred and active members in the defined benefit pension scheme by offering aPension IncreaseExchange (“PIE”)option fordeferredandactivemembersat retirementafter1May2012.BalancesheetdisclosuresThefairvalueofschemeinvestments,thepresentvalueofschemeliabilitiesandexpectedratesofreturnarebasedontheresultsoftheactuarialvaluationasat1May2017,updatedtotheyear-end. 2019

£0002018£000

2017£000

2016£000

2015£000

Investmentclass Equities 22,139 16,025 17,694 17,112 16,788Multi-assetdiversifiedfunds 25,382 17,512 21,533 21,509 25,476Liability-driveninvestmentfunds 27,688 28,379 28,534 26,532 14,107Bonds - - - - 11,119Securedpropertyincomefund 6,192 7,112 6,606 - -Europeanloanfund 6,379 6,645 6,562 6,334 -Other(cashandsimilarassets) 281 154 31 6,321 303

Fairvalueofschemeinvestments 88,061 75,827 80,960 77,808 67,793Presentvalueofschemeliabilities (94,526) (85,592) (92,783) (92,345) (79,311)

Schemedeficit (6,465) (9,765) (11,823) (14,537) (11,518)

25

MacfarlaneGroupPLC



10. Pensionscheme(continued)The Trustees review the investments of the scheme on a regular basis and consult with theCompany regardinganyproposedchanges to the investmentprofile. Liability-Driven InvestmentFundsare intendedtoprovideamatchof100%againstthe impactofmovements in inflationonpension liabilities and a match of 80% against the impact of movements in interest-rates onpensionliabilities.During2019adjustmentsweremadebetweeninvestmentstobringtheoverallallocationsintolinewiththeTrustees’strategicassetallocation.

The ability to realise the Scheme’s investments at, or close to, fair value was considered whensettingtheinvestmentstrategy.86%oftheScheme’sinvestmentscanberealisedatfairvalueonadailyorweeklybasis.Theremainingassetshavemonthlyorquarterlyliquidity,however,whilstthe income from these helps tomeet the Scheme’s cash flow needs, they are not expected torequiretoberealisedatshortnotice.

Thepresentvalueoftheschemeliabilitiesisderivedfromcashflowprojectionsoveralongperiodoftimeandisthusinherentlyuncertain.Thescheme’sliabilitieswerecalculatedonthefollowingbasesasrequiredunderIAS19:Assumptions 2019 2018 2017 2016 2015

Discountrate 2.00% 2.80% 2.50% 2.70% 3.70%Rateofincreaseinsalaries 0.00% 0.00% 0.00% 0.00% 0.00%Inflationassumption(RPI) 3.00% 3.30% 3.30% 3.30% 3.10%Inflationassumption(CPI) 2.10% 2.30% 2.30% 2.30% 2.10%

Lifeexpectancybeyondnormalretirementdateof65 Male 23.3years 23.7years 22.8years 22.7years 22.7yearsFemale 25.5years 25.7years 25.3years 25.3years 25.1years

In2018,theDirectorshavemadethejudgementthattheestimatedeffectofGMPequalisationontheGroup’spensionliabilitiesisapastservicecostinrespectofpensionableservicebetween1990and1997. TheaverageupliftforGMPserviceforimpactedmembershasbeenreflectedthroughthe consolidated income statement as an exceptional item as set out in note 3, with anysubsequent changes in the estimate to be recognised in other comprehensive income. Thistreatment is based on the fact that the reported pension liabilities for the scheme as at 31December2017didnotincludeanyamountinrespectofGMPequalisation.

2019 20187 2016 2016 2015Movementinschemedeficit £000 £000 £000 £000 £000 At1January (9,765) (11,823) (14,537) (11,518) (13,873)Currentservicecosts (112) (120) (105) (95) (152)PastservicecostsforGMPequalisation

- (330)

-

-

-

Employercontributions 3,106 2,802 3,390 3,001 2,834Netfinancecost (231) (262) (348) (373) (438)Remeasurementofpensionschemeliability

537

(32)

(223)

(5,552)

111

At31December (6,465) (9,765) (11,823) (14,537) (11,518)

FundingUKpensionlegislationrequiresthatpensionschemesarefundedprudently.Followingthetriennialactuarial valuation of the scheme at 1 May 2017, the Company agreed a new schedule ofcontributionswiththePensionSchemeTrustees,whichassumedarecoveryplanperiodof7years.Thenexttriennialactuarialvaluationisdueat1May2020.

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10. Pensionscheme(continued) 2019 2018

Movementinfairvalueofschemeinvestments £000 £000

Schemeinvestmentsatstartofperiod 75,827 80,960Interestincome 2,109 1,987Returnonschemeinvestments(excludinginterestincome) 11,154 (4,143)Contributionsfromsponsoringcompanies 3,106 2,802Contributionfromschememembers 70 72Benefitspaid (4,205) (5,851)

Schemeinvestmentsatendofperiod 88,061 75,827

2019 2018

Movementinpresentvalueofschemeliabilities £000 £000

Schemeliabilitiesatstartofperiod (85,592) (92,783)Currentservicecost (112) (120)PastservicecostsforGMPequalisation - (330)Interestcost (2,340) (2,249)Contributionfromschememembers (70) (72)Changesinassumptionsunderlyingtheschemeliabilities (10,617) 4,111Benefitspaid 4,205 5,851

Schemeliabilitiesatendofperiod (94,526) (85,592)

Sensitivitytokeyassumptions

The key assumptions used for IAS 19 are discount rate, inflation and mortality. If differentassumptionswereused,thenthiscouldhaveamaterialeffectontheresultsdisclosed.Assumingall other assumptions are held static then amovement in the following key assumptionswouldaffectthelevelofthedeficitasshownbelow:-Assumptions

2019£000

2018£000

Discountratemovementof+0.4% 6,048 5,476Inflationratemovementof+0.1% (482) (436)Mortalitymovementof+0.1yearinagerating 284 257Positivefiguresreflectareductionintheschemeliabilitiesandthereforeareductionintheschemedeficit. Thesensitivity informationhasbeenpreparedusing thesamemethodasadoptedwhenadjustingtheresultsofthelatestfundingvaluationtothebalancesheetdateandisconsistentwiththe approach adopted in previous years. The level of sensitivities shown reflect averagemovementsintheassumptionsinthelastthreeyears.All sensitivity information assumes that the average duration of Scheme liabilities is seventeenyears.

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MacfarlaneGroupPLC



11. Deferredtax 2019£000

2018£000

At1January (1,142) (641)Acquisitions (599) (371)Chargedinincomestatement (seenote5) (185) (136)(Charged)/creditedinothercomprehensiveincome Remeasurementofpensionschemeliability

(92)

6

At31December (2,018) (1,142)

Deferredtaxassets Onretirementbenefitobligations 1,099 1,660Corporationtaxlosses 125 191

Disclosedasdeferredtaxassets 1,224 1,851

Deferredtaxliabilities Onacceleratedcapitalallowances (291) (199)Onotherintangibleassets (2,951) (2,794)

Disclosedasdeferredtaxliabilities (3,242) (2,993)

At31December (2,018) (1,142)

A reduction in theUKcorporation tax rate to17%effective from1April 2020was substantivelyenactedon6September2016.ThiswillreducetheCompany’sfuturecurrenttaxcharge.Deferredtaxassetsandliabilitieshavebeencalculatedbasedonthisrate.

12. Sharecapital 2019£000

2018£000

Allotted,issuedandfullypaid: At1January 39,387 39,387Issuedduringtheyear 66 -

At31December 39,453 39,387

Sharepremium At1January 12,975 12,975Issueofnewsharesduringtheyear 184 -Expensesofshareissue (11) -

At31December 13,148 12,975

TheCompanyhasoneclassofordinarysharesof25peach,whichcarrynorighttofixedincome.EachordinarysharecarriesonevoteinanyGeneralMeetingoftheCompany.

On 5 September 2019, the Company issued 264,382 ordinary shares of 25p each at a value of94.56ppershareasnon-cashconsiderationtotheVendorsofLeylandPackagingCompany(Lancs)Limited,aneffectivevalueof£250,000.TheshareswereadmittedtotheOfficialListoftheLondonStockExchangeon5September2019.

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13. RelatedpartytransactionsTransactions between the Company and its subsidiaries, which are related parties, have beeneliminatedonconsolidationandarenotdisclosed.Details of individual and collective remuneration of the Company’s Directors and dividendsreceived by the Directors for calendar year 2019 will be disclosed in the Group’s 2019 AnnualReportandAccounts.Thedirectorsaresatisfiedthattherearenootherrelatedpartytransactionsoccurringduringtheyearwhichrequiredisclosure.

14. PostbalancesheeteventsOn6January2020,theCompany’ssubsidiary,MacfarlaneGroupUKLimitedacquiredthebusiness,goodwillandselectedassetsofthepackagingdistributionbusinessofArmagripLimited,based inCountyDurhamforaconsiderationof£0.9m.Thenetassetsacquiredamountedto£0.5m.

15. PostingtoshareholdersandAnnualGeneralMeetingTheAnnualReportandAccountswillbesenttoshareholdersonTuesday31March2020andwillbeavailabletomembersofthepublicattheCompany’sRegisteredOfficefromFriday3April2020.TheAnnualGeneralMeetingwilltakeplaceattheDoubleTreebyHiltonHotel,CambridgeStreetGlasgowG23HNat12noononTuesday12May2020.

Documents

27 February 2020 ANNUAL RESULTS 2019 2019 2018 Increase€¦ · Macfarlane Group PLC achieved sales of £225.4m in 2019, (2018: £217.3m) a 4% increase on 2018, with 2019 profit before