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Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Strategic Review Concluded
Macfarlane Group PLC
7 December 1999

                        STRATEGIC REVIEW
           1999 pre-exceptional expectations unchanged
              Strong operating cash flows continue
           Four trading divisions from 1 January 2000
       Restructuring programme to deliver benefits in 2000
    Site consolidation, predominantly in Macfarlane Packaging
               Sale of Daniel Montgomery completed
John Ward, Chairman of Macfarlane Group PLC, today said:

'As  promised in our announcement on 7 September 1999, we are now
in a position to give a more detailed report on the consolidation
of our activities into four focused business divisions.

'Most  of  the restructuring being undertaken will arise  in  our
Packaging  Division, where it is intended to close  three  sites,
two  in  Glasgow and one, still to be identified in  England,  by
June  2000.  Combined with the restructuring carried out  in  two
other divisions there will be a loss of up to 150 jobs. To create
a  flatter management structure, more in line with current market
dynamics,  25  senior managers have already left  or  will  leave
Macfarlane Group before the end of the year.

'The estimated cost of the restructuring programme is £4.85m  (of
which  £2.7m  will be cash costs and £2.15m will be  asset  write
downs)  with  resultant  cost savings  of  £1.65m  per  annum  on
completion of the programme, as set out in the Appendix  to  this

'The  disposal  of  Daniel Montgomery & Son Ltd,  announced  last
week,  and the restructuring exercise announced today will enable
the   reshaped  Macfarlane  Group  to  be  an  attractive  profit
generator in future years.  Our objective in reshaping Macfarlane
Group  is to produce a company which will provide total packaging
solutions in key markets and deliver double-digit earnings growth
as a starting point for generating additional shareholder value.'

Further information:
John  M. Ward                  Chairman             0141  333 9666
Iain  D. Duffin                Chief Executive      0141  333 9666
John  Love                     Finance Director     0141  333 9666

Press and Media:
Neil Gibson                   Beattie Media         01698 787878
David Rydell                  Beattie Media         0171 930 0453


Following his appointment on 14 June 1999, Iain Duffin, the Chief
Executive of Macfarlane Group, has completed the initial phase of
his  strategic  review of the Group's operations.  More  detailed
information  is  now being provided on the costs  of  undertaking
this restructuring and the resultant benefits.

Macfarlane Group    Merchanting Division

Trading  in  the  Division has remained  strong  and  profitable,
despite considerable competition.

The  management team has reviewed the existing branch network and
identified  a number of geographical clusters of small  branches,
which  should be consolidated into fewer larger sites, some where
improved  telesales  operations and other  Division-wide  support
operations  will be introduced.  In most cases, the consolidation
will  have  a  minimal incremental infrastructure  capital  cost.
Further reductions in headcount, over that already achieved, will
come  from  natural wastage. The only branch being added  to  the
network  in  1999 will be in Peterborough, the existing  site  of
Dalewood Packaging.

The  costs to vacate the properties is estimated at £150,000  and
headcount reductions will cost £550,000.  The resultant  benefits
in 2000 are estimated at £350,000.

Joe  Bisland and his team at Macfarlane Merchanting aim to  build
on  their  long-standing  reputation for  pre-eminent  levels  of
customer  service  in  the nationwide distribution  of  packaging
materials, whilst at the same time maximising profitability  from
its UK-wide branch network.

Macfarlane Group    Packaging Division

Our  Packaging  Division  has  continued  to  experience  pricing
pressures in the second half of 1999, particularly as a result of
substantial raw material price increases from manufacturers.

The  management  team has reviewed all activities  including  the
number  of  manufacturing sites and concluded that  the  products
offered to customers need to be enhanced through improved product
design and by further concentrating of manufacturing expertise at
specific sites.

As a result it is intended to close one of the company's sites in
England and reduce the scale of the operations at other sites  to
concentrate  solely  on  the manufacture  of  quality  corrugated
products.   Operations at all other locations will be streamlined
to  focus  the Division on its specialised areas of manufacturing
expertise, which will result in the closure of two rented storage
sites  at  Hillington and Govan with resultant asset write  downs
and reductions in headcount.

The  costs  of closure and the write-downs applied to assets  are
estimated at £2m. Headcount reductions will cost £1.75m with  the
resultant  benefits expected to reach £950,000 on  an  annualised

In  October  1999  David  Dawson was appointed  Divisional  Chief
Executive of the Packaging Division and with his management  team
is   developing  the  Division's  strategy  to  provide   bespoke
packaging solutions to meet customers' requirements. The recently
acquired  Western Foam, based in California, is trading well  and
has  brought exciting new processes in the approach to market and
its knowledge base which will be applied in the UK.

Macfarlane Group    Plastics Division

Profitability  in  the second half of 1999 has  been  maintained,
despite   the   hardening  of  raw  material  prices   in   1999,
particularly the most recent increases sustained in  October  and
November,  which  have  proved more  difficult  to  recover  from

Mike  Clark and his management team are already well advanced  in
the  process  of  integrating the activities  of  the  individual
companies  into  one trading unit for January  2000.   Macfarlane
Plastics has already commenced trading and will be a major  force
in the plastics industry.

All existing manufacturing sites will contribute to the continued
progress  of  the  Division.   The recent  acquisition  of  Ketts
Products  Limited for £900,000 introduced a high quality extruder
based in Norwich to Macfarlane Plastics and will provide valuable
additional turnover of £2m to the Division.

Costs   to   reduce  the  layers  of  management  in   individual
subsidiaries  will  be  £400,000  with  a  resultant  benefit  of
£350,000 in future years.

Mike  Clark  and  his  team will improve the performance  of  the
Division still further in future years by increasing the  product
portfolio  offered  by  the Division.   Organic  growth  will  be
supplemented  by  small  acquisitions  as  well  as  by   capital

Macfarlane Group    Labels Division

Our  Labels  Division continues to perform well in  an  extremely
competitive  market  environment.  Pricing pressures  remain  but
Macfarlane   Labels   is   responding  well   to   all   business

No  restructuring is required in Macfarlane Labels.  The Division
continues  to  provide  highest quality self-adhesive  labels  to
major  customers throughout the UK particularly in the healthcare
and pharmaceutical industries.

Graham   Casey   and  his  team  operate  from  a  high   quality
manufacturing  site in Kilmarnock.  It remains our  intention  to
expand  the business aggressively to meet the demands  caused  by
increased competition.

Macfarlane Group - Activities Under Strategic Review

As  announced  on 1 December 1999, the Group disposed  of  Daniel
Montgomery for a consideration of £2m, net of expenses  of  sale.
Macfarlane  Group will incur a loss on disposal of  approximately
£6.5m  after  all  expenses  of the sale  have  been  taken  into

The  other company noted as under strategic review, Flo-pak  (UK)
Limited  continues  to trade profitably.  This company's  diverse
manufacturing  activities remain under review with the  intention
of maximising the value from each of its activities.

Finance and Investment

Following the acquisition of Western Foam in September 1999 for a
consideration  of £5.1m, £4.5m payable in cash the  remainder  in
loan  notes,  net  debt remains modest at  £14m  at  the  end  of
November 1999.  Interest cover remains high.

Macfarlane  Group  continues to actively seek earnings  enhancing
acquisitions which will generate significant shareholder value.

Board and Management

Since our last announcement three key appointments have been made
at  Group level to support the activities of our Divisional teams
in  fulfilling the challenging objectives which will be  set  for
them by the Board.

Rob  Shorrick joined the Group from LucasVarity plc to  lead  the
Group's   Organisation  and  Management  Development  activities.
Fiona  Smith  joined  the  Group from  Rothmans  to  support  the
development  of  robust strategies for Group  operations  in  the
future.   Neil Haddow, formerly with Scottish Power  plc,  joined
the  Group as Group Financial Controller and will play a key role
in developing the Group's business planning processes.

Current Trading and Future Prospects

The Group's expectations for 1999 prior to charging restructuring
costs  and  the  loss  on  disposal of Daniel  Montgomery  remain

John Ward concluded:

'This is a time of exciting and fundamental change for Macfarlane

'The Board fully supports the new Executive Team in their efforts
to  restructure the Company.  Our restructuring programme will be
followed through rigorously with the benefits being seen  in  the
year  2000.   Selective  acquisitions will  continue  to  further
develop each of the Divisions.

'The  Executive team is targeting increases in sales and improved
operating efficiencies in all our Divisions.  The performance  of
each  Division will continue to be benchmarked internally against
a  range  of  comparator  companies  to  ensure  that  meaningful
improvements in performance can be sought.

'Our  objective  in reshaping Macfarlane Group is  to  produce  a
company  which  will  provide total packaging  solutions  in  key
markets  and deliver double-digit earnings growth as  a  starting
point for generating additional shareholder value.'


              Merchanting  Packaging  Plastics   Labels     Total
                     £000       £000      £000     £000      £000
Property costs        150        450         -        -       600
Reduce                550      1,750       400        -     2,700
Closure costs           -      1,550         -        -     1,550
                      700      3,750       400        -     4,850
1999      costs                                                  
Cash      costs       350        500       400        -     1,250
Asset                   -        750         -        -       750
writedowns made
1999 provisions                                                  
writedowns /          150      1,250         -        -     1,400
costs to vacate
in 2000
Cash  costs  in       200      1,250         -        -     1,450
                      700      3,750       400              4,850
Resultant             350        950       350        -     1,650
annual benefit
Sale of Daniel Montgomery & Son                            Total
Net assets disposed                                         6,500
Asset                                                       2,000
Disposal                                          3,600          
Costs relating to sale to be met by Macfarlane    1,600          
Loss on                                                     6,500
Operating losses from 1 January 1999                        1,200
to date of sale

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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