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Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Final Results - Year Ended 31 December 1999
Macfarlane Group PLC
14 March 2000

    Initial strategic review completed in line with December
    Profit of £14.1m before restructuring costs in line with
 Restructuring costs confirmed at £4.9m, programme will deliver
                        benefits in 2000
 Disposal of loss-making Daniel Montgomery complete, 1999 charge
                            of £6.6m
       Cost of restructuring and disposals is cash neutral
           Final dividend increased to 3.00p per share
 Profit before exceptional charges down 6.6% by £1.0 million to
                          £14.1 million
  Earnings per share before restructuring charges and disposals
                    down to 7.48p from 8.37p
              Group sales up 2.2% to £196.3 million
          Strong balance sheet and high interest cover
John Ward, Chairman of Macfarlane Group PLC today said:

'The  results  for  1999 are in line with  expectations,  a  very
creditable  performance given the competitive trading  conditions
referred  to  in  our statement last December. The  restructuring
programme  has progressed well and will be completed  within  the
cost  levels  previously  outlined.   The  benefits  will  be  as
previously  indicated  and are already  becoming  apparent.  Both
companies highlighted as under strategic review in September 1999
have  now been sold.  We also achieved our key objective  in  the
second  half  of  the  year  by creating  four  focused  business
divisions under the Macfarlane Group brand.

Our medium term aim is to concentrate on value added products and
services,  building on the acquisition programme  seen  in  1999.
The  more  immediate aims are to increase operating  efficiencies
still further and reduce costs to enable Macfarlane Group to be a
competitive  player in its selected activities and an  attractive
profit   generator.  Following  the  conclusion  of  the  initial
strategic review in September 1999, the Board is now reviewing in
detail  our  four  Divisions  to  develop  the  most  appropriate
directions for growth and shareholder value creation.'

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:
Gordon Beattie                Beattie Media       01698 787878
Ann-marie Wilkinson           Beattie Media       0171  930 0453

Financial Headlines

In  line  with  our  trading statement in December  1999,  profit
before  restructuring  charges  and  the  loss  on  disposal   of
businesses  for  the year ended 31 December 1999  decreased  from
£15.1m  to  £14.1m.   Earnings  per  share  before  restructuring
charges  and disposals were 7.48p compared with 8.37p  for  1998.
Total  sales  in  the period increased by 2.2%  from  £192.1m  to

The  Directors  have  declared  a final  dividend  of  3.00p,  an
increase on the 2.95p paid in 1999, reflecting the Group's strong
cash  generation and the minimal cash impact of the restructuring
programme  and disposals.  The dividend will be paid on  Thursday
25  May  2000 to those shareholders on the register at  14  April

Initial strategic review and restructuring programme

The  initial strategic review of the group's operations  by  Iain
Duffin  is now substantially complete. Our four focused operating
divisions are in place following the restructuring of the company
announced  in  September  1999.  The cost  of  the  restructuring
programme  outlined in December 1999 is in line  with  the  £4.9m
indicated and the resultant benefits will be realised in 2000 and
beyond.   Both  of  the companies highlighted as under  strategic
review in September 1999, Daniel Montgomery & Son Limited and Flo-
pak (UK) Limited, have now been sold.

Macfarlane Group    Merchanting Division

Trading  in  our  Merchanting Division remained  strong  in  1999
despite considerable competition and the first two months of 2000
have  continued  this  trend.  The  Division  has  continued   to
outperform  its  competitors and provides a  secure  distribution
channel  for products manufactured in the Group.  The  management
team  reviewed the existing branch network in the second half  of
1999  and  is  now  consolidating  a  small  number  of  selected
operations into fewer larger sites, some where improved telesales
operations  and  other Division-wide support operations  will  be
introduced.   A  new  procurement team is in  place  and  already
delivering  benefits not just to the Division but also throughout
the  Group.   The  costs to vacate the properties  and  headcount
reductions  in  1999 are as envisaged, a total  of  £0.72m.   The
resultant benefits in 2000 will be £0.35m.

Macfarlane   Merchanting  aims  to  build  on   a   long-standing
reputation  for customer service in the nation-wide  distribution
of  packaging materials, whilst maximising profitability from its
UK-wide  branch network. The high levels of service  achieved  in
this  division and the clear expertise in distribution and supply
chain  logistics  are  considered vital  to  the  Group's  future

Macfarlane Group    Packaging Division

Our  Packaging  Division had a good finish to  1999  despite  raw
material  price  pressures in the second half of the  year,  with
demand  in particular from the electronics and telecoms  sectors.
Trading has continued with year on year improvements in the first
quarter of 2000.

The  management team has reviewed all manufacturing sites in  the
Division.  The costs of closure and the costs to exit two  rented
storage  sites have resulted in write-downs to assets in 1999  of
£2.04m  and  headcount reductions costing £1.75m.  The  resultant
benefits  will reach £0.95m on an annualised basis,  with  £0.50m
expected  to be delivered in 2000.  The restructuring will  allow
operations at other locations in the Division to be refocused  on
specialised  areas of manufacturing expertise,  concentrating  on
value-added products.

Macfarlane Western Foam, acquired in September 1999 and based  in
California, is trading well and has brought new processes in  the
approach  to market and its knowledge base which will be  applied
throughout  the  Group.   Recent developments in the  UK  include
moves  by  larger  customers  to  partially  or  fully  outsource
packaging supply chain management.  Two significant new customers
are  pilot-testing schemes with our Packaging Division to  manage
their packaging supply chain in a similar manner to that used  by
our Merchanting Division for their customers.

Our  Packaging  Division  is developing  a  strategy  to  provide
bespoke packaging solutions to meet customers' requirements.   We
are  building  on our existing expertise to become a full-service
packaging provider for large businesses liaising closely with the
customers'   supply   chain  to  manage  packaging   requirements
efficiently and effectively.

Macfarlane Group    Plastics Division

Having  had  an excellent first six months in 1999  our  Plastics
Division continued to performed well in the second half of  1999,
despite  the  well-documented hardening of  raw  material  prices
throughout  the  year.   The last two increases  in  October  and
November proved particularly difficult to recover from customers,
particularly   in  the  price-down  environment  which   is   now

Orion  Flexo  Limited,  acquired in February  for  £1.7m,  had  a
difficult  year, being the company hardest hit by  increased  raw
material  costs.  The more recent acquisition of  Ketts  Products
Limited  for  £0.9m introduced a high quality extruder  based  in
Norwich,  providing valuable additional turnover of  £2m  to  the
Division.    The  company  has  traded  well  since  acquisition.
Similar  bolt-on  acquisitions continue  to  be  targeted  as  an
alternative  to  capital expenditure driven  organic  growth  and
further  efforts  are  being made to  increase  the  product  and
service portfolio offered to customers.

Macfarlane Plastics is recognised as one of the market leaders in
the  UK  plastics  industry.  All six  of  the  previously  self-
standing   subsidiaries  are  now  fully  integrated  under   the
Macfarlane Plastics trading name.  The costs to reduce the layers
of  management  in individual subsidiaries were as  envisaged  at
£0.40m with resultant benefits of £0.35m expected in 2000.

There  is  strong competition for business in 2000, reflecting  a
trading  environment with high material costs  and  overcapacity.
Whilst  this has had an impact on profitability at the  start  of
2000  we  expect  the Division to recover strongly,  particularly
when raw material prices reduce.

Macfarlane Group    Labels Division

Our  Labels Division performed well in 1999 in a very competitive
market  environment.   Pricing pressures  remain  but  Macfarlane
Labels  is responding well to all business opportunities and  has
secured a number of substantial long-term contracts from existing
customers  despite strong competition.  Whilst there will  be  an
impact  on  short-term profitability in 2000 from the renewal  of
contracts, securing the business for extended periods enables the
Division to participate in new projects with customers.

The  Division needs to develop by a mixture of organic growth and
acquisitions  to build on the excellent results achieved  at  our
high   quality   operation  in  Kilmarnock  and   a   number   of
opportunities are being explored for the Division.  The  Division
continues  to  provide  highest quality self-adhesive  labels  to
major  customers throughout the UK particularly  in  the  beauty-
care,  healthcare  and  pharmaceutical  industries.   New  market
sectors  are  being  targeted to broaden the sales  base  of  the

Macfarlane Group    Activities Under Strategic Review

Both companies highlighted as under strategic review in September
1999 have now been sold. Daniel Montgomery & Son Limited and Flo-
pak  (UK) Limited were viewed as businesses which did not readily
fit  into  our  new  divisional framework.   Both  were  sold  to
international  companies who had a very  specific  focus  on  the
manufacturing   activities  involved,  injection   moulding   and
loosefill manufacture.

As  announced  on 1 December 1999, the Group disposed  of  Daniel
Montgomery for a consideration of £2m, net of expenses  of  sale.
Macfarlane Group incurred a loss on disposal of £6.6m  after  all
expenses  of the sale were taken into account.  The loss incurred
in 1999 to the date of disposal was £1.2m on a turnover of £8.0m.

The  other company noted as under strategic review, Flo-pak  (UK)
Limited was sold on 11 February 2000 for a consideration of £3.6m
net of expenses of sale.  The purchaser assumed debt of £0.5m  on
acquisition.  A profit on disposal of £0.5m will be  recorded  in
the  results  for  2000.  The operating profit  incurred  by  the
company in 1999 was £0.4m on a turnover of £3.3m.


We  have  continued to invest in order to support  future  growth
plans.   In  1999,  capital expenditure was  restricted  to  £4.3
million,  reflecting our objectives to generate returns from  the
significant capital expenditure incurred in previous  years.   In
addition  there  have  been moves particularly  in  our  Plastics
Division,  to  use  bolt-on acquisitions  as  an  alternative  to
capital expenditure driven growth.

Following the acquisition of Orion Flexo, Western Foam and  Ketts
Products, at a cash cost of £6.6m, net debt was £9.7m at the  end
of  1999 with strong interest cover.  The effect on profits is  a
net interest charge of £0.8m compared to £1.3m in 1998, primarily
reflecting the impact of lower interest rates.

A  number of our Divisions already have links in Europe and other
continents  to  more  effectively service our  global  customers.
Whilst  the strength of sterling currently disadvantages many  UK
manufacturing  companies, there is no  doubt  that  proximity  to
customers  who  relocate overseas will be a  requirement  in  the
medium  term.  Any  such acquisitions will be financed  from  our
existing borrowing facilities.

At  our  Annual General Meeting on 22 May 2000, the Board intends
to  seek shareholder approval to buy back up to 10% of the shares
in  the  company.  We shall use this authority only where  it  is
felt  appropriate.  The Board currently has no present  intention
of utilising this facility in full but  believes it  is right  to
have the flexibility to do so taking into account  the  company's
cash position and market liquidity in the company's shares.

Management and employees

During  the  year  the  Board  has  significantly  enhanced   the
management capability within the Group by making a number of  key
appointments to support the newly constituted Divisional teams in
fulfilling the challenging objectives set for them.

All  our management teams and employees deserve our gratitude for
their  commitment in meeting the considerable challenges we faced
during 1999, a year of significant restructuring in the Group.

Year 2000

Following  their  initial review, the directors  continue  to  be
alert  to  the potential risks and uncertainties surrounding  the
year  2000  issue. At the date of this report, the directors  are
not  aware of any significant factors which have arisen, or  that
may  arise,  which  will affect the activities of  the  business;
however, the situation is still being monitored. Any future costs
associated  with  this  issue cannot be quantified  but  are  not
expected to be significant.


John  Ward  concluded:- 'This is undoubtedly a time  of  exciting
changes within Macfarlane Group.

The  Board fully supports the new Executive Team in their efforts
to  restructure  the Company.  The Executive  team  is  targeting
increases  in  sales and improved operating efficiencies  in  all
Divisions.  The performance of each Division will continue to  be
benchmarked  against  a range of comparator companies  to  ensure
that meaningful improvements in performance can be achieved.  The
Board  will also evaluate the opportunities across our businesses
to apply the use of e-commerce.

Trading  in  2000  has continued to be competitive  and  although
Merchanting,  Packaging and Labels are ahead of our expectations,
Plastics  is  currently experiencing strong  competition  in  its
markets.  Overall our expectations for 2000 remain unchanged.

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

                      Macfarlane Group PLC
                   Year ended 31 December 1999
              Consolidated profit and loss account

                             Before                    Year     Year
                        exceptional Exceptional       ended    ended
                              items       items          31       31
                                                   December December
                                                       1999     1998
                               £000        £000        £000     £000
   continuing operations    190,555                 190,555  192,143
            acquisitions      5,786                   5,786        -
                            196,341                 196,341  192,143

Cost of sales               127,058                 127,058  122,841
Gross profit                 69,283                  69,283   69,302

Net overheads                54,347       4,917      59,264   52,977
Operating profit             14,936      (4,917)     10,019   16,325
Operating profit 
   continuing operations     14,676      (4,917)      9,759   16,325
            acquisitions        260           -         260        -
                             14,936      (4,917)     10,019   16,325

Loss on disposal of businesses    -      (6,580)     (6,580)       -
Profit before interest       14,936     (11,497)      3,439   16,325
Interest receivable                                      62       54
Interest payable                                       (883)  (1,302)
Profit before taxation                                2,618   15,077

Tax on profit on ordinary                             3,016    4,464
(Loss)/profit for the financial                        (398)  10,613
Dividends on equity shares                            5,809    5,745
Retained profit for the year                         (6,207)   4,868
per ordinary                  7.48p     (7.79p)      (0.31p)    8.37p
share of 25p
Diluted (loss)/earnings per   7.48p     (7.79p)      (0.31p)    8.36p
ordinary share of 25p
Dividends per share                                   4.58p     4.53p
Corporation tax rate excluding  disposal              32.8%     29.6%
of business
1. Earnings  per  share  are  calculated  on  the  basis  of  the
   weighted  average of 126,828,240 shares in issue (31  December
   1998   -   126,828,240).  Diluted  earnings  per   share   are
   calculated  on  the  weighted average on a  diluted  basis  in
   accordance  with  FRS  14 Earnings Per  Share  of  126,828,240
   shares. (31 December 1998 - 127,006,301).
2. The figures for 1999 are extracted from those shown in  the
   statutory  accounts  on  which  the  auditors  will  issue  an
   unqualified report today and which will not contain a statement
   under s237(2) or (3) of the Companies Act 1985.  The figures for
   1998 are taken from the published accounts.  A copy of the full
   accounts for that year on which the auditors have also issued an
   unqualified  report,  has been filed  with  the  Registrar  of

                      Macfarlane Group PLC
                        31 December 1999
                   Consolidated balance sheet

                                      As at 31  As at 31
                                      December  December
                                          1999      1998
                                          £000      £000
Fixed assets                                     
Intangible assets                        5,542       963
Tangible assets                         61,615    73,342

                                        67,157    74,305
Current assets                                  
Stocks                                  11,670    12,767
Debtors                                 45,094    42,301
Cash at bank and in hand                 1,674     1,610
                                        58,438    56,678
Creditors: amounts falling due within   55,518    53,761
one year
Net current assets                       2,920     2,917
Total assets less current liabilities   70,077    77,222
Creditors: amounts falling due after        95       119
more than one year
Provisions for liabilities and charges   2,295     2,702
Total net assets                        67,687    74,401
Operating assets by division                     
Merchanting                             19,036    18,945
Packaging                               30,403    27,293
Plastics                                20,951    18,622
Labels                                   3,580     3,812
Under strategic review                   3,383    17,145
Operating assets                        77,353    85,817
Net debt                                (9,666)  (11,416)
Net assets                              67,687    74,401
1. Audited accounts will be sent to shareholders on or about 17
   April 2000 and will be available to members of the public at the
   Company's Registered Office, 21 Newton Place, Glasgow, G3  7PY
   from 19 April 2000.
2. The  Annual General Meeting will be held on Monday  22  May
   2000  and  the final dividend payable to shareholders  on  the
   register at close of business on 14 April 1999 will be paid on 25
   May 2000.
3. Financial Reporting Standards 12 and 13 have been adopted in
   these  accounts,  with no effect on the current  or  preceding
   financial year.
4. There have been no changes of accounting policies during the

                      Macfarlane Group PLC
                   Year ended 31 December 1999
                Consolidated cash flow statement

                                                 Year     Year
                                                ended    ended
                                                   31       31
                                             December December
                                                 1999     1998
                                                 £000     £000
Net cash flow from operating activities         19,147  24,609
(see note 1 below)
Cash outflow from returns on investments         (819)  (1,252)
and servicing finance 
Tax paid                                       (4,469)  (5,815)
Net cash outflow from capital expenditure        (980) (10,863)
and financial investment                          
Net cash outflow from acquisitions and         (4,564)  (1,777)
Equity dividends paid                          (5,745)  (5,745)
Net cash inflow/(outflow) before liquid         2,570     (843)
resources and financing
Management of liquid resources                      -        -
Net cash outflow from financing                  (930)  (1,066)
Increase/(decrease) in cash in the period       1,640   (1,909)
(see note 2 below)

                                                 1999     1998  
Notes:                                           £000     £000
1. Reconciliation of operating profit to net    
cash flow from operating activities      
Operating profit                               14,936   16,325
Restructuring costs                            (4,917)       -
Depreciation                                    8,336    9,073
Amortisation of intangible assets                 145       16
Gain on disposal of assets                       (146)  (1,074)
Decrease/(increase) in stocks                     447      (67)
(Increase)/decrease in debtors                 (2,578)   2,459
Increase/(decrease) in creditors                2,924   (2,123)
Net cash inflow from operating activities      19,147   24,609
2. Reconciliation of movement in net debt                    
Increase/(decrease) in cash in the period       1,640   (1,909)
Cash inflow from decrease in debt and lease       930    1,066
Cash outflow from decrease in liquid                -        -
                                                2,570     (843)

Borrowings acquired with subsidiaries            (199)     (11)
New finance leases and loan notes                (621)       -
Movement in net debt in the period              1,750     (854)
Opening net debt                              (11,416) (10,562)
Closing net debt                               (9,666) (11,416)

                      Macfarlane Group PLC
                   Year ended 31 December 1999
     Analysis of turnover and operating profits by division
Year ended 31 December 1999
         Merchanting Packaging   Plastics   Labels    review      1999
                £000      £000       £000     £000      £000      £000
Turnover      51,653    55,339     55,143   17,084    11,336   190,555
acquisitions       -     2,248      3,538        -         -     5,786
               51,653   57,587      58,681  17,084    11,336   196,341

Cost of sales  34,970   38,967      38,908   9,258     4,955   127,058
Gross profit   16,683   18,620      19,773   7,826     6,381    69,283
Net overheads  13,019   15,319      14,610   4,204     7,195    54,347
                3,664    3,301       5,163   3,622      (814)   14,936

Restructuring     718    3,799         400       -         -     4,917
Operating       2,946     (498)      4,763   3,622      (814)   10,019
Continuing      2,946     (702)      4,707   3,622      (814)    9,759
Acquisitions        -      204          56       -         -       260
Operating       2,946     (498)      4,763   3,622      (814)   10,019
Loss on             -        -           -       -    (6,580)   (6,580)
Net interest       25     (382)       (428)    119      (155)     (821)
Profit          2,971     (880)      4,335   3,741    (7,549)    2,618
before tax

Year ended 31 December 1998
         Merchanting Packaging   Plastics   Labels    review      1998
                £000      £000       £000     £000      £000      £000
Turnover      47,996    56,842     56,072   15,977    15,256   192,143

Cost of       32,251    37,948     37,063    8,877     6,702   122,841
Gross profit  15,745    18,894     19,009    7,100     8,554    69,302

Net           12,113    13,985     13,957    3,631     9,291    52,977
Operating      3,632     4,909      5,052    3,469      (737)   16,325
Net interest      55      (479)      (868)      54       (10)  (1,248)
Profit         3,687     4,430      4,184    3,523      (747)  15,077
before tax
                      Macfarlane Group PLC
                   Year ended 31 December 1999
      Segmental information on operating assets by division
                        31 December 1999
         Merchanting Packaging   Plastics   Labels    review      1999
                £000      £000       £000     £000      £000      £000
Fixed assets  12,417    27,402     20,033    4,098     3,207    67,157
Stocks         3,506     2,994      3,750    1,120       300    11,670
Debtors       12,798    13,203     14,865    3,523       705    45,094
Current       16,304    16,197     18,615    4,643     1,005    56,764

Creditors      9,625    12,401     16,708    4,734       805    44,273
Net current    6,679     3,796      1,907      (91)      200    12,491
Total assets                                                          
less current  19,096    31,198     21,940    4,007     3,407    79,648
Deferred          60       795        989      427        24     2,295
Operating     19,036    30,403     20,951    3,580     3,383    77,353
Net            1,327    (7,178)    (6,107)   2,036       256    (9,666)
Total net     20,363    23,225     14,844    5,616     3,639    67,687

31 December 1998
         Merchanting Packaging   Plastics   Labels    review      1998
                £000      £000       £000     £000      £000      £000

Fixed assets  14,032    24,688     16,696    4,913    13,976    74,305
Stocks         2,986     3,125      3,181    1,195     2,280    12,767
Debtors       10,552    12,843     11,887    3,628     3,391    42,301
Current       13,538    15,968     15,068    4,823     5,671    55,068

Creditors      8,504    12,509     12,198    5,440     2,203    40,854
Net current    5,034     3,459      2,870     (617)    3,468    14,214
Total assets                                                          
less current  19,066    28,147     19,566    4,296    17,444    88,519
Deferred         121       854        944      484       299     2,702
Operating     18,945    27,293     18,622    3,812    17,145    85,817
Net              406    (4,975)    (5,502)   1,902    (3,247)  (11,416)
Total net     19,351    22,318     13,120    5,714    13,898    74,401

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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