This site uses cookies. Some of the cookies are essential for parts of the site to operate and have already been set. You may delete and block all cookies from this site, but if you do, parts of the site may not work. To find out more about cookies used on Trustnet and how you can manage them, see our Privacy and Cookie Policy.

By clicking "I Agree" below, you acknowledge that you accept our Privacy Policy and Terms of Use.

For more information Click here



It's look like you're leaving us

What would you like us to do with the funds you've selected

Show me all my options Forget them Save them
Customise this table
Share   Print      RSS

Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Macfarlane Group PLC
17 August 2001

                                PRESS RELEASE


                                                                17 August 2001



The Board of Macfarlane Group PLC ('Macfarlane' or 'Company') today announces
that it has reached agreement with Tyco Plastics Limited ('Tyco') for the
disposal of the business, assets and certain liabilities of Macfarlane's UK
Plastics Division ('Plastics Division'), for a total consideration of $70.0m
on a debt-free basis.

In view of its size, the disposal requires the approval of the shareholders of
Macfarlane, which will be sought at an extraordinary general meeting of the
Company. A circular containing further details on the disposal and convening
an extraordinary general meeting will be sent to Macfarlane shareholders

Background to and reasons for the disposal

Over the last three years Macfarlane has fully integrated the six previously
self-standing subsidiaries under the Macfarlane Plastics brand. Macfarlane
Plastics is now recognised as one of the largest players in the UK plastics
industry. Following the Division's strategy of incremental acquisitions in
place of capital expenditure, the Division has acquired Marpak Polythene
Supplies Limited, an extruder and converter based in Leeds, Monospec Limited
an extruder and printer based in Wrexham and United Polythene Limited, a
converter based in Oxford since the start of 2001.

The Board has always recognised that in order to obtain a leadership position
in manufacturing, scale was required. It was hoped that the bid for British
Polythene Industries PLC ('BPI') would have achieved this. Following the
lapsing of that bid, the Macfarlane Board began to examine ways in which to
maximise long-term shareholder value and concluded that the appropriate course
of action was to exit from the UK Plastics market. After examining a number of
options the Macfarlane Board concluded that the value from the Plastics
Division would be optimised by a trade sale, whilst retaining our injection
moulding business in Ireland. As part of this strategy the Macfarlane Board
announced on 3 August 2001 the sale of Macfarlane's entire shareholding in BPI
at a price of 230 pence per share.

Future strategy

The Company's investments in recent months have clearly concentrated on the
Packaging Division in order to consolidate a leadership position in the
markets in which the Division operates. In January 2001, the Group's
merchanting, packaging and labels businesses were combined into one new
Packaging Division. This was a further step in the Group's strategy of
focusing on serving the customer's total requirement through an integrated
procurement, manufacturing and logistics function.

Following the acquisitions of National Packaging Group in April 2001 and of
the business and certain assets of A1 Packaging in July 2001, Macfarlane's
leadership position within the UK has been enhanced and the packaging
distribution business is a major player in its market.

Macfarlane's distribution business aims to provide outstanding customer
service in the nationwide distribution of packaging materials, whilst
maximising profitability from its UK-wide branch network. The high levels of
service achieved in this division and its clear expertise in distribution and
supply chain logistics are vital for the future. Customers will be provided
with a national offering supported by full service at the local level.

Macfarlane Group's strategy and focus continues to shift from primarily
selling only what it traditionally manufactured to selling what Macfarlane's
customers request. The Company will however maintain value added manufacturing
and assembly businesses where this is determined to be a strategic customer
requirement, which enables it to make satisfactory margins to justify the
investments made.

 Use of proceeds from the disposal

The proceeds of the sale will initially be used to eliminate Group debt. The
additional resources which will become available will enable Macfarlane to
finance the Group's organic and acquisition led expansion programme to enhance
our leadership position. The Board continues to seek opportunities in the UK
and in Europe. The Board will also use proceeds as appropriate to fund share

Financial information on the Plastics Division

In the year ended 31 December 2000, the Plastics Division achieved net profits
before interest and tax of £6.0m (1999 - £5.2m) on turnover of £61.0m (1999 -
£53.1m). As at that date, the net assets of the Plastics Division amounted to
£4.3m (1999 - £3.0m).

In the six months ended 30 June 2001, the Plastics Division achieved net
profits before interest and tax of £2.4m on turnover of £29.8m. As at that
date, the net assets of the Plastics Division amounted to £4.3m.

Terms of the disposal

Under the terms of the disposal agreement, the total consideration will be
$70m on a debt-free basis for the business, assets and certain liabilities of
the Plastics Division, being £48.7m at an exchange rate of $1.438/£ being the
exchange rate at the close of business on 15 August 2001, the latest
practicable date prior to this announcement. This consideration is based on
the net book value of the transferring assets and liabilities as at 31
December 2000 and will be adjusted in accordance with the terms of the
disposal agreement with Tyco to reflect the movement in such net book value up
to the date of completion, taking into account certain provisions as detailed
in the disposal agreement. The provisions of the agreement also include a
supply agreement between the two parties on normal commercial terms.

Completion of the disposal is conditional upon shareholders' approval, which
will be sought at an extraordinary general meeting to be convened by
Macfarlane. A summary of the principal terms of the disposal agreement will be
set out in the circular to the shareholders of Macfarlane, which will be sent

Financial effects of the disposal

The disposal of the Plastics Division will initially be dilutive to the
earnings of Macfarlane Group. However, the Board is confident that the Group's
existing and planned investments in the Packaging businesses will continue to
provide a strategic focus on scale and leadership in the markets in which
Macfarlane Group continues to operate. The Board believes that this will prove
to be the most appropriate means to ultimately generate value for Macfarlane

The net book value of the Plastics Division as at 30 June 2001 was £4.3m. Had
the transaction taken place on that date, after estimated expenses of sale and
other necessary adjustments, the increase in shareholders' funds arising on
disposal would have been £17.3m but after accounting for goodwill previously
written off reserves there would have been no material profit before taxation
reported for the transaction. However, the final financial result will depend,
inter-alia, on the exchange rate ruling at the date of settlement of the

Group interim results

The unaudited interim results of Macfarlane Group for the six months ended 30
June 2001 have also been released today to the Stock Exchange. In the six
months ended 30 June 2001, the Group achieved profit before tax of £7.2m (six
months ended 30 June 2000 - £6.7m before gain on disposal of Flo-pak of £0.5m)
on turnover of £105.1m (six months ended 30 June 2000 - £98.2m). Net assets at
30 June 2001 were £69.5m (30 June 2000 - £68.8m) and net group borrowings
amounted to £39.1m (30 June 2000 - £9.0m).

Current trading and prospects

The Macfarlane board remains confident for the future of Macfarlane Group. The
Group has a strong balance sheet and is proceeding with the realignment of its
asset base. There is an enthusiastic executive team in place and the
restructuring programme will be pursued in the second half of the year with
the aims of achieving the restructuring plan on a cost neutral basis. Sales
growth opportunities are still evident despite cost and competitive pressures.
In spite of the competitive trading conditions in the year to date the board
expects the Group's remaining businesses to make further progress in the
current year provided there is no further material deterioration in trading
conditions outwith our control.


The Board of Macfarlane, which has received financial advice from Noble
Grossart Limited, considers the terms of the disposal to be in the best
interests of the shareholders of Macfarlane as a whole. In providing its
financial advice, Noble Grossart Limited has relied on the Macfarlane board's
commercial assessment of the disposal.

Accordingly, the directors of Macfarlane will unanimously recommend that
Macfarlane's shareholders vote in favour of the resolution to approve the
disposal which will be proposed at an extraordinary general meeting of
Macfarlane as they intend to do in respect of their own beneficial holdings
amounting to 1,785,577 ordinary shares in aggregate, representing
approximately 1.44% of the issued share capital of Macfarlane.

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

Press & Media:
Gordon Beattie             Beattie Media                01698 787878

Noble Grossart:
Todd Nugent                                             0131 226 7011

HSBC is broker to Macfarlane Group PLC

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.

You are currently using an old browser which will not be supported by Trustnet after 31/07/2016. To ensure you benefit from all features on the site, please update your browser.   Close