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Macfarlane Group PLC (MACF)

Macfarlane Group PLC

Final Results
Macfarlane Group PLC
18 March 2008

                                                                   18 March 2008


      Profit before tax from continuing operations up 67% to £2.5 million

                        Net debt reduced to £3.1 million

                    Further progress on re-shaping the Group

                        Sharper focus on core activities

                      Benefits emerging from acquisitions

                  Full year dividend confirmed at 2p per share

Archie Hunter, Chairman of Macfarlane Group PLC today said: -

'2007 was a year of significant progress for Macfarlane Group as we continued to
re-shape the business and focus on our core activities, substantially increasing
profits from our continuing operations in the process.

2007 saw the benefits of the strategy set out three years ago. We have shown the
ability to grow the business significantly and we see the potential for further
progress in 2008.


Operating profits from continuing activities increased to £3.1 million (2006:
£2.0 million) on Group turnover up 13% at £119.7 million. Pre-tax profits
increased to £2.5 million (2006: £1.5 million).

   •   Packaging Distribution turnover increased by 15%, with operating profits
       increasing from £0.44 million to £1.34 million.
   •   Our Manufacturing Operations turnover rose by 6%, with operating profits
       increasing from £1.57 million to £1.73 million.

Earnings per share increased from 1.03p to 3.06p per share, with profits after
tax benefiting from a one-off deferred tax credit of £1.7 million. The Board
will pay a final dividend of 1p per share, which combined with the interim
dividend of 1p per share, results in a full year dividend of 2p per share.

Trading in the first part of 2008 is in line with the Board's expectations and
continues to show the benefits of the concentrated effort put in to running and
expanding our UK businesses, following the sale of businesses in the United
States and Mexico.

In our Packaging Distribution business, turnover increased by 15% from £80.9
million to £92.7 million. The acquisition of Bloomfield for £2.0 million in
October 2006 has demonstrated what targeted acquisitions can achieve; packaging
distribution profit more than tripled to £1.3 million in 2007 (2006: £0.4
million) and we are seeing continuing benefit from our scale and market
presence. Online Packaging was purchased for £5.1 million in January 2008 and is
trading well.

Trading (continued)

The link between our packaging distribution and packaging manufacturing
businesses in the UK is becoming more important and valuable each year. In
Packaging Distribution we are now three times the size of our nearest competitor
and with a UK market share of just over 10% there is considerable opportunity
for further profitable growth in the sector.

Our labels company faced considerable market consolidation in what was a
difficult year, but coped well to record a profit of £1.2 million on turnover up

More detailed comments on trading are contained in the operating review
following my statement.

Cash and Dividends

During 2007 our borrowings benefited from the disposal of our North American
interests and at the year-end our net debt was reduced to £3.1 million. The
disposal proceeds from our Kirkintilloch property, realised a further £2.4
million at the start of 2008.

The Board continues to recognise the importance to shareholders of a regular and
reliable dividend stream. I am pleased to report that, in addition to the
Interim Dividend of 1p per share announced in September, it is the intention of
the Board to declare a Final Dividend of 1p per share, payable in June, making a
dividend of 2p per share for the full year.

Future Prospects

Whilst the UK economy is entering an uncertain period, the Board is confident
that the broad range of industries we serve and the continued opportunity to
improve operational performance will enable the business to continue to
progress. 2008 has started well.

During the year we will further refine our business focus and will expect to
continue to make value-enhancing acquisitions to expand our UK reach. Recent
acquisitions have increased our geographic spread and, along with our
recruitment initiatives in the past two years, we have added considerably to our
customer offering and to our talent pool. Also, the disposal of our US/Mexico
business has freed up the time of senior executives to concentrate on internal
efficiencies, business innovation and expansion.

The development of Macfarlane Group into an increasingly stable business has
demanded huge effort and considerable personal commitment from management and
staff alike. The Board very much appreciates this and would like to take this
opportunity to thank them all for their contribution to our progress.'

|Further information:                     |                                       |
|                                         |                                       |
|Archie S. Hunter                         |Chairman 0141 333 9666                 |
|Peter D. Atkinson                        |Chief Executive 0141 333 9666          |
|John Love                                |Finance Director 0141 333 9666         |

Operating review
                                              Revenue     Revenue    Profit        Profit
                                                 2007        2006      2007          2006
Group Segment                                    £000        £000      £000          £000

Packaging Distribution                         92,654      80,853     1,338           436
Manufacturing Operations                       27,083      25,460     1,727         1,571

Continuing activities                         119,737     106,313

Operating profit                                                      3,065         2,007
Net finance costs                                                     (598)         (534)

Profit before tax from continuing                                     2,467         1,473

All businesses within the Group were profitable in 2007 and this was achieved
despite continuing cost pressures on raw materials, fuel and energy.

Group debt continued to reduce during 2007 as more focus was brought to the
Group's activities.

We have demonstrated good progress in 2007. The focus of our plans for 2008 and
beyond is to continue to grow the business both organically and through

Packaging Distribution

Macfarlane's Packaging Distribution business is the leading UK distributor of a
comprehensive range of packaging consumable products. In a highly fragmented
market, Macfarlane is the market leader with a market share in excess of 10%.
The business operates through 15 Regional Distribution Centres (RDCs) supplying
customers on a local, regional and national basis. The business enables
customers to ensure their products are cost-effectively protected in transit and
storage by providing them with a comprehensive product range, single source
supply, just in time delivery and tailored stock management programmes.

Business Performance

In 2007 Packaging Distribution recorded an operating profit of £1.3m, compared
to £0.4m the previous year. There were a number of factors that contributed to
these results:

   •  Sales revenue increased by 10% on an organic basis, partly driven by
      price increases and partly through volume growth;
   •  Sales growth was supplemented by the full year benefit of the acquisition
      of Bloomfield Supplies Limited ('Bloomfield') made in 2006, which increased
      sales revenues by an additional 5%;
   •  Supplier price increases remained a significant feature in 2007 due to
      inflation in raw materials, energy and oil related costs. However we were
      successful in managing price increases with our customers and this allowed
      us to improve the gross margin to just over 30%;
   •  In 2007 our On-Time-In-Full ('OTIF') deliveries averaged 94% compared
      with 92% in 2006 and 91% in 2005. This clearly demonstrates the progress we
      are making in improving the service to our customers;

   •  In 2007 we increased product range penetration in our existing customer
      base to an average 8.7 lines per customer compared with 8.6 in 2006 and 8.2
      in 2005;
   •  During 2007 we opened 2,278 new customer accounts;
   •  We continued to make key investments in the business particularly in our
      e-commerce capability, new business development and the strengthening of the
      management team;

Operating review

Packaging Distribution

   •  Our 2007 customer satisfaction survey showed 81% of customers rating our
      service above average (2006 - 86%) and of these, 29% rated our service as
      excellent (2006 - 33%). Our slightly lower customer satisfaction score in
      2007 reflects a growing need from our customers for help and advice on
      identifying more environmentally friendly packaging solutions.  One of our key
      customer programmes in 2008 will address this;
   •  Visitors to Packaging2U our web-based packaging service doubled in 2007,
      which has enabled us to access a number of market segments where
      traditionally Macfarlane has not had a presence. We expect Packaging2U to
      become profitable in 2008;
   •  During 2007 the dedicated new business team demonstrated its potential
      with a series of major new customer wins; and
   •  Bloomfield was successfully integrated into the Macfarlane RDC network
      and this has given us encouragement to pursue further similar acquisitions
      in 2008.

Within our current network of 15 RDCs, based on our 2007 results we had 5 RDCs
performing at acceptable levels, 8 RDCs demonstrating improvements that indicate
their ability to achieve acceptable performance levels in the short-term and 2
RDCs where performance is currently not at the acceptable level.

The plan for 2008 is to focus our management actions in the following areas:

   •  Improve gross margin through effective management and recovery of likely
      further supplier price changes;
   •  Accelerate organic sales growth particularly through effective
      deployment of the new business development and national account teams;
   •  Ensure all RDCs are operating to their full profit potential;
   •  Build the Packaging2U business in order to deliver profits in 2008;
   •  Increase the efficiency of the logistics infrastructure through the
      introduction of fleet management software;
   •  Improve our ability to respond to the increasing demands from our
      customers regarding environmentally friendly packaging solutions;
   •  Deliver the benefits from the full year contribution of the Online
      Packaging acquisition made in January 2008; and
   •  Accelerate market penetration through further targeted acquisitions.

Manufacturing Operations

Macfarlane operates a range of manufacturing businesses, Labels producing
self-adhesive and resealable labels, and Packaging Manufacturing producing
bespoke composite transit packaging and protective components.

In 2007 Macfarlane Group's Manufacturing Operations recorded a profit of £1.7
million, an increase of £0.1 million on 2006. Key features of the Manufacturing
Operations performance in 2007 were:

   • Sales increase 6% versus 2006;
   • Gross margin was flat versus 2006 despite customer price pressure where
     raw material price increases can not always be fully passed onto customers;
   • The overhead to sales ratio improved by 0.2% reflecting the nature of
     the fixed cost base of the manufacturing businesses, however total overheads
     increased by £0.4 million reflecting additional investments in capacity in
     both businesses.

Operating review

Manufacturing Operations


The principal activity of the Labels business is the production of self-adhesive
and resealable labels for major Fast Moving Consumer Goods ('FMCG') customers
primarily in European markets. The business operates from two production sites
in Kilmarnock and Dublin and a sales and design office in Sweden which focuses
on the development and growth of our resealable labels business - Reseal-itTM.

Business Performance

During 2007 the Macfarlane Labels business continued to experience the price and
margin pressure that has been a consistent feature over recent years. In
response the business has been transitioning itself away from the volatile lower
margin own brand food related business to more secure margin high-quality
branded products. This led to a 4% increase in sales and a 3% increase in volume
from 2006, with efficiency improvements giving a 5% improvement in
profitability. New business levels showed some improvement during the second
half of 2007 and it is expected that this will continue in 2008.

Reseal-itTM continues to progress well. The first machine sale in North America
was completed in 2007 and there is a growing level of interest from North
American customers in the Reseal-it product.

The priorities for the Labels business in 2008 are to:-

   •  Accelerate organic growth plans particularly in the branded products
   •  Improve operational efficiencies to counterbalance retail price pressure;
   •  Develop the Reseal-itTM product in the US market; and
   •  Broaden the re-sealable label product range.

Packaging Manufacturing

The principal activity of the business is the design and manufacture/assembly of
bespoke composite packaging for use in protecting goods in transit. The primary
components are corrugate, timber and foam. The business operates from two
manufacturing sites in Grantham and Westbury. The business supplies goods
directly to customers and via the Group's Distribution business focusing on such
sectors as aerospace, medical equipment, electronics and automotive.

Business Performance

The business had a solid year in 2007 building on the operational improvements
achieved during the last two years. Strong sales momentum was achieved with
growth of 11% versus last year. There was one significant customer win during
the year and sales growth via the Macfarlane Packaging Distribution channel was
12% ahead of last year. However the sales momentum achieved in 2007 was not
translated into profit growth due to investments both in equipment and
management, which will help secure future profitability. Margins were broadly
flat despite volatility in raw material prices.

The Group currently believes the retention of an in-house manufacturing
capability allows it to differentiate its offering from other packaging

The priorities for 2008 are to:

   • Improve the overall returns from the business;
   • Recover gross margin through effective recovery of further cost
   • At Grantham the focus will be on growing sales directly and through the
     in-house Distribution network; and
   • Our Westbury location is focused on maintaining sales momentum while at
     the same time introducing productivity improvement initiatives that were
     effective at Grantham in 2007.

Operating review

Manufacturing operations


The principal activity is the manufacture of injection moulded plastic packaging
and dispensing components particularly lids and scoops for the baby food market.

Business Performance

Sales revenue showed growth of 13% versus 2006 primarily through strong
performances from the existing base of customers. However input prices for raw
materials, energy and labour were not easily transferred to selling prices
resulting in a weak gross margin performance.

The overall result for 2007 was disappointing but the business continues to be
highly cash generative.

During 2007, working in co-operation with key customers, there have been major
improvements in the infrastructure of the business and our enhanced hygiene
procedures are at the leading edge of our industry.

During 2008 the management team will focus on:-

   •  Ensuring input price increases are effectively managed with our
   •  Achieving ISO22000 accreditation for the Wicklow facility;
   •  Establishing new lower cost raw material sources; and
   •  Continuing to improve operational efficiency.

The Board has approved discussions with a number of parties who have expressed
interest in acquiring this business and therefore the results of the business
have been treated as discontinued in the income statement.


Macfarlane had packaging manufacturing and assembly operations in California and
Mexico, with two plants in Mexico and two in California. The business focused on
foam-based packaging components supplying the electronics, healthcare and food
and drink sectors of the market.

Following a strategic review in the first half of 2007, the Board decided that
it was appropriate to exit our operations in US/Mexico. These operations had not
made any significant return in recent years and consumed considerable executive
management time. Accordingly the Board considered offers for the business
although these would be likely to generate a loss on disposal. In October 2007
Macfarlane US/Mexico was sold to Specialized Packaging Group L.P. resulting in a
loss of £1.8 million. Of this loss, £0.7 million related to the accumulated
exchange loss for the US/Mexican operations, written off over a number of years
which accounting standards require to be brought into the calculation of the
loss on disposal in the current year. An equivalent credit to reserves is also

Future Outlook

Our objectives in 2007 were to continue progress in improving Group
profitability, bring a greater focus to the activities of the Group and build
both organically and through acquisition our UK market-leading position in
Packaging Distribution.

In overall terms we are pleased with what has been achieved in 2007:

   •  Packaging Distribution has demonstrated good sales momentum and returns
      are improving;
   •  UK Packaging Manufacture is showing sustainable profit performance;
   •  The Labels business is showing stability in the UK and good growth
      potential for Re-Seal it in North America;
   •  Plastics has demonstrated a reliable revenue base;
   •  We have successfully managed the sale of our foam operations in US/

The acquisition of Online Packaging early in 2008 demonstrates our commitment to
building our market-leading position in UK Packaging Distribution and additional
acquisition opportunities are being evaluated for implementation during 2008.

Our future priorities are to continue to bring greater focus to the activities
of the Group in order to allow management to concentrate their time on building
and improving returns from our key businesses.

                              Macfarlane Group PLC

                         Consolidated income statement

                      For the year ended 31 December 2007

                                                                      2007                 2006
                                                          Note        £000                 £000
                                                                                  * As restated
Continuing operations
Revenue                                                      2     119,737              106,313
Cost of sales                                                     (81,442)             (72,522)

Gross profit                                                       38,295                33,791
Distribution costs                                                (5,791)               (5,490)
Administrative expenses                                          (29,453)              (26,294)
Non-recurring net property gains                             4         14                   -

Operating profit                                                    3,065                 2,007
Finance income                                               5      2,947                 2,762
Finance expense                                              5    (3,545)               (3,296)

Profit before tax                                                   2,467                 1,473
Tax                                                          6        979                 (315)

Profit for the year from continuing operations                      3,446                1,158

Discontinued operations
(Loss)/profit for the year from discontinued             2 / 9    (1,616)                  893

Profit for the year                                                1,830                 2,051

Earnings per share                                           8

From continuing operations
Basic                                                                3.06p               1.03p

Diluted                                                              3.06p               1.02p

From continuing and discontinued operations
Basic                                                                1.63p               1.82p

Diluted                                                              1.62p               1.81p

* The comparative figures are restated for the reasons set out in note 3 with no
impact on the profit for that year.

                              Macfarlane Group PLC

            Consolidated statement of recognised income and expense

For the year ended 31 December 2007

                                                                      2007          2006

                                                                      £000          £000

Exchange differences on translation of overseas                         78         (764)
Exchange differences realised on disposal of subsidiary                670             -

Exchange difference on translation of foreign                          748         (764)
Actuarial gains on defined benefit pension                             393         5,835
Tax on items taken directly to equity actuarial                      (111)       (1,751)
long-term rate change                                                (270)             -

Net income recognised directly in equity                               760         3,320
Profit for the year                                                  1,830         2,051

Total recognised income and expense for the year                     2,590         5,371

                              Macfarlane Group PLC

        Consolidated reconciliation of movements in shareholders' equity

For the year ended 31 December 2007

                                                     Note             2007          2006
                                                                      £000          £000

Profit for the year                                                  1,830         2,051
Dividends to equity holders in the year                 7          (2,252)       (1,125)
Net income recognised directly in equity (as                           760         3,320
Credit in respect of share based payments                               82           140

Movements in equity in the year                                        420         4,386
Opening equity                                                      29,825        25,439

Closing equity                                                      30,245        29,825

Macfarlane Group PLC

                 Consolidated balance sheet at 31 December 2007

                                                      Note  2007        2006
                                                            £000        £000
Non-current assets
Goodwill                                                   18,646     18,973
Property, plant and equipment                               9,637     13,112
Investment property                                            -       1,701
Other receivables                                             872      1,057
Deferred tax asset                                          3,917      4,560

Total non-current assets                                   33,072     39,403

Current assets
Inventories                                                 8,095      9,811
Trade and other receivables                                31,108     29,508
Deferred tax asset                                          1,665      -
Cash and cash equivalents                                     348      2,195

Total current assets                                       41,216     41,514
Non-current assets classified as held for sale        9     4,238      -

                                                           45,454     41,514

Total assets                                               78,526     80,917

Current liabilities
Trade and other payables                                   28,087     26,710
Current tax liabilities                                       407        663
Obligations under finance leases                              182         44
Bank overdrafts and loans                                   3,252      7,747
Liabilities directly associated with assets           9     1,409      -
classified as held for sale

Total current liabilities                                  33,337     35,164

Net current assets                                         12,117      6,350

Non-current liabilities
Retirement benefit obligations                       11    14,272     15,873
Other creditors                                               169         -
Obligations under finance leases                              503         55

Total non-current liabilities                              14,944     15,928

Total liabilities                                          48,281     51,092

Net assets                                                 30,245     29,825

Share capital                                              28,755     28,755
Revaluation reserves                                           70        167
Own shares                                                (1,406)    (1,406)
Translation reserves                                         (52)      (800)
Retained earnings                                          2,878       3,109

Total equity                                              30,245      29,825

                              Macfarlane Group PLC

Consolidated cash flow statement

For the year ended 31 December 2007

                                                         Note      2007             2006
                                                                   £000             £000

Net cash from operating activities                         10     4,025              160

Investing activities
Interest received                                                    46                9
Disposal of subsidiary undertaking                                3,088            2,102
Acquisition of subsidiary undertaking                             (800)          (1,262)
Proceeds on disposal of property, plant and                          44            1,472
Purchases of property, plant and equipment                        (988)            (604)

Net cash from investing activities                                1,390            1,717

Financing activities
Dividends paid                                              7   (2,252)          (1,125)
Repayments of obligations under finance leases                     (34)            (268)
Decrease in bank overdrafts                                     (4,495)             (83)

Net cash used in financing activities                           (6,781)          (1,476)

Net (decrease)/increase in cash and cash                        (1,366)             401

Cash and cash equivalents at beginning of year                    2,195           1,794

Cash and cash equivalents at end of year                            829           2,195

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

1. General information

The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements as defined in Section 240
of the Companies Act 1985 and has been extracted from the full statutory
accounts for the years ended 31 December 2007 and 31 December 2006 respectively.
The information for the year ended 31 December 2006 does not constitute the
Group's statutory financial statements as defined in Section 240 of the
Companies Act 1985. A copy of the statutory accounts for that year has been
delivered to the Registrar of Companies. The auditors' report on those accounts
was unqualified pursuant to Section 235 of the Companies Act 1985 and did not
contain a statement under sub-section 237 (2) or (3) of that Act.

The auditors' report on the statutory financial statements for the year ended 31
December 2007 was unqualified pursuant to Section 235 of the Companies Act 1985
and did not contain a statement under sub-section 237 (2) or (3) of that Act.

2. Split between continuing and discontinued activities
                                             2007                               2006
                          Continuing Discontinued      Total Continuing Discontinued      Total
                                £000         £000       £000       £000         £000       £000

Revenue                      119,737       18,312    138,049    106,313       23,754    130,067
Cost of sales               (81,442)     (12,082)   (93,524)   (72,522)     (15,978)   (88,500)

Gross profit                  38,295        6,230     44,525     33,791        7,776     41,567
Distribution costs           (5,791)        (881)    (6,672)    (5,490)       (1,029)   (6,519)
Administration costs        (29,453)      (5,027)   (34,480)   (26,294)       (6,508)  (32,802)
Non-recurring net
property gains
                                  14            -         14          -            -          -

Operating profit               3,065          322      3,387      2,007          239      2,246
Net finance costs              (598)        (140)      (738)      (534)         (197)     (731)

Profit before tax              2,467          182      2,649      1,473           42      1,515
Tax                              979            2        981      (315)            2      (313)

Profit after tax               3,446          184      3,630      1,158           44      1,202
(Loss)/profit on disposal
of operations                     -       (1,800)    (1,800)          -          849        849

Profit for the year            3,446      (1,616)      1,830      1,158          893      2,051

3. Segmental information

The Group's activities are centred on two principal activities, with those
manufacturing operations discontinued in the current and prior years disclosed

(i)  Packaging Distribution

The Distribution of packaging materials and supply of storage and warehousing
services in the UK.

(ii) Manufacturing Operations

The manufacture and supply of self-adhesive and re-sealable labels to a variety
of FMCG customers in the UK and Europe and the manufacture, assembly and supply
of timber, corrugated and foam-based packaging materials in the UK.

Discontinued Operations

The Manufacturing Operations in US/Mexico were sold in the second half of 2007
and are classified as discontinued in the consolidated income statement. In
addition the decision to dispose of the Group's plastic injection-moulding
operation was taken in the first half of 2007. Consequently the results of this
operation for 2006 were re-classified as discontinued operations in the
consolidated income statement.

                              Macfarlane Group PLC

                       Notes to the financial information
                      For the year ended 31 December 2007
3. Segmental information (continued)
Packaging Distribution                                       2007            2006
                                                             £000            £000

Revenue                                                    92,654          80,853
Cost of sales                                            (64,565)        (56,650)

Gross profit                                               28,089          24,203

Net operating expenses                                   (26,751)        (23,767)

Operating profit                                            1,338            436

Manufacturing Operations
Revenue                                                    27,083          25,460
Cost of sales                                            (16,877)        (15,872)

Gross profit                                               10,206           9,588

Net operating expenses                                    (8,479)         (8,017)

Operating profit                                            1,727           1,571

                                                             2007            2006
                                                             £000            £000

Packaging Distribution                                      1,338             436
Manufacturing Operations                                    1,727           1,571

Operating profit                                            3,065           2,007
Net finance costs                                           (598)           (534)

Profit before tax                                           2,467           1,473
Tax                                                           979           (315)

Profit from continuing operations                           3,446           1,158
(Loss)/profit from discontinued operations after          (1,616)             893

Profit after tax and discontinued operations                1,830           2,051

                                                             2007            2006
Group segment                                                £000            £000

Packaging Distribution                                     16,510          16,425
Manufacturing Operations                                   10,906          13,400

Continuing operations                                      27,416          29,825
Discontinued operations                                     2,829               -

Net assets                                                 30,245          29,825

4. Non-recurring net property gains

An investment property was sold during 2007 for a consideration of £2,386,000
realising a gain of £539,000 which has been offset by amounts totalling £525,000
due under certain of the Group's vacant properties.

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

5. Net finance expense                                      2007         2006
                                                            £000         £000

Interest on bank loans and overdrafts                      (446)        (292)
Interest on obligations under finance leases                (24)         (12)
Interest cost of pension scheme liabilities              (3,075)      (2,992)

Total finance expense                                    (3,545)      (3,296)

Expected return on pension scheme assets                   2,900        2,631
Investment income                                             47          131

Total finance income                                       2,947        2,762

Net finance expense                                         (598)       (534)

6. Tax                                                              2007          2006
                                                                    £000          £000
Current tax
United Kingdom corporation tax at 30% (2006: 30%)                      -          (57)
Foreign tax                                                         (66)          (86)
Adjustments in respect of prior periods                            (228)           187

Current tax (charge)/credit                                        (294)           44
Deferred taxation credit/(charge)                                  1,273         (359)

Total tax credit/(charge)                                            979         (315)

The major feature of the 2007 tax credit relates to the recognition of a
deferred tax asset for the Group's corporation tax losses. A value of £1,665,000
has been recognised in the current year for the first time as it is now regarded
as more likely than not that these losses will be recovered within the short

The standard rate of tax for the year, based on the UK rate of corporation tax
is 30% (2006 - 30%). Taxation for other jurisdictions is calculated at the rates
prevailing in the respective jurisdictions. The deferred tax credit includes a
charge of £385,000 in relation to the reversal of the deferred tax asset on the
pension deficit. £47,000 of this charge relates to the change in the long-term
rate of tax from 30% to 28% with effect from April 2008.

The actual tax charge for the current and previous year is less than 30% of the
results as set out in the income statement for the reasons set out in the
following reconciliation:

Profit before taxation                                            2,467         1,473

Tax on profit at 30%                                              (740)         (442)
Factors affecting tax charge for the year:-
Depreciation in excess of capital allowances                          8         (216)
Tax charge on contributions to defined benefit pension            (385)         (380)
Non taxable gain                                                    162            -
Other differences                                                   171         (353)
Tax losses utilised                                                 299           836
Tax losses recognised as a deferred tax asset                     1,665            -
Difference on overseas tax rates                                     27           53
Adjustments in respect of prior periods                            (228)         187

Tax credit/(charge) for the year                                    979        (315)

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

7. Dividends                                                       2007           2006
                                                                   £000           £000
Amounts recognised as distributions to equity holders in
the year:
Final dividend for the year ended 31 December 2006 of 1.00p
per share (2006 - Nil)                                             1,126            -
Interim dividend for the year ended 31 December 2007 of
1.00p per share (2006 - 1.00p per share)                           1,126         1,125

                                                                   2,252         1,125

Dividends are not payable on own shares held in the employee share trust.

The proposed final dividend of 1.00p per share will be paid on 12 June 2008 to
those shareholders on the register at 23 May 2008 and is subject to approval by
shareholders at the Annual General Meeting in 2008 and has not been included as
a liability in these financial statements.

8. Earnings per share

From continuing and discontinued operations

The calculation of the basic and diluted earnings per share is based on the
following data:
                                                                    2007          2006
                                                                    £000          £000
Earnings from continuing and discontinued operations for
the purposes of earnings per share being profit for the
year                                                               1,830         2,051
Add/(less) Loss/(profit) for the year from discontinued            1,616         (893)

Earnings from continuing operations for the purposes of
earnings per share being profit for the year from
continuing operations                                              3,446         1,158

Number of shares in issue for the purposes of calculating           2007          2006
basic and diluted earnings per share
                                                                  No. of        No. of
                                                             shares '000   shares '000

Weighted average number of ordinary shares in issue              115,019       115,019
Own shares in Employee Share Ownership Trusts                    (2,491)       (2,491)

Weighted average number of shares in issue for the

purposes of basic earnings per share                             112,528       112,528
Effect of dilutive potential ordinary shares due to share            166           601

Weighted average number of shares in issue for the
purposes of diluted earnings per share                           112,694       113,129

9. Discontinued operations, non-current assets and current liabilities
classified as held for sale

In April 2007 the Board decided to divest the Plastics business. In October
2007, the Group's US and Mexican Packaging manufacturing subsidiaries were sold,
following a decision to divest taken in May 2007. As the decisions to sell the
respective businesses were taken before 31 December 2007, the results of the
businesses for 2006 and 2007 are classified as discontinued operations in the
consolidated income statement. The components of the Plastics business's balance
sheet are classified as non-current assets and current liabilities held for sale
at 31 December 2007.

In January 2006, the Group's Hungarian subsidiary was sold and the gain on
disposal is reflected in the 2006 results.

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

9. Discontinued operations, non-current assets and current liabilities
classified as held for sale
                                                                       2007              2006
Manufacturing Operations                                               £000              £000

Revenue                                                              18,312            23,754
Cost of sales                                                      (12,082)          (15,978)

Gross profit                                                          6,230             7,776

Net operating expenses                                              (5,908)           (7,537)

Operating profit                                                        322               239
Net interest paid                                                     (140)             (197)
(Loss)/gain on disposal of subsidiary undertaking                   (1,800)               849

(Loss)/profit before tax                                            (1,618)               891
Tax                                                                       2                 2

Post-tax (loss)/profit from discontinued operations                 (1,616)               893

(Loss)/gain on disposal of subsidiary undertaking

Goodwill                                                                327                 -
Property, plant and equipment                                         1,107               167
Inventories                                                             723               265

Trade receivables                                                     4,022               902
Cash and cash equivalents                                               249               591
Trade payables                                                      (1,109)             (485)

Net assets disposed of                                                5,319             1,440
Accumulated foreign exchange loss on disposal                         (670)                 -
(Loss)/gain on disposal of subsidiary undertaking                   (1,130)               900

Total consideration                                                   3,519             2,340

Cash                                                                  3,337             2,153
Deferred consideration                                                  182               187

Total consideration                                                   3,519             2,340

Non-current assets held for sale

The major classes of assets and liabilities comprising the operations classified
as held for sale at 31 December 2007 are as follows:-
                                                                          2007            2006
                                                                          £000            £000

Property, plant and equipment                                            2,064              -
Inventories                                                                455              -

Trade receivables                                                        1,238              -
Cash and cash equivalents                                                  481              -

Total assets classified as held for sale                                 4,238              -
Trade and other payables                                                (1,290)             -
Deferred tax liabilities                                                  (119)             -

                                                                        (1,409)             -

Total net assets classified as held for sale                             2,829              -

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

10. Notes to the cash flow statement                                      2007           2006
                                                                          £000           £000

Operating profit Continuing operations                                   3,065          2,246
Discontinued operations                                                    322              -

Operating profit                                                         3,387          2,246
Adjustments for:
Depreciation of property, plant and equipment                            2,094          2,136
Gain on disposal of property, plant and equipment                        (539)          (191)

Operating cash flows before movements in working capital                 4,942          4,191
Decrease/(increase) in inventories                                         538          (681)
(Increase)/decrease in receivables                                     (4,379)             58
Increase/(decrease) in payables                                          5,433          (999)
Adjustment for pension scheme funding                                  (1,383)        (1,630)

Cash generated by operations                                             5,151            939
Income taxes paid                                                        (554)          (195)
Interest paid                                                            (572)          (584)

Net cash from operating activities                                       4,025            160

                                                                          2007           2006
                                                                          £000           £000

(Decrease)/increase in cash and cash equivalents in the year           (1,366)            401
Decrease in bank overdrafts                                              4,495             83
Cash flows from debt and lease financing                                 (586)            268

Movement in net debt in the year                                         2,543            752
Opening net debt                                                       (5,651)        (6,403)

Closing net debt                                                       (3,108)        (5,651)

Net debt comprises:
Cash and cash equivalents                                                  348          2,195
Cash and cash equivalents in business held for resale                      481              -
Bank overdrafts and loans                                              (3,252)        (7,747)

Net bank debt                                                          (2,423)        (5,552)
Obligations under finance leases Due within one year                     (182)           (44)
Due outwith one year                                                     (503)           (55)

Closing net debt                                                       (3,108)        (5,651)

Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with maturity of three months or less. Cash inflows in
respect of the discontinued operations for operating activities amounted to
£821,000 for 2007, (2006 Nil) cash inflows in respect of investing activities
totalled £2,930,000 (2006 - £2,102,000) and cash outflows from financing
activities amounted to £268,000 (2006 £Nil).

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

11. Pension scheme

The Group operates a pension scheme based on final pensionable salary for its UK
operations. The assets of the scheme are held separately from those of the Group
in managed funds under the overall supervision of the scheme trustees.

The contributions are determined by the scheme's qualified actuary on the basis
of triennial valuations using the projected unit method. The most recent
triennial valuation was as at 1 May 2005. The principal assumptions adopted were
that investment returns would average 7.75% per annum and that salary increases
would average 3.5% per annum. The valuation showed that the market value of the
relevant assets of the scheme was £35,259,000 and the actuarial value of these
assets represented 76% of the value of benefits that had accrued to members.

Balance sheet disclosures

The figures below have been based on the triennial actuarial valuation as at 1
May 2005, updated to the current year-end. The assets in the scheme, the net
liability position for the scheme at 31 December 2007 and the expected rates of
return were:
                                   Fair value  Fair value     Fair value    Fair value
                                         2007        2006           2005          2004
Asset class                              £000        £000           £000          £000

Equities                               28,162      26,785        24,077          19,911
Bonds                                  16,859      16,661        16,678          15,173
Other (cash)                               11         184            21              37

Fair value of assets                   45,032      43,630        40,776          35,121
Present value of scheme              (59,304)    (59,503)      (63,753)        (52,545)

Deficit in the scheme                (14,272)    (15,873)      (22,977)        (17,424)
Related deferred tax asset              3,996       4,762         6,893           5,227

Net pension liability                (10,276)    (11,111)      (16,084)        (12,197)

The scheme's liabilities were calculated on the following bases as required
under IAS 19:

Assumptions                           2007        2006          2005            2004

Discount rate                         5.80%        5.25%        4.75%          5.25%
Rate of increase in salaries          3.25%        2.75%        2.75%          2.75%
Inflation assumption                  3.25%        2.75%        2.75%          2.75%
Life expectancy beyond normal
retirement date of 65
Male                             21.3 years   19.5 years   19.5 years     17.2 years
Female                           24.0 years   22.4 years   22.4 years     21.0 years

                              Macfarlane Group PLC

                       Notes to the financial information

For the year ended 31 December 2007

11. Pension scheme (continued)
                                          2007           2006         2005           2004
Movement in scheme deficit in             £000           £000         £000           £000

At 1 January                           (15,873)       (22,977)     (17,424)       (17,312)
Current service cost                      (272)          (353)        (298)          (438)
Employer contributions                    1,571          1,925          746            621
Curtailment gains                            84             58          -              -
Net finance costs                         (175)          (361)        (448)          (517)
Actuarial gain in the period                393          5,835      (5,553)           222

At 31 December                         (14,272)       (15,873)     (22,977)       (17,424)

During 2007, the Group made additional payments of £1.3 million to reduce the
pension scheme deficit. These payments, combined with an improvement in equity
returns and an increase from 5.25% to 5.80% in the bond yields assumed in the
valuation of the pension scheme liabilities had a positive impact on the deficit
recorded in our balance sheet.

12. Posting to shareholders and Annual General Meeting

The Annual Report and Accounts will be sent to shareholders on Wednesday 9 April
2008. The Annual General Meeting will take place at the Thistle Hotel, Cambridge
Street Glasgow at 12 noon on Tuesday 20 May 2008. The Annual Report and Accounts
will be available to members of the public at the Company's Registered Office,
21 Newton Place, Glasgow G3 7PY from 11 April 2008.

                      This information is provided by RNS
            The company news service from the London Stock Exchange
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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