Macfarlane Group PLC Final Results (6741Q)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Macfarlane Group Plc	LSE:MACF	London	Ordinary Share	GB0005518872	ORD 25P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	2.00	1.40%	145.00	144.00	146.00	145.00	143.00	143.00	27,863	11:34:13

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
Business Services, Nec	280.71M	14.97M	0.0942	15.39	230.48M

Macfarlane (LSE:MACF)
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From Apr 2019 to Apr 2024

TIDMMACF

RNS Number : 6741Q

Macfarlane Group PLC

21 February 2019

ANNUAL RESULTS FOR THE YEAR TO 31 DECEMBER 2018 (UNAUDITED)

 
 Financial Highlights                                                    Earnings   per share 
                                                                        --------- 
                                        2018        2017      Increase       2018        2017 
                                     ----------  ----------  ---------  ---------  ---------- 
 
 Turnover                             GBP217.3m   GBP196.0m       +11% 
                                     ----------  ----------  ---------  ---------  ---------- 
 Profit before tax and exceptional 
  item                                GBP11.2m     GBP9.3m        +20%      5.72p       5.22p 
                                     ----------  ----------  ---------  ---------  ---------- 
 Profit before tax                    GBP10.9m     GBP9.3m        +17%      5.55p       5.22p 
                                     ----------  ----------  ---------  ---------  ---------- 
 Proposed full year dividend            2.30p       2.10p         +10% 
                                     ----------  ----------  ---------  ---------  ----------

Macfarlane Group PLC achieved another year of significant growth in 2018 with sales of GBP217.3m, (2017: GBP196.0m) 11% ahead of 2017 and profit before tax and exceptional items of GBP11.2m (2017: GBP9.3m), 20% ahead of 2017. The trading performance continued the positive trends of recent years and was in line with market expectations.

Exceptional item

Following the High Court judgement involving Lloyds Banking Group pension schemes on 26 October 2018, we have made a charge against the 2018 results as an exceptional item. This charge of GBP330k represents past service cost in respect of the equalisation of Guaranteed Minimum Pensions ("GMP") benefits between 1990 and 1997. When the commentary on the following pages refers to items before exceptional items, it excludes these charges. We believe this information, provides a more meaningful basis for measuring our financial performance in 2018.

Trading

Packaging Distribution increased sales by 11% to GBP189.8m (2017: GBP171.8m) with 4% achieved from organic growth and 7% from acquisitions, both the new acquisitions in 2018 and the full year benefit from those completed in 2017, all of which continue to perform well. Gross margin in Packaging Distribution rose to 29.5%, (2017: 29.4%) reflecting the effective management of input price increases in the second quarter as well as a full year contribution from the Greenwoods' business acquired in 2017. The acquisitions of Tyler Packaging (Leicester) Limited ("Tyler") and Harrisons Packaging Limited ("Harrisons") were both concluded in the second half of 2018 and have contributed as expected since acquisition.

The growth in sales and gross margin, combined with good cost control, resulted in Packaging Distribution achieving a 19% increase in operating profit before exceptional items to GBP11.2m (2017: GBP9.4m).

Sales in our Manufacturing Operations at GBP27.5m (2017: GBP24.2m) grew by 14% on the previous year. Gross margin reduced from 40.7% in 2017 to 38.4% in 2018, mainly due to first half operational pressures in Packaging Design and Manufacture and an adverse sales mix in our Labels business. Despite this, the overall Manufacturing Division operating profit before exceptional items in 2018 was GBP0.9m, GBP0.2m above the 2017 result.

After charging interest of GBP0.8m (2017: GBP0.8m), Group profit before tax and exceptional items totalled GBP11.2m, an increase of 20% on 2017. Basic and diluted earnings per share for 2018 before exceptional items were 5.72p (2017: 5.22p).

Dividend

The Board is proposing a final dividend of 1.65 pence per share, amounting to a full year dividend of 2.30 pence per share, a 10% increase on the prior year's dividend of 2.10 pence per share. Subject to the approval of shareholders at the Annual General Meeting on Tuesday 14 May 2019, this dividend will be paid on Thursday 6 June 2019 to those shareholders on the register at Friday 17 May 2019.

Net Bank Debt

The Group's net bank borrowing at 31 December 2018 decreased by GBP1.1m to GBP13.2m from GBP14.3m at the prior year-end. The Group's bank facility of GBP30.0 million with Lloyds Banking Group is available until June 2022 and accommodates normal working capital requirements and supports acquisition funding.

Pension Scheme

The Group's pension deficit at 31 December 2018 decreased by GBP2.0m to GBP9.8m, (2017: GBP11.8m) despite the exceptional charge for equalising GMP benefits taken in 2018. Although the discount rate increased, which reduced the value of the pension liabilities, this was largely offset by reductions in the value of the scheme's holding in liability-driven investments, reflecting an appropriate prudent investment strategy for a mature pension scheme.

Outlook

The Board remains confident that its strategy to position the business to serve key growth markets continues to be effective.

Commenting on the 2018 results, Stuart Paterson, Chairman, said:

"The increase in profits in 2018 represents the ninth consecutive year of profit growth for Macfarlane Group. 2019 has started well and our profitability in the year to date is ahead of the same period in 2018.

Our strategy continues to focus on the delivery of sustainable profit growth by concentrating on added value products and services in our target market sectors, combined with efficiency improvements and the identification and completion of value-enhancing acquisitions. This strategy, which is continuously refined, has served all stakeholders well in recent years and we remain confident that it will continue to do so. Macfarlane Group's performance in 2018 reflects the successful implementation of this strategy and despite the ongoing uncertainties surrounding Brexit and the difficulties being experienced in the retail sector, we are confident that the Group will demonstrate further progress in 2019."

 
 Further enquiries:   Macfarlane Group                 Tel: 0141 333 9666 
                      Stuart Paterson Chairman 
                     -------------------------------  ------------------- 
                      Peter Atkinson Chief Executive 
                     -------------------------------  ------------------- 
                      John Love Finance Director 
                     -------------------------------  ------------------- 
 
                      Spreng Thomson                   Tel: 0141 548 5191 
                     -------------------------------  ------------------- 
                      Callum Spreng                    Mob: 07803 970103 
                     -------------------------------  -------------------

Legal Entity Identifier (LEI): 213800LVRYDERSJAAZ73

Notes to Editors:

-- Macfarlane Group PLC is listed on the London Stock Exchange (LSE: MACF) in the Industrials Sector

-- The company is headquartered in Glasgow, Scotland and has more than 60 years' experience in the UK packaging industry

   --      Macfarlane Group's businesses are:

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

o Labels designs and prints high quality self-adhesive and resealable labels, principally for FMCG companies

o Packaging Design and Manufacture designs and produces protective packaging for high value, fragile products

-- Macfarlane Group employs over 900 people at 30 sites, principally in the UK, but also in Ireland and Sweden.

-- The company has 20,000+ customers in the UK, Europe and the USA providing 600,000+ lines to a wide range of industry sectors including: consumer goods; food manufacturing; logistics; internet retail; mail order; electronics; defence and aerospace.

 
 
                                               Operating               Operating 
  Business Review                   Revenue       profit    Revenue       profit 
   Group performance                   2018         2018       2017         2017 
   Segment                           GBP000       GBP000     GBP000       GBP000 
 
  Packaging Distribution            189,835       11,172    171,771        9,436 
  Manufacturing Operations           27,455          853     24,220          653 
 
  Revenue from continuing 
   operations                       217,290                 195,991 
 
  Operating profit before 
   exceptional item                    5.5%       12,025       5.1%       10,089 
  Exceptional item                                 (330)                       - 
 
  Operating profit - continuing 
   operations                                     11,695                  10,089

Macfarlane Packaging Distribution is the leading UK specialist distributor of protective packaging materials. Macfarlane operates a Stock and Serve supply model from 23 Regional Distribution Centres (RDCs) and 3 satellite sites, supplying industrial and retail customers with a comprehensive range of protective packaging materials on a local, regional and national basis.

Competition in the packaging distribution market is from local and regional protective packaging specialist companies as well as national/international distribution generalists who supply a range of products, including protective packaging materials. In a fragmented market, Macfarlane competes effectively on a local basis through its strong focus on and regular monitoring of customer service, its breadth and depth of product offer and through the recruitment and retention of high-quality staff with good local market knowledge. On a national basis Macfarlane has focus, expertise and a breadth of product and service knowledge, all of which enables it to compete effectively against non-specialist packaging distributors.

Macfarlane Packaging benefits its customers by enabling them to ensure their products are cost-effectively protected in transit and storage through the supply of a comprehensive product range, single source Stock and Serve supply, Just In Time delivery, tailored stock management programmes, electronic trading and independent advice on both packaging materials and packing processes.

 
                                   Base    Acquisition 
  Packaging Distribution       Business         impact         2018         2017      2018 
                                 GBP000         GBP000       GBP000       GBP000    Growth 
 
  Sales                         176,395         13,440      189,835      171,771     11% 
                            -----------  ------------- 
  Cost of sales                                           (133,843)    (121,323) 
 
  Gross margin                                               55,992       50,448     11% 
  Net operating expenses                                   (44,820)     (41,012)      9% 
 
  Operating profit before 
   exceptional item               9,730          1,442       11,172        9,436      18% 
                            -----------  ------------- 
  Exceptional item                                            (270)            - 
 
  Operating profit                                           10,902        9,436

Macfarlane Packaging Distribution grew sales by 11% in 2018 comprising 4% organic growth as well as the incremental contribution from the acquisitions of Tyler and Harrisons in 2018 and the full year contribution from the 2017 acquisitions.

There were well publicised challenges in UK Retail in 2018 and as a result, our sales to this sector declined slightly due to demand weakness and customer churn. However this was more than offset by growth in the Industrial Sector with a number of contract extensions and new business wins.

Gross margin in Packaging Distribution was 29.5%, (2017: 29.4%) with effective management of input price increases as well as a strong full year contribution from the 2017 acquisition of Greenwoods.

Cost control remained strong with an improving operating expenses to sales ratio of 23.6% (2017: 23.9%).

Operating profit before exceptional items for Packaging Distribution at GBP11.2m grew 18% versus 2017, representing a return on sales of 5.9% (2017: 5.5%).

Future Plans

2019 plans are focused on continuing to grow sales and improving profitability by the following actions:

Sales Growth

l Maintaining our focus on the growth potential for protective packaging in key market segments -

the e-commerce sector and the related Third-party logistics ("3PL") operators; and,

National Accounts in the industrial sector and the related 3PL operators;

l Accelerating the growth in new business through effective use of our Innovation Lab;

l Demonstrating our ability to add value to customers through effective implementation of our "Significant Six" sales approach to optimise their Total Cost of Packaging;

l Developing our web-based offerings through www.macfarlanepackaging.com and Customer Connect to enable customers to further improve access to our full range of products and services;

l Growing sales of new products from recent acquisitions throughout the Group; and

l Providing customers requiring our capabilities in Europe with access to our offering.

Efficiency Improvements

l Improving our sourcing through strengthening our relationships with key strategic suppliers;

l Implementing further operational savings in logistics by expanding the use of the Paragon vehicle management system and extending our warehouse best practice programme;

l Reducing operating costs by taking opportunities to consolidate the existing property footprint;

l Integrating recent acquisitions following the completion of the earn-out periods; and

l Maintaining our focus on working capital management to generate additional funds to support growth opportunities.

Acquisition Growth

l Supplementing organic growth through completion of further suitable quality acquisitions.

Manufacturing Operations comprise our Packaging Design and Manufacture and our Labels business.

 
                                              2018        2017 
                                            GBP000      GBP000 
 
  Sales                                     27,455      24,220 
  Cost of sales                           (16,906)    (14,364) 
 
  Gross margin                              10,549       9,856 
  Operating expenses (recurring)           (9,696)     (9,203) 
 
  Operating profit before exceptional 
   item                                        853         653 
  Operating expenses (exceptional)            (60)           - 
 
  Operating profit                             793         653

The principal activity of the Packaging Design and Manufacture business is the design, manufacture and assembly of custom-designed packaging solutions for customers requiring cost-effective methods of protecting high value products in storage and transit. The primary raw materials are corrugate, timber and foam. The business operates from two manufacturing sites in Grantham and Westbury, supplying both directly to customers and also through the RDC network of the Packaging Distribution business.

Key market sectors are defence, aerospace, medical equipment, electronics and automotive. The markets in which we operate are highly fragmented with a range of locally based competitors. We differentiate our market offering through technical expertise, design capability, industry accreditations and national coverage through Macfarlane Packaging Distribution.

2018 sales for Packaging Design and Manufacture were 12% above 2017 with particularly strong growth from the aerospace sector. Despite operational pressures in the first half of the year which have now been resolved, profitability in 2018 was above that in 2017. Our sales team has continued to develop a strong pipeline of new customer relationships, which should benefit the business in 2019.

Future Plans

2019 plans for Packaging Design and Manufacture include:

l Accelerating sales growth in target market sectors e.g. Defence, Aerospace and Medical;

l Prioritising sales activity on the higher added-value bespoke composite pack product range;

l Improving operational performance further; and

l Continuing to strengthen the relationship with our Packaging Distribution business to create both sales and cost synergies.

Our Labels business designs and prints self-adhesive labels for major Fast-moving Consumer Goods ("FMCG") customers in the UK and Europe and resealable labels for major customers in the UK, Europe and the USA. The business operates from production sites in Kilmarnock and Wicklow and a sales and design office in Sweden, which focuses on the development and growth of our resealable labels business, Reseal-it.

The Labels business has a high level of dependence on a small number of major customers. Management works closely with these key customers to ensure high levels of service and to introduce product and service development initiatives to achieve competitive differentiation.

Sales increased by 15% in the year as penetration of our resealable range improved and a number of new business wins were achieved. Despite margin being impacted by the increasingly competitive conditions in the UK retail sector, profits in the Labels business increased by 15% vs. 2017.

Future Plans

2019 plans for Labels will focus on: -

-- Increasing business in higher added value products and services through rebalancing sales between our resealable and self-adhesive label ranges;

-- Generating efficiency and sales benefits from investments in additional capacity and digital printing capability;

   --    Continuing improvement in operational efficiency to mitigate sales price pressure; and

-- Developing the Reseal-it product in the US and in Europe through ongoing partnerships, new business wins and increased penetration with key retailers.

2019 Outlook

Our sales efforts will focus on those segments of the market, such as e-commerce, which are forecast to show continued above average growth rates and those industrial markets where customers recognise the added value brought to their operations by a specialist national protective packaging distributor.

During 2019 we will continue to look to acquire further good quality protective packaging businesses, improve our geographic coverage, develop new products introduced by recent acquisitions, work more closely with strategic suppliers and improve our operational efficiency by leveraging our property and logistics footprint.

Macfarlane businesses all have strong market positions with differentiated product and service offerings. We have a flexible business model and a clear strategic plan incorporating a range of actions, which are being effectively implemented and are reflected in our consistent, profitable growth in recent years.

Our future performance is largely dependent on the successful execution of actions to grow sales, increase efficiencies and bring high-quality acquisitions into the Group. With a focus on attractive UK market sectors for our products and services, combined with our successful track record of growth and acquisitions, we expect 2019 to be another year of progress for Macfarlane Group.

The principal risks and uncertainties faced by Macfarlane Group and factors mitigating these risks are detailed below. These risks are complemented by an overall governance framework including clear and delegated authorities, business performance monitoring and appropriate insurance cover for a wide range of potential risks. There is a dependence on good quality local management, which is supported by an investment in training and development and ongoing performance evaluation.

Risk Description Mitigating Factors
Raw material prices
The Group's businesses are impacted The Group works closely with suppliers
by commodity-based raw material to manage the scale and timing of
prices and manufacturer energy price increases to end-users effectively.
costs, with profitability sensitive Our IT systems monitor and measure
to supplier price changes including effectiveness in recovering supplier
currency fluctuations. The principal price changes. Where possible, alternative
components are corrugated paper, supplier relationships are maintained
polythene films, timber and foam, to minimise supplier dependency.
with changes to paper and oil We work with customers to redesign
prices having a direct impact packs and reduce packing cost to
on the price we pay to our suppliers. mitigate the impact of cost increases.
------------------------------------------------
Property
Given the multi-site nature of Where a site is non-operational the
its business, the Group has a Group seeks to assign, sell or sub-lease
property portfolio comprising the building to mitigate the financial
3 owned sites and 35 leased sites impact. If this is not possible,
of which 3 are sublet. This portfolio rental voids are provided on vacant
gives rise to risks in relation properties taking into consideration
to ongoing lease costs, dilapidations the likely period of vacancy and
and fluctuations in value. incentives to re-let.
------------------------------------------------
Working capital
The Group has a significant investment Credit risk is controlled by applying
in working capital in the form rigour to the management of trade
of trade receivables and inventories. receivables by the Credit manager
There is a risk that this investment and the credit control team, and
is not fully recovered. is subject to additional scrutiny
from the Group Finance Director.
Inventory levels and order patterns
are regularly reviewed and risks
arising from holding bespoke stocks
are managed by obtaining order cover
from customers.
------------------------------------------------
Financial liquidity, debt covenants,
interest rates The Group seeks to maintain an appropriate
The Group needs continuous access level of committed bank facilities
to funding to meet its trading that provides sufficient headroom
obligations and to support organic above peak projected borrowing requirements.
growth and acquisitions. There The existing facility is in place
is a risk that the Group may be until June 2022.
unable to obtain funds or that
such funds will only be available The Group regularly monitors net
on unfavourable terms. debt and forecast cash flows to ensure
The Group's borrowing facility that it will be able to meet its
comprises a committed facility financial obligations as they fall
of up to GBP30m. This includes due. Compliance with debt covenants
requirements to comply with covenants, is monitored on a monthly basis and
with a breach potentially resulting sensitivity analysis is applied to
in borrowings being subject to forecasts to assess the impact on
more onerous conditions. covenant compliance.
------------------------------------------------
Defined benefit pension scheme
The Group's defined benefit pension The scheme was closed to new members
scheme is sensitive to a number in 2002.
of key factors; investment returns, Benefits for active members were
discount rates used to calculate amended by freezing pensionable salaries
scheme liabilities and mortality at 30 April 2009 levels.
assumptions. The IAS 19 valuation A Pension Increase Exchange option
of the Group's defined benefit is available to offer flexibility
pension scheme as at 31 December to new pensioners in the current
2018 estimated the scheme deficit level of pension benefits and the
to be GBP9.8m, a decrease of GBP2.0m rate of future increases.
during 2018. Small changes in The Group makes Deficit Reduction
these assumptions could mean that Contributions each year.
the deficit increases. The investment profile is constantly
reviewed to ensure continued matching
of investments with the liability
profile of the scheme.
------------------------------------------------
Decentralised structure
The Packaging Distribution business The Group ensures that our staff
model reflects a decentralised have the right working environment,
approach with a high dependency information and sales tools to enable
on effective local decision-making. them to meet corporate objectives.
There is a risk that the decentralised A comprehensive management information
management control is less effective system is maintained with key performance
and local decisions do not meet indicators monitored and actions
corporate objectives. taken when required.
------------------------------------------------
Acquisitions
The Group's growth strategy includes The Group carefully reviews potential
acquisitions as demonstrated in acquisition targets, ensuring that
recent years. There is a risk the focus is on high-quality businesses
that such acquisitions may not which complement the existing Group
be available on acceptable terms profile and provide opportunities
in the future. for growth. Having completed a number
It is also possible that acquisitions of acquisitions in recent years,
will not succeed due to the loss the Group has established due diligence
of key people or customers following and integration processes and procedures.
acquisition or the acquired business The Group has a comprehensive management
not performing at the level expected. information system to enable effective
This could potentially lead to monitoring of post-acquisition performance.
impairment in the carrying value Earn-out mechanisms also mitigate
of the related intangible assets. risk in the post-acquisition period.
Execution risks around the failure Goodwill and other intangible assets
to successfully integrate the are tested annually for impairment
acquired business after the conclusion as set out in the Annual Report.
of the earn-out period also exist.
------------------------------------------------

Macfarlane Group has carried out an impact analysis and evaluated the potential short to medium-term implications of a no-deal Brexit including reversion to World Trade Organisation tariffs. Where practical, we have put in place contingency measures to try to mitigate any immediate effects on the supply chain. As a business with the majority of its trade in the UK, the principal impact on Macfarlane Group of a no-deal Brexit would be reduced levels of business caused by any significant downturn in the UK economy.

There are a number of other risks that we manage which are not considered key risks. The Group is subject to the impact of general economic conditions, the competitive environment and risks associated with business continuity including cyber-security. These are mitigated in ways common to all businesses and not specific to Macfarlane Group.

Viability statement

The Board has considered the Group's viability as part of the ongoing programme to manage risk. Each year the Board reviews the Group's strategic plan for the forthcoming three-year period and challenges the Executive team on the plan's risks. The strategic plan reflects the Group's businesses, which have a broad spread of customers across a range of different sectors with some longer term contracts in place. The assessment period of three years is consistent with the Board's review of Group strategy, including assumptions regarding future growth rates for our business and acceptable levels of performance.

A robust financial model covering a three year period is maintained and regularly updated. The model is subject to sensitivity analysis which flexes a number of the main assumptions, including future revenue growth, gross margins, operating costs, finance costs and working capital management. The results of flexing these assumptions, both individually and in aggregate, are used to determine whether additional bank facilities will be required during the three year period. The results of the exercise indicated that no additional facilities would be required.

The Board has carried out a robust assessment of the principal risks facing the Group and how these risks affect the Groups' prospects and the strategic plan. The review includes consideration of the principal risks facing the Group as described on the current and previous page including the potential impact of Brexit, which could prevent the Group from achieving its strategic plan and the potential impact these risks could have on the Group's business model, future performance, solvency and liquidity over the next three years.

The Directors' assessment has been made with reference to the resilience of the Group and the strength of its financial position, the Group's current strategy, the Board's risk appetite and the Group's principal risks including how these are managed. Based on the assessment of these risks and the sensitivity analysis undertaken, the Board of Directors have a reasonable expectation that the Group will continue to operate and meet its liabilities, as they fall due, for the next three years to December 2021.

Going Concern

The Directors, in their consideration of going concern, have reviewed the Group's future cash flow forecasts and profit projections, which are based on the Directors' past experience and their assessment of the current market outlook for the business. The Group's business activities, together with the factors likely to affect its future development, performance and financial position are set out in the Chairman's Statement and Business Review on pages 1 to 8.

The Group's principal financial risks in the medium term relate to liquidity and credit risk. Liquidity risk is managed by ensuring that the Group's day-to-day working capital requirements are met by having access to banking facilities with suitable terms and conditions to accommodate the requirements of the Group's operations. Credit risk is managed by applying considerable rigour in managing the Group's trade receivables. The Directors believe that the Group is adequately placed to manage its financial risks effectively, despite any economic uncertainty.

The Group's principal banking facility is in place until June 2022. The Directors are of the opinion that the Group's cash forecasts and revenue projections, taking account of reasonably possible changes in trading performance given current market and economic conditions, show that the Group should be able to operate within its current facilities and comply with its banking covenants.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least the next twelve months. For this reason they continue to adopt the going concern basis in preparing the financial statements.

Cautionary Statement

The Chairman's Statement and the Business Review on pages 1 to 8 have been prepared to provide additional information to members of the Company to assess the Group's strategy and the potential for the strategy to succeed. It should not be relied on by any other party or for any other purpose.

This report and the financial statements contain certain forward-looking statements relating to operations, performance and financial status. By their nature, such statements involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors, including both economic and business risk factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report.

Responsibility Statement of the Directors

The responsibility statement below has been prepared in connection with the company's full annual report for the year ending 31 December 2018. Certain parts of the full annual report are not included within this announcement. The Directors of Macfarlane Group PLC are

   S.R. Paterson                     Chairman 
   P.D. Atkinson                     Chief Executive 
   J. Love                                 Finance Director 
   R. McLellan                        Non-Executive Director and Senior Independent Director 
   J.W.F. Baird                         Non-Executive Director 
   A.M. Dunstan                    Non-Executive Director

To the best of the knowledge of the Directors (whose names and functions are set out above), the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit for the Company and the undertakings included in the consolidation taken as a whole; and

Pursuant to Disclosure and Transparency Rules, Chapter 4, the Directors' Report of the Company's annual report includes a fair review of the development and performance of the business and the position of the Company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced by the business.

   Peter Atkinson                                                                  John Love 
   Chief Executive                                                                 Finance Director 
   21 February 2019                                                             21 February 2019

Macfarlane Group PLC

Consolidated income statement