Packaging distributor MACF (Macfarlane) presented its half-year results over on IMC (InvestorMeetCompany) recently. The live presentation has now finished, but a recording of it will be available in due course.
The performance has been a little weak, with revenues down 8%. The dividend is covered 4.7X, and it has a pension surplus of £10.2m.
The company does make acquisitions, which range in 5-6X EBITDA. So the company is making disciplined acquisitions, in my opinion. They said that the pipeline for acquisitions is strong. They turned down 20 acquisition proposals this year, for example.
Acquisition opportunities come about because a lot of private owners want to retire, and no good succession plan (which is a pity, really). There is also a lot of increasing burden of regulation and legislation. This is motivating smaller outfits to sell, as the administration becomes more onerous.
MACF does close facilities where they feel there is excessive duplication.
MACF is also increasing its foothold in Europe. This is because many of their customers are pan-European, and they don’t want to lose out to competitors who are more able to accommodate their needs.
This all sounds really positive to me, allowing MACF to expand its network and reap some economies of scale.
The financial ratios are encouraging. At a price of 114p, it has a P/FCF of 7.3 (anything below 10 I regard as cheap, prima facie). It has an EV/EBITDA of 6.3, which I also regard as good value. Its average ROCE and ROE is around 14.5%. Its forward divend yield is 3.3%. Its interest cover is 9.3, nice and safe. Stockopedia gives its scores as: Q 82, V 73, M 42, StockRank 75.
I hold.