Good morning, everybody, and thank you for joining our meeting this morning. We're here to review the Macfarlane Group's first half results for 2026.

I'm Peter Atkinson, the Group CEO. I'm here with my colleague, Ivor Gray, the Group CFO.

Let me begin by sharing the agenda. What we'll do is I will start the meeting by talking about the key features of the H1 performance in terms of an executive summary.

Ivor will then take you through the numbers in terms of results, cash flow, and review our capital allocation program. I'll then put a bit of color to the numbers by talking through the individual business unit performances.

We'll then talk about sustainability and update you on where we are with the pension scheme. I'll make some concluding remarks before we turn over to questions.

Before I summarize H1, let's just remind everybody, I know some of you are new to the business, some of you know the business quite well, but just to remind you what it is we do. Basically, Macfarlane through its various divisions work with businesses just cost-effectively protect their products through the supply chain journey.

We differentiate ourselves by the breadth and depth of our products and service range, the range of products and services that we supply, the depth of coverage that we have across both the UK and increasingly into Europe. Then the added value proposition that we offer our customers and we do more than just products and price.

The final thing is to comment upon is our focus. Like a number of our competitors, we're a pure protective packaging business.

We live, breathe, sleep protective packaging 365 days a year and 24 hours a day. That's the nature of our business, and it operates through two divisions: a specialist distribution division where we're the market leader in the UK and a fast-growing specialist manufacturing business, all in the world of protective packaging, protecting different types of packaging, different types of products across various different market sectors.

Let me move on to our recent results announcement and just summarize the key messages. As you all are aware, we had a particularly challenging 2025 following 15 years of consistent profit growth.

We enter 2026 with the main focus of the business being on profit recovery, particularly in our distribution business and our Pitreavie business, and I'll come on to talk about those in a moment. I think the results that we achieved in H1 reflect favorably on the progress we're making in implementing recovery actions in the two key businesses.

In terms of distribution, and we'll put more color on this later on in the presentation, but we saw sales growth of just over a percentage point, more price than volume, but that's against a market background where we're seeing increasing headwinds with environmental legislation, which again, we'll touch on later on in the presentation. We've seen good margin stability.

In fact, our gross margin improved slightly during the period. Most encouraging for us is our new business momentum, almost 40% up on the previous year.

That was following a difficult year in 2025 where, despite having lots of new business opportunities and strong new business pipelines, weren't able to convert those opportunities into revenue, and we've now started to see that coming through in 2026. We've also taken actions to reduce the head count in distribution.

We've reduced our head count by around about 6%. Half of that was redundancy and half of that was natural wastage.

In terms of Pitreavie, obviously, 2025 was an awful year for Pitreavie for a whole range of different reasons. The key feature for us in terms of the recovery was replacing the corrugating machine where the tragic incident occurred.

That was identified, resourced, purchased, commissioned, and set up within the space of six months, which is quite spectacular, to be fair. The good news is that Pitreavie was profitable in Q2.

As we go into the second half of the year, we're encouraged by the positive trends we're seeing in Pitreavie. In terms of our specialist protective packaging business, we saw good stability in that business.

As that's the highest margin component of our overall business, and we're seeing good stability in that particular sector helped by the the tailwinds of our exposure to defense, space, and aerospace industry. All this has been achieved against a backdrop of very difficult Middle East conditions, which have affected us in terms of input price increases.

As you're probably aware, 30% of what we buy is broadly linked to polymer pricing. We've seen material input price increases on a whole range of our polymer products, and we've been very effective in recovering those from our customers, as reflected in our gross margin stability.

We've also announced in our half-year results that the maintenance of the dividend and the importance of a whole range of shareholders, and also of the introduction of our second share buyback program. We had our first share buyback program started in 2025.

That will come to an end September at the end of this month, effectively. Then we will initiate a new buyback program of valued at £6 million, which will start in October and run for 12 months.

As we look forward, there's little evidence of great catalysts for market improvement. We've got the environmental headwinds, which we'll talk about later on, which will always be affecting our revenue line, particularly on the retail sector.

The focus of all our activities is to execute an effective profit recovery program. I think what we're seeing in the first half of this year is the beginnings of that profit program beginning to come through.

Let me pass over to Ivor. I'll let him take you through the key metrics.

Thanks, Peter. I'm just covering off some of the key numbers from H1 2026.

Peter touched on the revenue growth, 2% year-on-year growth, H1 '25 versus H1 '26. That splits down £1.3 million of growth from distribution, just over 1%; £1.5 million of growth from our manufacturing business excluding Pitreavie, just over 5%; and the Pitreavie business was just £0.5 million down year-on-year, which, given the trials that that business has been through, is a pretty strong performance.

Overall £2.3 million of revenue growth predominantly in our distribution and manufacturing business, excluding Pitreavie. That's translated to a small reduction in adjusted operating profit of £300,000.

Distribution moved forward £300,000, manufacturing stayed stable, and Pitreavie, understandably, was £600,000 below last year. Pitreavie made a small loss in the first half of the year versus a profit of about £500,000 in the first half of last year.

Distribution, the flavor of distribution is, smaller sales growth, good stability in the margins, still some inflation coming through on the cost base. The story in manufacturing again is good sales growth with some of the sector tailwinds that we have in that business, some margin pressure with some of the cost increases coming through and some of the materials, and predominantly increased costs.

They were probably the business most affected by the NI and national minimum wage increases last year. The Pitreavie business, as you said, small sales decline, a significant margin decline because most of the products in the first quarter we were still outsourcing a lot of the manufacturing to suppliers until the new machine commissioned, and a stable cost base.

A 9% reduction in adjusted profit before tax. Again, that's a slight dip from the 3% operating [laugh?]

because of increased interest costs, predominantly related to leases. The most significant of that related to the new Midlands lease that we got in last year.

In terms of the balance sheet, bank debt position still relatively low at £17.9 million, albeit an increase of £1.8 million from the end of the year. That's predominantly related to absorption of working capital, predominantly inventories, and I'll cover that in a minute.

Still relatively low level of debt, as you can see, of 0.9 of EBITDA to net debt. You can see the pension surplus remains in surplus following the buy-in transaction that was completed on the 29th of June, and again, I'll cover that in a little more detail later on.

Despite the reduction in EPS of 9%, we've maintained the dividend at 0.96 pence, so that's same as last year, and we'll continue to do that as we see the business recovering and profits improving both through the back end of this year and as we move forward into next year. Just covering off the income statement.

Peter'll cover this off in a bit more detail when he comes to the divisional performance, but overall, just touching on a couple of areas, you can see the gross margin stability, and that's really due to that enhancement, small enhancement in the distribution gross margins, slight reduction in the manufacturing gross margins, and a more pronounced reduction in the gross margin in Pitreavie, which is related to that what I described earlier, that outsourcing activity to suppliers while we got the business back to operational capacity. You can see operational expenses increased by about 1.

£1.1 million, and that's predominantly employee-related costs. We have 3% less employees in the business than we did this time last year.

However, that's been offset by inflation, the impact of the NI that came in from 1st of April last year, some redundancy costs in the first half of the year. Half of the reduction in staff has been done through a small redundancy program of just over 20 employees.

Actually some of our business units are performing quite nicely this year, again, we've get some increased bonus provisioning coming through this year. So, £1.3 million of that increase is related to employees, £300,000 related to increased incremental logistics costs, and that purely driven by the higher fuel costs and higher outsized carriage costs that we're seeing as a result of events in the Middle East, and other costs are down £400,000.

Again, trying to keep a tight control in the other costs within the business. Interest rates are up, predominantly related to incremental cost of leases.

This slide just covers off that kind of reconciliation between the statutory measures and alternative performance measures. You can see the kind of two key areas that we adjust for is amortization related to historic acquisitions, and any small adjustments that we need to make related to any deferred contingent consideration.

The small adjustments that have come through in 2026 are related to some time value of money adjustments related to the Polyformes deferred contingent consideration, which was ultimately paid out in full in August this year. That was £2.6 million, which was paid out in full to the ex-owners of Polyformes because of the strong performance of that business, but that was paid in the second half of this year rather than the first half.

In terms of cash flow, you can see that the business has consumed cash of £1.8 million in the first part of the year. Probably the kind of three areas to pick out here are the working capital absorption, and that's really driven by an incremental increase in our stock days of around 49 to 52, a £2.4 million increase in our inventory levels from the end of last year and £1.7 million compared to 30th of June last year.

That's predominantly related to us building some stocks to deal with some of the supply chain challenges that were seeing coming through the Middle East, and also some of the price increases that were being flowed through, really since April, May this year. These are the kind of elevated inventory levels that I would expect to see as start to bring down between now and the end of the year.

Second thing to pick out is obviously tax costs are a bit lower, and that's because last year we acquired an overpayment of taxes. As we pay obviously tax in advance on a quarterly basis, and obviously the performance of the business in the first half of the year was relatively strong, second half of the year it declined quite significantly, therefore, we acquired a significant amount of tax that we'd overpaid in the first part of last year, which we've recovered in the first part of this year.

Then the last thing to pick out is just some of the CapEx that we've had in the first part of this year. That £1.8 million, some of the key features are we've put solar panels into our Polyformes manufacturing site, which is already actually starting to generate some nice efficiencies in terms of energy usage.

£400,000 was related to the final payments related to the machines going into Pitreavie, and we've spent £400,000 fitting out a new distribution site that we've got in Ireland. We had to move from an existing site south of Dublin into a new site on the west of Dublin at the middle part of this year, and we spent £400,000 fitting out that new warehouse so that we've actually got room for growth for the future in our business in Ireland.

They are the kind of key features. As I said earlier, net debt levels at £17.9 million still relatively low, and we plan to keep it that way in the short term.

In terms of capital allocation, the features here really is clearly we're committed to continuing to invest in the business in terms of capital expenditure, whether that's essential replacement or for value-add investment returns, and we allocate around £3.5 to £5 million per year to internal CapEx. We've got a commitment to maintain our dividend levels.

We know that the dividend is important to quite a number of our shareholders, and we're committed to maintaining those dividend levels. As the EPS starts to recover after the reduction last year and the reduction in the first part of this year, we see the profitability improving through the second half of this year and into the next two to three years, and that we will continue to maintain that dividend until the dividend cover restores to somewhere around 2.5 times plus, against adjusted EPS.

Currently, we're running about 2.1 times. In terms of the remainder of the cash, then we'll allocate that.

Primarily, our focus in the short term is to allocate that to share buybacks. You'll notice in the announcement that we'll complete the current share buyback of £4 million by the end of September this year.

That's about £900,000 of an additional spend in the second half of this year. We'll commence a new buyback program of £6 million from the 1st of October this year, and that'll be spent over a period of a year, £1.5 million quarterly tranches of £1.5 million between 1st of October this year and the end of September next year.

We've allocated that. It really the focus on share buyback from an M&A at the moment is really reflective of our view of the current valuation of business and also the fact that the management team's focused on the profit recovery program.

As we see valuations improve and as we see the profit recovery advance more as we go through next year, then we'll look to get back on the front foot with an M&A activity once we can demonstrate that we've got that recovery program well advanced and once we can start to see the valuations improve in the market. I'll hand back to Peter now, who'll go through the kind of the performance of the individual divisions.

Thanks, Ivor. Let's start with the distribution division.

The key points to note from our first half performance is we've achieved sales growth and profit growth. The sales growth has primarily been price-driven rather than volume, although we have seen a good new business performance, as I mentioned earlier on, about 40% up.

Why is our new business performing so strongly at the moment relative to the previous year? Firstly, we're finding customers looking in an uncertain world for suppliers who can give them reliability and certainty.

Clearly, we fill that gap nicely. We're also seeing now the benefits of the investment we made in 2025.

We brought in some strong new business people during the year. We thought they'd impact the business in '25, and they're now coming to fruition in 2026.

Also the breadth of the product offer. We are doing more work combining our distribution offer and our manufacturing offer with certainly key customers in the industrial sector, and that's helping and support our new business growth.

Finally, we were finding it more and more difficult as customers get tighter and tighter on their costs and control budgets of getting customers into our innovation labs, which is, most of you will know, is a key part of our sales proposition. We've done a lot more work in '26 in taking the innovation lab out to customers, and that has helped in terms of our new business performance.

I guess the point to note, as I mentioned earlier on, is that, despite the new business performance, we are seeing this headwind of environmental legislation, which is slowing down and getting customers to reduce the amount of packaging they're using, particularly in the retail space. If you look at our major retail business in the first half year, it's down by 6% versus the same period last year.

A key component of that is customers looking to buy less packaging in line with the environmental legislation that is penalizing them if they use too much packaging or the wrong type of packaging. That, as I repeat, will be a constant headwind going forward.

We've done an effective management of the polymer-based input price increases. We've seen certain polymer-based products go up to 20%, up to 40% for things like stretch, some tape products, bubble wrap, and so on and so forth.

I think we've done a pretty effective job so far in managing those with customers, and that's impacted with the steady gross margin during the period relative to last year. I think we've touched on the head count reductions.

We're squeezing the distribution business. We're taking heads out and realigning work.

We are canceling projects or delaying projects to just get very very tight on this profit recovery. The next slide just shows you our margin evolution over really the last sort of five or six years.

A lot of information on this slide, and I'll just pick out a number of things for you. First thing to note is that in terms of the first half, in terms of distribution, we have seen our net margin improve, which is positive, versus the same period previous year.

We've not got polymer on this graph, but we've seen an explosion in polymer prices. Corrugate is relatively stable.

It's been a little bit of pushing upwards in the first half of the year. Our operating costs are broadly flat on last year if you take into account the redundancy program that we've initiated and the redundancy costs as part of that.

As you can see, it reflects our stable gross margin. As and I'll talk about this later on in the presentation, our objective here is to get our net margin back to 7% to 8%, which we were delivering on average in the period '21 to 2024.

If you move over the page, a little bit more detail here for you in terms of our cost breakdown. Ivor has talked about the cost inflation that we've got and how we're managing that.

We've instituted the redundancy program in distribution, which has taken a number of heads out of the business. The good news, and I think it is good news, is that we've got a likely bigger bonus payout this year because we have got a number of sites performing extremely well.

Part of the year-on-year differences is the bonus provision. Continuing increase in National Insurance costs.

At last, we've got some property cost reduction, but that's really the effects of the duplicated property costs that we had in 2025. Underlying property costs still increase as landlords look to put up rents, and we get local authorities putting up rates.

Then transport costs are slightly higher than last year, and that's predominantly related to fuel costs vis-a-vis the Middle East activities. The next page details, and again, a lot of information on this chart, details the elements of our profit recovery plan, getting this business from where we are today back to the 7% to 8% that we see as the base point at which we were delivering in '21 to 2024.

A number of things to pull out of this slide. Firstly, we are pivoting the business away from retail towards industrial.

Industrial markets for us are more stable, and the customers are less transient, and the margins we earn from industrial customers are at 2% to 3% higher than our retail customers. As I mentioned earlier on, retail is that market which is more affected by the environmental legislation in the current situation than industrial is.

The split currently is 80-20. It's not a handbrake turn, but our new business focus is very much around industrial, and we'll see that mix over time slowly begin to change.

The other key part of our profit recovery plan is pricing disciplines. Within our local core customers, we have major core, local, different types of sizes and geography of customers, and particularly in our local core customers across the UK, we have quite a band of different margins that we earn at a gross level.

We're doing work at the moment to try and improve the margins we earn across all the bands, across all the sites to at least the average for the business as a whole. We've talked about the H1 cost reduction, and we expect that to flow through during the remainder of 2026, and we've got more cost reduction plans that we're working on as we speak.

Then we have a program called RDC Best Practice. At the moment, we've got a number of sites performing extremely well with net returns of 10%, and we've got a number of sites performing not as well with net returns below 5%.

What we're working on at the moment is best practicing the sites, comparing the really good with the relatively weak, and then working out what changes we need to make in terms of customer mix, in terms of pricing, in terms of resourcing, in terms of geography of distribution. All those things will help to improving the operating margin of the business and get us back to this 7.5% to 8%.

Why is that a realistic number? Is because we've achieved it in the past.

Why is it a realistic number? Because we've got some of our sites that are performing well way beyond that number already.

When we get all our sites performing to the average, then we should be on track to get back to that 7.5% to 8%. Let me move on to our manufacturing operations, and I'll talk firstly about our specialist operations, which don't include Pitreavie.

Good progress during the period, slightly missing gross margin, profits are broadly flat, but we're happy with the way this business is performing. It's got a little bit of tailwind from our exposure to the defense, the aerospace, and the electronics industry and a little bit also into the space industry.

Nevertheless, it's still dealing with the same conditions that we've got within our distribution business. They've got more of a tailwind than a headwind at the moment.

We're pretty happy with the way that this is performing, and we expect that the sort of level of margin that we deliver in that business to be sustainable in the medium term. Then moving over to Pitreavie, and you're very aware of what happened in 2025.

Very difficult for everybody involved, and obviously, a tragedy for the family involved in that particular incident. We're managing through that as we speak.

We've got the replacement machine in. We've had a lot of customer visits during Q1 to see the machine as it starts up, and more during Q2 as we see the machine performing in response to its expectations.

Although the business was unprofitable in the whole of H1, it was profitable in Q2 of H1. We're exiting H1 with the business profitable, having got the machine up and running.

We've done a really good job in retaining customer loyalty during the period despite the fact we're outsourcing work and using external suppliers to keep customers running. Those customers have now come back to us, and there's no major or even medium-sized customer that we've lost during this period.

I think we've got some good recovery actions in place in terms of Pitreavie. I obviously got the benefits of knowing what my July and August numbers look like, and Pitreavie is continuing to come through in terms of delivery profitability during those months as well as the Q2 in H1.

Let me touch on the Health and Safety investigation in relation to the incident. You're aware that the Health and Safety have been obviously reviewing what happened.

They've not yet fully started their investigation, we're waiting for them to confirm when that investigation will start. We have no more information that we can communicate at the moment on any possible fine.

Obviously, we would obviously want to keep you briefed, but at the moment, there's just no information that's available to share with you. Obviously, we will keep you briefed as more information starts to flow.

In terms of the Pitreavie recovery plan, again, relatively busy chart, a number of points to pull out. Firstly, is getting the machine up to its optimum level of throughput.

Currently running just under 80,000 80,000 per day in terms of the corrugating throughput. Our objective is to increase that to 100,000, and this is square meters we're talking about.

We're on track to do that as we come through into Q3. That'll give us the security of being able to ensure that all our customers are supported and serviced during that period and gives us the potential for for growth also.

Second point in terms of the recovery plan is, as we service effectively our external customers, then we'll switch into using some of that capacity to service in-house Macfarlane sites to provide security of supply on corrugate. We started that activity when we bought the business, but we obviously had to put it on hold as the business went through its difficulties.

As we come through into hopefully the fourth quarter, end of third fourth quarter, we'll start to look at using Pitreavie to supply corrugate to in-house Macfarlane operations. Then the third bullet point is, as Ivor touched on, the end of outsourcing to third parties.

That is now almost completed. It certainly will be completed as we are now into Q3.

Our medium-term objective for Pitreavie is to get it back to the £2 million of operating profit that we effectively acquired when we bought the business, and then that gives us the benchmark to start growing the business beyond the £2 million, which, from our point of view, is the starting line. We've talked about the environment quite a bit in terms of the headwind it's delivering, particularly in the distribution business.

Let me pass over to Ivor, and he can touch on what's happening in the world of the environment and how it's impacting the business and how we're addressing it.

Thanks, Peter. Peter's covered quite a lot of the kind of customer challenges with sustainability.

This slide covers quite a lot of stuff that we've probably already covered at the full-year results, but just wanted to pick out one or two features on this slide. One, we've invested in the solar panels at the Polyformes business.

As I said earlier, that's quite a nice investment. They're quite a high consumer of energy, therefore, that gives us quite a bit of energy efficiency, but also takes quite a bit of carbon out of our footprint.

The other thing to know is you've noted that we have invested in electric vehicles over the last number of years. I think, to be fair, we've probably been at the front end of that investment relative to the industry, and clearly, these trucks have been coming in at a more expensive cost than the diesel trucks.

We felt it was the right thing to do to move forward so we could try these vehicles out, see the levels of efficiency, see the levels of range, see the challenges we have with infrastructure. It's pleasing to see that some of the latest developments in electric vehicles are seeing, one, the range extension now in some of these vehicles is actually getting quite significant.

Some of the technology improvements that have been made, and also actually, from a cost point of view, some electric vehicles are now coming in very cost-effective way against diesel vehicles. Hopefully, over the next few years, you'll gradually see that transition from diesel to electric start to accelerate.

The only kind of caveat here is infrastructure is still a challenge, because obviously every site we don't necessarily have the input of electricity to be able to charge up the vehicles. That remains a bit of a challenge for us as it does for many companies.

The only other thing I just wanted to pick out here, which I will cover off in the next slide in more detail, is basically from a regulation point of view, clearly, there's some developments there. The most recent regulation that comes in that affects a number of our customers is PPWR, which is a kind of EU legislation.

I'll just cover that off here. You can see on the left-hand side some of the regulation that's already gone through, and I think we've covered the extended producer responsibility in quite a lot of detail in prior presentations.

The one in the middle there is probably the most important one. This is a new piece of legislation, EU legislation.

That's really all-encompassing, and that's going to come in in phases over a number of years. The ultimate aim is really, across EU, is to have a standard which is looking at ultimately reducing unnecessary packaging, increasing recyclability rates, and improving traceability, and actually looking to eliminate some forms of packaging that are considered that not environmentally friendly.

This doesn't just impact retail like the extended producer responsibility that came in the UK last year. This impacts all packaging.

It impacts us because we've get quite a number of customers that actually are packaging that then goes into the EU market. Actually quite a number of our customers are multinational customers.

They want to standardize their packaging, they don't want to have packaging that they use in the EU market and packaging that they use in the UK market. Of course, 8% to 10% of our business is actually in the EU with our operations in Germany, Netherlands, and Ireland.

I think this legislation just given the kind of all-encompassing aspect of it will have quite a significant impact on the business over the next few years, and certainly have a significant impact on quite a number of our customers who either have businesses in the EU or have quite a lot of cross-border transactions between the EU and the UK. That will develop quite nicely.

The ultimate aim is the EU is to try driving down the use of packaging, driving down the I suppose unnecessary packaging, so, i.e., too much void in the pack, and also drive in moving to more environmentally friendly packaging. More to come, but that's probably the biggest piece of legislation, and that started off in August this year.

In terms of pensions, I'll just touch on that. Clearly, the kind of biggest change in pension this year is we completed a buy-in transaction on the 29th of June, where all the assets were effectively bought over by Royal London.

I suppose, in essence, what that means for members, it gives members much more security, and their benefits remain the same, their benefits are totally unchanged. Instead of relying on Macfarlane Group as a covenant, they're now relying on Royal London as a covenant.

Now, although Macfarlane Group's a good covenant, Royal London clearly is a very strong covenant. It gives members a lot more security in terms of going forward.

There is some excess assets, you can see, post that buy-in. Effectively, what happens is the insured assets now effectively manage all pensions in payment and any deferred pensions that are due to be paid.

Any volatility related to those pensions are now covered by those insured assets. It takes out a lot of volatility in terms of the discount rate, in terms of inflation, in terms of mortality assumptions.

It takes a lot of volatility out for the group. The only thing that the pension scheme now has to deal with over the next two years is dealing with a lot of equalization adjustments related to guaranteed minimum pension and some historic Barber equalization adjustments.

These need to be dealt with over the next two years, and we've made provisions for those within our assumptions, and also the fees that are required to be paid to correct those pensions. That £5.5 million of cash that you see, that's there to cover those adjustments and the fees related to managing the pension scheme over the next two years between buy-in and buyout.

What we are kind of predicting at the moment is between now and buy-out, we should be in a position to exit the scheme completely either within a range of plus a million to minus a million in terms of potential cash that we might either recover or cash that we might have to pay into the scheme. That's the kind of range we are working with between now and buyout.

Good progress, more security for members, and less volatility for the group with the ultimate aim within two years is to get the pension scheme completely off the balance sheet. On that note, I'll pass back to Peter, who will just do a quick summary and conclusions.

Thanks, Ivor. One more slide, and then we'll move on to questions.

Three key final messages. Firstly, it's not easy out there at the moment.

Market conditions are weak in the UK, but the impact for the Middle East is slowing down, further slowing down demand, and obviously affecting our input pricing, we're having to work hard with customers to get recovery on those. We've got the headwind of the environmental regulation, which will cause people to use less packaging going forward, particularly in that retail sector.

I think when we look at what we've achieved in H1, we've made some progress, Middle East impact largely being offset by managing those price increases. Packaging distribution was seeing performance improvement.

Pitreavie we've got back into profitability, and manufacturing operations are performing in a stable fashion. The focus for us continues to be our profit recovery.

We had a number of people asking us last week when we were talking with them about what's the plan in terms of acquisitions. Just to clarify that, clearly, acquisitions has been a key part of our strategy up to date in terms of consolidating and widening the offer to customers.

At the moment, we've got all acquisition activity on hold. Those target acquisitions that we've got in the pipeline, we're talking with the owners of those businesses and in the main, they're agreeing to different timings and managing the delays.

Where acquisitions come to us at the moment, unless they are, absolutely, must-do acquisitions, then we're effectively saying now's not the right time. I think from an acquisition point of view, not a priority at this particular point in time.

I expect us to be back on the acquisition trail early 2028 is what we're scheduling as we focus management time on the profit recovery. In terms of that profit recovery, just as a reminder of the things that we're doing: so focusing our sales development on industrial markets, particularly in distribution; reducing our cost base, and we've started that program as we've described it; increasing the performance of the lower-return-on-sales RDCs in distribution through the Best Practice program; improve the input prices that we're achieving despite the Middle East thing, we're refining our sourcing program, try and find ways of getting better input prices, particularly on corrugate products; and then clearly, getting the Pitreavie business back to the £2 million of operating profit that we had when we acquired the business.

Then in terms of capital allocation, just to repeat what Ivor said, maintenance of the dividend, instituting a new share buyback program, and continuing that net debt level at a relatively low 1 times EBITDA. In terms of the presentation, if it's not already up on the website, will be up on the website later on today, you can delve into it in a bit more detail.

I recognize we've run through that at quite a pace. We will now move on to questions.

Okay. Thanks, Peter.

Thanks. The first question was one really and I think we kind of covered it off in the slide around the profit recovery program around distribution, which was really how do we get the business from 4.6% to 7.5% in the medium term.

I think Peter covered the actions, but I suppose, ultimately, if we can get the business growing roughly about 3% per annum, which is where we're targeting to get to, and we can maintain the gross margins at their current level, really if we can hold the cost base, is the kind of challenge for us, hold the cost base at the current levels, then within a kind of three-year program, we should see the bottom-line operating margin improve to that kind of 7 7% to 8% level. Just that natural flow-through of organic growth, maintaining the gross margin and holding, stopping that kind of inflationary pressure on the cost increases.

We appreciate there'll be continuing to be inflationary pressure there, but we'll be taking active actions to try and reduce our cost base, whether that's looking at kind of site consolidations as leases come up to an end, looking at software technology investments as we go forward to try and reduce some of the kind of processing strains on the business. Ultimately, that's how we get the business from 4.6% to 7.5%, is that natural flow-through of the growth, holding the operating cost where they currently are, and maintaining the margin roughly where they currently are at the moment.

One question is probably for you, Peter. Just in terms of the Middle East, what you've said, have we been able to recover the cost that have come through as a result of the Middle East, and do you see some maybe potential margin pressure coming through in the second half of the year?

It's a good question. Far, we've managed to do an effective job in recovering those price increases, and you can see that in the way our gross margin has performed in the first half of the year.

We probably see as we go into the second half of the year a slight weakening of that gross margin, but that will be offset by the fact that because we'll be implementing these price increases as a result of the flow-through, we'll see our revenue line strengthen. If you look to the second half of the year, expect a year-on-year stronger sales line versus 2025, but probably a slight weakening of margin, not materially so, still within that tight range that we operate.

Far, we're doing a good job and one of the key things is obviously security of supply because, yeah, you do not want to let down any customers in the current market, because if you let down a customer, it just opens the door for a new entrant. Far, we've been able to manage the supply chain particularly effectively.

Next question is around M&A, it's really, I'll take this one up, is when do we see M&A feature again, and is it likely to be focused on Europe versus the UK? I suppose in direct answer to that, we're not putting a time scale on it.

Clearly at the moment, our focus given, as I said, the current valuations that we've got at the moment, both of acquiring businesses relative to our own valuation, we see allocating capital to buyback is a more efficient way to manage our capital in the short term. As Peter described earlier, the management resources are really focused on the profit recovery program.

As we hope to develop that profit recovery program over the next 18 months and hopefully valuations start to improve, if those features start to move in a positive direction, then clearly, the timing of that means that we'll get on the front foot with M&A activity. We're actually focused on both continuing to do some buy-and-build within the UK, and we continue to look for strategic opportunities in Europe.

I don't know if you want to add to that, Peter?

No, I think that's a fair summary, and the only other thing I'd add to it is that the acquisition opportunities are there for us. We're probably seeing a couple of acquisition opportunities a week come through at the moment.

As we've said, we only buy quality businesses against an agreed strategy and against an agreed profile, and there's nothing we've seen so far that fits those criteria. As I say, more to come on acquisitions, but management time at the moment is focused on profit recovery.

In terms of the wider protective packaging market, where do you see the kind of opportunities and threats currently, and how do you see Macfarlane delivering against the wider market?

I think the wider market, if you look at it, people are trying to find ways of using less packaging, people are trying to find ways of using packaging more effectively, people are trying to find ways of using packaging in a way that reduces their operating costs. We're still very confident that the Macfarlane proposition around adding value to people's protective packaging requirements is still relevant, and that's reflected in our new business performance in the first half of this year.

I think in terms of the segments of the market, we see defense, aerospace, space, and tech, for the reasons that we all understand, will continue to be pretty robust and potentially, as they are doing at the moment, give us sustainable tailwinds. We see the retail space as probably the space that's going to be most difficult and most challenging, primarily because all the legislation that's currently in play and the legislation that Ivor touched on, which is coming into play, all has a really material effect on that retail space.

Hence, the pivot that we're making at the moment to really focus our business around industrial. The industrial customers, a final point, is good for us because it allows us to blend our distribution business and our specialist manufacturing activity together.

We can deal with a customer's sort of more simple protective packaging needs, and also their very sophisticated packaging needs, and genuinely become a one-stop supplier for those industrial clients.

A question on sourcing, Peter. How do we define our sourcing kind of strategy more?

The financial benefits that we could get from that?

In round terms, 50% of what we buy, we buy centrally through a central team. That's where we buy bubble wrap and tape on a central basis, agree terms, and then all our business units buy from that centrally agreed contract.

Then 50% we tend to deal with local and regional suppliers, and that's managed by our local sites and our regional operations. Our plan going forward is to bring more of our regional purchasing into a centralized fashion so that we get a better bang for our buck and spread our resources more effectively.

Also create stronger strategic supplier relationships, because, as you're all aware, the corrugated industry in the UK is going through a period of consolidation and rationalization. What we're doing at the moment is building and strengthening our relationships with key corrugate suppliers.

From a sustainability going forward, we've got long-term relationships and long-term partnerships, which will work well for them and for ourselves.

Peter, I think that's all the questions. I'll hand back to you to conclude it.

Yeah. Thank you, everybody, for your time today and your questions.

As I say, the presentation will be up on our website, you'll get a chance to look at it in more detail, and clearly, if there's anything that comes out from that, you can contact us directly or through Shore Capital. The summary of the first half year is, look, we had a really difficult 2025 after 15 years of consecutive profit growth.

The focus is on profit recovery, and we're beginning to demonstrate those profit recovery actions are coming through, and that's reflected in the performance that we've seen through the first half of the year, and that will only strengthen as we go into the second half of the year. We've got clear recovery targets for each of the key businesses that are not performing to plan at the moment in terms of distribution and Pitreavie, which we'll see us through the next two sort of really 12 to 24 months.

Again, thank you for your time.