REG - McBride PLC - Half-year Report
27/02/2024 07:00
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RNS Number : 5190E McBride PLC 27 February 2024
McBride plc
('McBride' or the 'Group')
Strong first half performance underpinned by continued consumer shift to
private label
Full year profit expectations raised
27 February 2024
McBride, the leading European manufacturer and supplier of private label and
contract manufactured products for the domestic household and professional
cleaning/hygiene markets, announces its unaudited interim results for the six
months ended 31 December 2023 (the 'period').
Improved profitability, underpinned by continued volume growth
· Ongoing consumer and retailer shift to high-quality private label
products supported further growth across the Group
· Total volume growth of 6.4%, with private label volumes increasing by
10.1%, taking further market share in a rising private label market
· Encouraging volume progress in strategic focus areas of Germany and
laundry, growing 10.5% and 9.8% respectively, ahead of overall market
· Strong operational delivery supporting higher volumes, together with
the impact of prior year pricing actions and raw material input costs
stability driving margin recovery
· Profitable performance across all five divisions
· Transformation programme on track to deliver target of £50m net
benefits over five years
· Group formally committed to the Science Based Targets initiative
(SBTi) in December 2023 as part of its wider sustainability agenda
Financial highlights
· Group revenue of £468.0m (2022: £426.3m), up 9.8% (9.9% at constant
currency((1)))
· Adjusted operating profit((2)) of £30.5m (2022: loss of £1.3m)
· Adjusted profit before taxation((2)) of £22.4m (2022: loss of
£7.9m)
· Profit before taxation of £17.4m (2022: loss of £20.0m)
· Net debt((2)) decreased to £145.7m (30 June 2023: £166.5m),
liquidity increased to £85.0m (30 June 2023: £59.3m)
· Negotiated termination of the 'upside sharing' mechanism announced on
25 October 2023
Optimistic outlook underpinned by strong market dynamics
· Demand levels in early months of 2024 in line with the first half;
favourable trends for private label markets expected to continue throughout
2024
· New contract wins expected to start deliveries in the second half of
2024
· Inflationary pressures remain, especially relating to employment,
general supplies, financing costs and energy; geopolitical tensions create
further inflationary and supply chain risks
· Full year adjusted operating profit now expected to be 10-15% ahead
of previous internal expectations
· Net debt/adjusted EBITDA((2)) now expected to be below 2x by 30 June
2024
Chris Smith, Chief Executive Officer, commented:
"McBride has continued with its positive momentum in the first half of this
financial year. It is pleasing to see all five divisions continuing to grow on
a constant currency basis, supporting our customers with high-quality products
to meet the consumer shift to private label. This strong performance is a
result of the commitment across all the business teams to provide our
customers with highest quality, best value products and the strongest
innovation options in the sector.
Our focus on operational delivery will see our second half year deliver ahead
of our plan with full year adjusted operating profit now expected to be 10-15%
ahead of previous internal expectations.
As we progress our Transformation programme, with specific initiatives to
enhance McBride's capabilities and tools for the future, we remain focused on
performance delivery today. This focus, together with our continued drive to
reduce debt levels, will ensure McBride is well positioned to achieve further
progress in the near and medium term and we look to the future with
confidence."
Half Half Constant
year to year to
31 Dec 31 Dec Reported currency
£m unless otherwise stated 2023 2022 change change((1))
Group revenue 468.0 426.3 9.8% 9.9%
Adjusted operating profit/(loss)((2)) 30.5 (1.3) 31.8 32.0
Operating profit/(loss) 29.5 (2.6) 32.1
Adjusted profit/(loss) before taxation((2)) 22.4 (7.9) 30.3
Profit/(loss) before taxation 17.4 (20.0) 37.4
Adjusted diluted earnings/(loss) per share((3)) 9.1p (4.2)p 13.3p
Diluted earnings/(loss) per share 7.0p (9.7)p 16.7p
Net debt 145.7 169.4 (23.7)
Adjusted return on capital employed((2)) 22.8% (5.5)% 28.3ppts
((1))Comparatives translated at six months to 31 December 2023 exchange rates.
((2))Refer to note 2 for definition.
((3))See note 6.
Analyst and investor presentation
A presentation for analysts and investors will be held at 10.00am today at the
office of Instinctif Partners.
Capital Markets Day
McBride will be hosting a Capital Markets Day for analysts and investors at
11.00am on Wednesday 13 March 2024 at the office of Instinctif Partners. To
register your interest, please contact McBride@instinctif.com
(mailto:McBride@instinctif.com) .
McBride plc 0161 203 7401
Chris Smith, Chief Executive Officer
Mark Strickland, Chief Financial Officer
Instinctif Partners 0207 457 2020
Guy Scarborough
Vivian Lai
This announcement contains forward-looking statements about financial and
operational matters. These statements are based on the current views,
expectations, assumptions and information of management, and are based on
information available to the management as at the date of this announcement.
Because they relate to future events and are subject to future circumstances,
these forward-looking statements are subject to unknown risks, uncertainties
and other factors which may not have been in contemplation as at the date of
the announcement. As a result, actual financial results, operational
performance and other future developments could differ materially from those
envisaged by the forward-looking statements. Neither McBride plc nor its
affiliates assume any obligations to update any forward-looking statements.
McBride plc gives no express or implied warranty, representation, assurance or
undertaking as to the impartiality, accuracy, completeness, reasonableness or
correctness of the information, opinions or statements expressed in the
announcement or any other information (whether written or oral) supplied as
part of it. Neither McBride plc, its affiliates nor its officers, employees or
agents will accept any responsibility or liability of any kind for any damage
or loss arising from any use of this announcement or its contents. All and any
such responsibilities and liabilities are expressly disclaimed. In particular,
but without prejudice to the generality of the foregoing, no representation,
warranty, assurance or undertaking is given as to the achievement or
reasonableness of any future projections, forward-looking statements about
financial and operational matters, or management estimates contained in the
announcement.
This announcement does not constitute an offer or invitation to underwrite,
subscribe for, or otherwise acquire or dispose of any McBride plc shares or
other securities, or of any of the businesses or assets described in the
announcement, and the information contained herein cannot be relied upon as a
guide to future performance.
Overall business performance
McBride delivered a much-improved performance for the first six months of the
financial year, with all divisions profitable. At a Group level, revenue
increased 9.8% to £468.0 million, with profit before taxation of £17.4
million (2022: loss of £20.0m).
The Group has built on the momentum in the second half of the last financial
year with the current period benefitting from continued strong demand for
McBride's high-quality private label products, as retailers look to support
their customers as they continue to transition to better quality products to
mitigate cost-of-living pressures. Private label share in the overall
household cleaning products market in Europe is estimated to have risen to
c.35% by volume, up over 4ppts since 2021. In the period, McBride private
label volumes are up 10.1%. In its core strategic focus areas of Germany and
laundry, McBride achieved pleasing volume growth of 10.5% and 9.8%
respectively. The Group's ability to deliver its strong private label
performance continues to be driven by several key factors. The execution of
McBride's strategy to embed specialism and focus in the divisional teams,
together with a commitment to improving customer service levels and
maintaining consistent product quality, has strengthened McBride's position as
a supplier of choice and led to further contract wins.
Gross margin continued to recover as a result of pricing actions implemented
in the last financial year, helping to offset the input cost inflation seen by
the business in previous periods. During the period, raw material input costs
remained relatively stable but inflationary pressures remain from employment,
general supplies, energy and financing costs. The Group continues to monitor
closely risks from global supply chain volatility arising from geopolitical
tensions.
Service levels on customer deliveries have significantly improved year on
year, following a series of targeted improvement areas, including supply route
and carrier changes. Additionally, physical changes to the business' current
warehouse network have been successfully completed and a review is in progress
to ensure future alignment to strategic growth plans.
Reducing levels of debt is a key priority for the business and further
progress was made in the period with net debt £20.8 million lower at £145.7
million. This reduction resulted from improved profit levels and good
operating capital management.
McBride's Transformation agenda is progressing at pace, targeting £50 million
net benefits over the next five years. The programme is being led by a
standalone team to ensure successful execution of its objectives. The
implementation of the Commercial Excellence, Service Excellence and SAP
programmes in particular will be key factors in driving McBride's future
success.
Outlook
The early part of the second half of the financial year has seen demand levels
continue in line with trends seen in the first six months, and the Group
expects to see the favourable trends for private label markets continue
throughout 2024. In addition, a number of new contract wins are expected to
commence during the next six months, adding further volumes. As a result the
Group now expects full year adjusted operating profit to be ahead of previous
internal expectations by 10-15%.
The rampant inflation seen in recent years is not expected to return at this
stage, therefore the Group expects input costs to remain stable for the coming
period. However, geopolitical tensions could present further inflationary and
supply chain risks.
The Group now anticipates that net debt/adjusted EBITDA((1)) will be below 2x
by 30 June 2024.
((1))Refer to note 2 for definition.
Divisional performance review
Half year to Half year to Constant
31 Dec 31 Dec Reported currency
2023 2022 change change
Revenue £m £m % %
Liquids 266.4 237.7 12.1% 11.8%
Unit Dosing 116.5 111.4 4.6% 4.5%
Powders 47.2 42.7 10.5% 10.5%
Aerosols 25.4 21.3 19.2% 19.2%
Asia Pacific 12.5 13.2 (5.3)% 4.2%
Group 468.0 426.3 9.8% 9.9%
Half year to Half year to Constant
31 Dec 31 Dec Reported currency
2023 2022 change change
Adjusted operating profit/(loss) £m £m £m £m
Liquids 22.8 0.2 22.6 22.7
Unit Dosing 7.9 2.2 5.7 5.4
Powders 3.2 (1.2) 4.4 4.5
Aerosols 0.5 - 0.5 0.6
Asia Pacific 0.7 0.8 (0.1) (0.1)
Corporate (4.6) (3.3) (1.3) (1.1)
Group 30.5 (1.3) 31.8 32.0
Liquids performance review
Liquids revenue grew by 11.8% on a constant currency basis, driven by private
label volumes, which were up 10.7%. Strong demand for private label continues
to be driven by consumers switching from branded products to high-quality
private label products. This positive performance was also supported by net
contract wins secured in the last financial year, particularly in the German
market. Laundry and dishwash maintained good momentum reporting revenue growth
of 20.0% and 11.1% respectively.
The division delivered an adjusted operating profit of £22.8 million, which
was £22.7 million higher on a constant currency basis, mostly as a result of
volume growth and supported by improved margins as the business benefitted
from the effect of last year's pricing actions agreed with customers.
Service levels continued to improve, which aligned with retailers' primary
focus on consistent supply and product availability.
Unit Dosing performance review
Unit Dosing revenue increased 4.5% on a constant currency basis to £116.5
million, supported in particular by volume growth in dishwash. Private label
volume growth of 7.4% was partly offset by a reduction in contract
manufacturing volumes. The division generated an adjusting operating profit of
£7.9 million, an increase of £5.7 million compared to the prior year period.
The division made significant investments to deliver new product launches in
the period, in addition to investing in new product launches anticipated for
the first half of the next financial year. Furthermore, capacity increases for
dishwasher tablets and laundry capsules are scheduled to go on stream in the
second half of the current financial year, supporting growth and service
improvements for specific product formats, in line with consumer demand.
The division will continue to focus on meeting the trend for higher doses per
consumer unit with new product launches focusing on compacted products and
leveraging sustainable packaging.
Powders performance review
Powders revenue grew by 10.5% on a constant currency basis to £47.2 million,
with adjusted operating profit of £3.2 million (2022: loss of £1.2m).
In the period, Powders saw a decline in private label sales as a result of a
sole supply account moving to dual supply, but these volumes were compensated
by improved sales to contract manufacturing, primarily in the professional
cleaning sector. Total volumes were lower in the period, but the impact of
prior year pricing actions resulted in revenue growth.
While the market remains competitive, Powders' performance demonstrates the
effectiveness of the division's strategy and its ability to adapt to
customers' needs. Powders continues to be well placed to deliver volume growth
and remains focused on achieving further efficiencies to offset potential cost
inflation.
Aerosols performance review
Aerosols revenue grew by 19.2% on a constant currency basis to £25.4 million,
making it McBride's fastest growing division. The division delivered an
adjusted operating profit in the period of £0.5 million (2022: £nil).
This positive performance was driven by accelerating growth in Germany and
Iberia with several tender wins. Within the division, private label and
personal care were top performers, with private label sales increasing by
27.8%. The division also introduced several innovative changes to its
packaging and formulations, which improved cost efficiency and made its
products more sustainable.
Aerosols remains committed to building on its existing strong relationships
with customers and continuing to drive operational excellence.
Asia Pacific performance review
Asia Pacific saw revenue increase by 4.2% on a constant currency basis to
£12.5 million. The division delivered adjusted operating profit of £0.7
million (2022: £0.8m).
Expanding volumes through the new site in Malaysia is the key priority for the
business. In the period, the local team has engaged positively with new
contract manufacturing customers and successfully launched a number of new
products in Malaysia. The team is in discussions with several new partners in
Vietnam and also delivered its first household cleaning products in the
Australian market.
Group operating results
Operating profit of £29.5 million was a significant improvement on the prior
year (2022: loss of £2.6m). Adjusted operating profit of £30.5 million was
also significantly better than the prior year (2022: loss of £1.3m), whilst
the adjusted operating profit margin increased to 6.5% (2022: (0.3)%).
Group EBITDA
Half-year adjusted EBITDA((1)) of £40.9 million (2022: £8.8m) reflected the
Group's strong trading performance.
Half year Half year Year ended
to 31 Dec to 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Operating profit/(loss) 29.5 (2.6) 10.3
Exceptional items in operating profit/(loss) (note 4) - - 0.8
Amortisation of intangibles (note 8) 1.0 1.3 2.4
Adjusted operating profit/(loss) 30.5 (1.3) 13.5
Depreciation of property, plant and equipment (note 8) 8.6 8.2 16.8
Depreciation of right-of-use assets (note 8) 1.8 1.9 3.8
Adjusted EBITDA 40.9 8.8 34.1
((1))Definition and reconciliation provided in note 16.
Exceptional items
Total exceptional items of £4.0 million were charged to finance costs during
the period (2022: £10.8m). The costs in the period relate to the Group's
financing confirmation, with the largest driver being £3.5 million of finance
costs recognised in October 2023 when the Group agreed with its lender group
an early settlement of the upside sharing mechanism. Costs incurred in the
prior period related to the independent business review and refinancing of the
Revolving Credit Facility (RCF).
Finance costs
At £8.1 million, adjusted finance costs((1)) were £1.5 million higher than
the prior period (2022: £6.6m), driven by revised terms under the Group's RCF
agreement announced on 29 September 2022 and increases to market interest
rates.
((1))Total finance costs less finance costs relating to exceptional items.
Taxation
Reported profit before taxation is £17.4 million (2022: loss of £20.0m).
Adjusted profit before taxation is £22.4 million (2022: loss of £7.9m). The
tax charge on adjusted profit before taxation for the year is £6.0 million
(2022: £0.7m credit) and the effective tax rate is 27% (2022: 9%).
The total tax charge is £4.7 million (2022: £3.2m credit) and the statutory
effective tax rate for the period is 27% (2022: 16%).
Earnings per share
On an adjusted basis, basic earnings per share was 9.5 pence (2022: loss of
4.2p). Total adjusted diluted earnings per share was 9.1 pence (2022: loss of
4.2p), with basic earnings per share at 7.3 pence (2022: loss of 9.7p).
Payments to shareholders
Under the amended terms of the RCF, McBride plc may not, except with the
consent of its lender group, declare, make or pay any dividend or distribution
to its shareholders prior to an 'exit event', being a change of control;
refinancing of the RCF in full; prepayment and cancellation of the RCF in
full; or upon the termination date of the RCF, being May 2026. Hence, the
Board is not recommending an interim dividend for the period.
Cash flow and balance sheet
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Adjusted EBITDA 40.9 8.8 34.1
Working capital excluding provisions and pensions 8.6 12.2 7.1
Share-based payments and loss on disposal of property, plant and equipment 0.9 0.5 0.8
Non-exceptional impairment of property, plant and equipment 0.2 - -
Pension deficit reduction contributions (2.0) (2.0) (4.0)
Free cash flow((1)) 48.6 19.5 38.0
Exceptional items (0.5) (0.8) (1.4)
Interest on borrowings and lease liabilities less interest receivable (6.2) (3.6) (11.4)
Refinancing costs paid (5.6) (10.6) (12.3)
Taxation (paid)/received (2.6) 0.1 (1.8)
Net cash generated from operating activities 33.7 4.6 11.1
Net capital expenditure((2)) (10.5) (6.8) (16.3)
Debt financing activities (10.4) 5.3 2.6
Settlement of derivatives (0.4) (0.1) 0.4
Net increase/(decrease) in cash and cash equivalents 12.4 3.0 (2.2)
Free cash flow in the period was £48.6 million (2022: £19.5m).
Working capital inflows of £8.6 million (2022: £12.2m) remained strong as
the Group continued its focus on working capital management.
During the period, net capital expenditure was £10.5 million (2022: £6.8m)
in cash terms. The increase has resulted from the easing of restrictions on
cash outflows that was required to manage liquidity in recent years. The Group
continues to prioritise capital expenditure to underpin its strategy of
focused investment in growth categories.
The Group's net assets increased to £43.6 million (30 June 2023: £37.1m).
Gearing((3)) decreased to 74% (30 June 2023: 78%) as net debt levels reduced
significantly. Adjusted return on capital employed of 22.8% was higher than
the prior year (2022: (5.5)%) driven by the significant improvement in
profitability.
((1))Refer to note 16 for definition.
((2)) Net capital expenditure is capital expenditure including capital
payments on lease liabilities less proceeds from sale of fixed assets.
((3))Gearing represents net debt divided by the average of current and prior
year year-end capital, being total equity plus net debt.
Bank facilities and net debt
Net debt at 31 December 2023 was £20.8 million lower than the prior year end
at £145.7 million (30 June 2023: £166.5m).
Throughout the period, the Group had a €175 million multi-currency,
sustainability-linked RCF. This facility ensures the Group continues to have
significant levels of liquidity headroom.
At 31 December 2023, liquidity((1)) was £85.0 million (30 June 2023:
£59.3m). Liquidity throughout the period remained comfortably above the RCF's
minimum liquidity covenant of £15 million.
At 31 December 2023, the net debt cover ratio as defined under the RCF funding
arrangements was 1.2x (30 June 2023: 2.9x) and the interest cover was 4.7x (30
June 2023: 2.7x). The amount undrawn on the facility was €73.9 million (30
June 2023: €46.7m).
At 31 December 2023, the Group had a number of facilities whereby it could
borrow against certain of its trade receivables. In the UK, the Group had a
£20 million facility, committed until May 2026. In Germany, the Group had a
€40 million facility, committed until May 2026. In France, Belgium and
Spain, the Group had an unlimited facility, committed until May 2026. The
Group can borrow from the provider of the relevant facility up to the lower of
the facility limit and the value of the receivables.
((1))Refer to note 2 for definition.
Pensions
In the UK, the Group operates a defined benefit pension scheme, which is
closed to new members and future accrual.
The deficit in the Robert McBride Pension Fund ('the Fund') increased during
the period to £30.6 million (30 June 2023: £24.7m). The main driver of the
movement was a significant reduction in corporate bond yields. This led to a
decrease in the discount rate used to value the Fund's liabilities, which in
turn led to an increase in the value of the liabilities. This was partially
offset by positive asset returns, the Group's deficit reduction contributions
of £2.0 million and a decrease in the assumption used for future inflation.
Following the triennial valuation at 31 March 2021, the Group and Trustee
agreed a new deficit reduction plan based on the scheme funding deficit of
£48.4 million. The current level of deficit contributions of £4.0 million
per annum is payable until 31 March 2028.
Separately, the Group has agreed that, from 1 October 2024, conditional
profit-related contributions of £1.7 million per annum may be paid over the
period to 31 March 2028. If adjusted operating profit exceeds £35 million,
additional annual deficit contributions of £1.7 million will be due over the
following year. If adjusted operating profit is below £30 million then no
profit-related contributions will be due in the following year. If reported
adjusted operating profit is between £31 million and £35 million, a
proportion of the £1.7 million contribution will be due over the following
year, with incremental increases of £0.34 million of additional contributions
for each whole £1 million of adjusted operating profit in excess of £30
million. Finally, the Group has agreed to make additional contributions such
that the total deficit contributions in any year match the value of any
dividends paid in that same year. The funding arrangements and recovery plan
will be reviewed by the Group and Trustee as part of the 31 March 2024
valuation.
The Group has other post-employment benefit obligations outside the UK that
amounted to £2.0 million (30 June 2023: £1.9m).
Environmental, social and governance (ESG)
McBride works to integrate the principles of long‑term environmental and
social sustainability within its business strategy. The approach to
sustainability is underpinned by an analysis of the ESG issues that are most
relevant and important in the context of McBride's business activities. The
Group recognises it must tackle climate change to remain viable and, as such,
places ESG issues at the core of its approach to sustainability.
McBride continues to report progress via an ESG dashboard and deliver on the
2025 targets for operations and product sustainability. The Group continues to
make progress on improving energy efficiency, reducing waste to landfill and
increasing the proportion of renewable electricity used in its operations.
McBride's corporate carbon footprint has been measured for three consecutive
years covering Scope 1, 2 and 3 emissions. During the period, the Group has
established science-based targets and formally committed to the Science Based
Target initiative (SBTi). These targets will guide efforts and ensure
McBride's actions are aligned to the latest scientific understanding on
climate change.
Key initiatives undertaken in the period to support the goal of creating a
positive social impact for colleagues, stakeholders and local communities have
been:
· running diversity, equity and inclusion workshops for senior leaders
across the business;
· inviting all European colleagues to provide their feedback in an
engagement survey;
· building programmes of social activities in all locations; and
· launching the 'McBride Gives' volunteering scheme in Poland.
During the period, McBride has also started its journey toward compliance with
the forthcoming EU Corporate Sustainability Due Diligence Directive (CSDDD).
The Group is building internal cross-functional alignment and understanding of
CSDDD requirements and what this means for McBride and its supply chains. The
aim is to achieve clarity on the high-level ESG risks and impacts that are the
most significant to supply chains, and to carry out targeted supplier risk
assessment and engagement. In relation to potential social and environmental
issues known to affect specific raw material supply chains, McBride will
conduct a deeper-dive risk assessment and due diligence. The results of such
risk assessments and supplier screenings will be integrated into existing
supplier management systems and processes.
Principal risks and uncertainties
The Group is subject to risk factors both internal and external to its
business and has a well-established set of risk management procedures. The
risks and uncertainties that the Directors believe could have the most
significant impact on the Group's business are:
· changing market, customer and consumer dynamics;
· disruptions to systems and processes;
· financing risks;
· supply chain resilience;
· safe and high-quality products;
· health and safety;
· climate change and environmental concerns;
· challenges in attracting and retaining talent;
· increased regulation; and
· economic, political and macro environment instability.
Responsibility statement
The Directors confirm that to the best of their knowledge:
• The condensed set of financial statements has been prepared in
accordance with UK-adopted IAS 34 'Interim Financial Reporting' and gives a
true and fair view of the assets, liabilities, financial position and profit
or loss of the issuer, or the undertakings included in the consolidation as a
whole as required by DTR 4.2.4 of the Disclosure and Transparency Rules.
• The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7 of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8 of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any material
changes in the related party transactions described in the last annual report
that could do so.
Chris
Smith
Mark Strickland
Chief Executive
Officer
Chief Financial Officer
27 February 2024
Condensed interim consolidated income statement
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
Note £m £m £m
Revenue 3 468.0 426.3 889.0
Cost of sales (297.1) (311.2) (625.4)
Gross profit 170.9 115.1 263.6
Distribution costs (40.8) (38.5) (77.9)
Administrative costs (96.5) (77.7) (171.6)
Impairment of trade receivables (3.6) (1.5) (3.5)
Loss on disposal of property, plant and equipment (0.3) - (0.3)
Impairment of property, plant and equipment (0.2) - -
Operating profit/(loss) 29.5 (2.6) 10.3
Finance costs (12.1) (17.4) (25.4)
Profit/(loss) before taxation 17.4 (20.0) (15.1)
Taxation 5 (4.7) 3.2 3.6
Profit/(loss) for the period 12.7 (16.8) (11.5)
Earnings/(loss) per ordinary share attributable to the owners of the parent
during the period
Basic earnings/(loss) per share 6 7.3p (9.7)p (6.6)p
Diluted earnings/(loss) per share 6 7.0p (9.7)p (6.6)p
Condensed interim consolidated statement of comprehensive income
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Profit/(loss) for the period 12.7 (16.8) (11.5)
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Currency translation differences of foreign subsidiaries 1.0 2.6 (0.6)
(Loss)/gain on net investment hedges (0.6) (0.5) 0.4
(Loss)/gain on cash flow hedges in the period (1.5) 3.4 3.7
Cash flow hedges transferred to profit or loss (0.8) (0.5) (1.4)
Taxation relating to the items above 0.6 (0.7) (0.4)
(1.3) 4.3 1.7
Items that will not be reclassified to profit or loss:
Net actuarial loss on post-employment benefits (7.3) (10.3) (14.1)
Taxation relating to item above 1.8 2.6 3.5
(5.5) (7.7) (10.6)
Total other comprehensive expense (6.8) (3.4) (8.9)
Total comprehensive income/(expense) 5.9 (20.2) (20.4)
Condensed interim consolidated balance sheet
Unaudited Unaudited Audited
As at As at As at
31 Dec 31 Dec 30 Jun
2023 2022 2023
Note £m £m £m
Non-current assets
Goodwill 8 19.8 19.8 19.7
Other intangible assets 8 6.1 6.5 6.5
Property, plant and equipment 8 115.8 121.1 117.8
Derivative financial instruments 9 1.6 3.8 4.5
Right-of-use assets 8 8.7 9.9 8.5
Deferred tax assets 45.3 32.9 41.6
197.3 194.0 198.6
Current assets
Inventories 109.4 128.2 121.5
Trade and other receivables 147.7 131.1 145.7
Current tax asset 2.0 5.3 2.3
Derivative financial instruments 9 0.8 1.5 0.6
Cash and cash equivalents 10 14.3 8.0 1.6
274.2 274.1 271.7
Total assets 471.5 468.1 470.3
Current liabilities
Trade and other payables 215.5 211.9 219.6
Borrowings 9 63.2 47.5 49.3
Lease liabilities 9 3.3 3.8 3.5
Derivative financial instruments 9 0.1 0.2 1.8
Current tax liabilities 10.3 4.0 6.7
Provisions 2.2 2.8 2.7
294.6 270.2 283.6
Non-current liabilities
Borrowings 9 87.6 119.3 109.8
Lease liabilities 9 5.9 6.8 5.5
Pensions and other post-employment benefits 11 32.6 24.7 26.6
Provisions 2.6 3.9 2.6
Deferred tax liabilities 4.6 5.9 5.1
133.3 160.6 149.6
Total liabilities 427.9 430.8 433.2
Net assets 43.6 37.3 37.1
Equity
Issued share capital 17.4 17.4 17.4
Share premium account 68.6 68.6 68.6
Other reserves 77.6 81.5 78.9
Accumulated losses (120.0) (130.2) (127.8)
Total equity 43.6 37.3 37.1
Condensed interim consolidated cash flow statement
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 (restated)((1)) 2023
Note £m £m £m
Operating activities
Profit/(loss) before taxation 17.4 (20.0) (15.1)
Finance costs 12.1 17.4 25.4
Exceptional items excluding finance costs 4 - - 0.8
Share-based payments charge 0.6 0.5 0.5
Depreciation of property, plant and equipment 8 8.6 8.2 16.8
Depreciation of right-of-use assets 8 1.8 1.9 3.8
Loss on disposal of property, plant and equipment 0.3 - 0.3
Amortisation of intangible assets 8 1.0 1.3 2.4
Impairment of property, plant and equipment 0.2 - -
Operating cash flow before changes in working capital and exceptional items 42.0 9.3 34.9
(Increase)/decrease in receivables (0.6) 17.6 (1.3)
Decrease/(increase) in inventories 13.5 (5.7) (2.7)
(Decrease)/increase in payables (4.3) 0.3 11.1
Operating cash flow after changes in working capital before exceptional items 50.6 21.5 42.0
Additional cash funding of pension schemes (2.0) (2.0) (4.0)
Cash generated from operations before exceptional items 48.6 19.5 38.0
Cash outflow in respect of exceptional items (0.5) (0.8) (1.4)
Cash generated from operations 48.1 18.7 36.6
Interest paid (6.2) (3.6) (11.4)
Refinancing costs paid (5.6) (10.6) (12.3)
Taxation (paid)/received (2.6) 0.1 (1.8)
Net cash generated from operating activities 33.7 4.6 11.1
Investing activities
Purchase of property, plant and equipment (7.8) (4.0) (10.3)
Purchase of intangible assets (0.6) (0.5) (1.7)
Settlement of derivatives used in net investment hedges (0.4) (0.1) 0.4
Net cash used in investing activities (8.8) (4.6) (11.6)
Financing activities
Drawdown/(repayment) of overdrafts 10 9.9 (4.1) (6.2)
Drawdown/(repayment) of other loans 10 3.0 (10.6) (4.9)
(Repayment)/drawdown of bank loans 10 (23.3) 20.0 13.7
Repayment of IFRS 16 lease obligations 10 (2.1) (2.3) (4.3)
Net cash (used in)/generated from financing activities (12.5) 3.0 (1.7)
Increase/(decrease) in net cash and cash equivalents 12.4 3.0 (2.2)
Net cash and cash equivalents at the start of the period 1.6 4.5 4.5
Currency translation differences 0.3 0.5 (0.7)
Net cash and cash equivalents at the end of the period 14.3 8.0 1.6
((1))Refinancing costs paid reclassified as operating activities, reported
previously under financing activities.
Condensed interim consolidated statement of changes in equity
Other reserves
Issued Share Cash flow Currency Capital Accumulated Total
share premium hedge translation redemption losses equity
capital account reserve reserve reserve £m £m
£m £m £m £m £m
At 1 July 2023 17.4 68.6 3.7 (2.0) 77.2 (127.8) 37.1
Profit for the period - - - - - 12.7 12.7
Other comprehensive income/(expense)
Items that may be reclassified
to profit or loss:
Currency translation differences
of foreign subsidiaries - - - 1.0 - - 1.0
Loss on net investment hedges - - - (0.6) - - (0.6)
Loss on cash flow hedges in the period - - (1.5) - - - (1.5)
Cash flow hedges transferred to profit or loss
- - (0.8) - - - (0.8)
Taxation relating to the items above - - 0.6 - - - 0.6
- - (1.7) 0.4 - - (1.3)
Items that will not be reclassified
to profit or loss:
Net actuarial loss on
post‑employment benefits - - - - - (7.3) (7.3)
Taxation relating to item above - - - - - 1.8 1.8
- - - - - (5.5) (5.5)
Total other comprehensive (expense)/income
- - (1.7) 0.4 - (5.5) (6.8)
Total comprehensive (expense)/income - - (1.7) 0.4 - 7.2 5.9
Transactions with owners of the parent
Share-based payments - - - - - 0.6 0.6
At 31 December 2023 17.4 68.6 2.0 (1.6) 77.2 (120.0) 43.6
Other reserves
Issued Share Cash flow Currency Capital Accumulated Total
share premium hedge translation redemption losses equity
capital account reserve reserve reserve £m £m
£m £m £m £m £m
At 1 July 2022 17.4 68.6 1.8 (1.8) 77.2 (106.2) 57.0
Loss for the period - - - - - (16.8) (16.8)
Other comprehensive income/(expense)
Items that may be reclassified
to profit or loss:
Currency translation differences - - - 2.6 - - 2.6
of foreign subsidiaries
Gain on net investment hedges - - - (0.5) - - (0.5)
Gain on cash flow hedges in the period - - 3.4 - - - 3.4
Cash flow hedges transferred to profit or loss - - (0.5) - - - (0.5)
Taxation relating to the items above - - (0.7) - - - (0.7)
- - 2.2 2.1 - - 4.3
Items that will not be reclassified
to profit or loss:
Net actuarial loss on - - - - - (10.3) (10.3)
post‑employment benefits
Taxation relating to item above - - - - - 2.6 2.6
- - - - - (7.7) (7.7)
Total other comprehensive income/(expense)
- - 2.2 2.1 - (7.7) (3.4)
Total comprehensive income/(expense) - - 2.2 2.1 - (24.5) (20.2)
Transactions with owners of the parent
Share-based payments - - - - - 0.5 0.5
At 31 December 2022 17.4 68.6 4.0 0.3 77.2 (130.2) 37.3
Other reserves
Issued Share Cash flow Currency Capital Accumulated Total
share premium hedge translation redemption losses equity
capital account reserve reserve reserve £m £m
£m £m £m £m £m
At 1 July 2022 17.4 68.6 1.8 (1.8) 77.2 (106.2) 57.0
Loss for the year - - - - - (11.5) (11.5)
Other comprehensive income/(expense)
Items that may be reclassified
to profit or loss:
Currency translation differences
of foreign subsidiaries - - - (0.6) - - (0.6)
Gain on net investment hedges - - - 0.4 - - 0.4
Gain on cash flow hedges in the year - - 3.7 - - - 3.7
Cash flow hedges transferred to profit or loss
- - (1.4) - - - (1.4)
Taxation relating to the items above - - (0.4) - - - (0.4)
- - 1.9 (0.2) - - 1.7
Items that will not be reclassified
to profit or loss:
Net actuarial loss on
post‑employment benefits - - - - - (14.1) (14.1)
Taxation relating to item above - - - - - 3.5 3.5
- - - - - (10.6) (10.6)
Total other comprehensive income/(expense)
- - 1.9 (0.2) - (10.6) (8.9)
Total comprehensive income/(expense) - - 1.9 (0.2) - (22.1) (20.4)
Transactions with owners of the parent
Share-based payments - - - - - 0.5 0.5
At 30 June 2023 (audited) 17.4 68.6 3.7 (2.0) 77.2 (127.8) 37.1
Notes to the consolidated financial information
1. Corporate information
McBride plc ('the Company') is a public company limited by shares incorporated
and domiciled in the United Kingdom and registered in England and Wales. The
Company's ordinary shares are listed on the London Stock Exchange. The
registered office of the Company is Middleton Way, Middleton, Manchester M24
4DP. For the purposes of DTR 6.4.2R, the Home State of McBride plc is the
United Kingdom.
The Company and its subsidiaries (together, 'the Group') is Europe's leading
provider of private label and contract manufactured products for the domestic
household and professional cleaning/hygiene markets. The Company develops and
manufactures products for the majority of retailers and major brand owners
throughout Europe and the Asia-Pacific region.
2. Accounting policies
Basis of preparation
The interim financial information for the six months period ended 31 December
2023 has been prepared on the basis of the accounting policies set out in the
2023 Annual Report and Accounts and in accordance with UK adopted IAS 34
'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the UK's Financial Conduct Authority.
This interim financial information should be read in conjunction with the
annual consolidated financial statements for the year ended 30 June 2023,
which were prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006. The financial
statements have been prepared under the historical cost convention, modified
in respect of financial assets and liabilities (derivative financial
instruments) at fair value through profit or loss, assets held for sale and
defined benefit pension plan assets.
The results for each half year are unaudited and do not represent the Group's
statutory accounts within the meaning of section 434 of the Companies Act
2006. The interim financial information has not been reviewed or audited. The
Group's statutory accounts were approved by the Directors on 18 September 2023
and have been reported on by PricewaterhouseCoopers LLP and delivered to the
Registrar of Companies. The report of PricewaterhouseCoopers LLP was (i)
unqualified and (ii) did not contain a statement under section 498 of the
Companies Act 2006.
Going concern
In determining the appropriate basis of preparation of the financial
statements for the six months to 31 December 2023, the Directors are required
to consider whether the Group can continue in operational existence for the
foreseeable future.
The Group meets its funding requirements through internal cash generation and
bank credit facilities. The Group has access to a €175 million
multi-currency RCF, with covenants in respect of liquidity, debt cover and
interest cover. The Group also has facilities whereby it can borrow against
certain of its trade receivables. At 31 December 2023, liquidity, as detailed
in note 16, amounted to £85.0 million.
In assessing the going concern assumptions, the Board has reviewed the Group's
base case scenario and considered severe but plausible downside scenarios.
The Group's base case scenario to 30 June 2025 assumes:
· revenue growth driven predominantly by volume increases resulting from
net contract wins;
· interest rates remaining unchanged from current levels; and
· Sterling: Euro exchange rate of £1:€1.12.
The Directors have considered severe but plausible downside scenarios to
stress test the Group's financial forecasts, with the following assumptions:
· revenue growth halved for the remainder of 2024;
· revenue growth reducing to half of that assumed in the latest view for
2025;
· interest rates increasing by a further 100 basis points; and
· Sterling appreciating significantly against the Euro to £1:€1.22.
If such a severe but plausible downside risk scenario occurs, the Group would
remain compliant with current banking covenants.
After reviewing the current liquidity position, financial forecasts, stress
testing of potential risks and considering the uncertainties described above,
and based on the currently committed funding facilities, the Directors have a
reasonable expectation that the Group has sufficient resources to continue in
operational existence and without significant curtailment of operations for
the foreseeable future. For these reasons, the Directors continue to adopt the
going concern basis of accounting in preparing the Group financial statements.
Critical accounting judgements and key sources of estimation uncertainty
The preparation of the consolidated financial statements from which this
preliminary announcement is derived, requires management to make judgements,
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates. The significant judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the consolidated
financial statements for the year ended 30 June 2023.
Alternative performance measures (APMs)
The performance of the Group is assessed using a variety of adjusted measures
that are not defined under IFRS and are therefore termed non-GAAP measures.
APM Definition Source
Adjusted operating profit Operating profit before amortisation of intangible assets and exceptional Consolidated income statement
items
Adjusted EBITDA Adjusted operating profit before depreciation Consolidated income statement
Adjusted profit before taxation Adjusted profit before taxation is based on adjusted operating profit less Consolidated income statement
adjusted finance costs
Adjusted profit for the period Adjusted profit for the period is based on adjusted profit before taxation Consolidated income statement
less taxation relating to non-adjusting items
Adjusted earnings per share Adjusted earnings per share is based on the Group's profit for the period Note 6
adjusted for the items excluded from operating profit in arriving at adjusted
operating profit Consolidated income statement
Free cash flow Free cash flow is defined as cash generated before exceptional items Consolidated cash flow statement
Cash conversion % Cash conversion % is defined as free cash flow as a percentage of adjusted Consolidated income statement
EBITDA
Consolidated cash flow statement
Adjusted return on capital employed (ROCE) Adjusted ROCE is defined as rolling twelve months total adjusted operating Consolidated income statement
profit divided by the average of the past two years' capital employed. Capital
employed is defined as the total of goodwill and other intangible assets, Consolidated balance sheet
property, plant and equipment, right-of-use assets, inventories, trade and
other receivables less trade and other payables.
Liquidity At any time, without double counting, the aggregate of: (a) cash; (b) cash Consolidated cash flow statement
equivalents; (c) the available facility at that time, which comprises the
headroom available in the RCF and other committed facilities; and (d) the Note 16
aggregate amount available for drawing under uncommitted facilities.
Net debt Net debt consists of cash and cash equivalents, overdrafts, bank and other Consolidated balance sheet
loans and lease liabilities.
The APMs used may not be directly comparable with similarly titled measures
used by other companies.
Adjusted measures exclude specific items that are considered to hinder
comparison of the trading performance of the Group's businesses either year on
year or with other businesses. This presentation is consistent with the way
that financial performance is measured by management and reported to the Board
and Executive Committee and is used for internal performance analysis and in
relation to employee incentive arrangements. The Directors present these
measures in the financial statements in order to assist investors in their
assessment of the trading performance of the Group. Directors do not regard
these measures as a substitute for, or superior to, the equivalent measures
calculated and presented in accordance with IFRS.
During the years under review, the items excluded from operating profit in
arriving at adjusted operating profit were the amortisation of intangible
assets and exceptional items. Exceptional items and amortisation are excluded
from adjusted operating profit because they are not considered to be
representative of the trading performance of the Group's businesses during the
year.
See note 16 'Additional information' for further information on alternative
performance measures.
3. Segment information
Background
Financial information is presented to the Board by product technology for the
purposes of allocating resources within the Group and assessing the
performance of the Group's businesses. There are five separately managed and
accountable business divisions:
· Liquids;
· Unit Dosing;
· Powders;
· Aerosols; and
· Asia Pacific.
Intra-group revenue from the sale of products is agreed between the relevant
customer-facing units and eliminated in the segmental presentation that is
presented to the Board, and therefore excluded from the below figures. Most
overhead costs are directly attributed within the respective divisions' income
statements. Central overheads are allocated to a reportable segment
proportionally using an appropriate cost driver. Corporate costs, which
include the costs associated with the Board and the Executive Leadership Team,
governance and listed company costs and certain central functions (mostly
associated with financial disciplines such as treasury), are reported
separately. Exceptional items are detailed in note 4 and are not allocated to
the reportable segments as this reflects how they are reported to the Board.
Net finance costs are not allocated to the reportable segments, as the
central treasury function manages this activity, together with the overall net
debt position of the Group.
The Board uses adjusted operating profit to measure the profitability of the
Group's businesses. Adjusted operating profit is, therefore, the measure of
segment profit presented in the Group's segment disclosures. Adjusted
operating profit represents operating profit before specific items that are
considered to hinder comparison of the trading performance of the Group's
businesses either year on year or with other businesses. During the years
under review, the items excluded from operating profit in arriving at adjusted
operating profit were the amortisation of intangible assets and exceptional
items.
Liquids Unit Dosing Powders Aerosols Asia Pacific Corporate Group
Period ended 31 December 2023 (unaudited) £m £m £m £m £m £m £m
Segment revenue 266.4 116.5 47.2 25.4 12.5 - 468.0
Adjusted operating profit/(loss) 22.8 7.9 3.2 0.5 0.7 (4.6) 30.5
Amortisation of intangible assets (1.0)
Operating profit 29.5
Finance costs (12.1)
Profit before taxation 17.4
Inventories 60.1 24.7 13.3 8.9 2.4 - 109.4
Capital expenditure 2.5 3.1 0.5 0.1 - - 6.2
Amortisation and depreciation 6.7 3.0 0.7 0.3 0.7 - 11.4
Liquids Unit Dosing Powders Aerosols Asia Pacific Corporate Group
Period ended 31 December 2022 (unaudited) £m £m £m £m £m £m £m
Segment revenue 237.7 111.4 42.7 21.3 13.2 - 426.3
Adjusted operating profit/(loss) 0.2 2.2 (1.2) - 0.8 (3.3) (1.3)
Amortisation of intangible assets (1.3)
Operating loss (2.6)
Finance costs (17.4)
Loss before taxation (20.0)
Inventories 62.6 36.2 15.5 10.3 3.6 - 128.2
Capital expenditure 1.6 1.3 0.3 0.1 0.1 - 3.4
Amortisation and depreciation 6.5 3.1 0.7 0.3 0.8 - 11.4
Liquids Unit Dosing Powders Aerosols Asia Pacific Corporate Group
Year ended 30 June 2023 (audited) £m £m £m £m £m £m £m
Segment revenue 497.9 234.2 85.9 46.2 24.8 - 889.0
Adjusted operating profit/(loss) 10.5 10.0 (0.7) 0.3 1.1 (7.7) 13.5
Amortisation of intangible assets (2.4)
Exceptional items (note 4) (0.8)
Operating profit 10.3
Finance costs (25.4)
Loss before taxation (15.1)
Inventories 59.4 33.8 15.8 9.6 2.9 - 121.5
Capital expenditure 5.9 4.9 1.7 0.4 0.3 - 13.2
Amortisation and depreciation 13.2 6.3 1.4 0.6 1.5 - 23.0
4. Exceptional items
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Environmental remediation - - 0.8
Total charged to operating profit/(loss) - - 0.8
Group refinancing:
Independent business review and refinancing costs 4.0 10.8 12.2
Total charged to finance costs 4.0 10.8 12.2
Total exceptional items 4.0 10.8 13.0
During the period, exceptional costs of £4.0 million were incurred and
recognised as finance costs (2022: £10.8m). The charge primarily relates to
the termination of the upside sharing fee. As announced on 25 October 2023,
the Group agreed to make a one-off payment of £5.0 million to its lender
group in respect of the upside sharing fee. As £1.5 million had already been
recognised at 30 June 2023, a further £3.5 million cost has been recognised
in the period.
Costs of £10.8 million incurred in the prior year period related to the
independent business review and refinancing of the RCF.
5. Taxation
Reported profit before taxation was £17.4 million (2022: loss of £20.0m).
Adjusted profit before taxation was £22.4 million (2022: loss of £7.9m).
The tax charge on adjusted profit before taxation for the year is £6.0
million (2022: £0.7m credit) and the effective tax rate is a charge of 27%
(2022: 9%).
The Group forecasts an adjusted effective tax rate for the full year of 30%,
before discrete items, which is higher than the UK corporation tax rate of 25%
due to non-UK tax rates, non-deductible items and local taxes payable.
6. Earnings/(loss) per ordinary share
Basic earnings/(loss) per ordinary share is calculated by dividing the
profit/(loss) for the period attributable to owners of the Company by the
weighted average number of the Company's ordinary shares in issue during the
financial period. The weighted average number of the Company's ordinary
shares in issue excludes 501,172 shares (2022: 629,200 shares), being the
weighted average number of own shares held during the year in relation to
employee share schemes.
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
Reference 2023 2022 2023
Weighted average number of ordinary shares in issue (million) a 173.6 173.5 173.4
Effect of dilutive share options (million) 7.1 2.8 2.5
Weighted average number of ordinary shares for calculating b
diluted earnings/(loss) per share (million) 180.7 176.3 175.9
Diluted earnings/(loss) per share is calculated by adjusting the weighted
average number of ordinary shares in issue assuming the conversion of all
potentially dilutive ordinary shares. Where potentially dilutive ordinary
shares would cause an increase in earnings per share, or a decrease in loss
per share, the diluted loss per share is considered equal to the basic loss
per share.
During the period, the Company had equity-settled awards with a nil exercise
price that are potentially dilutive ordinary shares.
Adjusted earnings/(loss) per share measures are calculated based on
profit/(loss) for the period attributable to owners of the Company before
adjusting items as follows:
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
Reference £m £m £m
Profit/(loss) for calculating basic and diluted earnings/(loss) per share c 12.7 (16.8) (11.5)
Adjusted for:
Amortisation of intangible assets (note 8) 1.0 1.3 2.4
Exceptional items (note 4) 4.0 10.8 13.0
Taxation relating to the above items (1.3) (2.5) (3.9)
Profit/(loss) for calculating adjusted earnings/(loss) per share d 16.4 (7.2) -
( )
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
Reference pence pence pence
Basic earnings/(loss) per share c/a 7.3 (9.7) (6.6)
Diluted earnings/(loss) per share c/b((1)) 7.0 (9.7) (6.6)
Adjusted basic earnings/(loss) per share d/a 9.5 (4.2) 0.0
Adjusted diluted earnings/(loss) per share d/b((1)) 9.1 (4.2) 0.0
((1))Diluted loss per share is considered equal to the basic loss per share as
potentially dilutive ordinary shares cause a decrease in the loss per share.
7. Payments to shareholders
Dividends paid and received are included in the financial statements in the
year in which the related dividends are actually paid or received or, in
respect of the Company's final dividend for the year, approved by
shareholders.
Under the terms of the amended RCF announced on 29 September 2022, the Company
may not, except with the consent of its lender group, declare, make or pay any
dividend or distribution to its shareholders prior to an 'exit event', being a
change of control, refinancing of the RCF in full, prepayment and cancellation
of the RCF in full, or upon the termination date of the RCF, being May 2026.
Hence, the Board is not recommending an interim dividend for the period ended
31 December 2023.
No payments to ordinary shareholders were made or proposed in respect of this
period or the prior year.
Furthermore, under the RCF, the Company may not, except with the consent of
its lender group, redeem or repay any of its share capital prior to an exit
event. Therefore, as intimated in the announcement dated 3 October 2022, the
redemption of B Shares that would normally take place in November each year
will not take place.
B Shares issued but not redeemed are classified as current liabilities.
Nominal
Number value
000 £m
At 31 December 2022 (unaudited), 30 June 2023 (audited) and 31 December 2023 665,888 0.7
(unaudited)
B Shares carry no rights to attend, speak or vote at Company meetings, except
on a resolution relating to the winding up of the Company.
8. Intangible assets, property, plant and equipment and right-of-use assets
Goodwill
and other Property,
intangible plant and Right-of-use
assets equipment assets
£m £m £m
Net book value at 1 July 2023 (audited) 26.2 117.8 8.5
Currency translation differences 0.1 1.6 0.1
Additions 0.6 5.6 1.9
Disposal of assets - (0.6) -
Depreciation charge - (8.6) (1.8)
Amortisation charge (1.0) - -
Net book value at 31 December 2023 (unaudited) 25.9 115.8 8.7
Included within 'goodwill and other intangible assets' is goodwill of £19.8
million (30 June 2023: £19.7m), computer software of £4.8 million (30 June
2023: £5.6m) and customer relationships of £0.5 million (30 June 2023:
£0.6m).
Capital commitments as at 31 December 2023 amounted to £4.1 million (30 June
2023: £5.5m). At 31 December 2023, the Group was committed to future minimum
lease payments of £0.6 million (30 June 2023: £2.1m) in respect of leases
which have not yet commenced and for which no lease liability has been
recognised.
9. Financial risk management
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk.
The condensed interim financial information does not include all financial
risk management information and disclosures required in the annual financial
statements and they should be read in conjunction with the Group's Annual
Report and Accounts 2023. There have been no material changes in the risk
management policies since the year end.
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
• Level 1 - unadjusted quoted prices in active markets for identical
assets or liabilities;
• Level 2 - inputs other than Level 1 that are observable for the
asset or liability, either directly (prices) or indirectly (derived from
prices); and
• Level 3 - inputs that are not based on observable market data
(unobservable inputs).
Unaudited Unaudited Audited
As at As at As at
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Level 2 assets
Derivative financial instruments
Forward currency contracts - 0.4 0.2
Interest rate swaps 2.4 4.9 4.9
Total financial assets 2.4 5.3 5.1
Level 2 liabilities
Derivative financial instruments
Forward currency contracts (0.1) (0.2) -
Interest rate swaps - - (0.3)
Upside sharing fee - - (1.5)
Total financial liabilities (0.1) (0.2) (1.8)
Derivative financial instruments
Derivative financial instruments comprise the foreign currency derivatives and
interest rate derivatives that are held by the Group in designated hedging
relationships.
Foreign currency forward contracts are measured by reference to prevailing
forward exchange rates. Interest rate swaps and caps are measured by
discounting the related cash flows using yield curves derived from prevailing
market interest rates.
The upside sharing fee recognised at 30 June 2023 was identified as an
embedded derivative. The amended RCF that the Group agreed with its lender
group on 29 September 2022 included an 'upside sharing' mechanism whereby a
fee would become payable by the Group to members of the lender group upon the
occurrence of an 'exit event'. Such a fee was to be determined as the
percentage of any increase in the market capitalisation of the Group from 29
September 2022 to the date of the exit event. For reporting to the year ended
30 June 2023, a valuation was performed using a conventional Black-Scholes
pricing model with an exit date of 31 May 2024, based on the assumption that
the Group would have agreed a new RCF arrangement at that time. In the first
half of the current financial year, the Group agreed and paid a settlement in
respect of this upside sharing fee, therefore no embedded derivative financial
instrument is recognised in respect of this as at 31 December 2023.
Valuation levels and techniques
There were no transfers between levels during the year and no changes in
valuation techniques.
Financial assets and liabilities measured at amortised cost
The fair value of borrowings, including overdrafts and lease liabilities, are
as follows:
Unaudited Unaudited Audited
As at As at As at
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Current 66.5 51.3 52.8
Non-current 93.5 126.1 115.3
Total borrowings 160.0 177.4 168.1
The fair value of the following financial assets and liabilities approximate
to their carrying amount:
· trade and other receivables;
· other current financial assets;
· cash and cash equivalents; and
· trade and other payables.
10. Net debt
Movements in net debt were as follows:
IFRS 16 Currency Unaudited
At 1 Jul non-cash Cash translation At 31 Dec
2023 movements((1)) flows differences 2023
£m £m £m £m £m
Cash and cash equivalents 1.6 - 12.4 0.3 14.3
Overdrafts (0.6) - (9.9) (0.5) (11.0)
Bank and other loans (158.5) - 20.3 (1.6) (139.8)
Lease liabilities (9.0) (2.2) 2.1 (0.1) (9.2)
Net debt (166.5) (2.2) 24.9 (1.9) (145.7)
((1))IFRS 16 non-cash movements includes additions (£2.0 million) and
interest charged (£0.1 million).
11. Pensions and post-employment benefits
The Group provides a number of post-employment benefit arrangements. In the
UK, the Group operates a closed defined benefit pension scheme and a defined
contribution pension scheme. Elsewhere in Europe, the Group has a number of
smaller post-employment benefit arrangements that are structured to accord
with local conditions and practices in the countries concerned. The Group also
recognises the assets and liabilities for all members of the defined
contribution scheme in Belgium, accounting for the whole defined contribution
section as a defined benefit scheme under IAS 19 'Employee Benefits', as there
is a risk the underpin will require the Group to pay further contributions to
the scheme.
At 31 December 2023, the Group recognised a deficit on its UK defined benefit
pension plan of £30.6 million (30 June 2023: £24.7m). The Group's
post-employment benefit obligations outside the UK amounted to £2.0 million
(30 June 2023: £1.9m).
Non-governmental collected post-employment benefits had the following effect
on the Group's results and financial position:
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Profit or loss
Service cost and administrative expenses (net of employee contributions) (0.4) (0.5) (1.0)
Net charge to operating profit/(loss) (0.4) (0.5) (1.0)
Net interest cost on defined benefit obligation (0.6) (0.3) (0.5)
Net charge to profit/(loss) before taxation (1.0) (0.8) (1.5)
Other comprehensive expense
Net actuarial loss (7.3) (10.3) (14.1)
Unaudited Unaudited Audited
As at As at As at
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Balance sheet
Defined benefit obligations
UK - funded (107.6) (97.6) (98.1)
Other - unfunded (12.5) (12.5) (12.4)
(120.1) (110.1) (110.5)
Fair value of scheme assets
UK - funded 77.0 74.8 73.4
Other - unfunded 10.5 10.6 10.5
Deficit on the schemes (32.6) (24.7) (26.6)
For accounting purposes, the UK scheme's benefit obligation as at 31 December
2023 has been calculated based on data gathered for the 2021 triennial
actuarial valuation and by applying assumptions made by the Group on the
advice of an independent actuary in accordance with IAS 19 'Employee
Benefits'.
12. Share capital
Allotted and fully paid
Number £m
Ordinary shares of 10 pence each
At 31 December 2022 (unaudited), 30 June 2023 (audited) and 31 December 2023 174,057,328 17.4
(unaudited)
Ordinary shares carry full voting rights and ordinary shareholders are
entitled to attend Company meetings and to receive payments to shareholders.
13. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties of the Company, are eliminated on consolidation and, therefore, are
not required to be disclosed in these financial statements.
Key management compensation and transactions with the Group's pension and
post-employment schemes for the financial year ended 30 June 2023 are detailed
in note 28 (page 211) of McBride plc's Annual Report and Accounts 2023. A copy
of McBride plc's Annual Report and Accounts 2023 is available on McBride's
website at www.mcbride.co.uk
(file:///C:/Users/GScarborough/Desktop/www.mcbride.co.uk) .
14. Exchange rates
The exchange rates used to translate the results, assets, liabilities and cash
flows of the Group's principal foreign operations into Sterling were as
follows:
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 Jun
2023 2022 2023
Average rate:
Euro 1.16 1.16 1.15
US Dollar 1.25 1.17 1.20
Polish Zloty 5.17 5.49 5.38
Danish Krone 8.64 8.62 8.56
Malaysian Ringgit 5.84 5.32 5.41
Australian Dollar 1.92 1.75 1.79
Closing rate:
Euro 1.15 1.13 1.17
US Dollar 1.27 1.20 1.27
Polish Zloty 4.99 5.28 5.17
Danish Krone 8.58 8.38 8.68
Malaysian Ringgit 5.84 5.30 5.91
Australian Dollar 1.87 1.77 1.91
15. Key performance indicators (KPIs)
Management uses a number of KPIs to measure the Group's performance and
progress against its strategic objectives. The most important of these are
defined below.
Financial
· Revenue: Revenue from contracts with customers from the sale of goods
is measured at the invoiced amount, net of sales rebates, discounts, value
added tax and other sales taxes.
· Transformation benefits: Net profit benefit achieved from the
Transformation programme.
· Adjusted EBITDA margin: The calculation of Adjusted EBITDA, which when
divided by revenue gives this EBITDA margin, is defined in note 2 to the 2023
Annual Report and Accounts.
· Free cash flow increase: Free cash flow is defined as cash generated
before exceptional items.
· Adjusted ROCE improvement: Total adjusted operating profit divided by
the total of goodwill and other intangible assets, property, plant and
equipment, right-of-use assets, inventories, trade and other receivables less
trade and other payables.
Non-financial
· Health and safety: The number of lost time injuries x 100,000 divided
by total number of person-hours worked.
· Customer service level: The volume of products delivered in the correct
volumes and within requested timescales, as a percentage of total volumes
ordered by customers.
· Gender split - female: The proportion of our workforce that is female.
· Customer quality: A customer satisfaction index which combines critical
issues, audit results, returns and complaints.
· Research and development expenditure: Total research and development
expenditure as a percentage of Group revenue.
16. Additional information
Alternative performance measures
The performance of the Group is assessed using a variety of adjusted measures
that are not defined under IFRS and are therefore termed non-GAAP measures. A
reconciliation for each non-GAAP measure to the most directly comparable IFRS
measure, is set out below.
Adjusted operating profit and adjusted EBITDA
Adjusted EBITDA means adjusted operating profit before depreciation and
amortisation. A reconciliation between adjusted operating profit, adjusted
EBITDA and the Group's reported statutory operating profit is shown below:
Half year Half year Year ended
to 31 Dec to 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Operating profit/(loss) 29.5 (2.6) 10.3
Exceptional items (note 4) - - 0.8
Amortisation of intangibles (note 8) 1.0 1.3 2.4
Adjusted operating profit/(loss) 30.5 (1.3) 13.5
Depreciation of property, plant and equipment (note 8) 8.6 8.2 16.8
Depreciation of right-of-use assets (note 8) 1.8 1.9 3.8
Adjusted EBITDA 40.9 8.8 34.1
Adjusted profit before taxation and adjusted profit for the year
Adjusted profit before taxation is based on adjusted operating profit less
adjusted finance costs. Adjusted profit for the period is based on adjusted
profit before taxation less taxation. The table below reconciles adjusted
profit before taxation to the Group's reported profit before taxation, and
adjusted profit for the period to the Group's reported profit for the period.
Half year Half year Year ended
to 31 Dec to 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Profit/(loss) before taxation 17.4 (20.0) (15.1)
Exceptional items (note 4) 4.0 10.8 13.0
Amortisation of intangibles (note 8) 1.0 1.3 2.4
Adjusted profit/(loss) before taxation 22.4 (7.9) 0.3
Taxation (6.0) 0.7 (0.3)
Adjusted profit/(loss) for the period 16.4 (7.2) -
Adjusted earnings per share
Adjusted earnings per share is based on the Group's profit for the period
adjusted for the items excluded from operating profit in arriving at adjusted
operating profit, and the tax relating to those items.
Free cash flow and cash conversion %
Free cash flow is one of the Group's key performance indicators by which our
financial performance is measured. It is primarily a liquidity measure.
However, management also believe that free cash flow and cash conversion % are
important indicators of overall operational performance as they reflect the
cash generated from operations. Free cash flow is defined as cash generated
before exceptional items. Cash conversion % is defined as free cash flow as a
percentage of adjusted EBITDA. A reconciliation from net cash generated from
operating activities, the most directly comparable IFRS measure, to free cash
flow, is set out as follows:
Half year Half year Year ended
to 31 Dec to 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Net cash generated from operating activities 33.7 4.6 11.1
Add back:
Taxation paid/(received) 2.6 (0.1) 1.8
Interest paid 6.2 3.6 11.4
Refinancing costs paid 5.6 10.6 12.3
Cash outflow in respect of exceptional items 0.5 0.8 1.4
Free cash flow 48.6 19.5 38.0
Adjusted EBITDA 40.9 8.8 34.1
Cash conversion % 119% 222% 111%
Adjusted return on capital employed (ROCE)
Adjusted ROCE serves as an indicator of how efficiently we generate returns
from the capital invested in the business. It is a Group KPI that is directly
relatable to the outcome of investment decisions. Adjusted ROCE is defined as
total adjusted operating profit/(loss) divided by the average period-end
capital employed. Capital employed is defined as the total of goodwill and
other intangible assets, property, plant and equipment, right-of-use assets,
inventories, trade and other receivables less trade and other payables. There
is no equivalent statutory measure within IFRS. Adjusted return on capital
employed is calculated as follows:
As at As at As at As at
31 Dec 31 Dec 31 Dec 30 Jun
2023 2022 2021 2023
£m £m £m £m
Goodwill (note 8) 19.8 19.8 19.7 19.7
Other intangible assets (note 8) 6.1 6.5 7.6 6.5
Property, plant and equipment (note 8) 115.8 121.1 122.1 117.8
Right-of-use assets (note 8) 8.7 9.9 11.8 8.5
Inventories 109.4 128.2 96.4 121.5
Trade and other receivables 147.7 131.1 120.4 145.7
Trade and other payables (215.5) (211.9) (183.2) (219.6)
Capital employed 192.0 204.7 194.8 200.1
Average period-end capital employed 198.4 199.8 209.9 209.4
Rolling twelve months' adjusted operating profit/(loss) 45.3 (11.0) (9.7) 13.5
Adjusted return on capital employed % 22.8% (5.5)% (4.6)% 6.4%
Liquidity
Liquidity means, at any time, without double counting, the aggregate of:
(a) cash;
(b) cash equivalents;
(c) the available facility at that time, which comprises the headroom
available in the RCF and other committed facilities; and
(d) the aggregate amount available for drawing under uncommitted facilities.
As at As at As at
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Cash and cash equivalents 14.3 8.0 1.6
RCF headroom 64.2 35.2 40.0
Other committed facilities headroom 6.5 15.5 17.5
Uncommitted facilities - 0.2 0.2
Liquidity 85.0 58.9 59.3
Net debt
Net debt consists of cash and cash equivalents, overdrafts, bank and other
loans and lease liabilities.
Net debt is a measure of the Group's net indebtedness that provides an
indicator of overall balance sheet strength. It is a key indicator used by
management to assess both the Group's cash position and its indebtedness. The
use of the term 'net debt' does not necessarily mean that the cash included in
the net debt calculation is available to settle the liabilities included in
this measure.
Net debt is considered to be an alternative performance measure as it is not
defined in IFRS. A reconciliation from loans and other borrowings, lease
liabilities and cash and cash equivalents, the most directly comparable IFRS
measures to net debt is set out below:
As at As at As at
31 Dec 31 Dec 30 Jun
2023 2022 2023
£m £m £m
Current assets
Cash and cash equivalents 14.3 8.0 1.6
Current liabilities
Borrowings (note 9) (63.2) (47.5) (49.3)
Lease liabilities (3.3) (3.8) (3.5)
(66.5) (51.3) (52.8)
Non-current liabilities
Borrowings (note 9) (87.6) (119.3) (109.8)
Lease liabilities (5.9) (6.8) (5.5)
(93.5) (126.1) (115.3)
Net debt (145.7) (169.4) (166.5)
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