REG - McBride PLC - Half-year Report
20/02/2020 07:00
For best results when printing this announcement, please click on link below:
http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20200220:nRST5338Da
RNS Number : 5338D McBride PLC 20 February 2020
McBride plc ("McBride", the "Company" or the "Group")
Weaker second quarter revenues in difficult market conditions; Strategy review
underway
20 February 2020
McBride, the leading European manufacturer and supplier of Contract
Manufactured and Private Label products for the domestic household and
professional cleaning/hygiene markets, announces its results for the six
months ended 31 December 2019.
During the prior financial year, the Group successfully completed the sale of
the European Personal Care (PC) Liquids business. The financial results of
this business have been treated as discontinued operations in the half-year
financial statements. The remaining activities within the Group are referred
to as continuing operations.
£m unless otherwise stated Half-year to Half-year to Reported % Constant
31 Dec 31 Dec Change Currency %
2019 2018 Change(2)
Continuing operations
Household revenue 334.4 341.6 (2.1)% (1.4)%
Group revenue 350.4 369.2 (5.1)% (4.4)%
Adjusted operating profit(3) 11.6 16.8 (31.0)% (30.1)%
Operating profit 8.5 15.6 (45.5)%
Adjusted profit before taxation 9.7 14.5 (33.1)% (32.2)%
Profit before taxation 6.6 13.3 (50.4)%
Adjusted diluted earnings per share(4) 3.7p 5.6p (33.9)%
Diluted earnings per share 2.0p 5.0p (60.0)%
Total operations
Revenue 350.4 391.1 (10.4)% (9.8)%
Adjusted operating profit(3) 11.6 16.5 (29.7)% (28.8)%
Operating profit 8.2 13.5 (39.3)%
Adjusted profit before taxation 9.7 14.2 (31.7)% (30.7)%
Profit before taxation 6.3 11.2 (43.8)%
Adjusted diluted earnings per share(4) 3.7p 5.5p (32.7)%
Diluted earnings per share 1.9p 4.9p (61.2)%
Net debt(1,5) 121.7 130.3
Net debt pre-IFRS 16(1,6) 113.5 120.9
Return on capital employed(7) 13.4% 20.8%
Interim payment to shareholders (per ordinary share) 0.8p 1.5p
Headlines
Business
· Ludwig de Mot appointed as CEO, November 2019
· Revenue growth in South, East and Asia, offset by declines in UK,
France and North
· Further delivery against key business improvement objectives:
o logistics improvement study nearing conclusion
o new Malaysian factory expected to be operational by end 2020
o Barrow, UK site, expected to close in summer 2020
o Aerosols standalone business established, operating at targeted break even
position
o sale of land and buildings at former Aerosols site at Hull, UK completed
during second quarter for £3.0 million
· Review of strategy, organisation and operations underway, output
expected September 2020 alongside full year results presentation
Financial
Continuing Operations
· Household reported revenues of £334.4m (2018: £341.6m), 2.1% lower,
down 1.4% at constant currency
· Marked revenues slowdown in last two months of the period
· Group reported revenues £350.4m (2018: £369.2m), 5.1% lower, down
4.4% at constant currency
· Adjusted operating profit((3)) of £11.6m, lower by £5.2m
· Operating profit of £8.5m (2018: £15.6m)
· Finance costs down to £1.9m, from £2.3m in the prior half-year
· Adjusted profit before tax of £9.7m (2018: £14.5m)
· Profit before tax £6.6m, lower by £6.7m
· Adjusted diluted EPS 33.9% lower at 3.7p (2018: 5.6p)
Total Group
· Net debt at £121.7m (30 June 2019 restated for IFRS 16: £130.3m)
· Excluding IFRS 16, net debt £113.5m, down £7.4m since 30 June 2019
(£120.9m)
· Interim payment to shareholders 0.8p (2018: 1.5p)
Ludwig de Mot, Chief Executive Officer, commented:
( )
"Since joining McBride in November I have visited all of our sites and met
many of our people and been impressed by their commitment to making McBride a
successful business. McBride has a strong market position but the Group's
recent performance has been disappointing. Accordingly, as announced last
month, I have initiated a review of the Group's strategy, organisation and
operations which I expect to report on at the time of our year end results
announcement in September.
Our third quarter revenue run rates are as expected. Our revenue outlook
remains in line with our expectations despite our markets remaining
challenging. Material costs are tracking consistently with the first half
year. The Board's expectations for the full year remain in line with our
January trading update."
McBride plc
Ludwig de Mot, Chief Executive Officer 020 3642 1587
Chris Smith, Chief Finance Officer 020 3642 1587
FTI Consulting 020 3727 1017
Ed Bridges, Nick Hasell
The Analyst presentation meeting at 9.30am today, will be available as a
listen only call. The dial in details are:
Standard International Access: +44 (0)330 336 9411
Password: McBride
The results presentation will be available on the McBride plc investor
relations website immediately prior to the meeting.
(1)Net debt is at 30 June 2019, all other comparatives refer to the six months
ended 31 December 2018 unless otherwise stated.
(2)Comparatives translated at 31 December 2019 exchange rates.
(3)Adjustments were made for the amortisation of intangible assets and
exceptional items.
(4)Adjustments were made for the amortisation of intangible assets,
exceptional items, unwind of discount on provisions, exceptional tax charges
and any related tax.
(5)Net debt comprises cash and cash equivalents, overdraft, bank and other
loans and lease liabilities.
(6)Net debt excluding IFRS 16 comprises cash and cash equivalents, overdraft,
bank and other loans, excluding lease liabilities.
(7)Rolling twelve months adjusted operating profit to 31 December 2019 as a
percentage of average period end net assets excluding net debt.
Business Progress
Ludwig de Mot became Chief Executive on 1 November 2019 and the Group is in
the process of a review of its strategy, organisation and operations. It is
expected that the outcome from this review will be reported at the time of our
full year results announcement in September 2020.
During the six months to 31 December 2019, the Group has continued with a
number of key business improvement initiatives:
Logistics network
o The Group is at an advanced stage in its externally supported study to
identify savings and operational improvements in its warehousing network and
is complete in the review of improvement options for transport management
activities. It is expected that the final roadmap will be concluded in the
third quarter and the implementation will be aligned with the outcome of the
strategy review. The annualised benefits will accrue over a number of years
as warehouse locations change in line with existing contractual arrangements.
Asia expansion
o As previously announced, the Group is expanding its Asian operations,
including the introduction of a new production facility in Malaysia. The
project is progressing ahead of schedule and we now expect the new facility to
be operational later this year.
Business process improvement - Segmentation
o The Group identified benefits from implementing a segmentation approach to
managing its customer and product ranges. As well as supporting improved and
differentiated customer service and inventory levels, this initiative
determines priorities over development projects and complexity management.
This initiative is considered a key component supporting the Group's future
strategic direction.
Factory Footprint
o In light of continuing reducing levels of demand for laundry powders, the
Group announced the proposed closure of its Barrow, UK site, one of its three
laundry powder manufacturing locations. Consultation with affected colleagues
has recently completed and it is expected the site will cease operations in
summer 2020, with its volumes transferring to other Group locations.
Aerosols
o Following the decision last financial year to consolidate the Group's two
aerosols operations to a single factory, the former Hull factory ceased
operations in 2019 and the site was sold during the second quarter, realising
£3.0 million of proceeds. The on-going business is now a stand-alone
operation and first half-year results are in line with the break even ambition
set for this financial year.
Group Operating Results
The financial results of the PC Liquids business, which was sold in the prior
financial year, have been treated as discontinued operations in the half-year
financial statements. The remaining activities within the Group are referred
to as continuing operations.
Continuing Operations - Income Statement
The Group's first half Household revenues at constant currency were 1.4% lower
compared to the prior year. Following a steady performance in the first four
months of the period, the Group experienced a marked slowdown in the last two
months of the period, especially in the UK and East regions.
Reflecting the decision to exit UK Aerosol manufacture in the fourth quarter
of the previous financial year, half-year Group revenues at £350.4 million
were £18.8 million (5.1%) lower than the prior period (4.4% at constant
currency).
Half-year adjusted operating profit of £11.6 million was lower than the last
half-year (2018: £16.8m) with adjusted operating profit margin decreasing by
1.3 percentage points to 3.3% (2018: 4.6%).
Half-year operating profit was £8.5 million (2018: £15.6m). This includes
amortisation of £1.0 million and exceptional charges of £2.1 million,
largely related to consultancy and redundancy costs associated with the
factory footprint review.
Continuing Operations - Exceptional items
Total exceptional items incurred in relation to the continuing business of
£2.1 million were recorded during the period (2018: £0.3m). The charges
primarily comprised the following:
· £1.2 million professional fees incurred in relation to a review of the
Group's factory footprint;
· £0.8 million charge from restructuring activities to reduce the
operational cost base in the UK also as part of the review of the Group's
factory footprint;
· £0.8 million gain on sale of the land and buildings at the former UK
Aerosols site in Hull. Additionally, charges totalling £0.9 million were
incurred in relation to the termination of a contract with a third party to
operate the Hull warehouse and other site closure costs.
In January 2020 we concluded the consultation process with our Barrow site in
the UK and the closure is expected in summer 2020. Expected future exceptional
costs relating to the proposed site closure of Barrow are £7.5 million, of
which £3.2 million is a non-cash asset write off.
Discontinued Operations - Income Statement and Exceptional items
In the first half-year there was no revenue or operating profit/loss related
to the PC Liquids business. In the prior period, the PC Liquids business
generated revenues of £21.9 million and had an adjusted operating loss of
£0.3 million.
Following the sale of our PC Liquids business in the previous financial year,
liabilities for specific future redundancy remained with McBride. These were
implemented in the first half-year by Royal Sanders and £0.3 million of
exceptional costs were transferred to McBride.
This project is now closed with no further costs expected.
Finance Costs
Finance costs of £1.9 million (2018: £2.3m) were lower as a result of lower
interest cost levels and certain benefits of a stronger sterling on currency
derivative revaluations. This level of reduction is not expected into the
second half-year.
Profit Before Tax and Tax Rate
Reported profit before taxation from continuing operations was £6.6 million
(2018: £13.3m). Adjusted profit before taxation from continuing operations
reduced by £4.8 million to £9.7 million (2018: £14.5m). The tax charge on
continuing adjusted profit before tax for the period of £2.9 million (2018:
£4.2m) represents an effective tax rate of 30% (2018: 29%). The increase in
the tax rate resulted from weaker UK profitability in the mix of profits,
where corporate tax rates are lower than the Group's other jurisdictions.
Earnings per Share
On an adjusted basis, diluted earnings per share (EPS) from continuing
operations fell versus prior year to 3.7 pence (2018: 5.6p). Total adjusted
diluted EPS decreased to 3.7 pence (2018: 5.5p) with basic diluted EPS at 1.9
pence (2018: 4.9p).
Payments to Shareholders
The Group's current policy on payments to shareholders is to distribute
adjusted earnings to shareholders based on a dividend cover range of 2x-3x
progressive with earnings of the Group, taking into account funding
availability. As a result, a payment to shareholders of 0.8 pence per share
will be paid at the interim stage in May. It is intended this will be issued
using the Company's B Share scheme.
The Board has initiated a dividend policy review as part of the overall
strategy review, which will include consultation with major shareholders, on
which we expect to report in September 2020.
Continuing Operations - Segmental Performance
As previously advised, our Asia segment is now reported as part of the Group's
Household activities. Aerosols is now operating as a stand-alone business unit
and is reported as a separate segment within these financial statements.
Corporate costs, which include the costs associated with the Board, Group
leadership teams, governance and listed company costs and certain central
functions (mostly associated with financial disciplines such as treasury), are
reported separately to Household and Aerosols.
Household
Reported revenues decreased 2.1% to £334.4 million (2018: £341.6m). Revenues
at constant currency were down 1.4% with volume decreases partially offset by
the full-year effect of the customer pricing programme implemented in the last
financial year.
Adjusted operating profit for the Household business was £14.9 million (2018:
£22.5m). Adjusted operating profit margins in this segment declined from 6.6%
to 4.5%. Following the closure of the Hull site and establishment of Aerosols
as a stand-alone business unit together with a detailed review of Aerosols use
of shared functions, a proportion of the related overhead was reallocated from
Aerosols to the Household segment.
Half-year to Half-year
to
31 Dec 31 Dec
2019 2018 Reported Constant
Revenue £m £m change currency(1)
UK 82.3 89.4 (7.9)% (7.9)%
France 59.4 64.3 (7.6)% (6.8)%
North 52.7 55.3 (4.7)% (3.8)%
South 45.2 39.5 14.4% 15.6%
East 82.7 82.2 0.6% 1.6%
Asia 12.1 10.9 11.0% 11.0%
334.4 341.6 (2.1)% (1.4)%
(1)Comparatives translated at 31 December 2019 exchange rates. Comparatives
quoted in Trading Update issued 14 January 2020 based on unrounded data.
In the UK, revenues of £82.3 million were 7.9% lower versus prior year. Q1
was 2.9% down on prior year, with Q2 down 12.9% on prior year. This was due in
part to lost contracts as well as weaker Private Label activity caused by a
higher level of branded promotions and lower retail footfall in December than
in previous years.
In the France region, revenues of £59.4m declined 6.8% at constant currency
versus the prior year, consistent with its weaker performance in recent
periods. In particular, the region was affected by a 6.6% decrease in volume
levels, mainly as a result of high promotional activities from brands and a
negative customer reaction following our pricing action in the prior year.
In the North region, revenues of £52.7 million compared with £55.3 million
in the prior year. Volumes declined largely as expected following contract
losses in the prior financial year. This was partially offset by the pricing
recovery programme also implemented in the prior financial year.
Our South region reported revenues of £45.2 million, a revenue increase of
15.6% at constant currency, driven by growth in both Iberia and Italy. The
period saw continued progress in our Iberian business where new customer and
contract wins resulted in a volume increase of 34.8% versus prior year. Within
the larger Italian market, volumes increased by 4.3% versus prior year, which
was an encouraging result against a backdrop of slower consumer demand.
The East region, covering Germany, Poland and other East European countries,
reported revenues of £82.7 million, an increase of 1.6% at constant currency.
Q1 was up 9.8% versus prior year, whilst Q2 declined 5.9% versus the prior
year. Growth in Q1 was driven by contract gains, strong promotional activity
and run-rate improvements. However, the Q2 decrease, largely due to contract
losses, softened the half-year performance. The region's performance in the
second half of the current year is expected to be broadly consistent with the
second half of last year.
Asia reported sales of £12.1 million, an 11.0% increase on prior year and
continues to show strong progress. This has been driven by significant
contract gains with key customers. The Group's growth plans will expand
manufacturing facilities in the region to provide a platform to significantly
increase our local manufacturing capacity, with a focus on developing our
Household business in the region.
Across the half-year to December 2019, the Group saw relative stability in raw
material prices and packaging costs. Whilst pricing on palm and coconut oil
derived products ran higher in the last few months, overall costs were in line
with expectations as a result of price stability in the majority of our other
raw material inputs.
Logistics costs as a percentage of revenues continued to increase, reflecting
the higher distribution costs associated with our growing business in Germany.
Additionally, following a period of transport capacity issues, and to ensure
certainty of supply, a number of new contracts were secured, with both
existing and new suppliers, with some at higher rates. Excluding the impact of
lower volumes, distribution costs increased 7.1% versus the prior year.
In the first half-year, administrative overheads excluding exceptional items
increased £1.6 million versus the prior year. While the improvement in
customer service levels seen in the second half of the last financial year
continued into the first half of this financial year, penalties from customers
increased by £0.4 million versus the prior period, mainly due to specific
quality and service issues in the East region. Customer service remains a
priority for the Group and recent improvements are expected to lead to lower
penalty levels in the second half. An increase in the cost of packaging
recycling levies in the UK led to an additional charge of £0.6 million
compared to the prior year. The remaining cost increase relates primarily to
recent senior appointments.
Aerosols
Aerosols is now managed as a stand-alone business unit and is reported as a
separate segment. This financial half-year saw the sale of the Hull site for
£3.0m in the second quarter that resulted in an exceptional gain of £0.8m.
Reported revenues were £16.0 million (2018: £27.6m) with the revenue decline
reflecting the decision to exit UK Aerosol manufacture in the fourth quarter
of the previous financial year. Overall, this resulted in an adjusted
operating profit of £0.4 million for the half-year (2018: loss £1.9m), in
line with our strategic aim to bring the Aerosols business back to at least a
break even position by this financial year.
Balance Sheet and Net Debt
Net debt excluding IFRS 16 decreased from £120.9 million at 30 June 2019 to
£113.5 million at 31 December 2019 mainly as a result of a decrease in
working capital and favourable currency movements. Net debt including IFRS 16
at the half-year decreased to £121.7 million (30 June 2019: £130.3m).
Trading working capital efficiency(a) has increased slightly to 12.4% (30 June
2019: 12.0%). Inventory levels decreased by £4.8 million reflecting the
decrease in volumes, whilst trade receivables reduced by £14.0 million and
trade payables reduced by £13.8 million from 30 June 2019. This resulted in a
significant improvement in free cash flow in the first half versus the second
half of the last financial year.
Cash generated from operations before exceptional items was lower at £17.8
million (2018: £25.3m) in the six months to 31 December 2019, mainly as a
result of the lower profitability levels.
During the period, capital expenditure on property, plant and equipment
increased by £0.8m compared to the prior year, and cash consideration of
£3.0 million was received in relation to the disposal of the former
manufacturing site at Hull.
Net assets reduced to £60.9 million (30 June 2019: £64.2m) with
gearing(b) unchanged at 66% (30 June 2019: 66%).
Return on capital employed (excluding IFRS 16) decreased to 13.4% compared to
15.3% at 30 June 2019 and the prior half-year of 20.8% mainly as a result of
the lower profitability levels.
(a )Trading working capital efficiency defined as inventories, trade
receivables and trade payables as a percentage of sales.
(b )Gearing defined as the ratio of equity to net debt excluding IFRS 16.
Covenants
The Group's funding arrangements are subject to banking covenants,
representations and warranties that are customary for unsecured borrowing
facilities, including two financial covenants: Debt Cover (the ratio of net
debt to EBITDA(c)) may not exceed 3:1 and Interest Cover (the ratio of EBITDA
to net interest) may not be less than 4:1. For the purpose of these
calculations, net debt excludes IFRS 16 leases and amounts drawn under the
invoice discounting facilities. The Group remains well within these
covenants. As at 31 December 2019, the debt cover ratio was 2.2x and the
interest cover was 11.8x, both well within the banking limits.
(c )Earnings before interest, tax, depreciation and amortisation.
Pensions
The Group operates a funded defined benefit scheme in the UK. At 31 December
2019, the Group recognised a deficit on its UK scheme of £28.9 million (30
June 2019: £28.1m). The deficit is broadly unchanged over the period due to
changes in asset values being broadly in-line with changes in assumptions used
to calculate pension liabilities.
The Group has other unfunded post-employment benefit obligations outside the
UK that amounted to £2.9 million (30 June 2019: £3.0m).
Current Trading and Outlook
Our third quarter revenue run rates are as expected. Our revenue outlook
remains in line with our expectations despite our markets remaining
challenging. Material costs are tracking consistently with the first half
year. The Board's expectations for the full year remain in line with our
January trading update.
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
following risks and uncertainties are those that the Directors believe could
have the most significant impact on the Group's business:
· Consumer and customer trends;
· Market competitiveness;
· Input costs;
· Legislation;
· Financial risks;
· Breach of IT security;
· Supply chain risk relating to COVID-19; and
· Brexit impacts.
Cautionary Statement
This announcement contains forward-looking statements that are subject to risk
factors associated with, among other things the economic and business
circumstances occurring from time to time in the countries, sectors and
markets in which the Group operates. It is believed that the expectations
reflected in these statements are reasonable but they may be affected by a
wide range of variables which could cause actual results to differ materially
from those currently anticipated. No assurances can be given that the
forward-looking statements in this announcement will be realised.
The forward-looking statements reflect the knowledge and information available
at the date of preparation of this announcement and the Company undertakes no
obligation to update these forward-looking statements. Nothing in this
announcement should be construed as a profit forecast.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
· The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;
· 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.
On behalf of the Board
Ludwig de Mot, Chief Executive Officer
Chris Smith, Chief Financial Officer
20 February 2020
Condensed interim consolidated income statement
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Continuing operations Note £m £m £m
Revenue 4 350.4 369.2 721.3
Cost of sales (232.4) (248.2) (480.9)
Gross profit 118.0 121.0 240.4
Distribution costs (28.7) (28.0) (56.6)
Administrative expenses (80.8) (77.4) (157.2)
Operating profit 8.5 15.6 26.6
Finance costs (1.9) (2.3) (4.6)
Profit before taxation 6.6 13.3 22.0
Taxation 5 (2.9) (4.1) (10.0)
Profit for the period from continuing operations 3.7 9.2 12.0
Discontinued operations
Loss for the period from discontinued operations (0.3) (0.3) (3.9)
Profit for the period 3.4 8.9 8.1
Earnings per ordinary share from continuing and discontinued operations
attributable to the owners of the parent during the period
Basic earnings per share 6
From continuing operations 2.0p 5.0p 6.5p
From discontinued operations (0.1)p (0.1)p (2.1)p
From profit for the period 1.9p 4.9p 4.4p
Diluted earnings per share 6
From continuing operations 2.0p 5.0p 6.5p
From discontinued operations (0.1)p (0.1)p (2.1)p
From profit for the period 1.9p 4.9p 4.4p
Continuing operating profit 8.5 15.6 26.6
Adjusted for:
Amortisation of intangible assets 1.0 0.9 1.9
Exceptional items 7 2.1 0.3 0.4
Adjusted operating profit 11.6 16.8 28.9
Continuing profit before taxation 6.6 13.3 22.0
Adjusted for:
Amortisation of intangible assets 1.0 0.9 1.9
Exceptional items 7 2.1 0.3 0.4
Unwind of discount on provisions - - 0.2
Adjusted profit before taxation 9.7 14.5 24.5
Condensed interim consolidated statement of comprehensive income
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
£m £m £m
Profit for the period 3.4 8.9 8.1
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Currency translation differences on foreign subsidiaries (3.4) 1.2 0.6
Gain/(loss) on net investment hedges 2.7 (1.4) (0.9)
(Loss)/gain on cash flow hedges (0.5) 0.1 (0.2)
(Loss)/gain on cash flow hedges transferred to profit or loss (0.1) - 0.2
Taxation relating to items above 0.2 - -
(1.1) (0.1) (0.3)
Items that will not be reclassified to profit or loss:
Net actuarial loss on post-employment benefits (2.5) (0.7) (3.5)
Taxation relating to item above 0.4 0.1 0.5
(2.1) (0.6) (3.0)
Total other comprehensive expense (3.2) (0.7) (3.3)
Total comprehensive income for the period attributable to owners of the Parent 0.2 8.2 4.8
Total comprehensive income/(expense) attributable to equity shareholders
arises from:
Continuing operations 0.5 8.5 8.7
Discontinued operations (0.3) (0.3) (3.9)
0.2 8.2 4.8
Condensed interim consolidated balance sheet
Unaudited Unaudited Audited
as at as at as at
31 Dec 31 Dec 30 June
2019 2018 2019
Note £m £m £m
Non-current assets
Goodwill 8 20.3 20.6 20.4
Other intangible assets 8 8.8 9.4 9.1
Property, plant and equipment 8 128.1 134.9 136.0
Right-of-use assets 2 6.7 - -
Derivative financial instruments 9 0.1 - 0.1
Deferred tax assets 11.9 12.3 10.9
Other non-current assets 0.5 0.6 0.6
176.4 177.8 177.1
Current assets
Inventories 90.2 95.2 95.0
Trade and other receivables 132.5 140.8 145.9
Current tax asset 8.3 0.8 2.1
Derivative financial instruments 9 0.2 0.7 0.6
Cash and cash equivalents 10 13.5 15.3 14.4
244.7 252.8 258.0
Total assets 421.1 430.6 435.1
Current liabilities
Trade and other payables 165.1 194.0 182.3
Borrowings 9 31.5 39.1 43.5
Lease liabilities 2 3.0 - -
Derivative financial instruments 9 0.7 0.2 0.3
Current tax liabilities 16.6 8.6 7.4
Provisions 1.1 3.9 3.7
218.0 245.8 237.2
Non-current liabilities
Borrowings 9 95.5 74.2 91.8
Lease liabilities 2 5.2 - -
Derivative financial instruments 9 0.3 0.3 0.4
Pensions and other post-employment benefits 11 31.8 30.8 31.1
Provisions 3.7 3.8 4.2
Deferred tax liabilities 5.7 5.1 6.2
142.2 114.2 133.7
Total liabilities 360.2 360.0 370.9
Net assets 60.9 70.6 64.2
Equity
Issued share capital 18.3 18.3 18.3
Share premium account 70.6 76.7 73.9
Other reserves 72.1 67.2 69.9
Accumulated loss (100.1) (91.6) (97.9)
Total equity 60.9 70.6 64.2
Condensed interim consolidated cash flow statement
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Note £m £m £m
Operating activities
Profit before tax 6.3 11.2 16.2
Finance costs 1.9 2.3 4.6
Exceptional items 7 2.4 2.1 5.4
Share-based payments charge/(credit) 0.2 0.3 (0.2)
Depreciation of property, plant and equipment 8 8.6 9.0 18.4
Depreciation of right-of-use assets 2 1.7 - -
Amortisation of intangible assets 8 1.0 0.9 1.9
Profit on disposal of property, plant and equipment (0.6) - -
Operating cash flow before changes in working capital 21.5 25.8 46.3
Decrease in receivables 9.0 16.3 8.1
Decrease/(increase) in inventories 0.9 (5.9) (3.6)
Decrease in payables (11.6) (9.4) (20.9)
Operating cash flow after changes in working capital 19.8 26.8 29.9
Additional cash funding of pension schemes (2.0) (1.5) (4.2)
Cash flow from operations before exceptional items 17.8 25.3 25.7
Cash outflow in respect of exceptional items (3.0) (2.1) (6.9)
Cash generated from operations 14.8 23.2 18.8
Interest paid (1.5) (1.7) (4.3)
Taxation paid (1.4) (1.6) (7.2)
Net cash generated from operating activities 11.9 19.9 7.3
Investing activities
Proceeds from sale of Hull site 3.0 - -
Proceeds from sale of property, plant and equipment 0.2 - -
Proceeds from sale of Solaro - 1.6 1.6
Proceeds from sale of PC Liquids - 11.5 12.5
Purchase of property, plant and equipment (9.1) (7.9) (17.1)
Purchase of intangible assets (1.0) (0.9) (1.6)
Sale of plant and equipment in Hull - - 0.8
Settlement of derivatives used in net investment hedging 2.6 (1.4) (0.8)
Net cash (used)/generated in investing activities (4.3) 2.9 (4.6)
Financing activities
Redemption of B Shares (3.3) (5.7) (8.6)
Net (repayment)/drawdown of borrowings (2.6) (13.6) 8.9
Repayment of IFRS 16 lease obligations (1.9) - -
Purchase of own shares (0.1) - -
Capital element of finance lease rentals - (0.1) (0.2)
Net cash (used)/generated in financing activities (7.9) (19.4) 0.1
(Decrease)/increase in net cash and cash equivalents (0.3) 3.4 2.8
Net cash and cash equivalents at the start of the period 14.4 11.7 11.7
Currency translation differences (0.6) 0.2 (0.1)
Net cash and cash equivalents at the end of the period 13.5 15.3 14.4
Condensed interim consolidated statement of changes in equity
Issued Share Other reserves Accumulated Total
share premium losses equity
capital account £m £m
£m £m
Cash flow Currency Capital
hedge translation redemption
reserve reserve reserve
£m £m £m
At 30 June 2019 18.3 73.9 - (0.9) 70.8 (97.9) 64.2
IFRS 16 Transition (note 2) - - - - - 0.6 0.6
IFRIC 23 Transition (note 2) - - - - - (0.9) (0.9)
At 1 July 2019 18.3 73.9 - (0.9) 70.8 (98.2) 63.9
Profit for the period - - - - - 3.4 3.4
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Currency translation differences on foreign subsidiaries - - - (3.4) - - (3.4)
Gain on net investment hedges - - - 2.7 - - 2.7
Loss on cash flow hedges in the period - - (0.5) - - - (0.5)
Loss on cash flow hedges transferred to profit or loss - - (0.1) - - - (0.1)
Taxation relating to items above - - 0.2 - - - 0.2
- - (0.4) (0.7) - - (1.1)
Items that will not be reclassified to profit or loss:
Net actuarial loss on post‑employment benefits - - - - - (2.5) (2.5)
Taxation relating to item above - - - - - 0.4 0.4
- - - - - (2.1) (2.1)
Total other comprehensive expense - - (0.4) (0.7) - (2.1) (3.2)
Total comprehensive (expense)/income - - (0.4) (0.7) - 1.3 0.2
Transactions with owners of the parent
Issue of B Shares - (3.3) - - - - (3.3)
Redemption of B Shares - - - - 3.3 (3.3) -
Share-based payments - - - - - 0.2 0.2
Purchase of own shares - - - - - (0.1) (0.1)
At 31 December 2019 18.3 70.6 (0.4) (1.6) 74.1 (100.1) 60.9
Issued Share Other reserves Accumulated Total
share premium losses equity
capital account £m £m
£m £m
Cash flow Currency Capital
hedge translation redemption
reserve reserve reserve
£m £m £m
At 30 June 2018 18.3 81.8 - (0.6) 62.2 (94.1) 67.6
IFRS 15 transition - - - - - (0.4) (0.4)
At 1 July 2018 18.3 81.8 - (0.6) 62.2 (94.5) 67.2
Profit for the period - - - - - 8.9 8.9
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Currency translation differences on foreign subsidiaries - - - 1.2 - - 1.2
Loss on net investment hedges - - - (1.4) - - (1.4)
Gain on cash flow hedges in the period - - 0.1 - - - 0.1
- - 0.1 (0.2) - - (0.1)
Items that will not be reclassified to profit or loss:
Net actuarial loss on post‑employment benefits - - - - - (0.7) (0.7)
Taxation relating to item above - - - - - 0.1 0.1
- - - - - (0.6) (0.6)
Total other comprehensive income/(expense) - - 0.1 (0.2) - (0.6) (0.7)
Total comprehensive income/(expense) - - 0.1 (0.2) - 8.3 8.2
Transactions with owners of the parent
Issue of B Shares - (5.1) - - - - (5.1)
Redemption of B Shares - - - - 5.7 (5.7) -
Share-based payments - - - - - 0.3 0.3
At 31 December 2018 18.3 76.7 0.1 (0.8) 67.9 (91.6) 70.6
Issued Share Other reserves Accumulated Total
share premium losses equity
capital account £m £m
£m £m
Cash flow Currency Capital
hedge translation redemption
reserve reserve reserve
£m £m £m
At 30 June 2018 18.3 81.8 - (0.6) 62.2 (94.1) 67.6
IFRS 15 transition - - - - - (0.4) (0.4)
At 1 July 2018 18.3 81.8 - (0.6) 62.2 (94.5) 67.2
Profit for the year - - - - - 8.1 8.1
Other comprehensive
income/(expense)
Items that may be reclassified to profit or loss:
Currency translation differences on foreign subsidiaries - - - 0.6 - - 0.6
Loss on net investment hedges - - - (0.9) - - (0.9)
Loss on cash flow hedges in the year - - (0.2) - - - (0.2)
Gain on cash flow hedges transferred to profit or loss - - 0.2 - - - 0.2
Taxation relating to items above - - - - - - -
- - - (0.3) - - (0.3)
Items that will not be reclassified to profit or loss:
Net actuarial loss on post-employment benefits - - - - - (3.5) (3.5)
Taxation relating to item above - - - - - 0.5 0.5
- - - - - (3.0) (3.0)
Total other comprehensive expense - - - (0.3) - (3.0) (3.3)
Total comprehensive income/(expense) - - - (0.3) - 5.1 4.8
Transactions with owners of the parent
Issue of B Shares - (7.9) - - - - (7.9)
Redemption of B Shares - - - - 8.6 (8.6) -
Share-based payments - - - - - 0.1 0.1
At 30 June 2019 18.3 73.9 - (0.9) 70.8 (97.9) 64.2
Notes to the condensed interim financial statements
1. Basis of preparation
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 Household products. The Company develops and
manufactures products for the majority of retailers and major brand owners
throughout the UK, Europe and Asia.
This half-year report has been prepared in accordance with the Disclosure and
Transparency Rules of the United Kingdom Financial Conduct Authority; IAS 34
'Interim Financial Reporting' as adopted by the European Union; on the basis
of the accounting policies and the recognition and measurement requirements of
IFRS applied in the financial statements at 30 June 2019 and those standards
that have been endorsed by the European Union and will be applied at 30 June
2020 except for those described in note 2 below. This report should be read in
conjunction with the financial statements for the year ended 30 June 2019.
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 been reviewed, not audited. The
Group's statutory accounts were approved by the Directors on 5 September 2019
and have been reported on by PricewaterhouseCoopers LLP and delivered to the
Registrar of Companies. The report of PricewaterhouseCoopers LLP was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 of the Companies Act 2006.
Going concern basis
The Group meets its funding requirements through internal cash generation and
bank credit facilities, most of which are committed until June 2022.
At 31 December 2019, committed undrawn facilities and net cash position
amounted to £62.3 million. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance, show that the
Group will be able to operate well within its current bank facilities.
The Group has a reasonable level of debt compared to earnings. As a result,
the Directors believe that the Group is well placed to manage its business
risks successfully. After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis.
The condensed interim consolidated financial statements were approved by the
Board on 20 February 2020.
2. Accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 30 June 2019 except for the following
described below.
The Group has applied the following standards and amendments for the first
time for the annual reporting period commencing 1 July 2019:
· IFRS 16, 'Leases' (effective 1 January 2019, not yet endorsed by
EU); and
· IFRIC 23, 'Uncertainty over Income Tax Treatments'.
IFRS 16 'Leases'
The Group has adopted this new standard with the modified retrospective
approach from 1 July 2019 with the cumulative net effect of initial
application being an adjustment to the opening balance of retained earnings as
at 1 July 2019. Comparative information has not been restated and is
presented, as previously reported, under IAS 17 and therefore may not be
directly comparable.
The Group currently leases both properties and vehicles, comprising cars and
commercial vehicles, which under IAS 17, were classified as a series of
operating lease contracts with payments made (net of any incentives received
from the lessor) charged to profit or loss on a straight-line basis over the
period of the lease.
From 1 July 2019, under IFRS 16, leases are recognised as a right-of-use asset
and a corresponding lease liability at the date at which the leased asset is
available for use by the Group.
For leases, the liabilities were measured at the present value of the
remaining lease payments, discounted, in the absence of a rate implicit in the
lease, at the Group's incremental borrowing rate on the current facility as of
1 July 2019, adjusted for risk weighting by country, currency, size of asset
and credit risk. The discount rate applied therefore differs by lease and
ranges from 1.6% to 4.9%.
The associated right-of-use assets were measured using the approach set out in
IFRS 16.C8(b)(ii), whereby right-of-use assets are equal to the lease
liabilities, adjusted by the amount of onerous lease contracts that required
an adjustment to the right-of-use assets at the date of initial application.
Each lease payment is allocated between the liability and finance cost. The
finance cost is charged to profit or loss over the lease period using the
effective interest method. The right-of-use asset is depreciated on a
straight-line basis over the shorter of the asset's useful life and the lease
term.
In applying IFRS 16 for the first time, the Group has used the following
practical expedients permitted by the standard:
· In determining whether existing contracts meet the definition of a
lease, the Group will not reassess those contracts previously identified as
leases and will not apply the standard to those contracts not previously
assessed as leases.
· Leases with less than 12 months remaining as at the date of
adoption of the new standard will not be within the scope of IFRS 16.
· The use of a single discount rate to a portfolio of leases with
reasonably similar characteristics.
· To rely on its assessment of whether leases are onerous applying
IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' rather than
performing an impairment review.
In addition the Group has elected to make use of the following exemptions in
IFRS 16:
· Short-term leases (12 months or less from commencement) will not be
within the scope of IFRS 16.
· Leases for which the asset is of low value (IT equipment and small
items of office equipment) will not be within the scope of IFRS 16.
The effect of IFRS 16 adoption is as follows:
Impact on the statement of financial position as at 1 July 2019:
As at IFRS 16 As at
30 June 1 July
2019 adjustment 2019
£m £m £m
Non-current assets
Right-of-use assets - 7.9 7.9
Current liabilities
Lease liabilities - 3.0 3.0
Provisions 3.7 (0.5) 3.2
Non-current liabilities
Lease liabilities - 6.4 6.4
Provisions 4.2 (1.6) 2.6
Net assets 64.2 0.6 64.8
Equity
Accumulated loss (97.9) 0.6 (97.3)
Total equity 64.2 0.6 64.8
£2.1 million (£0.5m current and £1.6m non-current) of provisions held on
the balance sheet for onerous leases at 30 June 2019 have been reversed under
the transitional practical expedient and offset to impair the respective
right-of-use asset.
A reconciliation of the revised operating lease commitments as disclosed at 30
June 2019 under IAS 17 to the lease liabilities at 1 July 2019 under IFRS 16
is as follows:
£m
Operating lease commitments under IAS 17 at 30 June 2019 8.5
Additional contract leases identified as part of ongoing IFRS 16 assessment 2.3
Adjusted operating lease commitments under IAS 17 at 30 June 2019 10.8
Discounted using the Group's incremental borrowing rate at 1 July 2019 (0.5)
Less: Short-term leases recognised as an expense on a straight-line basis (0.4)
Less: Low value leases recognised as an expense on a straight-line basis (0.5)
Lease liabilities at 1 July 2019 9.4
For the six months ended 31 December 2019 the application of IFRS 16 resulted
in a £0.1 million increase in profit before tax. The table below shows a
reconciliation of the impact on profit under IAS 17 and IFRS 16:
£m
Operating lease costs under IAS 17 1.9
Less: Depreciation of right-of-use assets (1.7)
Less: Finance costs associated with IFRS 16 lease liabilities (0.1)
Profit before tax 0.1
During the six months to 31 December 2019 the movements in the right-of-use
assets and lease liabilities are as follows:
As at
31 Dec
2019
£m
Right-of-use assets
Opening net book value 7.9
New leases recognised 0.7
Exchange movements (0.2)
Depreciation (1.7)
Closing net book value 6.7
Lease liabilities
Opening liabilities 9.4
New leases recognised 0.7
Lease payments (1.9)
Exchange movements (0.1)
Finance costs 0.1
Closing liabilities 8.2
IFRIC 23 'Uncertainty over Income Tax Treatments'
IFRIC 23 changes the method of calculating provisions for uncertain tax
positions. The Group previously recognised provisions based on the most likely
amount of the liability, if any, for each separate uncertain tax position. The
interpretation requires a probability weighted average approach to be taken in
situations where there is a wide range of possible outcomes. For tax issues
with a binary outcome, the most likely amount method remains in use.
The Group has implemented the interpretation using the modified retrospective
approach, with the cumulative impact of application recognised at 1 July 2019
without restatement of comparatives. The effect of this was an increase to the
provision for uncertain tax positions of £0.9 million. The Group has updated
its accounting policy to reflect the requirements of the interpretation.
Use of adjusted measures
The Group believes that adjusted operating profit, adjusted profit before
taxation and adjusted earnings per share provide additional useful information
to shareholders on the underlying performance achieved by the Group.
These measures are used for internal performance analysis and short and
long-term incentive arrangements for employees. Adjusting items include
amortisation of intangible assets, exceptional items, any non-cash financing
costs from the unwinding of the discount on provisions, exceptional tax
charges and tax related to those items.
Taxation
Taxation in the interim period is accrued using the tax rate that would be
applicable to the expected annual profit or loss.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the condensed interim financial statements 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.
In preparing these condensed interim financial statements, 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 2019.
4. Segment information
Financial information is presented to the Board by product category for the
purposes of allocating resources within the Group and assessing the
performance of the Group's businesses. It is considered that Household
products have different market characteristics to Aerosols in terms of
volumes, market share and production requirements. Accordingly, the Group's
operating segments are determined by product category, being Household and
Personal Care & Aerosols.
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 to Household and Aerosols.
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 period-on-period or with other businesses. During
the periods under review, the items excluded from operating profit in arriving
at adjusted operating profit were the amortisation of intangible assets and
exceptional items.
Following the disposal of the Group's PC Liquids assets in the prior period,
the respective results of this division are disclosed as a discontinued
operation.
Analysis by reportable segment
Operating segments
Household - Regions
Personal Care & Aerosols((4))
Total Total Total
UK France North((1)) South((2)) East((3)) Asia Household segments Corporate((5)) Group
31 December 2019 £m £m £m £m £m £m £m £m £m £m £m
Continuing operations
Segment revenue 82.3 59.4 52.7 45.2 82.7 12.1 334.4 16.0 350.4 - 350.4
Adjusted operating profit/(loss) 14.9 0.4 15.3 (3.7) 11.6
Amortisation of intangible assets (1.0)
Exceptional items (see note 7) (2.1)
Operating profit 8.5
Finance costs (1.9)
Profit before taxation 6.6
Discontinued operations
Segmental revenue - - - - - - - - - - -
Adjusted operating loss - - - - -
Inventories 85.2 5.0 90.2 - 90.2
Capital expenditure 9.5 0.2 9.7 - 9.7
Amortisation and depreciation* 11.2 0.1 11.3 11.3
-
*Depreciation includes £1.7m of depreciation from IFRS 16 right-of-use
assets.
Operating segments
Household - Regions
Personal Care & Aerosols((4))
Total Total Total
UK France North((1)) South((2)) East((3)) Asia Household segments Corporate((5)) Group
31 December 2018((6)) £m £m £m £m £m £m £m £m £m £m £m
Continuing operations
Segment revenue 89.4 64.3 55.3 39.5 82.2 10.9 341.6 27.6 369.2 - 369.2
Adjusted operating profit/(loss) 22.5 (1.9) 20.6 (3.8) 16.8
Amortisation of intangible assets (0.9)
Exceptional items (see note 7) (0.3)
Operating profit 15.6
Finance costs (2.3)
Profit before taxation 13.3
Discontinued operations
Segmental revenue - - - - - - - 21.9 21.9 - 21.9
Adjusted operating loss - (0.3) (0.3) - (0.3)
Inventories 90.9 4.3 95.2 - 95.2
Capital expenditure 7.9 0.9 8.8 - 8.8
Amortisation and depreciation 9.8 0.1 9.9 - 9.9
Operating segments
Household - Regions
Personal Care & Aerosols((4))
Total Total Total
UK France North((1)) South((2)) East((3)) Asia Household segments Corporate((5)) Group
30 June 2019 £m £m £m £m £m £m £m £m £m £m £m
Continuing operations
Segment revenue 173.1 122.0 111.3 79.4 166.4 21.4 673.6 47.7 721.3 - 721.3
Adjusted operating
profit/(loss) 39.9 (4.0) 35.9 (7.0) 28.9
Amortisation of
intangible assets (1.9)
Exceptional items
(see note 7) (0.4)
Operating profit 26.6
Finance costs (4.6)
Profit before taxation 22.0
Discontinued operations
Segmental revenue - - - - - - - 21.9 21.9 - 21.9
Adjusted operating loss - (0.8) (0.8) (0.8)
-
Inventories 90.3 4.7 95.0 - 95.0
Capital expenditure 17.1 1.6 18.7 - 18.7
Amortisation and depreciation 20.1 0.2 20.3 20.3
-
( )
(1. )(Belgium, Holland and Scandinavia.)
(2. )(Italy and Spain.)
(3. )(Germany, Poland, Luxembourg and other Eastern Europe.)
(4. )(Continuing operations relates to Aerosols activity only.)
(5. )(Corporate represents costs related to the Board, the
Executive Leadership Team and key supporting functions.)
(6. )(2018 comparatives have been restated to reflect the revised
reportable segments.)
5. Taxation
The tax charge for the year on the continuing adjusted profit before tax of
£2.9 million (30 June 2019: £6.8m) reflects an effective tax rate of 30% (30
June 2019: 28%) on continuing adjusted profit before taxation of £9.7 million
(30 June 2019: £24.5m).
6. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit 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
42,041 shares (2018: 135,630 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 June
Reference 2019 2018 2019
Weighted average number of ordinary shares in issue (million) a 182.8 182.8 182.8
Effect of dilutive share incentive plans (million) 0.1 0.1 0.1
Weighted average number of ordinary shares for calculating diluted earnings b 182.9 182.9 182.9
per share (million)
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue assuming the conversion of all potentially
dilutive ordinary shares. During the period, the Company had both
equity-settled Long Term Incentive Plan (LTIP) awards and Deferred Annual
Bonus Plan awards (together the "share incentive plans") that are potentially
dilutive ordinary shares.
Adjusted earnings per share measures are calculated based on profit for the
year 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 June
2019 2018 2019
From continuing operations Reference £m £m £m
Earnings for calculating basic and diluted earnings per share c 3.7 9.2 12.0
Adjusted for:
Amortisation of intangible assets 1.0 0.9 1.9
Exceptional items (see note 7) 2.1 0.3 0.4
Unwind of discount on provisions - - 0.2
Taxation relating to the above items (0.1) (0.1) (0.9)
Exceptional items - taxation - - 4.1
Earnings for calculating adjusted earnings per share d 6.7 10.3 17.7
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Reference pence pence pence
Basic earnings per share c/a 2.0 5.0 6.5
Diluted earnings per share c/b 2.0 5.0 6.5
Adjusted basic earnings per share d/a 3.7 5.6 9.7
Adjusted diluted earnings per share d/b 3.7 5.6 9.7
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
From discontinued operations Reference £m £m £m
Earnings for calculating basic and diluted earnings per share c (0.3) (0.3) (3.9)
Adjusted for:
Exceptional items (see note 7) 0.3 1.8 5.0
Taxation relating to the above items - (1.7) (1.7)
Earnings for calculating adjusted earnings per share d - (0.2) (0.6)
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Reference pence pence pence
Basic earnings per share c/a (0.1) (0.1) (2.1)
Diluted earnings per share c/b (0.1) (0.1) (2.1)
Adjusted basic earnings per share d/a - (0.1) (0.3)
Adjusted diluted earnings per share d/b - (0.1) (0.3)
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Total attributable to ordinary shareholders Reference £m £m £m
Earnings for calculating basic and diluted earnings per share c 3.4 8.9 8.1
Adjusted for:
Amortisation of intangible assets 1.0 0.9 1.9
Exceptional items (see note 7) 2.4 2.1 5.4
Unwind of discount on provisions - - 0.2
Taxation relating to the above items (0.1) (1.8) (2.6)
Exceptional items - taxation - - 4.1
Earnings for calculating adjusted earnings per share d 6.7 10.1 17.1
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Reference pence pence pence
Basic earnings per share c/a 1.9 4.9 4.4
Diluted earnings per share c/b 1.9 4.9 4.4
Adjusted basic earnings per share d/a 3.7 5.5 9.4
Adjusted diluted earnings per share d/b 3.7 5.5 9.4
7. Exceptional items
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
£m £m £m
Continuing operations
Reorganisation and restructuring costs:
Acquisition of Danlind - 0.2 0.7
UK Aerosols reorganisation 0.1 - (1.2)
Factory footprint review 1.2 - -
Efficiency based restructuring 0.8 - 0.8
Other - 0.1 0.1
Total charged to operating profit 2.1 0.3 0.4
Reduction of ACT deferred tax asset - - 4.1
Total charged to taxation - - 4.1
Total continuing operations 2.1 0.3 4.5
Discontinued operations
Sale of PC Liquids business 0.3 1.8 5.0
Total discontinued operations 0.3 1.8 5.0
Total 2.4 2.1 9.5
Exceptional items are presented separately as, due to their nature or the
infrequency of the events giving rise to them, this allows users of the
financial statements to understand better the elements of financial
performance for the year, to facilitate comparison with prior periods, and to
assess the trends of financial performance.
During the period ended 31 December 2019, the Group recognised total
exceptional items of £2.4 million (2018: £2.1m), of which £2.1 million was
from continuing operations as follows:
· exceptional charge of £0.1 million from the UK Aerosols
reorganisation comprising of a gain of £0.8 million following the sale of the
land and buildings at the former UK Aerosols site in Hull. In addition, an
exceptional charge of £0.9 million has been recognised following the
termination of a contract with a third party to operate the warehouse at Hull
and other site closure costs; and
· exceptional charge of £1.2 million incurred in respect of
professional fees to undertake a review of the Group's factory footprint: and
· exceptional charge of £0.8 million for restructuring activities to
reduce the operational cost base in the UK also as part of the Group's review
of the factory footprint.
The charges in relation to discontinued operations were as follows:
· As part of the sale agreement with Royal Sanders, the Group has
incurred an additional £0.3 million of redundancy costs relating to the sale
of the Group's PC Liquids activities in 2019.
During the prior period ended 31 December 2018, the Group recognised £2.1
million of exceptional charges. The charges were made up of the following
items:
· exceptional charge of £0.2 million incurred as part of the further
integration of Danlind;
· exceptional gain of £0.1 million following the sale of the former
manufacturing site in Italy; and
· exceptional charge of £0.2 million incurred in respect of the
equalisation of male and female Guaranteed Minimum Pension (GMP) entitlement.
This is following the UK High Court ruling handed down on 26 October 2018
involving Lloyds Banking Group's defined benefit pension scheme.
The charges in relation to discontinued operations were as follows:
· £1.8 million of exceptional costs were incurred in relation to
discontinued operations from the sale of the Group's PC Liquids activities.
This was made up of £1.2 million in relation to termination and consultancy
costs, and £0.6 million incurred as a loss on disposal of assets.
8. Property, plant and equipment and intangible assets
Goodwill
and other Property,
intangible plant and
assets equipment
£m £m
Net book value at 1 July 2019 (audited) 29.5 136.0
Exchange movements (0.4) (5.5)
Additions 1.0 8.7
Disposal of Hull site - (2.1)
Disposal of assets - (0.4)
Depreciation charge - (8.6)
Amortisation charge (1.0) -
Net book value at 31 December 2019 (unaudited) 29.1 128.1
Goodwill and other intangible assets comprise goodwill of £20.3 million (30
June 2019: £20.4m) and computer software of £5.4 million (30 June 2019:
£5.2m), brands of £0.9 million (30 June 2019: £1.1m) and customer
relationships of £2.5 million (30 June 2019: £2.8m).
Capital commitments as at 31 December 2019 amounted to £13.9 million (30 June
2019: £8.8m).
Impairment tests carried out during the period
Goodwill is tested for impairment annually at the level of the cash generating
unit (CGU) to which it is allocated. At the end of each reporting period,
management are required to consider possible indicators of impairment and,
where applicable, perform impairment testing on the relevant CGUs. As a result
of the lowering of earnings expectations disclosed in the January 2020 trading
update, management undertook to perform additional impairment testing. In each
of the tests carried out, the recoverable amount of the CGUs concerned was
measured on a value-in-use basis.
The impairment review has been performed on the basis of the annual impairment
review set out on pages 103 to 104 of the 2019 annual report. Management based
its cash flow estimates on the Group's Board-approved forecast for the 2020
financial year. Discount rates applied to the cash flow projections were held
in line with the discount rates at June 2019. Having performed the impairment
tests, no impairment has been recognised for the period ended 31 December 2019
(year ended 30 June 2019: £nil).
As part of forming this conclusion a sensitivity analysis was performed which
focused on the change required in key assumptions (long-term growth and the
pre-tax discount rate), both individually and collectively, to give rise to an
impairment.
In line with our conclusions at 30 June 2019, management estimates that in the
case of all CGUs, a reduction in the perpetual growth rate to 0.0% would not
result in an impairment charge. Management estimates that in the case of
Household Powders and Tablets, an increase in the pre-tax discount rate from
11.7% to 19% would reduce the headroom in the CGU to nil but would not result
in an impairment charge. No reasonable movement in the discount rate applied
to the remaining CGUs would result in nil headroom or impairment.
Additionally, due to market conditions at the period end, a sensitivity has
been applied to gross margin. A reduction in the forecast gross margin by 1.9
percentage points would reduce the headroom of the Powders and Tablets CGU to
nil, but would not result in an impairment charge.
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 statements do 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
financial statements as at 30 June 2019. 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 June
2019 2018 2019
£m £m £m
Assets
Level 2:
Derivative financial instruments
Forward currency contracts 0.2 0.7 0.7
Interest rate swaps 0.1 - -
Total financial assets 0.3 0.7 0.7
Liabilities
Level 2:
Derivative financial instruments
Forward currency contracts (0.7) (0.2) (0.3)
Interest rate swaps (0.3) (0.3) (0.4)
Total financial liabilities (1.0) (0.5) (0.7)
Derivative financial instruments
Derivative financial instruments comprise the foreign currency derivatives,
non-deliverable commodity 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. Foreign currency options are measured using a variant of the Monte
Carlo valuation model. Interest rate swaps and caps are measured by
discounting the related cash flows using yield curves derived from prevailing
market interest rates.
Valuation levels and techniques
There were no transfers between levels during the period and no changes in
valuation techniques.
Financial assets and liabilities measured at amortised cost
The fair value of borrowings are as follows:
Unaudited Unaudited Audited
as at as at as at
31 Dec 31 Dec 30 June
2019 2018 2019
£m £m £m
Current 34.5* 39.1 43.5
Non-current 100.7* 74.2 91.8
Total borrowings 135.2 113.3 135.3
*Current borrowings includes £3.0 million of IFRS 16 lease liabilities due
less than one year. Non-current borrowings includes £5.2 million of IFRS 16
lease liabilities due greater than one year.
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
Audited Unaudited
as at as at
30 June Exchange 31 Dec
2019 IFRS 16 non-cash movements* Cash flow differences 2019
£m £m £m £m £m
Cash and cash equivalents 14.4 - (0.3) (0.6) 13.5
Overdrafts (13.4) - 9.0 0.5 (3.9)
Bank and other loans (121.9) - (6.4) 5.2 (123.1)
Net debt (excluding IFRS 16) (120.9) - 2.3 5.1 (113.5)
IFRS 16 lease liabilities - (10.2) 1.9 0.1 (8.2)
Total net debt (120.9) (10.2) 4.2 5.2 (121.7)
*IFRS 16 non-cash movements includes the initial liability at adoption of the
new standard (£9.4m), and additions (£0.7m) and interest charged (£0.1m).
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 unfunded post-employment benefit arrangements that are structured to
accord with local conditions and practices in the countries concerned.
At 31 December 2019, the Group recognised a deficit on its UK Defined Benefit
pension plan of £28.9 million (30 June 2019: £28.1m). The Group's
post-employment benefit obligations outside the UK amounted to £2.9 million
(30 June 2019: £3.0m).
Defined Benefit schemes 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 June
2019 2018 2019
£m £m £m
Profit or loss
Service cost and administration expenses (0.4) (0.5) (1.3)
Charge to operating profit (0.4) (0.5) (1.3)
Net interest cost on defined benefit obligation (0.3) (0.4) (0.7)
Charge to profit before taxation (0.7) (0.9) (2.0)
Other comprehensive expense
Net actuarial loss (2.5) (0.7) (3.5)
Other comprehensive expense (2.5) (0.7) (3.5)
Unaudited Unaudited Audited
as at as at as at
31 Dec 31 Dec 30 June
2019 2018 2019
£m £m £m
Balance sheet
Defined benefit obligations:
UK - funded (155.8) (141.0) (153.2)
Other - unfunded (2.9) (2.5) (3.0)
(158.7) (143.5) (156.2)
Fair value of scheme assets 126.9 112.7 125.1
Deficit on the schemes (31.8) (30.8) (31.1)
For accounting purposes, the UK scheme's benefit obligation as at 31 December
2019 has been calculated based on data gathered for the triennial actuarial
valuation as at March 2018 and by applying assumptions made by the Group on
the advice of an independent actuary in accordance with IAS 19, 'Employee
Benefits'.
12. Payments to shareholders
Payments to ordinary shareholders are made by way of the issue of B Shares in
place of income distributions. Ordinary shareholders are able to redeem any
number of the B Shares issued to them for cash. Any B Shares that they retain
attract a dividend of 75% of LIBOR on the 0.1 pence nominal value of each
share, paid on a twice-yearly basis.
Payments to ordinary shareholders made or proposed in respect of each period
were as follows:
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019((1)) 2018 2019
Interim 0.8p 1.5p 1.5p
Final n/a n/a 1.8p
(1Interim payment to shareholders that is not recognised within these
condensed interim consolidated financial statements.)
Movements in the B Shares were as follows:
Nominal
Number value
000 £m
At 30 June 2018 (audited) 1,560,374 1.5
Issued 5,118,351 5.1
Redeemed (5,696,243) (5.6)
At 31 December 2018 (unaudited) 982,482 1.0
Issued 2,741,974 2.8
Redeemed (2,908,825) (3.0)
At 30 June 2019 (audited) 815,631 0.8
Issued 3,290,368 (3.3)
Redeemed (3,295,335) 3.3
At 31 December 2019 (unaudited) 810,664 0.8
13. Acquisitions and disposals
Sale of Hull Site
On 2 December 2019, the Group completed the sale of the UK Aerosols site at
Hull (held on the balance sheet at £2.1m). Cash consideration of £3.0
million was received in respect of this sale. After accounting for costs to
sell of £0.1 million an exceptional gain of £0.8 million has been recognised
in the period.
PC Liquids sale
In the prior period, the Group completed the disposal of its PC Liquids
activities on 16 November 2018. The transaction comprised the disposal of the
trade and assets of the Group's PC Liquids business for a cash consideration
of £12.5 million. In the prior period, the PC Liquids business generated
revenues of £21.9 million and had an adjusted trading loss of £0.3 million.
Former manufacturing site in Italy
On 25 July 2018, the Group completed the sale of the Solaro site in Italy
(held on the balance sheet at £1.3m). Cash consideration of £1.6 million was
received with respect to this sale. After accounting for costs to sell an
exceptional gain of £0.1 million was recognised in the prior period.
14. Events after the balance sheet date
In November 2019, the Group announced a proposal to close its Barrow site and,
at the balance sheet date, the Group was in collective consultation with the
employees affected. In January, the Group concluded the consultation process
and the closure of the Barrow site is expected in summer 2020.
15. Related party transactions
Transactions between the Company and its subsidiaries, which are related
parties of the Company, have been eliminated on consolidation and, therefore,
are not required to be disclosed in these condensed interim financial
statements.
Key management compensation and transactions with the Group's pension and
post-employment schemes for the financial year ended 30 June 2019 are detailed
in note 28 (page 123) of McBride plc's Annual Report and Accounts 2019.
A copy of McBride plc's Annual Report and Accounts 2019 is available on
McBride's website at www.mcbride.co.uk (www.mcbride.co.uk) .
Ludwig de Mot, the Chief Executive of the Company appointed on 1 November
2019, is a Non-Executive Director of VPK Packaging Group, which is a supplier
to the Group. During the period from 1 November 2019 to 31 December 2019, the
Group purchased goods to a total value of £0.2 million. At the period end,
the amount owed to VPK Packaging Group was £0.2 million. Purchases and
balances between related parties are made at normal market prices.
Aside from this, there are no other related party transactions.
16. 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
noted and defined below:
· Adjusted operating profit - operating profit before adjusting
items;
· Adjusted operating margin - adjusted operating profit as a
percentage of revenue;
· Labour cost/revenue - labour cost as a percentage of revenue;
· Customer Service Level - volume of products delivered in the
correct volumes and within agreed timescales as a percentage of total volumes
ordered by customers;
· Return on capital employed - adjusted operating profit as a
percentage of average period-end net assets excluding net debt;
· Debt/adjusted EBITDA - net debt divided by EBITDA.
Additional information
Financial calendar for the year ending 30 June 2020
Payments to shareholders
Interim Announcement 20 February 2020
Entitlement to B Shares 24 April 2020
Redemption of B Shares 29 May 2020
Final Announcement 3 September 2020
Entitlement to B Shares 23 October 2020
Redemption of B Shares 27 November 2020
Results
Interim Announcement 20 February 2020
Preliminary statement for full year Announcement 3 September 2020
Annual Report and Accounts 2020 Circulated September 2020
Annual General Meeting To be held 20 October 2020
Exchange rates
The exchange rates used for conversion to Sterling were as follows:
Unaudited Unaudited Audited
Half year to Half year to Year ended
31 Dec 31 Dec 30 June
2019 2018 2019
Average rate:
Euro 1.14 1.12 1.14
US Dollar 1.26 1.30 1.30
Polish Zloty 4.88 4.84 4.88
Czech Koruna 29.12 28.97 29.20
Danish Krone 8.48 8.38 8.47
Hungarian Forint 374.60 363.77 365.28
Malaysian Ringgit 5.24 5.34 5.34
Australian Dollar 1.84 1.78 1.81
Closing rate:
Euro 1.18 1.12 1.12
US Dollar 1.32 1.28 1.27
Polish Zloty 5.00 4.81 4.74
Czech Koruna 29.86 28.76 28.38
Danish Krone 8.78 8.35 8.33
Hungarian Forint 388.49 358.83 360.71
Malaysian Ringgit 5.40 5.29 5.25
Australian Dollar 1.88 1.81 1.81
Note: This announcement contains inside information which is disclosed in
accordance with the Market Abuse Regulation which came into effect on 3 July
2016.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
. END IR MZGMZZLZGGZZRecent news on McBride
See all newsREG - McBride PLC - Holding(s) in Company
AnnouncementREG - McBride PLC - Holding(s) in Company
AnnouncementREG - McBride PLC - Holding(s) in Company
AnnouncementREG - McBride PLC - Director/PDMR Shareholding
AnnouncementREG - McBride PLC - Director/PDMR Shareholding
Announcement