Final Results

McBride PLC 07 September 2006 7 September 2006 McBRIDE PLC McBride plc, Europe's leading supplier of Private Label Household and Personal Care products, announces its preliminary results for the year ended 30 June 2006 • Overall results in line with expectations supported by growth in the UK and Eastern Continental Europe • Strengthened customer focus and lower cost base in Western Continental Europe • Group revenue 1% above last year at £540.1m (2005: £537.1m) • Profit before tax, before exceptional items, down 12% to £29.7m (2005: £33.6m); reported profit before tax was £25.9m (2005: £30.6m) • Exceptional items of £3.8m (2005: £3.0m) primarily related to improving cost base in Western Continental Europe • Basic earnings per share, before exceptional items, down 11% to 11.7p (2005: 13.2p); reported basic earnings per share were 10.3p (2005: 12.0p) • Final dividend proposed of 3.5p, up 6%, making a total of 5.1p, up 6% (2005: 4.8p) • Two recent value enhancing in-fill acquisitions, from Sanmex International and Coventry Chemicals, already making a positive contribution Miles Roberts, Chief Executive, commented: 'In a year of transition these results demonstrate the resilience of our business. Eastern Continental Europe and the UK experienced growth but overall Group profitability reflects a difficult year for Western Continental Europe. We have made strong progress against our business objectives. In addition to reorganising our Western Continental Europe division, factory costs and customer service have improved. Higher levels of product development are reflected in improved sales momentum towards the year end. Private Label products continue to gain share as both consumers and retailers increasingly appreciate their benefits. Since the year end trading has been as expected. Looking ahead, despite higher input costs and investment in the future growth of the business, the Group expects to make progress as we benefit from ongoing cost reductions and the recent acquisitions.' For further information please contact: McBride plc Miles Roberts, Chief Executive 07748 180076 Bob Beveridge, Finance Director 07876 593182 Financial Dynamics Andrew Dowler 020 7831 3113 McBride is Europe's leading supplier of Private Label Household and Personal Care products, supplying over 1.2 billion products each year to Europe's leading retailers. It employs over 4,000 people in 11 European countries. For more information, visit www.mcbride.co.uk . Overview • Revenue and operating profit, before exceptional items, were ahead of last year in the UK and Eastern Continental Europe divisions but a difficult year for the Western Continental Europe division resulted in lower Group profitability • UK revenue increased 3% to £249.8m (2005: £243.3m). Operating profit, before exceptional items, grew 2% to £21.8m (2005: £21.4m), with a stronger second half performance • Western Continental Europe revenue declined 2% to £280.3m (2005: £286.2m), reflecting challenging market conditions, particularly in France. Operating profit, before exceptional items, was £9.0m (2005: £13.7m) • The Eastern Continental Europe division had a buoyant year, increasing revenue by 39% to £21.9m (2005: £15.8m) and operating profit, before exceptional items, by 33% to £1.6m (2005: £1.2m) • The personal care sector experienced strong growth of 9% in revenues with good growth in all geographic territories • Return on capital employed, before exceptional items, was 24.3% (2005: 28.4%), the decline reflecting primarily lower Group profits The Group made good progress given conditions across its markets, achieving revenue growth in the UK and Eastern Continental Europe offset by a decline in Western Continental Europe. Across the Group as a whole, personal care products revenue grew by 9% whilst household products revenue declined 1%. Direct costs of manufacture rose due to raw material, packaging and energy price increases fuelled primarily by rises in oil and gas prices. Operational efficiencies, including waste reduction, labour efficiencies and product reformulations, and administrative cost savings mitigated to some extent the effects of input cost increases. Profitability improved in the UK and Eastern Continental Europe. However, overall Group profitability declined relative to the prior year primarily due to lower household product revenues in Western Continental Europe. Progress against business objectives Our target Private Label markets have demonstrated sustained development and we believe there remain significant future growth opportunities. We have renewed focus on positioning the business to benefit from the favourable market dynamics and enhance shareholder value. We are at a relatively early stage in this process but there were some important developments during the year. Reorganisation of Western Continental Europe A fundamental reorganisation of the Western Continental Europe division was completed. The division was reorganised into four customer focused business units organised by geographic territory, each with clear accountability for developing its markets and delivering profits. Improving efficiency and asset utilisation The Group has a relentless focus on extracting operating efficiencies to support its competitive position and future prospects. During the year, as part of the Western Continental Europe reorganisation, a review of operations enabled administrative headcount to be reduced by 85 and a further reduction of over 100 jobs in its manufacturing operations, resulting in overall headcount reduction across this division of over 10%. In the UK, the transfer of Bampton and Sanmex production into other Group facilities improved efficiency and asset utilisation. Factory waste reduced by 8% across the Group and there were various investments to deliver greater automation, capacity and reliability. Customer relationships There is a renewed focus on deepening our customer relationships which provide the basis for delivering sustainable organic growth. Key to this is further increasing the recognition that a comprehensive Private Label strategy offers retailers the opportunity to increase profits and margins relative to sales of branded alternatives whilst delivering quality and value to consumers. Category development will be supported by new product innovation, product quality improvements, excellence in customer service and greater management accountability. New product development in the UK personal care product portfolio contributed strongly to the increase in category revenue that is a feature of this year's results. In addition, customer service levels improved in Western Continental Europe and were maintained at a Group level against a background of the reorganisation of the Western Continental Europe division, production transfers in the UK and significant investments in several of our production facilities. Improvements in forecasting processes and investments in improved plant reliability resulted in the Group's key customer service measure improving from 96.6% in the first half to 97.8% in the second half. Acquisitions The Group considers selective acquisitions that support its broader strategy to benefit from the favourable Private Label market dynamics and enhance shareholder value. Two in-fill acquisitions have been agreed recently, namely the household liquids businesses of Sanmex International, announced in April 2006, and Coventry Chemicals, that we agreed to acquire after the year end. These acquisitions provide opportunities to enhance shareholder value as a result of improved efficiencies and asset utilisation derived by transferring production into existing facilities. The Group continues to review acquisition opportunities including those that will enable it to either enter or significantly enhance its presence in specific product categories, geographic markets or distribution channels. Shareholder returns The Board is recommending a final dividend of 3.5p per share to be paid on 24 November 2006. The total dividend is 5.1p per share, a 6% increase over last year. Including the proposed final dividend, we will be returning £9.0m to shareholders in dividends in respect of the financial year ended 30 June 2006. We also completed a modest share repurchase programme during the year. The Board In July 2005, Miles Roberts was promoted to the position of Chief Executive, following the resignation of Mike Handley. In May 2006, Bob Beveridge was appointed as the new Group Finance Director. Lord Sheppard, Chairman, has expressed his wish to retire from the Board following the appointment of a suitable successor. The search process will be initiated in the near future. Current trading and outlook Since the year end, trading has been as expected. Looking ahead, despite higher input costs and investing in the future growth of the business, the Group expects to make progress as we benefit from cost reduction initiatives and the recent acquisitions. Investments in support of our growth agenda will focus on marketing, research and development and certain key management positions. Capital expenditure will be higher in the current year with over 50% directed to cost saving projects and 10% on capacity expansion. UK divisional review Markets Whilst the household products market remained competitive, Private Label continued its trend of increasing overall market share. Private Label value growth of 4% was achieved in the year to June 2006 compared to 1% decline for the total household products market. Product innovation in the higher value categories of machine dish wash and aircare were the main positive influences on the overall market whilst Private Label growth was particularly strong in the aircare and washing up liquid categories. Reflecting its growth, in the year to June 2006, Private Label increased its volume share of the overall household products market to 34% respectively (2005: 33% )(1). Private Label personal care products experienced similar trends. The personal care market in which we operate has shown modest volume growth (c.1%) in line with the total market growth and now represents some 22% share by volume. The continuing growth in Private Label share reflects the key benefits of Private Label products, namely offering retailers the opportunity to increase profits and margins relative to sales of branded alternatives whilst delivering quality and value to consumers. Given its significant presence in these markets, it also reflects McBride's continuing success in driving overall category growth by focusing on excellent new product development and launch activity, strong customer relationships, consumer understanding and providing value through consistent product quality and well executed promotions. (1) Source of market data: McBride estimates based on Taylor Nelson Sofres Financial performance Total UK revenue grew by 3% to £249.8m (2005: £243.3m), including £1.6m of revenue attributable to the acquisition of Sanmex International. The year was characterised by stronger revenue in the second half and some modest price increases. The personal care business had an excellent year, with revenue growth of 12%, and significantly increased its share of the available market. Household products experienced a revenue decline of 1%. The progress in personal care reflects renewed focus on new product development, with more resources dedicated to this activity which yielded a large number of product launches. The UK division increased operating profit, before exceptional items, by 2% to £21.8m (2005: £21.4m) with a stronger second half performance due to a gradual reduction in administrative costs and improved revenues. Operations The overall operational priorities for the UK division in the year under review were a continued focus on customer service and driving operating efficiencies. Customer service is our number one operational priority. We measure our performance in this area particularly by success in delivering product ordered within the agreed timescales. Customers require delivery lead times of as little as 48 hours and expect us to manage significant fluctuations in demand. Our business processes and systems enabled successful delivery of shipments from over 3,000 different products and 5 factories to almost 800 destinations across the UK. The performance relative to the prior year was impacted primarily by issues in Barrow, where short-term disruption was caused by changes in product specifications and investments being made at the site. As in previous years there were a number of significant cost savings including projects to reduce waste, improve labour efficiency and optimise purchasing arrangements across Europe. In addition, a number of major capital investment projects completed in the year were focused on efficiency improvements. These included investment in Barrow that introduced robot packing and pallet stacking to packing lines and automatic guided vehicles, replacing manned forklift trucks, in the production area. This investment reduced factory costs and also improved the health and safety environment. In addition, the closure of Bampton and transfer of its aircare production to our Hull facility was completed on time in March 2006 leading to reductions in both direct and administrative costs. Other major capital investments included increasing capacity at our Bradford personal care factory to support growing sales, through investment in blow moulding and bottle filling, and the capability to produce shelf-ready packaging formats required by some leading customers. In April 2006, we announced the purchase of Sanmex International's household liquids business. The subsequent transfer of assets and production into three existing McBride facilities was implemented in line with plan with customer service maintained throughout this transfer. Western Continental Europe divisional review Markets Household products market growth was mixed; there was growth of 5% in Spain, 2% in Germany and 1% in Italy but declines in France, Belgium and Netherlands due to price reductions and high levels of promotional activity. However, Private Label value share continued to grow in all markets except Netherlands. In our largest market, France, overall French household and personal care markets declined in value terms by 3% in the year to June 2006, the decline in the Private Label markets was limited to 1.0% in both cases. Consequently, Private Label increased its volume share of the overall French household and personal care markets value to 30% and 21% respectively (year to June 2005: 29% and 20.5% respectively)(1). One of the contributory factors to the market environment in France was disruption caused by the introduction of the Loi Dutreill that changed the trading terms between all consumer goods manufacturers and retailers. The new legislation particularly impacted trading patterns in early 2006 but recently the market has shown signs of recovery. (1) Source of market data: Taylor Nelson Sofres Financial performance Total Western Continental Europe revenue declined by 2% to £280.3m (2005: £286.2m). Operating profits, before exceptional items, were £9.0m (2005: £13.7m) reflecting higher raw material, packaging and energy input costs and lower household products revenue. Whilst these results are disappointing, they should be assessed in the context of the difficult market conditions across the region, particularly in the household products sector in France. There were some encouraging aspects to the results. Personal care products made excellent progress with revenue up over 7%. In addition, the Italian business performed well, registering close to 4% revenue growth in a flat overall market. McBride has the capabilities to drive the growth of Private Label products across Western Continental Europe. We will continue to increase the focus on the development of Private Label categories and the consequent benefit to retailers. Operations Key improvements were made by successfully implementing a significant business restructuring, improving customer service and extracting further operating efficiencies particularly through targeted investments at our factories. Further investments were made in support of product innovation and growing sales. Towards the end of the year, a fundamental reorganisation of the Western Continental Europe division was completed. The division was reorganised into four customer focused business units organised by geographic territory, each with clear accountability for developing its sales and profits. The reorganisation has also ensured enhanced responsiveness to, and focus on, customers. It should enable McBride to participate more effectively in growing markets such as Italy and Spain, in household products, and across all personal care markets. Headcount in the Western Continental Europe division was reduced by over 10%. Our increased focus on customer service resulted in improved customer service levels in the second half, i.e. delivery of over 4,500 products within the agreed timescales from 8 factories to over 1,200 destinations. The improvement reflects investments in improved plant reliability and improvements in forecasting processes. There were a number of targeted investments made in the year to support increased efficiency, product innovation and growing sales. Reducing cost and improving efficiency were the main drivers behind investments in new blow moulding at Estaimpuis and additional end of line automation at the Ieper household products facility. Reflecting an important product innovation in the year, investment was made to produce the soluble wrappers for new dish wash tablets produced at Solaro. In order to build upon our success with personal care products, we decided to invest in an expansion of our personal care factory in Ieper. There was also a strong focus on driving operating efficiencies across the division. Of particular note was the 18% reduction in factory waste, due to targeted investment and various continuous improvement projects across sites in Western Continental Europe. Other efficiency initiatives included projects aimed at using new product formulations, different materials and improved packaging. Eastern Continental Europe divisional review Markets The core markets of the Eastern Continental Europe division, Poland, Czech Republic, Hungary and Slovakia, continue to experience good growth driven by a number of specific factors supporting the growth of the Private Label category. These include continued expansion of international retailers and discounters in the region, ongoing extensions of retailers' Private Label offering, accelerating retail consolidation and increasing market share for discounters. Whilst most activity in Private Label household and personal care products in Eastern Continental Europe has been in the 'low value' sector, reflecting the price sensitivity of consumers in the region, standard and premium products have started to emerge. This market background is evident in market data indicating that in McBride's core markets in the region, household and personal care products markets increased in value terms by 2.8% and 3.6% respectively in the year to 31 December 2005. In Poland, the biggest market in the Group's Eastern Continental Europe division, Private Label also increased its share of the available market.(1) (1) Source of market data: Euromonitor Financial performance The Eastern Continental Europe division enjoyed a good financial performance in the year ended 30 June 2006. Revenue grew 39% to £21.9m (2005: £15.8m) reflecting increased production from the Polish operation, including a significant new contract for the production of household and personal care products on behalf of a major branded company. Operating profit, before exceptional items, for the Eastern Continental Europe division increased 33% to £1.6m (2005: £1.2m). Operations The key operational priority for the Eastern Continental Europe division was implementation of a significant investment to increase capacity in the Group's factory in Poland to support growing sales. This investment has increased production capacity by 40%. The investment focused on introducing new blow moulders, filling lines and storage tanks, the delivery of enhanced research and development and testing facilities and further expansion of warehouse facilities. Group financial review Adoption of International Financial Reporting Standards (IFRS) With effect from 1 July 2005, the Group has moved to reporting its financial results in accordance with IFRS as adopted for use in the European Union. The results for the year ended 30 June 2005 have been restated except with regard to IAS 32/39 Financial Instruments, where the Group has taken the option to defer the implementation of these standards to the year ended 30 June 2006. A full analysis of the impact of adopting IFRS including reconciliations to UK GAAP is included in a document entitled Adoption of International Financial Reporting Standards published on 6 December 2005. This document is available at www.mcbride.co.uk within the investor relations section. Overview Profit after tax, excluding exceptional items, reduced 11% from £23.5m to £21.0m impacted particularly by higher input costs generally and lower revenue in household products in the Western Continental Europe division. In terms of segment operating profit performance, personal care increased 15% while the household sector fell 18%. In relation to the Group's geographic operating divisions, operating profit in Eastern Continental Europe was up 33%, the UK was up 2% but Western Continental Europe was down 34%. Measures have been put in place during the year to improve performance in Western Continental Europe including cost reduction initiatives and a change in its organisational structure to both improve customer focus and accountability for performance. Cash flow, before financing activities and excluding the Sanmex acquisition and exceptional items, was £20.0m (2005: £27.5m). Despite a continuing focus on asset utilisation, pre-tax return on average capital employed before exceptional items reduced from 28.4% to 24.3% primarily due to lower operating profits. Revenue Revenue for the year ended 30 June 2006 increased £3.0m to £540.1m (2005: £537.1m) including £1.6m of revenue attributable to the acquisition of Sanmex International. Revenue for the year particularly reflected a strong personal care sector where good broad based headline and organic growth was achieved across both product categories and geographic territories. This mitigated the performance of the household sector, where flat revenue in the UK and strong growth in the Eastern Continental Europe division (primarily in Poland) offset weakness in the Western Continental Europe division, particularly in France. The performance in France reflects price deflation resulting partly from changes in the law governing relationships between retailers and their suppliers. These trends are reflected in revenue by product category and geography. Personal care products revenue increased 9% to £105.2m (2005: £96.1m) whilst household products revenue was 1% lower at £434.9m (2005: £441.0m). In terms of revenue by origin, the UK division's revenue increased 3% to £249.8m (2005: £243.3m), with growth accelerating in the second half, whilst Western Continental Europe revenue was £280.3m (2005: £286.2m) and the Eastern Continental Europe division's revenues grew 39% to £21.9m (2005: £15.8m). There was no significant currency impact year on year as the key average Euro/ sterling exchange rate remained at 1.46. Operating profit Group operating profit for the year, before exceptional items, was £31.0m (2005: £35.0m). The most significant factor affecting profitability relative to the previous year was higher raw material, packaging and energy costs. The other main factor impacting profitability was lower revenue in household products in the Western Continental Europe division. Set against this, the Group was successful in reducing other costs, reflected particularly in the reduction in administrative costs (excluding exceptional items). Exceptional item There was a £3.8m pre-tax operating exceptional charge to the income statement in the year (2005: £3.0m). This related primarily to a programme to reduce administrative costs in the Western Continental Europe division, through a reduction of 85 jobs without significant change in support provided to the business. Profit before tax and tax charge Profit before tax for the year was £25.9m (2005: £30.6m) and before exceptional items it was £29.7m (2005: £33.6m). Net finance costs were slightly lower than the prior year at £1.3m (2005: £1.4m). The £7.5m taxation charge for the year represents a 29% effective rate, 1% less than in the prior year. It is believed that this rate is sustainable in the near future. Cash flow Cash flow - before financing activities and excluding the Sanmex acquisition and exceptional items - remained strong at £20.0m (2005: £27.5m) in spite of significant increases in input costs, lower household products revenues in Western Continental Europe and a modest working capital outflow of £2.8m (2005: £1.1m inflow). Capital expenditure, net of disposals, was £17.3m (2005: £17.5m) with the vast majority of the spend on factory automation, new product development, capacity expansion or customer satisfaction projects. Net debt rose £4.7m in the year to £29.1m after £24.7m of other outflows. Cash outflows relating to exceptional items were £5.5m and included the remaining £2.6m of the £3.0m exceptional charge in the year ended 30 June 2005 as well as £2.9m of the £3.8m exceptional charge in the year ended 30 June 2006. Other outflows also included £8.7m in dividend payments, £7.3m on the Sanmex acquisition (a further £0.3m has been paid since the year end) and £2.7m of share repurchases, net of proceeds on issue of shares. Balance sheet Net assets increased £5.8m in the year from £98.1m to £103.9m, with the main movements being £6.7m of new intangible assets (primarily goodwill arising on the acquisition of Sanmex). Liabilities for pensions and other post-employment benefits increased to £9.6m (net of associated deferred tax asset) (2005: £8.8m). The majority of this liability, £8.6m, (2005: £7.8m) relates to the UK defined benefit pension scheme. The pre-tax (excluding exceptional items) return on average capital employed reduced from 28.4% to 24.3% reflecting both lower operating profits and the increase in capital employed resulting from the Sanmex acquisition close to the year end. Sanmex acquisition In April 2006, the Group announced the acquisition of the household liquids business, including inventory and some equipment, of Sanmex International Limited, a UK based Private Label supplier, for a total consideration of £7.6m. Its integration into the Group's household products business has been successfully completed in line with plan, with production having been transferred into existing facilities. Earnings per share and dividends Basic earnings per share (EPS) were 10.3p (2005: 12.0p). Basic EPS, before exceptional items, reduced 11% to 11.7p (2005: 13.2p). The weighted average number of shares in issue in the year used in calculating these EPS figures was 177,364,227 (2005: 177,122,822). A final dividend of 3.5p per share, an increase of 6%, is recommended, giving a full year dividend of 5.1p, an overall increase of 6%. The final dividend, if approved by shareholders at the AGM on 31 October 2006, will be paid on 24 November 2006 to shareholders on the register on 27 October 2006. The ex-dividend date will be 25 October 2006. The £9.0m total dividend for the year is covered 2.3 times by earnings before exceptional items. Share capital Issued ordinary share capital reduced from 176.7m to 176.6m during the year. 1.6m shares were purchased during the year at a cost of £2.5m, 0.65m for cancellation and 0.95m to be held as treasury shares. 1.5m treasury shares held were used to satisfy the exercise of SAYE share options. Subsequent event On 19 July 2006 the Group agreed to purchase the household liquids business, including inventory, of Coventry Chemicals Limited for £1.6m plus inventory. As with the Sanmex acquisition, production will be transferred to the Group's existing facilities. CONSOLIDATED INCOME STATEMENT for the year ended 30 June 2006 Pre Post Pre Post exceptional Exceptional exceptional exceptional Exceptional exceptional items items items items items items 2006 2006 2006 2005 2005 2005 Note £m £m £m £m £m £m Revenue 2 540.1 - 540.1 537.1 - 537.1 Cost of sales (355.8) - (355.8) (348.4) - (348.4) Gross profit 184.3 - 184.3 188.7 - 188.7 Distribution costs (35.2) - (35.2) (34.0) - (34.0) Administrative costs (118.1) (3.8) (121.9) (119.7) (3.0) (122.7) Operating profit 2,4 31.0 (3.8) 27.2 35.0 (3.0) 32.0 Financial income 3.9 - 3.9 4.4 - 4.4 Financial expenses (5.2) - (5.2) (5.8) - (5.8) Net financing costs (1.3) - (1.3) (1.4) - (1.4) Profit before tax 29.7 (3.8) 25.9 33.6 (3.0) 30.6 Taxation 8 (8.7) 1.2 (7.5) (10.1) 0.9 (9.2) Profit for the year 21.0 (2.6) 18.4 23.5 (2.1) 21.4 Attributable to: Equity holders of the parent 20.8 (2.6) 18.2 23.4 (2.1) 21.3 Minority interest 0.2 - 0.2 0.1 - 0.1 Profit for the year 21.0 (2.6) 18.4 23.5 (2.1) 21.4 Earnings per ordinary share (pence) 6 Basic 10.3 12.0 Diluted 10.1 11.6 Dividends Paid in year (£m) 8.7 7.6 Paid in year (pence per share) 4.9 4.3 Proposed (£m) 6.2 5.9 Proposed (pence per share) 3.5 3.3 Note: all results are reported under International Financial Reporting Standards as adopted by the European Union ('adopted IFRS'). The 2004/5 results as permitted by IFRS1 are not restated in respect of IAS 32/39 Financial Instruments. A full analysis of the impact of adopting IFRS is available at www.mcbride.co.uk within the investor relations section. CONSOLIDATED BALANCE SHEET at 30 June 2006 2006 2005 Note £m £m Non-current assets Intangible assets 15.4 8.7 Property, plant and equipment 130.6 129.6 Other non-current assets 0.5 0.5 Deferred tax 5.1 6.0 151.6 144.8 Current assets Inventories 41.3 41.3 Trade and other receivables 106.6 106.3 Cash and cash equivalents 1.3 0.3 149.2 147.9 Total assets 2 300.8 292.7 Current liabilities Interest bearing loans and borrowings 5.2 4.0 Trade and other payables 141.7 143.8 Current tax payable 1.7 2.0 Provisions 1.3 4.1 149.9 153.9 Non-current liabilities Interest bearing loans and borrowings 25.2 20.7 Pensions and other post-employment benefits 13.7 12.6 Provisions 1.0 0.8 Deferred tax 7.1 6.6 47.0 40.7 Total liabilities 2 196.9 194.6 Net assets 103.9 98.1 Equity Issued share capital 7 17.7 17.7 Share premium account 7 141.8 141.8 Other reserves 7 (0.8) 0.3 Retained earnings 7 (55.2) (61.9) Total equity attributable to equity holders of the parent 7 103.5 97.9 Minority interest 7 0.4 0.2 Total equity and reserves 7 103.9 98.1 M W ROBERTS R J BEVERIDGE Directors CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 June 2006 2006 2005 Note £m £m Profit before tax 25.9 30.6 Net financing costs 1.3 1.4 Pre-tax exceptional charge in the year 3.8 3.0 (Profit)/loss on sale of property, plant and equipment (0.3) 0.1 Depreciation and amortisation 18.0 18.6 Operating cash flow before changes in working capital 48.7 53.7 Decrease in receivables 2.1 9.6 Decrease/(increase) in inventories 1.5 (1.1) Decrease in payables (6.4) (7.4) Cash flow in respect of exceptional items (5.5) (3.7) Cash generated from operations 40.4 51.1 Interest paid (2.4) (2.8) Taxation paid (6.5) (7.2) Net cash from operating activities 31.5 41.1 Cash flows from investing activities Proceeds from sale of land and buildings 2.2 - Acquisition of property, plant and equipment (19.1) (17.5) Acquisition of intangible assets (0.4) - Acquisition of subsidiaries 5 (7.3) (2.8) Interest received 0.3 0.2 (24.3) (20.1) Cash flows from financing activities Proceeds from issue of share capital 0.6 2.9 Repurchase of own shares (3.3) (8.5) Increase/(repayment) of borrowings 6.0 (8.2) Payment of finance lease liabilities (0.4) (0.4) Dividends paid (8.7) (7.6) (5.8) (21.8) Net increase/(decrease) in cash and cash equivalents 1.4 (0.8) Cash and cash equivalents at start of year (2.7) (1.8) Effect of exchange rate fluctuations on cash held - (0.1) Cash and cash equivalents at end of year (1.3) (2.7) Reconciliation of cash and cash equivalents per the balance sheet and cash flow statement Cash and cash equivalents per the balance sheet 1.3 0.3 Overdrafts (2.6) (3.0) Cash and cash equivalents per the cash flow statement (1.3) (2.7) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT for the year ended 30 June 2006 2006 2005 £m £m Increase/(decrease) in cash and cash equivalents in the 1.4 (0.8) year Cash (inflow)/outflow from movement in debt (6.0) 8.2 Movement on finance leases 0.4 0.4 Change in net debt resulting from cash flows (4.2) 7.8 Lease financing acquired with subsidiary - (0.3) Other new lease financing - (0.1) Translation differences (0.5) (0.4) Movement in net debt in the year (4.7) 7.0 Net debt at the beginning of the year (24.4) (31.4) Net debt at the end of the year (29.1) (24.4) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 30 June 2006 2006 2005 £m £m Profit for the year 18.4 21.4 Foreign exchange translation differences 0.7 (0.1) Net loss on hedge of net investment in foreign (0.7) - subsidiaries Cashflow hedge reserve movement 0.4 - Tax on items taken directly to equity (0.1) - Actuarial loss net of deferred tax (0.6) (1.1) Total recognised income and expense for the year 18.1 20.2 Attributable to: Equity shareholders of the parent 17.9 20.0 Minority interest 0.2 0.2 18.1 20.2 2006 £m Total recognised income and expense for the year 18.1 Adjustments relating to the implementation of IAS 32 and IAS 39 from 1 July 2005 (1.5) 16.6 NOTES TO THE FINANCIAL STATEMENTS 1) Exchange rates The exchange rates against sterling used for the periods were as follows: 2006 2005 Average rate: Euro 1.46 1.46 Polish Zloty 5.74 6.14 Czech Koruna 42.4 44.9 Hungarian Forint 372.1 361.3 2006 2005 Closing rate: Euro 1.45 1.48 Polish Zloty 5.90 5.99 Czech Koruna 41.3 44.5 Hungarian Forint 409.7 365.7 2) Segmental information Segmental information is presented below in respect of the Group's geographic, UK, Western Continental Europe and Eastern Continental Europe, and business, Household and Personal care, segments. The primary format, geographic segments, is based on the Group's operating divisions and internal reporting structure. In previous years there were two geographic segments with Eastern Continental Europe incorporated within Western Continental Europe (previously called Continental Europe). Geographic segments Segment Segment Segment Segment revenue revenue profit profit 2006 2005 2006 2005 £m £m £m £m UK 249.8 243.3 21.8 21.4 Western Continental Europe 280.3 286.2 9.0 13.7 Eastern Continental Europe 21.9 15.8 1.6 1.2 Total reporting segments 552.0 545.3 32.4 36.3 Inter segment revenue (11.9) (8.2) Exceptional items (note 4) (3.8) (3.0) Corporate (1.4) (1.3) Revenue/Operating profit 540.1 537.1 27.2 32.0 Net finance costs (1.3) (1.4) Taxation (7.5) (9.2) Profit for the year 18.4 21.4 Corporate costs relate primarily to head office costs that are not allocated to one of the geographic segments. Segment Segment Segment Segment assets assets liabilities liabilities 2006 2005 2006 2005 £m £m £m £m UK 119.1 115.8 (70.1) (71.7) Western Continental Europe 163.2 160.5 (85.0) (87.8) Eastern Continental Europe 12.1 9.8 (4.0) (2.5) Total reporting segments 294.4 286.1 (159.1) (162.0) Corporate 6.4 6.6 (37.8) (32.6) Total 300.8 292.7 (196.9) (194.6) Corporate liabilities include external debt and tax liabilities. Segment Segment Segment Segment amortisation amortisation capital capital and and expenditure expenditure depreciation depreciation 2006 2005 2006 2005 £m £m £m £m UK 8.7 8.0 9.0 9.5 Western Continental Europe 10.1 9.1 8.4 8.6 Eastern Continental Europe 0.7 0.3 0.5 0.5 Total reporting segments 19.5 17.4 17.9 18.6 Corporate - 0.1 0.1 - Total 19.5 17.5 18.0 18.6 Capital expenditure includes expenditure on property, plant and equipment and intangible fixed assets. Business segments Segment Segment Segment Segment revenue revenue profit profit 2006 2005 2006 2005 £m £m £m £m Household 434.9 441.0 23.2 28.3 Personal Care 105.2 96.1 9.2 8.0 Total reporting segments 540.1 537.1 32.4 36.3 Exceptional items (note 4) (3.8) (3.0) Corporate (1.4) (1.3) Revenue/Operating profit 540.1 537.1 27.2 32.0 Net finance costs (1.3) (1.4) Taxation (7.5) (9.2) Profit after tax 18.4 21.4 Corporate costs relate primarily to head office costs that are not allocated to one of the business segments. Segment Segment Segment Segment capital capital assets assets expenditure expenditure 2006 2005 2006 2005 £m £m £m £m Household 229.7 230.5 14.5 14.8 Personal Care 64.7 55.6 5.0 2.6 Total reporting segments 294.4 286.1 19.5 17.4 Corporate 6.4 6.6 - 0.1 Total 300.8 292.7 19.5 17.5 External revenue by destination Segmental information is also presented below in respect of external revenue by destination. In previous years the three segments used in this analysis were UK, Continental Europe and Rest of World and revenue to Eastern Continental Europe was previously included within Continental Europe. Figures for 2005 reflect the revised segment descriptions set out below. 2006 2005 £m £m UK 233.7 227.4 Western Continental Europe 263.9 274.1 Eastern Continental Europe 42.5 35.6 Total 540.1 537.1 3) Basis of preparation The financial statements are the Group's first financial statements following the adoption of International Financial Reporting Standards (IFRS). These financial statements have been prepared in accordance with IFRS adopted for use in the EU ('adopted IFRS') in accordance with EU law (IAS Regulation EC 1606/ 2002). This financial information has been prepared on the basis of recognition and measurement requirements of adopted IFRSs as at 30 June 2006. As allowed by IFRS 1 'First-time adoption of IFRS', the Group adopted IAS 32 ' Financial instruments: disclosure and presentation' and IAS 39 'Financial instruments: recognition and measurement', prospectively from 1 July 2005. Therefore, until 30 June 2005, the Group continued to hedge account for forecast foreign exchange transactions in accordance with UK GAAP, and hence the comparative financial statements exclude the impact of these standards. On 6 December 2005, the Group published an analysis of the impact of adopting IFRS from 1 July 2004 - press release available from the company's web site at www.mcbride.co.uk. This included income statement and balance sheet reconciliations, as well as details of the accounting policies applied in restating its financial statements for the year ended 30 June 2005 and as at 1 July 2004. Some small reclassifications have been made to these statements to reflect emerging best practice and interpretation. 4) Exceptional items The Group presents certain items as 'exceptional'. These are items which, in management's judgment, need to be disclosed by virtue of their size or incidence in order to obtain a proper understanding of the financial information. There was a £3.8m pre-tax operating exceptional charge to the income statement in the year. This related primarily to a programme to reduce administrative costs in the Group's Western Continental Europe division, that enabled a reduction of 85 jobs without significant change in support provided to the business. The remainder of the exceptional charge related to restructuring in the UK division and a termination payment for the Group's previous chief executive. The £3.0m 2005 pre-tax exceptional item included a £1.3m provision for the closure of the production plant at Bampton UK and transfer of its activities to the aerosol plant at Hull, and £1.7m provision relating to a Group wide rationalisation programme. In the segmental analysis in note 2, exceptional items relate to UK £0.5m (2005: £2.0m), Western Continental Europe £2.5m (2005: £0.7m) and Corporate £0.8m (2005: £0.3m) on a geographic basis, and Household £2.9m (2005: £2.7m), Personal Care £0.1m (2005: nil) and Corporate £0.8m (2005: £0.3m) on a business basis. 5) Acquisition The Group acquired the household liquids business of Sanmex International Limited, a UK based Private Label supplier, during the year for a total cash consideration of £7.6m. Book Provisional fair Fair value value adjustments value £m £m £m Net assets acquired: Property, plant and equipment 0.2 - 0.2 Intangible assets - 0.2 0.2 Inventory 1.1 (0.2) 0.9 1.3 - 1.3 Goodwill 6.3 Total consideration 7.6 Satisfied by: Cash consideration on acquisition 7.6 As at 30 June 2006, £7.3 million had been paid with the remaining amount settled since the year end. The goodwill arising on the acquisition is attributable to additional sales volume acquired and operating synergies obtained from including production in existing plants. Intangible assets mostly relate to customer lists. The business contributed £1.6 million of revenue between the date of acquisition and the balance sheet date whilst the profit impact was immaterial. It would be impractical to disclose either the revenue or profit impact of this acquisition had it been completed on the first day of the year ended 30 June 2006 because this would depend on an assessment of customer orders and synergistic benefits. 6) Earnings per share Basic earnings per ordinary share is calculated on profit after tax and minority interest divided by the weighted average number of ordinary shares in issue during the year in accordance with IAS 33. 2006 2005 Total earnings (£m) 18.2 21.3 Weighted average number of ordinary shares 177,364,227 177,122,822 Basic earnings per share (pence) 10.3 12.0 Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to take account of all potentially dilutive ordinary shares. The Company has three categories of potentially dilutive ordinary shares: share options issued whose exercise price is less than the average price of the Company's ordinary shares during the year, share awards with no option price and shares allocated to an approved Save As You Earn scheme. 2006 2005 Weighted average number of ordinary shares (m) 177.4 177.1 Effect of dilutive share options (m) 0.9 3.2 Effect of dilutive share awards (m) 0.2 - Effect of dilutive SAYE scheme shares (m) 2.5 3.6 Diluted weighted average number of ordinary shares (m) 181.0 183.9 Diluted earnings per share (pence) 10.1 11.6 Adjusted basic earnings per share applies to earnings before exceptional items. This supplementary earnings per share information has been provided as the directors consider that it gives a more meaningful measure of the underlying performance of the Group. 2006 2005 £m £m Earnings used to calculate basic and diluted EPS 18.2 21.3 Exceptional items after tax 2.6 2.1 Earnings before exceptional items 20.8 23.4 Basic earnings per share before exceptional items (pence) 11.7 13.2 7) Reconciliation of movement in equity and reserves Issued Cashflow Total share Share hedge Translation Other Retained Minority equity capital premium reserve reserve reserves earnings Total interest and reserves £m £m £m £m £m £m £m £m £m At 1 July 2004 17.8 139.4 - - - (64.5) 92.7 - 92.7 Profit for the year - - - - - 21.3 21.3 0.1 21.4 Own shares acquired and held as treasury (0.1) - - - - (2.3) (2.4) - (2.4) Own shares acquired and cancelled (0.5) - - - 0.5 (6.9) (6.9) - (6.9) Shares issued to satisfy employee share option exercises 0.5 2.4 - - - - 2.9 - 2.9 Foreign exchange translation differences - - - (0.2) - - (0.2) 0.1 (0.1) Actuarial loss on pension scheme taken directly to equity - - - - - (1.1) (1.1) - (1.1) Equity dividends - - - - - (7.6) (7.6) - (7.6) Tax on share options - taken directly to equity - - - - (0.8) (0.8) - (0.8) At 30 June 2005 17.7 141.8 - (0.2) 0.5 (61.9) 97.9 0.2 98.1 Adoption of IAS 32 and IAS 39 - - (0.3) - (1.2) - (1.5) - (1.5) At 1 July 2005 17.7 141.8 (0.3) (0.2) (0.7) (61.9) 96.4 0.2 96.6 Profit for the year - - - - - 18.2 18.2 0.2 18.4 Own shares acquired and held as treasury (0.1) - - - - (1.5) (1.6) - (1.6) Treasury shares issued to satisfy employee share option exercise 0.2 - - - - 0.4 0.6 - 0.6 Own shares acquired and cancelled (0.1) - - - - (1.0) (1.1) - (1.1) Movement in cash flow hedge - - 0.4 - - - 0.4 - 0.4 Foreign exchange translation differences - - - 0.7 - - 0.7 - 0.7 Net loss on hedge of net investment in foreign subsidiaries - - - (0.7) - - (0.7) - (0.7) Actuarial loss net of deferred tax - - - - - (0.6) (0.6) - (0.6) Equity dividends - - - - - (8.7) (8.7) - (8.7) Tax on share options taken directly to equity - - - - - (0.1) (0.1) - (0.1) At 30 June 2006 17.7 141.8 0.1 (0.2) (0.7) (55.2) 103.5 0.4 103.9 The Group has taken the option to defer implementation of IAS 32/39 Financial Instruments until the year ended 30 June 2006. Therefore, as at 1 July 2005, the Group recognised in equity, derivative contracts used for hedge accounting purposes that were previously not recognised on the balance sheet. Other reserves includes the capital redemption reserve and a reserve reflecting shares that entitle the minority shareholder to exercise a put option and are now treated as a liability under IAS 32. 8) Taxation The £7.5m tax charge for the year ended 30 June 2006 (2005: £9.2m) consists of £4.8m (2005: £5.0m) of UK tax and £2.7m (2005: £4.2m) of overseas tax. 9) Other notes i) The financial information set out above does not constitute the company's statutory accounts for the years ended 30 June 2006 or 2005. Statutory accounts for 2005 which were prepared under UK GAAP have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their reports were unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. Accounts for 2006 prepared under IFRS, as adopted by the EU, will be delivered in due course. ii) The Annual Report for 2006 will be issued to shareholders on 29 September 2006 and will be available from the Company Secretary at the Company's Registered Office, McBride House, Penn Road, Beaconsfield, Buckinghamshire HP9 2FY; the Annual General Meeting will be held on Tuesday 31 October 2006. iii) If approved at the Annual General Meeting on 31 October 2006; the final dividend of 3.5p per share will be paid on 24 November 2006 to shareholders on the register at 27 October 2006. This information is provided by RNS The company news service from the London Stock Exchange

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