Interim Results
McBride PLC
10 February 2005
10 February 2005
McBride plc
Interim Announcement for the Half-Year Ended 31 December 2004
McBride supplies more than 20 million Private Label household and personal care
products every week to Europe's leading retailers.
Highlights of the half-year results are as follows:
• Group turnover was £268.0 million, up 5.5% (2003: £254.0 million)
• Group operating profit was £18.7 million (before £0.6 million of
goodwill amortisation), up 8.7% (2003: £17.2 million)
• Profit before tax was £17.5 million, up 6.1% (2003: £16.5 million)
• Profit after tax was £12.0 million, up 10.1% (2003 £10.9 million)
• Basic Earnings Per Share increased 9.8% to 6.7p (2003: 6.1p)
• Interim dividend per share of 1.5pence, up 25%
• Net debt reduced to £29.5 million (June 2004: £31.4 million)
Mike Handley, Chief Executive, commented:
'I am very pleased to announce another set of strong results in terms of sales,
profits and underlying cash generation which have been achieved despite a
background of challenging market conditions. The results reflect continuing
growth of sales, particularly Continental Europe, improved asset utilisation and
the management of the rise to date in raw material prices.
Early trading in the second half of the year has started in line with
expectations. The trading environment is challenging and requires us to make
further improvements in efficiency.
Looking ahead we will maintain our focus on sales growth, cost management and
operational performance in order to address the increasingly competitive market
environment.'
For further information please contact:
McBride plc 01494 60 70 50
Mike Handley, Chief Executive
Miles Roberts, Finance Director
Financial Dynamics 020 7831 3113
Andrew Dowler
Overview
• Group sales of £268.0 million increased by 5.5% and at constant
currency by 6.7% driven by Private Label / Minor Brand core sales growth in
Continental Europe (CE) of 7.7% and the consolidation of Aerosol Products
Limited (APL).
• Sales to CE increased by 3.1% to £151.1 million and by 5.1% on a
constant currency basis. Operating profits improved 2.5% to £8.1 million as the
benefits of higher volumes were partially offset by selling price deflation.
• Sales to UK increased 7.8% to £113.3 million including a first time APL
contribution. Operating profits rose by 16.3% driven by volume growth,
operating efficiencies and APL, partially offset by price deflation.
• Return on average capital employed continued its upward trend to 28.5%
for the half year, (2003: 24.2%) reflecting ongoing profit growth, improved
asset utilisation, lower working capital and strong cash generation.
• The Breda plant closure was completed slightly ahead of plan.
Evaluation is ongoing to identify further opportunities to improve the
utilisation and efficiency of the asset base.
• Underlying cash generation remains strong.
Strategic Focus
The Group's strategy for the long term profit growth and cash generation is
supported by a focus on five key areas: geographic and product markets which
provide the greatest returns and growth opportunities , maximising effective use
of existing assets, product development, speed to market and customer service,
financial management and sustainable development.
Key strengths of our business include European leadership in Private Label
household and personal care products, established long term relationships with
many of Europe's leading retailers, a strong track record in new product
development, supply chain management and customer service and underlying
financial strength.
Commercial Review
Continental Europe
Our Continental European business, sells in all countries of mainland Europe.
During the half year core Private Label household and personal care sales were
up 7.7% in local currency, with growth particularly strong in France 9.3% and
Italy 9.0%. A key factor underpinning this growth has been the increasing focus
on improved Private Label products by the major grocery retailers in all markets
as a response to the continuing expansion of the discount store format.
The Group has continued its development of manufacturing capability in Central
Europe with the commissioning of a new laundry detergent line in Poland as well
as liquid cleaners capability. Sales at Intersilesia the Polish subsidiary, up
9.9%, have been particularly strong assisted by record exports to neighbouring
markets. Czech Republic sales increased 53% and Hungarian sales were up 51%,
with Private Label sales underpinning the growth.
All countries in the CE business achieved sales growth with Germany at 16.2%,
Spain at 1.1%, Belgium at 3.6% and Netherlands at 4.7%.
CE personal care sales, up 11.4% in local currency showed particularly strong
growth in all core markets. During the period the closure of the Breda factory
was completed slightly ahead of plan with production transferred to sites in
Belgium, UK and Poland. Reflecting the increase in sales, CE's operating profit
increased by 2.5% to £8.1 million.
United Kingdom
The UK grocery retail market continues to remain extremely competitive with the
major chains increasing market share. McBride UK saw strong volume demand for
Private Label household and personal care products with volume growth of 5.7%
outstripping market growth of 1.1%. In value terms, sales in the UK at £113.3
million (2003: £105.1 million) were up 7.8% including a 4 month contribution
from the newly acquired APL. Like for like sales were slightly down on last
year with strong volume increases offset by price deflation.
The UK business continues to focus on maximising customer service whilst
improving its operational efficiencies and cost structure. This has resulted in
operating profit of £10.0 million including APL, compared with the £8.6 million
for the first half last year.
In the 12 months to January 2005, Private Label's volume share of the overall UK
household products market grew from 32.7% to 33.2%, while its value share
declined slightly reflecting a competitive pricing environment.
The personal care business of McBride UK has once again had an excellent six
months with both sales volume and value growth, up 5.8% and 4.1% respectively.
This achievement resulted from McBride increasing its share of the Private Label
sector.
APL revenues for the period at £15.5 million (Group share 50% of first two
months plus 100% of last four months) were 6.6% down on the previous year
reflecting tough market conditions and some delayed shipments of products to
Eastern Europe.
The consolidation of APL and improved operational efficiency resulted in a 16.3%
improvement in operating profit to £10.0 million.
Rest of World
Rest of World covers all markets outside Europe. Rest of the world sales
recovered strongly in the first half and were £3.6 million compared with £2.4
million in the corresponding period last year. Sales to the United States has
been a contributing factor in this recovery.
Sustainable Development
The Group has played a major part in formulating the AISE (European Detergents
Association) Charter for Sustainable Cleaning. This is seen as a key industry
initiative to work with the regulatory authorities in the EU to ensure that the
expectations of consumers that industry will protect the environment can be
achieved by voluntary means.
Financial Review
Profit and loss
Turnover improved 5.5% to £268.0 million (2003: £254.0 million) helped by the
consolidation of APL. Excluding APL, sales increased by 2.3% at constant
currency, mostly in Continental Europe and the Rest of World.
Profit on ordinary activities before interest, excluding goodwill amortisation
of £0.6 million, has increased 6.2% to £18.8 million (2003: £17.7 million).
This increase was driven by continuing sales growth, improving asset utilisation
and the management of the rise to date of raw material prices. Sales price
deflation continued to adversely affect our major markets.
The tax charge for the period was £5.5 million, equating to a 30.4% effective
rate based on profit before tax excluding goodwill amortisation. This reduction
on the prior year first half at 32.6%, mainly reflecting APL utilising brought
forward losses.
The Euro depreciated 2.1% against Sterling from the six months to December 2003
to six months to December 2004. Although this had a negative impact on
turnover, at the operating profit level the effect was immaterial due to the
natural hedging between the Euro earnings stream and the value of raw materials
bought in the UK denominated in Euros and some smaller financial hedging.
Cash flow
Net debt reduced £1.9 million over the period to £29.5 million at 31 December
2004. This reduction was after the acquisition of APL for, £3.0 million, the
majority of the costs associated with the closure of the factory in The
Netherlands of £4.0 million, and the cost of buying back shares, £1.9 million
and adverse exchange movements. Underlying cash flow was strong as a result of
further profit growth, working capital improvements and capital expenditure
remaining below depreciation. Exchange movements adversely affected the cash
flow but these are all offset by opposite movements in the retranslation of
asset values.
Capital expenditure in the period was £8.7 million (2003: £6.1 million) and
included £1.1 million relating to the closure of the Breda plant. Continuing
improvement in asset utilisation was reflected in capital expenditure levels
again remaining well below depreciation, excluding Breda.
Balance Sheet
Return on average capital employed has increased to 28.5% for the half-year,
versus 25.4% for the year ending June 2004 and 24.2% for the half year to
December 2003. This is due to ongoing profit growth and higher asset
utilisation. Gearing has further reduced from 34.2% at June 2004 to 29.5% at
December 2004.
Aerosol Products Limited (APL)
The Group acquired the remaining equity interest of APL on 6 September 2004,
having previously been a 50% Joint Venture partner. The consideration was £1.0
million and early payment was made of £2.0 million deferred from the financial
restructuring in 2002. Since this acquisition APL has performed in line with
expectations contributing an operating profit before goodwill amortisation of
£0.5 million.
The £0.1 million share of joint venture's operating profit covers a two month
period compared to last year's £0.5 million being for a full six months.
Breda plant closure
The closure of the Breda plant in The Netherlands and transfer of its production
to factories in Belgium, Poland and the UK proceeded smoothly and slightly ahead
of plan. During the six months to 31 December 2004, £2.9 million of the £3.3
million closure provision was spent, with the remainder expected in the second
half of the financial year and £1.1 million of capital expenditure.
International Financial Reporting Standards (IFRS)
In 2002 the EU determined that all listed companies should prepare their
consolidated financial statements in accordance with a common set of accounting
standards for financial years beginning on or after 1 January 2005. The EU
legislated that the common set of accounting standards that companies should
report under are those standards known collectively as International Financial
Reporting Standards ('IFRS') set by the International Accounting Standards
Board, subject to their formal adoption by the European Commission.
The Group will continue to report in accordance with UK Generally Accepted
Accounting Principles ('UK GAAP') for the year ended 30 June 2005 and commence
reporting under IFRS for the year ending 30 June 2006. The principal areas in
which the adoption of IFRS is expected to impact earnings and the presentation
of results are pensions, goodwill, financial instruments, share based payments,
dividends, operating / finance leases and deferred tax.
The Group intends to take advantage of the exemption included in IFRS 1 '
First-time adoption of IFRS' not to revisit its acquisition accounting in
respect of historic transactions. The Group has chosen to take advantage of this
exemption for transactions completed prior to 30 June 2004.
The Group intends to make further disclosures in respect of IFRS as follows: -
September 2005 - Report and accounts for the year ending 30 June 2005 will be
prepared in accordance with UK GAAP, with supplementary information prepared in
accordance with IFRS also provided
September 2005 - Announce the financial impact of IFRS on the Group's balance
sheet at 30 June 2004
November 2005 - Announce the financial impact of IFRS on the Group's profit and
loss and balance sheet for the year ending 30 June 2005
February 2006 - Interim results for the 6 months ended 31 December 2005 will be
produced in accordance with IFRS and will include appropriate reconciliation to
UK GAAP for the comparative information
September 2006 - Report and accounts for the year ending 30 June 2006 will be
produced in accordance with IFRS and will include appropriate reconciliation to
UK GAAP for the comparative information
Earnings and Dividends
The weighted average number of shares in issue in the period was 177,332,040.
Following repurchase and cancellation of 1.3 million shares, earnings per share
at 6.7p, continued to grow up from 6.1p in 2003/4 and 4.7p in 2002/3. The
average price paid for the shares bought back was 149p.
An interim dividend of 1.5 pence per share (December 2003: 1.2p) will be paid on
27 May 2005 to shareholders on the register on 29 April 2005.
Current Trading and Outlook
These are another strong set of results in terms of sales, profits and
underlying cash generation, which have been achieved against a background of
challenging market conditions. The results reflect the continuing growth of
sales particularly in Continental Europe, improved asset utilisation and the
management of the rise to date in raw material prices.
Early trading in the second half of the year has started in line with
expectations. The trading environment is as challenging as the market has known
for many years and requires further improvements in internal efficiency.
Looking ahead we will maintain our focus on sales growth, cost management and
operational performance in order to address the increasingly competitive market
environment.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited
6 months to 6 months to Audited
31 Dec 31 Dec Year ended
2004 2003 30 June 2004
Note £m £m £m
Turnover
Continuing operations and share of joint venture 270.4 262.3 517.8
Less: share of joint venture's turnover (2.4) (8.3) (16.5)
Group turnover 1 268.0 254.0 501.3
Cost of sales (171.6) (157.7) (309.5)
Gross profit 96.4 96.3 191.8
Distribution costs (17.4) (16.4) (32.3)
Administrative costs:
Before exceptional items and goodwill amortisation (60.3) (62.7) (124.4)
Exceptional items - - (3.3)
Goodwill amortisation (0.6) (0.7) (1.4)
Administrative costs including goodwill (60.9) (63.4) (129.1)
amortisation
and exceptional item
Group operating profit 1 18.1 16.5 30.4
Share of joint venture's operating profit 0.1 0.5 0.8
Profit on ordinary activities before interest 18.2 17.0 31.2
Group interest receivable and similar income 0.3 0.9 1.8
Group interest payable and similar charges (0.9) (1.3) (2.5)
Share of joint venture's interest payable and similar (0.1) (0.1) (0.3)
charges
Profit on ordinary activities before taxation 17.5 16.5 30.2
Group Tax on profit on ordinary activities (5.5) (5.6) (9.9)
Profit on ordinary activities after taxation 12.0 10.9 20.3
Equity minority interest (0.1) - (0.1)
Profit for the period 11.9 10.9 20.2
Dividends proposed (2.6) (2.1) (7.1)
Retained profit for the period 9.3 8.8 13.1
Earnings per ordinary share (pence) 4
Basic 6.7 6.1 11.4
Diluted 6.4 5.9 10.9
Basic before goodwill amortisation and operating 7.0 6.5 13.5
exceptional items
Dividend per share (pence) 1.5 1.2 4.0
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
As at As at As at
31 Dec 2004 31 Dec 2003 30 June 2004
Note £m £m £m
Fixed assets
Intangible assets 8.1 8.3 7.6
Tangible assets 135.1 125.0 124.6
Total fixed assets 143.2 133.3 132.2
Current assets
Stocks 43.7 41.3 38.8
Debtors 109.0 113.9 114.9
Cash at bank and in hand 0.6 0.2 0.2
153.3 155.4 153.9
Creditors: amounts falling due within one year (162.1) (154.8) (151.0)
Net current (liabilities) / assets (8.8) 0.6 2.9
Total assets less current liabilities 134.4 133.9 135.1
Creditors: amounts falling due after more than one year (23.3) (38.1) (28.1)
Provisions for liabilities and charges (11.0) (7.6) (14.1)
Investment in joint venture:
Share of gross assets - 5.4 3.9
Share of gross liabilities - (6.8) (5.1)
Net investment in joint venture 6 - (1.4) (1.2)
Net assets 100.1 86.8 91.7
Capital and reserves
Called up share capital 17.7 17.8 17.8
Share premium account 139.4 139.3 139.4
Capital redemption reserve 0.1 - -
Profit and loss account 3 (57.3) (70.3) (65.5)
Equity shareholders' funds 99.9 86.8 91.7
Equity minority interest 0.2 - -
Total shareholders' funds 100.1 86.8 91.7
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
Note £m £m £m
Net cash inflow from operating activities 5 28.3 32.3 62.4
Returns on investments and servicing of finance (3.3) (0.3) 1.0
Taxation (3.0) (2.7) (10.6)
Operating cash inflow after taxation and finance costs 22.0 29.3 52.8
Cash expenditure on fixed assets (8.7) (6.1) (17.3)
Disposal of fixed assets - - 0.1
Net cash outflow on capital expenditure (8.7) (6.1) (17.2)
APL acquisition 6 (1.0) - -
APL deferred consideration 6 (2.0) - -
Equity dividends paid (5.0) (5.2) (7.3)
Cash inflow before financing 5.3 18.0 28.3
Ordinary shares repurchased less issued for cash (1.9) - -
Movement in debt and lease financing (6.0) (19.5) (26.8)
Financing (7.9) (19.5) (26.8)
(Decrease) / increase in cash in the period (2.6) (1.5) 1.5
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
£m £m £m
(Decrease) / Increase in cash in the period (2.6) (1.5) 1.5
Cash outflow from movement in debt 5.8 19.3 26.4
Movement on finance leases 0.2 0.2 0.4
Change in net debt resulting from cash flows 3.4 18.0 28.3
Debt and lease financing acquired with subsidiary (0.1) - -
Translation differences (1.4) (0.5) 1.4
Movement in net debt in the period 1.9 17.5 29.7
Net debt at the beginning of the period (31.4) (61.1) (61.1)
Net debt at the end of the period (29.5) (43.6) (31.4)
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
£m £m £m
Profit for the period 11.9 10.9 20.2
Unrealised foreign currency differences 0.8 (0.6) (0.1)
Total recognised gains and losses 12.7 10.3 20.1
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
£m £m £m
Profit for the period 11.9 10.9 20.2
Equity dividends (2.6) (2.1) (7.1)
Retained profit 9.3 8.8 13.1
Ordinary shares repurchased less issued for cash (1.9) - -
Unrealised foreign currency differences 0.8 (0.6) (0.1)
Increase in share premium - - 0.1
Opening equity shareholders' funds 91.7 78.6 78.6
Closing shareholders' funds 99.9 86.8 91.7
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1) Segmental information
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
£m £m £m
Turnover by destination is analysed by geographical area as follows:
UK 113.3 105.1 210.5
Continental Europe 151.1 146.5 286.7
Rest of world 3.6 2.4 4.1
Group turnover 268.0 254.0 501.3
Share of joint venture's turnover 2.4 8.3 16.5
Turnover by destination 270.4 262.3 517.8
Turnover by geographical origin is analysed as follows:
UK 119.4 110.3 216.6
Continental Europe 148.6 143.7 284.7
Group turnover 268.0 254.0 501.3
Share of joint venture's turnover 2.4 8.3 16.5
Turnover by origin 270.4 262.3 517.8
Turnover by class of business is analysed as follows:
Household products 222.3 219.2 432.0
Personal care products 45.7 34.8 69.3
Group turnover 268.0 254.0 501.3
Share of joint venture's turnover 2.4 8.3 16.5
Turnover by class of business 270.4 262.3 517.8
Operating profit by geographical origin is analysed as follows:
UK 10.0 8.6 17.2
Continental Europe - pre exceptional item 8.1 7.9 16.5
Exceptional item - - (3.3)
Continental Europe - post exceptional item 8.1 7.9 13.2
Group operating profit 18.1 16.5 30.4
Non operating items - 0.4 0.5
Net interest payable (0.6) (0.4) (0.7)
Profit on ordinary activities before tax 17.5 16.5 30.2
Operating profit by class of business is analysed as follows:
Household products - pre exceptional item 14.8 13.7 29.3
Exceptional item - - (3.3)
Household products - post exceptional item 14.8 13.7 26.0
Personal care products 3.3 2.8 4.4
Group operating profit 18.1 16.5 30.4
Non operating items - 0.4 0.5
Net interest payable (0.6) (0.4) (0.7)
Profit on ordinary activities before tax 17.5 16.5 30.2
2) Unaudited half-year results
The results for the half year ended 31 December 2004 and 31 December 2003 are
unaudited and have been prepared on the basis of accounting policies set out in
the Report and Accounts for the year ended 30 June 2004. The comparative
figures for the year ended 30 June 2004 do not constitute statutory accounts.
The accounts for that period have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors thereon was
unqualified and did not contain a statement under section 237 (2) or (3) of the
Companies Act 1985.
3) Movement on reserves
Unaudited Unaudited Audited
As at As at As at
31 Dec 2004 31 Dec 2003 30 June 2004
£m £m £m
Goodwill reserve (146.4) (146.4) (146.4)
Cumulative retained profit 89.1 76.1 80.9
Profit and loss account (57.3) (70.3) (65.5)
4) Earnings per ordinary share
Basic earnings per share is calculated on profit after tax and minority interest
in accordance with FRS 14. For the six months ended 31 December 2004 it is
based on 177,332,040 ordinary shares of 10 pence each which is the weighted
average number of ordinary shares in issue during the period (2003 -
177,639,197).
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares to take account of the Group's share option schemes
where their conversion is dilutive. For the six months ended 31 December 2004
it is based on 184,763,839 (2003 - 184,199,302).
Adjusted basic earnings per share is shown by reference to earnings before
goodwill amortisation and operating exceptional items since the directors
consider this gives a more meaningful measure of the underlying performance of
the Group.
Unaudited Unaudited Audited
As at As at As at
31 Dec 2004 31 Dec 2003 30 June 2004
£m £m £m
Earnings used to calculate Basic and Diluted EPS 11.9 10.9 20.2
Goodwill amortisation 0.6 0.7 1.4
Operating exceptional items after tax - - 2.3
Adjusted earnings 12.5 11.6 23.9
5) Reconciliation of operating profit to operating cash flow
Pre Exceptional Post
exceptional Items exceptional Unaudited Audited
Unaudited 6 months to Unaudited 6 months to Year ended
6 months to 31 Dec 2004 6 months to 31 Dec 2003 30 June 2004
31 Dec 2004 £m 31 Dec 2004 £m £m
£m £m
Group operating profit 18.1 - 18.1 16.5 30.4
Depreciation 9.2 - 9.2 10.2 18.5
Goodwill amortisation 0.6 - 0.6 0.7 1.4
Movement in stocks (2.4) - (2.4) (0.1) 1.3
Movement in debtors 9.8 - 9.8 1.2 (3.7)
Movement in creditors (4.1) (2.9) (7.0) 3.8 14.5
Cash flow from operating 31.2 (2.9) 28.3 32.3 62.4
activities
The Group booked a £3.3 million pre-tax operating exceptional cost, relating to
the closure of its Breda production plant, in its year ended 30 June 2004 profit
and loss account. As at 30 June 2004 this cost is included in provisions on the
balance sheet. During the six months to 31 December 2004 £2.9 million has been
spent against this provision.
6) Aerosol Products Limited
The Group acquired the remaining equity interest of Aerosol Products Limited on
6 September 2004 and since then it has been consolidated as a 100% subsidiary.
The consideration was £1.0 million producing a negative goodwill on
consolidation of £1.3 million. In addition, the £2.0 million consideration re
the June 2002 restructure, deferred until July 2005, was brought forward and
settled.
Financial calendar for the year ending 30 June 2005
Dividends
Interim Announcement 10 February 2005
Payment 27 May 2005
Final Announcement September 2005
Payment November 2005
Results
Interim Announcement 10 February 2005
Preliminary statement for full year Announcement September 2005
Report and Accounts Circulated September 2005
Annual General Meeting To be held 31 October 2005
Exchange rates
The exchange rates used for conversion to sterling were as follows:
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 Dec 2004 31 Dec 2003 30 June 2004
Average rate:
Euro 1.46 1.43 1.46
Polish Zloty 6.34 6.48 6.75
Czech Koruna 45.89 46.02 47.09
Hungarian Forint 361.9 371.9 375.9
Closing rate:
Euro 1.41 1.42 1.49
Polish Zloty 5.75 6.70 6.70
Czech Koruna 42.87 45.97 47.45
Hungarian Forint 347.0 371.3 373.8
This information is provided by RNS
The company news service from the London Stock Exchange
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