Interim Results - 6 Months to 31 December 1999
McBride PLC
2 March 2000
McBride plc
Interim results for the six months ended 31 December 1999
McBride is Europe's leading supplier of household and personal care retailer
brand products and Europe's leading independent retailer brand and contract
supplier of OTC pharmaceuticals
Results highlights
* A 5.9% increase in sales in local currency excluding the share of the
joint venture
* Operating profit of £17.8 million, before goodwill amortisation and share
of the joint venture, increased by 7.2% from £16.6 million
* Profit before taxation, goodwill amortisation and share of the joint
venture increased by 8.5% to £15.3 million with strong growth from
Continental Europe
* Basic earnings per share were 6.4p compared with 6.0p, an increase of
6.7%
* Interest cover was 7.1 times compared with 6.7 times
* Interim dividend increased by 0.1p to 2.6p
Strategic actions
* The acquisition of Wrafton has taken McBride into the growth activity of
OTC pharmaceuticals
* Aerosol Products Limited, a joint venture with Nichol Beauty Products
Limited, created the UK's largest manufacturer of retailer brand aerosols
* The Eastern European business based in Poland performed strongly in the
first half year
Prospects
* Expectations for the year remain in line with market projections. The
trading environment is expected to be similar to the first half with
McBride benefiting from new product developments, investment programmes
and efficiency gains from the nearly completed rationalisation programme
Commenting on the results, Mike Handley, Chief Executive said:
'The strategic direction of the Group is clear and further progress has been
made in the first half of the year in difficult trading conditions. We expect
the trading environment in the second half of the year to be similar but
McBride will continue to benefit from new product developments, the effect of
recent investment programmes and the efficiency gains from the nearly
completed rationalisation programme.'
For further information please contact:
McBride plc 01494 607050
Mike Handley, Chief Executive
Terry Monks, Group Finance Director
Financial Dynamics 0171 831 3113
Andrew Dowler
Interim review
In the first six months of the financial year, McBride succeeded in growing
both sales and profits compared with the first half of the previous year.
Sales in local currency, excluding the sales of Aerosol Products Limited, the
recently established joint venture, increased by 5.9% compared with the first
half of last year. However, the continuing strength of the pound, principally
against the Euro, resulted in sterling reported sales, including the share of
the joint venture, being £247.4 million compared with £236.9 million in the
first half of last year. Wrafton Laboratories, which was purchased in
September 1999, contributed sales of £6.8 million in the period and is
expected to be earnings enhancing in the financial year.
Profits before goodwill amortisation and the contribution from Aerosol
Products Limited increased to £17.8 million compared with £16.6 million in
1998/99. This growth reflected the continued improvement in most of the
Continental European markets together with a growing contribution from Poland
and the benefit of the Wrafton acquisition partly offset by the continuing
difficult trading environment in the United Kingdom. Profit before taxation in
the six months was £14.6 million compared with £14.0 million for the
comparable period last year, an increase of 4.3%.
The Board has declared an increased interim dividend of 2.6p per share
compared with 2.5p which will be paid on the 18 May 2000 to shareholders on
the register on 14 April 2000.
United Kingdom
Sales of household and personal care products in the United Kingdom were
£128.9 million compared with £132.8 million in the first half of last year.
The competitive activity in the UK market, which was noted in last year's
review, persisted throughout the first six months of the current financial
year and was the primary cause of the 2.9% decline in sales. During the first
six months McBride successfully launched further variants of textile washing
tablets which can be placed in either the drawer or the drum of the washing
machine. These faster dissolving tablets have been successful and have gained
an increased share of the tablet market, which has now grown to one fifth of
the total textile washing market. The market for personal care products
remained especially competitive in the period. The marketing initiatives of
the branded manufacturers, together with the retailers' focus on price,
combined to further reduce private label and minor brand shares.
Operating profit in the UK, before goodwill amortisation and operating
exceptional items, was £9.1 million and compared with £11.2 million in the
first half of last year.
Continental Europe
Sales of household and personal care products in Continental Europe expressed
in local currencies increased by 6.4% but the further strengthening of the
pound resulted in sterling reported sales showing a marginal decline to £115.2
million compared with £115.6 million.
The acquisitions made by McBride in France, the Netherlands and Poland in the
last two years have strengthened the Group's position with the major European
retailers. This, together with further growth in demand for private label and
minor brand products, produced a good performance in the first half of the
year. The level of demand in France was particularly strong showing sales
growth of 11.2% over the first half of last year. Sales in Spain, Benelux and
Poland also showed good progress and McBride opened its first sales office in
Germany. Offices in the Czech Republic and Hungary will be opened in the
second half of the year.
In November there was a serious fire at the Estaimpuis factory which destroyed
the raw material and packaging warehouse, together with the blow moulding
department. However, management action successfully minimised the effect on
both sales and customer service and the process of rebuilding the factory is
progressing well with the full support and co-operation of the insurance
companies.
In Continental Europe, the operating profit before goodwill amortisation and
exceptional items was £8.1 million, a 47.3% increase when compared with the
first half of last year.
Wrafton Laboratories
In September 1999, McBride announced the acquisition of 80% of the share
capital of Wrafton Laboratories for £17.3 million. This acquisition followed a
strategic review of the opportunities for McBride to expand its product range,
which identified the Over-The-Counter (OTC) medicines market as an important
and growing market sector. The purchase of Wrafton is McBride's first
strategic move outside the household and personal care sectors and will
provide a base from which to build its business in the OTC medicines market.
The UK market for OTC medicines is worth some £1.6 billion and is expected to
continue to grow as the combination of higher NHS prescription charges and the
increased awareness of the efficacy, safety and value of OTC pharmaceuticals
is recognised by consumers. Wrafton operates in three main areas of the OTC
market, namely oral analgesics, gastrointestinal and cold/flu remedies, all of
which are experiencing solid growth. UK supermarkets have strategically grown
their share of traditional chemist products with a major part of their product
offering being the development of retailer brand alternatives. In the last two
years the UK grocers have raised their share of the OTC market from 28% to 34%
and within these sales retailer brand has increased from 18% to 21%. Prior to
the acquisition by McBride, Wrafton had implemented a retailer brand
development strategy alongside its long standing contract business. In the
three months as part of McBride, the growth of retailer brand has accelerated
although sales to contract customers have been adversely affected, in certain
export markets, by the strength of sterling. Overall Wrafton has performed in
line with expectations and will be earnings enhancing in the current financial
year.
Joint venture
In October 1999 McBride announced the creation of a joint venture company with
Nichol Beauty Products Limited. The joint venture, which is called Aerosol
Products Limited, comprises the Hull site of Robert McBride together with the
aerosol activities of Nichol Beauty Products. The closure of the Nichol site
at Thetford is now substantially completed with almost all production having
been moved into the Hull factory. The joint venture is now well established
although the inevitable disruption during the process of rationalisation gave
rise to customer service difficulties resulting in a trading loss in the
period to the end of December of which the McBride share was £0.1 million
before goodwill amortisation.
Financial summary
In the six months to the end of December 1999 net interest costs were £2.5
million which was the same as in the first half of the previous financial
year. The level of interest expense reflected continued tight control of
working capital together with the impact of marginally lower average interest
rates and the impact of exchange rates in the translation of Euro denominated
interest costs into sterling. Interest cover before goodwill amortisation was
7.1 times compared with 6.7 times in the first six months of last year. The
charge for taxation has been calculated at 25% which is the same percentage
rate as last year and represents the estimated effective rate for the current
financial year. In the first six months of the financial year capital
expenditure amounted to £9.5 million compared with £7.2 million last year.
The main items of expenditure included the final phase of the extension of the
Barrow textile washing powder factory, which is due to be commissioned in
March 2000, additional equipment for the manufacture of textile washing
tablets and completion of a further extension to the factory and warehouse in
Poland.
Cash flow from operating activities was £24.5 million compared with £18.2
million, with the increase of £6.3 million reflecting an improved operating
profit together with better control of working capital. Net debt of £105.0
million at the end of December 1999 compared with £86.3 million at June 1999
and £90.0 million at December 1998. The increase of £18.7 million since June
is less than the cost of purchasing Wrafton and the acquisition of the liquid
products business of Nichol Beauty Products.
An agreement with BP Amoco concerning the deferred consideration relating to
the buy-in has resulted in a reduction in the provision for liabilities and
charges of £9.0 million with the consequent reduction in goodwill and the
increase in shareholder's funds.
Equity shareholders funds at 31 December 1999 were £63.3 million compared with
£50.9 million at June 1999 and £56.5 million at December 1998.
Prospects
Although the UK market for household and personal care products remains
challenging, McBride continues to trade well from a strong market position.
In Continental Europe, market conditions have improved which, together with
the benefit of recent acquisitions, has given rise to the improved results.
The purchase of Wrafton takes McBride into an important new market with
considerable growth potential.
The strategic direction of the Group is clear and further progress has been
made in the first half of the year in difficult trading conditions. We expect
the trading environment in the second half of the year to be similar but
McBride will continue to benefit from new product developments, the effect of
recent investment programmes and the efficiency gains from the nearly
completed rationalisation programme.
Lord Sheppard of Didgemere Mike Handley
Chairman Chief Executive and Deputy Chairman
Consolidated profit and loss account
UK
Before aerosol
UK aerosol activities Unaudited
activities before 6 months
transfer to transfer to to 31 Dec
J.V. J.V. 1999
Note £m £m £m
Turnover: Group and share of
joint venture 247.4 7.8 255.2
Less: share of joint
venture's turnover (4.3) - (4.3)
Group turnover (including
acquisitions of £6.8
million) 1 243.1 7.8 250.9
Cost of sales (151.1) (5.8) (156.9)
Gross profit/(loss) 92.0 2.0 94.0
Distribution costs (11.5) (0.2) (11.7)
Administrative costs (63.2) (2.4) (65.6)
Group operating
profit/(loss) before
goodwill amortisation
(including acquisitions of
£0.8 million) 1 17.8 (0.6) 17.2
Goodwill amortisation (0.5) - (0.5)
Group operating
profit/(loss)
(including acquisitions of
£0.6 million) 17.3 (0.6) 16.7
Share of joint venture's
operating loss before
goodwill amortisation (0.1) - (0.1)
Goodwill amortisation on
joint venture (0.1) - (0.1)
Share of joint venture's
operating loss (0.2) - (0.2)
Goodwill previously written
off to reserves - (1.4) (1.4)
Loss on transfer of business
to joint venture - (1.4) (1.4)
Group interest receivable/
(payable) and similar
charges (2.5) - (2.5)
Profit/(loss) on ordinary
activities before taxation 14.6 (3.4) 11.2
Tax on profit/(loss) on
ordinary activities 2 (3.8) 0.1 (3.7)
Profit/(loss) on ordinary
activities after taxation 10.8 (3.3) 7.5
Equity minority interest (0.2) - (0.2)
Profit/(loss) for the period 10.6 (3.3) 7.3
Dividends 4 (4.6) - (4.6)
Retained profit/(loss) for
the period 6.0 (3.3) 2.7
Earnings per ordinary share 3
* Basic and diluted 6.0p 4.1p
* Basic before operating
exceptional items, share of
joint venture and goodwill
amortisation 6.4p
Before UK
aerosol
activities
transfer to UK aerosol
J.V. and activities
operating before Operating
exceptional transfer to exceptional
items J.V. items
£m £m £m
Turnover: Group and share of
joint venture 236.9 11.5 -
Less: share of joint venture's
turnover - - -
Group turnover (including
acquisitions of £6.8 million) 236.9 11.5 -
Cost of sales (146.9) (7.9) (0.4)
Gross profit/(loss) 90.0 3.6 (0.4)
Distribution costs (11.0) (0.2) -
Administrative costs (62.5) (3.3) (5.1)
Group operating profit/(loss)
before goodwill amortisation
(including acquisitions of £0.8
million) 16.6 0.1 (5.5)
Goodwill amortisation (0.1) - -
Group operating profit/(loss)
(including acquisitions of £0.6
million) 16.5 0.1 (5.5)
Share of joint venture's
operating loss before goodwill
amortisation - - -
Goodwill amortisation on joint
venture - - -
Share of joint venture's
operating loss - - -
Goodwill previously written off
to reserves -
Loss on transfer of business to
joint venture - - -
Group interest receivable/
(payable) and similar charges (2.5) - -
Profit/(loss) on ordinary
activities before taxation 14.0 0.1 (5.5)
Tax on profit/(loss) on ordinary
activities (3.5) - 0.1
Profit/(loss) on ordinary
activities after taxation 10.5 0.1 (5.4)
Equity minority interest - - -
Profit/(loss) for the period 10.5 0.1 (5.4)
Dividends (4.5) - -
Retained profit/(loss) for the
period 6.0 0.1 (5.4)
Earnings per ordinary share
* Basic and diluted 6.0p
* Basic before operating
exceptional items, share of joint
venture and goodwill amortisation 6.0p
All operations above are continuing
Before
Unaudited operating Operating Audited
6 months exceptional exceptional Year ended
to 31 Dec items items 30 June
1998 1999
£m £m £m £m
Turnover: Group and share of
joint venture 248.4 496.8 - 496.8
Less: share of joint
venture's turnover - - - -
Group turnover (including
acquisitions of £6.8
million) 248.4 496.8 - 496.8
Cost of sales (155.2) (307.8) (0.4) (308.2)
Gross profit/(loss) 93.2 189.0 (0.4) 188.6
Distribution costs (11.2) (22.2) - (22.2)
Administrative costs (70.9) (132.3) (11.3) (143.6)
Group operating
profit/(loss) before
goodwill amortisation
(including acquisitions of
£0.8 million) 11.2 34.9 (11.7) 23.2
Goodwill amortisation (0.1) (0.4) - (0.4)
Group operating
profit/(loss)
(including acquisitions of
£0.6 million) 11.1 34.5 (11.7) 22.8
Share of joint venture's
operating loss before
goodwill amortisation - - - -
Goodwill amortisation on
joint venture - - - -
Share of joint venture's
operating loss - - - -
Goodwill previously written
off to reserves - - - -
Loss on transfer of business
to joint venture - - - -
Group interest receivable/
(payable) and similar
charges (2.5) (4.9) - (4.9)
Profit/(loss) on ordinary
activities before taxation 8.6 29.6 (11.7) 17.9
Tax on profit/(loss) on
ordinary activities (3.4) (7.5) 1.2 (6.3)
Profit/(loss) on ordinary
activities after taxation 5.2 22.1 (10.5) 11.6
Equity minority interest - (0.1) - (0.1)
Profit/(loss) for the period 5.2 22.0 (10.5) 11.5
Dividends (4.5) (13.4) - (13.4)
Retained profit/(loss) for
the period 0.7 8.6 (10.5) (1.9)
Earnings per ordinary share
* Basic and diluted 2.9p 12.4p 6.5p
* Basic before operating
exceptional items, share of
joint venture and goodwill
amortisation 12.7p
Consolidated Balance sheet
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
1999 1998 1999
Note £m £m £m
Fixed assets
Intangible assets 34.8 9.5 9.6
Tangible assets 146.7 145.2 147.7
Total fixed assets 181.5 154.7 157.3
Current assets
Stocks 58.6 54.1 52.6
Debtors 93.3 97.5 93.1
Cash at bank and in hand 1.0 5.6 4.7
152.9 157.2 150.4
Creditors: amounts falling due
within one year (160.3) (152.6) (150.2)
Net current assets/(liabilities) (7.4) 4.6 0.2
Total assets less current
liabilities 174.1 159.3 157.5
Creditors: amounts falling due
after more than one year (104.4) (92.4) (90.2)
Provisions for liabilities and
charges (2.9) (10.3) (16.3)
Investments in joint ventures
Share of gross assets 13.1 - -
Share of gross liabilities (15.5) - -
Net investment in joint venture (2.4) - -
Net assets 64.4 56.6 51.0
Capital and reserves
Called up share capital 17.8 17.8 17.8
Share premium account 139.3 139.3 139.3
Profit and loss account 5 (93.8) (100.6) (106.2)
Equity shareholders' funds 63.3 56.5 50.9
Equity minority interest 1.1 0.1 0.1
Net assets 64.4 56.6 51.0
Consolidated cash flow statement
Unaudited Unaudited Audited
6 months 6 months Year ended
to 31 Dec to 31 Dec 30 June
1999 1998 1999
Note £m £m £m
Cash flow from operating activities 6 24.5 18.2 48.2
Returns on investments and
servicing of finance (2.3) (2.6) (5.1)
Taxation (0.5) (0.9) (6.8)
Operating cash flow after taxation
and finance costs 21.7 14.7 36.3
Capital expenditure (9.5) (7.2) (19.2)
Acquisitions (22.7) (16.4) (22.5)
Equity dividend paid (8.9) (8.8) (13.2)
Financing 15.7 14.6 14.8
Decrease in cash in the period (3.7) (3.1) (3.8)
Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited Audited
6 months 6 months Year ended
to 31 Dec to 31 Dec 30 June
1999 1998 1999
£m £m £m
Decrease in cash in the period (3.7) (3.1) (3.8)
Cash outflow from movement in debt and
lease financing (15.7) (14.6) (14.7)
Change in net debt resulting from cash
flows (19.4) (17.7) (18.5)
Loans and finance leases acquired with
subsidiary (2.6) (1.5) (1.5)
Translation differences 3.3 (4.4) 0.1
Movement in net debt in the period (18.7) (23.6) (19.9)
Net debt at the beginning of the period (86.3) (66.4) (66.4)
Net debt at the end of the period (105.0) (90.0) (86.3)
Statement of total recognised gains and losses
Unaudited Unaudited Audited
6 months 6 months Year ended
to 31 Dec to 31 Dec 30 June
1999 1998 1999
£m £m £m
Profit after tax 7.3 5.2 11.5
Unrealised foreign currency differences (0.7) 2.0 0.5
Total recognised gains and losses 6.6 7.2 12.0
Reconciliation of movements in total shareholders' funds
Unaudited Unaudited Audited
6 months 6 months Year ended
to 31 Dec to 31 Dec 30 June
1999 1998 1999
£m £m £m
Opening shareholders' funds 50.9 51.0 51.0
Profit for the financial period 7.3 5.2 11.5
Equity dividends (4.6) (4.5) (13.4)
53.6 51.7 49.1
Unrealised foreign currency differences (0.7) 2.0 0.5
New share capital subscribed (including
merger reserve) - 2.8 2.8
Goodwill written back/(off) to profit
and loss account 10.4 - (1.5)
Closing shareholders' funds 63.3 56.5 50.9
Notes to the interim financial statements
1. Segmental information
Unaudited Unaudited Audited
6 months 6 months Year ended
to 31 Dec to 31 Dec 30 June
1999 1998 1999
£m £m £m
Turnover by destination is analysed by
geographical area as follows:
UK 131.9 130.9 258.1
Continental Europe 116.6 116.0 232.9
Rest of World 2.4 1.5 5.8
250.9 248.4 496.8
Turnover by geographical origin is
analysed as follows:
UK 135.7 132.8 265.1
Continental Europe 115.2 115.6 231.7
250.9 248.4 496.8
Turnover by class of business is
analysed as follows:
Household products 203.0 200.6 406.1
Personal care products 41.1 47.8 90.7
Pharmaceuticals 6.8 - -
250.9 248.4 496.8
Operating profit by geographical origin
is analysed as follows:
UK 8.7 8.2 18.6
Continental Europe 8.0 2.9 4.2
Operating profit 16.7 11.1 22.8
Share of joint venture after goodwill (0.2) - -
Goodwill previously written off to
reserves (1.4) - -
Loss on transfer of business to joint
venture (1.4) - -
Net interest payable (2.5) (2.5) (4.9)
Profit on ordinary activities before tax 11.2 8.6 17.9
Operating profit by class of business is
analysed as follows:
Household products 15.1 13.7 27.2
Personal care products 1.0 (2.6) (4.4)
Pharmaceuticals 0.6 - -
Operating profit 16.7 11.1 22.8
Share of joint venture after goodwill (0.2) - -
Goodwill previously written off to (1.4) - -
reserves
Loss on transfer of business to joint (1.4) - -
venture
Net interest payable (2.5) (2.5) (4.9)
Profit on ordinary activities before tax 11.2 8.6 17.9
2. Tax on profit on ordinary activities
The Group tax charge is calculated at 25% of the profit before taxation
excluding non taxable deductions, being the estimated effective rate of tax
for the year to 30 June 2000.
3. Earnings per ordinary share
Earnings per ordinary share is calculated on profit after tax in accordance
with FRS 14. The calculation of earnings per ordinary share for the six
months ended 31 December 1999 is based on 177,639,197 ordinary shares of 10p
each, which was the number of ordinary shares in issue at 30 June 1999 and 31
December 1999. The weighted average number of shares in issue at 31 December
1998 and 30 June 1999 was 176,178,267 and 176,869,413 respectively.
4. Dividend
The Directors will pay an interim dividend of 2.6p per ordinary share on 18
May 2000 to shareholders registered at the close of business on 14 April 2000.
5. Profit and loss account
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
1999 1998 1999
£m £m £m
Goodwill reserve (146.4) (155.3) (156.8)
Profit and loss account 52.6 54.7 50.6
(93.8) (100.6) (106.2)
6. Reconciliation of operating profit to operating cash flow
Unaudited Unaudited Audited
6 months 6 months Year ended
to 31 Dec to 31 Dec 30 June
1999 1998 1999
£m £m £m
Group operating profit 16.7 11.1 22.8
Depreciation 8.8 8.3 16.9
Other non cash items - 5.5 9.9
Goodwill amortisation 0.5 0.1 0.4
Movement in stocks (7.8) 4.0 4.0
Movement in debtors (2.1) (4.7) (0.2)
Movement in creditors 8.4 (6.1) (5.6)
Cash flow from operating activities 24.5 18.2 48.2
7. Unaudited half year results
The results for the half year ended 31 December 1999 and 31 December 1998 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 1999. The comparative
figures for the year ended 30 June 1999 do not constitute statutory accounts.
Those accounts 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. The Group has implemented FRS 15 - Tangible fixed assets
in preparing these financial statements.
Financial calendar for the year ending 30 June 2000
Dividends
Interim Announcement 2 March 2000
Payment 18 May 2000
Final Announcement September 2000
Payment November 2000
Results
Interim Announcement 2 March 2000
Preliminary statement for full year Announcement September 2000
Report and Accounts Circulated September 2000
Annual General Meeting To be held October 2000
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