Final Results
McBride PLC
24 October 2000
McBride plc
Preliminary Announcement for the Year ended 30 June 2000
McBride plc, the largest manufacturer of private label household, personal
care and OTC pharmaceutical products in Europe, announces its preliminary
results for the year ended 30 June 2000.
Highlights
* A 7.0% increase in sales in local currency, excluding the share of the
joint venture, with UK sales up 10.2% and Continental Europe up 3.8%
* In Continental Europe core sales of private label and minor brand in
local currency up 6.4%
* Operating profit of £32.5 million, before goodwill amortisation,
operating exceptional items and share of the joint venture compared
with £34.9 million
* Profit before taxation, goodwill amortisation, operating exceptional
items and share of the joint venture was £26.1 million compared with
£30.0million
* Basic earnings per share of 8.7 pence compared with 6.5 pence
* Interest cover of 5.1 times compared with 7.1 times
* Total dividend of 4.6 pence compared with 7.5 pence
Strategic actions
* Acquisition of Wrafton Laboratories has taken McBride into the growth
market for 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 continued to perform
strongly throughout the year
Outlook
The difficult trading conditions experienced in the main UK and Continental
European businesses during the second half, which resulted from the
combination of competitive pricing and raw material and packaging price
inflation, have continued through the first quarter of the current financial
year. The dilution of the Company's Continental European performance caused
by the weak euro has also continued. The performance of Wrafton in the OTC
pharmaceutical market, and of Intersilesia in Eastern Europe remain strong.
Measures have been identified to increase sales, mitigate inflationary input
costs and reduce all other costs, and these are being implemented. It is
difficult, however, to estimate when the impact of these measures will be
realised and to forecast the outcome for the year.
It was announced on 2 June 2000 that the Board was reviewing the Company's
strategic options in order to maximise shareholder value. On 26 September
2000 the Company announced that it had received a number of preliminary
enquiries from interested parties concerning a possible offer for the Company.
Discussions are at an early stage and are continuing. Whilst there can be no
certainty at this stage that any transaction will result, an announcement will
be made as further developments occur.
For further information please contact:
Financial Dynamics 020 7831 3113
Andrew Dowler
Chairman's Statement
In my statement last year I started by saying that it had been a very
challenging period for McBride. The tough trading conditions of that year
continued throughout 1999/2000 but much has been achieved in terms of
strategic progress.
The acquisition of Wrafton Laboratories has taken McBride into the important
and growing market for OTC pharmaceuticals and represents McBride's first
strategic move outside household and personal care. In November 1999 we also
announced the creation of Aerosol Products Ltd as a joint venture with Nichol
Beauty Products. This private label aerosol business is now the largest of
its kind in Europe.
Our principal markets in the UK and Continental Europe continued to grow as
major retailers demonstrated their continuing faith in the benefits of private
label. On the Continent in particular retailers are becoming more determined
to exploit the private label opportunity. McBride developed and launched
several new products for customers experimenting with retailer brands for the
first time.
In McBride's most important sector, household products, sales of branded
products gave up further market share to private label despite unprecedented
levels of product innovation, advertising expenditure and price promotions by
the major brand manufacturers.
Although the year has been a good one in terms of strategic progress the
financial results have been disappointing. After a strong performance in the
first half of the year, the second half proved more difficult. In the UK the
competitive conditions experienced in the previous two years persisted. In
Continental Europe sales and trading profit for the year in local currency
showed encouraging growth, but when translated into sterling the results were
adversely affected by the weakness of the euro. Profit before taxation,
goodwill amortisation, operating exceptional items, and the effect of the
Aerosol Products joint venture, was £26.1 million compared with £30.0 million
in the previous year. Earnings per share, again before goodwill amortisation,
operating exceptional items and the joint venture, were 10.8 pence compared
with 12.7 pence.
The performance of Aerosol Products Ltd was a significant disappointment in
the year. McBride's share of the operating loss for the period to 30 June
2000 was £2.4 million. However, the strategic rationale for creating APL,
namely combining two large private label/contract manufacturers into a single
leading supplier remains valid. The penetration of private label aerosols is
low and provides an opportunity for growth. The Board of APL believes the
business is now on track to recover in 2000/01.
Despite the difficult trading conditions McBride has achieved sound progress
towards its strategic goals and this reflects the hard work, dedication and
commitment of our employees. On behalf of the Board and shareholders I would
like to give them my heartfelt thanks.
Dividend
Bearing in mind the uncertainty of the discussions with interested parties,
which were announced on 26 September 2000, the Board has determined to rebase
the level of dividend, having regard to an appropriate level of dividend
cover. The Board is therefore proposing a final dividend for the year ended
30 June 2000 of 2.0 pence, giving a total dividend of 4.6 pence for the year.
Allen Sheppard
23 October 2000
Chief Executive's Statement
McBride has been developed into a truly European business with operations in
most of Europe's major markets, and is actively developing new strengths in
Eastern Europe. Nevertheless, widely differing operating conditions continued
to be experienced from area to area. In the UK volumes were good but prices
came under severe pressure in very tough trading conditions. In Continental
Europe in general and in France in particular demand for McBride's products
gained momentum but margins came under pressure in the second half. In Poland
trading was very strong.
Whilst total sterling reported sales of £496.8 million were unchanged from the
previous year, the weakness of the euro reduced sales on translation into
sterling by £18.0 million. After allowing for this currency effect and
excluding the joint venture, sales growth of 7% was achieved.
The reported operating profit before goodwill amortisation, operating
exceptional items and the impact of the joint venture, was £32.5 million
compared with £34.9 million last year. The adverse currency effect reduced
profit on translation by £1.1 million.
United Kingdom
The challenging market conditions for consumer goods and strong competitor
activity from branded products, which have been noted in previous reports,
persisted throughout the year.
Sales of household and personal care products were £255.9 million compared
with £265.1 million in the previous year. However, after allowing for the
effect of the transfer of the Hull aerosol sales to the joint venture, UK
sales grew by an underlying 2.2%. In addition, Wrafton's OTC pharmaceutical
sales contributed £18.5 million from September 1999. Therefore overall UK
sales growth, including the acquisition of Wrafton Laboratories, was 10.2%.
As part of McBride's continuing programme of product innovation further new
variants of textile washing tablets were launched during the year. The
tablets, which can be placed in either the drawer or the drum of the washing
machine, have faster dissolving properties. By the end of the financial year
the tablet share of the UK textile wash market had risen to 27%, with private
label's share of tablets reaching 18%.
The UK market for personal care products has been intensely competitive for
some time and remained so throughout the year. The total market was largely
unchanged with price reductions and promotional activity continuing to be key
features. The private label segment declined under pressure from the
marketing activity of the major brand manufacturers. However McBride
successfully launched its first own label striped toothpaste with a major
retail customer. In addition a premium men's range was also launched and a
number of products were re-launched during the year.
The expansion of McBride's textile washing powder capacity at Barrow was
completed and officially opened on 16 June 2000. This state-of-the-art
facility is capable of providing a wide range of high quality powders and
tablets. Investment also continued on the implementation phase of the SAP R/3
integrated management information system.
Continental Europe
The sterling reported sales in Continental Europe of £222.4 million for
1999/2000 showed a decline of £9.3 million from the previous year. However,
in constant currency terms total sales grew 3.8% while sales of the core
private label and minor brand business grew 6.4%. This underlying increase
reflected a further improvement in France, which was helped by the integration
of the acquisitions completed in 1998. The value of the private label
household products market in France grew encouragingly in the year to December
1999, reaching 9.6% value share and 13% volume share.
McBride's sales in Spain recorded significant growth as a result of increased
volumes with two major Spanish supermarket groups. These improvements,
together with a good performance in the smaller Belgian market, were partly
offset by lower sales in the Netherlands. In Italy additional business was
won with a number of new customers and this contributed to the overall sales
growth.
In Poland another strong performance was achieved during the second year of
ownership of Intersilesia. A further expansion of the factory was completed
during the year and significant new business was won with a number of western
European retailers as they increased their presence in the Polish market.
Sales offices were opened in Germany, Czech Republic and Hungary during the
year, and these will provide opportunities for expansion into the important
eastern European sector.
It was reported in the Interim Review that a serious fire at the Estaimpuis
factory in November 1999 had destroyed the raw material and packaging
warehouse and the blow-moulding department. These areas of the factory were
substantially rebuilt by the end of June and will be fully operational by
December 2000. The full co-operation and support of McBride's insurers has
assisted the recovery. Meanwhile effective management actions successfully
minimised the effect on sales and customer service.
Wrafton Laboratories
McBride's purchase of 80% of Wrafton Laboratories in September 1999 was a key
strategic development during the year. The market for OTC pharmaceuticals has
been identified as an important growth opportunity. In the UK the total
market is estimated to be worth £1.6 billion and is forecast to grow strongly
as the combination of higher NHS prescription charges and increasing awareness
of the effectiveness of OTC pharmaceuticals begins to be recognised by
consumers. UK supermarkets are aiming to grow their share of traditional
chemists products, and a key element of their product offering is the
development of private label alternatives. Since its acquisition by McBride,
Wrafton has accelerated its sales to retail customers and this trend is
expected to continue as retailers increase the private label share of this
large market.
Joint venture
In October 1999 McBride announced that Aerosol Products Ltd had been set up as
a joint venture between Robert McBride and Nichol Beauty Products. The joint
venture began trading in November 1999 and comprised the Hull factory of
Robert McBride and the Thetford factory of Nichol Beauty Products. The
closure of the Thetford site was completed in January 2000 with all production
being moved to the Hull site. During the period of the run-down of Thetford
and the transfer of equipment and stock to Hull, procedures and systems within
the logistics function broke down, severely impacting customer service. This
resulted in the company incurring an operating loss of which McBride's share
was £2.4 million. However, the situation is now improving significantly and
the company is moving into profit and regaining the confidence of its retail
and contract customers.
Mike Handley, Chief Executive and Deputy Chairman
23 October 2000
Consolidated profit and loss account
Year
ended 30 Year ended
June 1999 30 June
Before 1999
Year operating Operating Year
ended exceptional exceptional ended
30 June items items 30 June
2000 1999
£m £m £m £m £m
Turnover: Group and share
of joint venture 511.1 496.8 - 496.8
Less: share of joint
venture's turnover (14.3) - - -
Group turnover 496.8 496.8 - 496.8
(including acquisitions of
£18.5 million)
Cost of sales (311.5) (307.8) (0.4) (308.2)
Gross profit/(loss) 185.3 189.0 (0.4) 188.6
Distribution costs (23.3) (22.2) - (22.2)
Administration costs:
- Before goodwill (129.5) (131.9) (11.3) (143.2)
amortisation
- Goodwill amortisation (1.5) (0.4) - (0.4)
Administrative costs
including goodwill (131.0) (132.3) (11.3) (143.6)
amortisation
Group operating
profit/(loss)
(including acquisitions of 31.0 34.5 (11.7) 22.8
£1.1 million)
Share of joint venture's
operating loss before
goodwill amortisation (2.2) - - -
Goodwill amortisation on
joint venture (0.2) - - -
Share of joint venture's
operating loss (2.4) - - -
Profit on disposal of fixed
assets 3.4 - - -
Loss on transfer of
business to joint venture
(including goodwill (2.9) - - -
previously written off to
reserves of £1.4 million)
Group interest receivable
and similar income 0.2 0.1 - 0.1
Group interest payable and
similar charges (6.6) (5.0) - (5.0)
Share of joint venture's
interest payable and
similar charges (0.4) - - -
Profit/(loss) on ordinary
activities before taxation 22.3 29.6 (11.7) 17.9
Tax on profit/(loss) on
ordinary activities (6.5) (7.5) 1.2 (6.3)
Profit/(loss) on ordinary
activities after taxation 15.8 22.1 (10.5) 11.6
Equity minority interest (0.4) (0.1) - (0.1)
Profit/(loss) for the 15.4 22.0 (10.5) 11.5
period
Dividends (8.2) (13.4) - (13.4)
Retained profit/(loss) for 7.2 8.6 (10.5) (1.9)
the period
All operations above are
continuing.
Earnings per ordinary share
(pence)
Basic and diluted 8.7 6.5
Basic before operating
exceptional items, share of
joint venture and goodwill
amortisation 10.8 12.7
Dividend per share (pence) 4.6 7.5
Balance sheets
Group Group Company Company
As at As at As at As at
30 June 30 June 30 June 30 June
2000 1999 2000 1999
£m £m £m £m
Fixed assets
Intangible assets 26.5 9.6 - -
Tangible assets 153.8 147.7 0.2 0.2
Investments 7.5 - 173.5 164.0
Total fixed assets 187.8 157.3 173.7 164.2
Current assets
Stocks 59.0 52.6 - -
Debtors 104.8 93.1 73.7 63.7
Cash at bank and in hand 8.2 4.7 - -
172.0 150.4 73.7 63.7
Creditors: amounts falling due
within one year (167.4) (150.2) (26.1) (34.8)
Net current (liabilities)/assets 4.6 0.2 47.6 28.9
Total assets less current 192.4 157.5 221.3 193.1
liabilities
Creditors: amounts falling due
after more than one year (116.8) (90.2) (52.2) (18.0)
Provisions for liabilities and
charges (0.9) (16.3) - (15.0)
Investment in joint venture
Share of gross assets 10.5 - - -
Share of gross liabilities (15.7) - - -
Net investment in joint venture (5.2) - - -
Net assets 69.5 51.0 169.1 160.1
Capital and reserves
Called up share capital 17.8 17.8 17.8 17.8
Share premium account 139.3 139.3 139.3 139.3
Profit and loss account (88.8) (106.2) 12.0 3.0
Equity shareholders' funds 68.3 50.9 169.1 160.1
Equity minority interest 1.2 0.1 - -
Net assets 69.5 51.0 169.1 160.1
These financial statements were approved the Board of Directors on 23 October
2000 and were signed on its behalf by:
M Handley
T J Monks
Directors
Consolidated cash flow statement
Year Year Year Year
ended 30 ended 30 ended 30 ended 30
June 2000 June 2000 June 1999 June 1999
£m £m £m £m
Cash flow from operating 43.0 48.2
activities
Returns on investments and
servicing of finance (6.2) (5.1)
Taxation (5.3) (6.8)
Operating cash flow after
taxation and finance costs 31.5 36.3
Capital expenditure
Cash expenditure on fixed assets (24.5) (20.6)
Insurance proceeds on loss of
tangible fixed assets 2.3 -
Disposal of fixed assets 0.3 1.4
(21.9) (19.2)
Acquisitions
Purchase of subsidiary (22.2) (8.1)
undertakings
Overdrafts acquired with
subsidiaries (0.4) (0.6)
Other payments - (2.0)
Deferred consideration payments (1.9) (11.8)
(24.5) (22.5)
Equity dividends paid (13.5) (13.2)
Cash flow before financing (28.4) (18.6)
Financing 28.8 14.8
Increase/(decrease) in cash in
the year 0.4 (3.8)
Reconciliation of net cash flow to movement in net debt
Year ended Year ended
30 June 30 June
2000 1999
£m £m
Increase/(decrease) in cash in the year 0.4 (3.8)
Cash outflow from movement in debt and lease
financing (29.4) (16.5)
Movement on finance leases 0.6 1.8
Change in net debt resulting from cash flows (28.4) (18.5)
Loans and finance leases acquired with
subsidiaries (2.6) (1.5)
Translation differences 2.3 0.1
Movement in net debt in the year (28.7) (19.9)
Net debt at the beginning of the year (86.3) (66.4)
Net debt at the end of the year (115.0) (86.3)
Consolidated statement of total recognised gains and losses
Year ended Year ended
30 June 30 June
2000 1999
£m £m
Profit for the financial year 15.4 11.5
Unrealised foreign currency differences (0.2) 0.5
Total recognised gains and losses relating to the
financial year 15.2 12.0
Reconciliation of movements in shareholders' funds
Year ended Year ended
30 June 30 June
2000 1999
£m £m
Profit for the financial year 15.4 11.5
Equity dividends (8.2) (13.4)
Retained profit/(loss) at the year end 7.2 (1.9)
New share capital subscribed - 2.8
Unrealised foreign currency differences (0.2) 0.5
Goodwill written back/(off) to profit and loss
account and reserves 10.4 (1.5)
Opening shareholders' funds 50.9 51.0
Closing shareholders' funds 68.3 50.9
Notes to the financial statements
Segmental Information
Year ended Year
30 June ended
2000 £m 30 June
1999 £m
Turnover by destination is analysed by
geographical
area as follows:
United Kingdom 269.5 258.1
Continental Europe 223.0 232.9
Rest of World 4.3 5.8
Group turnover 496.8 496.8
Share of joint venture's turnover 14.3 -
Turnover: Group and share of joint venture 511.1 496.8
Turnover by geographical origin is analysed as
follows:
United Kingdom 274.4 265.1
Continental Europe 222.4 231.7
Group turnover 496.8 496.8
Share of joint venture's turnover 14.3 -
Turnover: Group and share of joint venture 511.1 496.8
Turnover by class of business is analysed as
follows:
Household products 406.6 406.1
Personal care products 71.7 90.7
Pharmaceuticals 18.5 -
Group turnover 496.8 496.8
Share of joint venture's turnover 14.3 -
Turnover: Group and share of joint venture 511.1 496.8
Operating profit by geographical origin is
analysed as follows:
United Kingdom 17.7 18.6
Continental Europe 13.3 4.2
Operating profit 31.0 22.8
Non operating items (2.3) -
Net interest payable (6.4) (4.9)
Profit on ordinary activities before tax 22.3 17.9
The UK business includes goodwill amortisation of £1.3 million and the
Continental Europe business goodwill amortisation of £0.2 million.
Year Year
ended ended
30 June 30 June
2000 £m 1999 £m
Operating profit by class of business is analysed as
follows:
Household products 28.5 27.2
Personal care products 1.4 (4.4)
Pharmaceuticals 1.1 -
Operating profit 31.0 22.8
Non operating items (2.3) -
Net interest payable (6.4) (4.9)
Profit on ordinary activities before tax 22.3 17.9
The household business includes goodwill amortisation of £0.9 million and the
pharmaceutical business goodwill amortisation of £0.6 million.
As at As at
30 June 30 June
2000 1999
£m £m
Non operating items consist of the following:
Profit on disposal of fixed assets 3.4 -
Loss on transfer of business to joint venture (2.9) -
Share of joint venture's operating loss (2.4) -
Share of joint venture's interest payable and
similar charges (0.4) -
Total non operating items (2.3) -
As at As at
30 June 30 June
2000 1999
£m £m
Net assets by geographical origin are analysed
as follows:
United Kingdom 84.8 81.6
Continental Europe 81.7 88.5
166.5 170.1
Non operating liabilities (102.3) (119.1)
Net assets 64.2 51.0
Non operating liabilities include cash less short and long-term borrowings,
provisions for liabilities and charges and dividends.
It is not possible to provide an analysis of the net assets by class of
business as a number of the Group's operating sites manufacture both private
label household and personal care products.
Notes:
1.The financial information set out above for the year ended 30 June 2000
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985, but is derived from those accounts. The statutory
accounts for the year ended 30 June 1999 have been delivered to the
Registrar of Companies and those for 2000 will be delivered following the
Company's Annual General Meeting. The auditors have reported on those
accounts; their reports were unqualified and did not contain statements
under Section 237 (2) of (3) of the Companies Act 1985.
2.The Annual Report for 2000 will be issued to shareholders on 10 November
2000 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 7 December 2000.
3.The calculation of earnings per share is based on the profit on ordinary
activities after taxation divided by the average number of shares in issue
during the year of 177,639,197 (1999: 176,869,413).
4.If approved at the Annual General Meeting on 7 December 2000, the final
dividend of 2.0p per share will be paid on 18 December 2000 to shareholders
on the register at 17 November 2000.
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