Final Results

RNS Number : 9085K

McBride PLC

07 September 2021

McBride plc ("McBride", the "Company" or the "Group")

Results in-line with previously revised expectations

Compass strategy remains on-track

£10m of cost saving expected in the current financial year

7 September 2021

McBride, the leading European manufacturer and supplier of private label and contract manufactured products for the domestic household and professional cleaning/hygiene markets, announces its unaudited preliminary results for the year ended 30 June 2021.

Headlines

Strategy and management

· Programme Compass divisional reorganisation complete; new organisation in place from 1 January 2021, with benefits already seen

· Divisional structure supported by a leaner Group structure

· Refreshed executive team including permanent Group CFO and Divisional Managing Directors

Business

· Full year revenues at constant currency down 4% following a 'year of two halves': H1 growth of 1.7% was followed by H2 decline of 9.5%

· Covid-19 continues to impact demand, cleaners volumes normalised in H2, laundry volumes still light compared to historic levels

· Exceptional input cost inflation impacted Q4, driven by Covid-19 shocks to supply chain and rapid and exceptional inflation of key feedstocks

· Cost savings on track, £10m expected in current financial year

· Good progress being made towards achieving our 2025 product sustainability targets and defining our wider environmental, social and governance approach

· Strong closing balance sheet, with a sustainability linked revolving credit facility agreed for 5+1 years

Financial

· Group revenues of £682.3m (2020: £706.2m), 3.4% lower (4.0% at constant currency)

· Adjusted operating profit⁽²⁾ of £24.1m (2020: £28.3m)

· Operating profit from continuing operations of £15.5m (2020: £15.4m)

· Adjusted profit before tax of £19.9m (2020: £24.2m), 17.8% lower

· Profit before tax from continuing operations of £11.3m (2020: £11.2m)

· Adjusted Group Effective Tax rate (6)% (2020: 28%); tax credit due to significant deferred tax asset recognition and provision release following closure of a tax audit

· Adjusted diluted EPS⁽³⁾ from continuing operations 23.2% higher at 11.7p (2020: 9.5p)

· Diluted EPS from continuing operations 7.8p (2020: 3.7p)

· Share buy-back: 8.6 million shares purchased and cancelled at total cost of £6.8m

· Dividend policy reviewed as part of Group strategy reset; no final dividend proposed (2020: nil)

· Net debt⁽⁴⁾ at £118.4m (30 June 2020: £101.5m)

· Net debt/adjusted EBITDA⁽⁶⁾ 2.6x accounting basis (30 June 2020: 2.1x); 1.5x banking covenant basis (30 June 2020: 1.4x)

Chris Smith, Chief Executive Officer, commented:

"This year has been one of two halves, with a strong first half followed by a more difficult second. In our recent trading update we highlighted the supply side cost inflation being felt due to rapidly increasing raw material costs and freight capacity. The £10m of savings expected in the current financial year leave us well placed to meet these challenges and our efforts to recoup input cost rises from customers continue. Our balance sheet remains robust and we expect current market conditions to create opportunities for selected in-fill acquisitions at attractive valuations. We continue to anticipate a weak first half year, especially when compared to our strong first half last year, with profits therefore heavily weighted to the second half of the year."

McBride plc
Chris Smith, Chief Executive Officer	0161 203 7401
Mark Strickland, Chief Finance Officer	0161 203 7401

FTI Consulting	020 3727 1017
Ed Bridges, Nick Hasell

A results presentation will be available on the McBride plc investor relations website from 08.30am today.

	Year to	Year to		Constant
	30 Jun	30 Jun	Reported %	currency %
£m unless otherwise stated	2021	2020	change	change⁽¹⁾
Continuing operations⁽⁷⁾
Group revenue	682.3	706.2	(3.4)%	(4.0)%
Adjusted operating profit⁽²⁾	24.1	28.3	(14.8)%	(15.7)%
Operating profit	15.5	15.4	0.6%
Adjusted profit before taxation	19.9	24.2	(17.8)%	(18.8)%
Profit before taxation	11.3	11.2	0.9%
Adjusted diluted earnings per share⁽³⁾	11.7p	9.5p	23.2%
Diluted earnings per share	7.8p	3.7p	110.8%
Total operations
Group revenue	682.3	706.2	(3.4)%	(4.0)%
Adjusted operating profit⁽²⁾	24.1	28.3	(14.8)%	(15.7)%
Operating profit	14.8	15.1	(2.0)%
Adjusted profit before taxation	19.9	24.2	(17.8)%	(18.8)%
Profit before taxation	10.6	10.9	(2.8)%
Adjusted diluted earnings per share⁽³⁾	11.7p	9.5p	23.2%
Diluted earnings per share	7.5p	3.6p	108.3%
Net debt⁽⁴⁾	118.4	101.5
Adjusted return on capital employed⁽⁵⁾	11.5%	12.8%

¹ Comparatives translated at 30 June 2021 exchange rates.

² Adjustments were made for the amortisation of intangible assets and exceptional items.

³ Adjustments were made for the amortisation of intangible assets, exceptional items, unwind of discount on provisions and any related tax.

⁴ Net debt comprises cash and cash equivalents, overdraft, bank and other loans and lease liabilities.

⁵ Rolling twelve months adjusted operating profit from continuing operations as a percentage of average period-end capital employed. Capital employed is defined as property, plant and equipment, intangible assets, right-of-use assets, current trade and other receivables less current trade and other payables.

⁶ Net debt divided by rolling twelve months adjusted operating profit. Adjustments were made for the amortisation of intangible assets, exceptional items and depreciation.

⁷ During the 2019 financial year, the Group successfully completed the sale of the European Personal Care (PC) Liquids business. The financial results of this business have been treated as discontinued operations. The remaining activities within the Group are referred to as continuing operations .

The information in this announcement has not been audited or otherwise independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this announcement, or its contents, or otherwise arising in connection with this announcement.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares of the Company.

Certain statements, statistics and projections in this announcement are or may be forward looking. By their nature, forward-looking statements involve a number of risks, uncertainties or assumptions that may or may not occur and actual results or events may differ materially from those expressed or implied by the forward-looking statements. Accordingly, no assurance can be given that any particular expectation will be met and reliance should not be placed on any forward-looking statement. Accordingly, forward-looking statements contained in this announcement regarding past trends or activities should not be taken as representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which are based on the knowledge and information available only at the date of this announcement's preparation.

The Company does not undertake any obligation to update or keep current the information contained in this announcement, including any forward-looking statements, or to correct any inaccuracies which may become apparent and any opinions expressed in it are subject to change without notice.

References in this announcement to other reports or materials, such as a website address, have been provided to direct the reader to other sources of information on McBride plc which may be of interest. Neither the content of McBride's website nor any website accessible by hyperlinks from McBride's website nor any additional materials contained or accessible thereon, are incorporated in, or form part of, this announcement.

Overall business performance

Full-year Group revenues at £682.3 million were 4.0% lower than the prior year at constant currency. The adverse impact on business performance from Covid-19 that many experienced in 2020 hit us mostly during 2021. In particular, following sales growth of 1.7% in the first half, second half demand slow-down saw revenues 9.5% lower compared to a 'Covid-inflated' second half of the previous year.

The Group has seen destocking at retailers, as well we believe also at the consumer level, impacting order volumes. Laundry demand did not recover at any time in the period to pre pandemic levels and was 14% lower over the year. Volumes of Cleaners products slowed, having been 11% higher in the first six months, revenues in the second half were 11% lower. Dishwashing product revenues ended 6% higher across the year, but growth in the second half slowed to 1%, having been up 11% in the first half.

The bulk of the volume reductions came in private label with good gains being made in contract manufacturing, which now represents 16% of Group revenues. Some branded top-up contract manufacturing business ceased in the second half, providing further confirmation of an overall slow-down in market demand.

Adjusted operating profit for the year reduced by £4.2 million to £24.1 million (2020: £28.3m), with adjusted operating profit margin reducing to 3.5% (2020: 4.0%). Second half adjusted operating profits were £11.6 million lower against a strong comparative last year, as a result of the weaker demand and significant increases to input costs.

Divisional portfolio performance

All divisions saw sales lower year-on-year, despite the first half seeing all except Powders ahead.

	Year to	Year to
	30 June	30 June
	2021	2020	Reported	Constant
Revenue	£m	£m	change	currency⁽¹⁾
Liquids	376.1	383.2	(1.9%)	(2.5%)
Unit Dosing	181.5	183.5	(1.1%)	(1.8%)
Powders	66.3	78.2	(15.2%)	(15.9%)
Aerosols	34.0	35.2	(3.4%)	(4.2%)
Asia Pacific	24.4	26.1	(6.5%)	(5.4%)
Group	682.3	706.2	(3.4%)	(4.0%)

	Year to	Year to
	30 June	30 June
	2021	2020	Reported	Constant
Adjusted operating profit	£m	£m	change	currency⁽¹⁾
Liquids	11.7	15.5	(24.5%)	(26.4%)
Unit Dosing	16.7	17.2	(2.9%)	(4.0%)
Powders	(2.3)	(4.1)	(43.9%)	(45.2%)
Aerosols	0.8	2.3	(65.2%)	(63.6%)
Asia Pacific	1.9	3.0	(36.7%)	(34.5%)
Corporate	(4.7)	(5.6)	(16.1%)	(16.1%)
Group	24.1	28.3	(14.8%)	(15.7%)

Liquids was heavily impacted by lower cleaners and dish-wash volumes in the second half, with full year sales at constant currency ending 2.5% lower. Adjusted operating profits for the twelve months to June 2021 were 26.4% lower at £11.7 million, with exit rate profitability very weak as a result of input cost rises.

Unit Dosing revenues for the full year were lower by 1.8%, mostly as a result of weak laundry activity, the lapping of the end of a major contract last year in capsules, balanced by strong auto dish-wash volumes throughout the year, especially in the first half. Full year adjusted operating profits were broadly flat at £16.7 million, an adjusted operating profit margin of 9.2%.

Whilst Powders saw its top line fall by 16%, adjusted operating losses reduced from £4.1 million to £2.3 million with ongoing cost actions and volume growth initiatives targeting to get this business back to at least break even in the near term. Aerosols saw second half sales reduce as sanitiser orders failed to repeat and personal care revenues stayed weaker. Adjusted operating profits were lower by £1.5 million, mostly in the second half and the division back to break even after the pandemic upside last year, more in line with the first six months of the previous financial year. Asia Pacific has suffered in 2021 due to government restrictions on factory operations, with sales 5% lower year ‑ on ‑ year having been 12% higher in the first half. Adjusted operating profit followed the same pattern, with full year profit of £1.9 million compared to £3.0 million last year. The business is well set for the re ‑ opening of the Malaysian economy, with the new factory complete and fully operational but subject to current restrictions on manning levels.

Input prices

The severe challenges seen across industries with supply chain shortages have heavily impacted McBride. We have experienced an exceptionally fast escalation in input costs since early spring. The size of cost increases in materials including plastics, cardboard and surfactants is unprecedented and is coupled with challenges with freight availability and costs adding further inflationary pressures. Compared to one year ago, cardboard is priced more than 50% higher, Ethylene is 50% up impacting on plastics and surfactants and certain solvents over 300% higher. On average, the Group is predicted to see the peak of these raw materials in the autumn this year with the most impacted division, Liquids, seeing raw materials nearly 20% higher than one year ago. The whole industry is affected, whether branded or private label and the size of the increases has warranted urgent pricing conversations with retailers alongside many branders publically warning of price rises for their products. At the end of the financial year, these input cost rises have ultimately sealed the fate of two sizeable German competitors who have filed for insolvency.

Compass

The Group has made good progress with transitioning to the new Compass strategies and operating model. Since January 2021, we have focused on stabilising the business model, establishing ways of working between divisions, especially the customer interface, and starting to action the strategic priorities for the divisions. So far, the customer response is favourable and as we move into the new financial year, customers will see further benefits of the divisional approach as our teams' confidence and focus further embed. There have been many positive examples of the impact of this new approach such as the speed and agility in new product development and targeted growth in Unit Dosing, technical skills and innovation activity in Powders to recover ground lost in recent years and the focus and targeting of pricing actions in Liquids. Despite the significant and unforeseen challenge thrown at the business from huge input cost rises and skewed demand, our divisional strategies remain sound and our focus is to get the business back on track as quickly as possible.

Covid-19

All of our European factories remained operational throughout the year with absenteeism levels only slightly higher than a usual year. The McBride team have yet again demonstrated fantastic commitment and teamwork to keep the business running against the backdrop of pandemic challenges and a major internal change programme. Supply disruption has led to inefficiencies and service impacts with more supplier 'force majeure' events in the first quarter of 2021 than in the whole of 2020. The Asia Pacific division has had to deal with more disruption from national control orders in both Kuala Lumpur and Ho Chi Minh City, with both factories on restricted output. The stark input cost pressures seen in the last four months of the year are primarily a result of supply imbalances resulting from Covid-19 effects across the world. The impact on our colleagues, whether home working or working at our factories, has remained top of our agenda and we have an active wellbeing programme in place. As restrictions across the Group's locations lift, a 'flexible' working trial for office based colleagues has been instigated aimed at understanding the right balance of flexible work arrangements for different teams before confirming the Group's approach to office working in due course.

Group operating results

The full-year operating profit from continuing operations of £15.5m was slightly higher than the prior year (2020: £15.4m).

Despite a strong first half of the year, full-year adjusted operating profit of £24.1 million was lower than the prior year (2020: £28.3m) as rapid input price inflation hit the final quarter. Adjusted operating profit margin decreased from 4.0% to 3.5%.

Programme Compass is delivering an increased focus on cost optimisation and has meant that most overhead costs are now directly attributed within the respective divisions income statements. The only costs now allocated out to the divisions are Central overheads, with PLC costs being retained at a Group level. In total, Central and PLC costs were £27.7 million, a fall of 9.2% from the prior year (2020: £30.5m).

Group EBITDA

Full year adjusted EBITDA of £45.5 million (2020: £49.1m) reflected the tough final quarter trading conditions.

Exceptional items

Total exceptional items of £6.2 million were recorded during the period in relation to continuing operations (2020: £10.8m). The charges primarily comprised the following:

· £0.4 million in respect of one-off legacy costs in relation to the former UK Aerosols site in Hull;

· £0.3 million relating to the closure costs for the Barrow production facility, which ceased operations in October 2020;

· £4.4 million relating to Programme Compass, including £2.5 million of redundancy costs, £0.8 million in consulting support, £0.3 million of fixed asset write offs, £0.3 million in professional fees and £0.2 million in other project expenses; and

· £1.1 million relating to the Group's logistics transformation, including £0.7 million of redundancy costs, £0.2 million of site clearance costs, £0.1 million of fixed asset write offs; and £0.1 million in other project expenses.

	2021	2020
	£m	£m
Operating profit	14.8	15.1
Add back: operating loss from discontinued operations	0.7	0.3
Operating profit from continuing operations	15.5	15.4
Exceptional Items	6.2	10.8
Amortisation	2.4	2.1
Adjusted operating profit	24.1	28.3
Depreciation of property, plant and equipment	17.6	17.1
Depreciation of right-of-use assets	3.8	3.7
Adjusted EBITDA	45.5	49.1

Finance costs

At £4.2 million, adjusted finance costs remained stable (2020: £4.1m).

Profit before tax and taxation

Reported profit before taxation from continuing operations was £11.3 million (2020: £11.2m). Adjusted profit before taxation from continuing operations reduced by £4.3 million to £19.9 million (2020: £24.2m). The tax credit on continuing adjusted profit before tax for the year is £1.1 million (2020: £6.8m charge) and the effective tax rate is a credit of 6% (2020: 28% charge). The tax credit is a result of a £5.9m credit in respect of Deferred Tax Asset recognition and a £1.8m release from uncertain tax provisions in respect of a closed tax audit.

The statutory effective tax rate on continuing operations for the year is a credit of 24% (2020: 40% charge). The impact on the future effective tax rate for the Group as a result of the new divisional structure is currently being assessed, but is not expected to be significant.

The Group operates across a number of jurisdictions and tax risk can arise in relation to the pricing of cross ‑ border transactions, where a taxation authority's interpretation of the arm's length principle can diverge from the approach taken by the Group. Transfer pricing is inherently subjective and in determining the appropriate level of provision, the Group considers the probability of a range of outcomes, using a weighted average methodology to focus risk on the most likely outcomes in the event of an audit. The amount provided also takes account of international dispute resolution mechanisms, where available, to mitigate double taxation. This analysis is re-assessed at each period end and the estimates refined as additional information becomes available.

At 30 June 2021, the Group estimated its maximum possible tax exposure for ongoing tax audits and uncertain tax treatments to be £18.9 million, against which a provision of £2.9 million has been made, in line with IFRIC 23 requirements.

Earnings per share

On an adjusted basis, diluted earnings per share (EPS) from continuing operations was 11.7 pence (2020: 9.5p). Total adjusted diluted EPS increased to 11.7 pence (2020: 9.5p), with basic EPS at 7.5 pence (2020: 3.6p). The 2021 EPS has been significantly affected by the year's tax credit referred to above.

Payments to shareholders

On 2 November 2020, the Company announced that it would commence a share buy-back programme of up to £12 million in McBride plc ordinary shares, running from 2 November 2020 through to the date of the Company's next AGM. The maximum number of shares that may be re-purchased by the Company under the programme is 18.3 million. Purchases may continue during any closed period to which the Company is subject. The purpose of the share buy-back programme is to reduce the share capital of the Company (any shares repurchased for this purpose will be cancelled). The Board believed that it was in the interests of all shareholders to commence this programme based on the Board's assessment that McBride's current share price did not reflect the value of the underlying business, which has resilient revenues, a strong balance sheet and highly visible cash flows.

During the year, the Group purchased and cancelled 8.6 million ordinary shares representing 4.7% of the issued ordinary share capital as at 2 November 2020. The shares were acquired at an average price of 79.3 pence per share, with prices ranging from 61.0 pence per share to 90.0 pence per share. The total cost of £6.8 million was deducted from equity. A transfer of £0.9 million was made from share capital to the capital redemption reserve. Post the year-end, in the period up to 1 September 2021, the Group has purchased and cancelled a further 0.2 million ordinary shares. These shares were acquired at an average price of 76.9 pence per share, with prices ranging from 73.3 pence per share to 78.6 pence per share. From the date of this announcement, the Board intends to end the share buy-back programme announced on 2 November 2020.

Investing in the business to drive mid-term sustainable profitable growth is a key priority of the business. Therefore, as part of the Group's strategy reset, at its Capital Markets Day on 23 February 2021, the Company announced a new flexible policy on payments to shareholders, making pay ‑ outs when appropriate and affordable. More specifically, the business moved to annual payments, payable only when the net debt to adjusted EBITDA leverage ratio (on an accounting basis) is 2x or less.

Once this ratio is 2x or less the Group has indicated a progressive dividend policy, as follows:

1.5x to 2.0x	Base Dividend - one sixth of EPS	Cash
1.0x to 1.49x	Additional Distribution - one sixth of EPS	Cash / Share Buy-Back / Retain
Below 1.0x	Special Distribution	At Board's discretion

Since the ratio was over 2.0x at 30 June 2021, the Board believes that it is prudent not to propose a distribution to shareholders.

Cash flow and balance sheet

	2021	2020
Free cash flow	£m	£m
Adjusted EBITDA	45.5	49.1
Working capital excluding provisions and pensions	(9.4)	20.1
Share-based payments and loss/profit on disposal of fixed assets	0.7	(0.3)
Non-exceptional impairment	0.3	-
Pension deficit reduction contributions	(4.0)	(4.0)
Free cash flow	33.1	64.9
Exceptional items and tax paid	(15.3)	(9.9)
Capital expenditure including capital payments on lease liabilities
less proceeds from sale of fixed assets	(28.5)	(20.2)
Interest on borrowings and lease liabilities less interest receivable	(3.2)	(3.3)
Debt financing and refinancing activities	1.1	(0.3)
Other items - Settlement of derivatives	3.8	0.6
Free cash flow to equity	(9.0)	31.8
Dividends paid/Redemption of B shares	(2.0)	(3.4)
Share buy-back	(6.8)	-
Purchase of own shares held by employee benefit trust	(0.3)	(0.1)
Net (decrease)/increase in cash and cash equivalents	(18.1)	28.3
Cash Conversion⁽¹⁾ (%)	73%	132%

Cash generated from continuing operations before exceptional items was £33.1 million (2020: £64.9m) in the year to 30 June 2021.

As signposted at last year's results, working capital levels at 30 June 2020 benefited from a one-off upside. This related to the consequences of exceptionally high demand in March 2020, from which the rebuilding of inventory over the following three months saw higher creditor levels than usual at the year-end date. The June 2021 working capital ratio has returned to more normal levels.

As a result, cash conversion reduced to 73%⁽¹⁾ (2020: 132%)

During the year, capital expenditure, including capital payments on lease liabilities less proceeds from the sale of fixed assets, increased to £28.5 million (2020: £20.2m) in cash terms. We continue to prioritise capital expenditure to underpin our strategy of focused investment in our growth categories.

As part of its share buy-back programme, the Group bought back shares for a total cash outflow of £6.8 million in the year. In addition, the Employee Benefit Trust purchased £0.3m of McBride plc shares.

The Group's net assets increased to £69.8 million (2020: £66.9m). Gearing⁽²⁾ improved to 66% (30 June 2020: 57%) and adjusted return on capital employed of 11.5% was lower compared to the prior year (2020: 12.8%).

1. Cash flow from continuing operating activities before exceptional items and taxation as a percentage of adjusted EBITDA.

2. Gearing is defined as the ratio of net debt/average year-end capital.

Bank facilities and net debt

Net debt at the year-end increased to £118.4 million (30 June 2020: £101.5m). Of the increase in net debt, approximately £10m were a result of the normalisation of trading working capital referred to above.

Net debt, excluding IFRS 16 increased by £14.3 million to £107.1 million (30 June 2020: £92.8m) again mainly due to the normalisation of working capital.

During the year, the Group signed a €175 million multi-currency "Sustainability Linked Revolving Credit Facility" (RCF). The RCF is initially for a five year tenor, with the option to be extended to 30 September 2027, and is provided by a syndicate of supportive international bank lenders. It also includes a €75 million uncommitted accordion feature which could provide additional commitments for potential acquisitions in support of our Compass strategy.

The RCF, which is aligned with the Loan Market Association "Sustainability Linked Loan Principles", incorporates three sustainability performance targets which are central to McBride's commitment to maintaining a responsible business and to actively contribute to a more sustainable future. Successful achievement of the annual targets will result in the earning of a discount on the margin of the RCF.

At 30 June 2021, the amount undrawn on the facility was €87.0 million (2020: €61.3m).

The Group's RCF funding arrangements are subject to banking covenants, representations and warranties that are customary for unsecured borrowing facilities, including two financial covenants: debt cover (the ratio of net debt to EBITDA) may not exceed 3:1 and interest cover (the ratio of EBITDA to net interest) may not be less than 4:1. For the purpose of these calculations, net debt excludes IFRS 16 leases and amounts drawn under the Group's invoice discounting facilities. As at 30 June 2021, the debt cover ratio under the RCF funding arrangements was 1.5x (2020: 1.4x) and the interest cover was 11.0x (2020: 12.2x). The Group remains well within these covenants.

At 30 June 2021, the Group had a number of facilities whereby it could borrow against certain of its trade receivables. In the UK, the Group had a £25 million facility that was committed until October 2021. In France and Belgium, the Group had an aggregate €30 million facility, which had a rolling notice period of six months for the French part and three months for the Belgian part. In Germany, the Group had a €26 million facility that is committed until December 2024. The Group can borrow from the provider of the relevant facility up to the lower of the facility limit and the value of the respective receivables. Since the close of the year, the Group has extended the UK facility to October 2022 reducing the commitment to £20 million. The Group has also increased the commitment on the German facility to €35 million.

The Group also has access to uncommitted working capital facilities amounting to £44.3 million at 30 June 2021 (2020: £32.8m). At 30 June 2021, £5.9 million (2020: £4.1m) was drawn against these facilities in the form of overdrafts and short ‑ term borrowings.

Pensions

The Group provides a number of post-employment benefit arrangements. In the UK, the Group operates a defined benefit scheme, which is closed to new members and to future accrual, and a defined contribution pension scheme. Elsewhere in Europe, the Group has a number of smaller unfunded post ‑ employment benefit arrangements that are structured to accord with local conditions and practices in the countries concerned. At 30 June 2021, the Group recognised a deficit on its UK scheme of £29.3 million (30 June 2020: £28.4m). The deficit is broadly unchanged over the period due to the increase in pension liabilities being offset by asset returns and deficit contributions paid by the Group.

A cash flow driven investment (CDI) strategy was implemented during the first half of the financial year to 30 June 2020. Through the use of credit/bond investments, the CDI strategy delivers a stable, more certain expected return and reduced volatility in the reported accounting deficit as assets and liabilities are better matched.

The latest funding valuation for the UK scheme was performed as at 31 March 2021, which confirmed that, with the Company agreeing to continue annual deficit reduction contributions of £4 million, the deficit is on track to be neutralised by 2028.

The Group has other unfunded post-employment benefit obligations outside the UK that amounted to £2.6 million (30 June 2020: £3.1m).

Environmental, social and governance (ESG)

Our new ESG agenda will bring together our Corporate Social Responsibility (CSR) program and Sustainability work to a single, joined up cost conscious approach that will have clear ambitions on the key impactful areas of our responsibilities as a good corporate citizen. We have established a framework for McBride's ESG program, using the appropriate components from a variety of the global agencies, to steer our approach. The next year is about establishing this framework internally, our new governance routines and establishing our baselines. From these baselines we can then set our ambitions for the coming years and thus the priorities for our teams.

The sub group covering 'Environmental' already has 2025 product sustainability targets and outline ambitions on energy and waste. As part of our targeting and prioritising, we have started an external assessment of our Corporate Carbon Footprint (CCF) to pinpoint relative carbon impacts from operations, products, transportation and travel. We know our existing targets will feature as key components but extending our understanding of our controllable carbon impact is crucial to ensuring we target effectively.

For our 'Social' team, we have many great examples of strong achievement, but they are not as dispersed across the business as we are likely to aspire to, hence much of our initial efforts will be about building on the existing platforms that today cover health and well-being, charitable and community engagement, dignity and equality, training and employment practices.

As a plc, we consider that many of the best practice areas covered by the 'Governance' team are part of the way McBride operates today, with much of this on display in the governance sections of this annual report. There are however always gaps and improvements and this team will focus on the priority areas to ensure our stakeholders can be sure all our activities meet the appropriate level of good governance to be expected of McBride.

Principal risks and uncertainties

The Group is subject to risk factors both internal and external to its business, and has a well-established set of risk management procedures. The following risks and uncertainties are those that the Directors believe could have the most significant impact on the Group's business:

· Climate change and environmental concerns;

· Increased regulatory and reporting requirements;

· Consumer and customer trends;

· Input costs and supplier reliability;

· Market competitiveness;

· Product legislation and regulations;

· Financial risks; and

· IT security, systems and technologies.

Current trading and outlook

Order levels for products other than laundry are trading in line with fourth quarter FY21 activity levels. With lockdowns easing, there have been some early signs of improving laundry volumes, including into professional cleaning markets. Our Asia Pacific business is expected to operate at 50-60% of expected output levels due to Covid-19 restrictions for the next two to three months.

The effect of higher input costs is broadly in line overall with our most recent estimates, with some easing in some packaging items but increases in various chemicals. Freight and distribution continue to be challenging, both in availability and cost. At this stage, the outlook on input costs remains difficult to predict and our forecast continues to assume that input costs will peak mid first half year and then stabilise at lower levels than the peak, but not back to March 2021 levels.

The liquids division continues to conclude pricing discussions with customers with the impact of agreed increases starting to deliver margin recovery. The success of our pricing actions and their timing will be a key determinant on the full year results.

Our full year expectations remain in line with our update of 19 August and we continue to anticipate a weak first half year, especially when compared to our strong first half last year. With limited visibility at this stage and such uncertainty around the ongoing impacts of the pandemic, our current expectations are that fourth quarter exit rates will be close to strategic plan despite the weaker first half year performance.

Unaudited consolidated income statement

for the year ended 30 June 2021

	2021			2020
	Adjusted	Adjusting items	Total	Adjusted	Adjusting items	Total
Continuing operations	£m	£m	£m	£m	£m	£m
Revenue	682.3	-	682.3	706.2	-	706.2
Cost of sales	(445.3)	-	(445.3)	(462.0)	(1.0)	(463.0)
Gross profit/(loss)	237.0	-	237.0	244.2	(1.0)	243.2
Distribution costs	(56.0)	-	(56.0)	(57.3)	-	(57.3)
Administrative costs	(156.6)	(8.6)	(165.2)	(158.6)	(9.7)	(168.3)
Impairment of goodwill	-	-	-	-	(0.5)	(0.5)
Impairment of property, plant and equipment	(0.3)	-	(0.3)	-	(1.7)	(1.7)
Operating profit/(loss)	24.1	(8.6)	15.5	28.3	(12.9)	15.4
Finance costs	(4.2)	-	(4.2)	(4.1)	(0.1)	(4.2)
Profit/(loss) before taxation	19.9	(8.6)	11.3	24.2	(13.0)	11.2
Taxation	1.1	1.6	2.7	(6.8)	2.3	(4.5)
Profit/(loss) for the year from continuing operations	21.0	(7.0)	14.0	17.4	(10.7)	6.7
Discontinued operations
Loss for the year from discontinued operations	-	(0.6)	(0.6)	-	(0.2)	(0.2)
Profit/(loss) for the year	21.0	(7.6)	13.4	17.4	(10.9)	6.5
Earnings/(loss) per ordinary share from continuing and discontinued operations attributable to the owners of the parent during the year
Basic earnings/(loss) per share
From continuing operations			7.8p			3.7p
From discontinued operations			(0.3p)			(0.1p)
From profit for the year			7.5p			3.6p
Diluted earnings/(loss) per share
From continuing operations			7.8p			3.7p
From discontinued operations			(0.3p)			(0.1p)
From profit for the year			7.5p			3.6p

Operating profit			15.5			15.4
Adjusted for:
Amortisation of intangible assets			2.4			2.1
Exceptional items			6.2			10.8
Adjusted operating profit			24.1			28.3

Unaudited consolidated statement of comprehensive income

for the year ended 30 June 2021

	2021	2020
	£m	£m
Profit for the year	13.4	6.5
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss:
Currency translation differences on foreign subsidiaries	(4.6)	-
Gain on net investment hedges	3.7	0.8
(Loss)/gain on cash flow hedges in the year	(0.1)	0.4
Cash flow hedges transferred to profit or loss	(0.5)	0.2
Taxation relating to items above	-	(0.1)
	(1.5)	1.3
Items that will not be reclassified to profit or loss:
Net actuarial loss on post ‑ employment benefits	(4.2)	(3.7)
Taxation relating to item above	4.1	1.8
	(0.1)	(1.9)
Total other comprehensive expense	(1.6)	(0.6)
Total comprehensive income	11.8	5.9

Total comprehensive income/(expense) attributable to equity shareholders arises from:
Continuing operations	12.4	6.1
Discontinued operations	(0.6)	(0.2)
	11.8	5.9

Unaudited consolidated balance sheet

At 30 June 2021

	2021	2020
	£m	£m
Non-current assets
Goodwill	19.7	19.9
Other intangible assets	8.2	8.5
Property, plant and equipment	129.8	134.7
Derivative financial instruments	0.1	-
Right-of-use assets	10.0	7.3
Deferred tax assets	22.8	13.8
	190.6	184.2
Current assets
Inventories	92.9	97.5
Trade and other receivables	117.9	138.3
Current tax asset	3.7	6.2
Non-current assets classified as held for sale	1.6	-
Derivative financial instruments	0.2	1.4
Cash and cash equivalents	24.9	44.2
	241.2	287.6
Total assets	431.8	471.8

Current liabilities
Trade and other payables	169.2	198.1
Borrowings	53.7	33.2
Lease liabilities	3.4	3.5
Derivative financial instruments	0.3	0.4
Current tax liabilities	4.2	12.4
Provisions	2.7	6.3
	233.5	253.9
Non-current liabilities
Borrowings	78.3	103.8
Lease liabilities	7.9	5.2
Derivative financial instruments	-	0.3
Pensions and other post-employment benefits	31.9	31.5
Provisions	3.7	3.6
Deferred tax liabilities	6.7	6.6
	128.5	151.0
Total liabilities	362.0	404.9
Net assets	69.8	66.9

Equity
Issued share capital	17.4	18.3
Share premium account	68.6	70.6
Other reserves	76.0	74.6
Accumulated losses	(92.2)	(96.6)
Total equity	69.8	66.9

Unaudited consolidated cash flow statement

for the year ended 30 June 2021

	2021	2020
	£m	£m
Operating activities
Profit/(loss) before tax
Continuing operations	11.3	11.2
Discontinued operations	(0.7)	(0.3)
Finance costs	4.2	4.2
Exceptional items	6.9	8.9
Share-based payments charge	0.3	0.4
Depreciation of property, plant and equipment	17.6	17.1
Depreciation of right-of-use assets	3.8	3.7
Loss/(profit) on disposal of fixed assets	0.4	(0.7)
Amortisation of intangible assets	2.4	2.1
Impairment of goodwill	-	0.5
Impairment of tangible fixed assets	0.3	1.7
Operating cash flow before changes in working capital before exceptional items	46.5	48.8
Decrease in receivables	13.2	8.6
Increase in inventories	(0.4)	(1.3)
(Decrease)/increase in payables	(22.2)	12.8
Operating cash flow after changes in working capital before exceptional items	37.1	68.9
Additional cash funding of pension schemes	(4.0)	(4.0)
Cash generated from operations before exceptional items	33.1	64.9
Cash outflow in respect of exceptional items	(8.0)	(5.2)
Cash generated from operations	25.1	59.7
Interest paid	(3.2)	(3.3)
Taxation paid	(7.3)	(4.7)
Net cash generated from operating activities	14.6	51.7

Investing activities
Proceeds from sale of property, plant and equipment	0.2	3.3
Purchase of property, plant and equipment	(21.6)	(17.6)
Purchase of intangible assets	(2.2)	(1.6)
Settlement of derivatives used in net investment hedges	3.8	0.6
Net cash used in investing activities	(19.8)	(15.3)

Financing activities
Redemption of B Shares	(2.0)	(3.4)
Drawdown/(repayment) of overdrafts	2.8	(10.2)
Drawdown of other loans	25.9	-
Drawdown of bank loans	76.2	9.9
Repayment of bank loans	(103.8)	-
Repayment of IFRS 16 lease obligations	(4.9)	(4.3)
Purchase of own shares	(6.8)	-
Purchase of own shares by employee benefit trust	(0.3)	(0.1)
Net cash used in financing activities	(12.9)	(8.1)
(Decrease)/increase in net cash and cash equivalents	(18.1)	28.3
Net cash and cash equivalents at the start of the year	44.2	14.4
Currency translation differences	(1.2)	1.5
Net cash and cash equivalents at the end of the year	24.9	44.2

Unaudited consolidated statement of changes in equity

for the year ended 30 June 2021

			Other reserves
	Issued	Share	Cash flow	Currency	Capital
	share	premium	hedge	translation	redemption	Accumulated	Total
	capital	account	reserve	reserve	reserve	losses	equity
	£m	£m	£m	£m	£m	£m	£m
At 1 July 2019	18.3	73.9	-	(0.9)	70.8	(98.1)	64.0
Year ended 30 June 2020
Profit for the year	-	-	-	-	-	6.5	6.5
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Gain on net investment hedges	-	-	-	0.8	-	-	0.8
Gain on cash flow hedges in the year	-	-	0.4	-	-	-	0.4
Cash flow hedges transferred to profit or loss	-	-	0.2	-	-	-	0.2
Taxation relating to items above	-	-	(0.1)	-	-	-	(0.1)
	-	-	0.5	0.8	-	-	1.3
Items that will not be reclassified to profit or loss:
Net actuarial loss on post ‑ employment benefits	-	-	-	-	-	(3.7)	(3.7)
Taxation relating to items above	-	-	-	-	-	1.8	1.8
	-	-	-	-	-	(1.9)	(1.9)
Total other comprehensive expense	-	-	0.5	0.8	-	(1.9)	(0.6)
Total comprehensive income	-	-	0.5	0.8	-	4.6	5.9
Transactions with owners of the parent
Issue of B Shares	-	(3.3)	-	-	-	-	(3.3)
Redemption of B Shares	-	-	-	-	3.4	(3.4)	-
Share-based payments	-	-	-	-	-	0.4	0.4
Purchase of own shares held by employee benefit trust	-	-	-	-	-	(0.1)	(0.1)
At 30 June 2020	18.3	70.6	0.5	(0.1)	74.2	(96.6)	66.9
Year ended 30 June 2021
Profit for the year	-	-	-	-	-	13.4	13.4
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss:
Currency translation differences of foreign subsidiaries	-	-	-	(4.6)	-	-	(4.6)
Gain on net investment hedges	-	-	-	3.7	-	-	3.7
Loss on cash flow hedges in the year	-	-	(0.1)	-	-	-	(0.1)
Cash flow hedges transferred to profit or loss	-	-	(0.5)	-	-	-	(0.5)
	-	-	(0.6)	(0.9)	-	-	(1.5)
Items that will not be reclassified to profit or loss:
Net actuarial loss on post ‑ employment benefits	-	-	-	-	-	(4.2)	(4.2)
Taxation relating to items above	-	-	-	-	-	4.1	4.1
	-	-	-	-	-	(0.1)	(0.1)
Total other comprehensive expense	-	-	(0.6)	(0.9)	-	(0.1)	(1.6)
Total comprehensive income	-	-	(0.6)	(0.9)	-	13.3	11.8
Transactions with owners of the parent
Issue of B Shares	-	(2.0)	-	-	-	-	(2.0)
Redemption of B Shares	-	-	-	-	2.0	(2.0)	-
Share-based payments	-	-	-	-	-	0.3	0.3
Purchase of own shares	-	-	-	-	-	(6.8)	(6.8)
Purchase of own shares held by employee benefit trust	-	-	-	-	-	(0.3)	(0.3)
Transfers between reserves	(0.9)	-	-	-	0.9	-	-
Taxation relating to items above	-	-	-	-	-	(0.1)	(0.1)
At 30 June 2021	17.4	68.6	(0.1)	(1.0)	77.1	(92.2)	69.8

At 30 June 2021, the accumulated losses include a deduction of £0.5 million (2020: £0.2m) for the cost of own shares held in relation to employee share schemes.

Notes to the unaudited consolidated financial information

1. Basis of preparation and accounting policies

The financial information set out above does not constitute the company's statutory accounts for the years ended 30 June 2021 and 30 June 2020. The results for the year ended 30 June 2021 are unaudited. The auditor's report on the financial statements will include a material uncertainty in respect of Going Concern, which is not a modified opinion. The financial information for 2020 is derived from the statutory accounts for 2020 which have been delivered to the registrar of companies. The auditor has reported on the 2020 accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2021 will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the registrar of companies in due course.

The financial information has been prepared on the going concern basis in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006. The financial information has also been prepared in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial statements have been prepared under the historical cost convention, modified in respect of financial assets and liabilities (derivative financial instruments) at fair value through profit or loss, assets held for sale and defined benefit pension plan assets. The financial information has been prepared applying accounting policies that were applied in the preparation of the company's published consolidated financial statements for the year ended 30 June 2020.

The financial information does not constitute statutory accounts of the Group for the years ended 30 June 2021 and 2020 within the meaning section 435 of the Companies Act 2006 or contain sufficient information to comply with the disclosure requirements of IFRS.

Discontinued operations

During the 2019 financial year, the Group successfully completed the sale of the European Personal Care (PC) Liquids business. The financial results of this business have been treated as discontinued operations in the current and prior year financial statements. The remaining activities within the Group are referred to as continuing operations.

Going concern basis

The consolidated financial statements are prepared on a going concern basis.

The Group's base case forecasts are based on the Board approved budget and 5 year plan and indicate continued compliance with its banking covenants and sufficient liquidity throughout the going concern review period. The Group's base case scenario assumes revenue growth of 3.5%, raw materials prices reducing from current very high levels, but stabilising at a higher level than pre Covid-19 pandemic levels, interest rates remaining stable, and Sterling:Euro exchange rate of £1:€1.15.

The Directors have considered a severe but plausible downside scenario including a number of downside assumptions to stress test the Group's financial forecasts:

· Zero revenue growth;

· Divisional gross profit margins 10% lower than budgeted to reflect risk of further Covid-19 supply chain disruption / raw material input costs not reducing as currently projected;

· Interest rates increasing by 100 basis points; and

· Sterling weakening significantly against the Euro to £1:€1.10.

In the event that such a severe but plausible downside scenario occurs the Group would need to negotiate a covenant waiver to ensure the business meets its obligations for the next 12 months. The Group has also taken into consideration mitigating actions available to it, including reducing overhead and capital expenditure over the period.

After reviewing the current liquidity position, financial forecasts, stress testing of potential risks and considering the uncertainties described above, and based on the current funding facilities, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the Group financial statements. However, the occurrence of multiple downside potential risks represent a material uncertainty at 7 September 2021 that could cast significant doubt upon the Group's ability to continue as a going concern.

The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern.

Viability statement

In accordance with the requirements of the UK Corporate Governance Code ('the Code'), the Directors have performed a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. The Board has determined that a five ‑ year period to 30 June 2026 constitutes an appropriate period over which to provide its viability statement.

In assessing the Group's viability, the Directors have considered the current financial position of the Group and its principal risks and uncertainties. The analysis considers severe but plausible downside scenarios incorporating the principal risks from a financial and operational perspective, with the resulting impact on key metrics, such as debt headroom and covenants, considered. The alternative scenarios assume sensitivity around exchange rates and interest rates, along with significant reductions in revenue, margins and cash flow over the five ‑ year period. The Group's global footprint, product diversification and access to external financing all provide resilience against these factors and the other principal risks that the Group is exposed to. After conducting their viability review, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five ‑ year period of their assessment to 30 June 2026.

Alternative performance measures

The performance of the Group is assessed using a variety of adjusted measures that are not defined under IFRS and are therefore termed non-GAAP measures. The non-GAAP measures used are: adjusted operating profit, adjusted EBITDA, adjusted finance costs, adjusted profit before tax, adjusted earnings per share, free cash flow and cash conversion %, adjusted return on capital employed and net debt. The alternative performance measures we use may not be directly comparable with similarly titled measures used by other companies.

Adjusted measures exclude specific items that are considered to hinder comparison of the trading performance of the Group's businesses either year-on-year or with other businesses. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and Executive Committee, and is used for internal performance analysis and in relation to employee incentive arrangements. The Directors present these measures in the financial statements in order to assist investors in their assessment of the trading performance of the Group. Directors do not regard these measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with IFRS.

During the years under review, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items. Exceptional items and amortisation are excluded from adjusted operating profit because they are not considered to be representative of the trading performance of the Group's businesses during the year.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of the consolidated financial statements from which this preliminary announcement is derived, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 30 June 2020 except for the determination of cash-generating units. From 1 January 2021, the European Household business was restructured into three product technology-led and separately managed and accountable business divisions. As a result, the CGUs have been determined as Liquids, Unit Dosing, Powders, Aerosols and Asia Pacific, these being based on product technologies and the separate Asia Pacific location. All CGUs are lower than, or equal to, operating segments.

2. Segment information

Background

Financial information is presented to the Board by product technology for the purposes of allocating resources within the Group and assessing the performance of the Group's businesses. From 1 January 2021, the European Household business was restructured into three product technology-led and separately managed and accountable business divisions:

· Liquids - anything sold in a bottle or pouch, such as washing up liquid, bleach, disinfecting sprays;

· Unit Dosing - single-use products, typically auto dishwash tablets and laundry capsules; and

· Powders - mostly laundry powders, but with some auto dishwash powder products.

Our Asia Pacific and Aerosols businesses were already separately managed by standalone management teams and leadership.

Intra-group revenue from the sales of products is agreed between the relevant customer-facing units and eliminated in the segmental presentation that is presented to the Board. Programme Compass is delivering an increased focus on cost optimisation and has meant that most overhead costs are now directly attributed within the respective divisions income statements. The only costs now allocated out to the divisions are central overheads with corporate costs being retained at a Group level. Central overheads are allocated to a reportable segment proportionally using an appropriate cost driver. Corporate costs, which include the costs associated with the Board and the Executive Leadership Team, governance and listed company costs and certain central functions (mostly associated with financial disciplines such as treasury), are reported separately. Exceptional items are not allocated to the reportable segments as this reflects how they are reported to the Board. Finance expense and income are not allocated to the reportable segments, as the central treasury function manages this activity, together with the overall net debt position of the Group.

The Board uses adjusted operating profit to measure the profitability of the Group's businesses. Adjusted operating profit is, therefore, the measure of segment profit presented in the Group's segment disclosures. Adjusted operating profit represents operating profit before specific items that are considered to hinder comparison of the trading performance of the Group's businesses either period-on-period or with other businesses. During the periods under review, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items.

	Liquids	Unit Dosing	Powders	Aerosols	Asia Pacific	Corporate	Group
Year ended 30 June 2021	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Segment revenue	376.1	181.5	66.3	34.0	24.4	-	682.3
Adjusted operating profit/(loss)	11.7	16.7	(2.3)	0.8	1.9	(4.7)	24.1
Amortisation of intangible assets							(2.4)
Exceptional items							(6.2)
Operating profit							15.5
Finance costs							(4.2)
Profit before taxation							11.3

Inventories	45.0	24.6	12.4	8.4	2.5	-	92.9
Capital expenditure	12.4	5.7	0.7	0.5	2.3	3.0	24.6
Amortisation and depreciation	13.0	6.3	1.5	0.5	1.0	1.5	23.8

	Liquids	Unit Dosing	Powders	Aerosols	Asia Pacific	Corporate	Group
Year ended 30 June 2020	£m	£m	£m	£m	£m	£m	£m
Continuing operations
Segment revenue	383.2	183.5	78.2	35.2	26.1	-	706.2
Adjusted operating profit/(loss)	15.5	17.2	(4.1)	2.3	3.0	(5.6)	28.3
Amortisation of intangible assets							(2.1)
Exceptional items							(10.8)
Operating profit							15.4
Finance costs							(4.2)
Profit before taxation							11.2

Inventories	43.8	26.6	15.4	7.9	3.8	-	97.5
Capital expenditure	12.6	2.9	0.8	1.2	0.3	2.6	20.4
Amortisation and depreciation	12.6	6.3	1.6	0.3	0.8	1.3	22.9

Geographical information

	Revenues from external customers		Non-current assets
	2021	2020	2021	2020
	£m	£m	£m	£m
United Kingdom	143.6	161.9	41.7	45.3
Germany	141.5	142.2	-	-
France	137.7	146.9	9.1	9.6
Other Europe	227.9	224.9	109.9	111.5
Australia	12.0	12.2	-	-
Other Asia-Pacific	16.0	15.8	7.0	4.0
Rest of the World	3.6	2.3	-	-
Total	682.3	706.2	167.7	170.4

The geographical revenue information above is based on the location of the customer.

Non-current assets for this purpose consist of goodwill, other intangible assets, property, plant and equipment and right-of-use assets.

Revenue by major customer

In 2021 and 2020, no individual customer provided more than 10% of the Group's revenue.

During 2021, the top ten customers accounted for 47% of total Group revenue (2020: 50%).

3. Exceptional items

Analysis of exceptional items

	2021	2020
	£m	£m
Continuing operations
Reorganisation and restructuring costs:
UK Aerosols closure	0.4	0.1
Factory footprint review	0.3	9.4
Review of strategy, organisation and operations	4.4	1.3
Logistics transformation programme	1.1	-
Total continuing operations	6.2	10.8

Discontinued operations
Sale of PC Liquids business	0.7	0.3
Total discontinued operations	0.7	0.3
Total	6.9	11.1

Total exceptional items of £6.9 million were recorded during the year (2020: £11.1m). The charge primarily comprises the following:

Items relating to continuing operations

Total exceptional items incurred in relation to the continuing business of £6.2 million were recorded during the year (2020: 10.8m). The charges comprise the following:

· £0.4 million in respect of one-off legacy costs in relation to the former UK Aerosols site in Hull;

· £0.3 million relating to the closure costs for the Barrow production facility, which ceased operations in October 2020;

· £1.1 million relating to the group's logistics transformation programme, including £0.7 million of redundancy costs, £0.2 million of site clearance costs; £0.1 million of fixed asset write offs and £0.1 million in other project expenses.

Items relating to discontinued operations

An exceptional charge of £0.7 million was incurred in respect of the impairment of a leased asset relating to the closed St Helens site.

4. Operating profit

Operating profit is stated after charging/(crediting):

	2021	2020
	£m	£m
Cost of inventories (included in cost of sales)	397.4	412.7
Employee costs	128.9	132.7
Amortisation of intangible assets	2.4	2.1
Depreciation of property, plant and equipment	17.6	17.1
Depreciation of right-of-use assets	3.8	3.7
Impairment:
Property, plant and equipment	0.3	1.7
Right-of-use assets	0.7	-
Inventories	2.9	1.9
Trade receivables	1.3	1.1
Expense relating to short-term leases	1.0	0.6
Expense relating to low-value leases	0.3	0.3
Research and development costs not capitalised	7.6	6.8
Net foreign exchange (gain)/loss	(0.4)	0.4

5. Finance costs

	2021	2020
	£m	£m
Finance costs
Interest on bank loans and overdrafts	2.7	2.6
Interest on lease liabilities	0.3	0.2
Net foreign exchange gain	(0.2)	(0.3)
Amortisation of facility fees	0.4	0.3
Non-utilisation fees	0.6	0.6
Premium on average rate currency options	-	0.1
	3.8	3.5
Post-employment benefits:
Net interest cost on defined benefit obligation	0.4	0.6
Adjusted finance costs	4.2	4.1
Unwind of discount on provisions	-	0.1
Total finance costs	4.2	4.2

Interest rate swaps are used to manage the interest rate profile of the Group's borrowings. Accordingly, net interest payable or receivable on interest rate swaps is included in finance costs.

6. Taxation

Income tax expense/(credit):	2021			2020
	UK	Overseas	Total	UK	Overseas	Total
From continuing operations	£m	£m	£m	£m	£m	£m
Current tax expense/(credit)
Current year	-	4.1	4.1	-	8.0	8.0
Adjustment for prior years	-	(2.6)	(2.6)	(0.2)	(2.6)	(2.8)
	-	1.5	1.5	(0.2)	5.4	5.2
Deferred tax (credit)/expense
Origination and reversal of temporary differences	(5.0)	0.6	(4.4)	(1.0)	0.4	(0.6)
Adjustment for prior years	0.1	0.1	0.2	0.4	(0.2)	0.2
Impact of change in tax rate	-	-	-	(0.3)	-	(0.3)
	(4.9)	0.7	(4.2)	(0.9)	0.2	(0.7)
Income tax (credit)/expense	(4.9)	2.2	(2.7)	(1.1)	5.6	4.5

The current tax adjustment for the prior year includes £2.2 million credit for the release of a provision following settlement of a tax enquiry and £0.3 million credit relating to the release of provisions for uncertain tax treatments due to the expiry of statutes of limitation.

Reconciliation to UK statutory tax rate

The total tax charge on the Group's profit before tax for the year differs from the theoretical amount that would be charged at the UK standard rate of corporation tax for the following reasons:

	2021	2020
From continuing operations	£m	£m
Profit before tax	11.3	11.2
Profit before tax multiplied by the UK corporation tax rate of 19.00% (2020: 19.00%)	2.1	2.2
Effect of tax rates in foreign jurisdictions	1.0	2.6
Non-deductible expenses	1.4	1.5
Tax incentives/non-taxable income	(0.1)	(0.6)
Tax losses and other temporary differences for which no deferred tax recognised	(3.8)	1.3
Change in tax rate	(1.4)	(0.3)
Other differences	0.5	0.4
Adjustment for prior years	(2.4)	(2.6)
Total tax (credit)/expense in profit or loss	(2.7)	4.5
Exclude adjusting items	1.6	2.3
Total tax (credit)/expense in profit or loss before adjusting items	(1.1)	6.8

Taxation is provided at current rates on the profits earned for the year.

7. Earnings per ordinary share

Basic earnings per ordinary share is calculated by dividing the profit for the year attributable to owners of the Company by the weighted average number of the Company's ordinary shares in issue during the financial year. The weighted average number of the Company's ordinary shares in issue excludes 372,864 shares (2020: 123,162 shares), being the weighted average number of own shares held during the year in relation to employee share schemes.

	Reference	2021	2020
Weighted average number of ordinary shares in issue (million)	a	179.1	182.8
Effect of dilutive LTIP and RSU awards (million)		0.3	-
Weighted average number of ordinary shares for calculating diluted earnings per share (million)	b	179.4	182.8

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming the conversion of all potentially dilutive ordinary shares.

During the year, the Company had equity-settled LTIP and RSU awards with a nil exercise price that are potentially dilutive ordinary shares.

Adjusted earnings per share measures are calculated based on profit for the year attributable to owners of the Company before adjusting items as follows:

		2021	2020
From continuing operations	Reference	£m	£m
Earnings for calculating basic and diluted earnings per share	c	14.0	6.7
Adjusted for:
Amortisation of intangible assets		2.4	2.1
Exceptional items		6.2	10.8
Unwind of discount on provisions		-	0.1
Taxation relating to the above items		(1.6)	(2.3)
Earnings for calculating adjusted earnings per share	d	21.0	17.4

		2021	2020
	Reference	pence	pence
Basic earnings per share	c/a	7.8	3.7
Diluted earnings per share	c/b	7.8	3.7
Adjusted basic earnings per share	d/a	11.7	9.5
Adjusted diluted earnings per share	d/b	11.7	9.5

		2021	2020
From discontinued operations	Reference	£m	£m
Losses for calculating basic and diluted earnings per share	c	(0.6)	(0.2)
Adjusted for:
Exceptional items		0.7	0.3
Taxation relating to the above items		(0.1)	(0.1)
Losses for calculating adjusted earnings per share	d	-	-

		2021	2020
	Reference	pence	pence
Basic loss per share	c/a	(0.3)	(0.1)
Diluted loss per share	c/b	(0.3)	(0.1)
Adjusted basic loss per share	d/a	-	-
Adjusted diluted loss per share	d/b	-	-

		2021	2020
Total attributable to ordinary shareholders	Reference	£m	£m
Earnings for calculating basic and diluted earnings per share	c	13.4	6.5
Adjusted for:
Amortisation of intangible assets		2.4	2.1
Exceptional items		6.9	11.1
Unwind of discount on provisions		-	0.1
Taxation relating to the above items		(1.7)	(2.4)
Earnings for calculating adjusted earnings per share	d	21.0	17.4

		2021	2020
	Reference	pence	pence
Basic earnings per share	c/a	7.5	3.6
Diluted earnings per share	c/b	7.5	3.6
Adjusted basic earnings per share	d/a	11.7	9.5
Adjusted diluted earnings per share	d/b	11.7	9.5

8. Payments to shareholders

As part of the Group's strategy reset, it is targeting an accounting basis net debt/adjusted EBITDA ratio of 2x or less. Our new distribution approach will link distribution to this debt cover measure. It is the Board's intention that any future payments to shareholders will be made by way of a cash dividend, rather than by the allotment and issue of B Shares. Consequently, the Board is not seeking shareholder approval at the AGM to capitalise reserves for the purposes of issuing B Shares or to grant directors authority to allot and issue such shares.

Payments to ordinary shareholders made or proposed in respect of the year were as follows:

	2021		2020
	Pence		Pence
	per share	£m	per share	£m
Interim	-	-	-	-
Final	-	-	1.1	2.0
Total for the year	-	-	1.1	2.0

As the net debt/adjusted EBITDA ratio at half-year was over 2x, an interim payment to shareholders was not made. At 30 June 2021, the ratio was also over 2x and in line with its revised Distribution Policy, the Board is not recommending a final dividend in 2021.

Holders of B Shares are permitted to keep their B Shares or redeem all (or part of) them for cash. Details of the B Share scheme can be found in the booklet entitled "Your Guide to B Shares" on the Company's website at www.mcbride.co.uk . Previously shareholders had had the opportunity to redeem their B Shares in May and November each year. Going forward, it is the Board's intention for B Share redemptions to take place in November of each year only.

Movements in the B Shares were as follows:

		Nominal
	Number	value
	000	£m
At 1 July 2019	815,631	0.8
Issued	3,290,369	3.3
Redeemed	(3,392,870)	(3.4)
At 30 June 2020	713,130	0.7
Issued	2,010,780	2.0
Redeemed	(1,976,511)	(2.0)
At 30 June 2021	747,399	0.7

9. Intangible assets, property, plant and equipment and right-of-use assets

	Goodwill
	and other	Property,
	intangible	plant and	Right-of-use
	assets	equipment	assets
	£m	£m	£m
Net book value at 1 July 2020	28.4	134.7	7.3
Currency translation differences	(0.3)	(7.2)	(0.5)
Additions	2.2	22.4	8.1
Impairment	-	(0.3)	(0.7)
Disposal of assets	-	(0.6)	(0.4)
Transfers to non-current assets held for sale	-	(1.6)	-
Depreciation charge	-	(17.6)	(3.8)
Amortisation charge	(2.4)	-	-
Net book value at 30 June 2021	27.9	129.8	10.0

Included within goodwill and other intangible assets is goodwill of £19.7 million (30 June 2020: £19.9m), computer software of £6.2 million (30 June 2020: £5.6m), brands of £0.3 million (30 June 2020: £0.7m) and customer relationships of £1.6 million (30 June 2020: £2.2m).

Capital commitments as at 30 June 2021 amounted to £1.8 million (30 June 2020: £6.0m). At 30 June 2021 the Group was committed to future minimum lease payments of £3.0 million (30 June 2020: £nil) in respect of leases which have not yet commenced and for which no lease liability has been recognised.

10. Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

There have been no material changes in the risk management policies in either the 30 June 2021 or 30 June 2020 financial years.

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

· Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;

· Level 2 - inputs other than Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and

· Level 3 - inputs that are not based on observable market data (unobservable inputs).


	As at	As at
	30 June	30 June
	2021	2020
	£m	£m
Assets
Level 2:
Derivative financial instruments
Forward currency contracts	0.1	1.4
Interest rate swaps	0.1	-
Contracts for Difference (HDPE)	0.1	-
Total financial assets	0.3	1.4
Liabilities
Level 2:
Derivative financial instruments
Forward currency contracts	(0.2)	(0.4)
Interest rate swaps	(0.1)	(0.3)
Total financial liabilities	(0.3)	(0.7)

Derivative financial instruments

Derivative financial instruments comprise the foreign currency derivatives, non-deliverable commodity derivatives and interest rate derivatives that are held by the Group in designated hedging relationships. Foreign currency forward contracts are measured by reference to prevailing forward exchange rates. Foreign currency options are measured using a variant of the Monte Carlo valuation model. Interest rate swaps and caps are measured by discounting the related cash flows using yield curves derived from prevailing market interest rates.

Valuation levels and techniques

There were no transfers between levels during the period and no changes in valuation techniques.

Financial assets and liabilities measured at amortised cost

The fair value of borrowings are as follows:


	As at	As at
	30 Jun	30 June
	2021	2020
	£m	£m
Current	57.1	36.7
Non-current	86.2	109.0
Total borrowings	143.3	145.7

The fair value of the following financial assets and liabilities approximate to their carrying amount:

· trade and other receivables;

· other current financial assets;

· cash and cash equivalents; and

· trade and other payables.

11. Net debt

Movements in net debt were as follows:

		IFRS 16		Currency
	At 1 July	non-cash	Cash	translation	At 30 June
	2020	movements⁽¹⁾	flows	differences	2021
	£m	£m	£m	£m	£m
Cash and cash equivalents	44.2	-	(18.1)	(1.2)	24.9
Overdrafts	(4.1)	-	(2.8)	1.0	(5.9)
Bank and other loans	(132.9)	-	1.7	5.1	(126.1)
Lease liabilities	(8.7)	(7.9)	4.9	0.4	(11.3)
Net debt	(101.5)	(7.9)	(14.3)	5.3	(118.4)

1. IFRS 16 non-cash movements includes additions (£7.9m), disposals (£0.3m) and interest charged (£0.3m).

12. Pensions and post-employment benefits

The Group provides a number of post-employment benefit arrangements. In the UK, the Group operates a closed defined benefit pension scheme and a defined contribution pension scheme. Elsewhere in Europe, the Group has a number of smaller unfunded post-employment benefit arrangements that are structured in accord with local conditions and practices in the countries concerned.

The net value of the pension deficit for the UK scheme increased in the year from £28.4 million at the end of the previous year to £29.3 million. The deficit is broadly unchanged over the period due to changes in asset values being broadly in line with changes in pension liabilities.

At 30 June 2021, the Group's post-employment benefit obligations outside the UK amounted to £2.6 million (2020: £3.1m).

Defined benefit schemes had the following effect on the Group's results and financial position:


	Year ended	Year ended
	30 June	30 June
	2021	2020
	£m	£m
Profit or loss
Service cost and administration expenses	(0.9)	(0.7)
Charge to operating profit	(0.9)	(0.7)
Net interest cost on defined benefit obligation	(0.4)	(0.6)
Charge to profit before taxation	(1.3)	(1.3)
Other comprehensive expense
Net actuarial loss	(4.2)	(3.7)
Other comprehensive expense	(4.2)	(3.7)


	As at	As at
	30 June	30 June
	2020	2020
	£m	£m
Balance sheet
Defined benefit obligations:
UK - funded	(161.9)	(163.9)
Other - unfunded	(2.6)	(3.1)
	(164.5)	(167.0)
Fair value of scheme assets	132.6	135.5
Deficit on the schemes	(31.9)	(31.5)

For accounting purposes, the UK scheme's benefit obligation as at 30 June 2021 has been calculated based on data gathered for the 2021 triennial actuarial valuation and by applying assumptions made by the Group on the advice of an independent actuary in accordance with IAS 19, 'Employee Benefits'.

13. Provisions

	Reorganisation
	and	Leasehold	Environmental
	restructuring	dilapidations	remediation	Other	Total
	£m	£m	£m	£m	£m
At 1 July 2019	3.5	0.8	3.0	0.6	7.9
Charged to profit or loss	7.4	0.2	0.1	(0.3)	7.4
Unwind of discount	-	0.1	-	-	0.1
Non-cash movement	(2.4)	-	-	-	(2.4)
Utilisation	(2.9)	-	(0.2)	-	(3.1)
At 30 June 2020	5.6	1.1	2.9	0.3	9.9
Charged to profit or loss	3.3	0.4	-	0.1	3.8
Currency translation differences	(0.1)	-	(0.1)	-	(0.2)
Utilisation	(6.7)	-	(0.4)	-	(7.1)
At 30 June 2021	2.1	1.5	2.4	0.4	6.4

Analysis of provisions:

	2021	2020
	£m	£m
Current	2.7	6.3
Non-current	3.7	3.6
Total	6.4	9.9

Reorganisation costs in the year of £3.3 million comprises £2.0 million of costs associated with Programme Compass, £1.0 million of costs associated with the Group's logistics transformation programme and £0.3 million of costs relating to the closure of the Barrow site.

Of the closing provision for reorganisation and restructuring projects £1.2 million relates to Programme Compass, £0.6 million relates to the Group's logistics transformation programme and £0.3 million is in relation to the closure of the Barrow site. The provision is expected to be utilised in full within twelve months of the balance sheet date.

Leasehold dilapidations provision relates to costs expected to be incurred to restore leased properties to their original condition at the end of the respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to undertake restoration works. Amounts will be utilised as the respective leases end and restoration works are carried out, within a period of approximately four years.

Environmental remediation provision relates to historical environmental contamination at a site in Belgium and will be utilised as the land is restored within a period of approximately ten years.

Other provisions relate to one-off legacy costs concerning the former UK Aerosols site in Hull. The liability is expected to be settled within a period of approximately two years.

14. Exchange rates

The principal exchange rates used to translate the results, assets and liabilities and cash flows of the Group's foreign operations into sterling were as follows:

	Average rate		Closing rate
	2021	2020	2021	2020
Euro	1.13	1.14	1.17	1.10
US Dollar	1.35	1.26	1.39	1.23
Danish Krone	8.40	8.51	8.67	8.17
Polish Zloty	5.09	4.96	5.27	4.89
Czech Koruna	29.59	29.60	29.70	29.31
Hungarian Forint	403.41	384.57	409.86	390.80
Malaysian Ringgit	5.55	5.30	5.75	5.26
Australian Dollar	1.80	1.88	1.85	1.79

15. Share capital

	Allotted and fully paid
	Number	£m
Ordinary shares of 10 pence each
At 1 July 2019 and 30 June 2020	182,840,301	18.3
Shares bought back on-market and cancelled	(8,597,599)	(0.9)
At 30 June 2021	174,242,702	17.4

Ordinary shares carry full voting rights and ordinary shareholders are entitled to attend Company meetings and to receive payments to shareholders.

McBride plc announced on 2 November 2020 that it would commence a share buy-back programme of up to £12 million in McBride plc ordinary shares, running from 2 November 2020 through to the date of the Company's next AGM. The maximum number of shares that may be repurchased by the company under the programme is 18.3 million. The purpose of the share buy-back programme is to reduce the share capital of the Company (any shares repurchased for this purpose will be cancelled). The Board believed that it was in the interests of all shareholders to commence this programme based on the Board's assessment that McBride's current share price did not reflect the value of the underlying business, which has resilient revenues, a strong balance sheet and highly visible cash flows.

During the year, the Group purchased and cancelled 8,597,599 ordinary shares representing 4.7% of the issued ordinary share capital as at 2 November 2020. The buy-back and cancellation was approved by shareholders at the 2020 AGM. The shares were acquired at an average price of 79.3 pence per share, with prices ranging from 61.0 pence per share to 90.0 pence per share. The total cost of £6.8 million was deducted from equity. A transfer of £0.9 million was made from share capital to the capital redemption reserve. Post year-end, in the period up to 1 September 2021, the Group has purchased and cancelled a further 0.2 million ordinary shares. These shares were acquired at an average price of 76.9 pence per share, with prices ranging from 73.3 pence per share to 78.6 pence per share. From the date of this announcement, the Board intends to end the share buy-back programme announced on 2 November 2020.

16. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and, therefore, are not required to be disclosed in these financial statements. Details of transactions between the Group and other related parties are disclosed below.

Post-employment benefit plans

Contributions amounting to £6.3 million (2020: £6.9m) were payable by the Group to pension schemes established for the benefit of its employees.

Compensation of key management personnel

For the purposes of these disclosures, the Group regards its key management personnel as the Directors and certain members of the senior executive team.

Compensation payable to key management personnel in respect of their services to the Group was as follows:

	2021	2020
	£m	£m
Short-term employee benefits	2.4	1.9
Post-employment benefits	0.1	0.1
Share-based payments	0.2	0.1
Total	2.7	2.1

17. Key performance indicators (KPIs)

Management uses a number of KPIs to measure the Group's performance and progress against its strategic objectives. The most important of these are noted and defined below:

· Continuing revenue - defined as revenue from contracts with customers from the sale of goods measured as the invoiced amount, net of sales rebates, discounts value added tax and other sales taxes;

· Cost savings - defined as cost savings achieved from the implementation of the Compass strategy;

· Adjusted EBITDA margin - means operating profit excluding exceptional items and amortisation of intangible assets before depreciation;

· Free cash flow increase - defined as cash generated from continuing operations before exceptional items;

· Adjusted ROCE improvement - defined as adjusted operating profit from continuing operations divided by the average period-end capital employed. Capital employed is defined as the total of goodwill and other intangible assets, property, plant and equipment, right-of-use assets, inventories, trade and other receivables less trade and other payables;

· Customer service level - defined as the volume of products delivered in the correct volumes and within requested timescales, as a percentage of total volumes ordered by customers;

· Customer quality - we measure using a customer satisfaction index which combines critical issues, audit results, returns and complaints;

· Health & safety - defined as our lost time frequency rate as number of lost time Injuries x 100.000 divided by total number of man-hours worked;

· Gender split - defined as the proportion of our total workforce that is female; and

· Research and development expenditure - defined as total research and development expenditure as a percentage of Group revenue.

Additional information

Annual General Meeting

The Annual General Meeting will be held on 19 October 2021.

Report and Accounts

Copies of the Annual Report and Financial Statements will be circulated to shareholders in October and can be viewed after the posting date on the McBride website.

Note: This report contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.

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