Interim Results
McBride PLC
12 February 2004
12 February 2004
McBride plc
Interim Announcement for the Half-Year Ended 31 December 2003
McBride supplies more than 20 million Private Label household and personal care
products every week to Europe's leading retailers.
Highlights of the half-year results are as follows:
• Group turnover at £254.0 million was up 6.1%, versus the same period last
year
• Group operating profit was £17.2 million (before £0.7m goodwill
amortisation), up 17% from £14.7 million
• Pre tax profit was £16.5 million, up 39% from £11.8 million
• Net debt at £43.6 million has continued to fall from £61.1million as at
30 June 2003
• Cash flow (before financing and dividends) per share increased to 13.1p
from 11.2p
• Basic Earnings per share was 6.1p, a 30% improvement from 4.7p
• Interim dividend per share of 1.2p, up 50% from 0.8p
Mike Handley, Chief Executive, commented:
'These strong results reflect McBride's continued focus on cash generation and
improving efficiency at a time when market conditions in both the UK and
Continental Europe remain competitive. The prospects for growth of Private
Label, particularly in Continental European business remain encouraging. Since
December 2003 trading has remained satisfactory and we remain confident about
the year as a whole.'
For further information please contact:
McBride plc
Mike Handley, Chief Executive 01494 60 70 50
Miles Roberts, Finance Director 01494 60 70 50
Financial Dynamics 020 7831 3113
Andrew Dowler
Overview
• The Group has continued to deliver on its strategy of improving margins, cash
generation and increased dividends - sixth consecutive half yearly increase
in operating profit.
• Group sales rose 6.1% to £254.0m. At constant exchange rates, turnover grew
1% which comprised a 2.6% growth in core Private Label products, partly
offset by a reduction in contract manufacturing.
• Continental European sales were £146.5m, a 2% increase on last year's
comparative figure at constant exchange rates. Their share of Group sales
has continued to increase and is now 58%. Sales in France and Spain led the
4.8% growth in our core products.
• UK sales of £105.1m were slightly down on those during the comparable period
last year, £105.7m, reflecting a generally flat market and an increased
focus on contract profitability.
• Operating profit, before goodwill amortisation, aided by efficiency
improvements combined with sales growth rose to £17.2m from £14.7m.
• The Group continues to review plant efficiency and capacity with a view
to ensuring future performance is optimised.
• Cashflow aided by improved profitability, working capital and asset
utilisation has reduced debt from £61.1m to £43.6m over the 6 months to
December 2003.
Commercial Review
Continental Europe
McBride CE (CE), our Continental European business, sells in all countries of
mainland Europe. During the half year sales and profits grew.
CE core Private Label household and personal care sales were up 4.8% in local
currency. Once again Spain and France were the key drivers of European sales
growth with increases of 8% and 7% respectively.
Continuing focus on the cost structure improved profits in local currency by
11%.
Competition throughout the grocery sector in Europe remains strongly influenced
by the growth of the discount store format across Europe. The growth of the
discounters and response from the major grocery retailers favours the
development of improved private label offers.
During the period, the company continued its managed exit from contract
manufacturing of industrial products in Belgium. European contract manufacturing
sales fell by 29% following the exit and now accounts for less than 5% of CE's
business.
Intersilesia's business in Poland continued to be impacted by the economic
downturn and highly competitive retail environment in Poland.
The Group has continued to develop sales in central Europe following last year's
encouraging results. Sales in the period in Hungary were up 4.7% in local
currency.
United Kingdom
The half year saw good profit improvement. Overall UK sales showed a marginal
decline of 0.5% in the period while the underlying core Private Label household
and personal care sales were up 1.3%. The UK grocery retail market continued to
be very competitive with the major chains competing strongly for market share.
Overall sales in the UK of £105.1m were only slightly lower than the same period
last year at £105.7m.
The UK business continued to focus on improving its operational cost structure
and manufacturing efficiencies, as well as business mix to offset the impact of
the competitive market environment. Operating profit at the UK business of £8.6m
was up 14% compared to the same period last year.
Private Label's volume share of the overall household products market in
(calendar year) 2003 grew from 32.2% to 32.5% while its value share declined
from 23.7% to 23.4% reflecting the selling price trends. Volume growth was
especially strong in Air Care +14.4%, Washing Up Liquids +10%, Cleaners +7.6%,
Laundry products +5.4% and Machine Dish wash products +4.0% while Fabric
Conditioners and Toilet Care showed small declines of 2.2% and 0.4%
respectively.
McBride's household business in the UK successfully regained laundry powder
volume lost last year to European suppliers competing on the back of a weak
Euro.
The personal care business of McBride continued to build on its excellent
performance in 2002-03 with sales up 4% in the six months to December 2003. This
achievement was despite an overall static market in volume terms that saw
private label's share of the market suffering a 3% volume decline across all
outlets while Private Label sales by value fell 10% in the 52 weeks to January
2004.
During the period the Bradford factory's Environmental Management system was
audited against ISO 14001 standard and confirmation of accreditation is expected
shortly. The business is also pleased to confirm that all UK sites now have
Investors in People status.
Aerosol Products Limited (APL)
The performance improvement made last year in the Joint Venture has been
maintained in the six months to 31 December 2003. APL generated an operating
profit of £0.5m (Group share) in the period and was cash generative.
Sales of £16.6m (Group share £8.3m) were up 10.6% compared to the same period
last year despite some difficulties arising in the East European export markets
resulting from the increasing strength of Sterling. Higher contract sales more
than offset lower export sales.
Rest of World
Rest of World covers all markets outside Europe. Against the backdrop of
stronger Euro and Sterling currencies sales to these markets were down 7% to
£2.4m compared with £2.6m in the same period last year.
Financial Review
Profit and loss
Half year turnover grew 6.1% from £239.5m to £254.0m, including an exchange
benefit of £11.9m caused by a stronger Euro versus Sterling. At constant
exchange rates turnover grew 1% reflecting a 2% increase in continental Europe
and a flat UK market.
To align with FRS 5 - Application Note G, which was issued in November 2003,
turnover is now stated net of sales discounts and rebates. Previously these
were accounted for within Administrative Costs. Prior periods have been
restated.
The £2.5m favourable operating profit before goodwill amortisation variance -
£17.2m vs £14.7m - included a £0.7m exchange impact from the conversion of Euro
denominated profits into Sterling. However, this favourable exchange influence
is broadly offset by Euro denominated costs in the UK operations.
Pre-tax profits grew from £11.8m to £16.5m, reflecting lower interest costs and
a higher APL contribution. Debt reduction and lower rates brought interest
costs down from £2.2m to £0.4m. At the APL joint venture, revenue increases and
cost savings - reaping the benefits of the 2002 restructuring exercise - have
resulted in their pre-tax contribution improving from breakeven to £0.4m.
The tax charge, under FRS19 that requires full provision for deferred tax, has
risen from £3.5m to £5.6m, an increase from 28% to 33% in the effective rate.
This rate reflects the mix of mainstream tax rates applicable in the UK and
Continental Europe, and is due to both UK ACT being fully utilised at June 2003
and lower loss offsets in Continental Europe in this half year.
Cash flow and liquidity
Continuing strong cash generation has reduced net debt, over the six months
since 30 June, from £61.1m to £43.6m. Higher operating inflows versus 2002
(£29.3m vs £23.5m) reflects increased profits, lower interest costs and a
positive working capital impact (£4.9m vs £2.0m). This is partly offset by
higher taxation payments, although these remain substantially below the charge
in the Profit and Loss due to continued utilisation of ACT.
Improving asset utilisation has ensured that capital expenditure levels have
continued to run at less than depreciation - £6.1m v £10.2m.
Balance Sheet
Overall stock and debtor levels have remained flat since June 2003. UK stocks
have reduced by £1m offset by an equal increase in Continental Europe reflecting
some additional stock cover for the Christmas period. Creditors due within one
year however have risen by £6.4m. The key increases have been tax up £2.7m (see
P&L comments), trade creditors up £1.8m (Continental Europe trading up) and a
£1.1m increase in short term borrowings. Creditors greater than one year have
however reduced from £57.2m at 30 June to £38.1m - reflecting the reduction in
net debt.
Gearing has further reduced from 78% (net debt / equity) as at 30 June 2003 to
50% as at 31 December. Net tangible fixed assets have reduced slightly over the
six months, from £128.3m to £125.0m.
The ongoing focus on operational efficiencies, asset utilisation, revenue
generation and tight capital expenditure and working capital control is
encapsulated in the continuing increase in the average return on capital
employed - up to 24.2% for the half-year versus 19.6% for the year ending 30
June 2003 and 18.0% for the previous half-year.
Earnings and Dividends
Earnings per share, on an undiluted basis, were 6.1 p (Dec 2002, 4.7 p).
An interim dividend of 1.2 p per share (Dec 2002, 0.8 p) will be paid on 28 May
2004 to shareholders on the record on 30 April 2004.
Current Trading and Outlook
The Company has had a satisfactory start to the second half and the Board
remains confident for the year as a whole.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited
Unaudited restated Unaudited
6 months to 6 months to restated
31 Dec 31 Dec Year ended
2003 2002 30 Jun 2003
Note £m £m £m
Turnover
Continuing operations and share of joint venture 262.3 247.0 501.9
Less: share of joint venture's turnover (8.3) (7.5) (15.1)
Group turnover 1 254.0 239.5 486.8
Cost of sales (157.7) (148.9) (299.9)
Gross profit 96.3 90.6 186.9
Distribution costs (16.4) (15.3) (31.2)
Administrative costs:
Before goodwill amortisation (62.7) (60.6) (124.6)
Goodwill amortisation (0.7) (0.7) (1.4)
Administrative costs including goodwill amortisation (63.4) (61.3) (126.0)
Group operating profit 1 16.5 14.0 29.7
Share of joint venture's operating profit 0.5 0.2 0.5
Profit on ordinary activities before interest 17.0 14.2 30.2
Group interest receivable and similar income 0.9 0.2 0.6
Group interest payable and similar charges (1.3) (2.4) (4.2)
Share of joint venture's interest payable and similar (0.1) (0.2) (0.4)
charges
Profit on ordinary activities before taxation 16.5 11.8 26.2
Group Tax on profit on ordinary activities (5.6) (3.5) (7.9)
Profit on ordinary activities after taxation 10.9 8.3 18.3
Equity minority interest - - (0.1)
Profit for the period 10.9 8.3 18.2
Dividends proposed (2.1) (1.4) (5.2)
Retained profit for the period 8.8 6.9 13.0
Earnings per ordinary share (pence)
* Basic 4 6.1 4.7 10.2
* Diluted 5.9 4.6 10.1
* Basic before goodwill amortisation, share 6.3 5.1 11.0
of joint venture and non operating items
Dividend per share (pence) 1.2 0.8 2.9
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited
Unaudited restated restated
As at As at As at
31 Dec 2003 31 Dec 2002 30 June 2003
Note £m £m £m
Fixed assets
Intangible assets 8.3 9.7 9.0
Tangible assets 6 125.0 130.1 128.3
Total fixed assets 133.3 139.8 137.3
Current assets
Stocks 6 41.3 42.1 41.1
Debtors 113.9 108.3 114.7
Cash at bank and in hand 0.2 3.0 0.7
Creditors: amounts falling due within one year (154.8) (137.5) (148.4)
Net current assets 0.6 15.9 8.1
Total assets less current liabilities 133.9 155.7 145.4
Creditors: amounts falling due after more than one year (38.1) (77.3) (57.2)
Provisions for liabilities and charges (7.6) (4.9) (7.9)
Investment in joint venture:
Share of gross assets 5.4 4.3 3.4
Share of gross liabilities (6.8) (6.1) (5.1)
Net investment in joint venture (1.4) (1.8) (1.7)
Net assets 86.8 71.7 78.6
Capital and reserves
Called up share capital 17.8 17.8 17.8
Share premium account 139.3 139.3 139.3
Profit and loss account 3 (70.3) (85.5) (78.5)
Equity shareholders' funds 86.8 71.6 78.6
Equity minority interest - 0.1 -
Total shareholders' funds 86.8 71.7 78.6
CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
Note £m £m £m
Net cash inflow from operating activities 5 32.3 27.0 63.0
Returns on investments and servicing of finance (0.3) (2.0) (4.3)
Taxation (2.7) (1.5) (6.9)
Operating cash inflow after taxation and finance 29.3 23.5 51.8
costs
Net capital expenditure (6.1) (3.6) (10.3)
Equity dividends paid (5.2) (1.3) (3.7)
Cash inflow before financing 18.0 18.6 37.8
Financing (19.5) (10.6) (33.7)
(Decrease) / increase in cash in the period (1.5) 8.0 4.1
Reconciliation of net cash flow to movement in net debt
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
£m £m £m
(Decrease) / Increase in cash in the period (1.5) 8.0 4.1
Cash inflow from movement in debt and lease financing 19.5 10.6 33.7
Change in net debt resulting from cash flows 18.0 18.6 37.8
Translation differences (0.5) (0.3) (4.0)
Movement in net debt in the period 17.5 18.3 33.8
Net debt at the beginning of the period (61.1) (94.9) (94.9)
Net debt at the end of the period (43.6) (76.6) (61.1)
Consolidated statement of total recognised gains and losses
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
£m £m £m
Profit for the period 10.9 8.3 18.2
Unrealised foreign currency differences (0.6) 0.3 1.2
Total recognised gains and losses 10.3 8.6 19.4
Reconciliation of movements in shareholders' funds
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
£m £m £m
Profit for the period 10.9 8.3 18.2
Equity dividends (2.1) (1.4) (5.2)
Retained profit 8.8 6.9 13.0
Unrealised foreign currency differences (0.6) 0.3 1.2
Opening equity shareholders' funds 78.6 64.4 64.4
Closing shareholders' funds 86.8 71.6 78.6
Notes to the interim financial statements
1) Segmental information
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
£m £m £m
Turnover by destination is analysed by geographical area as follows:
Continuing operations
UK 105.1 105.7 212.1
Continental Europe 146.5 131.2 271.0
Rest of world 2.4 2.6 3.7
Group turnover 254.0 239.5 486.8
Share of joint venture's turnover 8.3 7.5 15.1
Turnover by destination 262.3 247.0 501.9
Turnover by geographical origin is analysed as follows:
Continuing operations
UK 110.3 110.9 219.4
Continental Europe 143.7 128.6 267.4
Group turnover 254.0 239.5 486.8
Share of joint venture's turnover 8.3 7.5 15.1
Turnover by origin 262.3 247.0 501.9
Turnover by class of business is analysed as follows:
Continuing operations
Household products 219.2 206.2 418.7
Personal care products 34.8 33.3 68.1
Group turnover 254.0 239.5 486.8
Share of joint venture's turnover 8.3 7.5 15.1
Total turnover by class of business 262.3 247.0 501.9
Operating profit by geographical origin is analysed as follows:
Continuing operations
UK 8.6 7.5 16.8
Continental Europe 7.9 6.5 12.9
Group operating profit 16.5 14.0 29.7
Non operating items 0.4 - 0.1
Net interest payable (0.4) (2.2) (3.6)
Profit on ordinary activities before tax 16.5 11.8 26.2
Operating profit by class of business is analysed as
follows:
Continuing operations
Household products 13.7 12.2 25.5
Personal care products 2.8 1.8 4.2
Group operating profit 16.5 14.0 29.7
Non operating items 0.4 - 0.1
Net interest payable (0.4) (2.2) (3.6)
Profit on ordinary activities before tax 16.5 11.8 26.2
During the period the accounting policy for the treatment of sales discounts and
rebates has been amended. Discounts and rebates have, in the current period,
been accounted for as a reduction in revenue, having been previously treated as
an administrative cost. This accounting treatment is consistent with FRS 5 -
Application Note G (issued November 2003) and in the directors' opinion more
fairly reflects the nature of these transactions. Prior period figures have
been restated to reflect this change resulting in a revenue reduction of £18.2m
for the year ending 30 June 2003 and £9.8m for the six months ending 31 December
2002. There is no impact on Group operating profit.
2) Unaudited half-year results
The results for the half year ended 31 December 2003 and 31 December 2002 are
unaudited and have been prepared on the basis of accounting policies set out in
the Report and Accounts for the year ended 30 June 2003, as amended for
accounting policy changes referred to in notes 1 and 6. The comparative figures
for the year ended 30 June 2003 do not constitute statutory accounts. The
accounts for that period have been reported on by the Company's auditors and
delivered to the Registrar of Companies. The report of the auditors thereon was
unqualified and did not contain a statement under section 237 (2) or (3) of the
Companies Act 1985.
3) Movement on reserves
Unaudited Unaudited
Unaudited restated restated
As at As at As at
31 Dec 2003 31 Dec 2002 30 Jun 2003
£m £m £m
Goodwill reserve (146.4) (146.4) (146.4)
Cumulative retained profit 76.1 60.9 67.9
Profit and loss account (70.3) (85.5) (78.5)
4) Earnings per ordinary share
Basic earnings per share is calculated on profit after tax and minority interest
in accordance with FRS 14. For the six months ended 31 December 2003 it is
based on 177,639,197 ordinary shares of 10 pence each which is the weighted
average number of ordinary shares in issue during the period (2002 -
177,639,197).
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares to take account of the Group's share option schemes
where their conversion is dilutive. For the six months ended 31 December 2003
it is based on 184,199,302 (2002 - 179,306,409).
5) Reconciliation of operating profit to operating cash flow
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
£m £m £m
Group operating profit 16.5 14.0 29.7
Depreciation 10.2 10.3 22.9
Goodwill amortisation 0.7 0.7 1.4
Loss on disposal of fixed assets - - 0.1
Movement in stocks (0.1) 3.8 6.1
Movement in debtors 1.2 2.9 1.4
Movement in creditors 3.8 (4.7) 1.4
Cash in flow from operating activities 32.3 27.0 63.0
6) Fixed Asset accounting policy change
During the period the accounting policy for the treatment of ancillary moulding
capital equipment has been amended. This has, in the current period, been
accounted for as a fixed asset, having been previously treated as stock which
was amortised, with the charge included in administrative costs. In the
directors' opinion this accounting treatment more fairly reflects the nature of
these transactions. Prior period figures have been restated to reflect this
change resulting in a tangible asset increase and associated stock decrease of
£2.2m as at 30 June 2003 and £1.8m as at 31 December 2002.
Financial calendar for the year ending 30 June 2004
Dividends
Interim Announcement 12 February 2004
Payment 28 May 2004
Final Announcement September 2004
Payment November 2004
Results
Interim Announcement 12 February 2004
Preliminary statement for full year Announcement September 2004
Report and Accounts Circulated October 2004
Annual General Meeting To be held 2 November 2004
Exchange rates
The exchange rates used for conversion to sterling were as follows:
Unaudited Unaudited
Unaudited restated restated
6 months to 6 months to Year ended
31 Dec 2003 31 Dec 2002 30 Jun 2003
Average rate:
Euro 1.43 1.57 1.52
Polish Zloty 6.48 6.35 6.29
Czech Koruna 46.02 48.05 47.05
Hungarian Forint 371.9 381.0 371.0
Closing rate:
Euro 1.42 1.53 1.44
Polish Zloty 6.70 6.17 6.44
Czech Koruna 45.97 48.42 45.39
Hungarian Forint 371.3 361.9 382.6
This information is provided by RNS
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