RNS Number : 9348P
McBride PLC
24 February 2016
 

24 February 2016

 

McBride plc

 

McBride plc, the leading European manufacturer and supplier of Co-manufactured and Private Label products for the Household and Personal Care market, announces its Half-Year Report for the six months ended 31 December 2015.

 

Early progress with new strategy drives profit growth

 

Headlines

 

£m unless otherwise stated

H1 2015

H1 2014 1

Change

Revenue

344.1

364.7

(5.6%)

Revenue (constant currency) 2

344.1

342.7

0.4%

Adjusted operating profit 3

17.6

12.5

40.8%

Adjusted operating profit (constant currency) 2

17.6

11.2

57.1%

Adjusted operating margin 3

5.1%

3.4%

1.7ppts

Operating profit

17.1

11.1

54.1%





Adjusted profit before income tax

13.6

8.7

56.3%

Profit before income tax

13.0

7.3

78.1%





Diluted earnings per share

4.9p

2.8p

75.0%

Adjusted diluted earnings per share 4

5.2p

3.4p

52.9%

Interim payment to shareholders (per ordinary share)    

1.2p

1.7p

(29.4%)





Cash flow from operations (before exceptional items)   

26.2

30.7

(14.7%)

Net debt

86.3

92.4

(6.6%)

Return on capital employed 5

23.6%

16.4%

7.2ppts





·     Revenue increased by 0.4% on a constant currency basis.  On a reported basis, revenues were 5.6% lower due to the impact of a weaker Euro on translated results.

·     Group adjusted operating profit increased 57.1% on a constant currency basis (40.8% as reported).

·     New segmental analysis, splitting the Group's activities into two divisions, Household and Personal Care/Aerosols ("PCA"), with Household representing approximately 80% of the Group's revenue:

·     sales in Household were 0.9% higher overall with growth across most regions except in the UK, where an 8.2% fall was driven by lower private label sales and the end of some contract manufacturing business.  Germany continued the progress seen last year, while France delivered growth mostly from contracts; and

·     PCA saw a 1.5% sales decline, with a weak UK offset by good gains in Eastern Europe and strong growth in Asia. 

·     UK restructuring project on track to deliver annualised savings of £12.0 million by 30 June 2016.

·     Actions from the "Repair" phase of the Group's new strategy is well under way, with plans to lower complexity through the rationalisation of our customer base down to 25% of our existing customer portfolio on track to be complete by 30 June 2016. Additionally, new purchasing initiatives started delivering benefits in the first half year.

·     Adjusted profit before income tax up by 56.3% to £13.6 million (2014: £8.7m).

·     Net debt at £86.3 million represents 1.6x annualised adjusted EBITDA.6  

·     Interim payment to shareholders of 1.2 pence, in line with new policy outlined in September 2015.

·     Our Chairman Iain Napier has informed the Board of his intention to retire at the end of June this year by which time he will have completed nine years in the position.

 

Rik De Vos, Chief Executive Officer, commented:

 

"We are pleased with our progress in the first half and the improved profitability following the launch of our strategic transformation plan.  The commitment and focus of the McBride team on the execution and delivery of our objectives is very encouraging and a critical aspect for future success.  The ongoing actions of our "Repair" phase, which in part will result in lower second half revenues, are nevertheless expected to provide further progress in profitability.  As a consequence, the Board is now expecting full year results to be modestly ahead of its previous expectations."

 

McBride plc


Rik De Vos, Chief Executive Officer

020 3642 1587

Chris Smith, Chief Financial Officer

 

FTI Consulting

Ed Bridges, Nick Hasell

 

020 3642 1587

 

020 3727 1017

 

1 Net debt comparative is as at 30 June 2015, all other comparatives refer to the six months ended on 31 December 2014 unless otherwise stated. 

2 Comparatives translated at 2015 exchange rates.

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

4 Adjustments made for the amortisation of intangible assets, exceptional items, non-cash financing costs from unwind of discount on initial recognition of contingent consideration, unwind of discount on exceptional provisions and any related tax.            

5 Annualised adjusted operating profit for the six months ended on 31 December 2015 and 31 December 2014 as a percentage of average period end net assets excluding net debt.

6 Annualised adjusted EBITDA equates to the rolling 12 months to 31 December 2015.

 

 

Strategy update

The Group's new strategy, "Manufacturing our Future" was launched in September 2015.  Implementation of the strategy has started via the phased actions and projects included in our "Repair, Prepare, Grow" programme, a transformation plan with a three to five year ambition for adjusted operating profit margin (EBITA %) of 7.5% and ROCE targeted at 25-30%.

 

At the time of our final results in 2015, plans for £3 million of annual overhead savings were already actioned and during the period the Group made progress with its "Repair" phase initiatives, including:

 

·     customer choices project; 75% of the Group's customers in Europe will be exited by 30 June 2016, delivering a lower complexity product range with lower management, technical and administration requirements.  The project is expected to be profit positive in isolation, and also sets the platform for further value chain improvements;

·     simplification of the business model and ways of working with further integration of regional management teams.  The resulting flatter management structure will give rise to faster decision making and further overhead savings;

·     commencement of a large number of purchasing driven saving initiatives that provide both immediate and long term structural savings;

·     agreement for the closure to future service accrual of the UK Defined Benefit pension plan; and

·     a recovery plan for our Asia business, with improved results already evident and the completion of the closure of our loss-making China operations.

 

Additionally, a key element of the strategy review was to identify under-performing segments of activity and determine actions to improve them where possible.  During the period, we concluded a review of the operating performance of the PCA business, which represents approximately 20% of Group revenues.  The review found that this business' financial performance is some way below the Group's average and as a result the Board has concluded that this business will be separately run by a dedicated management team in order to provide improved direction and focus.  A management team has now been appointed and been tasked to produce an improvement plan during our second half year.

 

The KPIs linked to the "Repair" phase are monitored closely.  We have delivered an improvement in our average Customer Service Levels from 96.6% to 97.7% and exited the period end at over 98.5%. The labour cost/revenue measure has decreased by 0.7% to 19.0%. 

 

Board change

Iain Napier, Chairman since July 2007, has advised the Board of his intention to retire from the McBride Board at the end of June 2016.  The Board is commencing a search process and will provide an update at the appropriate time. 

 

Group operating results

McBride's main developed markets continue to experience challenging conditions with most territories seeing lower activity for private label through the period, in particular in the UK.  Nevertheless, overall the Group's half year constant currency revenues were marginally ahead (+0.4%) of the prior period with growth from contract manufacturing offsetting private label decline.  Reported revenues declined by 5.6% primarily as a result of the weaker Euro.

 

As a consequence of the decision to separately manage the Group's Household and PCA activities, our segmental reporting is being amended to accommodate this change, with revenues analysed on this basis in this interim report (note 4) and profits to be split from our next full year results presentation.  The reported PCA financial figures will comprise of European activities and the entire Asia business.

 

Sales growth in the Household segment delivered growth overall of 0.9%, however UK sales were lower by 8.2% as a result of continued price and volume pressures across all key accounts.  We experienced good growth in our German and Spanish businesses and also in France, where some private label growth was supported by good progress in contracts. 

 

PCA saw a 1.5% sales decline overall.  In Europe, our UK business saw decline in this sector as well, offset by good gains in Eastern Europe.  Our Asia activities delivered strong growth in the period in all territories.

 

Our contract manufacturing activities have shown encouraging early signs of development with existing opportunities developing well.  We continue to examine growth prospects from longer-term structural supply contracts emerging in these markets.

 

Margins have improved during the period, reflecting the Group's focus on sales activity which improves profitability.  While the Group experienced raw material prices in line with the second half of last year, we are also seeing early benefits from purchasing initiatives, a key aspect of our "Repair" phase.

 

The UK restructuring project is now in the final phase and on track to deliver annualised savings of £12.0 million by 30 June 2016, with savings in first half year of £5.5 million (2014: £1.5m), in line with expectations. 

 

On a constant currency basis, total operating costs before adjusting items and the impact of profit based incentives and wage inflation decreased by £2.2 million. The UK restructuring project and early actions on overhead savings from the "Repair" phase contributed £5.0 million, offset by a combination of factors, including one-off strategic project costs, increased commercial costs and the setup of a new Project Management Office to manage the delivery of our strategic projects.

 

Adjusted operating profit for the period was £17.6 million (2014: £12.5m) with adjusted operating profit margin increasing to 5.1% (2014: 3.4%) and return on capital employed improving to 23.6% (2014: 16.4%).  As a result of a weaker Euro, adjusted operating profit for the half year includes a negative foreign exchange translation impact of £1.3 million.

 

Cash generated from operations before exceptional items was £26.2 million (2014: £30.7m), with a net working capital outflow of £0.1 million (2014: inflow £9.2m).  Capital expenditure cash flow decreased to £5.6 million (2014: £10.0m), as a result of a slight re-setting of the timing of our medium term investment plans, with capital expenditure expected to accelerate during the next twelve months.  Cash outflow for exceptional items of £3.5 million (2014: £5.8m) reflects the UK restructuring project and the early overhead actions taken in June 2015.  Net cash inflow before financing activities was £13.9 million (2014: £8.2m). Cash payments made to shareholders during the period amounted to £3.7 million (2014: £5.6m), in line with our new policy.  Consequently, year-end net debt decreased to £86.3 million (30 June 2015: £92.4m).

 

The Group's balance sheet remains robust with net assets of £62.4 million (30 June 2015: £57.5m) and gearing at 58% (30 June 2015: 61%). The Group maintains significant borrowing headroom of £102.3 million (30 June 2015: £94.6m) on committed debt facilities. 

 

Other financial information

 

Exceptional items

During the period ended 31 December 2015, the Group recognised no exceptional items (2014: £0.8m).  Exceptional costs are anticipated across the next twelve months arising from one-off costs associated with the ongoing "Repair" phase of the strategy.

 

Net finance costs

Net finance costs were £4.1 million (2014: £3.8m) with the increase mainly due to foreign exchange losses on financing activities.

 

Profit before income tax and tax rate

Reported profit before income tax was £13.0 million (2014: £7.3m) with adjusted profit before income tax totalling £13.6 million (2014: £8.7m).  The tax charge on adjusted profit before income tax for the first half of 2015/16 of £4.0 million represents a 30% effective tax rate (30 June 2015: 30%).

 

Earnings per share

On an adjusted basis, diluted earnings per share (EPS) increased by 52.9% to 5.2 pence (2014: 3.4p) with basic EPS at 4.9 pence (2014: 2.8p).

 

Payments to shareholders

The Board reset its policy on payments to shareholders in September 2015 with a prudent approach being adopted during the early stage of the transformation plan.  In line with this policy an interim payment of 1.2 pence (2014: 1.7p) is declared and will be issued using the Company's B share scheme. 

 

Covenants

The Group's funding arrangements are subject to 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 amounts drawn under the invoice discounting facilities.  The Group still remains comfortably within these covenants.

 

Pensions

At 31 December 2015, the Group recognised a deficit on its UK Defined Benefit pension plan of £30.7 million (30 June 2015: £29.8m). 

 

Following consultation with staff and the UK plan's Trustees, the UK Defined Benefit plan will cease to be open to future service accrual from 29 February 2016.  Staff affected by this change have been offered a new defined contribution scheme from that date.  The closure of this plan is one of the actions in the "Repair" phase to limit the growth of fund liabilities, reducing the risks and uncertainty over future cash costs associated with providing an active Defined Benefit pension scheme.

 

Following the conclusion of the March 2015 triennial valuation, the Company and Trustees have recently agreed a new deficit reduction plan based on the scheme funding deficit of £44.2 million.  This will give rise to an increase in the deficit cash funding requirements of £0.4 million to £3.0 million per annum with effect from 31 March 2015.

 

Going Concern

The Group meets its funding requirements through internal cash generation and bank credit facilities, most of which are committed until April 2019.

 

At 31 December 2015, committed undrawn facilities amounted to £102.3 million. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate comfortably within its current bank facilities.

 

The Group has a relatively conservative level of debt to earnings. As a result, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis.

 

Outlook

For the second half year, current expectations are for constant currency underlying revenues to be slightly lower year-on-year, in line with market conditions.

 

The start of the impact from the customer choices project, planned during our first half year, is expected to reduce second half revenues by an additional £6.0 million.  

 

The ongoing actions of our "Repair" phase are expected to provide further progress in profitability, despite the backdrop of lower revenues.  As a consequence, the Board is now expecting full year results to be modestly ahead of its previous expectations. 

 

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: 

 

·     Market competitiveness

·     Change agenda

·     Input costs

·     Legislative compliance

·     Asset utilisation

·     Financial risks

 

For greater detail of these risks, please refer to pages 24 to 26 of the McBride plc Annual Report and Accounts 2015 - which is available on the Group's website www.mcbride.co.uk.

 

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 condensed interim financial statements.

 

Key management compensation and transactions with the Group's pension and post-employment schemes for the financial year ended 30 June 2015 are detailed in note 28 (page 108) of McBride plc's Annual Report and Accounts 2015.  A copy of McBride plc's Annual Report and Accounts 2015 is available on McBride's website at www.mcbride.co.uk.  Although there have been changes to the Executive Leadership Team since the year-end, there are no other related party transactions.

 

Post balance sheet events

There are no material post balance sheet events, other than the UK Defined Benefit plan will cease to be open to future service accrual from 29 February 2016.

 

Responsibility statement

The Directors confirm that to the best of their knowledge:

 

·     The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

·     The interim management report includes a fair review of the information required by:

 

(a)  DTR 4.2.7 of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)  DTR 4.2.8 of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any material changes in the related party transactions described in the last annual report that could do so.

 

On behalf of the Board

Rik De Vos, Chief Executive Officer
Chris Smith, Chief Financial Officer

24 February 2016

 

 

 

CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT










Unaudited

Unaudited

Audited




6 months to

6 months to

Year ended




31 Dec 2015

31 Dec 2014

30 June 2015



Note

£m

£m

£m







Revenue

4

344.1

364.7

704.2

Cost of sales


(221.9)

(242.8)

(460.5)

Gross profit


122.2

121.9

243.7

Distribution costs


(24.1)

(24.8)

(48.0)

Administrative expenses


(81.0)

(86.0)

(186.0)

Operating profit


17.1

11.1

9.7

Net finance costs


(4.1)

(3.8)

(7.1)

Profit before income tax


13.0

7.3

2.6

Income tax expense

5

(4.0)

(2.2)

(3.3)

Profit/(loss) for the period attributable to owners of the Company


9.0

5.1

(0.7)






Earnings per ordinary share

6




    Basic


4.9p

2.8p

(0.4)p

    Diluted


4.9p

2.8p

(0.4)p






Operating profit


17.1

11.1

9.7

Adjusted for:





Amortisation of intangible assets


0.5

0.6

1.0

Exceptional items

7

-

0.8

17.8

Adjusted operating profit


17.6

12.5

28.5






 

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



Unaudited

Unaudited

Audited


6 months to

6 months to

Year ended


31 Dec 2015

31 Dec 2014

30 June 2015


£m

£m

£m

Profit/(loss) for the period attributable to owners of the Company

9.0

5.1

(0.7)

Other comprehensive income/(expense)




Items that may be reclassified to profit and loss:




Currency translation differences on foreign subsidiaries

3.0

(7.6)

(17.6)

(Loss)/gain on net investment hedges

(2.5)

7.3

16.4

Gain on cash flow hedges

3.9

0.9

11.2

(Loss)/gain on cash flow hedges transferred to profit or loss

(3.1)

0.2

(6.7)

Taxation relating to items above

(0.1)

(1.3)

(3.0)


1.2

(0.5)

0.3

Items that will not be reclassified to profit or loss:




Net actuarial loss on post-employment benefits

(1.2)

(1.7)

(2.1)

Taxation relating to item above

(0.7)

0.3

0.4


(1.9)

(1.4)

(1.7)

Total other comprehensive expense

(0.7)

(1.9)

(1.4)

Total comprehensive income/(expense) for the period

8.3

3.2

(2.1)

 

 

 

CONDENSED INTERIM CONSOLIDATED BALANCE SHEET










Unaudited

Unaudited

Audited




as at

as at

as at




31 Dec 2015

31 Dec 2014

30 June 2015



Note

£m

£m

£m







Non-current assets






Goodwill



17.6

23.7

17.7

Other intangible assets



2.1

2.0

2.0

Property, plant and equipment


8

126.9

139.7

129.8

Derivative financial instruments


9

12.1

4.2

9.9

Deferred tax assets



9.0

13.5

11.1

Other non-current assets



0.5

0.5

0.5




168.2

183.6

171.0







Current assets






Inventories



74.2

69.1

66.8

Trade and other receivables



129.6

133.5

132.5

Derivative financial instruments


9

1.3

0.9

1.7

Cash and cash equivalents


10

27.7

28.2

23.3

Assets classified as held for sale



1.1

1.2

1.1




233.9

232.9

225.4

Total assets



416.5

396.4







Current liabilities






Trade and other payables



176.1

184.2

172.6

Borrowings


9

29.3

32.1

35.1

Derivative financial instruments


9

0.4

1.3

1.8

Current tax liabilities



5.9

4.8

3.7

Provisions



1.4

3.8

4.8




213.1

226.2

218.0







Non-current liabilities






Trade and other payables


9

0.5

0.5

0.4

Borrowings


9

84.7

82.1

80.6

Derivative financial instruments


9

-

0.2

0.1

Pensions and other post-employment benefits


11

32.3

31.5

31.4

Provisions



3.3

2.5

3.2

Deferred tax liabilities



5.8

7.7

5.2




126.6

124.5

120.9

Total liabilities



339.7

350.7

338.9

Net assets



62.4

65.8

57.5







Equity






Issued share capital



18.3

18.3

18.3

Share premium account



98.9

105.5

102.4

Other reserves



40.4

31.6

35.5

Accumulated loss



(90.2)

(99.3)

Equity attributable to owners of the Company



61.8

65.2

56.9

Non-controlling interests



0.6

0.6

Total equity



65.8

57.5

 

 

 

CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT










Unaudited

Unaudited

Audited




6 months to

6 months to

Year ended



Note

31 Dec 2015

31 Dec 2014

30 June 2015




£m

£m

£m







Operating activities






Profit before income tax



13.0

7.3

2.6

Net finance costs



4.1

3.8

7.1

Exceptional items


7

-

0.8

17.8

Share-based payments



0.7

0.1

-

Depreciation of property, plant and equipment


8

9.3

10.2

19.6

Amortisation of intangible assets



0.5

0.6

1.0

Operating cash flow before changes in working capital



27.6

22.8

48.1

Decrease/(increase) in receivables



5.4

5.9

(3.6)

Increase in inventories



(6.1)

(3.9)

(5.5)

Increase in payables



0.6

7.2

7.8

Operating cash flow after changes in working capital



27.5

32.0

46.8

Additional cash funding of pension schemes



(1.3)

(1.3)

(2.6)

Cash flow from operations before exceptional items



26.2

30.7

44.2

Cash outflow in respect of exceptional items



(3.5)

(5.8)

(10.7)

Cash generated from operations



22.7

24.9

33.5

Interest paid



(2.7)

(3.0)

(5.7)

Income tax paid



(0.2)

(4.1)

(6.9)

Net cash from operating activities



19.8

17.8

20.9







Investing activities






Proceeds from sale of non-current assets



-

0.2

0.2

Purchase of property, plant and equipment



(5.1)

(9.8)

(21.2)

Purchase of intangible assets



(0.5)

(0.2)

(0.7)

Settlement of derivatives used in net investment hedging

(0.3)

0.2

3.1

Net cash used in investing activities



(5.9)

(9.6)

(18.6)







Financing activities






Redemption of B Shares



(3.7)

(5.6)

(8.7)

Drawdown of borrowings



60.0

57.0

103.4

Repayment of borrowings



(66.1)

(65.9)

(107.7)

Capital element of finance lease rentals



(0.2)

(0.2)

(0.1)

Net cash generated used in financing activities



(10.0)

(14.7)

(13.1)

Increase/(decrease) in net cash and cash equivalents



3.9

(6.5)

(10.8)

Net cash and cash equivalents at start of the period



23.3

34.9

35.3

Currency translation differences

0.5

(0.2)

(1.2)

Net cash and cash equivalents at end of the period



27.7

28.2

23.3

 

 

 

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY





Other reserves






Issued

share

Share premium

Cash flow hedge

Currency translation

Capital

redemption

Accumulated

Equity attributable to owners of the Company

Non- controlling

Total


capital

account

reserve

reserve

reserve

loss

Total

interests

equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 July 2015

18.3

102.4

(2.0)

(4.6)

42.1

(99.3)

56.9

0.6

57.5

Profit for the period

-

-

-

-

-

9.0

9.0

-

9.0

Other comprehensive income /(expense)










Items that may be reclassified to profit or loss:










Currency translation differences on foreign subsidiaries

-

-

-

3.0

-

-

3.0

-

3.0

Loss on net investment hedges

-

-

-

(2.5)

-

-

(2.5)

-

(2.5)

Gain on cash flow hedges in the period

-

-

3.9

-

-

-

3.9

-

3.9

Loss on cash flow hedges transferred to profit or loss

-

-

(3.1)

-

-

-

(3.1)

-

(3.1)

Taxation relating to items above

-

-

(0.1)

-

-

-

(0.1)

-

(0.1)


-

-

0.7

0.5

-

-

1.2

-

1.2











Items that will not be reclassified to profit or loss:










Net actuarial loss on post employment benefits

-

-

-

-

-

(1.2)

(1.2)

-

(1.2)

Taxation relating to items above

-

-

-

-

-

(0.7)

(0.7)

-

(0.7)


-

-

-

-

-

(1.9)

(1.9)

-

(1.9)

Total other comprehensive income/(expense)

-

-

0.7

0.5

-

(1.9)

(0.7)

-

(0.7)

Total comprehensive income

-

-

0.7

0.5

-

7.1

8.3

-

8.3

Transactions with owners of the Company










Issue of B Shares

-

(3.5)

-

-

-

-

(3.5)

-

(3.5)

Redemption of B Shares

-

-

-

-

3.7

(3.7)

-

-

-

Share-based payments

-

-

-

-

-

0.1

0.1

-

0.1

At 31 December 2015

18.3

98.9

(1.3)

(4.1)

45.8

(95.8)

61.8

0.6

62.4

 

 

 




Other reserves






Issued

share

Share premium

Cash flow hedge

Currency translation

Capital redemption

Accumulated

Equity attributable to owners of the Company

Non- controlling

Total


capital

account

reserve

reserve

reserve

loss

Total

interests

equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 July 2014

18.3

111.5

(5.8)

(1.1)

33.4

(88.3)

68.0

0.6

68.6

Profit for the period

-

-

-

-

-

5.1

5.1

-

5.1

Other comprehensive income/(expense)










Items that may be reclassified to profit or loss:










Currency translation differences on foreign subsidiaries

-

-

-

(7.6)

-

-

(7.6)

-

(7.6)

Gain on net investment hedges

-

-

-

7.3

-

-

7.3

-

7.3

Gain on cash flow hedges in the period

-

-

0.9

-

-

-

0.9

-

0.9

Gain on cash flow hedges transferred to profit or loss

-

-

0.2

-

-

-

0.2

-

0.2

Taxation relating to items above

-

-

(0.2)

(1.1)

-

-

(1.3)

-

(1.3)


-

-

0.9

(1.4)

-

-

(0.5)

-

(0.5)











Items that will not be reclassified to profit or loss:










Net actuarial loss on post employment benefits

-

-

-

-

-

(1.7)

(1.7)

-

(1.7)

Taxation relating to items above

-

-

-

-

-

0.3

0.3

-

0.3


-

-

-

-

-

(1.4)

(1.4)

-

(1.4)

Total other comprehensive expense

-

-

0.9

(1.4)

-

(1.4)

(1.9)

-

(1.9)

Total comprehensive income/(expense)

-

-

0.9

(1.4)

-

3.7

3.2

-

3.2

Transactions with owners of the Company










Issue of B Shares

-

(6.0)

-

-

-

-

(6.0)

-

(6.0)

Redemption of B Shares

-

-

-

-

5.6

(5.6)

-

-

-

At 31 December 2014

18.3

105.5

(4.9)

(2.5)

39.0

(90.2)

65.2

0.6

65.8

 

 

 




Other reserves






Issued

share

Share premium

Cash flow hedge

Currency translation

Capital redemption

Accumulated

Equity attributable to owners of the Company

Non- controlling

Total 


capital

account

reserve

reserve

reserve

loss

Total

interests

equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 July 2014

18.3

111.5

(5.8)

(1.1)

33.4

(88.3)

68.0

0.6

68.6

Loss for the year

-

-

-

-

-

(0.7)

(0.7)

-

(0.7)

Other comprehensive income/(expense)










Items that may be reclassified to profit or loss:










Currency translation differences on foreign subsidiaries

-

-

-

(17.6)

-

-

(17.6)

-

(17.6)

Gain on net investment hedges

-

-

-

16.4

-

-

16.4

-

16.4

Gain on cash flow hedges in the year

-

-

11.2

-

-

-

11.2

-

11.2

Loss on cash flow hedges transferred to profit or loss

-

-

(6.7)

-

-

-

(6.7)

-

(6.7)

Taxation relating to items above

-

-

(0.7)

(2.3)

-

-

(3.0)

-

(3.0)


-

-

3.8

(3.5)

-

-

0.3

-

0.3











Items that will not be reclassified to profit or loss:










Net actuarial loss on post employment benefits

-

-

-

-

-

(2.1)

(2.1)

-

(2.1)

Taxation relating to items above

-

-

-

-

-

0.4

0.4

-

0.4


-

-

-

-

-

(1.7)

(1.7)

-

(1.7)

Total other comprehensive income/(expense)

-

-

3.8

(3.5)

-

(1.7)

(1.4)

-

(1.4)

Total comprehensive income/(expense)

-

-

3.8

(3.5)

-

(2.4)

(2.1)

-

(2.1)

Transactions with owners of the Company










Issue of B Shares

-

(9.1)

-

-

-

-

(9.1)

-

(9.1)

Redemption of B Shares

-

-

-

-

8.7

(8.7)

-

-

-

Share-based payments

-

-

-

-

-

0.1

0.1

-

0.1

At 30 June 2015

18.3

102.4

(2.0)

(4.6)

42.1

(99.3)

56.9

0.6

57.5

 

 

 

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

 

 

1)  Basis of preparation

McBride plc ('the Company') is a company incorporated and domiciled in the United Kingdom. The Company's ordinary shares are listed on the London Stock Exchange.  The registered office of the Company is Middleton Way, Middleton, Manchester, M24 4DP.  For the purposes of DTR 6.4.2R, the Home State of McBride plc is the United Kingdom.

 

The Company and its subsidiaries (together, 'the Group') comprise of the leading European manufacturer and supplier of Co-manufactured and Private Label products for the Household and Personal Care market.

 

This half-year report has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority; IAS 34 'Interim Financial Reporting' as adopted by the European Union; on the basis of the accounting policies and the recognition and measurement requirements of IFRS applied in the financial statements at 30 June 2015 and those standards that have been endorsed by the European Union and will be applied at 30 June 2016.  This report should be read in conjunction with the financial statements for the year ended 30 June 2015.

 

The results for each half-year are unaudited and do not represent the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.  The interim financial information has been reviewed, not audited.  The Group's statutory accounts were approved by the Directors on 8 September 2015 and have been reported on by PricewaterhouseCoopers LLP and delivered to the Registrar of Companies.  The report of PricewaterhouseCoopers LLP was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 of the Companies Act 2006.

 

Going concern basis

The Group meets its funding requirements through internal cash generation and bank credit facilities, most of which are committed until April 2019.

 

At 31 December 2015, committed undrawn facilities amounted to £102.3 million. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate comfortably within its current bank facilities.

 

The Group has a relatively conservative level of debt to earnings. As a result, the Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis.

 

The condensed interim consolidated financial statements were approved by the Board on 24 February 2016.

 

 

2)  Accounting policies

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 June 2015, except for:

 

-      Defined Benefit Plans: Employee Contributions (Amendments to IAS 19); and

-      Annual Improvements Projects 2012.

All of the above changes to accounting policies will have no material financial effect on the consolidated financial statements for the year ended 30 June 2016.

 

During the year ended 30 June 2015, management reclassified artwork, design and product testing costs from administrative expenses to cost of sales amounting to £6.1 million.  Consequently, the comparative figures for the period ended 31 December 2014 have been adjusted by £2.2 million.

 

Adjusted results

The Group believes that adjusted operating profit and adjusted earnings per share provide additional useful information to shareholders on the underlying performance achieved by the Group.  These measures are used for internal performance analysis and short-and long-term incentive arrangements for employees.  Adjusting items include amortisation of intangible assets, exceptional items, changes in estimates of contingent consideration arising on business combinations, any non-cash financing costs from unwind of discount on initial recognition of contingent consideration, unwind of discount on provisions and any related tax.

 

Income tax

Income tax in the interim period is accrued using the tax rate that would be applicable to the expected annual profit or loss.

 

Accounting standards issued but not yet adopted

Recently issued accounting standards that are relevant to the Group but have not yet been adopted are outlined below:

-      Amendments to IAS 16, 'Property, plant and equipment' and IAS 38, 'Intangible assets' on depreciation and amortisation;

-      Amendments to IAS 27, 'Separate financial statements' on the equity method;

-      Amendments to IFRS 10, 'Consolidated financial statements' and IAS 28, 'Investments in associates and

joint ventures';

-      Annual improvements 2014;

-      Amendments to IAS 1, 'Presentation of financial statements' on the disclosure initiative;

-      IFRS 15, 'Revenue from contracts with customers'; and

-      IFRS 9, 'Financial Instruments'.

 

 

3)  Critical accounting judgments and estimates

The preparation of the condensed interim financial statements requires management to make judgments, 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.

 

In preparing these condensed interim financial statements, the significant judgments 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 2015.

 

 

4)  Segment information

As outlined within the Annual Report and Accounts 2015, the new executive team has been reviewing the implementation of the new strategy and what information should be provided to the Board (Chief Operating Decision Maker (CODM)).  Currently, the CODM only reviews sales on a product category and geographic basis.   It is envisaged that the CODM will commence reviewing segment profitability during 2016, once systems have been re-configured to capture the required information on a routine basis.  On this basis, no segmental profitability has been disclosed for the 6 month period ended 31 December 2015.   

 



Unaudited

6 months to 31 Dec 2015


Unaudited

6 months to 31 Dec 2014


Audited

Year ended 30 Jun 2015

 



£m


£m


£m

 

Household:







 

UK


86.5


94.2


184.8

 

North 1


91.5


95.7


185.4

 

South 2


33.6


36.3


68.2

 

East 3


61.5


62.2


119.8

 

Total Household


273.1


288.4


558.2

 








 

Personal Care/Aerosols (PCA) 4


71.0


76.3


146.0

 








 

Total segment revenue


344.1


364.7


704.2

 

 

1 France, Belgium, Holland and Scandinavia.

2 Italy and Spain.

3 Germany, Poland, Luxembourg and other Eastern Europe.

4 Includes Asia.

 

 

 

5)   Income tax expense

The tax charge reflects an effective tax rate of 30% (30 June 2015: 30%) on adjusted profit before income tax of £13.6 million (30 June 2015: £21.7m).

 

 

6)  Earnings per ordinary share

Basic earnings per ordinary share is calculated by dividing the profit for the period attributable to owners of the Company by the weighted average number of the Company's ordinary shares in issue during the financial period.  The weighted average number of the Company's ordinary shares in issue excludes 0.6 million shares (2014: 0.6m shares), being the weighted average number of own shares held during the year in relation to employee share schemes.

 


Reference

Unaudited

6 months to

31 Dec 2015

Unaudited

6 months to

31 Dec 2014

Audited

Year ended

30 Jun 2015

Weighted average number of ordinary shares in issue (million) 

a

182.2

182.2

182.2

Effect of dilutive LTIP awards (million)


0.4

0.2

0.2

Weighted average number of ordinary shares for calculating diluted earnings per share (million)

b

182.6

182.4

182.4

 

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 period, the Company had equity-settled LTIP 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:

 


Reference

Unaudited

6 months to

31 Dec 2015

Unaudited

6 months to

31 Dec 2014

Audited

Year ended

30 Jun 2015

Earnings for calculating basic and diluted earnings per share

c

9.0

5.1

(0.7)

Adjusted for:





Amortisation of intangible assets


0.5

0.6

1.0

Exceptional items (see note 7)


-

0.8

17.8

Unwind of discount on contingent consideration


-

-

0.1

Unwind of discount on provisions


0.1

-

0.2

Taxation relating to the above items


(0.1)

(0.3)

(3.2)

Earnings for calculating adjusted earnings per share

d

9.5

6.2

15.2

 



Unaudited

6 months to

31 Dec 2015

pence

Unaudited

6 months to

31 Dec 2014

pence

Audited

Year ended

30 Jun 2015
pence

Basic earnings per share

c/a

4.9

2.8

(0.4)

Diluted earnings per share 

c/b

4.9

2.8

(0.4)

Adjusted basic earnings per share

d/a

5.2

3.4

8.3

Adjusted diluted earnings per share

d/b

5.2

3.4

8.3

 

 

7)  Exceptional items

Exceptional items are presented separately as, due to their nature or the infrequency of the events giving rise to them, this allows users of the financial statements to better understand the elements of financial performance for the year, to facilitate comparison with prior periods, and to assess the trends of financial performance.

 

During the period ended 31 December 2015, the Group recognised no exceptional costs (2015: £0.8m in relation to Classification, Labelling and Packaging). 

 

 

8)  Property, plant and equipment

 





Total





£m

Net book value at 1 July 2015 (audited)



129.8

Exchange movements




1.9

Additions




4.5

Depreciation charge




(9.3)

Net book value at 31 December 2015 (unaudited)




126.9

 

Capital commitments as at 31 December 2015 amounted to £2.5 million (2014: £6.7m).

 

 

9)  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.

 

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and they should be read in conjunction with the Group's annual financial statements as at 30 June 2015.  There have been no material changes in the risk management policies since the year-end.

 

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).

 





Unaudited

Unaudited

Audited





as at

as at

as at





31 Dec 2015

31 Dec 2014

30 Jun 2015





£m

£m

£m

Assets







Level 2:







Derivative financial instruments







-      Forward currency contracts




1.5

0.9

1.3

-      Cross currency interest rate swaps




11.9

4.2

9.9

-      Contract for Difference (HDPE)




-

-

0.4

Total assets




13.4

5.1

11.6

 

Liabilities







Level 2:







Derivative financial instruments







-      Forward currency contracts




(0.4)

(0.7)

(1.5)

-      Interest rate swaps




-

(0.8)

(0.4)





(0.4)

(1.5)

(1.9)

Level 3:





Trade and other payables





-      Contingent consideration


(0.5)

(0.5)

(0.4)

Total liabilities


(0.9)

(2.0)

(2.3)

 

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.  Commodity forward contracts are measured by the difference to prevailing market prices.  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.

 

Contingent consideration

Contingent consideration is measured at fair value based upon management's estimates of the future sales and profitability of the acquired business.  At each reporting date, the Directors estimate the contingent consideration payable in relation to the 70% interest acquired and the liability to acquire the remaining 30% interest.

 

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:

 





Unaudited

as at

Unaudited

as at

Audited

as at





31 Dec 2015

31 Dec 2014

30 Jun 2015





£m

£m

£m

Current




29.3

32.1

35.1

Non current




84.7

82.1

80.6

Total borrowings




114.0

114.2

115.7

 

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

·     Trade and other payables

 

 

10)  Net debt

 


Audited

as at

30 Jun 2015

Cash flow

Exchange

differences

Unaudited

as at

31 Dec 2015


£m

£m

£m

£m

Cash and cash equivalents

23.3

3.9

0.5

27.7

Overdrafts

(4.7)

1.2

(0.1)

(3.6)

Bank and other loans

(110.4)

4.9

(4.5)

(110.0)

Finance lease liabilities

(0.6)

0.2

-

(0.4)

Net debt

(92.4)

10.2

(4.1)

(86.3)

 

 

11)  Pensions and post-employment benefits.

The Group operates a number of post-employment benefit arrangements.  In the UK, the Group operates a defined benefit pension scheme and defined contribution schemes.  Together, these schemes cover most of the Group's UK employees.  Elsewhere in Europe, the Group has a number of unfunded post-employment benefit arrangements.

 

At 31 December 2015, the Group recognised a deficit on its UK Defined Benefit pension plan of £30.7 million (30 June 2015: £29.8m).  The Group's post-employment benefit obligations outside the UK amounted to £1.6 million (30 June 2015: £1.6m).

 

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

 





Unaudited

6 months to

Unaudited

6 months to

Audited

Year ended





31 Dec 2015

31 Dec 2014

30 Jun 2015





£m

£m

£m

Profit or loss







Service cost and administration expenses




(0.9)

(0.8)

(1.7)

Charge to operating profit




(0.9)

(0.8)

(1.7)








Net interest cost on defined benefit obligation




(0.6)

(0.6)

(1.3)

Charge to profit before income tax




(1.5)

(1.4)

(3.0)








Other comprehensive expense







Net actuarial loss




(1.2)

(1.7)

(2.1)

Other comprehensive expense




(1.2)

(1.7)

(2.1)












Unaudited

as at

31 Dec 2015

Unaudited

as at

31 Dec 2014

Audited

as at

30 Jun 2015





£m

£m

£m

Balance sheet







Defined benefit obligations:







UK - funded




(133.5)

(133.0)

(135.5)

Other - unfunded




(1.6)

(1.8)

(1.6)





(135.1)

(134.8)

(137.1)

Fair value of scheme assets




102.8

103.3

105.7

Deficit on the schemes




(32.3)

(31.5)

(31.4)

 

Following consultation with staff and the UK plan's Trustees, the UK defined benefit plan will cease to be open to future service accrual from 29 February 2016.  Staff affected by this change have been offered a new defined contribution scheme from that date.  The closure of this plan is one of the key actions in the "Repair" phase to limit the growth of fund liabilities, reducing the risks and uncertainty over future cash costs associated with providing an active Defined Benefit pension scheme.

 

Following the conclusion of the March 2015 triennial valuation, the Company and Trustees have recently agreed a new deficit reduction plan based on the scheme funding deficit of £44.2 million.  This will give rise to an increase in the deficit cash funding requirements of £0.4 million to £3.0 million per annum with effect from 31 March 2015.

 

For accounting purposes, the Fund's benefit obligation as at 31 December 2015 has been calculated based on data gathered for the triennial actuarial valuation as at March 2012 and by applying assumptions made by the Group on the advice of an independent actuary in accordance with IAS 19, 'Employee Benefits'.

 

 

12)  Payments to shareholders

Payments to ordinary shareholders are made by way of the issue of B Shares in place of income distributions.  Ordinary shareholders are able to redeem any number of the B Shares issued to them for cash.  Any B Shares that they retain attract a dividend of 75% of LIBOR on the 0.1 pence nominal value of each share, paid on a twice-yearly basis.

 

Payments to ordinary shareholders made or proposed in respect of each period were as follows:

 


Unaudited

Unaudited

Audited


6 months to

6 months to

Year ended


31 Dec 2015 *

31 Dec 2014

30 Jun 2015

Interim

1.2p

1.7p

1.7p

Final

n/a

n/a

1.9p

* Interim payment to shareholders that is not recognised within these condensed interim consolidated financial statements.

 

Movements in the B Shares were as follows:





Nominal





Number

value

£m

At 1 July 2014 (audited)




578,450,919

0.6

Issued




6,012,907,197

6.0

Redeemed




(5,580,803,984)

(5.6)

At 31 December 2014 (unaudited)




1,010,554,132

1.0

Issued




3,097,558,253

3.1

Redeemed




(3,139,105,190)

(3.1)

At 30 June 2015 (audited)




969,007,195

1.0

Issued




3,461,976,871

3.5

Redeemed




(3,674,427,539)

(3.7)

At 31 December 2015 (unaudited)




756,556,527

0.8

 

 

13)  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 condensed interim financial statements.

 

Key management compensation and transactions with the Group's pension and post-employment schemes for the financial year ended 30 June 2015 are detailed in note 28 (page 108) McBride plc's Annual Report and Accounts 2015.  A copy of McBride plc's Annual Report and Accounts 2015 is available on McBride's website at www.mcbride.co.uk.  Although there have been changes to the Executive Leadership Team since the year end, there are no other related party transactions.

 

 

14) 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:

 

·     Organic revenue growth - change in revenue adjusted for the effect of exchange rate movements (constant currency).

·     Adjusted operating profit - operating profit before adjusting items.

·     Adjusted operating margin - adjusted operating profit as a percentage of revenue.

·     Labour cost/revenue - labour cost as a percentage of revenue.

·     Customer Service Level - volume of products delivered in the correct volumes and within agreed timescales as a percentage of total volumes ordered by customers.

·     Adjusted diluted earnings per share - profit attributable to shareholders before adjusting items divided by the weighted average number of ordinary shares used for calculating diluting earnings per share.

·     Return on capital employed - adjusted operating profit as a percentage of average year-end net assets excluding net debt.

 

 

Other information

 

Financial calendar for the year ending 30 June 2016

 

Payments to shareholders





Interim


Announcement

24 February 2016



Entitlement to B Shares

22 April 2016



Redemption of B Shares

27 May 2016

Final


Announcement


7 September 2016



Entitlement to B Shares

21 October 2016



Redemption of B Shares

25 November 2016

Results






Interim


Announcement

24 February 2016

Preliminary statement for full year

Announcement


7 September 2016

Annual Report and Accounts 2016

Circulated


September 2016

Annual General Meeting

To be held

24 October 2016

 

 

Exchange rates

 

The exchange rates used for conversion to Sterling were as follows:

 


Unaudited

Unaudited

Audited


6 months to

6 months to

Year ended


31 Dec 2015

31 Dec 2014

30 June 2015





Average rate:




   Euro

1.39

1.26

1.31

   US Dollar

1.53

1.63

1.58

   Polish Zloty

5.87

5.30

5.48

   Czech Koruna

37.62

34.91

36.34

   Hungarian Forint

434.20

392.20

406.07

   Malaysian Ringgit

6.39

5.33

5.44

   Australian Dollar

2.12

1.83

1.89

   Chinese Yuan

9.73

10.01

9.75





Closing rate:




   Euro

1.36

1.28

1.41

   US Dollar

1.48

1.56

1.57

   Polish Zloty

5.81

5.49

5.89

   Czech Koruna

36.82

35.61

38.31

   Hungarian Forint

430.52

405.11

442.69

   Malaysian Ringgit

6.40

5.45

5.93

   Australian Dollar

2.10

1.90

2.05

   Chinese Yuan

9.62

9.67

9.75





-Ends-

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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IR EAEADAEKKEAF