TIDMMCB
RNS Number : 5880F
McBride PLC
22 February 2018
McBride plc ("McBride", the "Company" or the "Group")
Emerging Household growth tempered by rising external costs and
PCA losses
22 February 2018
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 2017.
The Group remains confident in the development of its strategy
and believes it is particularly well placed in light of its recent
success in securing a number of significant business wins as a
result of competitor weakness.
As a consequence the Group's Household activities are
progressing well and are expected to deliver significant growth in
the second half. The PCA business has seen disproportionate impact
from inflationary pressures and market dynamics resulting in
trading losses. The Group expects to shortly launch an accelerated
transformation plan to return the division to break even within 18
months.
Half year Half year Constant
to to Reported Currency Underlying
GBPm unless otherwise 31 Dec 31 Dec % % %
stated 2017 2016(1) Change Change(2) Change(3)
--------------------------- ---------- ---------- ---------- ----------- -------------
Revenue 368.4 360.6 2.2% (0.6%) (4.7%)
Adjusted operating
profit (4) 15.8 22.9 (31.0%) (33.9%) (33.9%)
Adjusted operating
margin (4) 4.3% 6.4% (2.1ppts) (2.1ppts) (1.9ppts)
Operating profit 6.7 22.5 (70.2%)
Operating margin 1.8% 6.2% (4.4ppts)
Adjusted profit
before taxation 13.6 19.5 (30.3%) (33.3%) (32.4%)
Profit before taxation 4.0 18.8 (78.7%)
Diluted earnings
per share 0.7p 7.1p (90.1%)
Adjusted diluted
earnings per share
(5) 5.2p 7.4p (29.7%)
Interim payment
to shareholders
(per ordinary share) 1.5p 1.4p 7.1%
Cash flow from operations
(before exceptional
items) 14.3 34.4
Net debt (6) 122.8 75.7
Return on capital
employed (7) 20.6% 28.0%
Group
-- Revenues 2.2% higher at GBP368.4m, with Danlind adding
GBP15.2m for the first three months following acquisition;
underlying(3) business 4.7% lower
-- Adjusted operating profit(4) of GBP15.8m, GBP7.1m (31%) lower
than the strong first half of last financial year
-- ROS of 4.3% (H1 2016: 6.4%; FY17: 5.9%)
-- Exceptional items of GBP9.0m, mostly asset write-downs in Personal Care & Aerosols (PCA)
-- Operating profits of GBP6.7m (2016: GBP22.5m)
-- 35% reduction in underlying(5) interest costs following refinancing in June 2017
-- Interim payment to shareholders increased by 7% to 1.5p
(2016: 1.4p) reflecting Board confidence in future growth
prospects
-- Net debt increase of GBP47.1m, primarily reflecting acquisition of Danlind (GBP35.7m)
Segments
-- Household underlying revenues lower by 3.4% with improving
performance and outlook (Q1 5.4% decline; Q2 1.2% decline with some
regions now in growth)
-- Household expected to deliver mid-to-high single digit
underlying revenue growth in second half driven by new contract
wins
-- Household adjusted operating profit(4) at GBP22.0m and ROS 7.4% (2016: GBP26.5m and 9.3%)
-- PCA underlying revenues lower by 9.7% with adjusted operating
loss(4) of GBP2.3m (2016: GBP0.9m)
-- European PCA recovery strategy nearing launch, Czech skincare business sold
Rik De Vos, Chief Executive Officer, commented:
"Our outlook for the current year remains unchanged from our
trading update in January.
Whilst the accelerated growth opportunity we are now seeing is
an encouraging validation of the Group's strategy and the
positioning of our Household business, the immediate task of
accommodating such substantial growth presents challenges and
choices.
Despite the near-term margin pressures we are experiencing, we
remain focused on delivering our medium-term financial targets,
investment in efficiency projects will recommence once this growth
has been effectively consolidated into our operations. Meanwhile,
restoring the performance of our Personal Care & Aerosols
business, the plans for which are under review, remains a top
priority.
Overall, we continue to expect the Group's full year adjusted
profit before tax and adjusted earnings per share to be broadly in
line with last year. Looking further ahead, we are well positioned
to benefit from volume growth in our Household business."
McBride plc
Rik De Vos, Chief Executive
Officer 020 3642 1587
Chris Smith, Chief Finance
Officer 020 3642 1587
FTI Consulting 020 3727 1017
Ed Bridges, Nick Hasell
(1) Net debt comparative is as at 30 June 2017, all other
comparatives refer to the six months ended on 31 December 2016
unless otherwise stated.
(2) Comparatives translated at 31 December 2017 exchange
rates.
(3) Underlying after adjusting for constant currency and
excluding the impact of Danlind acquisition.
(4) Adjustments made for the amortisation of intangible assets
and exceptional items (see Consolidated Income Statement).
(5) 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 provisions and any related tax (see Consolidated Income
Statement).
(6) Net debt comprises cash and cash equivalents, overdraft,
bank and other loans and finance lease liabilities.
(7) Rolling 12 months adjusted operating profit to 31 December
2017 as a percentage of average period end net assets excluding net
debt.
Strategy Progress
Significant progress in the delivery of our three-phased
('Repair', 'Prepare' and 'Grow') 'Manufacturing Our Future'
strategy since its launch in September 2015 has underpinned the
strong financial performance of the Group over recent years.
Having successfully concluded the 'Repair' phase during the last
financial year, we embarked on the 'Prepare' phase which comprises
four key objectives that will provide the foundations to deliver
our ambitions: first, building our fundamental commercial growth
capabilities; second, developing the necessary asset base with
related investment plans; third, creating the organisational
structure and skills required to deliver our strategy; and, fourth
and finally, resolving our underperforming European PCA
business.
In our Household business, we have identified Laundry capsules,
Laundry Liquids and Auto-dishwash tablets as key growth categories.
When combined with increasing demand for contract manufacturing
services and scale and cost leadership opportunities within
converging traditional retail and hard discount channels, we have
established a profitable growth plan. This plan will be underpinned
by a greatly improved cost position resulting from a more efficient
manufacturing and distribution asset base.
The 'Prepare' phase will provide an efficient and sustainable
platform to support our growth ambitions. To date, we have made
good progress in this programme and the contribution from staff
across the whole Group has been significant.
In September 2017 we announced the acquisition of Danlind a/s, a
supplier of Auto-dishwash and Laundry products in Denmark. Danlind
provides our Household division with access to accelerated growth
in our key strategic category of Auto-dishwash tablets through its
well-invested capacity, technology platform and high quality
product range. Having recently completed the first phase of its
integration into the Group we remain confident in the value
proposition it provides.
Competitor weakness led to a number of significant business wins
in H1, with further wins anticipated, within our key Household
growth categories. A number of our major customers have turned to
the Group for support, validating our assessment of the market
opportunities. This has fast-tracked our growth ambition
significantly but has required certain choices to be made in terms
of the phasing of our investment plans. Our focus in this financial
year is now on ensuring the smooth transition of this new
production to the McBride supply chain. As a result, we have
decided to defer certain efficiency and rationalisation initiatives
until these significant volumes of new business have been
effectively consolidated. Our progress in securing additional
volumes provides more evidence of the deliverability of our medium
term financial targets but changes the phasing of our growth,
essentially pushing back delivery by one year.
The Group has identified within its key management teams the
skills necessary to ensure the delivery of its strategy and has
made the appropriate investment both in securing key talent in
critical roles and developing existing management.
The performance of our European PCA business is clearly
unsatisfactory and the fourth key objective of the 'Prepare' phase
is to resolve this situation. By simplifying its scope and
streamlining its activities, we will reduce costs and deliver a
competitive business for the future. As a first step, we have sold
our Skincare business, based in Czech Republic, which had revenue
of GBP15 million and was break even at the trading profit level
last year. This business has been an uneasy fit in the volume
Personal Care liquids activities and a significant management
distraction. Plans for the remaining four liquids and aerosols
factories are currently under consideration and will shortly be
finalised, with implementation expected to commence in the second
half of this financial year. We aim to return PCA in Europe to at
least a breakeven position within 18 months. Exceptional costs
totalling GBP7.3 million to cover the anticipated loss on sale of
the Czech business and asset impairments in PCA have been charged
within these interim results.
Group operating results
Group revenues at GBP368.4 million were GBP7.8 million (2.2%)
higher than the prior half year, aided by the translation effect of
a strong Euro and the acquisition of Danlind during the period. On
an underlying basis, sales were lower by GBP17.6 million (4.7%),
with Household sales lower by 3.4% and PCA lower by 9.7%.
Overall volumes, excluding Danlind, were lower by 4.2% across
the Group (2.7% Household, 9.8% PCA). In Household the decline was
primarily as a result of the previously-disclosed major contract
loss in Germany that has subsequently resecured. In PCA, deliberate
management actions to exit certain customer and product
arrangements and increased market pressures, especially in
aerosols, were the key drivers of lower sales volumes. Customer
price pressure remained a feature in the period with 0.7% of the
year-on-year revenue decline a result of lower sales prices,
primarily in the competitive French market.
In the half year to December 2017, raw material prices increased
by approximately 4.0% versus the same period last year. Of this,
1.0% was driven by foreign exchange, mostly being the impact of
weaker Sterling. We continued to focus on overhead saving
initiatives, some of which were announced in previous years and
this delivered a further GBP5.1 million benefit in the period.
As a result, half year adjusted operating profit was GBP15.8
million (2016: GBP22.9m) with adjusted operating profit margin
decreasing to 4.3% (2016: 6.4%).
Half year operating profit decreased by GBP15.8 million to
GBP6.7 million (2016: GBP22.5m). This includes an exceptional
charge of GBP8.7 million, primarily due to restructuring and
impairment charges within our European PCA business as we focused
sites on dedicated PCA activities (GBP7.1m), a net change as a
result of the sale of the Czech Republic based skincare business at
Brno (GBP1.1m) and costs incurred as part of the acquisition of
Danlind (GBP0.5m).
Based on twelve month trailing adjusted operating profit, return
on capital employed fell to 20.6% (2016: 28.0%). Trading working
capital(1) as a percentage of sales increased from 10.7% at 30 June
2017 to 12.7% at the end of the period but excluding Danlind, the
underlying trading working capital percentage decreased from 10.7%
to 10.5%. Focus on the level of working capital invested in Danlind
forms a key part of the post-acquisition synergy programme and we
expect working capital levels to move into line with the Group over
the coming 12 months.
For the half year, cash generated from operations before
exceptional items was GBP14.3 million (2016: GBP34.4m). Capital
expenditure increased during the period to GBP12.7 million (2016:
GBP7.4m) in cash terms. This is in line with our planned GBP100
million programme of capital expenditure over the four years to
2021.
During the period, a cash consideration of GBP10.4 million was
paid to acquire Danlind, with net debt of GBP25.3 million assumed
by the Group on acquisition. This has contributed to half year-end
net debt increasing to GBP122.8 million (30 June 2017: GBP75.7m).
Some GBP1.1million of the increase arose because of the translation
impact of the weaker Sterling exchange rates on Euro denominated
borrowings.
Operating cash flow from working capital changes was an outflow
of GBP10.4 million compared to an inflow of GBP2.1 million in the
comparative period last year mainly comprising an increase in stock
following a period of reduced customer service levels, with
payments relating to the 2017 bonus scheme, quarterly tax charges
and the settlement of aged tax payments which occurred in the
period accounting for most of the balancing items.
The Group's balance sheet remains robust with net assets of
GBP64.1 million (30 June 2017: GBP64.2m). Gearing rose to 73% (30
June 2017: 50%) with the debt cover ratio increasing to 2.3x (30
June 2017: 1.2x) primarily driven by the financing of the Danlind
acquisition. The debt cover ratio is expected to return below 2.0x
within the next 9 months.
(1) Trading working capital consists inventories, trade
receivables and trade payables.
Segmental performance
We continue to separately manage the Group's Household and PCA
activities, and our segmental reporting reflects this. Danlind is
reported at half year as a separate business recognising the
current management and reporting structure and is included within
our Household segment. During our second half year as part of our
Danlind integration process, any changes to segmental reporting
will be reflected in our full year 2018 Annual Report and
Accounts.
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 to
Household and PCA.
Household
Reported revenues increased by 4.8% to GBP298.0 million (2016:
GBP284.4m) but underlying revenues were lower by 3.4%. Of this
decrease, GBP7.9 million is due to a reduction in underlying
volumes with an additional GBP2.5 million of the decline due to
customer pricing.
Half year Half year
to to
31 Dec 31 Dec
2017 2016 Reported Underlying
Revenue GBPm GBPm Change Change(1)
-------- --------- --------- -------- ----------
UK 80.6 79.7 1.1% 1.1%
North 96.7 96.0 0.7% (3.2%)
South 40.8 39.2 4.1% 0.2%
East 64.7 69.5 (6.9%) (10.8%)
Danlind 15.2 - - -
298.0 284.4 4.8% (3.4%)
-------- --------- --------- -------- ----------
(1) Comparatives translated at 31 December 2017 exchange rates
and excluding the impact of Danlind acquisition.
In the UK, revenues of GBP80.6 million compared to revenues of
GBP79.7 million in 2016, an increase of 1.1%. Increased customer
pricing of approximately GBP2.2 million was offset by GBP1.3
million of volume decline.
In the North region, underlying sales were impacted by a very
competitive market, particularly in France. Volume decline of 0.9%
was noted during the period, in addition to price deflation of
2.9%, driven by an increasingly competitive environment.
Our South region reported sales growth of 0.2% at constant
currency. Our Iberia business continues to show significant
improvement, with volumes up 8.4% on prior year following new
business wins at the end of last financial year. Within Italy,
revenue is broadly flat on prior period.
The East region, covering Germany, Poland and other East
European countries, saw volumes down on prior year by 8.6%. Germany
has seen an increasingly competitive environment in addition to the
negative impact of the previously-disclosed major contract loss,
whilst sales in Poland were weaker as key retailers shifted their
business models towards higher proportions of branded SKUs in
store.
Headline profits in Household decreased 17.0% (19.7% at constant
currency and excluding Danlind). The combination of a number of
mainly external cost challenges, including raw materials, labour
market pressures and transportation costs, resulted in adjusted
trading profit margins in this segment, excluding Danlind declining
from 9.3% to 7.8%.
As a result of competitor weakness, the Group has secured a
number of business wins that will start shipments in the second
half year. In order to capture and secure this growth opportunity
and to ensure high quality support is maintained with existing
customer arrangements, the Group decided to defer certain supply
chain efficiency and rationalisation initiatives planned for the
current financial year given the resources required in the near
term to meet the anticipated rapid increase in volumes. These
efficiency initiatives are planned to be implemented in the next
financial year as we seek a significantly improved cost position
delivered from a more efficient manufacturing and distribution
asset base, as identified in the 'Prepare' phase of our
strategy.
Personal Care & Aerosols (PCA)
The PCA division comprises the Personal Care liquids, Skincare
and Aerosols businesses of McBride's European operations and also
the activities of McBride in Asia.
On a reported basis, revenues for this division declined by 7.6%
to GBP70.4 million (2016: GBP76.2m). At constant currency, revenues
were lower by 9.7%, wholly driven by volume decline. Within this
segment revenues grew strongly in Asia, up 7.3% at constant
currency. Volumes in our European businesses were 12.1% lower
overall at constant currency, approximately half of which was due
to deliberate management actions to exit certain Personal Care
liquids customer and product arrangements. Our Aerosols business
experienced an extremely competitive environment in both the UK and
France, with revenues declining year on year by 17.1%. Our liquids
business, excluding the deliberate management actions noted above,
experienced marginal growth in the period.
Overall reported profitability for this segment reduced by
GBP3.2 million to a loss of GBP2.3 million (2016: profit GBP0.9m).
At constant currency, profitability reduced by GBP3.3 million,
reflecting the volume challenges during the year within our
European business and increasing price pressures on raw materials,
particularly in the UK.
Asia continued to make underlying profit margins close to the
Group average.
The sale of the Skincare business in Czech Republic is a first
step to simplifying and resetting the ambition of PCA. The Group is
developing an accelerated transformation programme in order to
recover the weak performance of PCA in Europe, and this is expected
to commence in the second half year.
Other financial information
Exceptional items
Exceptional items of GBP9.0 million were recorded during the
half year (2016: GBPnil). The charge primarily comprises the
following items:
-- Exceptional finance charges of GBP0.3 million incurred as
part of the refinancing of the Danlind banking arrangements;
-- As part of the acquisition of Danlind, exceptional costs of
GBP0.5 million have been incurred to date relating primarily to
legal and advisory fees;
-- The business is undertaking a strategic review of the PCA
business with GBP7.1 million exceptional costs incurred to date in
relation to redundancies (GBP0.9m) and the impairment of plant and
machinery (GBP6.2m); and
-- A net charge of GBP1.1 million in relation to the Czech
Republic based skincare business at Brno, comprising; the release
of GBP3.0 million contingent consideration following the
acquisition of the remaining 30% of the business for GBPnil
consideration; and GBP4.1 million charge following the impairment
review triggered by the now completed sale of 100% of the Czech
Republic based skincare business (equating to the net of the
businesses book and fair values at half year).
Net finance costs
Net finance costs were GBP2.7 million (2016: GBP3.7m) with the
reduction mainly a result of the benefits of the Group refinancing
initiative completed in June 2017.
Profit before tax and tax rate
Reported profit before taxation was GBP4.0 million (2016:
GBP18.8m) with adjusted profit before taxation totalling GBP13.6
million (2016: GBP19.5m). The tax charge on adjusted profit before
taxation for the period of GBP4.1 million (2016: GBP6.0m)
represents a 30% (2016: 31%) effective tax rate.
Earnings per share
On an adjusted basis, diluted earnings per share (EPS) decreased
by 29.7% to 5.2 pence (2016: 7.4p) with basic EPS at 0.7 pence
(2016: 7.1p) decreasing by 90.1%.
Payments to shareholders
The Group expects to distribute adjusted earnings to
shareholders based on a dividend cover range of 2x-3x, progressive
with earnings of the Group, taking into account funding
availability.
The Board recommends an increase in the interim payment to
shareholders in light of household growth prospects and the
effectiveness of the actions that are expected to result from the
PCA recovery strategy. The interim payment of 1.5 pence per share,
a 7% increase from the 1.4p in 2016, will be paid to shareholders
in May and it is intended this 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
remains comfortably within these covenants.
Pensions
The Group operates a funded defined benefit scheme in the UK. At
31 December 2017, the Group recognised a deficit on its UK scheme
of GBP34.9 million (30 June 2017: GBP40.0m). The reduction during
the past six months is primarily a result of improved asset
values.
The Group has other unfunded post-employment benefit obligations
outside the UK that amounted to GBP2.3 million (30 June 2017:
GBP2.2m).
Current trading and outlook
As stated in our January trading update, the Group's growth
prospects have been significantly enhanced by recent business wins,
mainly arising from competitor weakness, with a number of major
customers turning to the Group for support. We anticipate that
these opportunities will lead to annualised high-single digit
growth for the Household business. These additional sales are
anticipated to phase in through the second half of the current
financial year and Household is expected to deliver mid-to-high
single digit underlying revenue growth in the second half.
In order to capture this growth opportunity and support our
customers, the Group has decided to defer certain efficiency and
rationalisation initiatives planned for the current financial year,
given the resources required in the near term to meet the
anticipated rapid increase in volumes. The combination of the
trading performance in the first half, ongoing cost inflation and
the operational requirements of accommodating a significant level
of new business means that the Group's full year adjusted profit
before tax and adjusted EPS are expected to be broadly in line with
the prior year.
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:
-- Consumer and customer trends;
-- Market competitiveness;
-- Change agenda;
-- Input costs;
-- Legislation;
-- Financial risks; and
-- Breach of IT security.
For greater detail of these risks, please refer to pages 26 to
28 of the McBride plc Annual Report and Accounts 2017 - which is
available on the Group's website www.mcbride.co.uk.
Cautionary statement
This announcement contains forward-looking statements that are
subject to risk factors associated with, among other things the
economic and business circumstances occurring from time to time in
the countries, sectors and markets in which the Group operates. It
is believed that the expectations reflected in these statements are
reasonable but they may be affected by a wide range of variables
which could cause actual results to differ materially from those
currently anticipated. No assurances can be given that the
forward-looking statements in this announcement will be
realised.
The forward-looking statements reflect the knowledge and
information available at the date of preparation of this
announcement and the Company undertakes no obligation to update
these forward-looking statements. Nothing in this announcement
should be construed as a profit forecast.
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
22 February 2018
CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
Half year Half year
to to Year ended
31 Dec 31 Dec 30 June
2017 2016 2017
Continuing Operations Note GBPm GBPm GBPm
----------------------------------- ---- --------- --------- ----------
Revenue 4 368.4 360.6 705.2
Cost of sales (242.7) (227.9) (452.4)
Gross profit 125.7 132.7 252.8
Distribution costs (24.3) (23.8) (46.2)
Administrative expenses (94.7) (86.4) (166.8)
---------
Operating profit 6.7 22.5 39.8
Net finance costs (2.7) (3.7) (20.6)
Profit before taxation 4.0 18.8 19.2
Taxation 5 (2.8) (5.8) (10.3)
----------------------------------- ---- --------- --------- ----------
Profit for the period attributable
to owners of
the Parent 1.2 13.0 8.9
----------------------------------- ---- --------- --------- ----------
Earnings per ordinary share 6
Basic 0.7p 7.1p 4.9p
Diluted 0.7p 7.1p 4.9p
----------------------------------- ---- --------- --------- ----------
Operating profit 6.7 22.5 39.8
Adjusted for:
Amortisation of intangible
assets 0.4 0.4 0.7
Exceptional items 7 8.7 - 1.0
----------------------------------- ---- --------- --------- ----------
Adjusted operating profit 15.8 22.9 41.5
----------------------------------- ---- --------- --------- ----------
Profit before taxation 4.0 18.8 19.2
Adjusted for:
Amortisation of intangibles
assets 0.4 0.4 0.7
Exceptional items 7 9.0 - 14.0
Unwind of discount on contingent
consideration - 0.1 0.3
Unwind of discount on provisions 0.2 0.2 0.4
----------------------------------- ---- --------- --------- ----------
Adjusted profit before taxation 13.6 19.5 34.6
----------------------------------- ---- --------- --------- ----------
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Unaudited Unaudited Audited
Half year Half year
to to Year ended
31 Dec 30 June
31 Dec 2017 2016 2017
GBPm GBPm GBPm
----------------------------------------- ----------- --------- ----------
Profit for the period attributable
to owners of the Parent 1.2 13.0 8.9
----------------------------------------- ----------- --------- ----------
Other comprehensive income/(expense)
Items that may be reclassified
to profit and loss:
Currency translation differences
on foreign subsidiaries 0.7 3.7 7.4
Loss on net investment hedges (0.1) (2.3) (7.8)
Gain on discontinued cash
flow hedges recycled to
exceptional items - - 1.8
Gain on cash flow hedges 0.2 4.8 3.4
Loss on cash flow hedges transferred
to profit or loss (0.6) (8.1) (4.7)
Taxation relating to items
above 0.1 0.1 2.5
----------------------------------------- ----------- --------- ----------
0.3 (1.8) 2.6
Items that will not be reclassified
to profit or loss:
Net actuarial gain/(loss)
on post-employment benefits 4.2 (11.9) (11.0)
Taxation relating to item
above (0.7) 0.8 1.4
----------------------------------------- ----------- --------- ----------
3.5 (11.1) (9.6)
----------------------------------------- ----------- --------- ----------
Total other comprehensive
income/(expense) 3.8 (12.9) (7.0)
----------------------------------------- ----------- --------- ----------
Total comprehensive income
for the period 5.0 0.1 1.9
----------------------------------------- ----------- --------- ----------
CONDENSED INTERIM CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
as at as at as at
31 Dec 31 Dec 30 June
2017 2016 2017
Note GBPm GBPm GBPm
----------------------------------- ---- --------- --------- -------
Non-current assets
Goodwill 8 23.6 17.5 17.5
Other intangible assets 8 4.1 2.8 4.2
Property, plant and equipment 8 151.6 136.4 140.9
Derivative financial instruments 9 - 15.2 0.1
Deferred tax assets 12.4 10.5 12.0
Other non-current assets 0.6 0.5 0.6
192.3 182.9 175.3
----------------------------------- ---- --------- --------- -------
Current assets
Inventories 97.6 81.2 78.8
Trade and other receivables 146.1 132.2 137.6
Derivative financial instruments 9 0.4 0.7 0.9
Cash and cash equivalents 10 29.6 28.9 26.0
Assets classified as held
for sale 1.3 1.3 1.3
275.0 244.3 244.6
----------------------------------- ---- --------- --------- -------
Total assets 467.3 427.2 419.9
----------------------------------- ---- --------- --------- -------
Current liabilities
Trade and other payables 193.6 187.2 193.7
Borrowings 9 50.2 36.8 39.3
Derivative financial instruments 9 0.3 0.9 0.7
Current tax liabilities 6.3 5.9 5.8
Provisions 1.2 2.1 1.8
251.6 232.9 241.3
Non-current liabilities
Borrowings 9 102.2 75.0 62.4
Derivative financial instruments 9 0.1 0.1 0.1
Pensions and other post-employment
benefits 11 37.2 43.6 42.2
Provisions 3.1 3.5 2.9
Deferred tax liabilities 9.0 7.3 6.8
151.6 129.5 114.4
----------------------------------- ---- --------- --------- -------
Total liabilities 403.2 362.4 355.7
Net assets 64.1 64.8 64.2
Equity
Issued share capital 18.3 18.3 18.3
Share premium account 84.5 92.3 89.8
Other reserves 58.9 46.8 53.6
Accumulated loss (98.2) (93.2) (98.1)
----------------------------------- ---- --------- --------- -------
Equity attributable to owners
of the Parent 63.5 64.2 63.6
Non-controlling interests 0.6 0.6 0.6
----------------------------------- ---- --------- --------- -------
Total equity 64.1 64.8 64.2
----------------------------------- ---- --------- --------- -------
CONDENSED INTERIM CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
Half year Half year
to to Year ended
31 Dec 31 Dec 30 June
Note 2017 2016 2017
GBPm GBPm GBPm
---------------------------------- ---- --------- --------- ----------
Operating activities
Profit before taxation 4.0 18.8 19.2
Net finance costs 2.7 3.7 20.6
Exceptional items 7 8.7 - 1.0
Share-based payments charge 0.7 1.2 2.3
Depreciation of property,
plant and equipment 8 9.7 9.7 19.4
Amortisation of intangible
assets 8 0.4 0.4 0.7
----------------------------------- ---- --------- --------- ----------
Operating cash flow before
changes in working capital 26.2 33.8 63.2
Decrease in receivables 4.5 7.2 4.9
(Increase)/decrease in
inventories (6.4) (3.7) 0.5
Decrease in payables (8.5) (1.4) (2.3)
----------------------------------- ---- --------- --------- ----------
Operating cash flow after
changes in working capital 15.8 35.9 66.3
Additional cash funding
of pension schemes (1.5) (1.5) (3.0)
----------------------------------- ---- --------- --------- ----------
Cash flow from operations
before exceptional items 14.3 34.4 63.3
Cash outflow in respect
of exceptional items (2.3) (1.5) (13.2)
----------------------------------- ---- --------- --------- ----------
Cash generated from operations 12.0 32.9 50.1
Interest paid (1.6) (2.8) (6.4)
Taxation paid (2.6) (2.6) (6.4)
Net cash from operating
activities 7.8 27.5 37.3
----------------------------------- ---- --------- --------- ----------
Investing activities
Proceeds from sale of non-current
assets - - 0.1
Purchase of property, plant
and equipment (12.4) (6.8) (15.2)
Purchase of intangible
assets (0.3) (0.6) (2.5)
Settlement of derivatives used
in net investment hedging (0.4) (0.9) 8.3
Cash obtained from acquired
business 0.6 - -
Borrowings obtained from acquired
business (25.9) - -
Acquisition of Danlind (10.4) - -
Net cash used in investing
activities (48.8) (8.3) (9.3)
----------------------------------- ---- --------- --------- ----------
Financing activities
Redemption of B Shares (5.0) (4.2) (6.6)
Drawdown of borrowings 213.3 27.6 137.2
Repayment of borrowings (163.7) (38.6) (158.0)
Purchase of own Shares - (0.2) (0.2)
Capital element of finance
lease rentals (0.1) (0.1) (0.2)
Net cash generated/(used)
in financing activities 44.5 (15.5) (27.8)
----------------------------------- ---- --------- --------- ----------
Increase in net cash and
cash equivalents 3.5 3.7 0.2
Net cash and cash equivalents
at start of the period 26.0 24.8 24.8
Currency translation differences 0.1 0.4 1.0
Net cash and cash equivalents
at end of the period 29.6 28.9 26.0
----------------------------------- ---- --------- --------- ----------
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Other reserves
----------------------------------
Equity
attributable
to owners
Cash of
Issued Share flow Currency Capital the Non-
share premium hedge translation Redemption Accumulated Parent controlling Total
capital account reserve reserve reserve loss Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
At 1 July 2017 18.3 89.8 0.4 (1.3) 54.5 (98.1) 63.6 0.6 64.2
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Profit for the
period - - - - - 1.2 1.2 - 1.2
Other
comprehensive
income /(expense)
Items that may
be reclassified
to profit or
loss:
Currency
translation
differences
on foreign
subsidiaries - - - 0.7 - - 0.7 - 0.7
Loss on net
investment
hedges - - - (0.1) - - (0.1) - (0.1)
Gain on cash
flow hedges
in the period - - 0.2 - - - 0.2 - 0.2
Loss on cash
flow hedges
transferred
to profit or
loss - - (0.6) - - - (0.6) - (0.6)
Taxation relating
to items above - - 0.1 - - - 0.1 - 0.1
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
- - (0.3) 0.6 - - 0.3 - 0.3
Items that will
not be
reclassified
to profit or
loss:
Net actuarial
gain on
post-employment
benefits - - - - - 4.2 4.2 - 4.2
Taxation relating
to items above - - - - - (0.7) (0.7) - (0.7)
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
- - - - - 3.5 3.5 - 3.5
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Total other
comprehensive
income/(expense) - - (0.3) 0.6 - 3.5 3.8 - 3.8
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Total
comprehensive
income - - (0.3) 0.6 - 4.7 5.0 - 5.0
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Transactions
with owners
of the Parent
Issue of B Shares - (5.3) - - - - (5.3) - (5.3)
Redemption of
B Shares - - - - 5.0 (5.0) - - -
Share-based
payments charge - - - - - 0.2 0.2 - 0.2
At 31 December
2017 18.3 84.5 0.1 (0.7) 59.5 (98.2) 63.5 0.6 64.1
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Other reserves
----------------------------------
Equity
attributable
to owners
Cash of
Issued Share flow Currency Capital the Non-
share premium hedge translation Redemption Accumulated Parent controlling Total
capital account reserve reserve reserve loss Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
At 1 July 2016 18.3 96.7 (0.5) (3.0) 47.9 (90.9) 68.5 0.6 69.1
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Profit for the
period - - - - - 13.0 13.0 - 13.0
Other
comprehensive
income /(expense)
Items that may
be reclassified
to profit or
loss:
Currency
translation
differences
on foreign
subsidiaries - - - 3.7 - - 3.7 - 3.7
Loss on net
investment
hedges - - - (2.3) - - (2.3) - (2.3)
Gain on cash
flow hedges
in the period - - 4.8 - - - 4.8 - 4.8
Loss on cash
flow hedges
transferred
to profit or
loss - - (8.1) - - - (8.1) - (8.1)
Taxation relating
to items above - - 0.1 - - - 0.1 - 0.1
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
- - (3.2) 1.4 - - (1.8) - (1.8)
Items that will
not be
reclassified
to profit or
loss:
Net actuarial
loss on
post-employment
benefits - - - - - (11.9) (11.9) - (11.9)
Taxation relating
to items above - - - - - 0.8 0.8 - 0.8
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
- - - - - (11.1) (11.1) - (11.1)
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Total other
comprehensive
income/(expense) - - (3.2) 1.4 - (11.1) (12.9) - (12.9)
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Total
comprehensive
income/(expense) - - (3.2) 1.4 - 1.9 0.1 - 0.1
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Transactions
with owners
of the Parent
Issue of B Shares - (4.4) - - - - (4.4) - (4.4)
Redemption of
B Shares - - - - 4.2 (4.2) - - -
Share-based
payments charge - - - - - 0.2 0.2 - 0.2
Repurchase of
own shares - - - - - (0.2) (0.2) - (0.2)
At 31 December
2016 18.3 92.3 (3.7) (1.6) 52.1 (93.2) 64.2 0.6 64.8
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Other reserves
----------------------------------
Equity
attributable
Cash to owners
Issued Share flow Currency Capital of the Non-
share premium hedge translation redemption Accumulated Parent controlling Total
capital account reserve reserve reserve loss Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
At 1 July 2016 18.3 96.7 (0.5) (3.0) 47.9 (90.9) 68.5 0.6 69.1
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Profit for the
year - - - - - 8.9 8.9 - 8.9
Other
comprehensive
income/(expense)
Items that may
be reclassified
to profit or
loss:
Currency
translation
differences
on foreign
subsidiaries - - - 7.4 - - 7.4 - 7.4
Loss on net
investment
hedges - - - (7.8) - - (7.8) - (7.8)
Gain on
discontinued
cash flow hedges
recycled to
exceptional
items - - 1.8 - - - 1.8 - 1.8
Gain on cash
flow hedges
in the year - - 3.4 - - - 3.4 - 3.4
Loss on cash
flow hedges
transferred
to profit or
loss - - (4.7) - - - (4.7) - (4.7)
Taxation relating
to items above - - 0.4 2.1 - - 2.5 - 2.5
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
- - 0.9 1.7 - - 2.6 - 2.6
Items that will
not be
reclassified
to profit or
loss:
Net actuarial
loss on
post-employment
benefits - - - - - (11.0) (11.0) - (11.0)
Taxation relating
to items above - - - - - 1.4 1.4 - 1.4
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
- - - - - (9.6) (9.6) - (9.6)
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Total other
comprehensive
income/(expense) - - 0.9 1.7 - (9.6) (7.0) - (7.0)
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Total
comprehensive
income - - 0.9 1.7 - (0.7) 1.9 - 1.9
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
Transactions
with owners
of the Parent
Issue of B Shares - (6.9) - - - - (6.9) - (6.9)
Redemption of
B Shares - - - - 6.6 (6.6) - - -
Share-based
payments charge - - - - - 0.3 0.3 - 0.3
Purchase of
own shares - - - - - (0.2) (0.2) - (0.2)
At 30 June 2017 18.3 89.8 0.4 (1.3) 54.5 (98.1) 63.6 0.6 64.2
----------------- ------- -------- ------- ------------ ----------- ------------ ------------ ------------ ------
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 2017 and those standards that have
been endorsed by the European Union and will be applied at 30 June
2018. This report should be read in conjunction with the financial
statements for the year ended 30 June 2017.
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 7 September 2017 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 June 2022.
At 31 December 2017, committed undrawn facilities and net cash
position amounted to GBP80.5 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. 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 22 February 2018.
2) Accounting policies
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 June 2017.
The Group has applied the following standards and amendments for
the first time for the annual reporting period commencing 1 July
2017:
- Disclosure Initiative - Amendments to IAS 7;
- Recognition of Deferred Tax Assets for Unrealised Losses - Amendments; and
- Annual Improvements to IFRSs: 2014-16 Cycle - IFRS 12 Amendments.
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 2018.
Adjusted results
The Group believes that adjusted operating profit, adjusted
profit before taxation 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, any non-cash financing costs
from unwind of discount on initial recognition of contingent
consideration, unwind of discount on provisions and any related
tax.
Taxation
Taxation 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:
- IFRS 9 - Financial Instruments (effective 1 January 2018, EU endorsed 22 November 2016);
- IFRS 15 - Revenue from Contracts with Customers (effective 1
January 2018, EU endorsed 22 September 2016); and
- IFRS 16 - Leases (effective 1 January 2019, not yet endorsed by EU).
The Group is currently assessing the impact of the above
standards and will provide a fuller assessment for the year ended
30 June 2018. The standards and interpretations addressed above
will be applied for the purpose of the Group Financial Statements
from the date they become effective.
3) Critical accounting judgments and estimates
The preparation of the condensed interim financial statements
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.
In preparing these condensed interim financial statements, 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 2017.
4) Segment information
Financial information is presented to the Board by product
category for the purposes of allocating resources within the Group
and assessing the performance of the Group's businesses. It is
considered that Household Products have different market
characteristics to PCA in terms of volumes, market share and
production requirements. Accordingly, the Group's operating
segments are determined by product category.
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
intangibles assets and exceptional items.
Danlind is reported at half year as a separate business
recognising the current management and reporting structure and is
included within our Household segment. During our second half year
as part of our Danlind integration process, any changes to
segmental reporting will be reflected in our full year 2018 Annual
Report and Accounts.
Analysis by reportable segment
Household
----------------------------------------------------------
Personal
Care
&
Total Aerosols Total Corporate Total
UK North(1) South(2) East(3) Danlind Household (4) Segments (5) Group
31 December
2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---- -------- -------- --------- --------- ---------- --------- --------- --------- ------
Segment revenue 80.6 96.7 40.8 64.7 15.2 298.0 70.4 368.4 - 368.4
---- -------- -------- --------- --------- ---------- --------- --------- --------- ------
Adjusted
operating
profit/(loss) 22.0 (2.3) 19.7 (3.9) 15.8
Amortisation
of intangible
assets (0.4)
Exceptional
items (see
note 7) (8.7)
---- -------- -------- --------- --------- ---------- --------- --------- --------- ------
Operating
profit 6.7
Net finance
costs (2.7)
---- -------- -------- --------- --------- ---------- --------- --------- --------- ------
Profit before
taxation 4.0
---- -------- -------- --------- --------- ---------- --------- --------- --------- ------
Inventories 79.4 18.2 97.6 - 97.6
Capital
expenditure 12.0 0.7 12.7 - 12.7
Amortisation
and
depreciation 9.4 0.7 10.1 - 10.1
==== ======== ======== ========= ========= ========== ========= ========= ========= ======
(1) France, Belgium, Holland & Scandinavia
(2) Italy and Spain
(3) Germany, Poland, Luxembourg & other Eastern Europe
(4) Includes Asia
(5) Corporate represents costs related to the Board, the
Executive leadership team and key supporting functions.
Household
--------------------------------------------------------
Personal
Care
Total & Aerosols Total Corporate Total
UK North(1) South(2) East(3) Danlind Household (4) Segments (5) Group
31 December
2016 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---- -------- -------- --------- ------- ---------- ----------- --------- --------- ------
Segment revenue 79.7 96.0 39.2 69.5 - 284.4 76.2 360.6 - 360.6
---- -------- -------- --------- ------- ---------- ----------- --------- --------- ------
Adjusted
operating
profit/(loss) 26.5 0.9 27.4 (4.5) 22.9
Amortisation
of intangible
assets (0.4)
Exceptional
items (see
note 7) -
---- -------- -------- --------- ------- ---------- ----------- --------- --------- ------
Operating
profit 22.5
Net finance
costs (3.7)
---- -------- -------- --------- ------- ---------- ----------- --------- --------- ------
Profit before
taxation 18.8
---- -------- -------- --------- ------- ---------- ----------- --------- --------- ------
Inventories 62.7 18.5 81.2 - 81.2
Capital
expenditure 6.6 0.8 7.4 - 7.4
Amortisation
and
depreciation 8.6 1.5 10.1 - 10.1
==== ======== ======== ========= ======= ========== =========== ========= ========= ======
Household
---------------------------------------------------------
Personal
Care
Total & Aerosols Total Corporate Total
UK North(1) South(2) East(3) Danlind Household (4) Segments (5) Group
30 June 2017 GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----- -------- -------- --------- ------- ---------- ---------- --------- --------- ------
Segment revenue 155.4 192.8 76.4 131.1 - 555.7 149.5 705.2 - 705.2
----- -------- -------- --------- ------- ---------- ---------- --------- --------- ------
Adjusted
operating
profit/(loss) 50.3 (0.7) 49.6 (8.1) 41.5
Amortisation
of intangible
assets (0.7)
Exceptional
items (see
note 7) (1.0)
----- -------- -------- --------- ------- ---------- ---------- --------- --------- ------
Operating
profit 39.8
Net finance
costs (20.6)
----- -------- -------- --------- ------- ---------- ---------- --------- --------- ------
Profit before
taxation 19.2
----- -------- -------- --------- ------- ---------- ---------- --------- --------- ------
Inventories 59.0 19.8 78.8 - 78.8
Capital
expenditure 18.9 1.7 20.6 - 20.6
Amortisation
and
depreciation 16.8 3.3 20.1 - 20.1
===== ======== ======== ========= ======= ========== ========== ========= ========= ======
5) Taxation
The tax charge reflects an effective tax rate of 30% (30 June
2017: 31%) on adjusted profit before taxation of GBP13.6 million
(30 June 2017: GBP34.6m).
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 0.9 million shares
(2016: 0.7m shares), being the weighted average number of own
shares held during the year in relation to employee share
schemes.
Unaudited
Half Unaudited Audited
year Half year Year
to to ended
31 Dec 31 Dec 30 Jun
Reference 2017 2016 2017
------------------------------------- ----------- ---------- ----------- --------
Weighted average number of
ordinary shares in issue (million) a 182.1 182.1 182.1
Effect of dilutive share incentive
plans (million) 0.9 0.7 0.8
-------------------------------------------------- ---------- ----------- --------
Weighted average number of
ordinary shares for calculating
diluted earnings per share
(million) b 183.0 182.8 182.9
------------------------------------- ----------- ---------- ----------- --------
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 both equity-settled LTIP awards and
Deferred Annual Bonus Plan awards (together the "share incentive
plans") 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:
Unaudited
Unaudited Half Audited
Half year year Year
to to ended
31 Dec 31 Dec 30 Jun
2017 2016 2017
Reference GBPm GBPm GBPm
----------------------------------- ----------- ------------ ------------ ----------
Earnings for calculating basic
and diluted earnings per share c 1.2 13.0 8.9
Adjusted for:
Amortisation of intangible assets 0.4 0.4 0.7
Exceptional items (see note 7) 9.0 - 14.0
Unwind of discount on contingent
consideration - 0.1 0.3
Unwind of discount on provisions 0.2 0.2 0.4
Taxation relating to the above items (1.3) (0.2) (0.4)
------------------------------------------------ ------------ ------------ ----------
Earnings for calculating adjusted
earnings per share d 9.5 13.5 23.9
----------------------------------- ----------- ------------ ------------ ----------
Unaudited
Unaudited Half Audited
Half year year Year
to to ended
31 Dec 31 Dec 30 Jun
2016 2016 2017
pence pence pence
----------------------------------- ----------- ------------ ------------ ----------
Basic earnings per share c/a 0.7 7.1 4.9
Diluted earnings per share c/b 0.7 7.1 4.9
Adjusted basic earnings per
share d/a 5.2 7.4 13.1
Adjusted diluted earnings per
share d/b 5.2 7.4 13.1
----------------------------------- ----------- ------------ ------------ ----------
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 2017, the Group recognised
GBP9.0 million of exceptional charges (2016: GBPnil). The charge
was made up of the following items:
-- Exceptional finance charges of GBP0.3 million incurred as
part of the refinancing of the Danlind banking arrangements;
-- As part of the acquisition of Danlind, exceptional costs of
GBP0.5 million have been incurred to date relating primarily to
legal and advisory fees;
-- The business is undertaking a strategic review of the PCA
business with GBP7.1 million exceptional costs incurred to date in
relation to redundancies (GBP0.9m) and the impairment of plant and
machinery (GBP6.2m); and
-- A net charge of GBP1.1 million in relation to the Czech
Republic based skincare business at Brno, comprising; the release
of GBP3.0 million contingent consideration following the
acquisition of the remaining 30% of the business for GBPnil
consideration; and GBP4.1 million charge following the impairment
review triggered by the now completed sale of 100% of the Czech
Republic based skincare business (equating to the net of the
businesses book and fair values at half year).
8) Property, plant and equipment and intangible assets
Goodwill Property,
and plant
other intangible and
assets equipment
GBPm GBPm
------------------------------ ----------------- ----------
Net book value at 1 July 2017
(audited) 21.7 140.9
Exchange movements 0.3 1.5
Acquisition of Danlind 5.9 18.1
Additions 0.2 10.4
Impairment - (9.6)
Depreciation charge - (9.7)
Amortisation charge (0.4) -
Net book value at 31 December
2017 (unaudited) 27.7 151.6
------------------------------- ----------------- ----------
Goodwill and other intangible assets comprise goodwill of
GBP23.6 million (30 June 2017: GBP17.5m) and computer software of
GBP4.1 million (30 June 2017: GBP4.2m).
Capital commitments as at 31 December 2017 amounted to GBP5.4
million (30 June 2017: GBP7.8m).
The impairment loss of GBP9.6 million in the current financial
year is in relation to:
-- UK assets impaired (GBP6.2m) following a period of cost
inflation and as part of the PCA strategic business review; and
-- the impairment of Czech Republic based skincare business at Brno (GBP3.4m).
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 2017. 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 31 Dec 30 Jun
2017 2016 2017
GBPm GBPm GBPm
----------------------------------- --------- --------- -------
Assets
Level 2:
Derivative financial instruments
- Forward currency contracts 0.4 0.8 1.0
- Cross currency interest rate
swaps - 15.1 -
Total Financial Assets 0.4 15.9 1.0
----------------------------------- --------- --------- -------
Liabilities
Level 2:
Derivative financial instruments
- Forward currency contracts (0.4) (1.0) (0.7)
- Interest rate swaps - - (0.1)
(0.4) (1.0) (0.8)
Level 3:
Trade and other payables
- Contingent consideration - (2.6) (2.9)
----------------------------------- --------- --------- -------
Total liabilities (0.4) (3.6) (3.7)
----------------------------------- --------- --------- -------
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. 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 at 30 June 2017 related to the 70%
interest acquired and the liability to acquire the remaining 30%
interest of the Czech Republic based skincare business at Brno. The
Czech Republic based skincare business at Brno has been acquired
during the period for consideration of GBPnil, with the contingent
consideration released to exceptional items in the profit and
loss.
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 Unaudited Audited
as at as at as at
31 Dec 31 Dec 30 Jun
2017 2016 2017
GBPm GBPm GBPm
----------------- --------- --------- -------
Current 50.2 36.8 39.3
Non-current 102.2 75.0 62.4
Total borrowings 152.4 111.8 101.7
----------------- --------- --------- -------
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 Unaudited
as at as at
30 Jun Exchange 31 Dec
2017 Cash flow differences 2017
GBPm GBPm GBPm GBPm
--------------------------- -------- ---------- ------------- ----------
Cash and cash equivalents 26.0 3.5 0.1 29.6
Overdrafts (5.4) (9.7) (0.1) (15.2)
Bank and other loans (96.0) (39.9) (1.1) (137.0)
Finance lease liabilities (0.3) 0.1 - (0.2)
--------------------------- -------- ---------- ------------- ----------
Net debt (75.7) (46.0) (1.1) (122.8)
--------------------------- -------- ---------- ------------- ----------
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 2017, the Group recognised a deficit on its UK
Defined Benefit pension plan of GBP34.9 million (30 June 2017:
GBP40.0m). The Group's post-employment benefit obligations outside
the UK amounted to GBP2.3 million (30 June 2017: GBP2.2m).
Defined Benefit schemes had the following effect on the Group's
results and financial position:
Unaudited Unaudited
Half year Half year Audited
to to Year ended
31 Dec 31 Dec 30 Jun
2017 2016 2017
GBPm GBPm GBPm
--------------------------------- ---------- ---------- -----------
Profit or loss
Service cost and administration
expenses (0.3) (0.3) (0.5)
--------------------------------- ---------- ---------- -----------
Charge to operating profit (0.3) (0.3) (0.5)
--------------------------------- ---------- ---------- -----------
Net interest cost on defined
benefit obligation (0.5) (0.5) (0.9)
--------------------------------- ---------- ---------- -----------
Charge to profit before taxation (0.8) (0.8) (1.4)
--------------------------------- ---------- ---------- -----------
Other comprehensive expense
Net actuarial gain/(loss) 4.2 (11.9) (11.0)
--------------------------------- ---------- ---------- -----------
Other comprehensive expense 4.2 (11.9) (11.0)
--------------------------------- ---------- ---------- -----------
Unaudited Unaudited Audited
as at as at as at
31 Dec 31 Dec 30 Jun
2017 2016 2017
GBPm GBPm GBPm
--------------------------------- ---------- ---------- -----------
Balance sheet
Defined benefit obligations:
UK - funded (157.2) (162.1) (155.9)
Other - unfunded (2.3) (1.8) (2.2)
--------------------------------- ---------- ---------- -----------
(159.5) (163.9) (158.1)
Fair value of scheme assets 122.3 120.3 115.9
Deficit on the schemes (37.2) (43.6) (42.2)
--------------------------------- ---------- ---------- -----------
For accounting purposes, the Fund's benefit obligation as at 31
December 2017 has been calculated based on data gathered for the
triennial actuarial valuation as at March 2015 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
Half year Half year
to to Year ended
31 Dec 31 Dec 30 Jun
2017 (*) 2016 2017
-------- --------- --------- ----------
Interim 1.5p 1.4p 1.4p
Final n/a n/a 2.9p
-------- --------- --------- ----------
* Interim payment to shareholders that is not recognised within
these condensed interim consolidated financial statements.
Movements in the B Shares were
as follows: Nominal
value
Number 000 GBPm
-------------------------------- ------------ -------
At 1 July 2016 (audited) 858,528 0.9
Issued 4,373,024 4.4
Redeemed (4,231,289) (4.2)
-------------------------------- ------------ -------
At 31 December 2016 (unaudited) 1,000,263 1.0
-------------------------------- ------------ -------
Issued 2,550,930 2.6
Redeemed (2,345,581) (2.3)
-------------------------------- ------------ -------
At 30 June 2017 (audited) 1,205,612 1.2
-------------------------------- ------------ -------
Issued 5,284,070 5.3
Redeemed (4,996,018) (5.0)
-------------------------------- ------------ -------
At 31 December 2017 (unaudited) 1,493,664 1.5
-------------------------------- ------------ -------
13) Acquisitions
i) Acquisition of remaining 30% of Czech Republic based skincare business at Brno
On 5 October 2017, in line with the Sale and Purchase Agreement
(SPA), the remaining 30% of the Czech Republic based skincare
business at Brno was acquired by the Group for consideration of
GBPnil. As a result, the contingent consideration of GBP3.0 million
held in relation to acquiring this remaining 30% interest has been
released to exceptional items within the profit and loss.
Subsequent to the half year end, the Group has exchanged
contracts to sell the entire Czech Republic based skincare business
at Brno for GBP1.3 million. An exceptional charge at the half year
of GBP4.1 million has been made following the impairment review
triggered by the now completed sale of 100% of the Czech Republic
based skincare business (equating to the net of the businesses book
and fair values at half year).
The net charge to exceptional items is GBP1.1 million.
ii) Acquisition of the entire share capital of Danlind a/s
On 29 September 2017, the Group acquired the entire share
capital of Danlind a/s, a company registered in Denmark, whose
principal activity is the manufacture and sale of Auto dishwash and
Laundry products. Details of the acquisition are as follows:
a) Purchase consideration and provisional fair value of net assets acquired
GBPm
Cash consideration 10.4
Purchase discount (0.2)
------------------------------ ------
Total purchase consideration 10.2
------------------------------ ------
The assets and liabilities recognised at the date of acquisition
are as follows:
Provisional
Fair value fair
Book value adjustment value
GBPm GBPm GBPm
----------------------------- ----------- ------------ ------------
Intangible assets 0.1 - 0.1
Fixed assets 23.8 (5.7) 18.1
Inventories 14.0 (0.7) 13.3
Trade receivables and other
receivables 11.8 - 11.8
Net debt (25.3) - (25.3)
Trade payables and other
payables (13.6) - (13.6)
Net identifiable assets
acquired 10.8 (6.4) 4.4
Goodwill 5.8
----------------------------- ----------- ------------ ------------
Consideration paid 10.2
----------------------------- ----------- ------------ ------------
The fair value adjustments relate to; the fair value of fixed
assets using Group accounting policies and the recognition of
inventory to net realisable value, resulting in a goodwill balance
of GBP5.8 million. None of the recognised goodwill will be
deductible for tax purposes.
The above calculations are provisional with reviews to be
completed by the end of the financial year ended 30 June 2018.
b) Acquisition related costs
Acquisition related costs of GBP0.8 million (GBP0.5m legal and
advisory costs, GBP0.3m refinancing of Danlind debt) are included
in the income statement and are treated as exceptional.
c) Revenue and profit contribution
The acquired business contributed revenues of GBP15.2 million
and break-even operating profits to the Group for the period from
29 September 2017 to 31 December 2017.
If the acquisition had occurred on 1 July 2017, Group
consolidated revenue and consolidated operating profit before
exceptional items for the six months ended 31 December 2017 would
have been GBP382.8 million and GBP16.2 million respectively.
14) 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 2017 are detailed in note 28 (page 107) McBride plc's Annual
Report and Accounts 2017. A copy of McBride plc's Annual Report and
Accounts 2017 is available on McBride's website at
www.mcbride.co.uk. Aside from this, there are no other related
party transactions.
15) 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 period-end net assets excluding net debt.
Other information
Financial calendar for the year ending 30 June 2018
Payments to shareholders
--------------------------------------------------------------------
22 February
Interim Announcement 2018
Entitlement to B Shares 27 April 2018
Redemption of B Shares 1 June 2018
6 September
Final Announcement 2018
26 October
Entitlement to B Shares 2018
30 November
Redemption of B Shares 2018
---------------------- -------------------------
Results
--------------------------------------------------------------------
22 February
Interim Announcement 2018
Preliminary statement 6 September
for full year Announcement 2018
Annual Report and
Accounts 2017 Circulated September 2018
Annual General Meeting To be held 23 October 2018
------------------------ ----------------------- -----------------
Exchange rates
The exchange rates used for conversion to Sterling were as
follows:
Unaudited Unaudited Audited
Half year Half year
to to Year ended
31 Dec 30 June
31 Dec 2017 2016 2017
-------------------- ----------- --------- ----------
Average
rate:
Euro 1.12 1.16 1.16
US Dollar 1.32 1.28 1.27
Polish
Zloty 4.76 5.08 5.02
Czech Koruna 28.99 31.47 31.30
Danish Kroner 8.39 - -
Malaysian Ringgit 5.55 5.35 5.43
Australian Dollar 1.69 1.69 1.68
Closing
rate:
Euro 1.13 1.17 1.14
US Dollar 1.35 1.23 1.30
Polish
Zloty 4.71 5.15 4.81
Czech Koruna 28.78 31.56 29.79
Danish Kroner 8.39 - -
Malaysian Ringgit 5.47 5.52 5.57
Australian Dollar 1.73 1.70 1.69
Note: This announcement contains inside information which is
disclosed in accordance with the Market Abuse Regulation which came
into effect on 3 July 2016.
-Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGZZMMDGRZZ
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February 22, 2018 02:01 ET (07:01 GMT)
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