TIDMMCB
RNS Number : 8389M
McBride PLC
19 September 2023
Confidential
McBride plc
("McBride", the "Company" or the "Group")
Strong performance recovery through 2023
Improving momentum from private label demand surge
19 September 2023
McBride, the leading European manufacturer and supplier of
private label and contract manufactured products for the domestic
household and professional cleaning/hygiene markets, announces its
preliminary results for the year ended 30 June 2023.
Improved profitability and a return to volume growth
-- Strong business performance recovery; revenue growth and
improved profitability in all five divisions
-- Further improvement with customer partnering; supporting big
step up in private label demand, further innovation options and
improved delivery performance
-- Volume growth of +5.6%, significantly ahead of the market,
with private label increasing +7.0%. Second half volumes up 9.6%,
all from private label. Final quarter volume up 12.7%.
-- Inflationary pressures shifting from raw materials to labour,
transport, energy and general supplies, with additional impact from
interest rate rises
-- Healthy progress in key strategic focus areas; volumes in
Germany +9.8% for private label, with European Laundry +6.5% - both
significantly ahead of market growth
-- Continued progress on margin de-risking, with three-month sales pricing in place
-- All Transformation programmes underway, targeting GBP50m of benefits over five years
-- Established targets for Scope 1 and 2 emissions; targeting a
55% reduction by 2033, with Scope 3 targets to be finalised by end
2023
Financial highlights
-- Group revenue of GBP889.0m (2022: GBP678.3m), up 31.1% (28.4% at constant currency(1) )
-- Adjusted operating profit(2) of GBP13.5m (2022: loss of GBP24.5m)
-- Operating profit from continuing operations of GBP10.3m (2022: loss of GBP26.7m)
-- Second half profitability underpinned by surge in private
label demand, stabilisation of raw material prices and new contract
wins
-- Adjusted profit before tax(2) of GBP0.3m (2022: loss of GBP29.6m)
-- Loss before tax from continuing operations of GBP15.1m (2022: loss of GBP35.3m)
-- Net debt(2) at GBP166.5m (30 June 2022: GBP164.4m), with
liquidity solid at GBP59.3m (30 June 2022: GBP70.6m)
Confident outlook underpinned by business momentum
-- Encouraging start to new financial year
-- Growing shift towards private label products, across all markets, evident in demand levels
-- Well-positioned to manage in a volatile macro environment
-- Maintaining focus on reducing debt with tight control on costs, margins and operating capital
-- Confirmed Group financing, improved financial performance and
positive three-year outlook, will enable further liquidity and cash
flow improvements
Chris Smith, Chief Executive Officer, commented:
"The decisive actions taken in the last financial year helped
set the foundations for the strong recovery achieved across the
business. In combination with the hard work and dedication of our
teams, McBride has delivered an impressive return to profitability
and volume growth in an environment that continues to be volatile.
Inflation will remain a challenge for the business into the new
year, one which we believe we are better positioned to manage,
driven in part by our shift to three-monthly pricing.
The second half of the year saw encouraging momentum across the
Group, underpinned by a number of new contract wins and the growing
consumer shift towards private label products as cost-of-living
pressures continue to impact buying behaviour. Importantly, we have
continued to make good strategic progress across all divisions,
with our Transformation programmes moving at pace. Overall, while
the current macro environment continues to present challenges,
McBride is well-positioned to deliver sustainable and profitable
long-term growth."
Year to Year to Constant
30 Jun 30 Jun Reported currency
GBPm unless otherwise stated 2023 2022 change change(1)
--------------------------------------- ------- --------- -------- ---------
Continuing operations
Group revenue 889.0 678.3 31.1% 28.4%
Adjusted operating profit/(loss) 13.5 (24.5) 38.0 38.4
Operating profit/(loss) 10.3 (26.7) 37.0
Adjusted profit/(loss) before taxation 0.3 (29.6) 29.9 30.2
Loss before taxation (15.1) (35.3) 20.2
Adjusted diluted loss per share(3) 0.0p (11.7)p 11.7p
Diluted loss per share (6.6)p (13.8)p 7.2p
Net debt 166.5 164.4 2.1
Adjusted return on capital employed(2) 6.4% (11.4)% 17.8ppt
--------------------------------------- ------- --------- -------- ---------
(1) Comparatives translated at financial year 2023 exchange
rates.
(2) Refer to note 19 for definition.
(3) See note 8.
A results presentation will be available on the McBride plc
investor relations website from 9.20am today.
McBride plc 0161 203 7401
Chris Smith, Chief Executive
Officer
Mark Strickland, Chief Financial
Officer
Instinctif Partners 0207 457 2020
Tim McCall
Guy Scarborough
This announcement contains forward-looking statements about
financial and operational matters. These statements are based on
the current views, expectations, assumptions and information of
management, and are based on information available to the
management as at the date of this announcement. Because they relate
to future events and are subject to future circumstances, these
forward-looking statements are subject to unknown risks,
uncertainties and other factors which may not have been in
contemplation as at the date of the announcement. As a result,
actual financial results, operational performance and other future
developments could differ materially from those envisaged by the
forward-looking statements. Neither McBride plc nor its affiliates
assume any obligations to update any forward-looking
statements.
McBride plc gives no express or implied warranty,
representation, assurance or undertaking as to the impartiality,
accuracy, completeness, reasonableness or correctness of the
information, opinions or statements expressed in the announcement
or any other information (whether written or oral) supplied as part
of it. Neither McBride plc, its affiliates nor its officers,
employees or agents will accept any responsibility or liability of
any kind for any damage or loss arising from any use of this
announcement or its contents. All and any such responsibilities and
liabilities are expressly disclaimed. In particular, but without
prejudice to the generality of the foregoing, no representation,
warranty, assurance or undertaking is given as to the achievement
or reasonableness of any future projections, forward-looking
statements about financial and operational matters, or management
estimates contained in the announcement.
This announcement does not constitute an offer or invitation to
underwrite, subscribe for, or otherwise acquire or dispose of any
McBride plc shares or other securities, or of any of the businesses
or assets described in the announcement, and the information
contained herein cannot be relied upon as a guide to future
performance.
Overall business performance
McBride entered the financial year to 30 June 2023 in a
significantly stronger position than the previous year, when a
volatile macroeconomic backdrop led the Group and the industry to
experience unprecedented margin pressures. The decisive actions we
implemented through the second half of calendar year 2021 and into
2022, to enable the business to weather these challenges, have
provided the foundations for a much-improved performance and,
encouragingly, a return to strong volume growth. Whilst the extreme
input cost inflationary period is behind us, many of the themes
highlighted in last year's Annual Report remained significant and
continued to be factors that our teams have had to contend with
throughout the year. As a result, McBride has had to be agile and
innovative in its approach; skills that stand us in good stead for
the future.
The first six months of the year were characterised by a focus
on margin and service recovery as the dual effects of pricing and
input materials inflation from the preceding twelve months cycled
through the business, with sales volumes relatively flat and the
business break-even at the trading profit level. However, the
second half saw a pleasing return to volume growth and stronger
profitability levels, driven by the stabilisation of materials
prices, combined with McBride delivering new contract wins and a
strong volume pull as there was a growing consumer shift towards
private label products across all markets.
At a Group level, revenue was up 31.1% to GBP889.0 million
(2022: GBP678.3m) with GBP159.6 million a result of the wrap-around
effect of selling prices increases and GBP32.1 million from higher
volumes. Operating profit from continuing operations improved
significantly on the prior year, increasing to GBP10.3 million
(2022: loss of GBP26.7m). Adjusted operating profit increased to
GBP13.5 million (2022: adjusted operating loss of GBP24.5m), with
adjusted operating profit in the second half of GBP14.8 million
compared to a first half adjusted loss of GBP1.3 million.
Heading into the financial year ending 30 June 2023, one of our
top priorities was keeping a tight hold on costs and working
capital and maintaining strong capital expenditure control. The
focus across all teams on debt management has resulted in no
significant deterioration in our debt levels. Liquidity remains
strong despite higher activity levels at the end of the year. Debt
reduction will remain an important area of focus into the new
financial year.
In the face of such clear and profound pressures, this set of
results represents an excellent performance and is testament to the
hard work of our teams, our commitment to customer service and the
steps we have taken to strengthen the business and position it for
long-term growth.
Inflationary environment
As expected, inflation remained a major challenge throughout the
year, with the impact increasingly being from labour and energy
costs, with chemicals and packaging costs more benign. Energy cost
inflation remains an unpredictable factor, however, McBride's own
energy costs are fully hedged, with the principal risk to McBride
being the indirect impact of energy in its core raw material
supplies.
While inflation presented significant challenges, it led to an
important opportunity to consider how our pricing approach to
customers is best managed. The Group has persisted this past year
with the principle of not committing pricing to customers beyond
three months. With the ongoing potential for significant volatility
in input costs, this principle has enabled divisions to respond
more effectively and quickly to shifts in the macroeconomic
environment. Through our data led approach, our teams can now
clearly demonstrate the dynamics behind the decision making,
allowing teams to engage with customers and move pricing in a
collaborative, flexible manner.
Volume growth
Alongside margin recovery through price increases and value
engineering, the volume growth across the Group in the second half
of the year helped to deliver our return to profit. Importantly,
while the total market for private label and branded products is
estimated to have fallen by 5.5% in volume terms, McBride delivered
a 5.6% increase in total volumes, with private label volumes 7.0%
higher. A further acceleration in the latter part of the second
half of the financial year saw final quarter volume growth of
12.7%.
The overall market in Europe saw further gains for private label
with volume share up 2.5% to 33.1%, fuelled by clear switching by
consumers and retailers in light of cost-of-living challenges. At a
category level, dishwash saw the biggest growth in volumes, up
5.0%, with laundry up 2.0% and cleaners flat. McBride saw volume
growth significantly ahead of the market across the three
categories, with dishwash volumes standing out at 13.0% higher in
the year. This performance ahead of market is a result of a
combination of factors: the increasing focus and specialism
embedded in the divisional teams together with the Group wide focus
on customer service excellence and product quality leading to more
contract wins from customer confidence in McBride as their trusted
and preferred supplier.
Strategic progress
While the volatile macroeconomic environment forced the business
to focus on the short term in the years following the 2021 strategy
reset, the Board is confident that our Compass strategy remains as
relevant and compelling as it did when it was first announced. The
business has made significant progress in the year to 30 June 2023,
putting in place many of the processes and plans that will set us
on the path to long-term, sustainable growth.
The Board and senior leadership teams have continued to
undertake a thorough review of Group and divisional strategies each
year, and we maintain our commitment to delivering on our plans. To
that effect, we have continued to see strong growth in two key
areas of strategic focus with private label volumes in our key
German market up 9.8%, and in our key laundry category volumes grew
6.5%, significantly ahead of the total market growth level.
Importantly, we are committed to delivering all programmes set
out in our Transformation agenda. We have made a substantial
investment, including creating a standalone team to ensure each
programme is adequately resourced and we continue to target GBP50
million of benefits over five years. In particular, the progression
of our SAP programme, in combination with the Commercial Excellence
and Service Excellence programmes, will be key factors in
differentiating McBride in the market, improving business momentum
and generating shareholder value.
Sustainability
McBride remains committed to playing its part in the path to Net
Zero and acting in a responsible manner across its operations. In
2023, we established our targets for our Scope 1 and 2 emissions,
whereby we will reduce these emissions by 55% by 2033. We expect to
finalise our Scope 3 targets by the end of December 2023.
We also launched a range of ESG innovations, both in pursuit of
our Net Zero agenda and to help our customers and consumers with
their environmental ambitions. Initiatives include the launch of
Elopak (liquids in cardboard cartons), laundry capsules in
child-safe cardboard cartons, concentrated formats for laundry
powder and certain liquid cleaners and the introduction of a
cardboard cap for our aerosol products.
Current trading and outlook
The first two months of the new financial year have seen the
momentum of last year's second half continue. However, our teams
remain vigilant to safeguard the business from short-term
challenges arising from a still volatile macro environment and we
will continue to focus on reducing debt and maintaining tight
control of costs.
We enter the 2024 financial year with improving confidence about
the future. Our performance improvement momentum, the work done to
pursue our Compass strategies, the gathering pace of our
Transformation agenda and our leadership positions across many of
our markets and categories, mean McBride is well placed to deliver
sustainable, profitable growth over the longer term.
Divisional portfolio performance
All divisions reported bottom line improvement with Liquids,
Unit Dosing and Aerosols returning to profitability. While Powders
reported an overall loss for the year, due to cost increases in key
raw materials in the first half, the division recovered well and
returned to profitability in the final quarter. This represents an
excellent performance for the Group and highlights both the
underlying strength of the business, its teams and the significant
opportunity for growth.
Corporate costs were GBP7.7 million (2022: GBP4.5m), driven by
inflationary impacts and higher bonus provisions.
Year to Year to Constant
30 June 30 June Reported currency
2023 2022 change change
Revenue GBPm GBPm % %
------------- ------- ------- -------- --------
Liquids 497.9 383.9 29.7% 27.3%
Unit Dosing 234.2 171.5 36.6% 33.9%
Powders 85.9 68.6 25.2% 22.7%
Aerosols 46.2 31.9 44.8% 40.8%
Asia Pacific 24.8 22.4 10.7% 6.9%
------------- ------- ------- -------- --------
Group 889.0 678.3 31.1% 28.4%
------------- ------- ------- -------- --------
Year to Year to Constant
30 June 30 June Reported currency
2023 2022 change change
Adjusted operating profit/(loss) GBPm GBPm GBPm GBPm
--------------------------------- ------- ------- -------- --------
Liquids 10.5 (15.9) 26.4 26.8
Unit Dosing 10.0 (0.8) 10.8 10.9
Powders (0.7) (2.5) 1.8 1.4
Aerosols 0.3 (1.5) 1.8 1.9
Asia Pacific 1.1 0.7 0.4 0.4
Corporate (7.7) (4.5) (3.2) (3.0)
--------------------------------- ------- ------- -------- --------
Group 13.5 (24.5) 38.0 38.4
--------------------------------- ------- ------- -------- --------
Liquids performance review
Liquids revenue grew by 27.3% on a constant currency basis,
GBP391.2 million to GBP497.9 million, driven by volume growth of
5.0% and selling price increases in response to continued
inflationary pressures.
Private label sales volumes increased by 6.0%. This private
label performance compared favourably with the overall volumes seen
in the five key private label markets in Europe, which grew by
2.8%. Market outperformance was driven by new contract wins and
improving customer service.
In the fourth quarter, there was increased demand for private
label products, particularly in France, in response to pressures on
disposable incomes. This resulted in consumers switching from
branded products to private label items. Until the fourth quarter,
this had been more than offset by the overall decline in consumer
demand. Conversely, volumes sold to contract manufacturing
customers were down 16.6% as branded product lines were hit by the
market shift to private label.
Volumes of private label dishwash products grew by 12.9%, driven
by a contract win in the UK and the division outperforming the five
largest private label markets in Europe, which grew by 7.6%.
Volumes of private label laundry products grew by 6.2%, with key
contract wins in Spain and Germany, again significantly
outperforming the key markets in Europe. Volumes of private label
cleaner products increased by 1.8%, which represented a positive
performance compared to growth in the market as a whole, which was
flat year on year.
The division delivered an adjusted operating profit of GBP10.5
million, which was GBP26.8 million higher than the prior year on a
constant currency basis.
Service levels improved throughout the year, with improvements
made in the division's factories and across the broader supply
chain. These improvements in service resulted in lower customer
penalties and helped deliver year-on-year growth.
Good progress was made with committed Compass cost reduction
actions, while factory efficiencies were also improved through the
rollout of Lean manufacturing methodology across the division.
For the second year, the division achieved net contract wins,
particularly in the German market, which is expected to impact
volumes positively over the next financial year.
Unit Dosing performance review
Revenue was up by 33.9% to GBP234.2 million on a constant
currency basis, with the division recording adjusted operating
profit of GBP10.0 million (2022: operating loss of GBP0.8m),
resulting in an adjusted operating profit margin of 4.3% (2022:
adjusted operating loss margin of 0.5%).
After delivering a revenue increase of 35.1% in the first half
of the financial year, the division grew 32.7% in the second half,
driven by selling price increases, new contract wins and improved
rates of sale of private label products. Volumes in contract
manufacturing declined by 18.5%.
All of the division's product lines saw positive volume growth
in 2023, which represents a significant achievement. The division
grew in four of the five largest economies in Europe (UK, Germany,
France and Spain), with a marginal volume decline in Italy. New
product offerings - such as the new 'click to lock' box and capsule
shapes - have been selected by multiple customers and are growing
rapidly, illustrating how McBride is innovating to improve delivery
and create value.
Adjusted operating profit improved by GBP10.8 million, driven by
multiple factors. Continued price increases to recover inflation
played a key role in the first half, while efforts to develop next
generation lower cost products across all our categories had an
increasing impact as the year progressed. Volume growth allowed the
division to leverage its factories which resulted in an increase in
its direct labour productivity of over 7%. Strategic staffing
policies and tight cost controls helped to offset labour and
service cost increases, ensuring overheads only increased by 13%,
despite significant increases in labour and energy inflation.
Overall, the division has taken a major step forward in improving
its competitiveness and positioning itself for long-term
growth.
Powders performance review
Revenue in Powders at GBP85.9 million was 22.7% higher on a
constant currency basis, while the adjusted operating loss reduced
by GBP1.8 million to GBP(0.7) million. Ongoing cost mitigation
actions and volume growth in the final quarter provided the
foundations to returning the business to break -- even in the near
term.
The division has seen volatile, and at times, immediate price
increases for various key raw materials throughout the year.
Despite the strong selling price increases, given the magnitude
of the inflationary pressures experienced in the year, it was not
possible to offset cost increases fully. Additionally, the higher
selling prices of the category damaged its competitiveness versus
other types of formats, such as Liquids and Unit Dosing products.
This caused a reduction in powder product demand in most markets,
both across private label and contract manufacturing.
The total laundry powder market declined in volume by 3.7%,
although private label grew by 1.5%. The same dynamics were seen in
auto dishwash powder with a total market volume decline of 4.6%,
but with private label gaining market share in certain geographic
areas. However, the tabs format fell off significantly, seeing a
31.4% decline in private label volume.
For the laundry powder category, McBride generally benefited
from the switch from brands to private label in most of the key
European markets and gained significant new volumes in contract
manufacturing. However, auto dishwash category sales suffered due
to some contract losses and a lack of growth in France and
Italy.
As a result of the implementation of cost saving initiatives
throughout the year and the benefits of increased selling prices,
profit recovered in the last quarter. However, this did not offset
the losses incurred during the first three quarters and prevented
the division from achieving its break-even target.
During the year, the division worked relentlessly to deliver
award winning products in its five key markets, building on its
strong R&D strategy and establishing the Powders division as
the 'go to' manufacturer in the market.
Aerosols performance review
Revenue of GBP46.2 million was 40.8% higher in the year on a
constant currency basis, while adjusted operating profit of GBP0.3
million was up GBP1.9 million at constant currency. This resulted
in an adjusted operating profit margin of 0.6% (2022: adjusted
operating loss margin of 4.6%).
Following strong revenue growth of 33.4% in the first half, when
the division delivered an adjusted operating profit at break-even,
the second half saw sales increase by 48.1% across all core
categories. The implementation of price increases partially offset
exceptional increases in raw material, packaging and logistics cost
increases. Material prices appear to be plateauing at the high
level seen since the fourth quarter.
Of the division's three main product categories, both household
and personal care saw a significant increase in demand in the year,
while insecticides grew slightly.
This growth was driven by higher private label sales, largely
due to increasing underlying demand and new contract wins, in
addition to increased selling prices. Supply chain agility and
strong cost controls reinforced Aerosols' strong reputation with
customers and were key factors in capturing new business in both
private label and contract manufacturing.
The Aerosols division continues to pursue its strategy of
supplying niche products to a limited range of markets, while
pursuing targeted geographical expansion. The division is keenly
focused on meeting customers' needs in the most cost-effective way.
This approach has already secured new contract wins that launched
in the third quarter, with others planned for the next financial
year, continuing the positive growth momentum experienced through
2023.
Asia Pacific performance review
Revenue grew 6.9% on a constant currency basis to GBP24.8
million, with adjusted operating profit growing to GBP1.1 million,
representing a 57.1% increase. This resulted in an adjusted
operating profit margin of 4.4%, which was achieved via a
disciplined approach to overhead cost control across the division
as a means to combat the general inflationary pressures seen across
the region.
Revenue in the first six months of the year grew by 18.9%, but
decreased by 4.2% in the second half of the year. This reduction
was primarily due to the partial loss of a contract with a major
customer that operates across multiple countries in the South East
Asia region. Nevertheless, new contracts secured and launched in
the fourth quarter will more than mitigate this loss going forward
and are expected to generate positive sales growth momentum going
into the next financial year.
Demand for private label products is strong as consumers
increasingly turn towards better value products without
compromising on performance. In Australia, private label contracts
with a major customer were successfully extended. In Malaysia, key
customers have been strongly promoting their private label personal
care offering, resulting in significant sales growth.
Group operating results
Operating profit from continuing operations of GBP10.3 million
was a significant improvement on the prior year (2022: loss of
GBP26.7m). Adjusted operating profit of GBP13.5 million was also
significantly better than the prior year (2022: loss of GBP24.5m)
whilst the adjusted operating profit margin increased from (3.6)%
to 1.5%.
The Group returned to profitability as the time lag between the
exceptional levels of input cost inflation hitting the business and
the mitigating actions being agreed with our customers unwound. In
particular, in the second half of the year, we saw encouraging
sales momentum across the Group, underpinned by improved customer
service levels, new contract wins and increased consumer demand for
great-value, high-quality private label products.
Group EBITDA
Adjusted EBITDA(1) of GBP34.1 million (2022: GBP(3.6)m)
reflected the strong trading performance.
2023 2022
GBPm GBPm
------------------------------------------------------ ---- ------
Operating profit/(loss) 10.3 (27.1)
Add back: operating loss from discontinued operations - 0.4
------------------------------------------------------ ---- ------
Operating profit/(loss) from continuing operations 10.3 (26.7)
Exceptional items in operating profit/(loss) (note
4) 0.8 (0.4)
Amortisation of intangibles (note 10) 2.4 2.6
------------------------------------------------------ ---- ------
Adjusted operating profit/(loss) from continuing
operations 13.5 (24.5)
Depreciation of property, plant and equipment (note
10) 16.8 16.9
Depreciation of right-of-use assets (note 10) 3.8 4.0
------------------------------------------------------ ---- ------
Adjusted EBITDA 34.1 (3.6)
------------------------------------------------------ ---- ------
(1) Definition and reconciliation provided in note 19.
Exceptional items
Total exceptional items of GBP13.0 million were recorded during
the year in relation to continuing operations (2022: GBP3.1m). The
charges primarily comprised the following:
-- GBP12.2 million in respect of the independent business review
and refinancing costs, recognised in finance costs, including a
GBP1.5 million charge in respect of the valuation of the upside
sharing fee payable to members of the lender group upon exiting the
existing revolving credit facility (RCF) agreement; and
-- GBP0.8 million costs relating to the re-evaluation of an environmental remediation provision.
Finance costs
At GBP13.2 million, adjusted finance costs were GBP8.1 million
higher than the prior year (2022: GBP5.1m), driven by revised terms
under the lending agreement announced on 29 September 2022 and
increases to the underlying market interest rates.
Loss before tax and taxation
Reported loss before taxation from continuing operations was
GBP(15.1) million (2022: GBP(35.3)m). Adjusted profit before
taxation from continuing operations was GBP0.3 million (2022: loss
of GBP29.6m). The tax charge on continuing adjusted profit before
tax for the year is GBP(0.3) million (2022: GBP9.3m credit) and the
effective tax rate is 100% (2022: 31%).
The statutory effective tax rate on continuing operations for
the year is 24% (2022: 32%).
The Group operates across a number of jurisdictions and tax risk
can arise in relation to the pricing of cross -- border
transactions, where a taxation authority's interpretation of the
arm's length principle can diverge from the approach taken by the
Group.
Loss per share
On an adjusted basis, diluted loss per share from continuing
operations was 0.0 pence (2022: loss of 11.7p). Total adjusted
diluted loss per share was 0.0 pence (2022: loss of 11.7p), with
basic loss per share at 6.6 pence (2022: loss of 14.0p).
Payments to shareholders
Under the terms of the amended RCF announced on 29 September
2022, the Company may not, except with the consent of its lender
group, declare, make or pay any dividend or distribution to its
shareholders prior to an 'exit event', being a change of control,
refinancing of the RCF in full, prepayment and cancellation of the
RCF in full, or upon the termination date of the RCF, being May
2026. Hence the Board is not recommending a final dividend for the
financial year ended 30 June 2023.
Cash flow and balance sheet
2023 2022
GBPm GBPm
------------------------------------------------------- ------ ------
Adjusted EBITDA 34.1 (3.6)
Working capital excluding provisions and pensions 7.1 (15.3)
Share-based payments and loss on disposal of property,
plant and equipment 0.8 0.3
Non-exceptional reversal of impairment of property,
plant and equipment - (0.1)
Pension deficit reduction contributions (4.0) (4.0)
------------------------------------------------------- ------ ------
Free cash flow(1) 38.0 (22.7)
Exceptional items (1.4) (4.1)
Interest on borrowings and lease liabilities less
interest receivable (11.4) (3.3)
Refinancing costs paid (12.3) (1.8)
Tax paid (1.8) (0.1)
------------------------------------------------------- ------ ------
Net cash generated from/(used in) operating activities 11.1 (32.0)
Net capital expenditure(2) (16.3) (13.2)
Debt financing activities 2.6 24.7
Settlement of derivatives 0.4 0.4
------------------------------------------------------- ------ ------
Free cash flow to equity(3) (2.2) (20.1)
Dividends paid/redemption of B Shares - (0.1)
Share buy-back - (0.1)
Net decrease in cash and cash equivalents (2.2) (20.3)
------------------------------------------------------- ------ ------
Free cash flow in the year was GBP38.0 million (2022:
GBP(22.7)m).
Working capital inflows increased compared to the prior year
primarily due to a reduction in customer payment terms, partially
offset by an increase in the value of inventories due to higher
input costs.
During the year, net capital expenditure was GBP16.3 million
(2022: GBP13.2m) in cash terms. The ongoing reduction in gross
capital expenditure levels resulted from careful management of cash
flows to mitigate increases in net debt. The Group continues to
prioritise capital expenditure to underpin our strategy of focused
investment in our growth categories.
The Group's net assets decreased to GBP37.1 million (2022:
GBP57.0m). Gearing(4) decreased slightly to 78% (30 June 2022: 80%)
as net debt levels remained broadly in line with the prior year
end. Adjusted return on capital employed of 6.4% was higher than
the prior year (2022: (11.4)%) driven by a return to operating
profitability.
(1) Refer to note 19 for definition.
(2) Net capital expenditure is capital expenditure including
capital payments on lease liabilities less proceeds from sale of
fixed assets.
(3) Free cash flow to equity excludes cash flows relating to
transactions with shareholders.
(4) Gearing represents net debt divided by the average of
current and prior year year-end capital.
Bank facilities and net debt
Net debt at 30 June 2023 increased marginally to GBP166.5
million (30 June 2022: GBP164.4m).
Throughout the year the Group had a EUR175 million
multi-currency, sustainability-linked RCF. The facility was agreed
for a five -- year tenor to May 2026 and is provided by a syndicate
of supportive international bank lenders. On 29 September 2022, the
Group announced that it had agreed an amended RCF with its lender
group maintaining the commitment date to May 2026 and, ensuring the
Group has sufficient levels of liquidity headroom and can comply
with revised covenant requirements.
The Group considers that the amended RCF arrangement achieves an
appropriate balance between the interests of all stakeholders of
the Group. In particular, we have been in regular discussion and
consultation with the Trustee of the Group's defined benefit
pension scheme in the UK. In order to preserve and support the
position of the scheme, with the support of the lender group, we
agreed to provide in favour of the scheme a package of additional
credit support in the UK, as well as a new information sharing
protocol to ensure ongoing communication between the Group and the
Trustee remains comprehensive.
At 30 June 2023, liquidity(1) as defined by the RCF agreement
was GBP59.3 million (2022: GBP70.6m). Liquidity throughout the year
was comfortably above the minimum liquidity covenant of GBP15
million.
At 30 June 2023, the net debt cover ratio as defined under the
RCF funding arrangements was 2.9x (2022: (93.3)x) and the interest
cover was 2.7x (2022: (0.2)x). The amount undrawn on the facility
was EUR46.7 million (2022: EUR64.5m). Under the current agreement,
net debt cover and interest cover covenants are to be tested
quarterly from 30 September 2024.
The RCF, which is aligned with the Loan Market Association's
'Sustainability Linked Loan Principles', incorporates three
sustainability performance targets which are central to McBride
plc's commitment to maintaining a responsible business and
contributing actively to a more sustainable future:
1. Renewable energy: McBride plc strives to reduce its
environmental impact by increasing the percentage of energy from
renewable sources from 5.9% in 2020 to 70.0% in 2026. During this
financial year, 58.6% of the Group's energy came from renewable
sources, beating the target of 30.0% by 30 June 2023.
2. Recycled content: Plastics are a significant element in many
of the final products of McBride. The Company targets to increase
significantly the post-consumer recycled (PCR) content of
polyethylene terephthalate (PET) plastic packaging sourced for
manufacturing its products, from 64.0% in 2020 to 94.0% in 2026.
During this financial year, 98.2% of PET bought had PCR content,
exceeding the target of 79.0%.
3. Responsible sourcing: McBride plc targets the sourcing of all
paper and card components responsibly via FSC(R) approved
suppliers, with the percentage of virgin carton sourced from FSC(R)
approved suppliers increasing from 50.0% in 2020 to 100.0% in 2026.
By 30 June 2022, the percentage of skillets sourced that are FSC(R)
certified was 55.6%, below the target of 65.0% by 30 June 2023. The
decrease in the use of FSC(R) sourced board is due to product mix
and transition impacts. McBride continues to focus on improving our
recyclability via product design and working closely with our
customers.
Successful achievement of all three annual targets will result
in a reduction of 0.05% of the margin of the facility.
At 30 June 2023, the Group had a number of facilities whereby it
could borrow against certain of its trade receivables. In the UK,
the Group had a GBP20 million facility, committed until September
2024. In France and Belgium, the Group had an aggregate EUR30
million facility, which had a rolling notice period of six months
for the French part and three months for the Belgian part, both
committed until September 2024. In Germany, the Group had a EUR40
million facility, committed until September 2024. In Spain, the
Group had an EUR8 million facility, committed until May 2026. Since
the year end, the Group has agreed extension of all invoice
discounting facilities to May 2026. The Group can borrow from the
provider of the relevant facility up to the lower of the facility
limit and the value of the respective receivables.
The Group's confirmed financing, improved trading performance
and more positive three-year financial forecast has meant that
there is no longer a material uncertainty that would cast
significant doubt on the Group's ability to continue as a going
concern, even when modelling severe but plausible downside risks.
The Board anticipates that the financial turnaround will allow the
Group to improve liquidity and cash flows further. In particular,
it is expected that having a clean auditors' report will facilitate
the agreement of an invoice discounting line on our unencumbered
Italian debtor ledger and allow credit insurers to increase levels
of insurance cover to our suppliers back to more normal levels.
(1) Refer to note 19 for definition.
Pensions
In the UK, the Group operates a defined benefit pension scheme,
which is closed to new members and to future accrual.
A cash flow driven investment (CDI) strategy was implemented
during the first half of the financial year to 30 June 2020. Using
credit/bond investments, the CDI strategy delivered a stable, more
certain expected return and reduced volatility. The strategy
previously targeted a c.100% hedge of interest rates and inflation.
As a result of the government bond crisis in 2022 and the resultant
changes in liability driven investing (LDI) managers' collateral
requirements, the Trustee amended the strategy in October 2022 and
as an interim step moved to an unlevered government bond-based
hedge with c.40% of interest rate and inflation hedging. The
investment strategy is currently being reviewed and hedging is due
to be increased to c.60% of interest rates and inflation. This
level of hedging broadly hedges the current funding level of the
Fund and strikes a balance between risk and return objectives and
the liquidity needs of the Fund.
A significant increase in corporate bond yields has decreased
the value of the liabilities and the assets over the year to 30
June 2023. At 30 June 2023, the Group recognised a deficit in the
scheme of GBP24.7 million (30 June 2022: GBP14.4m). The increase in
deficit is due to recent high inflation impacting pension
liabilities at 30 June 2023 by more than had been assumed within
long-term inflation assumptions.
Following the triennial valuation at 31 March 2021, the Company
and Trustee agreed a new deficit reduction plan based on the scheme
funding deficit of GBP48.4 million. The current level of deficit
contributions of GBP4.0 million per annum is payable until 31 March
2028. The Company has separately agreed that, from 1 October 2024,
conditional profit-related contributions of GBP1.7 million per
annum will be paid over the period to 31 March 2028. If adjusted
operating profit exceeds GBP35 million, additional annual deficit
contributions of GBP1.7 million will be due over the following
year. If adjusted operating profit is below GBP30 million then no
profit-related contributions will be due the following year. If
reported adjusted operating profit is between GBP31 million and
GBP35 million, a proportion of the GBP1.7 million contribution will
be due over the following year, with incremental increases of
GBP0.34 million of additional contributions for each whole GBP1
million of adjusted operating profit in excess of GBP30 million.
Also, the Company has agreed to make additional contributions such
that the total deficit contributions in any year match the value of
any dividend paid. The funding arrangements and recovery plan will
next be reviewed by the Company and Trustee as part of the 31 March
2024 valuation.
The Group has other post-employment benefit obligations outside
the UK that amounted to GBP1.9 million (30 June 2022: GBP1.7m).
Environmental, social and governance (ESG)
McBride plc works to integrate the principles of long -- term
environmental and social sustainability within its business
strategy. Our approach to sustainability is underpinned by an
analysis of the ESG issues that are most relevant and important in
the context of McBride plc's business activities. The Company
recognises it must tackle climate change to remain viable, it
places ESG issues at the core of its approach to
sustainability.
Given their strategic significance, our ESG priorities are
actively driven and managed by a cross-functional ESG Committee,
overseen directly by the CEO reporting to the Board. The Board:
-- oversees strategies to manage social and environmental risks,
including management processes and standards;
-- reviews the effectiveness of management policies and
procedures relating to safety, health and employment practices;
-- monitors our key performance indicators against agreed commitments;
-- approves recommendations from the executive ESG Committee in
respect of key ESG issues and related objectives;
-- monitors the level of resource, competence and commitment
applied to the management of ESG issues to ensure a culture of
continuous improvement; and
-- supports McBride plc's commitment to make a positive
contribution to the communities in which it operates.
We have developed a framework of non-financial key indicators
and metrics to assess our performance against our ongoing ESG
objectives which sit alongside our obligations under the UK
Corporate Governance Code ('the Code'). Progress is regularly
monitored by the ESG Committee and reported on to our Board for
review.
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:
-- Financing risks;
-- Supply chain resilience;
-- Changing market, customer and consumer dynamics;
-- Disruptions to systems and processes;
-- Safe and high-quality products;
-- Health and safety;
-- Challenges in attracting and retaining talent;
-- Climate change and environmental concerns;
-- Increased regulation; and
-- Economic, political and macro environment instability.
Consolidated income statement
Year ended 30 June 2023
2023 2022
------------------------------- -----------------------------
Adjusted Adjusting Total Adjusted Adjusting Total
items items
Continuing operations Note GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Revenue 3 889.0 - 889.0 678.3 - 678.3
Cost of sales (625.4) - (625.4) (487.5) - (487.5)
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Gross profit 263.6 - 263.6 190.8 - 190.8
Distribution costs (77.9) - (77.9) (64.3) - (64.3)
Administrative costs (168.4) (3.2) (171.6) (148.8) (5.0) (153.8)
Impairment of trade
receivables (3.5) - (3.5) (2.0) - (2.0)
(Loss)/gain on disposal
of property, plant
and equipment (0.3) - (0.3) (0.3) 3.7 3.4
Impairment of property,
plant and equipment - - - 0.1 (0.9) (0.8)
Operating profit/(loss) 13.5 (3.2) 10.3 (24.5) (2.2) (26.7)
Finance costs 6 (13.2) (12.2) (25.4) (5.1) (3.5) (8.6)
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Profit/(loss) before
taxation 0.3 (15.4) (15.1) (29.6) (5.7) (35.3)
Taxation 7 (0.3) 3.9 3.6 9.3 2.0 11.3
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Loss for the year
from continuing
operations - (11.5) (11.5) (20.3) (3.7) (24.0)
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Discontinued operations
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Loss for the year
from discontinued
operations - - - - (0.3) (0.3)
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Loss for the year - (11.5) (11.5) (20.3) (4.0) (24.3)
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Loss per ordinary share
from continuing and discontinued
operations attributable
to the owners of the parent
during the year 8
Basic loss per
share
From continuing
operations (6.6)p (13.8)p
From discontinued
operations 0.0p (0.2)p
---------------------------- ------ ---------- --------- -------- -------- --------- --------
From loss for the
year (6.6)p (14.0)p
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Diluted loss per
share
From continuing
operations (6.6)p (13.8)p
From discontinued
operations 0.0p (0.2)p
---------------------------- ------ ---------- --------- -------- -------- --------- --------
From loss for the
year (6.6)p (14.0)p
---------------------------- ------ ---------- --------- -------- -------- --------- --------
Consolidated statement of comprehensive income
Year ended 30 June 2023
2023 2022
GBPm GBPm
---------------------------------------------------- ------ ------
Loss for the year (11.5) (24.3)
----------------------------------------------------- ------ ------
Other comprehensive income/(expense)
Items that may be reclassified to profit
or loss:
Currency translation differences on foreign
subsidiaries (0.6) 0.2
Gain on net investment hedges 0.4 0.5
Gain on cash flow hedges in the year 3.7 2.4
Cash flow hedges transferred to profit or
loss (1.4) -
Taxation relating to items above (0.4) (0.5)
----------------------------------------------------- ------ ------
1.7 2.6
Items that will not be reclassified to profit
or loss:
Net actuarial (loss)/gain on post -- employment
benefits (14.1) 12.4
Taxation relating to item above 3.5 (3.1)
----------------------------------------------------- ------ ------
(10.6) 9.3
---------------------------------------------------- ------ ------
Total other comprehensive (expense)/income (8.9) 11.9
----------------------------------------------------- ------ ------
Total comprehensive expense (20.4) (12.4)
----------------------------------------------------- ------ ------
Total comprehensive expense attributable
to equity shareholders arises from:
Continuing operations (20.4) (12.1)
Discontinued operations - (0.3)
----------------------------------------------------- ------ ------
(20.4) (12.4)
---------------------------------------------------- ------ ------
Consolidated balance sheet
As at 30 June 2023
2023 2022
Note GBPm GBPm
-------------------------------------------- ---- ------- -------
Non-current assets
Goodwill 10 19.7 19.7
Other intangible assets 10 6.5 7.3
Property, plant and equipment 10 117.8 122.9
Derivative financial instruments 11 4.5 1.9
Right-of-use assets 10 8.5 11.3
Deferred tax assets 41.6 29.7
198.6 192.8
-------------------------------------------- ---- ------- -------
Current assets
Inventories 121.5 118.9
Trade and other receivables 145.7 145.4
Current tax asset 2.3 3.9
Derivative financial instruments 11 0.6 0.6
Cash and cash equivalents 12 1.6 4.5
-------------------------------------------- ---- ------- -------
271.7 273.3
-------------------------------------------- ---- ------- -------
Total assets 470.3 466.1
-------------------------------------------- ---- ------- -------
Current liabilities
Trade and other payables 219.6 206.9
Borrowings 11 49.3 60.5
Lease liabilities 11 3.5 3.9
Derivative financial instruments 11 1.8 -
Current tax liabilities 6.7 5.3
Provisions 14 2.7 3.4
-------------------------------------------- ---- ------- -------
283.6 280.0
-------------------------------------------- ---- ------- -------
Non-current liabilities
Borrowings 11 109.8 96.4
Lease liabilities 11 5.5 8.1
Pensions and other post-employment benefits 13 26.6 16.1
Provisions 14 2.6 3.8
Deferred tax liabilities 5.1 4.7
-------------------------------------------- ---- ------- -------
149.6 129.1
-------------------------------------------- ---- ------- -------
Total liabilities 433.2 409.1
-------------------------------------------- ---- ------- -------
Net assets 37.1 57.0
-------------------------------------------- ---- ------- -------
Equity
Issued share capital 16 17.4 17.4
Share premium account 68.6 68.6
Other reserves 78.9 77.2
Accumulated losses (127.8) (106.2)
-------------------------------------------- ---- ------- -------
Total equity 37.1 57.0
-------------------------------------------- ---- ------- -------
Consolidated cash flow statement
Year ended 30 June 2023
2022
2023 (restated)(1)
Note GBPm GBPm
------------------------------------------------- ---- ------ -------------
Operating activities
Loss before tax
Continuing operations (15.1) (35.3)
Discontinued operations - (0.4)
Finance costs 25.4 8.6
Exceptional items excluding finance costs 4 0.8 -
Share-based payments charge 0.5 -
Depreciation of property, plant and equipment 10 16.8 16.9
Depreciation of right-of-use assets 10 3.8 4.0
Loss on disposal of fixed assets 0.3 0.3
Amortisation of intangible assets 10 2.4 2.6
(Reversal of) impairment of property, plant
and equipment - (0.1)
Operating cash flow before changes in working
capital before exceptional items 34.9 (3.4)
Increase in receivables (1.3) (27.4)
Increase in inventories (2.7) (25.7)
Increase in payables 11.1 37.8
------------------------------------------------- ---- ------ -------------
Operating cash flow after changes in working
capital before exceptional items 42.0 (18.7)
Additional cash funding of pension schemes (4.0) (4.0)
------------------------------------------------- ---- ------ -------------
Cash generated from/(used in) operations
before exceptional items 38.0 (22.7)
------------------------------------------------- ---- ------ -------------
Cash outflow in respect of exceptional items (1.4) (4.1)
------------------------------------------------- ---- ------ -------------
Cash generated from/(used in) operations 36.6 (26.8)
Interest paid (11.4) (3.3)
Refinancing costs paid (12.3) (1.8)
Taxation paid (1.8) (0.1)
------------------------------------------------- ---- ------ -------------
Net cash generated from/(used in) operating
activities 11.1 (32.0)
------------------------------------------------- ---- ------ -------------
Investing activities
Proceeds from sale of property, plant and
equipment - 6.1
Purchase of property, plant and equipment (10.3) (12.6)
Purchase of intangible assets (1.7) (1.7)
Settlement of derivatives used in net investment
hedges 0.4 0.4
------------------------------------------------- ---- ------ -------------
Net cash used in investing activities (11.6) (7.8)
------------------------------------------------- ---- ------ -------------
Financing activities
Redemption of B Shares 16 - (0.1)
(Repayment)/drawdown of overdrafts 12 (6.2) 0.7
(Repayment)/drawdown of other loans 12 (4.9) 6.0
Drawdown of bank loans 13.7 18.0
Repayment of IFRS 16 lease obligations 12 (4.3) (5.0)
Purchase of own shares - (0.1)
Net cash (used in)/generated from financing
activities (1.7) 19.5
------------------------------------------------- ---- ------ -------------
Decrease in net cash and cash equivalents (2.2) (20.3)
Net cash and cash equivalents at the start
of the year 4.5 24.9
Currency translation differences (0.7) (0.1)
------------------------------------------------- ---- ------ -------------
Net cash and cash equivalents at the end
of the year 1.6 4.5
------------------------------------------------- ---- ------ -------------
(1) Refinancing costs paid have been reclassified as operating
activities, having been reported previously under financing
activities.
Consolidated statement of changes in equity
Year ended 30 June 2023
Other reserves
------------------
Issued Share Cash flow Currency Capital
share premium hedge translation redemption Accumulated Total
capital account reserve reserve reserve losses equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
At 1 July 2022 17.4 68.6 1.8 (1.8) 77.2 (106.2) 57.0
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
Year ended 30 June
2023
Loss for the year - - - - - (11.5) (11.5)
Other comprehensive
income/(expense)
Items that may be
reclassified
to profit or loss:
Currency translation
differences
of foreign subsidiaries - - - (0.6) - - (0.6)
Gain on net investment
hedges - - - 0.4 - - 0.4
Gain on cash flow hedges
in the year - - 3.7 - - - 3.7
Cash flow hedges transferred
to profit or loss - - (1.4) - - - (1.4)
Taxation relating to
the items above - - (0.4) - - - (0.4)
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
- - 1.9 (0.2) - - 1.7
Items that will not
be reclassified
to profit or loss:
Net actuarial loss on
post -- employment benefits - - - - - (14.1) (14.1)
Taxation relating to
items above - - - - - 3.5 3.5
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
- - - - - (10.6) (10.6)
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
Total other comprehensive
income/(expense) - - 1.9 (0.2) - (10.6) (8.9)
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
Total comprehensive
income/(expense) - - 1.9 (0.2) - (22.1) (20.4)
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
Transactions with owners
of the parent
Share-based payments - - - - - 0.5 0.5
At 30 June 2023 17.4 68.6 3.7 (2.0) 77.2 (127.8) 37.1
----------------------------- -------- ---------- --------- ------------ ------------- ------------- --------
Other reserves
-------------------
Issued Share Cash flow Currency Capital
share premium hedge translation redemption Accumulated Total
capital account reserve reserve reserve losses equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
At 1 July 2021 17.4 68.6 (0.1) (1.0) 77.1 (92.2) 69.8
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
Year ended 30 June 2022
Loss for the year - - - - - (24.3) (24.3)
Other comprehensive
income/(expense)
Items that may be reclassified
to profit or loss:
Currency translation
differences of foreign
subsidiaries - - - 0.2 - - 0.2
Gain on net investment
hedges - - - 0.5 - - 0.5
Gain on cash flow hedges
in the year - - 2.4 - - - 2.4
Taxation relating to
items above - - (0.5) - - - (0.5)
- - 1.9 0.7 - - 2.6
Items that will not be
reclassified to profit
or loss:
Net actuarial gain on
post -- employment benefits - - - - - 12.4 12.4
Taxation relating to
items above - - - - - (3.1) (3.1)
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
- - - - - 9.3 9.3
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
Total other comprehensive
income - - 1.9 0.7 - 9.3 11.9
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
Total comprehensive
income/(expense) - - 1.9 0.7 - (15.0) (12.4)
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
Transactions with owners
of the parent
Redemption of B Shares - - - - 0.1 (0.1) -
Purchase of own shares - - - - - (0.1) (0.1)
Transfers between reserves - - - (1.5) - 1.5 -
Taxation relating to
the items above - - - - - (0.3) (0.3)
At 30 June 2022 17.4 68.6 1.8 (1.8) 77.2 (106.2) 57.0
--------------------------------- ------- --------- ------------ ----------- ------------ ------------- ------
At 30 June 2023, the accumulated losses include a deduction of
GBP0.4 million (2022: GBP0.5m) for the cost of own shares held in
relation to employee share schemes.
Notes to the consolidated financial information
1. Corporate information
McBride plc ('the Company') is a public company limited by
shares incorporated and domiciled in the United Kingdom and
registered in England and Wales. 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') is
Europe's leading provider of private label and contract
manufactured products for the domestic household and professional
cleaning/hygiene markets. The Company develops and manufactures
products for the majority of retailers and major brand owners
throughout the UK, Europe and Asia.
2. Accounting policies
Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 30 June 2023 and
30 June 2022, but is derived from those accounts. The financial
information for 2022 is derived from the statutory accounts for
2022 which have been delivered to the registrar of companies. The
statutory accounts for the year ended 30 June 2023 have been
reported on by the Company's auditor, PricewaterhouseCoopers LLP,
and will be delivered to the Registrar of Companies in due
course.
The financial information has been prepared on the going concern
basis in accordance with UK-adopted International Financial
Reporting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those standards.
The financial statements have been prepared under the historical
cost convention, modified in respect of financial assets and
liabilities (derivative financial instruments) at fair value
through profit or loss, assets held for sale and defined benefit
pension plan assets. The financial information has been prepared
applying accounting policies that were applied in the preparation
of the Company's published consolidated financial statements for
the year ended 30 June 2022.
The financial information does not constitute statutory accounts
of the Group for the years ended 30 June 2023 and 2022 within the
meaning section 435 of the Companies Act 2006 or contain sufficient
information to comply with the disclosure requirements of IFRS.
The auditor has reported on those accounts; their report 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 (2) or (3) of the Companies Act
2006.
Going concern
The Group's base case forecasts are based on the Board-approved
budget and three-year plan. They indicate sufficient liquidity,
debt cover and interest cover throughout the going concern review
period to ensure compliance with current banking covenants. The
Group's base case scenario assumes:
-- revenue growth of c.4-5% per annum, driven predominantly by
volume increases resulting from net contract wins;
-- raw material prices reducing compared to 2023 levels, which
in themselves remained significantly higher than the pre-Covid-19
pandemic era as a result of exceptional levels of input cost
inflation;
-- interest rates increasing by c.100 basis points versus budgeted assumptions; and
-- Sterling: Euro exchange rate of GBP1:EUR1.12.
The Directors have considered a severe but plausible downside
scenario to stress test the Group's financial forecasts, with the
following assumptions:
-- no revenue growth from assumed contract wins in 2024;
-- revenue growth reducing to half of that assumed in the original three-year plan for 2025;
-- an increase in raw material and packaging input costs compared to latest forecasts;
-- interest rates increasing by a further 100 basis points; and
-- Sterling appreciating significantly against the Euro to GBP1:EUR1.22.
In the event that such a severe but plausible downside risk
scenario occurs, the Group would remain compliant with current
banking covenants.
After reviewing the current liquidity position, financial
forecasts, stress testing of potential risks and considering the
uncertainties described above, and based on the currently committed
funding facilities, the Directors have a reasonable expectation
that the Group has sufficient resources to continue in operational
existence and without significant curtailment of operations for the
foreseeable future. For these reasons the Directors continue to
adopt the going concern basis of accounting in preparing the Group
financial statements.
Viability statement
In accordance with the requirements of the UK Corporate
Governance Code ('the Code'), the Directors have performed a robust
assessment of the principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency or liquidity. The Board has determined that a three year
period to 30 June 2026 constitutes an appropriate period over which
to provide its viability statement.
In assessing the Group's viability, the Directors have
considered the current financial position of the Group and its
principal risks and uncertainties. The analysis considers a severe
but plausible downside scenario, featuring the principal risks from
a financial and operational perspective, with the resulting impact
on key metrics, such as debt headroom and covenants. The downside
risk scenario assumes sensitivity around exchange rates and
interest rates, along with significant reductions in revenue and
cash flow over the three year period. The Group's global footprint,
product diversification and access to external financing all
provide resilience against these factors and the other principal
risks to which the Group is exposed.
Whilst the Group ends the year with net current liabilities of
GBP11.9 million, the Directors conclude that the Group has access
to sufficient financing facilities in order to support this
position.
After conducting their viability review, the Directors confirm
that they have a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due
over the three year period of their assessment to 30 June 2026.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of the consolidated financial statements from
which this preliminary announcement is derived, requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expense. Actual results may
differ from these estimates. The significant judgements made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those applied to
the consolidated financial statements for the year ended 30 June
2022.
Alternative performance measures
The performance of the Group is assessed using a variety of
adjusted measures that are not defined under IFRS and are therefore
termed non-GAAP measures.
APM Definition Source
---------------------- ------------------------------------------ ------------------------- -------
Adjusted operating Operating profit/(loss) before amortisation Group income statement
(loss)/profit of intangible assets and exceptional
items
---------------------- --------------------------------------------------- -------------------------
Adjusted EBITDA Adjusted operating profit/(loss) before Group income statement
depreciation
---------------------- --------------------------------------------------- -------------------------
Adjusted profit/(loss) Adjusted profit/(loss) before tax is Group income statement
before tax based on adjusted operating profit less
adjusted finance costs.
---------------------- --------------------------------------------------- -------------------------
Adjusted loss for Adjusted loss after tax is based on Group income statement
the year adjusted profit before tax less taxation.
---------------------- --------------------------------------------------- -------------------------
Adjusted loss per Adjusted loss per share is based on Note 8
share the Group's loss for the year adjusted Group income statement
for the items excluded from operating
profit/(loss) in arriving at adjusted
operating profit/(loss)
---------------------- --------------------------------------------------- -------------------------
Free cash flow Free cash flow is defined as cash generated Group cash flow
from continuing operations before exceptional statement
items.
---------------------- --------------------------------------------------- -------------------------
Cash conversion Cash conversion % is defined as free Group income statement
% cash flow as a percentage of adjusted Group cash flow
EBITDA. statement
---------------------- --------------------------------------------------- -------------------------
Adjusted return Adjusted ROCE is defined as rolling Group income statement
on capital employed twelve months total adjusted operating Group balance sheet
profit from continuing operations divided
by the average of the past two years'
capital employed. Capital employed is
defined as the total of goodwill and
other intangible assets, property, plant
and equipment, right-of-use assets,
inventories, trade and other receivables
less trade and other payables.
---------------------- --------------------------------------------------- -------------------------
Liquidity At any time, without double counting, Group cash flow
the aggregate of: (a) cash; (b) cash statement
equivalents; (c) the available facility Note 16
at that time, which comprises the headroom
available in the RCF and other committed
facilities; and (d) the aggregate amount
available for drawing under uncommitted
facilities.
---------------------- --------------------------------------------------- -------------------------
Net debt Net debt consists of cash and cash equivalents, Group balance sheet
overdrafts, bank and other loans and
lease liabilities.
---------------------- --------------------------------------------------- -------------------------
The alternative performance measures we use may not be directly
comparable with similarly titled measures used by other
companies.
Adjusted measures
Adjusted measures exclude specific items that are considered to
hinder comparison of the trading performance of the Group's
businesses either year on year or with other businesses. This
presentation is consistent with the way that financial performance
is measured by management and reported to the Board and Executive
Committee and is used for internal performance analysis and in
relation to employee incentive arrangements. The Directors present
these measures in the financial statements in order to assist
investors in their assessment of the trading performance of the
Group. Directors do not regard these measures as a substitute for,
or superior to, the equivalent measures calculated and presented in
accordance with IFRS.
During the years under review, the items excluded from operating
profit in arriving at adjusted operating profit were the
amortisation of intangible assets and exceptional items.
Exceptional items and amortisation are excluded from adjusted
operating profit because they are not considered to be
representative of the trading performance of the Group's businesses
during the year.
See note 19 'Additional information' for further information on
alternative performance measures.
3. Segment information
Background
Financial information is presented to the Board by product
technology for the purposes of allocating resources within the
Group and assessing the performance of the Group's businesses.
There are five separately managed and accountable business
divisions:
-- Liquids
-- Unit Dosing
-- Powders
-- Aerosols
-- Asia Pacific
Intra-group revenue from the sale of products is agreed between
the relevant customer-facing units and eliminated in the segmental
presentation that is presented to the Board, and therefore excluded
from the below figures. Programme Compass is delivering an
increased focus on cost optimisation and has meant that most
overhead costs are now directly attributed within the respective
divisions' income statements. The only costs now allocated out to
the divisions are central overheads, with corporate costs being
retained at a Group level. Central overheads are allocated to a
reportable segment proportionally using an appropriate cost driver.
Corporate costs, which include the costs associated with the Board
and the Executive Leadership Team, governance and listed company
costs and certain central functions (mostly associated with
financial disciplines such as treasury), are reported separately.
Exceptional items are detailed in note 4 and are not allocated to
the reportable segments as this reflects how they are reported to
the Board. Finance expense and income are not allocated to the
reportable segments, as the central treasury function manages this
activity, together with the overall net debt position of the
Group.
The Board uses adjusted operating profit to measure the
profitability of the Group's businesses. Adjusted operating profit
is, therefore, the measure of segment profit presented in the
Group's segment disclosures. Adjusted operating profit represents
operating profit before specific items that are considered to
hinder comparison of the trading performance of the Group's
businesses either year on year or with other businesses. During the
years under review, the items excluded from operating profit in
arriving at adjusted operating profit were the amortisation of
intangible assets and exceptional items.
Liquids Unit Powders Aerosols Asia Corporate Group
Dosing Pacific
Year ended 30 June
2023 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ------- ------- -------- -------- --------- ------
Continuing operations
Segment revenue 497.9 234.2 85.9 46.2 24.8 - 889.0
---------------------- ------- ------- ------- -------- -------- --------- ------
Adjusted operating
profit/(loss) 10.5 10.0 (0.7) 0.3 1.1 (7.7) 13.5
Amortisation of
intangible assets (2.4)
Exceptional items
(note 4) (0.8)
---------------------- ------- ------- ------- -------- -------- --------- ------
Operating profit 10.3
Finance costs (note
6) (25.4)
---------------------- ------- ------- ------- -------- -------- --------- ------
Loss before taxation (15.1)
---------------------- ------- ------- ------- -------- -------- --------- ------
Inventories 59.4 33.8 15.8 9.6 2.9 - 121.5
Capital expenditure 5.9 4.9 1.7 0.4 0.3 - 13.2
Amortisation and
depreciation 13.2 6.3 1.4 0.6 1.5 - 23.0
---------------------- ------- ------- ------- -------- -------- --------- ------
Liquids Unit Powders Aerosols Asia Corporate Group
Dosing Pacific
Year ended 30 June
2022 GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------- ------- ------- -------- -------- --------- ------
Continuing operations
Segment revenue 383.9 171.5 68.6 31.9 22.4 - 678.3
----------------------- ------- ------- ------- -------- -------- --------- ------
Adjusted operating
loss/(profit) (15.9) (0.8) (2.5) (1.5) 0.7 (4.5) (24.5)
Amortisation of
intangible assets (2.6)
Exceptional items
(note 4) 0.4
----------------------- ------- ------- ------- -------- -------- --------- ------
Operating profit (26.7)
Finance costs (note
6) (8.6)
----------------------- ------- ------- ------- -------- -------- --------- ------
Profit before taxation (35.3)
----------------------- ------- ------- ------- -------- -------- --------- ------
Inventories 57.5 35.5 13.7 9.1 3.1 - 118.9
Capital expenditure 5.7 6.5 1.0 0.6 0.3 - 14.1
Amortisation and
depreciation 13.7 6.5 1.4 0.5 1.4 - 23.5
----------------------- ------- ------- ------- -------- -------- --------- ------
Geographical information
Revenue from
external customers Non-current
assets
----------------------- ---------------
2023 2022 2023 2022
GBPm GBPm GBPm GBPm
-------------------------------------- -------- -------- --- ------- ------
United Kingdom 187.8 150.6 34.5 37.7
Germany 205.8 143.3 - -
France 188.0 140.3 9.1 9.2
Other Europe 278.5 217.8 104.1 108.0
Australia 0.4 8.5 - -
Other Asia Pacific 25.3 14.7 4.8 6.3
Rest of the World 3.2 3.1 - -
-------------------------------------- -------- -------- --- ------- ------
Total 889.0 678.3 152.5 161.2
-------------------------------------- -------- -------- --- ------- ------
The geographical revenue information above is based on the
location of the customer.
Non-current assets for this purpose consist of goodwill, other
intangible assets, property, plant and equipment and right-of-use
assets.
Revenue by major customer
In 2023 and 2022, no individual customer provided more than 10%
of the Group's revenue.
During 2023, the top ten customers accounted for 53% of total
Group revenue (2022: 50%).
4. Exceptional items
Analysis of exceptional items
2023 2022
GBPm GBPm
------------------------------------------------------ ---- -----
Continuing operations
Reorganisation and restructuring costs/(gains):
UK Aerosols closure - 0.1
Factory footprint review - (1.4)
Review of strategy, organisation and operations - (0.4)
Logistics transformation programme - 0.7
------------------------------------------------------ ---- -----
- (1.0)
Environmental remediation 0.8 0.6
------------------------------------------------------ ---- -----
Total charged/(credited) to operating profit/(loss) 0.8 (0.4)
------------------------------------------------------ ---- -----
Group refinancing:
------------------------------------------------------ ---- -----
Independent business review and refinancing costs 12.2 3.5
------------------------------------------------------ ---- -----
Total charged to finance costs 12.2 3.5
------------------------------------------------------ ---- -----
Total continuing operations 13.0 3.1
------------------------------------------------------ ---- -----
Discontinued operations
Sale of PC Liquids business - 0.5
Other - (0.1)
------------------------------------------------------ ---- -----
Discontinued operations before tax - 0.4
Tax on discontinued operations - (0.1)
Total discontinued operations - 0.3
------------------------------------------------------ ---- -----
Total 13.0 3.5
------------------------------------------------------ ---- -----
Total exceptional items of GBP13.0 million were recorded during
the year (2022: GBP3.5m). The charge primarily comprises the
following:
Items relating to continuing operations
Total exceptional items incurred in relation to the continuing
business of GBP13.0 million were recorded during the year (2022:
GBP3.1m). The charges comprise the following:
-- GBP0.8 million costs relating to the re-evaluation of the
environmental remediation provision; and
-- GBP12.2 million charged to finance costs in respect of the
independent business review and refinancing work completed in
September 2022. The charge includes GBP1.5 million reflecting the
fair value of the liability in relation to fees payable to members
of the lender group upon exiting the existing RCF agreement. As
reported in last year's Annual Report, the amended RCF that McBride
plc agreed with its lender group on 29 September 2022 includes an
'upside sharing' mechanism whereby a fee will become payable by the
Group to members of the lender group upon the occurrence of an
'exit event'. Such a fee will be determined as the percentage of
any increase in the market capitalisation of the Group from 29
September 2022 to the date of the exit event. This valuation has
been performed on an embedded derivative basis using a conventional
Black-Scholes pricing model.
Items relating to discontinued operations
An exceptional charge of GBPnil was incurred in respect of
discontinued operations during the year (2022: GBP0.4m).
5. Operating profit/(loss)
Operating profit/(loss) is stated after
charging/(crediting):
2023 2022
(restated)
GBPm GBPm
------------------------------------ ------ ----------
Cost of inventories (included
in cost of sales) 573.2 441.8
Employee costs 142.0 126.2
Amortisation of intangible assets
(note 10) 2.4 2.6
Depreciation of property, plant
and equipment (note 10) 16.8 16.9
Depreciation of right-of-use assets
(note 10) 3.8 4.0
Impairment:
Property, plant and equipment
(note 10) - 0.8
Inventories 3.0 3.9
Trade receivables 2.6 2.0
Expense relating to short-term
leases 0.3 0.3
Expense relating to low-value
leases 0.1 0.2
Research and development costs
not capitalised 7.3 6.8
Net foreign exchange loss 0.4 0.3
------------------------------------ ------ ----------
6. Finance costs
2023 2022
GBPm GBPm
-------------------------------------------------- ----- ----
Finance costs
Interest on bank loans and overdrafts 11.1 2.7
Interest on lease liabilities 0.3 0.4
Net foreign exchange loss/(gain) (0.2) 0.4
Amortisation of facility fees 0.5 0.5
Non-utilisation and other fees 1.0 0.6
-------------------------------------------------- ----- ----
12.7 4.6
Post-employment benefits:
Net interest cost on defined benefit obligation 0.5 0.5
-------------------------------------------------- ----- ----
Adjusted finance costs 13.2 5.1
-------------------------------------------------- ----- ----
Costs associated with independent business review
and refinancing 12.2 3.5
-------------------------------------------------- ----- ----
Total finance costs 25.4 8.6
-------------------------------------------------- ----- ----
Interest rate swaps are used to manage the interest rate profile
of the Group's borrowings. Accordingly, net interest payable or
receivable on interest rate swaps is included in finance costs.
7. Taxation
Income tax expense/(credit): 2023 2022
-------------------------- ---------------------------
UK Overseas Total UK Overseas Total
From continuing operations GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------- -------- ------- ------- -------- --------
Current tax expense/(credit)
Current year - 5.0 5.0 - 3.2 3.2
Adjustment for prior
years - (0.2) (0.2) (1.0) (0.9) (1.9)
------------------------------ ------- -------- ------- ------- -------- --------
- 4.8 4.8 (1.0) 2.3 1.3
------------------------------ ------- -------- ------- ------- -------- --------
Deferred tax (credit)/expense
Origination and reversal
of temporary differences (8.8) 0.9 (7.9) (7.9) (2.7) (10.6)
Adjustment for prior
years (0.2) (0.3) (0.5) (6.4) 5.4 (1.0)
Impact of change in
tax rate - - - (1.0) - (1.0)
------------------------------ ------- -------- ------- ------- -------- --------
(9.0) 0.6 (8.4) (15.3) 2.7 (12.6)
------------------------------ ------- -------- ------- ------- -------- --------
Income tax (credit)/expense (9.0) 5.4 (3.6) (16.3) 5.0 (11.3)
------------------------------ ------- -------- ------- ------- -------- --------
The current tax adjustment for the prior year was GBPnil (2022:
GBP0.5m credit) and GBP0.4 million (2022: GBP0.4m) credit relating
to the release of provisions for uncertain tax treatments due to
the expiry of statutes of limitation.
Reconciliation to UK statutory tax rate
The total tax charge on the Group's (loss)/profit before tax for
the year differs from the theoretical amount that would be charged
at the UK standard rate of corporation tax for the following
reasons:
2023 2022
From continuing operations GBPm GBPm
----------------------------------------------------- ------ ------
Loss before tax (15.1) (35.3)
----------------------------------------------------- ------ ------
Loss before tax multiplied by the UK corporation
tax rate of 25% (2022: 19.0%) (3.1) (6.7)
Effect of tax rates in foreign jurisdictions 1.1 (1.7)
Non-deductible expenses 0.4 0.6
Tax incentives/non-taxable income - (0.4)
Tax losses and other temporary differences for which
no deferred tax recognised - 0.6
Change in tax rate (1.6) (1.0)
Other differences 0.3 0.2
Adjustment for prior years (0.7) (2.9)
----------------------------------------------------- ------ ------
Total tax credit in profit or loss (3.6) (11.3)
----------------------------------------------------- ------ ------
Exclude adjusting items 3.9 2.0
Total tax charge/(credit) in profit or loss before
adjusting items 0.3 (9.3)
----------------------------------------------------- ------ ------
Taxation is provided at current rates on the profits earned for
the year.
8. Loss per ordinary share
Basic loss per ordinary share is calculated by dividing the loss
for the year attributable to owners of the Company by the weighted
average number of the Company's ordinary shares in issue during the
financial year. The weighted average number of the Company's
ordinary shares in issue excludes 623,968 shares (2022: 629,200
shares), being the weighted average number of own shares held
during the year in relation to employee share schemes.
Reference 2023 2022
-------------------------------------------------- ---------- ------- -------
Weighted average number of ordinary shares
in issue (million) a 173.4 173.5
Effect of dilutive LTIP and RSU awards (million) 2.5 1.0
-------------------------------------------------------------- ------- -------
Weighted average number of ordinary shares
for calculating diluted loss per share (million) b 175.9 174.5
-------------------------------------------------- ---------- ------- -------
Diluted loss per share is calculated by adjusting the weighted
average number of ordinary shares in issue assuming the conversion
of all potentially dilutive ordinary shares. Where potentially
dilutive ordinary shares would cause an increase in earnings per
share, or a decrease in loss per share, the diluted loss per share
is considered equal to the basic loss per share.
During the year, the Company had equity-settled LTIP and RSU
awards with a nil exercise price that are potentially dilutive
ordinary shares.
Adjusted loss per share measures are calculated based on loss
for the year attributable to owners of the Company before adjusting
items as follows:
2023 2022
From continuing operations Reference GBPm GBPm
--------------------------------------------- ---------- ------ ------
Loss for calculating basic and diluted loss
per share c (11.5) (24.0)
Adjusted for:
Amortisation of intangible assets (note 10) 2.4 2.6
Exceptional items (note 4) 13.0 3.1
Taxation relating to the above items (3.9) (2.0)
Loss for calculating adjusted loss per share d - (20.3)
--------------------------------------------- ---------- ------ ------
2023 2022
Reference pence pence
-------------------------------- ---------- ----- ------
Basic loss per share c/a (6.6) (13.8)
-------------------------------- ---------- ----- ------
Diluted loss per share c/b(1) (6.6) (13.8)
-------------------------------- ---------- ----- ------
Adjusted basic loss per share d/a 0.0 (11.7)
-------------------------------- ---------- ----- ------
Adjusted diluted loss per share d/b(1) 0.0 (11.7)
-------------------------------- ---------- ----- ------
2023 2022
From discontinued operations Reference GBPm GBPm
--------------------------------------- ---------- ----- -----
Loss for calculating basic and diluted
loss per share e - (0.3)
Adjusted for:
Exceptional items (note 4) - 0.4
Taxation relating to the above items - (0.1)
---------------------------------------------------- --- -----
Loss for calculating adjusted earnings f - -
per share
---------------------------------------- ---------- ---- -----
2023 2022
Reference pence pence
-------------------------------- ---------- ----- -----
Basic loss per share e/a 0.0 (0.2)
-------------------------------- ---------- ----- -----
Diluted loss per share e/b(1) 0.0 (0.2)
-------------------------------- ---------- ----- -----
Adjusted basic loss per share f/a 0.0 0.0
-------------------------------- ---------- ----- -----
Adjusted diluted loss per share f/b(1) 0.0 0.0
-------------------------------- ---------- ----- -----
2023 2022
Total attributable to ordinary shareholders Reference GBPm GBPm
--------------------------------------------- ---------- ------ ------
Loss for calculating basic and diluted loss
per share g (11.5) (24.3)
Adjusted for:
Amortisation of intangible assets 2.4 2.6
Exceptional items (note 4) 13.0 3.5
Taxation relating to the above items (3.9) (2.1)
Loss for calculating adjusted loss per share h - (20.3)
--------------------------------------------- ---------- ------ ------
2023 2022
Reference Pence pence
-------------------------------- ---------- ----- ------
Basic loss per share g/a (6.6) (14.0)
-------------------------------- ---------- ----- ------
Diluted loss per share g/b(1) (6.6) (14.0)
-------------------------------- ---------- ----- ------
Adjusted basic loss per share h/a 0.0 (11.7)
-------------------------------- ---------- ----- ------
Adjusted diluted loss per share h/b(1) 0.0 (11.7)
-------------------------------- ---------- ----- ------
(1) Diluted loss per share in 2022 is considered equal to the
basic loss per share as potentially dilutive ordinary shares cause
a decrease in the loss per share.
9. Payments to shareholders
Dividends paid and received are included in the Company
financial statements in the year in which the related dividends are
actually paid or received or, in respect of the Company's final
dividend for the year, approved by shareholders.
Under the terms of the amended RCF announced on 29 September
2022, the Company may not, except with the consent of its lender
group, declare, make or pay any dividend or distribution to its
shareholders prior to an 'exit event', being a change of control,
refinancing of the RCF in full, prepayment and cancellation of the
RCF in full, or upon the termination date of the RCF, being May
2026. Hence the Board is not recommending a final dividend for the
financial year ended 30 June 2023.
No payments to ordinary shareholders were made or proposed in
respect of this year or the prior year.
Furthermore, under the RCF the Company may not, except with the
consent of its lender group, redeem or repay any of its share
capital prior to an exit event. Therefore, as intimated in the
announcement dated 3 October 2022, the redemption of B Shares that
would normally take place in November each year will not take
place.
B Shares issued but not redeemed are classified as current
liabilities.
Movements in the B Shares were as follows:
Nominal
Number value
000 GBP'000
---------------- -------- -------
At 1 July 2021 747,399 747
Issued - -
Redeemed (81,511) (81)
---------------- -------- -------
At 30 June 2022 665,888 666
---------------- -------- -------
Issued - -
Redeemed - -
---------------- -------- -------
At 30 June 2023 665,888 666
---------------- -------- -------
B Shares carry no rights to attend, speak or vote at Company
meetings, except on a resolution relating to the winding up of the
Company.
10. Intangible assets, property, plant and equipment and
right-of-use assets
Goodwill
and other Property,
intangible plant and Right-of-use
assets equipment assets
GBPm GBPm GBPm
--------------------------------- ---------- --------- ------------
Net book value at 1 July 2022 27.0 122.9 11.3
Currency translation differences - 0.4 (0.2)
Additions 1.7 11.5 1.2
Disposal of assets (0.1) (0.2) -
Depreciation charge - (16.8) (3.8)
Amortisation charge (2.4) - -
--------------------------------- ---------- --------- ------------
Net book value at 30 June 2023 26.2 117.8 8.5
--------------------------------- ---------- --------- ------------
Included within goodwill and other intangible assets is goodwill
of GBP19.7 million (2022: GBP19.7m), computer software of GBP5.6
million (2022: GBP5.3m) and customer relationships of GBP0.6
million (2022: GBP1.1m).
Capital commitments as at 30 June 2023 amounted to GBP5.5
million (2022: GBP4.0m). At 30 June 2023 the Group was committed to
future minimum lease payments of GBP2.1 million (2022: GBP1.5m) in
respect of leases which have not yet commenced and for which no
lease liability has been recognised.
11. Financial risk management
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk.
There have been no material changes in the risk management
policies in either the 30 June 2023 or 30 June 2022 financial
years.
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities;
-- Level 2 - inputs other than Level 1 that are observable for
the asset or liability, either directly (prices) or indirectly
(derived from prices); and
-- Level 3 - inputs that are not based on observable market data (unobservable inputs).
As at As at
30 June 30 June
2023 2022
GBPm GBPm
--------------------------------- ------- ---------------
Level 2 Assets
Derivative financial instruments
Forward currency contracts 0.2 0.4
Interest rate swaps 4.9 2.1
Total financial assets 5.1 2.5
--------------------------------- ------- ---------------
Level 2 Liabilities
Derivative financial instruments
Forward currency contracts - -
Interest rate swaps (0.3) -
Upside sharing fee (1.5) -
--------------------------------- ------- ---------------
Total financial liabilities (1.8) -
--------------------------------- ------- ---------------
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, in addition to the upside sharing fee payable to the
lender group upon exit of the current RCF arrangement.
Foreign currency forward contracts are measured by reference to
prevailing forward exchange rates. Commodity forward contracts are
measured by 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.
The upside sharing fee has been identified as an embedded
derivative. The amended RCF that the Group agreed with its lender
group on 29 September 2022 includes an 'upside sharing' mechanism
whereby a fee will become payable by the Group to members of the
lender group upon the occurrence of an 'exit event'. Such a fee
will be determined as the percentage of any increase in the market
capitalisation of the Group from 29 September 2022 to the date of
the exit event. A valuation has been performed using a conventional
Black-Scholes pricing model with an exit date of 31 May 2024, based
on the assumption that the Group will have agreed a new RCF
arrangement at that time.
Valuation levels and techniques
There were no transfers between levels during the year and no
changes in valuation techniques.
Financial assets and liabilities measured at amortised cost
The fair value of borrowings (including overdrafts and lease
liabilities) are as follows:
As at As at
30 June 30 June
2023 2022
GBPm GBPm
----------------- ------- -------
Current 52.8 64.4
Non-current 115.3 104.5
----------------- ------- -------
Total borrowings 168.1 168.9
----------------- ------- -------
The fair value of the following financial assets and liabilities
approximate to their carrying amount:
-- trade and other receivables;
-- other current financial assets;
-- cash and cash equivalents; and
-- trade and other payables.
12. Net debt
Movements in net debt were as follows:
IFRS 16 Currency
At 1 July non-cash Cash translation At 30
June
2022 movements(1) flows differences 2023
GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- ------------ ----- ----------- -------
Cash and cash equivalents 4.5 - (2.2) (0.7) 1.6
Overdrafts (6.8) - 6.2 - (0.6)
Bank and other loans (150.1) - (8.8) 0.4 (158.5)
Lease liabilities (12.0) (1.5) 4.3 0.2 (9.0)
-------------------------- --------- ------------ ----- ----------- -------
Net debt (164.4) (1.5) (0.5) (0.1) (166.5)
-------------------------- --------- ------------ ----- ----------- -------
(1) IFRS 16 non-cash movements includes additions (GBP1.2m) and
interest charged (GBP0.3m).
13. Pensions and post-employment benefits
The Group provides a number of post-employment benefit
arrangements. In the UK, the Group operates a closed defined
benefit pension scheme and a defined contribution pension scheme.
Elsewhere in Europe, the Group has a number of smaller
post-employment benefit arrangements that are structured to accord
with local conditions and practices in the countries concerned. The
Group also recognises the assets and liabilities for all members of
the defined contribution scheme in Belgium, accounting for the
whole defined contribution section as a defined benefit scheme
under IAS 19 'Employee Benefits', as there is a risk the underpin
will require the Group to pay further contributions to the
scheme.
At 30 June 2023, the Group recognised a deficit on its UK
defined benefit pension plan of GBP24.7 million (2022: GBP14.4m).
The Group's post-employment benefit obligations outside the UK
amounted to GBP1.9 million (2022: GBP1.7m).
Non-governmental collected post-employment benefits had the
following effect on the Group's results and financial position:
Year ended Year ended
30 June 30 June
2023 2022
GBPm GBPm
------------------------------------------------ ---------- ----------
Profit or loss
Service cost and administration expenses (1.0) (1.0)
------------------------------------------------ ---------- ----------
Charge to operating loss (1.0) (1.0)
------------------------------------------------ ---------- ----------
Net interest cost on defined benefit obligation (0.5) (0.5)
------------------------------------------------ ---------- ----------
Charge to profit or loss before taxation (1.5) (1.5)
------------------------------------------------ ---------- ----------
Other comprehensive (expense)/income
Net actuarial (loss)/gain (14.1) 12.4
------------------------------------------------ ---------- ----------
Other comprehensive (expense)/income (14.1) 12.4
------------------------------------------------ ---------- ----------
As at As at
30 June 30 June
2023 2022
GBPm GBPm
------------------------------------------------ ---------- ----------
Balance sheet
Defined benefit obligations:
UK - funded (98.1) (116.6)
Other - unfunded (12.4) (12.0)
------------------------------------------------ ---------- ----------
(110.5) (128.6)
Fair value of scheme assets
UK - funded 73.4 102.2
Other - unfunded 10.5 10.3
------------------------------------------------ ---------- ----------
Deficit on the schemes (26.6) (16.1)
------------------------------------------------ ---------- ----------
For accounting purposes, the UK scheme's benefit obligation as
at 30 June 2023 has been calculated based on data gathered for the
2022 triennial actuarial valuation and by applying assumptions made
by the Group on the advice of an independent actuary in accordance
with IAS 19 'Employee Benefits'.
14. Provisions
Reorganisation Independent
and Leasehold Environmental business
restructuring dilapidations remediation review Other Total
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- -------------- ------------- ------------- ----------- ----- -----
At 1 July 2021 2.1 1.5 2.4 - 0.4 6.4
Charged to profit
or loss 0.4 - 0.6 1.7 0.6 3.3
Utilisation (1.7) - (0.3) - (0.5) (2.5)
--------------------- -------------- ------------- ------------- ----------- ----- -----
At 30 June 2022 0.8 1.5 2.7 1.7 0.5 7.2
Charged to profit
or loss (0.1) 0.2 0.7 1.0 - 1.8
Currency translation
differences - - 0.1 - - 0.1
Utilisation (0.4) - (0.5) (2.6) (0.3) (3.8)
--------------------- -------------- ------------- ------------- ----------- ----- -----
At 30 June 2023 0.3 1.7 3.0 0.1 0.2 5.3
--------------------- -------------- ------------- ------------- ----------- ----- -----
Analysis of provisions:
2023 2022
GBPm GBPm
------------ ---- ----
Current 2.7 3.4
Non-current 2.6 3.8
------------ ---- ----
Total 5.3 7.2
------------ ---- ----
Reorganisation costs in the year of GBP0.1 million is due to a
release of costs associated with the Group's logistics
transformation programme. The closing provision for reorganisation
and restructuring relates to the Group's logistics transformation
programme only. The provision is expected to be fully utilised
within twelve months of the balance sheet date.
Leasehold dilapidations provision relates to costs expected to
be incurred to restore leased properties to their original
condition at the end of the respective lease terms. A provision has
been recognised for the present value of the estimated expenditure
required to undertake restoration works. A dilapidation provision
of GBP0.2 million has been added in year, relating to the UK head
office building. Amounts will be utilised as the respective leases
end and restoration works are carried out, within a period of
approximately twelve months.
Environmental remediation provision relates to historical
environmental contamination at a site in Belgium. The additional
costs in the year of GBP0.7 million result from a re-evaluation of
the cost of environmental remediation. The closing provision is
expected to be utilised as the land is restored within a period of
approximately seven years.
The independent business review (IBR) was initiated to support
discussions with banking partners regarding revisions to financing
arrangements and banking covenants. A closing provision of GBP0.1
million has been recognised in relation to consultancy costs
directly associated with the IBR.
Other provisions of GBP0.2 million relate to costs concerning
the sale of the PC Liquids business, property repairs and onerous
lease obligations. The liability is expected to be settled within
twelve months of the balance sheet date.
The amount and timing of all cash flows related to the
provisions are reasonably certain.
15. Exchange rates
The principal exchange rates used to translate the results,
assets and liabilities and cash flows of the Group's foreign
operations into sterling were as follows:
Average rate Closing rate
-------------- --------------
2023 2022 2023 2022
------------------ ------ ------ ------ ------
Euro 1.15 1.18 1.17 1.17
US Dollar 1.20 1.33 1.27 1.21
Danish Krone 8.56 8.78 8.68 8.67
Polish Zloty 5.38 5.45 5.17 5.47
Czech Koruna 27.72 29.57 27.66 28.83
Hungarian Forint 453.41 433.28 433.34 462.64
Malaysian Ringgit 5.41 5.63 5.91 5.33
Australian Dollar 1.79 1.83 1.91 1.76
------------------ ------ ------ ------ ------
16. Share capital
Allotted and fully
paid
--------------------
Number GBPm
------------------------------------------- -------------- ----
Ordinary shares of 10 pence each
------------------------------------------- -------------- ----
At 1 July 2021 174,242,702 17.4
Shares bought back on-market and cancelled (185,374) -
------------------------------------------- -------------- ----
At 30 June 2022 and 30 June 2023 174,057,328 17.4
------------------------------------------- -------------- ----
Ordinary shares carry full voting rights and ordinary
shareholders are entitled to attend Company meetings and to receive
payments to shareholders.
McBride plc announced on 2 November 2020 that it would commence
a share buy-back programme of up to GBP12 million in McBride plc
ordinary shares, running from 2 November 2020 through to the date
of the Company's next AGM. The maximum number of shares that could
have been repurchased by the Company under the programme was 18.3
million. The purpose of the share buy-back programme was to reduce
the share capital of the Company (cancelling any shares repurchased
for this purpose). The Board believed that it was in the interests
of all shareholders to commence this programme based on the Board's
assessment that McBride plc's share price at that time did not
reflect the value of the underlying business, which has resilient
revenue, a strong balance sheet and highly visible cash flows.
As previously announced, the Board ended the share buy-back
programme during the prior year. In the year to 30 June 2022, the
Group purchased and cancelled 185,374 ordinary shares, representing
0.1% of the issued ordinary share capital as at 2 November 2020.
The shares were acquired at an average price of 77.0 pence per
share, with prices ranging from 73.3 pence per share to 78.6p per
share. The total cost of GBP0.1 million was deducted from equity as
the purchase of own shares. A transfer of GBPnil was made from
share capital to the capital redemption reserve.
17. Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation and, therefore, are not required to be disclosed in
these financial statements. Details of transactions between the
Group and other related parties are disclosed below.
Post-employment benefit plans
Contributions amounting to GBP6.5 million (2022: GBP6.4m) were
payable by the Group to pension schemes established for the benefit
of its employees. At 30 June 2023, GBP0.6 million (2022: GBP0.5m)
in respect of contributions due was included in other payables.
Compensation of key management personnel
For the purposes of these disclosures, the Group regards its key
management personnel as the Directors and certain members of the
senior executive team.
Compensation payable to key management personnel in respect of
their services to the Group was as follows:
2023 2022
GBPm GBPm
----------------------------- ---- ----
Short-term employee benefits 2.5 2.2
Post-employment benefits 0.1 0.1
Share-based payments 0.3 -
----------------------------- ---- ----
Total 2.9 2.3
----------------------------- ---- ----
18. 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:
Financial:
-- Continuing revenue: Revenue from contracts with customers
from the sale of goods is measured at the invoiced amount, net of
sales rebates, discounts, value added tax and other sales
taxes.
-- Cost savings: Cost savings achieved from the implementation of the Compass strategy.
-- Adjusted EBITDA margin advances: The calculation of Adjusted
EBITDA, which when divided by revenue gives this EBITDA margin, is
defined in the Adjusted measures section of note 2 to the 2022
Accounts.
-- Free cash flow increase: Free cash flow is defined as cash
generated from continuing operations before exceptional items.
-- Adjusted ROCE improvement: Total adjusted operating
(loss)/profit from continuing operations divided by the total of
goodwill and other intangible assets, property, plant and
equipment, right-of-use assets, inventories, trade and other
receivables less trade and other payables.
Non-financial:
-- Health and safety: The number of lost time Injuries x 100,000
divided by total number of person-hours worked.
-- Customer service level: The volume of products delivered in
the correct volumes and within requested timescales, as a
percentage of total volumes ordered by customers.
-- Gender split - female: The proportion of our workforce that is female.
-- Customer quality: A customer satisfaction index which
combines critical issues, audit results, returns and
complaints.
-- Research & development expenditure: Total research and
development expenditure as a percentage of Group revenue.
19. Additional information
Alternative performance measures
The performance of the Group is assessed using a variety of
adjusted measures that are not defined under IFRS and are therefore
termed non-GAAP measures. A reconciliation for each non-GAAP
measure to the most directly comparable IFRS measure, is set out
below.
Adjusted operating profit/(loss) and adjusted EBITDA
Adjusted EBITDA means adjusted operating profit/(loss) before
depreciation. A reconciliation between adjusted operating
profit/(loss), adjusted EBITDA and the Group's reported statutory
operating profit/(loss) is shown below:
2023 2022
GBPm GBPm
--------------------------------------------------- ---- ------
Operating profit/(loss) 10.3 (27.1)
--------------------------------------------------- ---- ------
Add back: operating loss from discontinued
operations - 0.4
--------------------------------------------------- ---- ------
Operating profit/(loss) from continuing operations 10.3 (26.7)
Exceptional items (note 4) 0.8 (0.4)
Amortisation of intangibles 2.4 2.6
--------------------------------------------------- ---- ------
Adjusted operating profit/(loss) from continuing
operations 13.5 (24.5)
Depreciation of property, plant and equipment 16.8 16.9
Depreciation of right-of-use assets 3.8 4.0
--------------------------------------------------- ---- ------
Adjusted EBITDA 34.1 (3.6)
--------------------------------------------------- ---- ------
Adjusted profit/(loss) before tax and adjusted loss for the
year
Adjusted profit/(loss) before tax is based on adjusted operating
profit/(loss) less adjusted finance costs. Adjusted loss for the
year is based on adjusted profit/(loss) before tax less/add
taxation. The table below reconciles adjusted profit/(loss) before
tax to the Group's reported loss before tax, and adjusted loss for
the year to the Group's reported loss for the year
2023 2022
GBPm GBPm
-------------------------------------------------- ------ ------
Loss before tax (15.1) (35.7)
Add back: loss before tax from discontinued
operations - 0.4
-------------------------------------------------- ------ ------
Loss before tax from continuing operations (15.1) (35.3)
Exceptional items (note 4) 13.0 3.1
Amortisation of intangibles (note 10) 2.4 2.6
Adjusted profit/(loss) before tax from continuing
operations 0.3 (29.6)
-------------------------------------------------- ------ ------
Taxation (note 7) (0.3) 9.3
Adjusted loss for the year from continuing
operations - (20.3)
-------------------------------------------------- ------ ------
Adjusted loss per share
Adjusted loss per share is based on the Group's loss for the
year adjusted for the items excluded from operating profit/(loss)
in arriving at adjusted operating profit/(loss), and the tax
relating to those items.
Free cash flow and cash conversion %
Free cash flow is one of the Group's key performance indicators
by which our financial performance is measured. It is primarily a
liquidity measure. However, we also believe that free cash flow and
cash conversion % are important indicators of our overall
operational performance as they reflect the cash we generate from
operations. Free cash flow is defined as cash generated from
continuing operations before exceptional items. Cash conversion %
is defined as free cash flow as a percentage of adjusted EBITDA. A
reconciliation from net cash generated from operating activities,
the most directly comparable IFRS measure, to free cash flow, is
set out as follows:
2023 2022
GBPm GBPm
-------------------------------------------- ---- ------
Net cash generated from/(used in) operating
activities 11.1 (32.0)
Add back:
Taxation paid 1.8 0.1
Interest paid 11.4 3.3
Refinancing costs paid 12.3 1.8
Cash outflow from exceptional items 1.4 4.1
Free cash flow 38.0 (22.7)
Adjusted EBITDA 34.1 (3.6)
-------------------------------------------- ---- ------
Cash conversion % 111% n/a
-------------------------------------------- ---- ------
Adjusted return on capital employed (ROCE)
Adjusted ROCE serves as an indicator of how efficiently we
generate returns from the capital invested in the business. It is a
Group KPI that is directly relatable to the outcome of investment
decisions. Adjusted ROCE is defined as total adjusted operating
profit/(loss) from continuing operations divided by the average
year-end capital employed. Capital employed is defined as the total
of goodwill and other intangible assets, property, plant and
equipment, right-of-use assets, inventories, trade and other
receivables less trade and other payables. There is no equivalent
statutory measure within IFRS. Adjusted return on capital employed
is calculated as follows:
2023 2022 2021
GBPm GBPm GBPm
---------------------------------------- ------- ------- -------
Goodwill (note 10) 19.7 19.7 19.7
Other intangible assets (note 10) 6.5 7.3 8.2
Property, plant and equipment (note 10) 117.8 122.9 129.8
Right-of-use assets (note 10) 8.5 11.3 10.0
Inventories 121.5 118.9 92.9
Trade and other receivables 145.7 145.4 117.9
Trade and other payables (219.6) (206.9) (169.2)
---------------------------------------- ------- ------- -------
Capital employed 200.1 218.6 209.3
---------------------------------------- ------- ------- -------
Average year-end capital employed 209.4 214.0 208.7
---------------------------------------- ------- ------- -------
Adjusted operating profit/(loss) from
continuing operations 13.5 (24.5) 24.1
---------------------------------------- ------- ------- -------
Adjusted return on capital employed
% 6.4% (11.4)% 11.5%
---------------------------------------- ------- ------- -------
Liquidity
Liquidity means, at any time, without double counting, the
aggregate of:
(a) cash;
(b) cash equivalents;
(c) the available facility at that time, which comprises the
headroom available in the RCF and other committed facilities;
and
(d) the aggregate amount available for drawing under uncommitted
facilities.
2023 2022
GBPm GBPm
------------------------------------ ---- ----
Cash and cash equivalents 1.6 4.5
RCF headroom 40.0 55.1
Other committed facilities headroom 17.5 -
Uncommitted facilities 0.2 11.0
------------------------------------- ---- ----
Liquidity 59.3 70.6
------------------------------------- ---- ----
Net debt
Net debt consists of cash and cash equivalents, overdrafts, bank
and other loans and lease liabilities.
Net debt is a measure of the Group's net indebtedness that
provides an indicator of overall balance sheet strength. It is a
key indicator used by management to assess both the Group's cash
position and its indebtedness. The use of the term 'net debt' does
not necessarily mean that the cash included in the net debt
calculation is available to settle the liabilities included in this
measure.
Net debt is considered to be an alternative performance measure
as it is not defined in IFRS. A reconciliation from loans and other
borrowings, lease liabilities and cash and cash equivalents, the
most directly comparable IFRS measures to net debt is set out
below:
2023 2022
GBPm GBPm
-------------------------- ------- -------
Current assets
Cash and cash equivalents 1.6 4.5
Current liabilities
Borrowings (49.3) (60.5)
Lease liabilities (3.5) (3.9)
-------------------------- ------- -------
(52.8) (64.4)
Non-current liabilities
Borrowings (109.8) (96.4)
Lease liabilities (5.5) (8.1)
-------------------------- ------- -------
(115.3) (104.5)
-------------------------- ------- -------
Net debt (166.5) (164.4)
-------------------------- ------- -------
Annual General Meeting
The Annual General Meeting will be held on 20 November 2023.
Annual Report and Accounts
Copies of the Annual Report and Accounts will be circulated to
shareholders in October and can be viewed after the posting date on
the McBride plc website.
Note: This report contains inside information which is disclosed
in accordance with the Market Abuse Regulation which came into
effect on 3 July 2016.
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END
FR FFFEIARITLIV
(END) Dow Jones Newswires
September 19, 2023 02:00 ET (06:00 GMT)
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