McBride : FY23 Full Year Results RNS

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 £50m 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 £889.0m (2022: £678.3m), up 31.1% (28.4% at constant currency(1))
• Adjusted operating profit(2) of £13.5m (2022: loss of £24.5m)
• Operating profit from continuing operations of £10.3m (2022: loss of £26.7m)
• 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 £0.3m (2022: loss of £29.6m)
• Loss before tax from continuing operations of £15.1m (2022: loss of £35.3m)
• Net debt(2) at £166.5m (30 June 2022: £164.4m), with liquidity solid at £59.3m (30 June 2022: £70.6m)

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-positionedto 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
£m 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

1Comparatives translated at financial year 2023 exchange rates.

2Refer to note 19 for definition.

3See 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 managem ent 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.

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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 £889.0 million (2022: £678.3m) with £159.6 million a result of the wrap-around effect of selling prices increases and £32.1 million from higher volumes. Operating profit from continuing operations improved significantly on the prior year, increasing to £10.3 million (2022: loss of £26.7m). Adjusted operating profit increased to £13.5 million (2022: adjusted operating loss of £24.5m), with adjusted operating profit in the second half of £14.8 million compared to a first half adjusted loss of £1.3 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,

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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 £50 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.

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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 £7.7 million (2022: £4.5m), driven by inflationary impacts and higher bonus provisions.

	Year to	Year to		Constant
	30 June	30 June	Reported	currency
	2023	2022	change	change
Revenue	£m	£m	%	%
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)	£m	£m	£m	£m
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, £391.2 million to £497.9 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%.

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