European private label household and personal care products provider McBride (MCB) powers 8.3% higher to 167.25p as better-than-expected half year results highlight improved operating margins and drive analysts to upgrade their earnings forecasts.

Positive early progress with CEO Rik De Vos' self-help strategy is reflected in an eye-catching half-time profit leap, though top line growth is proving hard to come by given a testing retail environment.

Under seasoned troubleshooter De Vos and experienced finance director Chris Smith (pictured below), the Manchester-headquartered supplier to a who's who of international retailers is delivering a compelling turnaround.


Last September, De Vos launched his 'Repair, Prepare, Grow' recovery strategy, which aims to transform and simplify McBride, then return it to sustainable growth.

Through cutting costs, improving manufacturing efficiency and leveraging the group’s scale to deliver higher-quality sales, the goal is to lift earnings before interest, tax and amortisation (EBITA) margins to 7.5% and return on capital employed (ROCE) to 25-30% on a three to five–year view.

Interim results confirm progress with the recovery strategy. While a weaker euro means reported revenue was 5.6% lower at £344.1 million, sales were 0.4% higher at constant currency, no mean feat given the challenging market conditions facing McBride's supermarket customers, currently engaged in a savage UK price war.

Adjusted pre-tax profit rocketed 56.3% higher to £13.6 million and operating margin improved to 5.1% (2014: 3.4%), reflecting the momentum from earlier restructuring actions feeding through.

Other improved metrics included net debt, down 6.6% at £86.3 million and return on capital employed (ROCE), up materially from 16.4% to 23.6%.

McBride, on track with shedding its long tail of customers and which has decided to manage its Household and PCA (Personal Care/Aerosols) activities separately, also issues a positive outlook statement.

De Vos comments: 'We are pleased with our progress in the first half and the improved profitability following the launch of our strategic transformation plan.

'The commitment and focus of the McBride team on the execution and delivery of our objectives is very encouraging and a critical aspect for future success.

'The ongoing actions of our "Repair" phase, which in part will result in lower second half revenues, are nevertheless expected to provide further progress in profitability.

'As a consequence, the board is now expecting full-year results to be modestly ahead of its previous expectations.'

Web chart - MCB - Feb 16

Issue Date: 24 Feb 2016