McBride Passionate about Private Label

Executive review


Following an overall decline in the first half of 4.3%, second half underlying revenues were ahead by 2.9% with Household underlying revenues up 3.8%.

Group operating results
During the year, the Group disposed of its Skincare business in the Czech Republic and on 3 July 2018 agreed the terms for the sale of its European Personal Care Liquids business. Within these financial statements, the financial results of these disposed activities have been treated as discontinued operations in both the current and prior year. The remaining activities withinthe Group are referred to as continuing operations. The use of the expression "underlying" refers to the figures excluding the impact of acquisitions or disposals and stated at constant currency.

Continuing operations
Income statement
Full-year Group revenues at £689.8 million were £56.9 million (9.0%) higher than the prior year, aided by the translation effect of a weak Sterling and the acquisition of Danlind from 29 September 2017. On an underlying basis, full-year sales were lower by £5.1 million (0.8%). Following an overall decline in the first half of 4.3%, second half underlying revenues were ahead by 2.9% with Household underlying revenues up 3.8%.

Full-year underlying Household sales were higher by 0.1% and PCA lower by 7.0%. In Household the increase was primarily as a result of the start-up of deliveries in the second half, from the previously disclosed contract wins in Germany that resulted from competitor weakness, and UK growth following a number of contract wins. These volume gains were offset by volume losses in France due to continuing difficult market conditions.

The PCA segment, which now comprises Aerosols and Asia, saw the Aerosols business continue to experience an extremely competitive environment in both the UK and France, with volumes declining year-on-year by 11.7% after a first-half year decline of 12.1%. Asia delivered a 2.6% year-on-year increase driven mainly by continued growth in Australia.

Customer price pressure remained a feature during the year and at a Group level, prices were essentially flat overall. We experienced deflation in France and Eastern Europe but this was offset by some successful price increase actions elsewhere, mostly in the UK. Late in the second half year, the Group launched a Group‑wide initiative to further recover the impact of the significantly higher input costs experienced over the last 18 months from our customers through price increases.

This is a major challenge in such a highly competitive market, with many retailers themselves under pricing pressure. Whilst we have already seen some positive outcomes so far, these negotiations will continue through the coming months.

Across the full-year to June 2018, raw material prices increased by approximately 2.2% when compared to the prior year. Some 0.4% of this was driven by foreign exchange, mostly from the impact of the weak Sterling. This measure was at 4.0% for the first half before raw material prices levelled out early in the second half. With rapid volume growth in the second half, especially in Germany, our distribution platform has been under significant pressure and as a result the business has experienced increased distribution costs. These were due to higher costs associated with external storage, accentuated by cost pressure driven mostly by labour shortages in the transport and logistics market. The impact, with underlying volumes down 0.6%, has been a distribution cost increase of 6.7% or £2.9 million for the full year.

We continued to focus on overhead saving initiatives, some of which had been announced in previous years, although specific initiatives during the year supported the Group result. The combined effect of these initiatives amounted to a benefit of £10.5 million, which included lower costs for management incentives of £3.3 million.

Full-year adjusted operating profit was £37.7 million (2017: £42.0m) with adjusted operating profit margin decreasing to 5.5% (2017: 6.6%), and Danlind contributing £1.6 million. On an underlying basis, operating profits were lower by £7.1 million, which comprised lower profits of £5.6 million in underlying Household and £2.8 million higher losses in PCA offset by a £1.3 million of lower corporate costs.

Year-end operating profit decreased by £8.5 million to £31.8 million (2017: £40.3m). This includes exceptional charges of £4.5 million, due to costs incurred as part of the acquisition of Danlind (£1.6m) and costs to reorganise the Aerosols business following the announcement to close the Hull site (£2.9m) and amortisation of £1.4 million.

To read the 'Executive Review' in full, please go got page 16 of the new Annual Report.

Executive review charts 2018

Rik De Vos
Chief Executive Officer

Chris Smith
Chief Finance Officer

6 September 2018

Sign up for email alerts

Email alert panel

More