McBride has delivered a good performance over H121, with higher revenues and improved gross margins. Input costs have started to increase, but the board’s expectations for the full year are unchanged. The company gave an update on its new strategy, Programme Compass, and as previously announced, the business has been reorganised into product divisions to sharpen focus, improve execution and increase speed to market. McBride has been through several strategy resets over the years and time will tell if this successfully addresses the company’s long-term challenges. The CEO has thorough knowledge of the business and there are not expected to be substantial exceptional or capital costs associated with the programme.
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McBride |
Resetting the business
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Consumer |
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26 February 2021 |
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McBride has delivered a good performance over H121, with higher revenues and improved gross margins. Input costs have started to increase, but the board’s expectations for the full year are unchanged. The company gave an update on its new strategy, Programme Compass, and as previously announced, the business has been reorganised into product divisions to sharpen focus, improve execution and increase speed to market. McBride has been through several strategy resets over the years and time will tell if this successfully addresses the company’s long-term challenges. The CEO has thorough knowledge of the business and there are not expected to be substantial exceptional or capital costs associated with the programme.
Good H1 performance
Group revenues were £362.9m in H1, 3.6% ahead of the prior year, or +1.7% at constant FX. Adjusted PBT was £16.9m, 74% above H120, and adjusted diluted EPS from continuing operations was 7.1p vs 3.7p in H120. The dividend policy has been reviewed as part of the strategy reset and no interim dividend was proposed. Demand levels continue to be more variable than usual due to the pandemic and there were some contract losses caused by McBride’s current lack of agility and speed. Management is seeking to address this by moving to a new structure.
New structure
The European household business has been reorganised into three business units from 1 January 2021: liquids, unit dosing and powders, to run alongside the existing divisions of Asia Pacific and aerosols. These will be supported by a smaller central structure. The headline objective is to reach €1bn of annual revenues in the next five years, with EBITA margins increasing by 200–400bp and ROCE improving by five to 10 percentage points. Progress is not expected to be linear over the next five years, with less growth expected in the initial two-year phase, as the focus is on cost reduction and readying the business for increased innovation and agility.
Valuation: Reflects balance of risk and opportunity
McBride trades on 7.1x FY21e P/E and 4.8x FY20e EV/EBITDA, which is a sharp discount to the household sector. A re-rating is conditional on the new strategy successfully delivering stable growth, improving margins and ensuring any cost savings and operating leverage fall through to the bottom line. The group is targeting an accounting basis net debt/EBITDA below 2x. Because this was 2.2x at December 2020, the board believes it is not prudent to pay an interim dividend. The board also intends to move to a single annual dividend payment (after FY results).
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Consensus estimates
Source: Refinitiv, company data |
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Research: Investment Companies
EEuropean Assets Trust (EAT) seeks to generate long-term capital growth by investing in a concentrated but diverse portfolio of small and medium-sized European companies. The trust has adopted a high distribution policy that pays a dividend of 6% of NAV as at the end of the preceding financial year. Managers Sam Cosh and Lucy Morris used the Q120 market sell-off to improve the quality of the portfolio and these changes are having a favourable impact on EAT’s performance. In the six months to end-January 2021, EAT made positive absolute gains, returning 23.7% in NAV terms, and outperformed the benchmark, which returned 22.2%. The trust has consistently outperformed the UK market over the past 10 years.