06.01.2025
I will have a bet with you.
There is a very strong chance that somewhere around your household there is a product produced by the McBride group.
Two years ago, I featured the company, with its shares then just 24p, since when they have been as high as 145p, before easing back to the current 105p – at which level I suggest that they are too cheap to ignore.
The Business
Established way back in 1927, this Manchester-based group is now exceptionally well embedded with its client base, manufacturing from facilities across the UK, Europe and Asia Pacific.
For over five decades McBride (LON:MCB) has been a leader in private label cleaning and laundry products.
The company supports its customers across the supply chain from sourcing and formulating, to production, packing and delivery.
The company operates through five segments: Liquids, Powders, Unit Dosing, Aerosols, and Asia Pacific.
It employs over 3,400 people across 18 locations in 13 countries.
The group develops, manufactures and distributes products for both Private Label clients in the retail segment and Contract Manufacturing for established brands.
In addition, it also has a growing portfolio of its own successful brands within the household category, including Surcare, Oven Pride, Hospec, Actiff and Clean n Fresh.
We all know this group’s household and personal care products and it sells over 1bn of them a year.
Its Liquids segment produces a range of household cleaning products sold in a bottle or pouch, including laundry detergent, dishwasher liquids and surface cleaners, this division supplies over 90% of the leading retail multiples and similar customers in Europe.
The Unit Dosing segment produces cleaning products in individually packaged single dose measures, including dishwasher tablets and laundry capsules.
The company’s Powders segment produces powdered cleaning products, primarily for laundry, but also for dishwashers.
Its Aerosols segment produces a range of household, personal care, and professional cleaning products.
AGM Trading Update
In the AGM Trading Update, issued on Tuesday 12th November 2024, the group stated that it was pleased to confirm that it was continuing to deliver a strong financial and operational performance and currently anticipates that adjusted operating profit for the full year to June 2025 will be in line with market expectations.
This will result in a third consecutive year of revenue growth, with profitability levels significantly ahead of the historical average.
The early months of the new financial year have seen revenue ahead of the same period last year and in line with internal expectations.
The group continues to support its wide range of customers with improved service and innovation and has an encouraging healthy pipeline of new product launches and business wins.
Input costs for the main raw and packaging materials remain in line with forecasts made at the beginning of the financial year.
It then stated that with only four months of the financial year complete, the group remained cautious about the macro-economic environment and potential increased volatility in commodity markets adversely impacting input costs.
Important Refinancing
Late last year, on Friday 29th November, the company announced that it had successfully refinanced its banking facilities.
The new facility comprises a €200m Revolving Credit Facility package, with a four-year maturity including an option to extend by up to two years.
The new arrangement includes a €75m uncommitted accordion feature to provide additional facilities for potential future acquisitions or other financing needs, also with a four-year maturity.
CFO Mark Strickland stated that:
"We are delighted to announce the completion of this refinancing, which provides McBride with a strong financial platform for the coming years.
The increased un-secured facilities and extended maturity provides the business with flexibility and security as we continue to execute our growth strategy.
The refinancing secures improved terms and conditions on our borrowing facilities, reflecting the Company's solid financial performance metrics.
The removal of the block on shareholder distributions extends flexibility to the business in its capital allocation options."
The Equity
There are some 174m shares in issue.
The larger holders include Teleios Capital Partners (23.76%), DUMAC (14.78%), Zama Capital Advisors (12.07%), Gilead Capital (11.12%), Goldman Sachs Advisors (5.22%), Premier Fund Managers (4.80%), Aberforth Partners (2.98%), Morgan Stanley Investment Management (2.15%), SMA Gestion (1.85%) and Syd ABB (1.68%).
Analyst’s View
Nick Spoliar and Charlie Cullen, at Zeus Capital, currently have a Buy note out on the group’s shares, with a Target Price of 175p.
For the current year to end-June 2025, the analysts estimate a rise in revenues to £948.8m (£934.8m) but with slightly lower adjusted pre-tax profits of £46.9m (£53.1m), easing earnings to 19.9p (21.7p) per share.
For the next year, they look for £967.8m in sales, £50.2m profits and 21.3p in earnings per share.
The year to end-June 2027 estimates show £987.2m turnover, £51.1m in pre-tax profits and 21.7p per share in earnings.
The brokers note that McBride has built a strong platform for future growth through taking market share in its existing activities, by expanding into new products or geographies and through gaining new contract wins.
In My View
That refinancing package could well prove pivotal for McBride’s fortunes over the next few years.
It could also be good news for its shareholders too – as long as it does not embark upon a ‘share buyback’ scheme, I say that because so many have been abject failures over the last year or so, especially when being completed with borrowed money.
In the last twelve months the group’s shares have been up to 145p, but are now trading at around the 105p level, valuing the whole business at only £183m.
However, I look forward to the group announcing its Interim Trading Update, probably next week, before the actual Interim Results are declared on Tuesday 25th February.
The reactions to both pieces of corporate news could well help to renew investor interest in the group’s shares, possibly to get them back over the 145p level at which they would still only be trading on 7.3 times earnings.
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