- All divisions profitable in first half
- Full year operating profit upgraded
- Net debt significantly reduced
One of 2023’s best share price performers, private-label cleaning products maker McBride (MCB), has upgraded earnings guidance again as the cost-of-living squeeze continues to stoke demand for its affordable products, news that sent the stock up 16% to 85.2p in early dealings on Tuesday.
Having reported a much-improved first-half performance with all divisions profitable, the budget laundry-detergent-to-surface-cleaner maker now expects full year operating profit to be 10% to 15% ahead of internal expectations.
PRIVATE LABEL SHIFT PERSISTS
A trusted supplier to Europe’s leading grocery retailers, McBride’s strong showing in the half to 31 December 2023 was underpinned by the ongoing shift away from expensive brands and towards cheaper private-label alternatives as consumers seek to save money and retailers look to reinforce their value propositions.
McBride’s constant currency revenue rose 9.9% to £468 million in the half, reflecting price increases as well as healthy 10.1% private label volume growth, with the Manchester-headquartered dishwasher-liquid-to-aerosol supplier ‘taking further market share in a rising private-label market’.
In its core strategic focus areas of Germany and laundry, McBride achieved pleasing volume growth of 10.5% and 9.8% respectively.
FIRMLY BACK IN THE BLACK
McBride also pleased investors with a swing from losses of £7.9 million to adjusted pre-tax profits of £22.4 million thanks to positive margin progress, as well as a £20.8 million decrease in net debt from £166.5 million at the prior year end to £145.7 million.
While sales growth slowed in the final two months of the half, the outlook for the rest of the second half and the balance of the calendar year is positive and contract wins will begin to boost revenues from the first half of full year 2025.
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WHAT DID THE COMPANY SAY?
Chief executive Chris Smith commented: ‘McBride has continued with its positive momentum in the first half of this financial year. It is pleasing to see all five divisions continuing to grow on a constant currency basis, supporting our customers with high-quality products to meet the consumer shift to private label.’
Smith added: ‘As we progress our transformation programme, with specific initiatives to enhance McBride’s capabilities and tools for the future, we remain focused on performance delivery today. This focus, together with our continued drive to reduce debt levels, will ensure McBride is well positioned to achieve further progress in the near and medium term and we look to the future with confidence.’
WHY BROKERS ARE BULLISH
Investec, which has a ‘buy’ rating and a 112p price target for the stock, said the company ‘continues to make reassuring progress and expects the favourable trends for private label products in its categories to continue throughout calendar 2024. It now expects full year 2024 operating profit to be 10% to 15% above its previous expectations. We upgrade by 17% for full year 2024 and by 8% for subsequent years.’
Peel Hunt (PEEL:AIM) upgraded its full year 2024 pre-tax profit forecast from £40 million to £46 million and highlighted McBride’s ‘improving operational performance, which is translating into strong free cash flow. We upgrade our target price from 108p to 120p to reflect the higher profit outlook.’
