Own-label supplier McBride (MCB) was an early victim of the supermarket price wars as heavy branded discounting squeezed sales, but the household goods supplier appears on the way back.
It had a busy week - first announcing a £38.8m deal to buy Danish goods company Danlind on Monday and then announcing its full-year results for the year to 30 June on Thursday. Its annual results were something of a mixed bag, reflecting that McBride remains in the early stages of its Repair, Prepare, Grow turnaround strategy.
Annual sales fell 5.9% to £705.2m, with household sales down 5.8% and personal care & aerosols down 6.3%. Core market sales continued to drop, with the UK down 5.8% - though 3% of that fall was due to its rationalisation of customers - while Northern region sales were down 5.6%.
However, on a reported basis McBride delivered a 3.6% boost in group revenues as it was aided by the translation effect of a strong euro. The group also kept a tight hold on costs, despite rising raw material prices, with adjusted operating profits up 14.6% to £41.5m and an increase of 21% in operating profits to £39.8m.
McBride CEO Rik De Vos said it had now completed the “repair” phase of its plan and analysts at Liberum hailed the progress it was already making in the “prepare” phase of the strategy. While the retail backdrop for the group’s core customer base remains tough, Liberum commented: “McBride’s transformation from a marketing-led, sales-driven strategy towards a service orientation is now driving sustainable growth.” “While the retail backdrop for the group’s core customer base remains tough, McBride’s transformation from a marketing-led, sales-driven strategy towards a service-orientation is now driving sustainable growth,” the broker said.
Peel Hunt welcomed McBride’s deal for Danlind, noting it increases the company’s exposure to the growth homecare segments of eco and commercial markets. “The business is currently in a small loss-making position but there are significant improvements to be made in working cap control, purchasing and supply chain (where the McBride team has a strong track record).”
McBride shares jumped 4.5% to 184.5p on Monday after announcing the deal and rose a further 1.9% on Thursday morning to 197.5p to take its gains for the week to almost 12%.
Also on the acquisition hunt this week was Irish beer and cider producer C&C Group. The Magners and Tennent’s brewer shelled out £37m to snap up a 47% stake in UK pub group Admiral Taverns as part of its wider acquisition by US investment fund Proprium Capital Partners. C&C Group has previously been on the hunt for pub acquisitions and missed out in the bidding for Spirit Pub Company to Greene King back in 2015.
Societe Generale welcomed the “sensible acquisition”, adding: “It enables the group to increase its distribution of Magners and its other brands without taking too much operational risk. Doing the deal jointly with a real-estate focussed private equity buyer reduces the capital required by C&C, yet the full synergies should be realised.”
Nevertheless, C&C shares eased back 0.2% to €3.03 on Monday and the group’s shares are 22.6% down so far in 2017.
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