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Corp strategy adds sparkle to McBride

Just one year into the company's overhaul, management's strategy seems to have having a significant impact on profitability
February 24, 2016

The deep clean over at household and personal care company McBride (MCB) is well under way. Only one in four existing customers are deemed profitable, and the group is on track to cull the other three-quarters by June. The company is also closing its loss-making China plant and making progress towards the annualised £12m of cost savings announced in 2014. Investors clearly appreciate the effort made by management to meet these targets, as shares rose close to 10 per cent on results day.

IC TIP: Buy at 167p

It's not all plain sailing though. The reported numbers were hit by the impact of a weaker euro and the group is a victim of the ongoing supermarket price war in the UK. Sales in its household division - roughly 80 per cent of revenues - rose 0.9 per cent thanks to performance on the continent, but UK turnover fell 8 per cent due to price and volume pressures.

But as McBride works to reduce the amount of products it produces - it now only makes 11 washing-up liquids for Tesco rather than 17 - costs should come down and therefore counterbalance any deflationary pressures "slightly to our favour", according to chief executive Rik De Vos.

Analysts at Liberum upgraded their 2016 forecasts by 7 per cent. They now expect adjusted pre-tax profit of £25.9m for the full 2016 financial year, giving EPS of 10.2p (from 4.9p in FY2015).

MCBRIDE (MCB)
ORD PRICE:167pMARKET VALUE:£304m
TOUCH:168-169p12-MONTH HIGH:174pLOW: 88p
DIVIDEND YIELD:1.9%PE RATIO:98
NET ASSET VALUE:34p*NET DEBT:138%

Half-year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20143657.32.81.7
201534413.04.91.2
% change-6+78+75-29

*Includes intangible assets of £19.7m, or 11p a share

**Dividend payment made by way of issued 'B' shares. Entitlement to 'B' shares: 22 Apr. Redemption of 'B' shares: 27 May