It's a bold decision for management to cut a dividend, especially when - as is the case with household and personal goods manufacturer McBride - there seems little pressing reason to do so. Add that to such worries as raw material price volatility and consumer weakness and the shares look set to tread water.
True, broker Panmure Gordon notes that the cut will raise dividend cover from 1.4 times to two times - more in line with peers. Nevertheless, with net debt representing a comfortable 1.6 times underlying cash profits and the benefits of a cost-saving programme coming through, the cut is a surprise and helped the shares slide 9 per cent on the day of the results. Management says the savings generated will fund investment in new product categories and product innovation, to take advantage of opportunities in the private label business. Already 47 per cent of private label revenue is from these core and future growth categories.
Adjust for exceptionals and underlying operating profit rose 2 per cent year on year to £29.5m. The profitability improvements that started working through last year should build this year and, subject to revision, broker Peel Hunt forecasts adjusted full-year pre-tax profit of £29m and EPS of 11.9p (2012: £22.5m/9.7p).
| MCBRIDE (MCB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 120p | MARKET VALUE: | £219m | |
| TOUCH: | 119-120p | 12-MONTH HIGH: | 136p | LOW: 105p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 61p* | NET DEBT: | 72% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 701 | 15.7 | 6.40 | 5.60 |
| 2009 | 792 | 22.2 | 9.20 | 6.00 |
| 2010 | 812 | 29.6 | 12.3 | 6.80 |
| 2011 | 812 | 7.10 | 2.90 | 6.80 |
| 2012 | 814 | 12.1 | 5.10 | 5.00 |
| % change | - | +70 | +76 | -26 |
Ex-div: 24 Oct Payment: 23 Nov *Includes intangible items of £35.7m, or 20p a share | ||||
