Mcbride Regulatory News (MCB)

7 Sep 2006 07:03

McBride PLC07 September 2006 7 September 2006 McBRIDE PLC McBride plc, Europe's leading supplier of Private Label Household and PersonalCare products, announces its preliminary results for the year ended 30 June 2006 • Overall results in line with expectations supported by growth in the UK and Eastern Continental Europe • Strengthened customer focus and lower cost base in Western Continental Europe • Group revenue 1% above last year at £540.1m (2005: £537.1m) • Profit before tax, before exceptional items, down 12% to £29.7m (2005: £33.6m); reported profit before tax was £25.9m (2005: £30.6m) • Exceptional items of £3.8m (2005: £3.0m) primarily related to improving cost base in Western Continental Europe • Basic earnings per share, before exceptional items, down 11% to 11.7p (2005: 13.2p); reported basic earnings per share were 10.3p (2005: 12.0p) • Final dividend proposed of 3.5p, up 6%, making a total of 5.1p, up 6% (2005: 4.8p) • Two recent value enhancing in-fill acquisitions, from Sanmex International and Coventry Chemicals, already making a positive contribution Miles Roberts, Chief Executive, commented: "In a year of transition these results demonstrate the resilience of ourbusiness. Eastern Continental Europe and the UK experienced growth but overallGroup profitability reflects a difficult year for Western Continental Europe. We have made strong progress against our business objectives. In addition toreorganising our Western Continental Europe division, factory costs and customerservice have improved. Higher levels of product development are reflected inimproved sales momentum towards the year end. Private Label products continue togain share as both consumers and retailers increasingly appreciate theirbenefits. Since the year end trading has been as expected. Looking ahead, despite higherinput costs and investment in the future growth of the business, the Groupexpects to make progress as we benefit from ongoing cost reductions and therecent acquisitions." For further information please contact:McBride plc Miles Roberts, Chief Executive 07748 180076Bob Beveridge, Finance Director 07876 593182Financial Dynamics Andrew Dowler 020 7831 3113 McBride is Europe's leading supplier of Private Label Household and PersonalCare products, supplying over 1.2 billion products each year to Europe's leadingretailers. It employs over 4,000 people in 11 European countries. For moreinformation, visit www.mcbride.co.uk . Overview • Revenue and operating profit, before exceptional items, were ahead oflast year in the UK and Eastern Continental Europe divisions but a difficultyear for the Western Continental Europe division resulted in lower Groupprofitability • UK revenue increased 3% to £249.8m (2005: £243.3m). Operating profit, before exceptional items, grew 2% to £21.8m (2005: £21.4m), with a stronger second half performance • Western Continental Europe revenue declined 2% to £280.3m (2005: £286.2m), reflecting challenging market conditions, particularly in France. Operating profit, before exceptional items, was £9.0m (2005: £13.7m) • The Eastern Continental Europe division had a buoyant year, increasing revenue by 39% to £21.9m (2005: £15.8m) and operating profit, before exceptional items, by 33% to £1.6m (2005: £1.2m) • The personal care sector experienced strong growth of 9% in revenues with good growth in all geographic territories • Return on capital employed, before exceptional items, was 24.3% (2005: 28.4%), the decline reflecting primarily lower Group profits The Group made good progress given conditions across its markets, achievingrevenue growth in the UK and Eastern Continental Europe offset by a decline inWestern Continental Europe. Across the Group as a whole, personal care productsrevenue grew by 9% whilst household products revenue declined 1%. Direct costs of manufacture rose due to raw material, packaging and energy priceincreases fuelled primarily by rises in oil and gas prices. Operationalefficiencies, including waste reduction, labour efficiencies and productreformulations, and administrative cost savings mitigated to some extent theeffects of input cost increases. Profitability improved in the UK and Eastern Continental Europe. However,overall Group profitability declined relative to the prior year primarily due tolower household product revenues in Western Continental Europe. Progress against business objectives Our target Private Label markets have demonstrated sustained development and webelieve there remain significant future growth opportunities. We have renewedfocus on positioning the business to benefit from the favourable market dynamicsand enhance shareholder value. We are at a relatively early stage in thisprocess but there were some important developments during the year. Reorganisation of Western Continental Europe A fundamental reorganisation of the Western Continental Europe division wascompleted. The division was reorganised into four customer focused businessunits organised by geographic territory, each with clear accountability fordeveloping its markets and delivering profits. Improving efficiency and asset utilisation The Group has a relentless focus on extracting operating efficiencies to supportits competitive position and future prospects. During the year, as part of theWestern Continental Europe reorganisation, a review of operations enabledadministrative headcount to be reduced by 85 and a further reduction of over 100jobs in its manufacturing operations, resulting in overall headcount reductionacross this division of over 10%. In the UK, the transfer of Bampton and Sanmexproduction into other Group facilities improved efficiency and assetutilisation. Factory waste reduced by 8% across the Group and there were variousinvestments to deliver greater automation, capacity and reliability. Customer relationships There is a renewed focus on deepening our customer relationships which providethe basis for delivering sustainable organic growth. Key to this is furtherincreasing the recognition that a comprehensive Private Label strategy offersretailers the opportunity to increase profits and margins relative to sales ofbranded alternatives whilst delivering quality and value to consumers. Categorydevelopment will be supported by new product innovation, product qualityimprovements, excellence in customer service and greater managementaccountability. New product development in the UK personal care product portfolio contributedstrongly to the increase in category revenue that is a feature of this year'sresults. In addition, customer service levels improved in Western ContinentalEurope and were maintained at a Group level against a background of thereorganisation of the Western Continental Europe division, production transfersin the UK and significant investments in several of our production facilities.Improvements in forecasting processes and investments in improved plantreliability resulted in the Group's key customer service measure improving from96.6% in the first half to 97.8% in the second half. Acquisitions The Group considers selective acquisitions that support its broader strategy tobenefit from the favourable Private Label market dynamics and enhanceshareholder value. Two in-fill acquisitions have been agreed recently, namelythe household liquids businesses of Sanmex International, announced in April2006, and Coventry Chemicals, that we agreed to acquire after the year end.These acquisitions provide opportunities to enhance shareholder value as aresult of improved efficiencies and asset utilisation derived by transferringproduction into existing facilities. The Group continues to review acquisitionopportunities including those that will enable it to either enter orsignificantly enhance its presence in specific product categories, geographicmarkets or distribution channels. Shareholder returns The Board is recommending a final dividend of 3.5p per share to be paid on 24November 2006. The total dividend is 5.1p per share, a 6% increase over lastyear. Including the proposed final dividend, we will be returning £9.0m toshareholders in dividends in respect of the financial year ended 30 June 2006.We also completed a modest share repurchase programme during the year. The Board In July 2005, Miles Roberts was promoted to the position of Chief Executive,following the resignation of Mike Handley. In May 2006, Bob Beveridge wasappointed as the new Group Finance Director. Lord Sheppard, Chairman, has expressed his wish to retire from the Boardfollowing the appointment of a suitable successor. The search process will beinitiated in the near future. Current trading and outlook Since the year end, trading has been as expected. Looking ahead, despite higherinput costs and investing in the future growth of the business, the Groupexpects to make progress as we benefit from cost reduction initiatives and therecent acquisitions. Investments in support of our growth agenda will focus onmarketing, research and development and certain key management positions.Capital expenditure will be higher in the current year with over 50% directed tocost saving projects and 10% on capacity expansion. UK divisional review Markets Whilst the household products market remained competitive, Private Labelcontinued its trend of increasing overall market share. Private Label valuegrowth of 4% was achieved in the year to June 2006 compared to 1% decline forthe total household products market. Product innovation in the higher valuecategories of machine dish wash and aircare were the main positive influences onthe overall market whilst Private Label growth was particularly strong in theaircare and washing up liquid categories. Reflecting its growth, in the year toJune 2006, Private Label increased its volume share of the overall householdproducts market to 34% respectively (2005: 33% )(1). Private Label personal care products experienced similar trends. The personalcare market in which we operate has shown modest volume growth (c.1%) in linewith the total market growth and now represents some 22% share by volume. The continuing growth in Private Label share reflects the key benefits ofPrivate Label products, namely offering retailers the opportunity to increaseprofits and margins relative to sales of branded alternatives whilst deliveringquality and value to consumers. Given its significant presence in these markets,it also reflects McBride's continuing success in driving overall category growthby focusing on excellent new product development and launch activity, strongcustomer relationships, consumer understanding and providing value throughconsistent product quality and well executed promotions. (1) Source of market data: McBride estimates based on Taylor Nelson Sofres Financial performance Total UK revenue grew by 3% to £249.8m (2005: £243.3m), including £1.6m ofrevenue attributable to the acquisition of Sanmex International. The year wascharacterised by stronger revenue in the second half and some modest priceincreases. The personal care business had an excellent year, with revenue growth of 12%,and significantly increased its share of the available market. Householdproducts experienced a revenue decline of 1%. The progress in personal care reflects renewed focus on new product development,with more resources dedicated to this activity which yielded a large number ofproduct launches. The UK division increased operating profit, before exceptional items, by 2% to£21.8m (2005: £21.4m) with a stronger second half performance due to a gradualreduction in administrative costs and improved revenues. Operations The overall operational priorities for the UK division in the year under reviewwere a continued focus on customer service and driving operating efficiencies. Customer service is our number one operational priority. We measure ourperformance in this area particularly by success in delivering product orderedwithin the agreed timescales. Customers require delivery lead times of as littleas 48 hours and expect us to manage significant fluctuations in demand. Ourbusiness processes and systems enabled successful delivery of shipments fromover 3,000 different products and 5 factories to almost 800 destinations acrossthe UK. The performance relative to the prior year was impacted primarily byissues in Barrow, where short-term disruption was caused by changes in productspecifications and investments being made at the site. As in previous years there were a number of significant cost savings includingprojects to reduce waste, improve labour efficiency and optimise purchasingarrangements across Europe. In addition, a number of major capital investmentprojects completed in the year were focused on efficiency improvements. Theseincluded investment in Barrow that introduced robot packing and pallet stackingto packing lines and automatic guided vehicles, replacing manned forklifttrucks, in the production area. This investment reduced factory costs and alsoimproved the health and safety environment. In addition, the closure of Bamptonand transfer of its aircare production to our Hull facility was completed ontime in March 2006 leading to reductions in both direct and administrativecosts. Other major capital investments included increasing capacity at our Bradfordpersonal care factory to support growing sales, through investment in blowmoulding and bottle filling, and the capability to produce shelf-ready packagingformats required by some leading customers. In April 2006, we announced thepurchase of Sanmex International's household liquids business. The subsequenttransfer of assets and production into three existing McBride facilities wasimplemented in line with plan with customer service maintained throughout thistransfer. Western Continental Europe divisional review Markets Household products market growth was mixed; there was growth of 5% in Spain, 2%in Germany and 1% in Italy but declines in France, Belgium and Netherlands dueto price reductions and high levels of promotional activity. However, PrivateLabel value share continued to grow in all markets except Netherlands. In our largest market, France, overall French household and personal caremarkets declined in value terms by 3% in the year to June 2006, the decline inthe Private Label markets was limited to 1.0% in both cases. Consequently,Private Label increased its volume share of the overall French household andpersonal care markets value to 30% and 21% respectively (year to June 2005: 29%and 20.5% respectively)(1). One of the contributory factors to the market environment in France wasdisruption caused by the introduction of the Loi Dutreill that changed thetrading terms between all consumer goods manufacturers and retailers. The newlegislation particularly impacted trading patterns in early 2006 but recentlythe market has shown signs of recovery. (1) Source of market data: Taylor Nelson Sofres Financial performance Total Western Continental Europe revenue declined by 2% to £280.3m (2005:£286.2m). Operating profits, before exceptional items, were £9.0m (2005: £13.7m)reflecting higher raw material, packaging and energy input costs and lowerhousehold products revenue. Whilst these results are disappointing, they should be assessed in the contextof the difficult market conditions across the region, particularly in thehousehold products sector in France. There were some encouraging aspects to the results. Personal care products madeexcellent progress with revenue up over 7%. In addition, the Italian business performed well, registering close to 4%revenue growth in a flat overall market. McBride has the capabilities to drive the growth of Private Label productsacross Western Continental Europe. We will continue to increase the focus on thedevelopment of Private Label categories and the consequent benefit to retailers. Operations Key improvements were made by successfully implementing a significant businessrestructuring, improving customer service and extracting further operatingefficiencies particularly through targeted investments at our factories. Furtherinvestments were made in support of product innovation and growing sales. Towards the end of the year, a fundamental reorganisation of the WesternContinental Europe division was completed. The division was reorganised intofour customer focused business units organised by geographic territory, eachwith clear accountability for developing its sales and profits. Thereorganisation has also ensured enhanced responsiveness to, and focus on,customers. It should enable McBride to participate more effectively in growingmarkets such as Italy and Spain, in household products, and across all personalcare markets. Headcount in the Western Continental Europe division was reducedby over 10%. Our increased focus on customer service resulted in improved customer servicelevels in the second half, i.e. delivery of over 4,500 products within theagreed timescales from 8 factories to over 1,200 destinations. The improvementreflects investments in improved plant reliability and improvements inforecasting processes. There were a number of targeted investments made in the year to supportincreased efficiency, product innovation and growing sales. Reducing cost andimproving efficiency were the main drivers behind investments in new blowmoulding at Estaimpuis and additional end of line automation at the Ieperhousehold products facility. Reflecting an important product innovation in theyear, investment was made to produce the soluble wrappers for new dish washtablets produced at Solaro. In order to build upon our success with personalcare products, we decided to invest in an expansion of our personal care factoryin Ieper. There was also a strong focus on driving operating efficiencies across thedivision. Of particular note was the 18% reduction in factory waste, due totargeted investment and various continuous improvement projects across sites inWestern Continental Europe. Other efficiency initiatives included projects aimedat using new product formulations, different materials and improved packaging. Eastern Continental Europe divisional review Markets The core markets of the Eastern Continental Europe division, Poland, CzechRepublic, Hungary and Slovakia, continue to experience good growth driven by anumber of specific factors supporting the growth of the Private Label category.These include continued expansion of international retailers and discounters inthe region, ongoing extensions of retailers' Private Label offering,accelerating retail consolidation and increasing market share for discounters. Whilst most activity in Private Label household and personal care products inEastern Continental Europe has been in the "low value" sector, reflecting theprice sensitivity of consumers in the region, standard and premium products havestarted to emerge. This market background is evident in market data indicating that in McBride'score markets in the region, household and personal care products marketsincreased in value terms by 2.8% and 3.6% respectively in the year to 31December 2005. In Poland, the biggest market in the Group's Eastern ContinentalEurope division, Private Label also increased its share of the available market.(1) (1) Source of market data: Euromonitor Financial performance The Eastern Continental Europe division enjoyed a good financial performance inthe year ended 30 June 2006. Revenue grew 39% to £21.9m (2005: £15.8m)reflecting increased production from the Polish operation, including asignificant new contract for the production of household and personal careproducts on behalf of a major branded company. Operating profit, before exceptional items, for the Eastern Continental Europedivision increased 33% to £1.6m (2005: £1.2m). Operations The key operational priority for the Eastern Continental Europe division wasimplementation of a significant investment to increase capacity in the Group'sfactory in Poland to support growing sales. This investment has increasedproduction capacity by 40%. The investment focused on introducing new blowmoulders, filling lines and storage tanks, the delivery of enhanced research anddevelopment and testing facilities and further expansion of warehousefacilities. Group financial review Adoption of International Financial Reporting Standards (IFRS) With effect from 1 July 2005, the Group has moved to reporting its financialresults in accordance with IFRS as adopted for use in the European Union. Theresults for the year ended 30 June 2005 have been restated except with regard toIAS 32/39 Financial Instruments, where the Group has taken the option to deferthe implementation of these standards to the year ended 30 June 2006. A full analysis of the impact of adopting IFRS including reconciliations to UKGAAP is included in a document entitled Adoption of International FinancialReporting Standards published on 6 December 2005. This document is available atwww.mcbride.co.uk within the investor relations section. Overview Profit after tax, excluding exceptional items, reduced 11% from £23.5m to £21.0mimpacted particularly by higher input costs generally and lower revenue inhousehold products in the Western Continental Europe division. In terms ofsegment operating profit performance, personal care increased 15% while thehousehold sector fell 18%. In relation to the Group's geographic operatingdivisions, operating profit in Eastern Continental Europe was up 33%, the UK wasup 2% but Western Continental Europe was down 34%. Measures have been put in place during the year to improve performance inWestern Continental Europe including cost reduction initiatives and a change inits organisational structure to both improve customer focus and accountabilityfor performance. Cash flow, before financing activities and excluding the Sanmex acquisition andexceptional items, was £20.0m (2005: £27.5m). Despite a continuing focus onasset utilisation, pre-tax return on average capital employed before exceptionalitems reduced from 28.4% to 24.3% primarily due to lower operating profits. Revenue Revenue for the year ended 30 June 2006 increased £3.0m to £540.1m (2005:£537.1m) including £1.6m of revenue attributable to the acquisition of SanmexInternational. Revenue for the year particularly reflected a strong personal care sector wheregood broad based headline and organic growth was achieved across both productcategories and geographic territories. This mitigated the performance of thehousehold sector, where flat revenue in the UK and strong growth in the EasternContinental Europe division (primarily in Poland) offset weakness in the WesternContinental Europe division, particularly in France. The performance in Francereflects price deflation resulting partly from changes in the law governingrelationships between retailers and their suppliers. These trends are reflected in revenue by product category and geography.Personal care products revenue increased 9% to £105.2m (2005: £96.1m) whilsthousehold products revenue was 1% lower at £434.9m (2005: £441.0m). In terms ofrevenue by origin, the UK division's revenue increased 3% to £249.8m (2005:£243.3m), with growth accelerating in the second half, whilst WesternContinental Europe revenue was £280.3m (2005: £286.2m) and the EasternContinental Europe division's revenues grew 39% to £21.9m (2005: £15.8m). There was no significant currency impact year on year as the key average Euro/sterling exchange rate remained at 1.46. Operating profit Group operating profit for the year, before exceptional items, was £31.0m (2005:£35.0m). The most significant factor affecting profitability relative to theprevious year was higher raw material, packaging and energy costs. The othermain factor impacting profitability was lower revenue in household products inthe Western Continental Europe division. Set against this, the Group wassuccessful in reducing other costs, reflected particularly in the reduction inadministrative costs (excluding exceptional items). Exceptional item There was a £3.8m pre-tax operating exceptional charge to the income statementin the year (2005: £3.0m). This related primarily to a programme to reduceadministrative costs in the Western Continental Europe division, through areduction of 85 jobs without significant change in support provided to thebusiness. Profit before tax and tax charge Profit before tax for the year was £25.9m (2005: £30.6m) and before exceptionalitems it was £29.7m (2005: £33.6m). Net finance costs were slightly lower thanthe prior year at £1.3m (2005: £1.4m). The £7.5m taxation charge for the year represents a 29% effective rate, 1% lessthan in the prior year. It is believed that this rate is sustainable in the nearfuture. Cash flow Cash flow - before financing activities and excluding the Sanmex acquisition andexceptional items - remained strong at £20.0m (2005: £27.5m) in spite ofsignificant increases in input costs, lower household products revenues inWestern Continental Europe and a modest working capital outflow of £2.8m (2005:£1.1m inflow). Capital expenditure, net of disposals, was £17.3m (2005: £17.5m)with the vast majority of the spend on factory automation, new productdevelopment, capacity expansion or customer satisfaction projects. Net debt rose £4.7m in the year to £29.1m after £24.7m of other outflows. Cashoutflows relating to exceptional items were £5.5m and included the remaining£2.6m of the £3.0m exceptional charge in the year ended 30 June 2005 as well as£2.9m of the £3.8m exceptional charge in the year ended 30 June 2006. Otheroutflows also included £8.7m in dividend payments, £7.3m on the Sanmexacquisition (a further £0.3m has been paid since the year end) and £2.7m ofshare repurchases, net of proceeds on issue of shares. Balance sheet Net assets increased £5.8m in the year from £98.1m to £103.9m, with the mainmovements being £6.7m of new intangible assets (primarily goodwill arising onthe acquisition of Sanmex). Liabilities for pensions and other post-employment benefits increased to £9.6m(net of associated deferred tax asset) (2005: £8.8m). The majority of thisliability, £8.6m, (2005: £7.8m) relates to the UK defined benefit pensionscheme. The pre-tax (excluding exceptional items) return on average capital employedreduced from 28.4% to 24.3% reflecting both lower operating profits and theincrease in capital employed resulting from the Sanmex acquisition close to theyear end. Sanmex acquisition In April 2006, the Group announced the acquisition of the household liquidsbusiness, including inventory and some equipment, of Sanmex InternationalLimited, a UK based Private Label supplier, for a total consideration of £7.6m.Its integration into the Group's household products business has beensuccessfully completed in line with plan, with production having beentransferred into existing facilities. Earnings per share and dividends Basic earnings per share (EPS) were 10.3p (2005: 12.0p). Basic EPS, beforeexceptional items, reduced 11% to 11.7p (2005: 13.2p). The weighted averagenumber of shares in issue in the year used in calculating these EPS figures was177,364,227 (2005: 177,122,822). A final dividend of 3.5p per share, an increase of 6%, is recommended, giving afull year dividend of 5.1p, an overall increase of 6%. The final dividend, ifapproved by shareholders at the AGM on 31 October 2006, will be paid on 24November 2006 to shareholders on the register on 27 October 2006. Theex-dividend date will be 25 October 2006. The £9.0m total dividend for the yearis covered 2.3 times by earnings before exceptional items. Share capital Issued ordinary share capital reduced from 176.7m to 176.6m during the year.1.6m shares were purchased during the year at a cost of £2.5m, 0.65m forcancellation and 0.95m to be held as treasury shares. 1.5m treasury shares heldwere used to satisfy the exercise of SAYE share options. Subsequent event On 19 July 2006 the Group agreed to purchase the household liquids business,including inventory, of Coventry Chemicals Limited for £1.6m plus inventory. Aswith the Sanmex acquisition, production will be transferred to the Group'sexisting facilities. CONSOLIDATED INCOME STATEMENT for the year ended 30 June 2006 Pre Post Pre Post exceptional Exceptional exceptional exceptional Exceptional exceptional items items items items items items 2006 2006 2006 2005 2005 2005 Note £m £m £m £m £m £m Revenue 2 540.1 - 540.1 537.1 - 537.1Cost of sales (355.8) - (355.8) (348.4) - (348.4)Gross profit 184.3 - 184.3 188.7 - 188.7 Distribution costs (35.2) - (35.2) (34.0) - (34.0)Administrative costs (118.1) (3.8) (121.9) (119.7) (3.0) (122.7)Operating profit 2,4 31.0 (3.8) 27.2 35.0 (3.0) 32.0 Financial income 3.9 - 3.9 4.4 - 4.4Financial expenses (5.2) - (5.2) (5.8) - (5.8)Net financing costs (1.3) - (1.3) (1.4) - (1.4) Profit before tax 29.7 (3.8) 25.9 33.6 (3.0) 30.6Taxation 8 (8.7) 1.2 (7.5) (10.1) 0.9 (9.2)Profit for the year 21.0 (2.6) 18.4 23.5 (2.1) 21.4 Attributable to:Equity holders ofthe parent 20.8 (2.6) 18.2 23.4 (2.1) 21.3Minority interest 0.2 - 0.2 0.1 - 0.1Profit for the year 21.0 (2.6) 18.4 23.5 (2.1) 21.4 Earnings perordinary share(pence) 6Basic 10.3 12.0Diluted 10.1 11.6 DividendsPaid in year (£m) 8.7 7.6Paid in year(pence pershare) 4.9 4.3Proposed (£m) 6.2 5.9Proposed (penceper share) 3.5 3.3 Note: all results are reported under International Financial Reporting Standardsas adopted by the European Union ("adopted IFRS"). The 2004/5 results aspermitted by IFRS1 are not restated in respect of IAS 32/39 FinancialInstruments. A full analysis of the impact of adopting IFRS is available atwww.mcbride.co.uk within the investor relations section. CONSOLIDATED BALANCE SHEETat 30 June 2006 2006 2005 Note £m £mNon-current assetsIntangible assets 15.4 8.7Property, plant and equipment 130.6 129.6Other non-current assets 0.5 0.5Deferred tax 5.1 6.0 151.6 144.8 Current assetsInventories 41.3 41.3Trade and other receivables 106.6 106.3Cash and cash equivalents 1.3 0.3 149.2 147.9Total assets 2 300.8 292.7 Current liabilities Interest bearing loans and borrowings 5.2 4.0Trade and other payables 141.7 143.8Current tax payable 1.7 2.0Provisions 1.3 4.1 149.9 153.9 Non-current liabilitiesInterest bearing loans and borrowings 25.2 20.7Pensions and other post-employment benefits 13.7 12.6Provisions 1.0 0.8Deferred tax 7.1 6.6 47.0 40.7Total liabilities 2 196.9 194.6Net assets 103.9 98.1 EquityIssued share capital 7 17.7 17.7Share premium account 7 141.8 141.8Other reserves 7 (0.8) 0.3Retained earnings 7 (55.2) (61.9)Total equity attributable to equity holders of the parent 7 103.5 97.9Minority interest 7 0.4 0.2 Total equity and reserves 7 103.9 98.1 M W ROBERTS R J BEVERIDGEDirectors CONSOLIDATED CASH FLOW STATEMENTfor the year ended 30 June 2006 2006 2005 Note £m £m Profit before tax 25.9 30.6Net financing costs 1.3 1.4Pre-tax exceptional charge in the year 3.8 3.0(Profit)/loss on sale of property, plant andequipment (0.3) 0.1Depreciation and amortisation 18.0 18.6Operating cash flow before changes inworking capital 48.7 53.7Decrease in receivables 2.1 9.6Decrease/(increase) in inventories 1.5 (1.1)Decrease in payables (6.4) (7.4)Cash flow in respect of exceptional items (5.5) (3.7)Cash generated from operations 40.4 51.1Interest paid (2.4) (2.8)Taxation paid (6.5) (7.2)Net cash from operating activities 31.5 41.1 Cash flows from investing activities Proceeds from sale of land and buildings 2.2 -Acquisition of property, plant and equipment (19.1) (17.5)Acquisition of intangible assets (0.4) -Acquisition of subsidiaries 5 (7.3) (2.8)Interest received 0.3 0.2 (24.3) (20.1) Cash flows from financing activities Proceeds from issue of share capital 0.6 2.9Repurchase of own shares (3.3) (8.5)Increase/(repayment) of borrowings 6.0 (8.2)Payment of finance lease liabilities (0.4) (0.4)Dividends paid (8.7) (7.6) (5.8) (21.8) Net increase/(decrease) in cash and cashequivalents 1.4 (0.8) Cash and cash equivalents at start of year (2.7) (1.8)Effect of exchange rate fluctuations on cash held - (0.1)Cash and cash equivalents at end of year (1.3) (2.7) Reconciliation of cash and cash equivalents per the balance sheet and cash flowstatement Cash and cash equivalents per the balance sheet 1.3 0.3Overdrafts (2.6) (3.0)Cash and cash equivalents per the cash flow statement (1.3) (2.7) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBTfor the year ended 30 June 2006 2006 2005 £m £m Increase/(decrease) in cash and cash equivalents in the 1.4 (0.8)yearCash (inflow)/outflow from movement in debt (6.0) 8.2Movement on finance leases 0.4 0.4 Change in net debt resulting from cash flows (4.2) 7.8Lease financing acquired with subsidiary - (0.3)Other new lease financing - (0.1)Translation differences (0.5) (0.4) Movement in net debt in the year (4.7) 7.0Net debt at the beginning of the year (24.4) (31.4) Net debt at the end of the year (29.1) (24.4) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year ended 30 June 2006 2006 2005 £m £m Profit for the year 18.4 21.4Foreign exchange translation differences 0.7 (0.1)Net loss on hedge of net investment in foreign (0.7) -subsidiariesCashflow hedge reserve movement 0.4 -Tax on items taken directly to equity (0.1) -Actuarial loss net of deferred tax (0.6) (1.1) Total recognised income and expense for the year 18.1 20.2 Attributable to:Equity shareholders of the parent 17.9 20.0Minority interest 0.2 0.2 18.1 20.2 2006 £m Total recognised income and expense for the year 18.1Adjustments relating to the implementation of IAS 32 and IAS 39 from 1 July 2005 (1.5) 16.6 NOTES TO THE FINANCIAL STATEMENTS 1) Exchange rates The exchange rates against sterling used for the periods were as follows: 2006 2005Average rate:Euro 1.46 1.46Polish Zloty 5.74 6.14Czech Koruna 42.4 44.9Hungarian Forint 372.1 361.3 2006 2005Closing rate:Euro 1.45 1.48Polish Zloty 5.90 5.99Czech Koruna 41.3 44.5Hungarian Forint 409.7 365.7 2) Segmental information Segmental information is presented below in respect of the Group's geographic,UK, Western Continental Europe and Eastern Continental Europe, and business,Household and Personal care, segments. The primary format, geographic segments,is based on the Group's operating divisions and internal reporting structure. Inprevious years there were two geographic segments with Eastern ContinentalEurope incorporated within Western Continental Europe (previously calledContinental Europe). Geographic segments Segment Segment Segment Segment revenue revenue profit profit 2006 2005 2006 2005 £m £m £m £mUK 249.8 243.3 21.8 21.4Western Continental Europe 280.3 286.2 9.0 13.7Eastern Continental Europe 21.9 15.8 1.6 1.2Total reporting segments 552.0 545.3 32.4 36.3 Inter segment revenue (11.9) (8.2)Exceptional items (note 4) (3.8) (3.0)Corporate (1.4) (1.3)Revenue/Operating profit 540.1 537.1 27.2 32.0Net finance costs (1.3) (1.4)Taxation (7.5) (9.2)Profit for the year 18.4 21.4 Corporate costs relate primarily to head office costs that are not allocated toone of the geographic segments. Segment Segment Segment Segment assets assets liabilities liabilities 2006 2005 2006 2005 £m £m £m £mUK 119.1 115.8 (70.1) (71.7)Western Continental Europe 163.2 160.5 (85.0) (87.8)Eastern Continental Europe 12.1 9.8 (4.0) (2.5) Total reporting segments 294.4 286.1 (159.1) (162.0) Corporate 6.4 6.6 (37.8) (32.6)Total 300.8 292.7 (196.9) (194.6) Corporate liabilities include external debt and tax liabilities. Segment Segment Segment Segment amortisation amortisation capital capital and and expenditure expenditure depreciation depreciation 2006 2005 2006 2005 £m £m £m £mUK 8.7 8.0 9.0 9.5Western Continental Europe 10.1 9.1 8.4 8.6Eastern Continental Europe 0.7 0.3 0.5 0.5 Total reporting segments 19.5 17.4 17.9 18.6 Corporate - 0.1 0.1 - Total 19.5 17.5 18.0 18.6 Capital expenditure includes expenditure on property, plant and equipment andintangible fixed assets. Business segments Segment Segment Segment Segment revenue revenue profit profit 2006 2005 2006 2005 £m £m £m £mHousehold 434.9 441.0 23.2 28.3Personal Care 105.2 96.1 9.2 8.0 Total reporting segments 540.1 537.1 32.4 36.3 Exceptional items (note 4) (3.8) (3.0)Corporate (1.4) (1.3) Revenue/Operating profit 540.1 537.1 27.2 32.0 Net finance costs (1.3) (1.4)Taxation (7.5) (9.2) Profit after tax 18.4 21.4 Corporate costs relate primarily to head office costs that are not allocated toone of the business segments. Segment Segment Segment Segment capital capital assets assets expenditure expenditure 2006 2005 2006 2005 £m £m £m £mHousehold 229.7 230.5 14.5 14.8Personal Care 64.7 55.6 5.0 2.6Total reporting segments 294.4 286.1 19.5 17.4 Corporate 6.4 6.6 - 0.1Total 300.8 292.7 19.5 17.5 External revenue by destination Segmental information is also presented below in respect of external revenue bydestination. In previous years the three segments used in this analysis were UK,Continental Europe and Rest of World and revenue to Eastern Continental Europewas previously included within Continental Europe. Figures for 2005 reflect therevised segment descriptions set out below. 2006 2005 £m £mUK 233.7 227.4Western Continental Europe 263.9 274.1Eastern Continental Europe 42.5 35.6Total 540.1 537.1 3) Basis of preparation The financial statements are the Group's first financial statements followingthe adoption of International Financial Reporting Standards (IFRS). Thesefinancial statements have been prepared in accordance with IFRS adopted for usein the EU ("adopted IFRS") in accordance with EU law (IAS Regulation EC 1606/2002). This financial information has been prepared on the basis of recognitionand measurement requirements of adopted IFRSs as at 30 June 2006. As allowed by IFRS 1 'First-time adoption of IFRS', the Group adopted IAS 32 'Financial instruments: disclosure and presentation' and IAS 39 'Financialinstruments: recognition and measurement', prospectively from 1 July 2005.Therefore, until 30 June 2005, the Group continued to hedge account for forecastforeign exchange transactions in accordance with UK GAAP, and hence thecomparative financial statements exclude the impact of these standards. On 6 December 2005, the Group published an analysis of the impact of adoptingIFRS from 1 July 2004 - press release available from the company's web site atwww.mcbride.co.uk. This included income statement and balance sheetreconciliations, as well as details of the accounting policies applied inrestating its financial statements for the year ended 30 June 2005 and as at 1July 2004. Some small reclassifications have been made to these statements toreflect emerging best practice and interpretation. 4) Exceptional items The Group presents certain items as 'exceptional'. These are items which, inmanagement's judgment, need to be disclosed by virtue of their size or incidencein order to obtain a proper understanding of the financial information. There was a £3.8m pre-tax operating exceptional charge to the income statementin the year. This related primarily to a programme to reduce administrativecosts in the Group's Western Continental Europe division, that enabled areduction of 85 jobs without significant change in support provided to thebusiness. The remainder of the exceptional charge related to restructuring inthe UK division and a termination payment for the Group's previous chiefexecutive. The £3.0m 2005 pre-tax exceptional item included a £1.3m provisionfor the closure of the production plant at Bampton UK and transfer of itsactivities to the aerosol plant at Hull, and £1.7m provision relating to a Groupwide rationalisation programme. In the segmental analysis in note 2, exceptional items relate to UK £0.5m (2005:£2.0m), Western Continental Europe £2.5m (2005: £0.7m) and Corporate £0.8m(2005: £0.3m) on a geographic basis, and Household £2.9m (2005: £2.7m), PersonalCare £0.1m (2005: nil) and Corporate £0.8m (2005: £0.3m) on a business basis. 5) Acquisition The Group acquired the household liquids business of Sanmex InternationalLimited, a UK based Private Label supplier, during the year for a total cashconsideration of £7.6m. Book Provisional fair Fair value value adjustments value £m £m £mNet assets acquired:Property, plant and equipment 0.2 - 0.2Intangible assets - 0.2 0.2Inventory 1.1 (0.2) 0.9 1.3 - 1.3Goodwill 6.3 Total consideration 7.6 Satisfied by: Cash consideration on acquisition 7.6 As at 30 June 2006, £7.3 million had been paid with the remaining amount settledsince the year end. The goodwill arising on the acquisition is attributable to additional salesvolume acquired and operating synergies obtained from including production inexisting plants. Intangible assets mostly relate to customer lists. The business contributed £1.6 million of revenue between the date of acquisitionand the balance sheet date whilst the profit impact was immaterial. It would beimpractical to disclose either the revenue or profit impact of this acquisitionhad it been completed on the first day of the year ended 30 June 2006 becausethis would depend on an assessment of customer orders and synergistic benefits. 6) Earnings per share Basic earnings per ordinary share is calculated on profit after tax and minorityinterest divided by the weighted average number of ordinary shares in issueduring the year in accordance with IAS 33. 2006 2005 Total earnings (£m) 18.2 21.3Weighted average number of ordinary shares 177,364,227 177,122,822 Basic earnings per share (pence) 10.3 12.0 Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares in issue to take account of all potentially dilutiveordinary shares. The Company has three categories of potentially dilutive ordinary shares: shareoptions issued whose exercise price is less than the average price of theCompany's ordinary shares during the year, share awards with no option price andshares allocated to an approved Save As You Earn scheme. 2006 2005 Weighted average number of ordinary shares (m) 177.4 177.1Effect of dilutive share options (m) 0.9 3.2Effect of dilutive share awards (m) 0.2 -Effect of dilutive SAYE scheme shares (m) 2.5 3.6 Diluted weighted average number of ordinary shares (m) 181.0 183.9 Diluted earnings per share (pence) 10.1 11.6 Adjusted basic earnings per share applies to earnings before exceptional items.This supplementary earnings per share information has been provided as thedirectors consider that it gives a more meaningful measure of the underlyingperformance of the Group. 2006 2005 £m £mEarnings used to calculate basic and diluted EPS 18.2 21.3Exceptional items after tax 2.6 2.1 Earnings before exceptional items 20.8 23.4 Basic earnings per share before exceptional items (pence) 11.7 13.2 7) Reconciliation of movement in equity and reserves Issued Cashflow Total share Share hedge Translation Other Retained Minority equity capital premium reserve reserve reserves earnings Total interest and reserves £m £m £m £m £m £m £m £m £m At 1 July 2004 17.8 139.4 - - - (64.5) 92.7 - 92.7 Profit for the year - - - - - 21.3 21.3 0.1 21.4Own shares acquired andheld as treasury (0.1) - - - - (2.3) (2.4) - (2.4)Own shares acquired andcancelled (0.5) - - - 0.5 (6.9) (6.9) - (6.9)Shares issued to satisfyemployee share option exercises 0.5 2.4 - - - - 2.9 - 2.9Foreign exchangetranslation differences - - - (0.2) - - (0.2) 0.1 (0.1)Actuarial loss on pensionscheme taken directly to equity - - - - - (1.1) (1.1) - (1.1)Equity dividends - - - - - (7.6) (7.6) - (7.6)Tax on share options -taken directly to equity - - - - (0.8) (0.8) - (0.8) At 30 June 2005 17.7 141.8 - (0.2) 0.5 (61.9) 97.9 0.2 98.1Adoption of IAS 32 and IAS 39 - - (0.3) - (1.2) - (1.5) - (1.5) At 1 July 2005 17.7 141.8 (0.3) (0.2) (0.7) (61.9) 96.4 0.2 96.6Profit for the year - - - - - 18.2 18.2 0.2 18.4Own shares acquired andheld as treasury (0.1) - - - - (1.5) (1.6) - (1.6)Treasury shares issued tosatisfy employee share option exercise 0.2 - - - - 0.4 0.6 - 0.6Own shares acquired andcancelled (0.1) - - - - (1.0) (1.1) - (1.1)Movement in cash flow hedge - - 0.4 - - - 0.4 - 0.4Foreign exchangetranslation differences - - - 0.7 - - 0.7 - 0.7Net loss on hedge of netinvestment inforeign subsidiaries - - - (0.7) - - (0.7) - (0.7)Actuarial loss net of deferred tax - - - - - (0.6) (0.6) - (0.6)Equity dividends - - - - - (8.7) (8.7) - (8.7)Tax on share optionstaken directly to equity - - - - - (0.1) (0.1) - (0.1) At 30 June 2006 17.7 141.8 0.1 (0.2) (0.7) (55.2) 103.5 0.4 103.9 The Group has taken the option to defer implementation of IAS 32/39 FinancialInstruments until the year ended 30 June 2006. Therefore, as at 1 July 2005, theGroup recognised in equity, derivative contracts used for hedge accountingpurposes that were previously not recognised on the balance sheet. Otherreserves includes the capital redemption reserve and a reserve reflecting sharesthat entitle the minority shareholder to exercise a put option and are nowtreated as a liability under IAS 32. 8) Taxation The £7.5m tax charge for the year ended 30 June 2006 (2005: £9.2m) consists of£4.8m (2005: £5.0m) of UK tax and £2.7m (2005: £4.2m) of overseas tax. 9) Other notes i) The financial information set out above does not constitute the company'sstatutory accounts for the years ended 30 June 2006 or 2005. Statutory accountsfor 2005 which were prepared under UK GAAP have been delivered to the Registrarof Companies. The auditors have reported on those accounts; their reports wereunqualified and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. Accounts for 2006 prepared under IFRS, as adopted by the EU,will be delivered in due course. ii) The Annual Report for 2006 will be issued to shareholders on 29 September2006 and will be available from the Company Secretary at the Company'sRegistered Office, McBride House, Penn Road, Beaconsfield, Buckinghamshire HP92FY; the Annual General Meeting will be held on Tuesday 31 October 2006. iii) If approved at the Annual General Meeting on 31 October 2006; the finaldividend of 3.5p per share will be paid on 24 November 2006 to shareholders onthe register at 27 October 2006. This information is provided by RNS The company news service from the London Stock Exchange