mcbride 2011 strategy presentation

8/6/2019 Mcbride 2011 Strategy Presentation

1/43

201011

InterimResults

8February2011


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Passionate about Private Label

Introduction

Iain

Napier

Chairman

2


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Passionate about Private Label

Introduction

Goodfinancialperformanceinachallengingeconomicenvironment

ConclusionoftheRefreshstrategyreviewbeingcommunicatedtoday

StrategicActions:

Organisationalchange

Categoryreview

Improvedcompetitivenessandefficiency

Exploitnewopportunities

Category

extensions Geographies

Interimdividendmaintainedat2.0p(2009:2.0p)

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Summary

Chris

Bull


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Summary

Revenuegrowthof2%onaconstantcurrencybasis Adjustedoperatingprofit1 down24%drivenbyincreasesinrawmaterial

inputcosts

Restructuringprogrammesannouncedin2010deliveringonplan

Recoveryof2010materialcostincreasescontinuestobeimplemented;

furtherpricerisestocontendwith

Netdebtof1.1xannualisedEBITDA

Proposed furthersupplychainrestructuringthatislikelytoleadtoan

exceptionalchargethisyearofaround20mwithannualisedsavingsof

around

11m(1)Operatingprofitbeforeamortisationofintangibleassetsandexceptionalitems

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Financialreview

Richard

Armitage

Finance

Director

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Financialheadlines

2010-11 2009-10 Y/Y 2009-10 Y/Y

H1 H1 H1

Revenue (m) 407.9 412.4 -1% 401.2 +2%

EBITA (m) 20.2 26.5 -24% 25.6 -21%EBITA margin 5.0% 6.4% -1.4pts 6.4% -1.4pts

Profit before t ax (m) 16.9 23.5 -28%

Diluted earnings per share (pence) 6.9 9.7 -29%

Div idend per share (pence) 2.0 2.0 +0%

Cash generated from operat ions (m) 27.2 48.8 -44%

Net debt (m) 72.2 69.4 +4%

Financial KP IsROCE 20.7% 26.6%

EBITA margin 5.0% 6.4%

A sset turnover 4.1 4.2

Constant Currency

(1)

All

figures

before

amortisation

of

intangible

assets

and

exceptional

items

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Incomestatement

2010-11 2009-10 Y/Y

H1 H1

m m

Revenue 407.9 412.4 -1%

Gross profit 139.4 152.0 -8%

Gross margin 34.2% 36.9% -2.7pts

Dist r ibut ion costs (27.4) (27.8) -1%Administ rat ive costs (91.8) (97.7) -6%

EBIT 20.2 26.5 -24%

Net financing costs (3.3) (3.0) +10%

Profit before taxat ion 16.9 23.5 -28%

(1) All figures are before amortisation of intangible assets and exceptional items

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Regionalperformance Revenue

2010-11 2009-10 Y/Y 2009-10 Y/Ym m m

UK 155.8 160.6 -3% 160.6 -3%

Western Cont inental Europe 183.3 199.9 -8% 190.5 -4%

Cent ral and Eastern Europe 64.7 51.9 +25% 50.1 +29%

A sia 4.1 0.0 n/ a 0.0 n/ a

Total 407.9 412.4 -1% 401.2 +2%

(1) Revenue is by geographic origin

(2) Revenue is on an ex ternal sales basis (i.e. ex cluding intra-group sales)

(3) 2009-10 figures rest ated for internal re-organisation of managem ent s tructure

Constant Currency

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PrivateLabelshareperformanceinUK

Q42009toQ42010

HouseholdCleaners PersonalCare

PrivateLabelvolumeshareup2%pointscomparedtoQ12010

PrivateLabelcleanersaccountforalmost1inevery3purchases

PrivateLabelPersonalCarevolumesharelowerthanHouseholdCleaners

VolumeshareimpactedbyincreasedpromotionalactivityinH22010

Source: Kantar Worldpanel

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PrivateLabelshareperformanceinFrance

Q32009toQ32010

HouseholdCleaners PersonalCare

PrivateLabelHouseholdCleanersvolumesinFranceremainrobustatc35%

PrivateLabelcleanersaccountforover1in3purchases

PrivateLabelPersonalCarevolumesinFranceremainbuoyant

Valueshareperformanceimpactedbydiscountandentrypriceranges

Source: Kantar Worldpanel

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Regionalperformance Operatingprofit

2010-11 2009-10 Y/Y 2009-10 Y/Y

m m m

UK 8.3 11.1 -25% 11.1 -25%

Western Cont inental Europe 12.8 15.7 -18% 14.9 -14%

Central and Eastern Europe 3.4 3.5 -3% 3.4 +0%

A sia 0.1 (0.2) n/ a (0.2) n/ a

Corporate costs (4.4) (3.6) -22% (3.6) -22%

Total 20.2 26.5 -24% 25.6 -21%

(1) Al l figures a re before amortisation of intangible a ssets and ex ceptional item s(2) 2009-10 figures rest ated for inte rnal re-organisation of managem ent st ructure

Constant Currency

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MovementinnetdebtJune2010toDecember2010

(1) Acquisitionsincludes 2.2mnetcashconsiderationand0.9mdebtacquired

(2) Otherincludesfinancecosts,paymentsreexceptionalitemsandforeignexchange

-80.0

-60.0

-40.0

-20.0

0.0

Opening netdebt

Net cashgenerated

from

operations

Capitalexpenditure Dividend Tax Acquisitions Other

Closing netdebt

m

(60.0) 27.2

(12.3)

(3.1)(7.4)

(72.2)

(8.7)

(7.9)

(1) (2)

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Managingmaterialcostsisacoreskill

AnincreasedProcurementteam,organisedonaGroupbasis,withc.50%newhighquality

staff

DevelopmentofprocurementstrategiesforkeycategoriesthatleverageMcBridesscale

Hardnegotiation

Improvedforecasting

Productreengineeringandalternative

sourcing

Hedgingthroughtakinglongercontractswhereappropriate

Supplierriskmanagement

Source: StS FeedstockEvolution

Jun09

Jul09

Aug09

Sep09

Oct0

9

Nov0

9

Dec09

Jan10

Feb

10

Mar1

0

Apr1

0

May10

Jun10

Jul10

Aug10

Sep10

Oct1

0

Nov1

0

Dec10

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Materialpurchases

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Implementation Costs:

Estimated exceptional cost for next phase of initiatives of c20m

Cash cost of c13m with a payback of 2 - 2 years

Further value-enhancing opportunities identified

Refresh Costsandbenefits

Rationale:

Recurring annualised benefit by year 2 of 11m

Underpin EPS growth within 3 years

Enhanced ROCE of in excess of long-run average

A progressive dividend policy

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Goingforward ProjectRefresh

ChrisBull

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ProjectRefresh:FromGoodtoGreat

Competitiveadvantage&

growth

potentialbycategory

SupplyChainefficiency&

footprint

Organisation&waysofworking

NewGeographies

Acquisitions

AFundamentalBusinessReview...

Refresh

Competitive

advantage&

growthpotential

bycategory

AcquisitionsSupplychain

efficiency&

footprint

New

Geographies

Organisation&

waysof

working

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KeyStrategicActions

OrganisationalChange

Categoryreview

Improvecompetitivenessandefficiency

Exploitnewopportunities


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ThePrivateLabelopportunity

Consumersseekvalueformoney

Majorretailersrequirepricecompetitive

productstoimprovevaluestream

PrivateLabelmanufacturersdeveloping

innovativeproducts

DemandforPrivate

Labelproducts

Retailerscontinuallylookingto

differentiateofferandbuildloyalty

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PrivateLabelGrowthDrivers

0

2

4

6

8

10

12

14

16

18

2001 2002 2003 2004 2005 2006 2007 2008 2009

Household Personalcare

PrivateLabelshare

WesternEuropeanmarkets

Source:

Euromonitor International

%ValueShare


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Ourcurrentbusiness

Growthmarketswithscopeformarketsharegain

Robustbusinessmodelwithstrongproductofferingsandexpertise

20

But:

Volatile Insufficientresponsivenessandflexibility

Untappedproductionandsupplychainefficiencies

Currenttradingheadwinds

- Rawmaterialcostinflation

Weakermacroeconomic/consumerclimate

Strongbalancesheetenablingacquisitionsandgeographicexpansion


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Ourplannedbusiness

Growthmarketswithscopeformarketsharegain

Robustbusinessmodelwithstrongproductofferingsandexpertise


21

Plus:

Arationalisedandenhancedoperatingplatform

Increasedcustomerresponsivenessandflexibility

Solidarchitectureforproductandgeographicexpansion

Leadingto:

Enhancedmargins

SustainedEPSgrowth

ROCEinexcessoflongrunaverage

Progressivedividend


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Strategicaction:Organisationalchange

Customers

Buildingstronger

strategicrelationships

atseniorlevel

International

Customerteams

established Buildingleading

categorymanagement

capabilities

GroupleaderofSupply

ChainEffectiveness

andFootprint

appointed

GroupwideLean

Manufacturing

programmeinitiated

Furtherstrengthening

ofGroupprocurement

function

Groupleader

ofR&Dappointed

Categoriesidentified

forGroupwideR&D

andcategory

development

3centresof

excellence

Groupwidequality

standards

ProductDevelopment SupplyChain

Toleveragesize,scaleandcapabilities

Responsiveness Speedtomarket Competitiveness

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Strategicaction:Categoryreview

3CoreGrowthCategories(characterisedbymarketposition,growth,technologyandmarginpotential)

Laundry

liquids Machinedishwashing

Specialistcleaners

FutureGrowthCategories(offeringbroadeningproductrange,

increasingPrivateLabelpenetration)

Skincare

Aircare(nonaerosol)

Malegrooming

Mouthwash

Ongoingmanagementofestablishedcategories

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Focus

on

Growth

Categories


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Categoryreview Coregrowthcategories

Laundryliquids c3bnpamarket categorygrowingattheexpenseofpowdersandtablets

McBridehasestablishedpositioningelsandsachets

Opportunity

to

leverage

scale

and

grow

Private

Label

share

Machinedishwashing Growingmarketworthc1.8bnpadrivenbyincreasingdishwasherownership

EstablishedPrivateLabelpropositionsbasedonTabinTabandsolublesachets

OpportunitytodrivePrivateLabelsharethroughnewproductdevelopment(NPD)

Specialistcleaners 1bnpamarketdrivenbyconsumerhygieneawareness&buyintothetriggerformat

BuildonscaleeconomiesintriggersanddriveNPDoncleaningperformance

24

h


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Categoryreview Futuregrowthcategories

Skincare c15bnpamarketdrivenbygrowthoffacialskincare

ExploitBrnoskincarecapabilityintocoreUKandEuropeancustomers

Aircare(nonaerosol) Totalaircaremarketworth1.9bnpabutveryfragmented

Overallcategorymostimpactedbyeconomicdownturn

ExploitMcBridepositioninhighergrowthinnovativeelectricandtimedrelease

productformats

Malegrooming Malegroomingsectorestimatedatc3bnpaandgrowingrapidly

ExploitMcBridepositioninshavegelandgrowingdemandformaleskincare

Mouthwash Mouthwashusageisgrowingrapidlyonbackoforalhygieneawareness

WestEuropeanmarketworth800mpa

ExploitMcBridecompetenceinWCE,CEE,andAsia

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Strategicaction:Improvecompetitiveness

Embarkonfurtherselectiverationalisationofthemanufacturingfootprint

Implementagroupwideleanmanufacturingprogramme

ImproverelationshipsandofferingthroughInternationalcustomerteams

UtiliseGroupscaletoimproveresponsiveness

26

Strategic action: New opportunities


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Strategicaction:Newopportunities

Selectivecategoryextension

Household Personal Care

Body

Care

Colour

Cosmetics

Oral

Care

Sun

Care

Skin

Care

Male

Grooming

Baby

wipesFacialCleansers

Household wipes

Laundry

Care

Dish

Wash

Surface

Care

Toilet

Care

Air

Care

Insecticides

Pet

Grooming

MedicatedSkin care

Car Care

Current portfolio

Category opportunities

Hair

Care

Outside scope

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Strategic action: New opportunities


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Strategicaction:Newopportunities

Geographicexpansion

DevelopingandEmergingmarketsprovideanexcellentopportunityforPrivateLabelfuelledbytheexpansionofInternationalretailers.

DetailedreviewconfirmsCentralandEasternEuropeandidentifiesAsiaandAustraliaasopportunitieswithAmericasinthelongerterm.

ContinuetostrengthenpresenceinCentralandEasternEurope.

InvestmentinSEAsianfootholdstocontinue

ExtendMalaysia,VietnamandChinafootprint

Strongcompetitiveadvantage fromleading edgePrivateLabelskills.

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Within 12 months:

Complete organisational changes

Implement first Group-wide category investments

Complete next phase of manufacturing rationalisation

Perform Lean Manufacturing assessment at key sites

Continue expansion in Developing and Emerging markets

Implementationroadmap

Within 24 months:

Achieve full run-rate of Supply Chain savings

Further cost saving opportunities

Continue geographic expansion

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KPIs


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KPIs

30

Growth

OrganicRevenuegrowth

PrivateLabelPenetration

%RevenuefromD&EGeographies

%RevenuefromCoreCategories

Efficiency

Overheads%Sales

CapitalAllocation

WorkingCapital

FixedAssetTurnover

FinancialHealth

OperatingMargin

CashConversion

DebtCover


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Investmentcase

Strongmarketpositionwithgoodopportunitiestoimproveexecution

Sustainableorganicrevenuegrowthaheadofmarket

SupplyChaincostreductionopportunitiesof11mp.a.inyear3

Focusedcapitalinvestmentwith>75%profitgenerating

Strongcashconversion


Longtermdividendgrowth

31

Sustainableearningsgrowth

PrivateLabelhasexcellentlongtermpotential


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Appendices

32

i b l b fi i i f i


33/43

33

15

20

25

30

35

40

45

79 80 81 82 89 90 91 92 93 06 07 08 09%P

rivateLa

belshareofUKpackagedgroceries

PrivateLabelsbenefitintimesofrecession

Source Kantar, Datamonitor

Private Labels gain and continue to grow share duringand after recessions

P i t L b l th t f i th k t


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PrivateLabelgrowthoutperformingthemarket

Source: Euromonitor International

P i t L b l i f t t i ll k t


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Note: Based on selected mature and emerging markets; f - forecast. Estimated shares of MGD sales; may exclude fresh produce.

Source: Planet Retail Ltd - www.planetretail.net; partly based on Nielsen and GfK

PrivateLabelisforecasttogrowinallmarkets

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The Private Label Business Model


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ThePrivateLabelBusinessModel

Consumersseekvalueformoney

Majorretailersrequirepricecompetitive

productstoimprovevaluestream

PrivateLabelmanufacturers

developinginnovativeproducts

DemandforPrivateLabel

products

Opportunitytotenderfor

retailersupply

Application

of: Categoryunderstanding

R&D

Productdevelopment

Manufacturingcapability

Productquality

CustomerService

Price/Margin

determined

by: Manufacturing

capability/capacity

Rawmaterialcosts

Distribution/supply chain

efficiency

Volume

Volumes

determined

by: Consumerdemand

Retailerbrandoffer

Retailer relationships

/customerservice

Competition

(Brand&PrivateLabel)

Retailerscontinuallylookingto

differentiateofferandbuildloyalty

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CoreGrowthActions MachineDishwashing


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Largemarket1.8bn,growthdrivenbyincreasingdishwasherownership&convenience

Highlevelofinnovationeg TabinTaband Soluble

sachet

EstablishedPrivateLabelpropositions

McBridehasestablishedpositioninUK,Italy,Germany

andFrance

ContinuetodriveNPD nextgeneration

DrivePrivateLabelsharegrowth categorymanagement

GrowmarketshareinFrance,Germany

GrowshareindevelopingmarketsinCEEandAsia

Category Attractiveness

Actions

1000

1100

1200

1300

1400

1500

1600

1700

1800

1900

2000

2004

2005

2006

2007

2008

2009

AutoDishwashingHandDishwashing

Western European marketm

Source : Euromonitor International

Core Growth Actions Speciality Cleaners


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CoreGrowthActions SpecialityCleaners

Combinedsurfacecleanermarketisworth3bn

Mixofroom surfacespecificcleanersand multipurposeproducts

Growthdrivenbyconsumersincreasedhygieneawarenessinthehomeandthebuyintotargetedcleaningpoweroftrigger

products.

McBridehassignificantscaleintriggervolumes

RecognisedPrivateLabelvalueproposition

Continuetobuildonscaleeconomiesintriggersandliquids

DriveNPDinimprovedcleaningperformanceandproducts

claimsegFlukill

BuildonleadershippositionsinUK,FranceandItaly

ContinuetogrowshareinGermanyandCEE


Actions


0

200

400

600

800

1000

1200

1400

2004 2005 2006 2007 2008 2009

SpeccleanersMultipurposecleaners

Othercleaners

Other cleaners include oven, glass, floor cleaners and

scouring agents


Future Growth Actions Skin care Western European market


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FutureGrowthActions Skincare

Largemarket15bn,drivenbygrowthoffacialskincare

Demandforantiagingproductsakeygrowthdriver

Brno

has

strong

face

and

skin

care

heritage GrowingPrivateLabelpresenceinhighvaluesector

Growingmaleskincaresegment

SkincaredesignatedFutureGrowth withGroupcategoryapproach

Exploit

Brno

skincare

capability

into

core

UK

customers

ExtendrangeintootherkeyEuropeanmarkets

ExploitCEEmarketopportunitiesusingMcBridesCEEdistributionnetwork

ExtendrangeoffertoPrivateLabelmaleskincare

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

2004

2005

2006

2007

2008

2009

SkincareFacialcareBodycareHandcare



Actions

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Future Growth Actions Air care (non aerosol)


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FutureGrowthActions Aircare(nonaerosol)

Totalaircaremarketworth1.9bnbutfragmented

Categorymostimpactedbytheeconomicdownturnwithproductsperceivedasneitheressentialorluxury

Discountsectorisdevelopingpremiumaircare

McBridehasestablishedpositioninbothElectricandspray/aerosolsegments

RecognisedPrivateLabelvalueproposition

Categoryhasmovedoutofcoregrowthdefinition

Electricairfreshenersdesignatedasfuturepromiseandgroupcategoryapproach

Exploit

our

capabilities

in

timed

release

and

sprays

Drivecompetitivenessandrangeoffer

ContinuetodevelopshareinGermanyandElectricformats


Actions


0

100

200

300

400

500

600

700

2004

2005

2006

2007

2008

2009

CandleAirFresheners

CarAirFresheners

ElectricAirFresheners

Spray/AerosolAirFresheners

OtherAirCare


Future Growth Actions Selected Personal Care


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FutureGrowthActions SelectedPersonalCare

TheEuropeanPersonalCaremarketislargebutfragmented.

HistoricallygrowthhasoutperformedtheHouseholdproductssector

PrivateLabelhasagrowingshareinmanycategorieswithscopeforfurthersharegains

McBridehasestablishedpositioninUK,FranceandPolandinmainlinetoiletriessectorse.g.Bath&Showerproducts,liquid

handsoap,shampoosandstyling.

Opportunitiestoexpandintohighergrowthsectors

ContinuetodriveNPDinhighergrowthsectors

including

mens

grooming

products

Exploitexistingmouthwashcompetence

inWCE,CEEandAsia

LeverageofBrnocapabilityinskincaretomensranges

DrivePrivateLabelsharegrowthacrossalltoiletrysectors categorymanagement


Actions0

200

400

600

800

1000

1200

1400

2004

2005

2006

2007

2008

2009

Mouthwashes

MensPreshaveMensDeo'sMensshowerMenshairMensskin


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Cash Generation 2010


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CashGeneration2010

2010-11H1

2009-10H1

m m

Cash generated from operations 27.2 48.8

Other net outflows (21.9) (17.7)

Free cash flow 5.3 31.1

Acquisitions (3.1)(4.7)

Dividends (8.7) (7.8)

Exceptional items (3.5) (1.5)

Exchange (2.2) (4.1)

Debt (increase)/ reduction (12.2) 13.0

Opening net debt (60.0) (82.4)

Closing net debt (72.2) (69.4)

(1)

(1)Cashgeneratedfromoperationsexcludescashflowinrespectofexceptionalitemsandacquisitions

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mcbride 2011 strategy presentation

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