8/6/2019 Mcbride 2011 Strategy Presentation
1/43
201011
InterimResults
8February2011
8/6/2019 Mcbride 2011 Strategy Presentation
2/43
Passionate about Private Label
Introduction
Iain
Napier
Chairman
2
8/6/2019 Mcbride 2011 Strategy Presentation
3/43
Passionate about Private Label
Introduction
Goodfinancialperformanceinachallengingeconomicenvironment
ConclusionoftheRefreshstrategyreviewbeingcommunicatedtoday
StrategicActions:
Organisationalchange
Categoryreview
Improvedcompetitivenessandefficiency
Exploitnewopportunities
Category
extensions Geographies
Interimdividendmaintainedat2.0p(2009:2.0p)
3
8/6/2019 Mcbride 2011 Strategy Presentation
4/43Passionate about Private Label
Summary
Chris
Bull
8/6/2019 Mcbride 2011 Strategy Presentation
5/43
Summary
Revenuegrowthof2%onaconstantcurrencybasis Adjustedoperatingprofit1 down24%drivenbyincreasesinrawmaterial
inputcosts
Restructuringprogrammesannouncedin2010deliveringonplan
Recoveryof2010materialcostincreasescontinuestobeimplemented;
furtherpricerisestocontendwith
Netdebtof1.1xannualisedEBITDA
Proposed furthersupplychainrestructuringthatislikelytoleadtoan
exceptionalchargethisyearofaround20mwithannualisedsavingsof
around
11m(1)Operatingprofitbeforeamortisationofintangibleassetsandexceptionalitems
5
8/6/2019 Mcbride 2011 Strategy Presentation
6/43Passionate about Private Label
Financialreview
Richard
Armitage
Finance
Director
6
8/6/2019 Mcbride 2011 Strategy Presentation
7/43
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
7
8/6/2019 Mcbride 2011 Strategy Presentation
8/43
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
8
8/6/2019 Mcbride 2011 Strategy Presentation
9/43
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
9
8/6/2019 Mcbride 2011 Strategy Presentation
10/43
PrivateLabelshareperformanceinUK
Q42009toQ42010
HouseholdCleaners PersonalCare
PrivateLabelvolumeshareup2%pointscomparedtoQ12010
PrivateLabelcleanersaccountforalmost1inevery3purchases
PrivateLabelPersonalCarevolumesharelowerthanHouseholdCleaners
VolumeshareimpactedbyincreasedpromotionalactivityinH22010
Source: Kantar Worldpanel
10
8/6/2019 Mcbride 2011 Strategy Presentation
11/43
PrivateLabelshareperformanceinFrance
Q32009toQ32010
HouseholdCleaners PersonalCare
PrivateLabelHouseholdCleanersvolumesinFranceremainrobustatc35%
PrivateLabelcleanersaccountforover1in3purchases
PrivateLabelPersonalCarevolumesinFranceremainbuoyant
Valueshareperformanceimpactedbydiscountandentrypriceranges
Source: Kantar Worldpanel
11
8/6/2019 Mcbride 2011 Strategy Presentation
12/43
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
12
8/6/2019 Mcbride 2011 Strategy Presentation
13/43
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)
13
8/6/2019 Mcbride 2011 Strategy Presentation
14/43
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
14
8/6/2019 Mcbride 2011 Strategy Presentation
15/43
Materialpurchases
15
8/6/2019 Mcbride 2011 Strategy Presentation
16/43
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
16
8/6/2019 Mcbride 2011 Strategy Presentation
17/43
Goingforward ProjectRefresh
ChrisBull
17
8/6/2019 Mcbride 2011 Strategy Presentation
18/43
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
18
KeyStrategicActions
OrganisationalChange
Categoryreview
Improvecompetitivenessandefficiency
Exploitnewopportunities
8/6/2019 Mcbride 2011 Strategy Presentation
19/43
ThePrivateLabelopportunity
Consumersseekvalueformoney
Majorretailersrequirepricecompetitive
productstoimprovevaluestream
PrivateLabelmanufacturersdeveloping
innovativeproducts
DemandforPrivate
Labelproducts
Retailerscontinuallylookingto
differentiateofferandbuildloyalty
19
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
8/6/2019 Mcbride 2011 Strategy Presentation
20/43
Ourcurrentbusiness
Growthmarketswithscopeformarketsharegain
Robustbusinessmodelwithstrongproductofferingsandexpertise
20
But:
Volatile Insufficientresponsivenessandflexibility
Untappedproductionandsupplychainefficiencies
Currenttradingheadwinds
- Rawmaterialcostinflation
Weakermacroeconomic/consumerclimate
Strongbalancesheetenablingacquisitionsandgeographicexpansion
8/6/2019 Mcbride 2011 Strategy Presentation
21/43
Ourplannedbusiness
Growthmarketswithscopeformarketsharegain
Robustbusinessmodelwithstrongproductofferingsandexpertise
Strongbalancesheetenablingacquisitionsandgeographicexpansion
21
Plus:
Arationalisedandenhancedoperatingplatform
Increasedcustomerresponsivenessandflexibility
Solidarchitectureforproductandgeographicexpansion
Leadingto:
Enhancedmargins
SustainedEPSgrowth
ROCEinexcessoflongrunaverage
Progressivedividend
8/6/2019 Mcbride 2011 Strategy Presentation
22/43
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
22
8/6/2019 Mcbride 2011 Strategy Presentation
23/43
Strategicaction:Categoryreview
3CoreGrowthCategories(characterisedbymarketposition,growth,technologyandmarginpotential)
Laundry
liquids Machinedishwashing
Specialistcleaners
FutureGrowthCategories(offeringbroadeningproductrange,
increasingPrivateLabelpenetration)
Skincare
Aircare(nonaerosol)
Malegrooming
Mouthwash
Ongoingmanagementofestablishedcategories
23
Focus
on
Growth
Categories
8/6/2019 Mcbride 2011 Strategy Presentation
24/43
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
8/6/2019 Mcbride 2011 Strategy Presentation
25/43
Categoryreview Futuregrowthcategories
Skincare c15bnpamarketdrivenbygrowthoffacialskincare
ExploitBrnoskincarecapabilityintocoreUKandEuropeancustomers
Aircare(nonaerosol) Totalaircaremarketworth1.9bnpabutveryfragmented
Overallcategorymostimpactedbyeconomicdownturn
ExploitMcBridepositioninhighergrowthinnovativeelectricandtimedrelease
productformats
Malegrooming Malegroomingsectorestimatedatc3bnpaandgrowingrapidly
ExploitMcBridepositioninshavegelandgrowingdemandformaleskincare
Mouthwash Mouthwashusageisgrowingrapidlyonbackoforalhygieneawareness
WestEuropeanmarketworth800mpa
ExploitMcBridecompetenceinWCE,CEE,andAsia
25
8/6/2019 Mcbride 2011 Strategy Presentation
26/43
Strategicaction:Improvecompetitiveness
Embarkonfurtherselectiverationalisationofthemanufacturingfootprint
Implementagroupwideleanmanufacturingprogramme
ImproverelationshipsandofferingthroughInternationalcustomerteams
UtiliseGroupscaletoimproveresponsiveness
26
Strategic action: New opportunities
8/6/2019 Mcbride 2011 Strategy Presentation
27/43
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
27
Strategic action: New opportunities
8/6/2019 Mcbride 2011 Strategy Presentation
28/43
Strategicaction:Newopportunities
Geographicexpansion
DevelopingandEmergingmarketsprovideanexcellentopportunityforPrivateLabelfuelledbytheexpansionofInternationalretailers.
DetailedreviewconfirmsCentralandEasternEuropeandidentifiesAsiaandAustraliaasopportunitieswithAmericasinthelongerterm.
ContinuetostrengthenpresenceinCentralandEasternEurope.
InvestmentinSEAsianfootholdstocontinue
ExtendMalaysia,VietnamandChinafootprint
Strongcompetitiveadvantage fromleading edgePrivateLabelskills.
28
8/6/2019 Mcbride 2011 Strategy Presentation
29/43
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
29
KPIs
8/6/2019 Mcbride 2011 Strategy Presentation
30/43
KPIs
30
Growth
OrganicRevenuegrowth
PrivateLabelPenetration
%RevenuefromD&EGeographies
%RevenuefromCoreCategories
Efficiency
Overheads%Sales
CapitalAllocation
WorkingCapital
FixedAssetTurnover
FinancialHealth
OperatingMargin
CashConversion
DebtCover
8/6/2019 Mcbride 2011 Strategy Presentation
31/43
Investmentcase
Strongmarketpositionwithgoodopportunitiestoimproveexecution
Sustainableorganicrevenuegrowthaheadofmarket
SupplyChaincostreductionopportunitiesof11mp.a.inyear3
Focusedcapitalinvestmentwith>75%profitgenerating
Strongcashconversion
Strongbalancesheetenablingacquisitionsandgeographicexpansion
Longtermdividendgrowth
31
Sustainableearningsgrowth
PrivateLabelhasexcellentlongtermpotential
8/6/2019 Mcbride 2011 Strategy Presentation
32/43
Appendices
32
i b l b fi i i f i
8/6/2019 Mcbride 2011 Strategy Presentation
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
8/6/2019 Mcbride 2011 Strategy Presentation
34/43
PrivateLabelgrowthoutperformingthemarket
Source: Euromonitor International
P i t L b l i f t t i ll k t
8/6/2019 Mcbride 2011 Strategy Presentation
35/43
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
35
The Private Label Business Model
8/6/2019 Mcbride 2011 Strategy Presentation
36/43
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
36
8/6/2019 Mcbride 2011 Strategy Presentation
37/43
CoreGrowthActions MachineDishwashing
8/6/2019 Mcbride 2011 Strategy Presentation
38/43
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
8/6/2019 Mcbride 2011 Strategy Presentation
39/43
CoreGrowthActions SpecialityCleaners
Combinedsurfacecleanermarketisworth3bn
Mixofroom surfacespecificcleanersand multipurposeproducts
Growthdrivenbyconsumersincreasedhygieneawarenessinthehomeandthebuyintotargetedcleaningpoweroftrigger
products.
McBridehassignificantscaleintriggervolumes
RecognisedPrivateLabelvalueproposition
Continuetobuildonscaleeconomiesintriggersandliquids
DriveNPDinimprovedcleaningperformanceandproducts
claimsegFlukill
BuildonleadershippositionsinUK,FranceandItaly
ContinuetogrowshareinGermanyandCEE
Category Attractiveness
Actions
Western European marketm
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
Source : Euromonitor International
Future Growth Actions Skin care Western European market
8/6/2019 Mcbride 2011 Strategy Presentation
40/43
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
Western European marketm
Category Attractiveness
Actions
40
Source : Euromonitor International
Future Growth Actions Air care (non aerosol)
8/6/2019 Mcbride 2011 Strategy Presentation
41/43
FutureGrowthActions Aircare(nonaerosol)
Totalaircaremarketworth1.9bnbutfragmented
Categorymostimpactedbytheeconomicdownturnwithproductsperceivedasneitheressentialorluxury
Discountsectorisdevelopingpremiumaircare
McBridehasestablishedpositioninbothElectricandspray/aerosolsegments
RecognisedPrivateLabelvalueproposition
Categoryhasmovedoutofcoregrowthdefinition
Electricairfreshenersdesignatedasfuturepromiseandgroupcategoryapproach
Exploit
our
capabilities
in
timed
release
and
sprays
Drivecompetitivenessandrangeoffer
ContinuetodevelopshareinGermanyandElectricformats
Category Attractiveness
Actions
Western European marketm
0
100
200
300
400
500
600
700
2004
2005
2006
2007
2008
2009
CandleAirFresheners
CarAirFresheners
ElectricAirFresheners
Spray/AerosolAirFresheners
OtherAirCare
Source : Euromonitor International
Future Growth Actions Selected Personal Care
8/6/2019 Mcbride 2011 Strategy Presentation
42/43
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
Category Attractiveness
Actions0
200
400
600
800
1000
1200
1400
2004
2005
2006
2007
2008
2009
Mouthwashes
MensPreshaveMensDeo'sMensshowerMenshairMensskin
Western European marketm
42
Source : Euromonitor International
Cash Generation 2010
8/6/2019 Mcbride 2011 Strategy Presentation
43/43
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
43