Cleaning products group in the eye of an inflationary storm
Manchester-based cleaning products group McBride is in the eye of an inflationary storm.
As forecast in its trading update in December 2021, the group has slumped to a half-year loss, and said it faces “the most extreme inflationary cost environment probably ever to hit this sector”.
In the six months to December 31, 2021, McBride achieved revenues of £323.4m, compared with £362.9m the year before. Previous revenues benefitted from particularly strong initial COVID-19-related demand in key categories.
However, a pre-tax loss of £16.8m was a 226.3% reversal on the previous year’s pre-tax profit of £13.3m.
Net debt rose from £118.4m a year ago to £124.9m.
The group blames the exceptional cost inflation on COVID-19 shocks to the global supply chain and rapid and exceptional inflation of key feedstocks, as well as the fall-out from Brexit.
It said early price actions are being supplemented with ongoing price discussions with customers, adding that it is “pleasing” to see the support of customers to these price increase requests.
The group’s ‘Programme Compass’ cost savings are on track, with £10m of savings expected in the current financial year.
But it said COVID-19 continues to impact demand, for example, laundry volumes remain lower compared with historic levels.
Today’s statement revealed that trading in the early part of 2022 has been slightly ahead of the group’s most recent internal expectations and its current outlook is for the second half of fiscal year 2022 trading results to show an improvement overall compared with the first half year.
For the final quarter of the financial year McBride expects to see its pricing actions getting closer to maturity and the business returning close to break-even at an EBITA level before moving onto modest profits in the new financial year.
Chief executive, Chris Smith, said: “The group is experiencing the most extreme inflationary cost environment probably ever to hit this sector.
“As we progress through the first part of 2022 it is encouraging that we expect the final quarter of our financial year to see our pricing actions getting closer to maturity and the business returning to close to break-even at an EBITA level and cash-flow neutral.
“The outlook is, of course, heavily dependent on our actions to deliver the outstanding essential price increases currently in discussion with our customers, as well as other external factors such as the development of input costs and other inflationary pressures, and continuing supply chain disruptions.”
He added: “The group’s core activities remain strong and the dedication of the entire McBride team to resolve the challenges confronting us is a strong demonstration of our values and the commitment to return the group to profitability.”
