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Preparing for growth
McBride plc Annual Report and Accounts 2016
Welcome to the McBride plc
Annual Report and Accounts
McBride plc is Europe’s leading supplier of Private Label Household
and Personal Care products. The Company develops, and manufactures
products for the majority of retailers and major brand owners throughout
Europe and Asia. Headquartered in Manchester, UK, McBride operates
across 12 countries, with 17 manufacturing facilities producing over
1.2 billion units a year and employs 4,400 employees globally. For more
information visit www.mcbride.co.uk
Our mission is to return to and then maintain McBride on a sustainable
growth path focusing on selected markets and customers achieving high
customer satisfaction through operational excellence and cost leadership.
Contents
Strategic report
Headlines
At a glance
Chairman’s statement
Thoughts of the CEO
Executive review
Investment case
Business model
Strategic progress
Our strategy – summary
Principal risks and uncertainties
Corporate responsibility
Corporate governance
Chairman’s introduction
Board of Directors
Corporate governance report
Audit Committee report
Remuneration report
Nomination Committee report
Other statutory information
Statement of Directors’ responsibilities
Financial statements
Independent auditors’ report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Reconciliation of net cash flow
to movement in net debt
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Independent auditors’ report
Company balance sheet
Company statement of changes in equity
Notes to the Company financial statements
Additional information
Subsidiaries
Group five‑year summary
Useful information for shareholders
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Cautionary statement This Annual Report has been prepared for
the shareholders of McBride plc, as a body, and no other persons.
Its purpose is to assist shareholders of the Company to assess the
strategies adopted by the Group, the potential for those strategies
to succeed and for no other purpose. The Company, its Directors,
employees, agents or advisers do not accept or assume responsibility
to any other person to whom this document is shown or into
whose hands it may come and any such responsibility or liability is
expressly disclaimed.
This Annual Report contains certain forward‑looking statements that
are subject to risk factors associated with, amongst other things, the
economic and business circumstances occurring from time to time
in the countries, sectors and markets in which the Group operates.
It is believed that the expectations reflected in these statements are
reasonable but they may be affected by a wide range of variables
which could cause actual results to differ materially from those
currently anticipated.
No assurances can be given that the forward‑looking statements in
this Strategic report will be realised. The forward‑looking statements
reflect the knowledge and information available at the date of
preparation of this Strategic report and the Company undertakes no
obligation to update these forward‑looking statements. Nothing in this
Annual Report should be constituted as a profit forecast.
Strategic and Directors’ reports The Strategic report and the
Corporate governance and Financial statements form a Directors’
report. Both the Directors’ report and Strategic report have been
drawn up and presented in accordance with English company law
and the liabilities of the Directors in connection with those reports
shall be subject to the limitations and restrictions provided by such
law. In particular, the Directors would be liable to the Company (but
not to any third party) if the Strategic report and/or Directors’ report
contain errors as a result of recklessness or knowing misstatement or
dishonest concealment of a material fact, but would not otherwise
be liable.
The Strategic report forms part of the Annual Report, full copies of
which can be obtained free of charge from the Group’s website at
www.mcbride.co.uk or from the Company’s registered office.
Headlines
McBride plc
Annual Report and Accounts 2016
1
Strategic highlights
• Significant progress on ‘Repair’ phase of
our strategy
• Business now engaged in ‘Prepare’ activities
• Project to focus on the top 25% of our
customers completed
• Strategic purchasing initiatives launched, over
£5 million benefit realised in year
• Organisational change progressing well
• Underperforming business being addressed, with
good traction in Asia and new dedicated team for
Personal Care & Aerosols
• Overhead savings programmes executed in line
with plans
• Key capital projects
• Leading edge technology line installed in UK
• Poland upgrade underway
• Laundry sachet investment about to launch
• Platform for contract manufacturing established
• Profit levels for the year ahead of the three to five
year plan ambition
Financial highlights
Revenue
(£m)
2016
2015
2014
2013
2012
(£23.3m)
(3.3%)
Adjusted operating profit
(£m)
680.9
704.2
744.2
761.4
813.9
2016
2015
2014
2013
2012
36.2
22.0
23.6
28.5
29.5
£7.7m
+27.0%
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Adjusted diluted EPS
(pence)
Debt/
adjusted EBITDA
2016
2015
2014
2013
2012
2.8p
+33.7%
11.1
5.3
8.3
7.3
9.7
2016
2015
2014
2013
2012
(0.2x)
(10.5%)
1.7
1.9
1.9
1.8
1.5
• Revenues lower by 1.9% at constant currency;
• UK Defined Benefit Plan closed to future
approximately half of this was due to the project
to reduce our customer numbers
• Adjusted operating profits 27% higher, 29% at
constant currency, operating margin up to 5.3%
(2015: 4.0%)
service accrual
• Cash generated from operations before exceptional
items £52.5 million (2015: £44.2m) with underlying
net cash inflow of £13.9 million, offset by adverse FX
impact in last week of June
• Adjusted diluted EPS up 33.7% to 11.1 pence
• Net debt reported at £90.9 million (2015: £92.4m)
(2015: 8.3p)
with debt cover ratio 1.7x (2015: 1.9x)
• Exceptional items reported of £2.4 million
• Full year payment to shareholders 3.6 pence per
(2015: £17.8m)
share (2015: 3.6p)
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McBride plc
Annual Report and Accounts 2016
At a glance
Established in 1927, McBride boasts a strong heritage.
We are the private label experts in our segments with the
scale to offer our development and manufacturing capabilities
to customers in continental Europe and Asia‑Pacific.
United Kingdom
Continental Europe
Brno
Asia‑Pacific
Strzelce
Barrow
Bradford
Hull
Manchester
eper
Estaimpuis
Moyaux
Foetz
Etain
Brno
Rosporden
Bagnatica
Sallent
Strzelce
Ho Chi Minh City
Hong Kong
Kuala Lumpur
Zhongshan
Hong Kong
Melbourne
Zhongshan
Hong Kong
we sell to
shipped to
90
different countries
over
1.2bn
units sold
49/50
of the major
European retailers
Vietnam
Kuala Lumpur
Vietnam
Kuala Lumpur
Melbourne
Melbourne
McBride plc
Annual Report and Accounts 2016
3
As the leading provider of Private Label Household and
Personal Care products, we manufacture and supply Europe’s
major retailers for their private label offering and our extensive
manufacturing platform provides contract manufacturing
capacity to brand owners.
purchased over
3.4bn
items of components
4,400
employees
globally
17
manufacturing
facilities
over 1m
tonnes of finished
goods sold
business activities
outside the UK
70%
our products
are used over
1,000 times
every second
of each day
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McBride plc
Annual Report and Accounts 2016
Chairman’s statement
The business has advanced
considerably in the past
twelve months as a result of
which we are able to report
further significant progress
in our financial performance.
Dear Shareholder
Welcome to our 2016 Annual Report. I am delighted
to have joined the Board of McBride, in part because
it feels a little like coming home. I started my career in
Procter and Gamble and clearly remember training in
various factories understanding how household cleaning
products were made and distributed. Most of my career
since then has been in retail, specifically in fashion, hard
goods and DIY. I am sure that my experience, garnered
over the years, will be useful to Rik and his team and will
help them to understand even better how retailers think
and why they do some of the things that they do.
This is a very exciting time to be joining McBride, we
are one year into our transformation programme,
‘Manufacturing our Future’, and significant progress has
been made. This report covers that progress in some
detail and signposts our next steps in implementing
our strategy. I have been fortunate enough to have
been able to visit four of the Group’s most important
factories in the last few months. I can report that the
leadership teams in those factories are enthused by the
strategy that Rik and his team have developed and are
passionate about delivering for the future. These are
exciting times for McBride, the Executive Leadership
Team have done an excellent job and the business has
advanced considerably in the past twelve months as a
result of which we are able to report further significant
progress in our financial performance.
Results
I am pleased to report that the plan to improve the
quality of the Group’s profits is on track after this first
year. Adjusted operating profit margins moved up to
5.3% from 4.0% in 2015 and 3.0% in 2014. Across this
period, adjusted operating profits have risen from
£22.0 million two years ago to end the last twelve
months at £36.2 million (2015: £28.5m), an increase of
29% on last year at constant currency. Adjusted EPS
rose to 11.1 pence (2015: 8.3p), a year‑on‑year increase
of 34%.
The balance sheet strengthened further in the
period with shareholder funds rising by £11.6 million
to £69.1 million. Reported net debt of £90.9 million
represented a debt cover ratio of 1.7x with the impact
of volatile exchange rates at the end of the financial
year, masking an underlying reduction in net debt of
£13.9 million.
Payments to shareholders
In September 2015, the Board reset its policy
concerning payments to shareholders. As part of the
‘Repair, Prepare, Grow’ implementation, the intention
was to hold the dividend at the new level during the
‘Repair’ period – hence for the year to 30 June 2016, the
Board will recommend a repeat of the payment level of
last year of 3.6 pence. Going forward, in line with the
new policy, the Group expects to distribute adjusted
earnings to shareholders based on a dividend cover
range of 2x‑3x, progressive with earnings of the Group,
taking into account funding availability.
McBride plc
Annual Report and Accounts 2016
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Current trading and outlook
The first few months of the new financial year have
started satisfactorily and show trading levels similar
to the exit rates seen last financial year.
The Group is seeing strong indications of upward
pressure on raw material pricing, especially from
the second half of the year, compounding the
imported inflation impact our UK operation is seeing
following the recent weakening of Sterling. The business
is actively mitigating any potential margin threats.
Delivery against the strategy plan remains on course
and the Board remains confident of the long‑term
prospects for the Group.
John Coleman
Chairman
7 September 2016
Governance
The Board recognises that good corporate governance
underpins the long‑term prospects of the Group.
We remain focused on ensuring that the principles
of leadership and board effectiveness are applied
in accordance with the UK Corporate Governance
Code (‘the Code’). My introduction to the Corporate
governance report on page 29 of this report sets out
how the Board has complied with the principles of the
Code which applied throughout the financial year ended
30 June 2016 and includes explanations of our approach
to risk management, Board performance evaluation,
succession planning and diversity.
Board changes
During the year, Iain Napier, Chairman since 2007,
informed the Board of his intention to retire.
On 22 April 2016 I was appointed as a Non‑Executive
Director and Chairman Elect, and subsequently became
Chairman on 1 July 2016. I would like to thank Iain, on
behalf of the Board, for his contribution and service to
McBride during the past eight years and to wish him
well in his retirement.
Our people
The Board would like to welcome new colleagues to
the Group and to thank everyone for their contribution
to a successful year in a working environment that
continues to undergo major transformation and change.
Whilst change can be unsettling and cause uncertainty
for some individuals, it can also provide opportunities
for others to make a significant contribution to the
business. In the past year there have been many good
examples that showcase this. Our colleagues have
demonstrated outstanding efforts and commitment.
I look forward to their continued contribution in
achieving the ambitions of the ‘Manufacturing our
Future’ strategy going forward.
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McBride plc
Annual Report and Accounts 2016
Thoughts of
the CEO
A year of change and difficult
decisions, yet one in which a
lot of progress has been made.
Rik De Vos
Chief Executive Officer
A key expectation and outcome from these changes
is that we make our people more accountable and
empowered to drive the strategy implementation. For
me, the human aspects of these changes have been a
key focus, to encourage our teams to adapt and adopt
the changes in their daily work. When I witness the shift
in behaviours with our employees and experience how
the “new McBride” is being embraced, I can only feel
confident about the prospects for our Company.
At our half year results, we reported an improvement of
our financial performance and this was above our earlier
expectations. Whilst we anticipated seeing lower second
half revenues in a market environment which continues
to show strong, competitive volume and price pressures,
I am pleased to report a continued improvement in our
profitability.
The progress of our strategy and the consequential
benefits are visible not only in the behavioural shift
but also in the results. I believe that both of these
elements are essential for a sustainable change
in the Company’s future.
I do sincerely hope that you enjoy reading about our
strategic progress in this Annual Report.
Rik De Vos
Chief Executive Officer
It is with great pleasure that I am writing my thoughts
on the past twelve months. It has been a time of
action and of change, doing things differently and
implementing new ways of working.
A year ago, I presented the ‘Manufacturing Our Future’
strategy, with its three phases – ‘Repair, Prepare, Grow’,
defining a clear roadmap to restore McBride to its core
capability of manufacturing excellence.
We launched the first phase ‘Repair’ through a
series of projects, each with a specific action plan in
support of the change agenda that we had defined
for the Company. As described in last year’s annual
report, we set ourselves the task of delivering five
key objectives. I am pleased to report that all ‘Repair’
projects are now embedded within the organisation and
in some cases have been fully delivered. More detail on
these ‘Repair’ projects is provided on pages 16 and 17.
Without doubt, the year has presented me with many
difficult moments, with many decisions being made
that had an impact on colleagues and the organisation.
It was also a period which demanded substantial time
commitment from our teams to drive the delivery of our
new strategy.
That recognised, we have made important progress in
simplifying our business. We have substantially reduced
our customer base and product range, and taken
concrete steps in addressing the underperforming parts
of the Group. Several structural initiatives have been
launched including driving our purchasing excellence,
whilst within our supply chain significant improvements
in efficiency have also been implemented.
McBride plc
Annual Report and Accounts 2016
7
Executive
review
The efficiency initiatives from
the ‘Manufacturing our Future’
strategy are already visible in
our financial results.
Rik De Vos
Chief Executive Officer
Chris Smith
Chief Finance Officer
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McBride plc
Annual Report and Accounts 2016
Executive review
continued
‘Manufacturing our Future’ strategy
‘Manufacturing our Future’ defines a clear roadmap to restore McBride
to its competence of manufacturing and operational excellence.
Strategy progress
Group operating results
Full year Group revenues at £680.9 million were
£23.3 million, 3.3% lower than the revenues reported
for the prior year. The translation impact of a weak
Euro for most of the financial year was responsible
for approximately half of this headline reduction.
On a constant currency basis, sales were lower by
£13.5 million (‑1.9%), with Household sales lower by
1.9% and Personal Care & Aerosols (PCA) lower by 2.1%.
A key objective of the ‘Repair’ phase of our strategy
implementation was to reduce the levels of complexity
in our customer and product portfolio. This action
will see Group revenues on an annualised basis
reduce by approximately £20.0 million. This initiative
commenced in the second half year such that in the
twelve months to 30 June 2016, the impact lowered
revenues by £6.0 million, equating to approximately
half of the year‑on‑year reduction in Group sales (at
constant currency).
Overall volume levels were unchanged across the total
Group but the impact of ongoing price pressures in most
of the Group’s markets continued to drive the revenue line
lower. This was most evident in the UK business, which
saw pricing lower overall by approximately 4%, offset by
implemented efficiency and raw material changes.
Full year adjusted operating profit was £36.2 million
(2015: £28.5m) with adjusted operating profit margin
increasing to 5.3% (2015: 4.0%), slightly ahead of the
projected 1% per annum improvement outlined in our
three to five year progress towards our 7.5% ambition.
Excluding the impact of translation exchange rates,
adjusted operating profits improved by 29.3% or
£8.2 million. Full year operating profit increased by
£23.2 million to £32.9 million (2015: £9.7m). Based on
adjusted operating profit, the improved profitability
levels led to an improved return on capital employed
ratio, with the measure rising to 23.4% (2015: 18.8%).
A significant proportion of the year‑on‑year profit
improvement related to cost savings initiatives, either
in overheads or from structural buying improvements.
During the year to 30 June 2016 all remaining actions
under the UK restructuring project, announced in 2014
were completed. As anticipated, the project is delivering
an annualised benefit of £12.0 million. In June 2015, we
announced a cost savings project affecting our sales
and finance administration with savings of £2.9 million
delivered in the year. Additionally, a consequence of the
initiative to decrease customer and product complexity
has been to reduce the burden of managing these
activities, facilitating further overhead reductions. In
the past financial year, savings amounted to £2.2 million
with the ongoing annualised benefit expected to
amount to £4.7 million, more than balancing the margin
lost from reducing customer and product ranges.
A further benefit of the business simplification actions
is being generated through purchasing efficiency. Our
purchasing teams are active in driving scale benefits
in many aspects of our procurement activities. The
significant effort to drive technically‑led formulation
simplification and thorough reviews of how and what we
buy has led to a steep fall in the number of components
and chemicals used by the Group, which realised a
benefit of over £5 million in the year. These purchasing
benefits and a range of efficiency initiatives in the
factories have delivered improved gross margins, which
rose by 1.2 percentage points to 35.8%. (2015: 34.6%)
despite the effect of lower customer pricing.
The year was a strong one for cash management with
cash generated from operations before exceptional items
of £52.5 million (2015: £44.2m). Capital expenditure
cash flow slowed to £12.8 million (2015: £21.9m) as the
new investment strategy outlined in the ‘Prepare’ phase
was under development for much of the year, impacting
short‑term investment decisions.
McBride plc
Annual Report and Accounts 2016
9
Cash outflow for exceptional items of £4.2 million
(2015: £10.7m) primarily reflects the impact of the charge
taken in June 2015 for central overhead restructuring
and the remaining cash costs associated with the UK
restructuring project announced in June 2014.
Net cash flow before payments to shareholders was
£19.7 million (2015: £2.3m). Cash payments made to
shareholders during the year amounted to £5.8 million
(2015: £8.7m), the reduction a reflection of the reset
of the dividend policy announced in September 2015.
Reported year‑end net debt reduced by £1.5 million
to £90.9 million (2015: £92.4m), comprising a strong
net cash flow of £13.9 million reduced by £12.4 million
of translation impact as a result of the weaker Sterling
exchange rates on Euro and USD‑denominated
borrowings. Financial instruments to hedge this
exposure saw an equivalent rise, but are included in
balance sheet but not recorded within net debt.
The Group’s balance sheet strengthened through
the year with net assets rising by £11.6 million to
£69.1 million (2015: £57.5m). Gearing improved
further to 59% (2015: 61%) and the debt cover ratio
fell to 1:7 (2015: 1:9). The Group has significant
borrowing capacity with headroom of £127.5 million
(2015: £94.6m) on committed debt facilities. The Group
traded throughout the period with ample headroom
on its banking covenants.
Segmental performance
In line with our announcement at the interim stage, as a
consequence of the decision to separately manage the
Group’s Household and PCA activities, our segmental
reporting has been amended to accommodate this
change. In addition, we separately report corporate
costs, which include the costs associated with the Board
and the Executive Leadership Team, governance and
listed company costs and certain central functions,
mostly associated with financial disciplines such
as treasury.
Revenue by segment
PCA
£145.9m
Household
– UK £164.9m
– North £179.0m
– South £69.2m
– East £121.9m
Adjusted operating profit
before corporate costs
Household £42.7m
PCA £2.7m
Corporate £(9.2)m
Household
The Household activities are managed by four regional
teams, a key organisational responsibility that has been
established as part of the redesign of the management
structure and implemented in our ‘Repair’ phase.
Whilst revenues for the four regions are split, trading
profits are only measured and reported at the total
segment level.
Reported revenues decreased by 3.1% to £535.0 million
(2015: £552.4m) but at constant currency revenues were
lower by only 1.9%. Of this sales decrease, £4.7 million
related to the in‑year effect of our “customer choice”
project, the balance of the shortfall relating to the effect
of pricing deflation with volumes broadly flat.
Headline profits increased in Household by 13.0%
(13.9% at constant currency), broadly matching the
improvements seen in the Group overall. In spite of
slightly lower revenues, the benefits of improved buying
of raw materials and the effect of the cost management
initiatives resulted in trading profit margins in this sector
rising from 6.8% to 8.0%.
In the UK, revenues of £164.9 million compared to
£180.5 million in 2015, a decline of 8.6%. The decrease
reflected lower volumes due to a number of UK retailers
reducing their SKU ranges in store and the effect of
the deflationary pricing environment as noted earlier.
Lower contract manufacturing volumes were also a key
contributor to the reduction in the UK as a two‑year
contract ended and was not replaced in the period.
In the North region, which covers France, Belgium,
Netherlands and Scandinavia, overall sales benefited
from improved contract volumes balanced by slightly
lower Private Label sales. Like the UK, price deflation
is also a feature in the revenue development although
volumes are showing good growth, especially in
Belgium and the Netherlands.
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McBride plc
Annual Report and Accounts 2016
Executive review
continued
The recent new blow moulding
machinery investment in Poland and the
UK has increased our output threefold
Our South region which primarily represents Italy and
Iberia reported underlying sales growth of 2.4% at
constant currency. Volume growth was strong with
both contract gains and growth in Private Label. Pricing
pressures however held back overall growth in an
ongoing competitive environment. Iberia in particular
showed significant improvement with volumes up 11.4%
following new business wins.
Our East region, covering Germany, Poland and other
East European countries, saw growth continue in the
German market with a range of key customer supply
relationships expanding further in scope during the year.
In Poland, sales were weaker as a result of certain key
retailers shifting their business model towards higher
levels of branded goods in store. Sales developed
satisfactorily in the growing markets of Russia, Hungary
and the Baltics.
Personal Care & Aerosols (PCA)
The PCA division comprises the Personal Care liquids,
Skincare and Aerosols businesses of McBride’s European
operations and also the activities of McBride in Asia.
On a reported basis, revenues for this division fell by
3.9% to £145.9 million (2015: £151.8m). At constant
currency, revenues were lower by only 2.1%. Within this
segment revenues were significantly higher in both Asia
and at our Skincare business in Europe, up 18.1% and
23% respectively at constant currency. Our European
Aerosols and Personal Care Liquids businesses saw
volumes lower by 4% overall at constant currency with
the main markets for these products, UK and France,
both seeing Private Label volumes under pressure from
branders and high levels of in‑store promotional activity.
Overall reported profitability for this segment improved
significantly by £4.1 million to £2.7 million (2015: ‑£1.4m).
In addition to the significantly improved performances
of both our Asian and European Skincare businesses,
our European Aerosols and Personal Care Liquids
businesses, saw profits improve in spite of lower
revenues as a result of improved margins, driven by
better buying and improved factory efficiencies. The
businesses also benefited from lower overall overheads
costs, achieved in part from the Group’s central cost
saving initiatives.
The new management team for PCA in Europe, in
position for over six months now, has provided focus
and dedicated support to this segment, its customers
and factory operations. Progress so far is pleasing and
further progress on simplifying this segment will be
required in the coming year to ensure this segment is
achieving acceptable margins to support reinvestment.
In Asia, the local teams have successfully turned a
break‑even operation to one that now makes underlying
profits close to the Group average. The closure of the
loss‑making Chinese operation was achieved to plan in
December 2015. Revenues have seen promising growth
in Australia, Vietnam and Malaysia with a range of new
Private Label and contract business.
Corporate costs
Costs increased by £1.3 million compared to last year
(2015: £7.9m). This increase relates primarily to incentive
payments, especially LTIP costs, which as a result of the
improved profits for the business are now considered
more likely to vest, incurring charges for not just this
year but also catch‑up charges from prior years.
McBride plc
Annual Report and Accounts 2016
11
Case study
Investing into our assets:
Middleton facility, UK
The problem
The Middleton, UK site is a major producer of Washing
Up Liquid (WUL). Our complex variety of product
ranges and customer sizes meant we produced
product on three sub‑optimal filling lines with frequent
changeovers. This equipment was not connected to
bottle production and required much manual handling.
The solution
Supported by a rationalised range and longer
production runs with fewer customers, we have taken
advantage of technology progress such that we have
replaced all previous equipment with a single line
which can manufacture the PET bottles and fill them
within the same filling line. This capability supports the
objective of the ‘Prepare’ phase to develop our asset
platform driving future cost and technology leadership.
This also supports our sustainability agenda by further
reducing waste in our production processes.
The benefit
We now have 15% more capacity for PET WUL from
a significantly reduced floorspace area while the
quality of this installation provides a more reliable and
consistent quality product to our customers.
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Other financial information
Exceptional items
Exceptional items of £2.4 million were recorded during
the year (2015: £17.8m), comprising the following
four components:
Net finance costs
Net finance costs amounted to £7.1 million (2015: £7.1m)
with a small reduction in pensions interest costs offset
by an increase in costs associated with net profit
hedge instruments.
• as previously outlined, the Group has implemented
a new strategy to lower complexity through the
rationalisation of our customer base down to 25%
of our previous customer portfolio. This strategy
is substantially complete as at 30 June 2016 with
reorganisation costs of £2.2 million charged to
exceptional items;
• following our review of the contingent consideration
payable arising from the acquisition of the Czech
Republic‑based skincare business at Brno an
additional provision of £1.7 million has been recorded
to reflect the increase in performance and our
increased liability. This charge is materially offset by
a reversal of the impairment charges previously made
in relation to the assets at Brno of £1.7 million;
• exceptional provisions were made in the two prior
financial years with regard to the UK restructuring
project and the creation of a functional structure
with centralised support services. Work is now
substantially complete on both projects resulting in
the release of unused provisions of £0.3 million and
£0.7 million respectively; and
• in late June 2016, the Group’s Italian business lost
a long‑running legal case surrounding costs of
reparation to a property vacated by the Group in
2011. In consideration of the advised worst case
position, an existing provision has been increased by
£1.2 million as at 30 June 2016.
Profit before tax and tax rate
Reported profit before tax was £25.8 million
(2015: £2.6m) with adjusted profit before tax totalling
£29.4 million (2015: £21.7m). The tax charge on adjusted
profit before tax for year of £9.2 million (2015: £6.5m)
represents a 31% effective tax rate. This compares to the
30% effective tax rate for the year ended 30 June 2015,
the increase being due to a change in the mix between
jurisdictions in which Group profits arise.
Earnings per share
On an adjusted basis, diluted earnings per share (EPS)
increased by 34% to 11.1 pence (2015: 8.3p) with basic
EPS at 9.3 pence (2015: (0.4p)).
Payments to shareholders
In September 2015, the Board’s policy on payments
to shareholders was reset following its strategy review.
As a consequence, the full year payment relating to
the year ended 30 June 2015 was reset to 3.6 pence.
For the year to 30 June 2016, the Board will recommend
the same level as the prior year and hence a payment
to shareholders of 3.6 pence. Going forward, in line with
the new policy, the Group expects to distribute adjusted
earnings to shareholders based on a dividend cover
range of 2x‑3x, progressive with earnings of the Group,
taking into account funding availability.
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McBride plc
Annual Report and Accounts 2016
Executive review
continued
Hence, following the interim payment of 1.2 pence
declared in February 2016 (2015: 1.7p), the Board
recommends a final payment to shareholders in
November 2016 of 2.4 pence (2015: 1.9p) and it is
intended this will be issued using the Company’s
B Share scheme.
Covenants
The Group’s funding arrangements are subject to
covenants, representations and warranties that are
customary for unsecured borrowing facilities, including
two financial covenants: debt cover (the ratio of net
debt to adjusted EBITDA) may not exceed 3:1 and
interest cover (the ratio of adjusted EBITDA to net
interest) may not be less than 4:1. For the purpose of
these calculations, net debt excludes amounts drawn
under the invoice discounting facilities. The Group
remains comfortably within these covenants.
Pensions
At 30 June 2016, the Group recognised a deficit on
its UK Defined Benefit pension plan of £31.1 million
(30 June 2015: £29.8m).
Following consultation with staff and the UK plan’s
Trustees, the UK Defined Benefit was closed to future
service accrual from 29 February 2016.
Employees affected by this change were offered a new
defined contribution scheme from that date. The closure
of this plan is one of the actions in the ‘Repair’ phase
to limit the growth of fund liabilities, reducing the risks
and uncertainty over future cash costs associated with
providing an active Defined Benefit pension scheme.
Following the March 2015 triennial valuation,
the Company and Trustees agreed a new deficit
reduction plan based on the scheme funding deficit of
£44.2 million. This gave rise to an increase in the deficit
cash funding requirements of £0.4 million to £3.0 million
per annum which took effect from 31 March 2015.
Going concern
The Group meets its funding requirements through
internal cash generation and bank credit facilities,
most of which are committed until April 2019.
At 30 June 2016, committed undrawn facilities
amounted to £127.5 million. The Group’s forecasts and
projections, taking account of reasonably possible
changes in trading performance, including the possible
effect of the UK’s decision to withdraw from the EU,
show that the Group will be able to operate comfortably
within its current bank facilities.
The Group has a relatively conservative level of debt
to earnings. As a result, the Directors believe that
the Group is well placed to manage its business risks
successfully despite the current uncertain economic
outlook. After making enquiries, the Directors have
a reasonable expectation that the Company and
the Group have adequate resources to continue in
operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern
basis in the preparation of the financial statements.
Board changes
During the year, our Chairman, Iain Napier, advised
the Board of his intention to retire. John Coleman was
appointed as a Non‑Executive Director and as Chairman
Elect on 22 April 2016, and became Chairman on
1 July 2016.
UK Referendum on EU membership
As a European business, with 70% of the Group’s
activities outside the UK, the outcome of the British
referendum on EU membership is clearly a significant
issue for the Group to understand. With so little
information on the likely shape of future relationships
between the UK, the EU and beyond, we are engaged in
developing a deeper understanding of the implications
of changes as they emerge,
In the short term, currency volatility has been the
most significant issue for the Group. Much of the
Group’s debt is USD or Euro‑denominated, the former
being hedged for its full term and the latter naturally
hedged by Euro‑denominated assets. The UK business
imports significant quantities of raw materials used for
manufacturing, for which the Group is hedged at rates
consistent with prior year averages for part of the next
financial year. Beyond this point, the UK business, along
with our competitors, will face some imported inflation
and will look to mitigate this from pricing to customers.
Current trading and outlook
Trading in the first few months of the new financial year
has been in line with expectations. Our margin and cost
initiatives, implemented as part of our strategy, continue
to deliver the expected benefits to our profitability
levels. Despite uncertainty in raw material pricing and
foreign exchange rates, we look forward to delivering
further good progress in our financial performance in
the current year, consistent with our three to five year
ambition.
Rik De Vos
Chief Executive Officer
7 September 2016
Chris Smith
Chief Finance Officer
Investment case
McBride plc
Annual Report and Accounts 2016
13
McBride is in the midst of a transformation
programme with the ambition to become the
leading European manufacturer and supplier of
Co‑manufactured and Private Label products for
the Household and Personal Care market through
selected channels and markets.
Leading market position
In 2015, after a number of years of disappointing returns, the Group entered a transformation phase with
a new management team driving a fresh strategic direction. This transformation will optimise McBride’s
activities, maximising its market‑leading position and size to deliver scale advantage for value creation and
development of growth opportunities.
Market dynamics supporting
McBride’s growth ambition
A number of developments in McBride’s markets
means that McBride’s scale and geographic spread
will be ever more a key part of market supply and
growth. These developments include consolidation
of retailers in many parts of Europe, the emergence
of the discounter retailers with their private label
offer, the drive by many established retailers to
simplify their product ranges and supplier base and,
additionally, increased outsourcing activity by the
brand owners. Our scale will allow us to maximise
these opportunities for growth.
World‑class manufacturing
assets are key to our cost
competitiveness and
operational excellence
McBride’s extensive network of manufacturing
locations and assets offers unrivalled capacity
and capability to both retailers for private label
and branders for outsourced manufacturing. The
market dynamics offer further opportunities which
will require targeted investments into our key sites.
These investments, aligned with our selective market
and product offering, will allow for a substantial
improvement in our cost competitiveness and
operational excellence.
Broad customer and product
base provides diversification of
opportunity and risk
The Group has well established market positions
in all of Europe’s major economies and supplies its
products to a very wide range of customers including
virtually all of Europe’s leading retailers. Extensive
product ranges for both Household and Personal
Care permit our customers to source most key
products from a reliable, reputable and long‑standing
supplier. The Group has manufacturing and product
development facilities across Europe which aligned
with our commercial activity to the specific regional
market requirements allows for customer focus whilst
we continue to maximise synergies between our
operating activities.
Cash generative business,
providing annual dividend and
capital growth opportunities
As a well invested manufacturing business, McBride
has the capacity for significant cash generation as
profits continue to improve. In spite of the ambition
to outspend depreciation in the next four to five
years, the business will generate good cash flows
to provide the opportunity to return funds to
shareholders, look for additional investment options
and further reduce our borrowings.
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McBride plc
Annual Report and Accounts 2016
Business model
McBride will deliver sustainable profit streams to permit
appropriate investment in assets to retain its leading position
in the industry and deliver earnings growth to shareholders.
Our strategic positioning
Our ambition is for McBride to become the
leading European manufacturer and supplier of
Co‑manufactured Private Label products for the
Household and Personal Care markets through selected
channels and markets.
We will offer tailored services aligned with specific
customer and channel requirements, and will cement
these relationships through a complete focus on
improving our operational excellence and driving
our cost competitiveness with the aim to fully lever
our scale.
EXTERNAL
DRIVERS
INTERNAL
DRIVERS
Branded goods
owners
Raw
materials
Supply
chain
focus
CHOICES
Quality
assets
People
Scale
Cost
leader
Service
best in
class
Competition
Regulation
Satisfied
customers
Sustainable
margins
Quality
products
Organisation
Technical
competence
Customer
concentration
Channel
development
External drivers
The markets in which McBride is active are being
challenged through a number of drivers impacting the
overall market quality and opportunity:
• market research indicates that the European
macroeconomic climate will not deliver a substantial
growth in our key territories in the foreseeable future,
with recent trends showing Private Label losing
market share to brands;
• raw material input costs, a major part of our product
cost, have been volatile for many years and the
recent disconnect between the oil price and the
derived material costing is not assisting with stable
cost structures for our activities;
• the regulatory environment continues to develop
with more stringent regulations concerning the
production, use and application of our type of
products. McBride embraces initiatives to improve
safety for the consumer. While this often creates
a cost increase in the development, production,
distribution and use of products, this favours the
larger suppliers over time;
• brand owners often use Private Label suppliers to
co‑manufacture their products, while this is not a new
phenomenon, there is a noticeable recent increase
in the demand for longer term, more structural
arrangements. For McBride, the requirements, apart
from scale, to serve this opportunity are not different
from direct supply to major retail customers, while
assisting in maximisation of asset utilisation;
• European consumers are becoming more dynamic
and mobile in their shopping habits. Value and
convenience are growing aspects of their shopping
behaviour, and the response from the different
channel players is diverse;
• the retail markets in many of the countries in which
we operate, are highly concentrated, with a limited
number of supermarket retailers resulting in fierce
competition. Private label being a key part of the
value chain, means that supermarket retailers rely on
large, sophisticated private label manufacturers to
assist them in gain a competitive advantage;
• discounters have experienced a steady increase in
sales across Europe with their combined market
share of the EU grocery market rising from 8.4%
in 1999 to 15.2% by 2014;
McBride plc
Annual Report and Accounts 2016
15
• the discount format successfully competes on
price, quality, consistency and simplicity rather
than offering a wide choice, access to manufacturer
brands or an unnecessary level of service. Because of
the focus on price and quality, most products offered
by discounters are either private label or other
exclusive store brands developed by private label
manufacturers; and
• other supermarket retailers are responding to the
challenge from discounters in their national markets
by reducing complexity in their on‑shelf ranges,
including both manufacturer brands and private label
ranges, in order to drive economies of scale in their
buying and distribution. This process favours private
label manufacturers with the scale to supply large
volumes of these new private label products.
Creating value through our business model
The dynamics as described above will favour market
or industry leaders as they can fully utilise their scale
in purchasing, innovation, manufacturing excellence,
legal know‑how and customer relationship management.
In order to deliver further growth ambitions from these
dynamics, the Group has needed to substantially simplify
its previous approach. This simplification has included
reviews and changes to our product range, customers
served, processes and procedures, organisational
set‑up and our overall cost basis.
This simplification allows for a substantially lower
cost base with more effective manufacturing and
distribution. Clear priorities will be defined for our New
Product Development (NPD) programmes that will
enable our sales teams to drive sales and value growth.
Our three to five year ambition for adjusted operating profit margin
(EBITA %) is 7.5% with ROCE targeted at 25%‑30%. Our growth ambition
and value creation is based upon four building blocks.
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Customer‑oriented service
propositions aligned with channel
requirements
We will have a tailored offering aligned with the
respective channel characteristics and the supporting
customer service levels and agreements clear on
content and commitment.
Manufacturing excellence with
customer integrated supply
chain networks
An investment programme targeted at an optimised
asset configuration supporting our market and
growth ambitions. Continued investment in existing
assets will further improve our operational cost
and will be extended to additional investments,
upgrading our five key assets, Middleton, Ieper,
Estaimpuis, Foetz and Strzelce to world‑class
manufacturing sites. This will give us a combined cost
and efficiency leadership. Through simplification,
our supply and distribution capability will be further
strengthened.
Focus on the development of our
people, organisational capabilities
and skills
Whatever we do, whatever organisation we build,
we will not deliver upon our ambition and promise
if our people are not engaged, developed and
positively challenged. McBride has launched a
series of structural initiatives further supporting the
development of our people through a reinforced HR
team and its activities.
Maximising our manufacturing
efficiencies through structural
supply agreements
Our strong asset base creates the opportunity to
further develop manufacturing agreements with
other industry players, as we have done in the past.
There is a clear visible trend that demand for such
agreements is increasing. By developing contracts
of a longer and more structured nature, McBride will
be able to generate further structural value by more
effectively utilising our asset base.
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McBride plc
Annual Report and Accounts 2016
Strategic progress
Repair
Good progress has been made in simplifying our business.
Customers, products, organisation and business processes
have all been addressed to drive better operational
performance and improve our cost position.
The three key considerations for
our actions in the past year have
been clarity, simplification and
focus. The ‘Repair’ phase has been
established and translated into a
number of specific and tangible
projects, being a subset of 17 key
projects in total, representing our
action plan of the ‘Repair, Prepare,
Grow’ strategy.
In last year’s Annual Report, we set five clear
objectives that were to be delivered upon during
the first year.
These were:
• delivery of the early overhead cost reduction plan;
• reduction in customer and SKU complexity;
• implementing the cost reduction resulting from
customer and product simplification;
• identifying and addressing the underperforming
segments of the Group; and
• accelerating purchasing efficiency initiatives.
In parallel to the UK restructuring project, a £3 million
overhead, reduction plan was initiated in June 2015.
This plan aimed to simplify the organisational
structure, enhancing clarity of responsibility and
to promote accelerated decision making. This plan
has been fully implemented and delivered on an
annualised basis the targeted savings.
McBride plc
Annual Report and Accounts 2016
17
Performance
Customer service levels
2016
2015
95%
Labour cost/revenue
2016
2015
99%
19.0%
19.7%
Immediately after our strategy announcement in
September last year, the Company embarked upon the
implementation of the most critical part of the ‘Repair’
phase; a focus on the top 25% of our customers and
the subsequent reduction in complexity of the products
we sell, estimated to deliver a 30% reduction in SKUs.
By the end of 2015, virtually all affected customers had
been informed and responsible exit plans agreed, while
by the end of June 2016, for the vast majority of these
customers, business activities had been ended. The
customer reduction target has already been fully met,
while the SKU objective is ongoing as part of the plan
is being achieved through rationalisation of product
ranges with our retained customers. The impact on
revenues is approximately £20 million per year, less than
3%, with £6 million exited in the year just ended.
This reduction in complexity is set to result in
proportionally less resources needed to manage the
simplified business. On an annualised basis the net
impact of margin loss and cost reduction will contribute
positively to our profitability. The majority of the
financial impact of this project will materialise in the
next financial year. Nevertheless, our labour cost to
revenue ratio has further improved from 19.7% last year
to 19.0% this year.
An additional impact from the simplification initiative is
our improved customer service. This initiative, focusing
on more effective production planning, combined
with better balanced stock management has led to
substantially improved customer service levels (CSL).
Last year our CSL was 95%. This year our performance
has improved to a constant level of 99% to date. We
have seen positive feedback from our customers on this
improvement and this has substantially reduced our
exposure to customer claims.
We have completed the Asia project, which, through
the closure of our loss making Chinese factory and
an efficiency upgrade in both the operations and
commercial activities in the region has seen the business
deliver solid double digit growth at constant currency
and profitability levels in line with the average of the
Group. Further growth plans are now being defined.
During the year we completed the investigation
concerning the financial performance of the Personal
Care & Aerosols (PCA) business. As a result of poor
profitability levels, we have separated the management
of this division to provide focus and direction to drive
more value from this part of the Group.
We recognised efficient and effective purchasing as a
major early opportunity for value generation for the
Company, independent from any raw material price
volatility developments. The customer and product
simplification initiative, supported by deeper integrated
Operations and R&D teams, has driven more focused
purchasing activities that allow for more structural
deals to be developed with our key suppliers. This has
become a key value generator as we institutionalised
this approach through a new organisational design.
Several initiatives were launched and have been
delivered this year, including projects on chemicals,
packaging materials, key additives and indirect spend.
Alongside these five key objectives, several other
initiatives were launched, all being part of our 17 key
projects, and further supporting our ‘Repair’ phase.
These initiatives focused on reducing the cost or risk of
our activities.
The UK Defined Benefit Plan was closed to future
service accrual on 29 February 2016. The closure of this
plan has substantially reduced the risks and uncertainty
over future cash costs associated with providing such
a Defined Benefit pension scheme. Additionally, new
insurance policies have been negotiated providing
improved levels of insurance cover at substantially
lower costs.
Overall, progress in the delivery of our key ‘Repair’
objectives has been very satisfactory and has been
a key contributor to our improved results along with
promoting more clarity, simplification and focus in
operational execution.
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McBride plc
Annual Report and Accounts 2016
Strategic progress
Prepare
We are starting to prepare the Company for the future, by
creating clarity on the markets and products we will sell in the
future, identifying and approving investment programmes for
our key assets, developing our new organisational structure and
culture, and addressing the underperforming businesses.
The core building blocks for our
‘Prepare’ phase are four‑fold:
• clarity on the segments, markets and products we
will target to fulfil our growth ambitions;
• the organisational structure and skills to effectively
implement the strategic elements of our
‘Grow’ phase;
• developing plans for value improvement from
underperforming businesses; and
• developing the asset blueprint to support future
cost and technology leadership, in the first instance
to address and resolve the identified sub‑optimal
areas of activity within the Group.
Following finalisation of the Asia project, we
announced in February 2016 that our Personal Care &
Aerosols business (PCA) was performing substantially
below the Group average and appointed a dedicated
management team to produce an improvement
plan. The team is defining the strategic options and
roadmap for this business unit. The reported results
for PCA show a substantial improvement compared
with the previous year in addition to benefiting
from Group wide initiatives. The structural projects
supporting the PCA business strategy are expected to
develop during the next financial year.
We continue to work on initiatives to drive
further actions to optimise the overall financing
cost of our activities, including our tax and interest
cost structures.
During the year we launched several programmes
to strengthen and align our organisational capability
with our operational excellence and growth ambitions
in mind. These included various internal appointments
in several key functions, such as finance management,
contract manufacturing, project management
capability and operations management. This has been
reinforced where necessary with further investment
in hiring new people bringing in additional required
skill sets, such as in Purchasing, Operations Planning,
Human Resources and Commercial. Hence, just as
much as we need to rework our cost base, new talent
is required to support the delivery of our objectives.
Investments into our manufacturing assets have been
launched whilst the warehousing and distribution
blueprint redesign has started. We have successfully
completed the commissioning of the high speed line
in the UK and are further investing in these facilities
to accelerate the efficiency improvements in the
site. (See the case study on page 11). Furthermore,
we have approved and launched a major redesign
and investment programme into our Strzelce facility
in Poland which, in three phases, will allow us to
substantially upgrade the plant’s efficiency and
prepare the plant for substantial expansion, aimed
at serving the surrounding geographies. We have
invested in resources to support the identification and
development of projects at our other key strategic
sites to develop the manufacturing excellence concept
in the coming years.
McBride plc
Annual Report and Accounts 2016
19
Strategic progress
Grow
We are making progress on deciding the direction we
will take to develop the Company in the longer term
through selected growth opportunities.
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We have started working on the design
of the future McBride. This work will
translate the ‘Repair, Prepare, Grow’
phases into a clear roadmap and action
plan to grow the Company. Focus on
execution and delivery is a key aspect
of this planning.
Our markets remain challenging, driven by uncertain
growth prospects, price pressure, volatile raw materials
and intensifying regulatory demands on some of
our products.
That said, we expect these trends to favour market and
industry leaders such as McBride, providing the right
business model flexibility and suppliers who can further
integrate activities with customers.
McBride will develop customer relationships beyond
the pure transactional dimension through differentiated
service and partnership options which we consider will
provide several growth opportunities.
McBride supplies its markets mainly through the
retail and discount channels and whilst we notice a
converging trend, we have distinct opportunities to
grow in both. Our strong service levels combined with
a differentiated innovation proposition will allow us to
gain market share in the retail environment facilitated by
leading cost efficiency.
Conversely, our continued drive for operational
excellence will deliver a leading cost proposition to the
discount channel, allowing us to expand in this area
beyond the growth levels seen in this channel. It will be
essential to maintain our scale advantages to ensure
sustainable margin and hence simplification will be key
to achieving this ambition.
Contract Manufacturing is of increasing importance
to our growth, and a dedicated team has been
established with a clear remit to deliver this opportunity
for McBride. Our leading cost competitiveness and
manufacturing expertise, with a good geographical
asset spread, increasingly allows us to seek out these
contract opportunities. The success of growing this
part of our business will drive further improvements in
asset utilisation, creating additional efficiencies and thus
supporting our overall leading cost and supply position.
Additionally, we are investigating further opportunities
beyond organic growth. Tactical acquisitions are always
an option as uncompetitive capacity leaves the market.
As we develop more clarity in our business ambitions,
we will start to define areas of growth that can be
accelerated by appropriate strategic acquisitions.
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McBride plc
Annual Report and Accounts 2016
Our strategy – summary
Strategic priorities
During the year
Performance
Future plans
Repair
McBride will substantially simplify its activities,
covering customers, products, processes and
organisation. We will launch a broad range of
purchasing driven saving initiatives, in further
support of the simplification and rightsize the
overhead base to reflect better the new way
of working.
• Focus on the top 25% of our customers with all affected
customers being informed and exit plans agreed
• A 30% reduction in SKUs targeted, 20% already delivered
• Substantially improved customer service levels (CSL) to a
constant level of 99%
• Asia profitability restored
• Raw materials cost base improved from better
purchasing activities
• UK Defined Benefit Pension Plan closed to future
service accrual
• PCA Division identified as underperforming
Labour cost/revenue (%)
Customer service level (%)
• Appointed a dedicated management team for PCA
• Strengthened our organisational capability
• Started warehousing and distribution blueprint redesign
• Capital investment plans being developed
• Upgrade of Strzelce facility in Poland launched
• High speed line installation in Middleton completed
• Developed sophisticated market database
Adjusted operating margin (%)
Return on capital employed (ROCE)
• Deliver efficiency based projects at
•
•
Initiated the planning of our growth ambitions
Installed a new dedicated Contract Manufacturing team
• Early work on acquisition and “white space” ideas
Adjusted operating profit (£m)
Debt/EBITDA
See page 16
Prepare
McBride will invest into its manufacturing assets
and optimise its warehousing and distribution
network. We will align the new organisational
set‑up aiming to institutionalise our new way
of working with our people. We will provide
a clear way forward for identified sub‑optimal
customers/categories and products.
See page 18
Grow
McBride will drive a sustainable and profitable
growth path based upon a greatly improved
cost position and more efficient manufacturing
and distribution. This will focus on fewer
markets, categories and customers. McBride will
develop customer specific value propositions
depending on their individual requirements and
the channel in which they are active.
See page 19
• Further purchasing initiatives as
a key value generator including
indirect spend
•
Initiatives to reduce the overall
financing cost of our activities
• Fully implement cost
savings following complexity
reduction project
other major sites
•
Implement business plans for
underperforming businesses
• Complete resourcing of the new
Project Management Office
• Further strengthening of the
organisation
• Define clear value propositions
to our selected and aligned
customer groups, including branders
• Develop closer ties with branders,
opening opportunities for central
manufacturing
• Organisational set up and skills plan
to match growth ambition
Strategic priorities
During the year
Performance
Future plans
McBride plc
Annual Report and Accounts 2016
21
• Focus on the top 25% of our customers with all affected
customers being informed and exit plans agreed
• A 30% reduction in SKUs targeted, 20% already delivered
• Substantially improved customer service levels (CSL) to a
constant level of 99%
• Asia profitability restored
• Raw materials cost base improved from better
purchasing activities
• UK Defined Benefit Pension Plan closed to future
service accrual
• PCA Division identified as underperforming
• Appointed a dedicated management team for PCA
• Strengthened our organisational capability
• Started warehousing and distribution blueprint redesign
• Capital investment plans being developed
• Upgrade of Strzelce facility in Poland launched
• High speed line installation in Middleton completed
• Developed sophisticated market database
•
•
Initiated the planning of our growth ambitions
Installed a new dedicated Contract Manufacturing team
• Early work on acquisition and “white space” ideas
Labour cost/revenue (%)
Customer service level (%)
2016
2015
2014
2013
2012
19.0
19.7
19.8
19.0
19.0
2016
2015
2014
2013
2012
95
96
96
99
98
• Further purchasing initiatives as
a key value generator including
indirect spend
•
Initiatives to reduce the overall
financing cost of our activities
• Fully implement cost
savings following complexity
reduction project
Labour cost as a percentage of revenue.
Volume of products delivered in the correct
volumes and within agreed timescales as
a percentage of total volumes ordered by
customers.
Adjusted operating margin (%)
Return on capital employed (ROCE)
2016
2015
2014
2013
2012
5.3
4.0
3.0
3.1
3.6
2016
2015
2014
2013
2012
23.4
18.8
12.7
12.2
14.7
Adjusted operating profit as a percentage
of revenue.
Adjusted operating profit as a percentage of
average year‑end net assets excluding net debt.
• Deliver efficiency based projects at
other major sites
•
Implement business plans for
underperforming businesses
• Complete resourcing of the new
Project Management Office
• Further strengthening of the
organisation
Adjusted operating profit (£m)
Debt/EBITDA
2016
2015
2014
2013
2012
36.2
28.5
22.0
23.6
29.5
2016
2015
2014
2013
2012
Operating profit before adjusting items.
Net debt divided by EBITDA.
• Define clear value propositions
to our selected and aligned
customer groups, including branders
• Develop closer ties with branders,
opening opportunities for central
manufacturing
• Organisational set up and skills plan
to match growth ambition
1.7
1.9
1.9
1.8
1.5
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McBride plc
Annual Report and Accounts 2016
Principal risks and uncertainties
The identification and assessment of risks and the
development of action plans to mitigate them is an integral
part of management systems throughout the Group.
The Group’s risk management process is detailed within
the Corporate governance section on pages 38 and
39, confirming how key strategic and operational risks
are continually reviewed and evaluated with reference
to the achievement of the Group’s strategic objectives
and priorities.
Whilst the medium to long‑term impact connected with
the UK’s decision to exit the European Union has yet
to be fully realised, specific short‑term risks have been
identified, with appropriate actions taken to minimise
any associated volatility. Further information can be
found under the Executive review on page 12.
Whilst the Group is prepared to accept risk as part of
doing business, and which it ultimately believes will lead
to an increase in shareholder value, it is critical these are
identified and managed at the appropriate level, using a
range of mitigation strategies.
The Board has identified those risks which are deemed
‘principal’ to its business due to their potential severity
and link to the Group’s strategy, markets and operations.
The current principal risks and uncertainties are shown
in the tables on pages 23 and 24, which also details
the Group’s actions undertaken to minimise any
potential impact.
This is not intended to be an exhaustive list. Additional
risks not presently known to management, or risks
currently deemed to be less material, may also have
potential to cause an adverse impact on our business.
In accordance with the UK Corporate Governance Code
2014, the Board has taken into consideration these
principal risks and uncertainties when determining
whether to adopt the going concern basis of accounting
(further details on page 12) and when assessing the
prospects of the Group when preparing its viability
statement, which can be found on page 24.
Heatmap of principal risks and uncertainties 2016
High
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Low
1
2
3
4
5
6
1: Market competitiveness
2: Change agenda
3: Input costs
4: Legislative and
consumer trends
5: Financial risk
6: Breach of IT security
Low
Probability
High
Risk management structure and process
The ELT provides leadership and direction to the Group’s overall risk management framework. The Audit
Committee, and ultimately the Board, challenge the outputs and assessments from the exercise and ensure action
plans to mitigate identified risks are in place, with appropriate ownership and timescales to ensure the Group’s
strategy can be delivered within the context of a risk managed framework.
BRIM process
Executive Leadership Team
Audit Committee
Board
Annual Group‑wide
risk identification and
analysis exercise
Review risk register and
agree actions to mitigate
key risks
Monitor and review financial
and key non‑financial
risks and internal controls,
external audit process
and reports
Overall responsibility for
risk management and
internal controls
McBride plc
Annual Report and Accounts 2016
23
Risk 1: Market competitiveness
Loss of key category and customer positions through inability to continue supply
or uncompetitive cost position
Impact
Mitigation
Change
Key developments
• Principal competition comprises
• Strengthening of business model
renowned international companies
that have the ability to change
markets through innovation
and pricing structures such as
promotional activity
• Strength of major retailers’
leverage over suppliers on pricing
and specification
• Failure to deliver targeted
strategic asset and distribution
improvement/exploitation projects
leading to uncontrolled costs
• Loss of key strategic site with
immediate and potential longer
term impact on ability to deliver
to customers
and operational excellence
through selective investment,
improving cost base, simplification
and adopting standardised best
practice across the Group
• The use of strategic market
intelligence and competitor
analysis to support market
activities and investment decisions
• Continue to drive New Product
Development (NPD) to meet
customer and end consumer
needs for optimal quality and
value products
• Develop sustainable long‑term
arrangements with customers
• Key projects prioritised and given
resources required to support
management
• Robust property risk management
and business continuity planning
processes in place
Link to strategy
Repair
Prepare
Grow
• Customer simplification
exercise has led to reduced
customer and product
complexity, enabling asset
utilisation efficiencies to
be realised
• UK restructure, announced
in 2014 completed and has
delivered planned savings,
with other central overhead
initiatives during 2015/16
also on track to deliver
further cost benefits and
ultimately improve market
competitiveness
• Progressive improvement in
purchasing activity driving
value from scale buying
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Risk 2: Change agenda
Continual adaptation required to remain competitive in a fast‑moving and dynamic market environment
Impact
Mitigation
Change
Key developments
•
Important that the Group remains
structurally and operationally
efficient during period of
significant transformation
in moving to a sustainable
growth platform
• Failure to deliver targeted
improvements/projects and/
or underperforming capital
expenditure projects could lead to
reduced customer satisfaction and
increased costs
• Loss of key personnel and
experience in fast‑moving
consumer goods sector during
period of rapid change
• The Group’s new strategy will
provide strengthened economies
of scale, cost competitiveness
and drive the turnaround in
underperforming businesses.
• Dedicated Project Management
Office to ensure key Group‑wide
projects prioritised and support
management to drive projects to
successful conclusion
• Strong package of HR
management policies and tools
to identify and foster training
succession and talent within
the Group
• Employee contracts contain strict
confidentiality clauses
Link to strategy
Repair
Prepare
Grow
• Clear and consistent
communication with
employees on the benefits
of the change agenda
undertaken to ensure all
engaged to deliver strategy
• Key initiatives and projects
to deliver strategy identified
and initiated
• Project management
office established, staffed
and active in supporting
key projects
Risk 3: Input costs
Majority of product costs associated with raw materials, therefore significant risks associated
with commodity markets
Impact
Mitigation
Change
Key developments
•
Increased fluctuations in
commodity prices resulting in
a time lag between raw material
price increases and recovery
through pricing initiatives,
with potential negative impact
on profits
• Significant proportion of UK
raw materials sourced from EU
markets; with the UK Referendum
on EU membership vote leading
to potential volatility in raw
material costs and foreign
exchange exposure in the short
to medium term
• A well resourced purchasing
function with a developed
forecasting capability
• Strong internal processes
to cement raw material
price increases quickly into
recovery plans
• Group is not overly reliant on
any one supplier and continual
alternative supplier scenario
planning taking place
• Robust supplier risk
assessment process
• Operational excellence model
to enable low cost competition
to be resisted
• Key project initiated to
drive significant savings
by optimising/standardising
raw material specifications
and reducing unique
materials
• We continue to explore
and introduce hedging
on targeted raw materials
and currencies
Link to strategy
Prepare
Grow
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McBride plc
Annual Report and Accounts 2016
Principal risks and uncertainties
continued
Risk 4: Legislation and consumer trends
Continuing high level of significant legislative requirements and emerging market trends,
with greater impact on businesses from complex/diverse product ranges
Impact
Mitigation
Change
Key developments
• Ability of Group to keep ahead of
regulatory changes leading to loss
of sale opportunity
• Regulatory compliance, imposes
a significant legislative burden
and resource pressure on key
Group functions
• Reduction in revenue and
profitability from obsolete
stock write downs and difficulty
in recovering additional
costs incurred
• Dedicated resource to monitor
and evaluate compliance with
current and future legislation at
early stages
• Experienced cross‑functional
project teams, with
dedicated resource, to ensure
implementation within deadlines
and minimising stock write downs
• Active participation in relevant
industry bodies
•
Investment made in new
software systems allowing
access to information on
legislative changes and
new scientific data with
minimum delay
• Strengthened communication
processes to customers to
aid better collaboration
Link to strategy
Prepare
Grow
Risk 5: Financial risks
Multinational operations expose business to a variety of financial risks
Impact
Mitigation
Change
Key developments
• Risks associated with foreign
• Strong and established financial
currency exchange rates, interest
rates, commodity prices, credit
risks and taxation could impact
profitability and cash flows
• Potential financial risks from
the UK Referendum on EU
membership vote, given
uncertainties about short term and
medium‑term economic forecasts
and their potential impact on
the Company’s liquidity, funding,
creditworthiness and share
price valuation
• Failure to operate within financial
framework could lead to inability
to support long‑term investment
and/or raise capital to fund growth
framework monitoring and
maintaining appropriate levels
of liquidity and covenant
commitments
• Foreign exchange risk managed
by hedging mitigating effects on
UK import costs and translation of
Euro profits
• Detailed functional analysis
to ensure compliance with all
international tax legislation,
including new BEPs developments
• Group banking facilities
committed until April 2019 and
long‑term debt commitments to
2020 and 2022
• Robust stress test scenario
planning in relation to going
concern, banking covenants
and headroom undertaken
during the year
• Closure of UK defined
benefit pension scheme
to future accrual provides
a de‑risking of the
pension liability
Link to strategy
Prepare
Grow
Risk 6: Breach of IT security
System security breach could result in loss of sensitive data and/or business disruption
Impact
Mitigation
Change
Key developments
• Loss of key and sensitive business
• Continual review of security
data as result of a security
breach, external hacking and/or
cyber threats materialising and
penetrating the IT security systems
and firewall
• Loss of IT services and
systems, resulting in significant
business disruption
policies, controls and technologies
in place in the Group
• Monitoring of developments in
cyber security; engaging with
third party specialists where
appropriate
• Hardware and software security
systems in place to protect
commercial and sensitive data
Link to strategy
Repair
Prepare
• External consultant
engaged during the year
to test the vulnerabilities of
the Group’s IT system, with
key findings being actioned
• Group‑wide engagement
exercise to raise awareness
of cyber risk
Viability statement
In accordance with the requirements the UK Corporate
Governance Code (‘the Code’), the Directors have performed
a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity. The Board has determined that
a three‑year period to 30 June 2019 constitutes an appropriate
period over which to provide its viability statement.
In assessing the Group’s viability the Directors have considered
the current financial position of the Group and its principal risks
and uncertainties as described on pages 22 to 24. The analysis
considers severe but plausible downside scenarios incorporating
the principal risks from a financial and operational perspective,
with the resulting impact on key metrics, such as debt headroom
and covenants considered.
In light of recent exchange volatility following the UK Referendum
on EU membership, the alternative scenarios assume sensitivity
around exchange rates and interest rates, along with significant
reductions in revenue, margins and cash flow over the three‑year
period. In all cases the business model remained robust, funding
capacity sufficient and covenants fully complied with. The Group’s
global footprint, product diversification and access to external
financing all provide resilience against these factors and the other
principal risks that the Group is exposed to.
After conducting their viability review, the Directors confirm that
they have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over
the three‑year period of their assessment to 30 June 2019.
Corporate responsibility
McBride plc
Annual Report and Accounts 2016
25
5
sustainability core themes roadmap
Customer
and consumer
Product
and design
Production
and operations
Our
people
Community
and society
Our commitment is to
make a positive impact on
society in the way in which
our products are designed,
manufactured and packaged
in collaboration with our
customers, suppliers and in
the communities in which
we operate. Sustainability
considerations are
therefore an important
element in the execution
of our strategy and
decision making.
Further information
can be found in our
Annual
sustainability
report
available on
our website
mcbride.co.uk
90%
of waste generated
recycled, reused and
recovered sustainable waste
(2015: 90%)
4.3%
improvement in
the Group’s energy
efficiency
McBride has been a
leading contributor in
the development of
the A.I.S.E. Charter for
sustainable cleaning
and was the first Private
Label company to
achieve Charter status
732
colleagues who have
attended change
leadership workshops
during the year
Member of RSPO,
with four sites
certified for
mass balance
LTIs down
Lost Time Incidents
down 2.08% during
the year
Diversity
We recognise and
value all forms
diversity in our
employees and
endeavour to
promote diversity
in our workplace
to enhance the
success of our
business
Gender split 2016
Female Directors
1
6
17%
Female senior management
12
49
24%
Female total workforce
1,758
4,396
40%
£100 k
value of donations
that UK charities
have benefited from
under InKind Direct
during 2015/16
We are proud to
continue to be a
constituent member of
the FTSE4Good Index
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McBride plc
Annual Report and Accounts 2016
Corporate responsibility
continued
Product and design
Objective: Design, create and supply
value Household cleaning and Personal Care
products, which are safe to use, whilst
minimising environmental impact
Link to strategy
Grow Sustainability capabilities become integral
to product development and offer to customer
We continue towards our target of eliminating
phosphates (used to soften water and assist in making
detergents work more effectively) from all our laundry
and dish washing products by 2017. This will lead
to a more environmentally friendly product, but still
maintaining the same performance.
During 2015 we also completed the phase out of all
small plastic beads from our Personal Care products.
McBride is a leading international user
of RSPO sustainable palm oil products
offering sustainable palm oil solutions
to some of its customers.
To date four of our major sites have
received RSPO Accreditation. We continue to drive
our supply base, as members of RSPO, to develop
and supply sustainable ingredients, so we can use
these materials in an increasing number of our
products, for many of our largest retail customers.
As part of our ongoing programme
we purchase Green Palm certificates
demonstrating our commitment and
support to the cause of RSPO certified
sustainable palm oil.
Greenhouse gas
We have been calculating our Scope 1 and 2 GHG
emissions since 2008 in accordance with the
relevant GHG Protocol Corporate Accounting and
Reporting Standards and latest emissions factors from
recognised sources. During the year we moved from
location to market‑based analysis with prior years also
being recalculated on this basis. Market‑based values
have been lower for the Group than location data
emissions over the last three years.
The overall impact on our operations for Scope 1
and Scope 2 emissions was 42,164 tonnes of
C02e emissions (2015: 48,539 tC02e). In terms of
eco‑efficiency, energy usage was slightly up from the
prior year to 1,702 kg per Gjoule (2015: 1,633 kg/Gj),
with CO2e efficiency also increasing to 23,955 kg
product/tCO2e (2015: 20,703 kg product tCO2e).
Net Scope 1 and 2 CO2e emissions tonnes CO2e
2016
2015
2014
2009
42,164
48,539
48,976
62,211
McBride plc
Annual Report and Accounts 2016
27
Human rights
We take the issue of human rights seriously and
continue to strengthen our policies and management
systems in this area. Our employee policies are set
locally to comply with local law within the overall
Group framework and we monitor the employment
practices of our supply chain.
We carry out third party ethical audits which are
run under the Sedex System wherever possible or,
alternatively, under a specific retailer’s own system.
All conform with the Ethical Trading Initiative (ETI)
and our sites are independently audited at a frequency
determined by risk. We maintain full data disclosure
under the Sedex System for all sites regardless of
audit frequency.
We approved an Anti‑Slavery and Human Trafficking
Statement and made changes to our Business Ethics
Policy to enshrine our obligations under the Modern
Slavery Act 2015. We are committed to ensuring
there is transparency in our own business and to our
approach to tackling modern slavery in our supply
chain. We expect the same high standards from our
suppliers and will be introducing our Supplier Code
of Conduct during 2017.
800k
709,870
600k
1,608
l
s
e
u
o
G
j
400k
200k
0
1,702
593,450
616,402
615,562
1,633
1,602
1,750
1,700
1,650
1,600
1,550
1,500
1,450
1,400
1,350
1,300
j
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Production and operations
Objective: Maximise operational
efficiency and value through the pursuit
of operational excellence to minimise our
environmental impact and reduce emissions
Link to strategy
Grow Further focus on improvement in
managing wastage in manufacturing process
2008-09
2013-14
2014-15
2015-16
Oil
Gas
Electricity non-green
Electricity green
Efficiency
Total Group energy consumption reduced by 3.6%
to 593,450 Gjoules (2015: 615,562 Gjoules) during
the year. At the same time we achieved energy
efficiency of 1,702 kg production/Gjoule (2015: 1,633 kg
production/Gjoule), a 4.3% improvement.
We are pleased that our energy consumption is
showing the benefits of our operational excellence
focused strategy.
A number of initiatives were introduced during the
second half of the year, to help drive a reduction in the
rate of accident seriousness and accident frequency
rate. These included a focus on the frequency
and effectiveness of near miss reporting, and the
Group‑wide launch of the ‘10 Rules for Life’ which saw
the Group invest 10,000 hours of training to ensure all
colleagues were briefed on this important evolution of
the Group’s Health and Safety strategy.
Our 10 Rules for Life
I must maintain my
working area to the
agreed housekeeping
standards
I must wear the
PPE & RPE as
required by
signage and SOP
I must only use
equipment I am
trained and
authorised to use
I must ensure machine
guarding is used as
designed and I never
bypass safety equipment
I must respect
designated
walkways
1
6
2
7
3
8
4
9
5
10
I must wear a seatbelt
in a moving vehicle
when one is provided
I must not work under
the influence of illegal
drugs and/or alcohol
I must ensure that I
work with a valid
Permit to Work
I must apply isolation
procedures before
working on potentially
energised systems
I must stop working
immediately if I see
conditions or behaviours
that are unsafe to myself
or others
The 10 Rules for Life reinforce behaviours and introduce a concept of consequential management.
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McBride plc
Annual Report and Accounts 2016
Welcome to Corporate governance
Corporate governance
Chairman’s introduction
Board of Directors
Corporate governance report
Audit Committee report
Remuneration report
Nomination Committee report
Other statutory information
Statement of Directors’ responsibilities
29
30
32
40
44
58
60
64
Compliance statement
The Company complied with the provisions
of the UK Corporate Governance Code
published in September 2014, which
applied throughout the financial year
ended 30 June 2016.
Chairman’s introduction
McBride plc
Annual Report and Accounts 2016
29
At a time of transformation and
change, I am pleased to see that the
Group has in place a robust governance
framework with an effective Board and
sub‑committee structure underpinned
by solid operating principles, policies
and controls.
Dear Shareholder
As your new Chairman, I am delighted to be joining
McBride at a time of transformation and change. In my
view, it is critical to have in place a robust governance
framework to support this and I am pleased to say this
is the case for the Group which has an effective Board
and sub‑committee structure, underpinned by solid
operating principles, policies and controls.
The following Corporate governance section, including
sub‑committee reports, set out how these levels of
governance are achieved.
Code compliance
As a Board, we remain committed to maintaining high
standards of corporate governance and we endorse
the provisions set out in the UK Corporate Governance
Code 2014 (‘the Code’).
During the year, we have assessed our level of
compliance with the Code and the disclosures in this
year’s Corporate governance report describe how the
main principles have been applied. The Board confirms
that throughout the year the Company has complied
with all of the Code’s provisions, in so far as they apply
to a FTSE SmallCap company.
Board responsibility and strategic direction
The Board acknowledges its collective responsibility for
overseeing the success of the Group by demonstrating
strong leadership and setting the Group’s strategy and
business model, reviewing management performance
and ensuring the necessary resources are in place to
achieve them.
As reported elsewhere in this Annual Report, work
already undertaken under the guidance of the Executive
Directors on the ‘Repair’ phase of our strategy has
started to deliver benefits and improved results for the
Group, for our colleagues and for our shareholders. The
strategy continues to be developed as we move through
our Transformation Programme into the ‘Prepare’ and
‘Grow’ phases to ensure that sustainable value growth
can be delivered to all stakeholders.
Both I and the Non‑Executive Directors are fully
supportive of the strategic direction being taken by the
executive team. The future direction is reported in our
Strategic report on pages 1 to 27 and more information
about Board activities in general is shown on page 36 of
this Corporate governance section.
Board evaluation
We have once again undertaken a Board performance
evaluation exercise during the year. As a FTSE SmallCap
company, it was felt to be more appropriate, as well
as cost effective and pragmatic, to carry out a further
internal evaluation exercise this year. A report on the
exercise is set out on page 37.
Sub‑committees
The performance of the sub‑committees of the Board
was also reviewed as part of the performance evaluation
exercise. It was concluded that all committees continue
to exercise their duties in compliance with all relevant
legislation, regulation and guidance. The Nomination
Committee was particularly active during the year
in the search for and subsequent appointment of a
new Chairman following Iain Napier’s indication of his
intention to retire from the Board at the end of the
financial year ended 30 June 2016. All sub‑committees
continue to be supported by both internal and, where
relevant, external advisers to ensure their duties are
satisfactorily and professionally fulfilled. Further
information on their activities is reported on pages 32
and 33.
Diversity
Our policy on diversity is available on our website at
www.mcbride.co.uk and our statement on how we
approach diversity is reported on page 34.
Shareholder engagement
The Board is keen to ensure ongoing and effective
communication with shareholders. The Executive
Directors continue to be involved in a programme
of engaging pro‑actively with investors and remain
committed to doing so. I, Steve Hannam as our Senior
Independent Director, and the other Non‑Executive
Directors are available to discuss matters with key
shareholders as and when required.
John Coleman
Chairman
7 September 2016
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McBride plc
Annual Report and Accounts 2016
Board of Directors
John Coleman
Chairman
Rik De Vos
Chief Executive Officer
Chris Smith
Chief Finance Officer
Appointed: July 2016
Appointed: February 2015
Appointed: January 2015
Rik has over 27 years’ experience
working within the chemical
and manufacturing sectors,
providing technical products to
a wide variety of international
markets, customers and
consumers. He also brings
extensive general management
experience internationally as
well as having proven success
in completing several strategic
turnaround projects where
businesses have been restored
to profitable growth.
Rik was previously Global General
Manager for the Flexible Foam
division of Recticel, the quoted
Belgian company. Prior to this,
his career has included roles with
ICI, Huntsman, Rohm & Haas and
BorsodChem.
Committees: Nomination
Chris is a chartered accountant
and has more than 25 years’
experience working in
manufacturing businesses in highly
competitive industries across the
UK, Europe and the Far East.
From 2008 to 2014, Chris was
Group Finance Director at
API Group plc, the AIM‑listed
specialty metallic film, foil and
laminates producer. Other previous
roles have included Scapa plc,
where he was Finance and IT
Director for Europe & Asia and also
a number of senior finance roles at
Courtaulds plc, where he gained
extensive international experience,
including overseas positions based
in Germany and Hong Kong.
John brings considerable
experience holding office as a
Non‑Executive Director in various
companies across multiple
market sectors, including retail
and construction. He was Senior
Independent Director whilst at
Travis Perkins between 2005 and
2014 and was Chairman of Aga
Rangemaster Group plc between
2008 and 2015.
John has also had significant
executive experience in the
retail sector, having been CEO of
House of Fraser and CEO of Texas
Homecare, a part of Ladbrokes
plc. Prior to this he was a member
of the senior management team
at the Burton Group, holding
managing director roles for a
number of its fashion chains.
Other roles: Chairman of
Bonmarché Holdings plc
and PJSC M Video, as well as
private company Barchester
Healthcare Ltd.
Committees: Nomination (Chair),
Remuneration
Carole Barnet
Company Secretary
Appointed: October 2010
Carole joined McBride in 1981. She has held the role of Company
Secretary of the UK subsidiary companies since 1988 and became
Company Secretary of Robert McBride Ltd in 1996. She was appointed
Company Secretary of McBride plc in 2010, having held the position
of Deputy Company Secretary since 2002. Carole has a degree in
German and is a Fellow of the Institute of Chartered Secretaries and
Administrators.
McBride plc
Annual Report and Accounts 2016
31
Steve Hannam
Senior Independent
Non‑Executive Director
Sandra Turner
Independent Non‑Executive
Director
Neil Harrington
Independent Non‑Executive
Director
Appointed: February 2013
Appointed: August 2011
Appointed: January 2012
Neil, a chartered accountant,
brings a strong financial
background as a highly
experienced Executive Finance
Director. In particular his wealth
of knowledge, understanding
and awareness of investment and
banking facilities is invaluable. Neil
has held senior finance roles in a
number of UK‑listed companies,
including Barclays Bank plc, French
Connection Group plc and, more
recently, Group Finance Director
at Mothercare Plc.
Neil’s financial background and
expertise leave him eminently
suitable to hold the role of Audit
Committee Chair.
Other roles: Chief Finance Officer
of Cath Kidston Limited.
Committees: Audit (Chair),
Nomination, Remuneration
Steve brings extensive experience
of independent Board level
scrutiny, having held a number
of positions as chairman and
Non‑Executive Director in listed
companies during his career, as
well as senior executive positions
both internationally and in the UK.
Steve brings diversity of style, skill
and experience and makes him
ideally suited for the role of Senior
Independent Director, ensuring a
challenging mindset when setting
and monitoring implementation of
the Group’s strategy.
Steve’s previous positions have
included Chairman of Aviagen
International Inc, Non‑Executive
Director of Clariant AG and AZ
Electronic Materials Services
Limited, Group Chief Executive
of BTP Chemicals plc and, most
recently, Chairman of Devro plc.
Other roles: Senior Independent
Director of Low & Bonar plc.
Committees: Audit, Nomination,
Remuneration
Sandra brings extensive consumer
business insight and experience,
from both a retailer and supplier
perspective. She was a member
of the senior management team
of Tesco, one of the Group’s major
customers, for over 20 years,
holding executive, commercial
and operational roles in the UK
and Ireland, latterly as Commercial
Director of Tesco Ireland between
2003 and 2009.
Since that time Sandra has been
appointed a Non‑Executive
Director to a number of listed
companies supplying into the
FMCG sector, including previously
Northern Foods plc. Also, as
Remuneration Committee Chair
of three listed companies, Sandra
brings a broad knowledge,
understanding and awareness
of this continuously changing
field and the importance of
linking the Company’s strategy
and performance to executive
remuneration.
Other roles: Non‑Executive
Director of Huhtamäki Oyj,
Non‑Executive Director and Chair
of Remuneration Committee
of Carpetright plc, Senior
Independent Director and
Remuneration Committee Chair of
Greggs plc. Also, the Vice‑Chair of
a large independent school.
Committees: Audit, Nomination,
Remuneration (Chair)
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McBride plc
Annual Report and Accounts 2016
Corporate governance report
Board and sub‑committee structure
Board
Chief Executive
Officer
Audit
Committee
Remuneration
Committee
Nomination
Committee
Executive Leadership Team (ELT)
Board composition
At 30 June 2016, the Board comprised six members:
two Executive Directors, the Chairman and three
Non‑Executive Directors. John Coleman was appointed
as Chairman Elect and Non‑Executive Director with
effect from 22 April 2016, becoming Chairman upon
Iain Napier’s resignation from the Board with effect
from 1 July 2016.
Director election and re‑elections
We are satisfied that all the Directors standing
for election or re‑election perform effectively and
demonstrate commitment to their roles, including
attendance at Board and sub‑committee meetings as
well as any other duties which may be undertaken by
them from time to time. This has been demonstrated
during the year by the willingness of the Directors
to attend additional informal meetings and from the
support they have given to the executive management
of the Group. When applicable, any changes to the
commitments of any Director are considered in advance
by the Board to ensure they are still able to fulfil their
duties satisfactorily.
Although the Articles of Association (‘Articles’) require
the Directors to submit themselves for re‑election at
every third Annual General Meeting (AGM), all eligible
Directors have agreed to submit themselves for annual
re‑election. Accordingly, Rik De Vos, Chris Smith, Steve
Hannam, Neil Harrington and Sandra Turner will retire at
the 2016 AGM and offer themselves for re‑election.
John Coleman, having been appointed by the Board
during the year, offers himself for election at the
2016 AGM.
The biographies for each Director, set out on pages 30
and 31, illustrate the range of skills and experience
they offer to the Company. Voting at the 2015 AGM
demonstrated continued support for all Directors who
held office at that time.
Attendance at meetings year ended 30 June 2016
Number of Board meetings held
7
Number of
meetings attended
Member
since AGM
1 22/04/2016
n/a
Members
John Coleman(1)
Chairman
Rik De Vos
Chief Executive Officer
Chris Smith
Chief Finance Officer
Steve Hannam
Senior Independent
Non‑Executive Director
Neil Harrington
Independent
Non‑Executive Director
Sandra Turner
Independent
Non‑Executive Director
7 02/02/2015
7 07/01/2015
7 04/02/2013
7 03/01/2012
7 01/08/2011
7
01/07/2011
1
1
1
1
1
1
Iain Napier(2)
Chairman
(1) From date of joining the Company.
(2) To date of leaving the Company.
Leadership and responsibilities
We recognise the importance of establishing the right
culture and communicating this message throughout
the organisation. It is important that we provide strong
and effective leadership, constructive challenge and,
along with the ELT, accept collective accountability for
the performance of the Group. In so doing, we can drive
and deliver our strategy in the best interests of all our
stakeholders.
In carrying out our work, the Board focuses on key tasks
which include active reviews of the Group’s long‑term
strategy, monitoring the decisions and actions of the
Chief Executive Officer and the ELT, and reviewing the
Group’s trading performance and critical business risks.
Further information on the matters we have considered
during the year is set out on page 36.
Chairman, Chief Executive Officer and Senior
Independent Director roles
The role of Chairman and Chief Executive Officer are
separate and clearly differentiated. No one individual
has unfettered powers of decision‑making.
John Coleman, as Chairman, is primarily
responsible for:
• overall leadership and governance of the Board,
ensuring it operates effectively in terms of agenda
setting, information management, induction,
development and performance evaluation;
• promoting a healthy culture of challenge and
debate at Board and sub‑committee meetings;
• fostering effective relationships and open
communication between the Executive and
Non‑Executive Directors;
• ensuring both Board and shareholder meetings
are properly conducted and that the views of
shareholders are communicated to the Board; and
• promoting effective decision‑making.
Rik De Vos, as Chief Executive Officer, is primarily
responsible for:
• effective leadership and development of the
executive management and operational running
of the Group;
• developing and implementing the Group’s
business model and strategy;
• effectively communicating the Group’s strategy
and performance; and
• building positive relationships by engaging
appropriately with all internal and external
stakeholders.
Steve Hannam, as Senior Independent Director,
is primarily responsible for:
• providing a sounding board for the Chairman and
acting as an intermediary between other Directors
when necessary;
• leading the succession process for a new Chairman
when required; and
• being an available communication channel for
shareholders, where contact through the Chairman
or Executive Directors is not appropriate.
McBride plc
Annual Report and Accounts 2016
33
Non‑Executive Directors
All the Non‑Executive Directors have been appointed
for their specific areas of knowledge and expertise, are
independent of management and exercise their duties
in good faith based on judgements informed by their
professional and personal experience. This ensures that
we can debate matters constructively in relation to
both the development of strategy and assessment of
performance against the objectives set by the Board.
The key responsibilities of the Non‑Executive
Directors are:
• developing and agreeing the Group’s business
model and strategy with the Executive Directors;
• scrutinising the performance of the Company and
the Executive Directors;
• providing challenge and advice to the
Executive Directors;
• overseeing the Company’s risks and internal controls;
• approving remuneration and succession planning
for Board Directors and other senior executives; and
• monitoring and enhancing the Company’s corporate
governance and compliance activities.
During the year, each Director confirmed that they
had no relationship or circumstance that could affect
their judgement and the Board has satisfied itself that
there is no compromise to the independence of those
Directors who have appointments with external entities.
We believe that the balance between non‑executive
and executive representation encourages healthy
independent challenge to the Executive Directors and
to senior management.
Items reserved for the Board
The schedule of matters specifically reserved for
decision by the Board is displayed on the Group’s
website at www.mcbride.co.uk.
Board sub‑committees
Certain activities of the Board are delegated to
various sub‑committees (Audit, Remuneration and
Nomination). Each sub‑committee is chaired by a
member of the Board which, in turn, enables the
Non‑Executive Directors to take active roles in
influencing and challenging the work, performance and
recommendations of the Chief Executive Officer, the
ELT and other senior management.
Each sub‑committee has been established under its own
Charter which sets out its Terms of Reference, authority,
composition, activities and duties. The Charters are
reviewed and updated as necessary to ensure ongoing
compliance with the provisions of the Code and other
best practice guidelines. They were last reviewed in
June 2016.
Reports for each of the sub‑committees are
incorporated within this Corporate governance report
and detail their membership, roles and activities.
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McBride plc
Annual Report and Accounts 2016
Corporate governance report
continued
Executive Leadership Team
Chief Executive Officer
Chief
Commercial
Officer
Chief
Finance Officer
Chief Operating
Officer
Company
Secretary
Chief R&D
Officer
Chief HR
Officer
Chief
Procurement
Officer
Project
Management
Officer
Effectiveness
Board style
A strong feature of the Board’s effectiveness in
delivering the strategy is our inclusive and open
style of management and a free flow of information
between the Executive and Non‑Executive Directors.
The size of our Board encourages individuals to discuss
matters openly and freely and to make a personal
contribution through the exercise of their personal skills
and experience. No single Director is dominant in the
decision‑making process.
All Directors communicate with each other on a regular
basis and contact with senior executives within the
Group is sought and encouraged.
Diversity
We recognise the recommendations regarding Board
diversity and acknowledge that gender diversity is a
key element to broaden the contribution made to Board
deliberations. However, as the Board is small, comprising
only six members, we continue to believe that quotas
are not appropriate. We also accept that there are many
different aspects to diversity, including professional
and industry‑specific experience, understanding of
geographical markets, different cultures as well as
gender, all of which can be an aid to the Board’s
effectiveness. Board appointments will ultimately
continue to be made based on merit and calibre.
We have a good record of appointing women to Board
positions, having had at least one female Non‑Executive
Director since 2003 and we continue to ensure that
potential female candidates are included in the search
for new Board appointments. During this year’s search
for the new Chairman, female candidates were included
on the shortlist. Furthermore, three members of the
ELT are females. This team also includes a number of
nationalities: British, Belgian, French and German.
Operational management of the Group
The management of the Group’s business activities
is delegated to the Chief Executive Officer, who is
ultimately responsible for establishing objectives and
monitoring executive actions and performance through
the ELT.
The Chief Executive Officer chairs monthly meetings
of the ELT, which regularly visit business locations to
engage with the general workforce and provide the
opportunity for site‑based colleagues to interact with
them and to ask questions concerning the business.
The key responsibilities of the ELT, led by the
Chief Executive Officer, are to:
• rigorously assess the Group’s trading performance;
• identify and develop to a successful conclusion,
those large‑scale cross‑Group projects which are
critical to delivering the Group’s strategy;
• facilitate the interface between the Group’s
functions to ensure decisions are taken in a manner
that both optimises delivery of the strategy and
maximises shareholder value;
• encourage and foster talent development and
succession planning processes; and
• provide a cross‑functional forum for the discussion
of opportunities, risks and controls arising from
business activities, as well as to communicate
business performance.
The Chief Executive Officer is responsible for the
day‑to‑day management of the business. In turn,
these responsibilities are delegated via the various
ELT members to senior management on a structured
functional basis. Specifically, health, safety and
environmental and quality matters are delegated to
the Chief Operating Officer and social and community
matters are delegated to the Chief HR Officer.
Whilst the Board takes overall responsibility for
approving Group policies, including those relating to
social responsibility, business ethics, health, safety,
sustainability, environmental matters and anti‑bribery
and corruption, the implementation of these policies
is delegated to the Chief Executive Officer and then
cascaded throughout the organisation via the ELT and
the various functional teams. Copies of our policies are
available on the Group’s website at www.mcbride.co.uk.
McBride plc
Annual Report and Accounts 2016
35
All Directors have access to the Company Secretary,
who is responsible for ensuring that Board procedures
are followed and that the Company complies with all
applicable rules, regulations and obligations governing
its operations.
Conflicts of interest
In line with the Companies Act 2006 and the Company’s
Articles, we have strict procedures in place to capture
the disclosure and subsequent consideration and
potential authorisation of any Director direct or indirect
interest which may conflict with those of the Group.
Any such disclosures are recorded and compliance
is reviewed at each Board meeting. Our procedures
allow for the imposition of limits or conditions by
the Board when authorising any conflict, if it is
thought appropriate.
Operation of the Board
Board papers are prepared and issued at least
one week prior to each Board meeting to enable
Directors to give due consideration to all matters in
advance of the meeting. Directors are able to take
independent professional advice, if necessary, at the
Company’s expense.
The Board holds at least six meetings a year at
approximate bi‑monthly intervals. Additional meetings
are held as necessary to consider specific matters where
a decision is required before the next meeting. From
time to time, the Board authorises the establishment
of a sub‑committee to consider and, if thought fit, to
approve certain items of business. On such occasions
input is sought from all Board members before the
business is considered.
At least one formal and several informal Non‑Executive
Director meetings have also been held during the
year without the Executive Directors being present,
and the Senior Independent Director and the
Non‑Executive Directors have met without the presence
of the Chairman as part of the Board performance
evaluation exercise.
The Board recognises the importance of developing
internal talent across its global workforce. To support
this, we are committed to ensuring that colleagues
of all diversities have an equal chance of developing
their careers within our business. We have policies and
processes in place which are designed to encourage
and support diversity in employee recruitment, as
well as providing opportunities for development
and promotion.
Succession planning
The Group is in the course of developing a more robust
approach to its succession planning process. This will
include identification of key talent within the business
and offering leadership training to those selected
as having the potential to assume ELT and/or Board
positions in the future. The outputs and proposals will
be overseen by the Board.
Induction, development and support
On appointment, all new Directors undergo formal and
in‑depth induction programmes to provide them with an
appropriate understanding of the business. This involves
site visits, face‑to‑face meetings with senior executives
and the issue of an induction manual containing key
documents relating to the new appointee’s role on the
Board. Independent external training may also provided
by legal advisers who have no other connection with
the Company.
John Coleman has undertaken a formal and
comprehensive induction since joining the Company.
This has involved a combination of presentations,
reading materials and meetings with the ELT and
Company advisers. He has visited a number of the
Group’s business locations, and has been provided with
an understanding of the Group’s principal risks and
strategic opportunities.
We recognise the importance of ongoing training and
development to ensure Directors have the skills and
knowledge to discharge their duties effectively. This can
take the form of briefing papers and/or presentations
on strategic as well as on regulatory/legislative
developments and other topics of specific relevance to
ensure that the Directors continually update their skills,
knowledge and familiarity with the Group’s business
and the markets in which we operate.
Additionally, all Directors are entitled to undertake
external training relevant to their particular duties.
During the year, Sandra Turner has attended various
forums which have benefited her in the role as Chair
of the Remuneration Committee. Neil Harrington has
continued to maintain his professional status as a
Chartered Accountant and the Executive Directors have
attended industry briefings relevant to their roles to
ensure they are up‑to‑date on developing themes.
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McBride plc
Annual Report and Accounts 2016
Corporate governance report
continued
Board activity year ended 30 June 2016
The graphic below illustrates those matters which formed the key areas of challenge and discussion by the Board
during the year.
John Coleman
Chairman
Rik De Vos
Chief Executive Officer
Chris Smith
Chief Finance Officer
Steve Hannam
Senior Independent
Non‑Executive Director
Sandra Turner
Independent
Non‑Executive Director
Neil Harrington
Independent
Non‑Executive Director
The Board
Market and economic
environment
Strategic development
opportunities
Trading, financial and
operational performance
Governance
and risk
Matters considered
Matters considered
Matters considered
Matters considered
• Market and customer
development updates
• Competitor activity
analysis
• Sales and marketing
activity reviews
• Customer contracts
updates
• Contract manufacturing
opportunity analyses
• Economic and currency
market forecasts
• Organisation and
strategic project
updates and reviews
• Consideration of major
capital investment
projects
• Purchasing performance
• Monitoring future
product safety
legislative compliance
requirements
• Development of the
business plan model
• Trading performance
• Health and safety
updates
updates
• Approval of budget
• Business risk
• Treasury strategy,
including banking
activity and
policy reviews
analysis exercise
•
Insurance programme
renewal
• Share register analysis
• Cash flow and net debt
reports
monitoring
• Approval of full
year and half‑year
announcements and
other trading updates
• Annual Report and
Accounts review and
approval
• Customer service and
operational reports
• Analyst expectations
•
Investor presentations
• Payments to shareholders,
policy and proposals
• Segmental analysis
reporting
• Stakeholder feedback
• Board self‑evaluation
exercise
• Code and legislation
compliance reviews
• Corporate policies
reviews and approval
• Sub‑committee and
reserved Board matter
Terms of Reference
updates
• Talent and succession
planning reviews
• Board Chairman
appointment
Board evaluation
We last undertook an externally facilitated evaluation
of the performance of the Board, its members and its
sub‑committees in the 2011/12 financial year. Since then,
the composition of the Board has changed with the
appointment of the new executive team and, during the
course of the 2015/16 year, the appointment of a new
Chairman. Furthermore, as a constituent of the FTSE
SmallCap, the Board did not deem it necessary for a
further external evaluation to be undertaken for the
2015/16 financial year. This will be considered further
during the course of the 2016/17 financial year.
As in previous years, the exercise was designed and led
by the Company Secretary, working closely with the
Chairman of the Board. A questionnaire was developed
to evaluate the effectiveness and skill sets of both the
individual Directors, as well as the Board as a whole.
Consideration of progress in terms of succession
planning and talent management was specifically
explored. A top‑line evaluation of the operation of each
of the sub‑committees of the Board was also covered.
The key findings identified that:
• the new Executive Directors are a cohesive team
and interface well with the Board by welcoming
open, frequent and constructive dialogue with the
Non‑Executive members;
• focus on and monitoring of quality, as well as
health, safety and environmental (HSE) matters has
improved significantly during the year with regular
reports being tabled as a key agenda item at each
Board meeting;
• the sub‑committees continue to be well established,
organised, chaired and comply with best practice.
In particular, the Nomination Committee was
successful in overseeing the appointment of a
new Chairman; and
• a strong governance culture exists within the
Company supported by all members of the Board.
McBride plc
Annual Report and Accounts 2016
37
Areas for improvement included:
• the need to develop succession planning further to
provide the Board with visibility of talent available
to assume roles at ELT and Board level positions in
the future. This work has commenced and is in the
course of being developed into a formal process; and
• a desire for more interaction with senior managers
below Board level. This has already commenced
with members of the ELT attending Board meetings
to present matters relating to their own particular
functions or associated with evolution of the Group’s
strategy. Exposure to people below ELT level has
also commenced and will be enhanced further
during the 2016/17 financial year.
Following completion of the exercise and his
appointment, the new Chairman met with individual
respondents to discuss the findings.
Accountability
Business risk
The Board considers that the Group operates a
risk‑aware culture with an open style of communication.
This facilitates the early identification of problems and
issues, so that appropriate action is taken quickly to
minimise the impact on the business.
The Group’s internal control and risk management
activities are managed through various activities
including:
• business risk reviews;
• specific functional and strategic risk workshops;
• focused Internal Audit reviews;
• year‑end control self assessment questionnaires
supporting internal control procedures, with a
quarterly follow‑up process to review outstanding
control actions; and
• site audits by various internal stakeholders, including
other assurance providers (such as Quality and HSE).
The Internal Audit function serves to provide assurances
to the Audit Committee that relevant controls and
actions are in place. Its plan of works is guided by the
Group’s risk assessment process and agreed with the
Audit Committee at the start of each year, although
it remains flexible to address new and emerging risks.
Further information on our Internal Audit function and
process can be found in the Audit Committee report on
page 43.
Whistleblowing procedures are in place for individuals
to report suspected breaches of law or regulations
or other serious malpractices. The Group has an
Anti‑Bribery and Corruption Policy which extends to
all business dealings and transactions in all countries in
which it, or its subsidiaries, operate.
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McBride plc
Annual Report and Accounts 2016
Corporate governance report
continued
Group business risk management process
We have continued to apply our Business Risk
Identification and Management process (BRIM) across
the Group. The outputs from the process are owned by
the individual functional leadership teams, reviewed and
assessed by the ELT and considered and challenged by
the Audit Committee. Further risk mitigating actions
are considered as part of this process for any significant
risks faced by the Group, thereby reflecting the ongoing
commitment towards managing and addressing key
risks in a responsive and proactive way. The exercise is
used to derive the principal risks and uncertainties faced
by the Group, as reported on pages 22 to 24.
Internal control systems and risk
management procedures
The Board recognises its responsibility for reviewing the
effectiveness of the Group’s systems of internal control
and risk management procedures during the year. This
responsibility is delegated to members of the ELT to
consider and reassess the effectiveness of the existing
controls and to identify whether any new risks have
arisen as a result of any control weaknesses. Further
information about these processes and procedures and
how their effectiveness has been assessed as reported
on page 43.
Such systems are designed to manage, rather than
eliminate, the risk of failure to achieve the business
objectives and can therefore only provide reasonable
and not absolute assurance against material
misstatement or loss.
The Board is satisfied that there is an ongoing process
for identifying, evaluating and managing risks faced by
the Group. This process has been in place for the year
under review and also up to the date of approval of this
Annual Report. The table on page 39 summarises the
key control procedures undertaken by the Group and
links these to the business model, strategy and principal
risks and uncertainties detailed in the Strategic report.
Investor relations
Relations with shareholders
We place considerable importance on maintaining
effective and balanced dialogue with all shareholders
to discuss the Company’s strategy and other
associated objectives.
The Executive Directors continue to pro‑actively engage
with both existing and potential new shareholders with
the purpose of understanding their appetite to invest in
the Company.
In addition, formal presentations of full year and
half‑year results are made by the Chief Executive Officer
and Chief Finance Officer. These presentations include
regular face‑to‑face meetings with analysts, brokers
and fund managers and provide the opportunity for
shareholders to assess the Group’s performance and
promote a better understanding of the business and its
strategic development, as well as to explore the Group’s
approach to corporate governance matters.
The Board is kept informed of investors’ views through
the distribution and regular discussion of analysts’ and
brokers’ briefings and through summaries of investor
opinion feedback. The Board also receives reports on
the output from surveys carried out by various investor
research bodies. The Chairman, Senior Independent
Director and Chair of the Remuneration Committee
are available to discuss governance, strategy and
overall remuneration policies and plans with major
shareholders and are prepared to contact individual
shareholders should any specific areas of concern or
enquiry be raised. Where applicable, the views of major
shareholders are sought on certain issues.
The principal communication method with
private investors is via our website at
www.mcbride.co.uk/investors, which has a
section dedicated to shareholders.
All the Directors attend the AGM and shareholders
have an opportunity to raise questions, both formally
during the meeting and informally after the meeting has
closed. A summary presentation of the Group’s trading
position is given at the AGM before the Chairman deals
with the formal business of the meeting. The proxy
votes cast in relation to all resolutions, including details
of votes withheld, are disclosed during the meeting
and the results made available on our website and
announced via the Regulatory News Service.
Information on share capital
Information about share capital can be found in the
Other statutory information section on page 62.
McBride plc
Annual Report and Accounts 2016
39
Control procedure
Link to business model, strategy and principal risks
Management
responsibility and
accountability
• Clearly defined management responsibility and reporting lines.
• Chief Executive Officer and Chief Finance Officer meet regularly with ELT to review progress
on financial, commercial, supply chain, HR, safety and environmental issues and regulatory/
legal compliance matters.
Strategic planning process
• Strategy developed and approved by the Board.
Budgeting and
financial reporting
• Strengths, weaknesses, risks and opportunities highlighted on a Group strategic and
functional level.
• Focus on the market environment, develop associated objectives and actions to achieve
them.
•
Implementation of the plans monitored by ELT reporting system which provides early
warning of any failure to meet targets.
• Comprehensive annual budgeting process ultimately approved by the Board.
• Detailed consolidated management accounts prepared each month and reviewed by the ELT.
• Financial performance against budget monitored and challenged centrally, with full year
forecasts updated each quarter.
• Board regularly updated on the Group’s financial performance and position against targets.
• Finance function encouraged to act independently of management in the course of its
preparation of monthly accounts and exercising of control procedures.
Key performance
indicators (KPIs)
• Comprehensive set of commercial, operational, financial and non‑financial KPIs
reported monthly.
• Performance against targets and sharing of best practice discussed regularly at both
functional and Group levels.
• Adequacy and suitability of current KPIs reviewed regularly.
Expenditure approval
• Authorisation and control procedures in place for capital expenditure and other major
projects.
• Process to review capital expenditure projects post‑completion to highlight issues, motivate
management to achieve forecast benefits and improve future projects performance
and delivery.
Documented policies
• Formalised and documented policies for a range of areas including HR matters, expenditure,
treasury and financial reporting.
• Group finance manual incorporates accounting, tax and treasury policies, as well as reporting
responsibilities and capital expenditure approval procedures.
• Group authority levels in place detailing matters reserved for the Board, its sub‑committees,
members of the ELT and other senior management across the Group.
Site property surveys
• Meetings held with insurance and risk advisers covering the Group.
• Risk assessments, safety audits and regular reviews of progress against objectives
established by each site.
Internal Audit
• Detailed Internal Control Questionnaire (ICQ) completed and signed by relevant executives
to confirm their compliance with core control procedures in operation across the Group.
•
Individual businesses, functions and significant strategic and operational projects, processes
and procedures periodically reviewed by Internal Audit function, and recommendations made
to improve controls (further information to be found in the Audit Committee report).
Cash
• Cash and debt position monitored daily and variances from forecast levels investigated.
• Working capital balances reviewed on a monthly basis at Group level and significant
variances analysed and investigated.
External auditor
• The audit includes the review and test of the system of internal financial control and the data
contained in the financial statements to the extent necessary for expressing an audit opinion
on the truth and fairness of the financial statements (further information to be found in the
Audit Committee report).
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McBride plc
Annual Report and Accounts 2016
Audit Committee report
The Committee is responsible for making
recommendations to the Board on the
financial reporting, internal control and
risk management functions and duties of
the Group and to provide independent
oversight and challenge to management.
The Committee is authorised by the
Board to investigate any matters
within its Terms of Reference to ensure
continuing compliance with evolving
best practice guidelines.
On behalf of the Audit Committee, I am pleased to
present the Audit Committee report for the year ended
30 June 2016.
Effectiveness of the Audit Committee
The Board is satisfied that Committee members are
sufficiently competent in financial matters, in addition
to having a wide range of business experience. As
Committee Chair, I have relevant financial experience
and up‑to‑date knowledge of financial matters, being
a member of the Institute of Chartered Accountants
and the current Chief Finance Officer of Cath Kidston
Limited. I was previously Group Finance Director at
Mothercare plc for seven years.
Committee meetings may be attended by the Board
Chairman, Chief Executive Officer, Chief Finance Officer
and Head of Internal Audit by invitation. Support is
provided by the Company Secretary who serves as
Secretary to the Committee. The Company’s external
auditor, PricewaterhouseCoopers LLP (PwC), also
attend meetings by invitation. During the year, PwC
attended four meetings.
Independent meetings were also held regularly between
the Committee members and the external auditor, in the
absence of the Executive Directors. The Chairman of the
Committee also had regular meetings with the Head of
Internal Audit.
As the Group continues to deliver upon its strategic
plans, the Board recognise that this must be achieved
within its established system of risk management and
internal controls framework, which will ensure that
the transformational change and growth realised is
supported by an embedded risk management culture.
Key actions and decisions taken during 2015/16:
• as in previous years, the Committee’s focus and
discussion primarily centred upon the integrity of the
Group’s accounting and financial reporting processes,
including reviewing key policies and reporting issues,
together with related risk mitigation and internal
control activities;
• the appointment, independence, remuneration
and effectiveness of the external auditor was also
assessed, taking into account the requirements of the
Statutory Audit Services Order 2014. The Committee
has considered the issue of external auditor rotation
and, whilst continuing to keep under review, currently
intends to next tender the Company’s audit in line
with relevant regulation and guidance;
• the Committee was requested by the Board to review
the Company’s going concern and longer‑term
viability statements in reference to the new UK
Corporate Governance Code requirements. These
statements can be found on pages 12 and 24
respectively;
• the Committee received regular reports on treasury
and taxation matters, including consideration of
the Group’s funding strategy, its foreign currency
management policy and banking facilities; and
• after a tender process, the Committee appointed
PwC to conduct an assessment of the Group’s cyber
security risk and to assist in establishing a roadmap
to develop and improve any gaps identified.
Neil Harrington
Chairman of the Audit Committee
7 September 2016
McBride plc
Annual Report and Accounts 2016
41
Main duties:
• to monitor the integrity of the financial and regulatory
reporting process of the Group;
• to review the Group’s accounting policies, financial
reporting standards and disclosure practices;
• to review and recommend the Board to approve all
financial statements and announcements;
• to review and monitor the effectiveness of the Group’s
internal controls and risk management systems as well
as the Internal Audit function;
• to oversee relations with and actively consider the
objectivity, independence and effectiveness of the
external auditor; and
• oversee the Group’s policy on the supply of
non‑audit services by the Group’s auditor.
A copy of the Committee’s Terms of Reference is
available on the Group’s website www.mcbride.co.uk
Attendance at meetings year ended 30 June 2016
The Board is satisfied all members are independent Non‑Executive Directors.
Number of meetings held (minimum two per year)
4
Members
Neil Harrington
Chairman
Steve Hannam
Sandra Turner
Number of meetings
attended (quorum is
two members)
Member
since
4
03/01/2012
4 04/02/2013
4
01/08/2011
Accounting and reporting issues
The Committee received regular reports on the Group’s
trading performance, as well as progress on both the
interim and full year financial statements. Papers and
other regular updates from both management and
the external auditor have also been provided to assist
the Committee to assess whether suitable accounting
policies have been adopted and that management has
made appropriate judgements.
The significant areas of judgement undertaken during
the 2015/16 financial year are set out below. The
Committee is satisfied that the presentation of the
financial statements is appropriate and in accordance
with the Group’s accounting policies.
Matters
considered
Actions
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Impairment
reviews
Tax and
treasury
matters
UK pension
scheme
Management’s judgement on the need (or otherwise) to take impairment charges for goodwill or fixed
assets at certain sites was reviewed, taking into account the trading performance of and the prospects for
each location. Recommendations were discussed and agreed with the external auditor. Refer to note 13 to
the financial statements.
The Committee considered and approved the Group’s tax policies and reviewed opportunities to improve
the Group legal structure to ensure efficient access to subsidiary distributable reserves.
In accordance with the terms of the Group’s debt facilities, the Committee continued to monitor compliance
with all relevant covenants to ensure the Group could continue to have sufficient funding capacity to deliver
its strategy. The Committee also reviewed the Group’s debt funding strategy and policies on currency and
interest rate hedging transactions.
The actuarial assumptions used for the half year and full year accounting valuation of the UK defined benefit
scheme were reviewed, with views from the external auditor also sought. The key measurements including
discount rate, inflation and mortality assumptions were found to be appropriate. Refer to note 23 to the
financial statements.
Going concern
status and
longer‑term
viability
statement
In‑depth reviews of the Group’s going concern status were carried out by the Committee both at the half and
full year period ends. Detailed papers setting out all the relevant considerations were tabled by management
and discussed by the Committee together with the external auditor who confirmed that their independent
tests continued to support the position that adequate facilities were in place for the period to September 2017
to enable the Group to continue as a going concern. Refer to page 12 of the Executive review.
The Committee also considered the modelling and assessments undertaken by management relating to the
principal risks facing the Group, including those that would threaten its business model, future performance,
solvency or liquidity. Assessments also took place including assumptions based upon the UK’s decision to
exit the European Union. After conducting their viability review, the Committee has a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the
three‑year period of their assessment to 30 June 2019.
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McBride plc
Annual Report and Accounts 2016
Audit Committee report
continued
Accounting and reporting issues continued
Supported by the external auditor’s reports and
findings, the Committee concluded that there were
no major concerns, that there was no evidence of
systematic control weaknesses and that the overall
control environment was acceptable for a group of
McBride’s size and nature.
Effectiveness of the external auditor
The Audit Committee has primary responsibility
for making recommendations to the Board on the
appointment, re‑appointment and removal of the
external auditor as submitted to shareholders for
their approval at the Company’s AGM.
During the year, the Committee has monitored the
scope, results and cost effectiveness of the audit
and overall independence and objectivity of the
external auditor:
Auditor objectivity and independence
Committee review
Auditor assurance
Auditor tenure
Non‑audit fees
The Committee considered
its external audit services,
taking into account the UK
Corporate Governance Code
and Statutory Audit Services
Order 2014.
A full tender for the
appointment of the external
audit firm took place in 2011,
as a result of which PwC
was appointed as external
auditor with effect from
November 2011.
The Committee is of the
current view that it is more
effective to align the tender
of the external auditor with
rotation of the incumbent’s
lead partner.
The Committee has sought
assurance from the external
auditor of their compliance
with applicable ethical
guidance and, in addition,
has taken account of the
appropriate independence
and objectivity guidelines.
The Committee considers the
risk of PwC withdrawing from
the market as remote since
they are one of the top four
accounting firms in the UK.
The Committee has
considered and approved the
terms of engagement and
fees of the external auditor for
the year ended 30 June 2016.
Fees payable by the Group
to PwC totalled £0.4 million
(2015: £0.4m) in respect of
audit services. There were no
contingent fee arrangements
with PwC.
The Committee has
undertaken its annual
assessment of the external
auditor. This included
their own evaluation of
the reports and services
received, such as the scope,
strategy and outcome of the
interim and year end audits.
Discussion with the
Company’s management
also took place; including
feedback on the types of
value‑add services received
from PwC in respect of
control and accounting
developments.
The Financial Reporting
Council conducted an Audit
Quality Inspection of PwC’s
2014 audit of the Group,
which received the grade
of 2A and provided the
Committee with external
verification that they were
receiving a good standard
of audit.
In 2015, audit fees were
benchmarked and the
agreed fees for 2016 are
considered to be consistent
with comparable companies.
The Company maintains
a detailed policy on the
engagement of external
auditor for non‑audit
services, designed to
preserve their independence
when performing the
statutory audit.
This policy aims to avoid
any conflict of interest
by specifying the type of
non‑audit work:
•
•
•
for which the auditor
can be engaged without
referral to the Audit
Committee;
for which a case‑by‑case
decision is necessary; and
from which the external
auditor is excluded.
In accordance with this
policy, other providers are
considered for non‑audit
work and such work is
awarded on the basis of
service and cost.
This policy is regularly
reviewed and a copy
is available from the
Group’s website at
www.mcbride.co.uk.
Fees payable by the Group
to PwC totalled £123k
(2015: £10k) in respect of
non‑audit services, equating
to 30% of audit fees
received by PwC during the
same period (2015: 2%).
The Committee and the Board remain satisfied with
the level of independence, objectivity, expertise, fees,
resources and general effectiveness of PwC and,
accordingly, recommends that a resolution for the
re‑appointment of PwC as external auditor for the
Company should be proposed at the forthcoming
AGM in October 2016.
McBride plc
Annual Report and Accounts 2016
43
Assurance and internal control environment
The Committee is delegated the responsibility for
reviewing the effectiveness of the Group’s systems
of internal control, including all material financial,
operational and compliance controls, as well as risk
management systems and key corporate policies.
The Committee is supported by the Group’s Internal
Audit function in order to complete these reviews.
The Internal Audit function provides independent
assurance to the ELT and the Board on the strength
and effectiveness of the Group’s risk management
framework and is responsible for overseeing internal
control processes for the Group. The Committee
continues to be satisfied that the Internal Audit
function has sufficient resource and provides an
important and effective role.
Internal controls
The Internal Audit function is actively engaged to understand and consider the extent to which the internal control environment
can be improved.
The Committee received specific audit reports, and detailed papers on both the annual Internal Control Questionnaire (ICQ)
and UK taxation control effectiveness questionnaire to comply with the Senior Accounting Officer (SAO) requirements, and
concluded that the overall approach to internal control and risk management continues to be effective. More information is
reported on pages 38 and 39.
During the year, 14 audits were undertaken by Internal Audit in conjunction with a quarterly process of monitoring outstanding
actions using our automated follow‑up software tool. High completion rates against identified audit actions show clear evidence
of management commitment to improving any potential weaknesses.
The recommendations arising from the external auditor’s internal controls report have also been reviewed and actions agreed,
which have included a Group‑wide policies consolidation exercise and harmonised reporting tool.
The Committee’s conclusion continues to be that a generally robust and effective control environment exists and that no failings
or weaknesses have been identified which had a material effect on the Company’s financial performance.
Risk management
The Internal Audit function facilitates the Group’s risk management process known as BRIM, which seeks to encourage a
robust assessment of potential threats to the business, its performance and its stability both at a strategic and functional/
operational level. BRIM provides a monitoring process for the Group’s key business risks and controls, as well as driving a more
risk‑accountable culture across the business.
The Committee was provided with regular reports on the progress and key results from this process. On behalf of the Board, the
Committee considered specifically those risks and uncertainties facing the business which should be classified as significant and
sought comfort from the executive about relevant and necessary mitigating factors. See the Principal risks and uncertainties
section on pages 22 to 24 for further details.
During the year the Committee approved the ELT’s decision to review and refresh the BRIM process and ensure it continues to
be effective for its purpose. This work is to be carried out during the 2016/17 financial year.
The Committee reviewed and agreed the Annual Internal Audit Plan confirming its alignment with the Group’s strategic
priorities, as well as the key risks identified from the output of the BRIM exercise.
Corporate policies
The Committee undertook its annual review of corporate policies on anti‑bribery and corruption and whistleblowing. The
Committee continues to believe that appropriate key policies are in place to ensure reasonable steps have been taken to
prevent fraud and to allow any improprieties to be reported. Copies of the policies are available from the Group’s website at
www.mcbride.co.uk.
Fair, balanced and understandable
Having given due and full consideration to all the
matters referred to above, the Committee is satisfied
that the financial statements present a fair, balanced
and understandable view and provides shareholders
with the necessary information to assess the Group’s
position and performance, strategy and business model,
and has undertaken to report accordingly to the Board.
As a result of its work during the year, the Committee
has concluded that it has acted in accordance with its
Terms of Reference and has ensured the independence
and objectivity of its external auditor.
Neil Harrington
Chairman of the Audit Committee
7 September 2016
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McBride plc
Annual Report and Accounts 2016
Remuneration report
The Committee is responsible for determining
the remuneration policy for the Executive
Directors and, in conjunction with the Chief
Executive Officer, remuneration packages
for the Executive Leadership Team (ELT).
The Committee is authorised by the Board
to consider all matters within its Terms
of Reference. The Committee’s Terms of
Reference is available from the Group’s
website at www.mcbride.co.uk.
Dear Shareholder
On behalf of the Remuneration Committee, I am pleased
to present the Remuneration report for the year ended
30 June 2016.
This Remuneration report has been prepared in
accordance with the provisions of the Companies Act
2006 and Schedule 8 of the Large and Medium‑sized
Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 and is split into three
sections: the annual statement; Remuneration Policy
report; and Annual Report on Remuneration.
At this year’s AGM in October 2016, there will be an
advisory vote on the Annual Report on Remuneration.
The Company’s Remuneration Policy, approved by
shareholders at the 2014 AGM, is again reproduced in
full to ensure shareholders have access to all information
available on executive remuneration. No changes are
proposed for the 2016/17 financial year. In line with the
relevant regulations, the Committee will therefore next
put the Remuneration Policy to shareholder vote at the
Company’s 2017 AGM.
Remuneration Policy – payment for performance
As the Company continues to implement its strategy
across the three phases of: ‘Repair, Prepare, Grow’;
the Committee is tasked with providing an executive
remuneration framework and set of stretching targets
which supports the successful delivery of the strategy
and encourages the behaviours and values required for
successful and sustained long‑term performance.
The Committee welcomes feedback from shareholders
and monitors the remuneration landscape to ensure
the Company’s Remuneration Policy remains fit for
purpose and is appropriately aligned with shareholder
expectations. During the coming year the Committee
will be undertaking a comprehensive review of the
Remuneration Policy, ahead of the 2017 AGM, and
I will be pleased to discuss with shareholders any
proposed changes to the structure and design of the
Remuneration Policy.
McBride plc
Annual Report and Accounts 2016
45
Main duties:
• to review the ongoing appropriateness and
relevance of the Remuneration Policy;
• to apply formal and transparent procedures
regarding executive remuneration packages;
• to consider and make recommendations to the
Board on remuneration issues for the Executive
Directors and other senior executives, taking into
account the interests of relevant stakeholders; and
• to review the implementation and operation of any
Company share option schemes, bonus schemes
and long‑term incentive plans (LTIP).
Attendance at meetings year ended 30 June 2016
The Board is satisfied all members are independent Non‑Executive
Directors, with the exception of Iain Napier and John Coleman who satisfied
the independence condition on their appointment as Non‑Executive
Director in 2007 and 2016 respectively.
Number of meetings held (minimum two per year)
6
Members
Sandra Turner Chair
Steve Hannam
Neil Harrington
John Coleman(1)
Number of meetings
attended (quorum is
two members)
Member
since
6
6
6
1
01/08/2011
04/02/2013
03/01/2012
22/04/2016
Iain Napier(2)(3)
(1) From date of joining Company.
(2) Apologies tendered for one meeting but matters for consideration
5
19/07/2007
shared prior to meeting.
(3) To date of leaving Company.
Recommendation
A positive vote of 92.46% in favour of the Annual Report
on Remuneration was received from shareholders at
the 2015 AGM providing a strong endorsement for
our remuneration strategy and the Committee hopes
to continue to receive this support at our AGM in
October 2016.
Sandra Turner
Chair of the Remuneration Committee
7 September 2016
Key actions and decisions taken during 2015/16
The Committee has considered:
• as part of the strategic ‘Repair’ phase, the Company
took the decision to harmonise the annual salary
review date to January of each year, beginning in
2017. As a result no salary reviews, including for the
Executive Directors, took place in 2016. The base
salaries for both Rik De Vos, Chief Executive Officer,
and Chris Smith, Chief Finance Officer, therefore
remain at the levels received upon appointment
in 2015;
• in September 2015 the Committee agreed to the
granting of LTIP awards for the year 2015/16 to
Rik De Vos and Chris Smith. Details of these awards
can be found on page 55;
• for the 2015/16 Annual bonus the Committee
determined the Group financial target had been
met in full. Personal objectives for both Executive
Directors had been partially achieved, giving a total
98.5% payout of the maximum annual bonus available
to both Executive Directors. Further details can be
found on page 54;
• the Committee reviewed performance targets and
objectives in relation to the Executive Director
2016/17 Annual bonus and LTIP awards and
determined they would continue to be based on
similar measures used in the previous year. Further
details can be found on page 52; and
• the Committee reviewed the fee for the new
Chairman and agreed it would remain at
£150,000 p.a. to ensure the right calibre and
experience of individual would be attracted to the
role to provide high quality and effective Board
leadership and governance.
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46
McBride plc
Annual Report and Accounts 2016
Remuneration report
continued
Remuneration Policy report
This report provides details of the Remuneration
Policy for the Executive and Non‑Executive Directors
as adopted by the Company following approval by
shareholders at the 2014 AGM.
Remuneration Policy principles
The Group’s approach for all employees, including
executives, is to set remuneration that takes account of
market practice, economic conditions, the performance
of the Group and of teams or individuals, recognising
any collective agreements that may apply as well as any
legal or regulatory requirements in jurisdictions where it
operates. Our Policy aims to attract, motivate and retain
suitably able employees.
The basic principles that guide our Remuneration Policy
for executives, including the Executive Directors, are
as follows:
Remuneration
principle
Component
Remuneration links
to business strategy and
long‑term investor interests
• Both short and long‑term rewards are linked to performance and Company strategy to
maximise long‑term shareholder value.
• The Policy provides an appropriate balance between fixed remuneration, short‑term bonus
and long‑term incentives.
• Executives are encouraged to build and maintain a targeted shareholding as this represents
the best way to align their interests with those of shareholders.
Fair reward to individuals
for successful contribution
made to the business
• The annual bonus targets are split between Company financial performance and personal
objectives which align with key business objectives in a given year.
• Long‑term incentives are targeted against metrics which align with shareholder interests.
• Environmental, safety, sustainability, social and governance issues are taken into account.
Performance targets are
appropriate and sufficiently
demanding
• Performance conditions for the variable elements of executive pay are set independently
by the Committee at the outset of each year and assessed by the Committee, both
quantitatively and qualitatively, at the end of each performance period.
• The personal objectives reward in annual bonus plans for senior executives are specific and
are reviewed by the Committee to ensure they adequately reflect the business objectives of
the Group and are only paid on measurable success.
In line with best practice
where appropriate
• General pay and employment conditions across the Group are taken into account when
setting executive remuneration. The Committee is kept informed of such matters via regular
interaction with the Group’s HR function.
• The Committee consults with the Chief Executive Officer and pays due regard to his
recommendations for other senior executives. Individual Directors are not involved in
decisions concerning their own remuneration.
• The Committee is committed to keeping its Policy under regular review, taking into account
changes in the competitive environment, remuneration practices and guidelines set by the
key institutional shareholder bodies.
Consideration of conditions elsewhere in the Group
The Committee does not consult with employees
specifically on its policy for Executive Director
remuneration, but takes into account salary increases
and benefits applying across the Group as a whole
when considering the salaries and other elements of
Executive Director remuneration packages.
Consideration of shareholder views
The Committee will continue to take into account
the views of our major shareholders to ensure the
Remuneration Policy reflects as far as practicable
latest trends in evolving good practice in the UK.
The Committee considers any feedback received
from shareholders when making decisions on the
Remuneration Policy.
McBride plc
Annual Report and Accounts 2016
47
Future policy table
The following table summarises the main elements of our Remuneration Policy for Directors.
Element: Executive Director base salary
Purpose and link
to strategy
Operation
• To ensure the Group is able to recruit and retain high calibre executives.
• Salaries are set by the Committee taking into account individual experience, performance, skills
and responsibilities, prevailing market conditions (by reference to companies of a similar size
and complexity and other companies in the same industry) and internal relativities.
• Salaries are paid monthly in arrears by bank transfer and are normally reviewed annually with
any changes effective from January.
Maximum
• Details of current salaries of the Executive Directors are detailed on page 53.
• Salaries are reviewed annually and may be increased each year. Increases will generally be
in line with those awarded to the UK‑based workforce, as well as reflective of the overall
financial performance of the Group.
Performance measures
Element: benefits
Purpose and link
to strategy
Increases beyond this may be awarded in limited circumstances, such as where there is a
change in responsibility, experience or a significant change in the scale of the role and/or
size, value and/or complexity of the Group.
•
—
• To provide market competitive benefits, and be in line with those provided to other
Group employees.
Operation
• Benefits include private medical insurance, sick pay, a fully expensed car (or equivalent cash
allowance), disability and life assurance cover.
Maximum
• The benefit provision is reviewed periodically. No maximum level is set on the value or cost of
Performance measures
—
benefits provided.
Element: pension
Purpose and link
to strategy
• Retirement benefits are regarded as an imported element of the Group’s basic benefits
package to attract and retain talent.
Operation
• Membership of the Company’s defined contribution, or similar pension scheme, or in agreed
circumstances, a cash allowance in lieu of pension.
Maximum
• Up to 25% of base salary.
Performance measures
—
Element: annual bonus
Purpose and link to strategy
• The purpose of the annual bonus is to incentivise delivery of the Group’s financial and
non‑financial objectives and to ensure that Executive Directors and senior executives are
fairly rewarded for their contribution to the success of the Group.
Operation
• Performance conditions are set independently by the Committee at the start of each year.
• Performance criteria include the financial targets of the Group as agreed by the Board and
specific annual targets based on clear and measurable objectives that underpin, and are key
to achievement of the Group’s strategy.
• Personal objectives are reviewed by the Committee to ensure they contribute to the strategic
aims of the Group.
• To further align the interests of Directors with shareholders, a portion of the bonus is paid
in deferred shares. Shares awarded under the Deferred Annual bonus Plan (DBP) vest after
three years and are normally only payable if the Director remains employed by the Group at
the end of that period. The deferred shares awarded are held by an Employee Benefit Trust
until vesting.
• Both the cash and deferred share elements of the annual bonus are subject to clawback
in the event of a material misstatement of the financial results, serious misconduct by a
participant or other defined reasons.
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48
McBride plc
Annual Report and Accounts 2016
Remuneration report
continued
Element: annual bonus continued
Maximum
•
100% of base salary.
Performance measures
• A bonus of 80% of salary is based against a sliding scale of challenging and stretching
financial performance targets, of which the first 50% of salary is payable in cash and the
remaining 30% of salary in deferred shares under the DBP. A bonus of up to 20% of salary,
which is payable in cash, is based on the achievement of specific and measurable personal
targets. Irrespective of achievement against the personal targets, no bonus is payable unless
a minimum level of financial performance is achieved.
• The Committee retains the ability in exceptional circumstances to adjust the targets
and/or set different measures and alter weightings for the annual bonus if events occur, such
as a material divestment of a Group business, which cause it to determine they are no longer
appropriate and a change is required to ensure that they achieve their original purpose and
are not materially less difficult to satisfy.
Element: LTIP
Purpose and link to strategy
• The objectives of the LTIP are to align the long‑term interests of shareholders and
management and reward achievement of long‑term, stretching targets.
• Awards are made to Executive Directors and to senior executives who have a significant
influence over the Group’s ability to meet its strategic objectives. Whilst it is not a
requirement of the LTIP, senior executives are encouraged to use the scheme to increase
their share ownership in the Company.
Operation
• Annual awards are granted, subject to individual performance and Committee discretion.
The awards vest after three years, subject to continued employment and the satisfaction of
challenging performance conditions.
• LTIP awards are subject to clawback in the event of a material misstatement of the financial
results, serious misconduct by a participant or other defined reasons.
• A ‘dividend equivalent’ provision is also available at the discretion of the Committee enabling
dividend or dividend equivalent payments to be paid, in cash or shares, on any shares that
vest under the LTIP.
• The Committee will operate the LTIP according to its respective rules and in accordance
with the Listing Rules and HMRC rules, where relevant. The Committee retains discretion,
consistent with market practice in regard to the operation and administration of the LTIP,
including the option to provide different types of awards; settling any vesting awards in cash;
when dealing with a change of control (e.g. the timing of testing performance conditions) or
restructuring of the Group; determination of a good/bad leaver based on the rules of each
plan and the appropriate treatment chosen; and adjustments in certain circumstances, such
as rights issues, corporate restructuring, events and special dividends.
Maximum
• Typically 100% of salary for Executive Directors, but with the flexibility to increase to 150% of
salary in relevant circumstances.
Performance measures
• 50% of the awards are subject to an EPS performance condition and 50% of the awards are
subject to a relative TSR performance condition.
• EPS is a measure of the Company’s overall financial success and TSR provides an external
assessment of the Company’s performance against comparable companies on the Stock
Exchange. It also aligns the rewards received by executives with the returns received by
shareholders.
• Targets are set by the Committee for each award on a sliding scale basis. The Committee
may set different EPS target ranges for each award providing they are equivalently
challenging in the circumstances. No more than 25% of awards will vest for threshold
performance, with full vesting taking place for equalling or exceeding maximum performance
conditions.
• Details of the performance conditions applied to awards granted in the year under review
and for the awards to be granted in the forthcoming year are set out on pages 55 and 52
respectively.
• Different performance measures and/or weightings may be used for future awards to help
drive the strategy of the business.
• The Committee retains the ability in exceptional circumstances to adjust the targets and/or
set different measures and alter weightings for the LTIP if events occur, such as a material
divestment of a Group business, which cause it to determine they are no longer appropriate
and a change is required to ensure that they achieve their original purpose and are not
materially less difficult to satisfy.
McBride plc
Annual Report and Accounts 2016
49
Element: Non‑Executive Director fees
Purpose and link
to strategy
Operation
• To ensure the Group is able to attract and retain experienced and skilled Non‑Executive
Directors able to advise and assist with establishing and monitoring the strategic objectives
of the Company.
• The remuneration of the Chairman and the Non‑Executive Directors is payable in cash fees.
They are not eligible to participate in bonus or share incentive schemes. Their services do
not qualify for pension or other benefits. Fees are paid monthly and reasonable expenses are
reimbursed where appropriate.
• Fee levels are determined by the full Board with reference to those paid by other companies
of similar size and complexity, and to reflect the amount of time they are expected to devote
to the Group’s activities during the year. A supplementary fee is also paid to Committee
Chairs and to the Senior Independent Director to reflect their additional responsibilities.
Maximum
• Details of the current fees for the Chairman and Non‑Executive Directors are set out on
page 56. Under the Company’s current Articles of Association, the aggregate annual sum for
Non‑Executive Director fees cannot exceed £400,000 p.a. The Company does not intend to
seek shareholder approval for any increase to this maximum in the short to medium term.
Performance measures
• No element of the Chairman’s or Non‑Executive Directors’ fees is performance related.
Element: share ownership guidelines
Purpose and link to strategy
• Both the Executive and Non‑Executive Directors and other senior executives are encouraged
to build and maintain a shareholding in the Company as this represents the best way to align
their interests with those of shareholders. Levels are set in relation to earnings and according
to the post held in the Company.
Operation
Maximum
• The expectation is that executives will build up to these levels over a period of time, through
retaining shares received under the Company’s incentive arrangements and/or purchased in
their own right.
• There is no maximum; however target levels are set at 150% of salary for Executive Directors,
33% of annual fees for Non‑Executive Directors and 50% of salary for other senior executives.
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Performance measures
—
Element: recruitment remuneration
Purpose and link to strategy
• To ensure the Group is able to recruit and retain high calibre Executive and Non‑Executive Directors.
Operation
• New Director remuneration arrangements will be based upon and within the limits of the
various elements as set out on pages 47 and 48.
In addition:
• Executive Director buy‑out payments may be made in exceptional circumstances; typically
when these are considered to be in the best interests of the Company to facilitate the
buy‑out of value forfeited on joining the Company. These payments would typically be in
the form of an enhanced LTIP award under the rules and maximums permitted under the
Company’s LTIP rules at that time and, in any event, would not be in excess of 200%. Such
payment would take account of remuneration being relinquished, including the nature and
time horizons attached to such remuneration and the impact of any performance conditions.
In exceptional circumstances, payments could be made in the form of a cash payment
or Restricted Share Award. When in the form of a cash payment, this would normally be
subject to clawback in certain situations, in line with other elements under the Company’s
Remuneration Policy.
• Relocation packages, generally consisting of out‑of‑pocket expenses, together with any
additional costs solely attributable to the relocation may be offered in situations deemed
essential in order to carry out the relevant role successfully. Any package will be designed
to ensure the new recruit becomes effective in their role as soon as possible, with minimal
distractions from any relocation.
•
•
In respect of internal promotions, any remuneration commitments made before such
promotion (whether or not they would fall within the principles of the Company’s current
Remuneration Policy) may form part of that Director’s remuneration package, with the
expectation that any such commitments would be phased out over time.
It is intended that the value of any element of recruitment remuneration will generally be on
the same basis as the existing Directors (pro‑rated where appropriate dependent on time
of joining the Company) and elements such as buy‑out payments being no higher than the
expected value of the forfeited arrangements.
Maximum
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McBride plc
Annual Report and Accounts 2016
Remuneration report
continued
External appointments
Executive Directors are permitted, where appropriate
and with Board approval, to assume non‑executive
directorships of other organisations. Where the
Company releases Executive Directors to carry out
non‑executive duties, they will be required to disclose
the fact that they retain any earnings and the amount
of such remuneration. Neither of the Executive Directors
held any external directorships during the year ended
30 June 2016.
Executive Directors’ service contracts and
compensation for loss of office
Service contracts stipulate that the Executive Directors
will provide services to the Company on a full time
basis. The contracts contain, in addition to remuneration
terms, details of holiday and sick pay entitlement,
restrictions and disciplinary matters. The contract
for the Chief Executive Officer was entered into on
17 December 2014 and for the Chief Finance Officer
on 15 July 2014.
The contracts contain restrictive covenants for periods
of up to six months post employment relating to
non‑competition and non‑solicitation of the Group’s
customers, suppliers and employees and indefinitely
with respect to confidential information. In addition,
they provide for the Group to own any intellectual
property rights created by the Directors in the course
of their employment.
The contracts for both the Chief Executive Officer
and the Chief Finance Officer stipulate six months’
notice by both the Company and the Director,
although, in exceptional circumstances, notice
periods for up to a maximum of twelve months may
be offered to newly recruited Directors. All Directors’
contracts are available for inspection at the AGM.
The Committee recognises the provisions of the
Code for compensation commitments to be stipulated
in Directors’ service contracts with regard to early
termination. Further information on the Committee’s
Executive Director compensation approach can be
found in the table below.
Element: Executive Director compensation on loss of office
Purpose and link
to strategy
• On termination of an Executive Director’s service contract, the Committee will seek to
provide the minimum compensation applicable to the individual’s employment contract.
Operation
• Executive Director service contracts will stipulate the Company’s compensation
commitments to be honoured in an early termination event. Any commitments will be within
the principles of the Company’s Remuneration Policy, together with any specific contractual
provisions agreed prior to 27 June 2012 where they do not fall within the principles, where
applicable.
• Directors’ service contracts confirm that the Company has the option to pay notice month by
month that would reduce or cease if the departing Director obtained other employment.
• There are no agreements between the Company and its Directors or employees providing
for additional compensation for loss of office or employment (whether through resignation,
purported redundancy or otherwise) that may occur in the event of a takeover bid. It is also
the Company’s policy not to include liquidated damages clauses in service contracts, unless
there is a clear explainable benefit for the Company in doing so. None of the Executive
Director service contracts contain any such liquidated damages provision.
Maximum
• Any compensation arrangements will not be beyond those stipulated in the Directors’
service contracts and will normally be limited to base salary, benefit and pension elements.
Dependent upon the circumstances (and subject to the Committee’s discretion) as shown
below, a Director’s performance related remuneration elements may also be included.
Normal exit
(termination for reasons of
resignation or dismissal).
No entitlement for year of
exit. Payments in earlier years
may be subject to clawback in
certain circumstances.
Unvested awards lapse.
Vested awards may be
subject to clawback in certain
circumstances.
Good leaver
(termination for reasons of
death, ill health, retirement,
redundancy, or at the
discretion of the Committee).
Change of control
(excludes a reorganisation
or reconstruction where
ownership does not
materially change).
Pro‑rated (based upon timing
and performance) for year
of exit. Any DBP awards (at
Committee discretion) vest at
either normal vesting date or
on cessation of employment.
Extent to which performance
requirements are satisfied
in year determines level of
annual bonus. Any unvested
DBP awards will vest on date
of the relevant event.
Unvested awards pro‑rated
based upon rules of LTIP plan
(at Committee discretion)
and vest on either normal
vesting date or cessation of
employment.
Unvested awards are
pro‑rated based upon rules
of LTIP plan (at Committee
discretion) and vest on the
date of the relevant event.
Annual bonus
LTIP
McBride plc
Annual Report and Accounts 2016
51
Non‑Executive Directors’ letters of appointment
Set out below is information regarding the dates of the letters of appointment and notice periods for the Chairman
and the Non‑Executive Directors.
Director
John Coleman
Steve Hannam
Neil Harrington
Sandra Turner
Date first
appointed to
the Board
22/04/2016
04/02/2013
03/01/2012
01/08/2011
Date of last
election
at AGM(1)
Notice
period
Compensation
upon early
termination
Latest
letter of
appointment
—
3 months
None 22/04/2016
2015
2015
2015
3 months
3 months
3 months
None 20/06/2016
None 20/06/2016
None 20/06/2016
(1) All Directors are re‑elected on an annual basis.
The Non‑Executive Directors and Chairman serve
on the basis of renewable letters of appointment
which are terminable at the discretion of either
party. In accordance with the principles of the Code,
the Chairman, the Non‑Executive Directors and the
Executive Directors are subject to voluntary re‑election
by shareholders on an annual basis. Their appointments
may be terminated without compensation in the
event of them not being re‑elected by shareholders or
otherwise in accordance with the Articles.
Any appointment for more than nine years in total will
be subject to annual review by the full Board, as well
as shareholder approval. Consideration will be given
to the importance of refreshing the membership of
the Board and avoiding any undue reliance on any
particular individual, whilst assessing the contribution
made by that individual, together with the ongoing
commitment required to the role and the benefit gained
from any continuity of handover with newer members
of the Board.
Remuneration performance scenarios 2016/17
The chart below illustrates how the composition
of the Chief Executive Officer’s and Chief Finance
Officer’s remuneration packages could vary at different
levels of performance under the Company’s 2016/17
implementation of Remuneration Policy as a total
value opportunity.
1,400
1,200
1,000
800
600
400
200
0
£k
LTIPs
Annual bonus
Fixed pay
£501
£312
£1,301
31%
31%
38%
£812
31%
31%
38%
£881
11%
29%
60%
£550
11%
29%
60%
Below
target
(CEO)(1)
Below
target
(CFO)(1)
On target
(CEO)(2)
On target
(CFO)(2)
Maximum
(CEO)(3)
Maximum
(CFO)(3)
(1) Below target represents fixed pay only (consisting of base salary,
benefits and pension).
(2) On‑target performance assumes a bonus award of 70% of salary
and 25% vesting under the LTIP.
(3) Maximum performance assumes a bonus award of 100% of
salary, cash and deferred shares, and full vesting under the LTIP.
No assumptions are made as to likely share price growth for the
DBP or LTIP.
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McBride plc
Annual Report and Accounts 2016
Remuneration report
continued
Annual Report on Remuneration
Application of the Remuneration Policy for the 2016/17 financial year
The table below sets out how the Remuneration Policy will be applied for the forthcoming financial year.
Element
Application of policy for 2016/17
Explanation
Executive Director
base salary
The base salary for Rik De Vos, Chief Executive
Officer, remains at £400,000.
Salaries will be subject to an annual
review in January 2017.
The base salary for Chris Smith, Chief Finance
Officer, remains at £250,000.
Benefits and pension
Both the Executive Directors will continue to receive
the Company’s standard benefits package.
The current benefits are considered to
be appropriate.
Annual bonus
LTIP
Rik De Vos receives a pension contribution by
the Company equivalent to 20% of annual base
salary. 50% of this contribution is provided into an
appropriate defined contribution pension scheme,
with the other 50% received as a cash sum in lieu of
pension. Chris Smith receives a cash sum in lieu of a
pension contribution at 20% of annual base salary.
The structure and operation of the annual bonus
scheme will continue in line with the previous
financial year. The maximum bonus opportunity
for the Executive Directors continues to be 100%
of salary: 80% of the award will be subject to a
sliding scale of challenging operating profit targets
and 20% will be subject to specific measurable
personal targets.
The LTIP awards to be granted in 2016/17 will
continue to be subject to EPS and relative TSR
performance conditions. The intended Executive
Director grant level for the LTIP is 100% of salary.
The TSR schedule and comparator group is based
upon the FTSE SmallCap Ex. Investment Companies
Index with 25% of this element of the award vesting
for median performance; with full vesting for upper
quartile performance. EPS targets continue to align
to the Company’s three‑year business targets and
our plans for EPS growth. Awards subject to the
EPS condition will lapse unless the Company’s EPS
Compound Annual Growth Rate (CAGR) (adjusted
to exclude the effects of amortisation of intangible
assets and exceptional items) is at least 8%, at which
level 20% of this element will vest. For performance
above this level, awards will vest on a rising scale,
with full vesting only if EPS CAGR reaches 17%.
The Committee considers that
the forward‑looking targets are
commercially sensitive and has,
therefore, chosen not to disclose them
in advance. Details of the targets will
be set out retrospectively in next year’s
Remuneration Report. However, the
targets are considered to be demanding
in the context of the Company’s
circumstances.
TSR provides an external assessment of
the Company’s performance against its
competitors. It also aligns the rewards
received by executives with the returns
received by shareholders.
The EPS performance measure has been
selected as it is one of the KPIs used
in the business and is a measure well
understood by the senior executives.
It is also something which they can
influence directly.
Non‑Executive fees
The fee policy for the Chairman and Non‑Executives
is as follows:
Non‑Executive Director fees were last
reviewed in July 2009.
Base Non‑Executive Director fee: £40,000
Chair of the Audit and Remuneration Committees:
£4,000 (additional fee)
Senior Independent Director: £4,000 (additional fee)
Chairman: £150,000
McBride plc
Annual Report and Accounts 2016
53
Application of the Remuneration Policy for 2015/16
The following information has been audited by the Company’s auditor:
• single total remuneration figure for the Executive and Non‑Executive Directors;
• Executive Director pension benefits and interests in the LTIP and DBP schemes;
• Director shareholdings; and
• exit payments, payments to past Directors and payments to third parties.
Single total remuneration figure for the Executive Directors
The table below sets out a single total remuneration figure for the position of Chief Executive Officer and
Chief Finance Officer for the 2015/16 financial year:
Rik De Vos
2015/16
2014/15(6)
Chris Smith
2015/16
2014/15(7)
Fixed remuneration
Performance related
Base
salary(1) Benefits(2) Pension(3)
£000
£000
£000
Sub
total
£000
Annual
bonus(4)
£000
LTIPs(5)
£000
400
167
250
121
21
7
11
6
78
35
50
24
499
209
311
151
394
148
246
107
—
—
—
—
Total
remuneration
Sub
total
£000
394
148
246
107
£000
893
357
557
258
(1) Full base salary paid during the year.
(2) Benefits consist of the provision of a company car and fuel (or cash equivalent), private healthcare, disability insurance and life cover.
(3) The pension figure represents the cash value of payments in lieu of pension contribution.
(4) The annual bonus is the cash value of the bonus in respect of the year ended 30 June 2016, including any deferred shares which must be
held for a minimum three‑year period.
(5) The value of the LTIP award earned in respect of the performance period commencing 1 July 2013 to 30 June 2016. The value of the
vested shares is the face value of the shares at the vesting date or estimate of the total market value if not yet vested.
(6) Rik De Vos was appointed as Chief Executive Officer with effect from 2 February 2015.
(7) Chris Smith was appointed as Chief Finance Officer with effect from 7 January 2015.
Base salary
In relation to the 2015/16 financial year:
• the annual base salary for Rik De Vos, Chief Executive
Officer, was £400,000; and
• the annual base salary for Chris Smith, Chief Finance
Officer, was £250,000.
Pension
The Company has agreed with Rik De Vos to pay his
contractual pension entitlement (equivalent to 20% of
annual base salary) 50% as a contribution to a defined
contribution pension scheme and 50% as a cash sum
in lieu of a pension contribution. For the latter cash
contribution, Rik De Vos has confirmed in writing that
this payment relieves the Company of any liability for
pension provision for this proportion on his behalf.
In 2014/15 Rik De Vos received £40,000 Company
contributions into a defined contribution pension
scheme as well as £38,000 cash sum in lieu of pension
contribution.
In accordance with his service contract, the Company
paid Chris Smith a cash sum in lieu of a pension
contribution at 20% of annual base salary. Chris Smith
has a contracted agreement that this payment relieves
the Company of any liability for pension provision on
his behalf.
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McBride plc
Annual Report and Accounts 2016
Remuneration report
continued
Annual bonus
For the 2015/16 financial year, the maximum bonus opportunity for the Executive Directors was 100% of salary.
80% of bonus was based upon financial performance and 20% for performance against demanding specific
measurable personal targets.
Details of the bonuses paid are provided in the tables below:
Financial element outcomes
Measure
Group EBITA(1)
Weighting
(% of salary) Threshold
Performance targets (£m)(2)
Target
Stretch
Actual
Payout
performance (% of salary)
80
29.7
33.0
34.7
34.8
100
(1) Excludes amortisation of intangibles, exceptional costs at 2015/16 internal budgeted exchange rates.
(2) Achievement between the minimum and maximum calculated on a straight‑line basis between the three reference points.
Personal element outcomes
Executive Director
Rik De Vos
Weighting
Performance targets (£m)(5)
Measure (% of salary) Threshold
Target
Stretch
Actual
Payout
performance (% of salary)
Net debt target(1)
5
97.0
95.8
93.8
82.3
5
Net return on average
capital employed (NROACE)(2)
10
11%
12%
13%
12.7%
8.5
Chris Smith
Group Purchasing Cost
Savings Project(3)
Net debt target(1)
Net return on average
capital employed (NROACE)(2)
UK defined benefit
pension scheme closure(4)
5
5
10
5
1
2
3
97.0
95.8
93.8
11%
n/a
12%
n/a
13%
n/a
4.6
82.3
12.7%
Scheme closed to
future accrual
with effect from
March 2016
5
5
8.5
5
(1) Net debt to be calculated for both target and actual achievement at 2015/16 internal budget exchange rates.
(2) Net return means the adjusted net profit, as per the statutory financial statements. Average Capital Employed means the average
capital employed calculated as the average of the twelve month end values. NROACE calculation based upon 2015/16 internal budget
exchange rates.
(3) Target for structural buying benefits.
(4) To de‑risk the impact and size of the deficit on the Company’s future financing and cost base, seek agreement to close UK DB
pension scheme.
(5) Achievement between the minimum and maximum calculated on a straight‑line basis between the three reference points.
Total Annual bonus outcome
Executive Director
Rik De Vos
Chris Smith
Financial element
bonus outcome
(% of salary)
Personal element
bonus outcome
(% of salary)
Overall bonus
outcome
(% of salary)
% of overall Annual
bonus in form of
deferred shares
80.0
80.0
18.5
18.5
98.5
98.5
30.0
30.0
McBride plc
Annual Report and Accounts 2016
55
LTIP
In the year under review LTIP awards were granted to the Chief Executive Officer and Chief Finance Officer in
September 2015 under the McBride plc 2014 LTIP.
Detailed assumptions used in calculating the fair value of the awards are outlined in note 24 to the consolidated
financial statements on pages 103 and 104.
Interests of Directors under the McBride plc 2014 LTIP at 1 July 2015 and 30 June 2016 are set out below:
Director
Rik De Vos
Number of
awards
at 1 July Allocated
in year
2015
Date of
award
19/02/2015
192,123
—
09/09/2015
— 329,896(1)
Chris Smith
19/02/2015
144,092
—
09/09/2015
— 206,185(1)
Awards Allocations
lapsed in
year
vested in
year
Number of
awards at
30 June
2016
Market
price at
date of
award (£)
—
—
—
—
—
192,123
0.8675
— 329,896
1.2125
—
144,092
0.8675
— 206,185
1.2125
Vesting
date
20/02/2018
10/09/2018
20/02/2018
10/09/2018
(1) Awards were granted on the basis of 100% of salary. The face value of the awards are Rik De Vos: £400,000 and Chris Smith: £250,000.
Threshold vesting under the TSR condition would be 25% of that part of the award (12.5% of the total award). Threshold vesting under
the EPS condition would be 20% of that part of the award (10% of the total award).
The performance conditions attaching to awards under
the LTIP are:
b. 50% of the award is subject to an EPS
performance condition.
a. 50% of the awards are subject to a TSR performance
condition measured against the FTSE SmallCap Ex.
Investment Companies Index as the comparator
group. If the Company’s TSR performance is lower
than the median of the comparator group, awards
subject to the TSR condition will lapse.
The awards start to vest on a sliding scale if TSR
performance is at or above the median (25% of
the TSR element at median) of the comparator
group, with full vesting only if the Company’s
TSR performance is in the upper quartile of the
comparator group.
The TSR measure is based upon the average of
three months’ share prices immediately preceding
the relevant performance date and is independently
calculated for the Committee.
TSR performance of the Company
relative to the comparator group
% of total award
vesting (max 50%)
Below the median
Equal to the median
Upper quartile
0
12.5
50
Intermediate performance
Straight‑line vesting
i. For the February 2015 LTIPs, awards subject to
the EPS condition will lapse unless the Company’s
growth in EPS (adjusted to exclude the effects of
amortisation of intangible assets and exceptional
items) is at least 24% p.a. For performance above
this level, awards will vest on a rising scale, with full
vesting only if growth in EPS exceeds 29% p.a.
EPS growth
Less than 24% p.a.
24% p.a.
29% p.a.
% of total award
vesting (max 50%)
0
10
50
Intermediate performance
Straight‑line vesting
ii. For the September 2015 LTIPs, awards subject to
the EPS condition will lapse unless the Company’s
EPS Compound Annual Growth Rate (CAGR)
(adjusted to exclude the effects of amortisation of
intangible assets and exceptional items) is at least
13%. For performance above this level, awards will
vest on a rising scale, with full vesting only if EPS
CAGR reaches 19%.
EPS CAGR
Less than 13% p.a.
13% p.a.
19% p.a.
% of total award
vesting (max 50%)
0
10
50
Intermediate performance
Straight‑line vesting
TSR and EPS performance are measured over
the period of three consecutive financial years of
the Company beginning with the year of grant of
the award. There will be no resetting or retesting
of the performance conditions, other than in
exceptional circumstances as set out on page 48.
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McBride plc
Annual Report and Accounts 2016
Remuneration report
continued
Deferred Annual bonus Plan (DBP)
Interests of Directors under the McBride plc 2012 Deferred Annual bonus Plan at 1 July 2015 and 30 June 2016 are:
Director
Rik De Vos
Chris Smith
Number of
awards
at 1 July Allocated
in year
2015
Date of
award
Number of
Awards Allocations awards at
30 June
lapsed in
2016
year
vested in
year
10/09/2015
10/09/2015
—
—
39,062
28,170
—
—
—
—
39,062
28,170
Normal
vesting
date
11/09/2018
11/09/2018
Rik De Vos and Chris Smith were granted awards under the DBP on 10 September 2015 as set out in the table
above, reflecting the proportion of their annual bonus deferred in 2015 as agreed by the Remuneration Committee.
There was no exercise price applicable to the awards and the market price at the date of the awards was £1.28.
The awards are subject to a restricted period of three years and will normally vest on the expiry of this period.
Rik De Vos and Chris Smith will be granted an award of shares under the DBP, reflecting a proportion of their
2015/16 Annual bonus payment as set out on page 54.
Awards granted under the DBP are eligible for dividend equivalent payments.
Single total remuneration figure for the Non‑Executive Directors
John Coleman(1)
Steve Hannam
Neil Harrington
Sandra Turner
Iain Napier(2)
2015/16
Committee
Chair/
SID fee
£000
Base fee
£000
28
40
40
40
150
—
4
4
4
—
2014/15
Committee
Chair/
SID fee
£000
Base fee
£000
—
40
40
40
150
—
4
4
4
—
Total
£000
28
44
44
44
150
Total
£000
—
44
44
44
150
(1) John Coleman was appointed to the Board with effect from 22 April 2016.
(2) Iain Napier resigned as a Director with effect from 30 June 2016.
Directors’ interests
At 30 June 2016
At 1 July 2015
Conditional
share
awards(3)
Total
shares
Conditional
share
awards
(3)
Total
shares
John Coleman(1)
Rik De Vos
Chris Smith
Steve Hannam
Neil Harrington
Sandra Turner
Iain Napier(2)
—
—
—
—
30,000 561,081 20,000
192,123
31,011 378,447
25,657
144,092
12,000
20,000
10,000
—
—
12,000
— 20,000
—
—
10,000
74,807
—
—
—
—
(1) John Coleman was appointed to the Board with effect from 22 April 2016.
(2) Iain Napier resigned as a Director with effect from 30 June 2016.
(3) The conditional share awards have been made under the McBride plc 2014 LTIP and Deferred Annual bonus Plan.
The beneficial interests of the Directors in the ordinary
shares of the Company at 1 July 2015 and 30 June 2016
are set out opposite (there have been no changes from
those detailed below between 30 June 2016 and the
date of this Report).
As detailed on page 49, Executive Directors are
expected to build and maintain personal shareholdings
in the Company equivalent to 150% of salary over
a period of time both through retaining shares
received (net of tax) under the Company’s incentive
arrangements, or purchasing shares on the open market
in their own right. As at 30 June 2016 the value of the
Executive Directors’ shareholdings were: Rik De Vos
£46,725 (representing 11.68% of annual base salary)
and Chris Smith £48,300 (representing 19.32% of
annual base salary).
None of the Directors had any interest in the shares of
any subsidiary company.
McBride plc
Annual Report and Accounts 2016
57
Review of past performance
The graph below charts the TSR (share value movement
plus reinvested dividends), over the seven years to
30 June 2016, of shares in McBride plc compared with
that of a hypothetical holding in the FTSE SmallCap Ex.
Investment Companies Index. The Directors consider
this index to be an appropriate comparator group for
assessing the Company’s TSR as it provides a well
defined, understood and accessible benchmark.
3.0
McBride
FTSE SmallCap
Relative importance of spend on pay
2014/15 £m
2015/16 £m
Shareholder
distribution
Underlying
EBITDA
Total
employee
cost
2.5
2.0
1.5
1.0
0.5
July 2009 July 2010 July 2011
July 2012
July 2013 July 2014 July 2015 July 2016
The following table shows the historic Chief Executive
Officers’ levels of total remuneration (single figure of
total remuneration), together with annual bonus and
LTIP awards as a percentage of the maximum available.
CEO/
Financial year
Rik De Vos
2015/16
2014/15(1)
Chris Bull
2014/15(1)
2013/14
2012/13
2011/12
2010/11
2009/10(2)
Miles Roberts
2009/10(2)
Total
Annual
remuneration bonus % of LTIP % of
maximum maximum
£000
893
357
253
512
512
704
531
83
519
98.5
89
—
—
—
48
5
—
—
—
—
—
—
—
—
—
—
—
(1) Chris Bull left the business on 18 December 2014, with
Rik De Vos appointed with effect from 2 February 2015.
(2) Miles Roberts left the business on 30 April 2010, with
Chris Bull appointed with effect from 4 May 2010.
Percentage change in Chief Executive
Officer’s remuneration
The table below shows the percentage change in
Chief Executive Officer annual remuneration from the
prior year compared to the average percentage in
remuneration for all UK employees (1,312 employees).
Although the Company has an international workforce,
this group has been chosen as it continues to represent
the most meaningful comparator group to the UK‑based
Chief Executive Officer.
Chief Executive Officer
Comparator group
% change 2015/16
Base
salary
Taxable
benefits
Annual
bonus
—
—
7
—
11
4
0
30
60
£m
90
120
150
Exit payments
There were no Executive Director exit payments made
during 2015/16.
Payments to third parties
No payments were made to third parties for making
available the services of any of the Directors during 2015/16.
Remuneration Committee support
Meetings may be attended by the Chief Executive
Officer on all matters except those relating to his own
remuneration. Support is provided by the Chief HR
Officer and the Company Secretary, who serves as
Secretary to the Committee. No Director participates in
any discussion relating to his or her own remuneration.
The Company’s independent remuneration consultants
also attend meetings by invitation.
Remuneration Committee advisers
During the year, the Committee continued to engage
the services of the independent consultants, New Bridge
Street (NB) part of Aon Hewitt Limited for the purposes
of providing professional advice to guide the Committee
in its decision‑making. NBS received £25,780 in respect
of the services provided for the 2015/16 financial year
(2014/15: £20,500). Neither NBS, nor any other part of
the wider Aon Corporation, provided any other services
to the Company during the year. NBS is a signatory to the
Remuneration Consultant Group’s Code of Conduct.
Statement of shareholder voting
The table below shows the voting outcome at the
October 2015 AGM for the approval of the Company’s
2014/15 Remuneration report:
Resolution
Approval of
Remuneration
Report
Votes
for
%
Votes
against
Votes
% withheld
121,794,083 92.46
9,933,173 7.54
116,729
The current Remuneration Policy was approved by
shareholders with 93.46% vote ‘for’ at the October
2014 AGM.
The Remuneration Committee strongly welcome this
continued shareholder support for the Company’s
Remuneration Policy.
The Remuneration report was approved by the Board
on 7 September 2016.
On behalf of the Board
Sandra Turner
Chair of the Remuneration Committee
7 September 2016
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McBride plc
Annual Report and Accounts 2016
Nomination Committee report
Our key objective is to ensure the Board
comprises individuals with the requisite
skills, knowledge and experience to ensure
the Board is effective in discharging its
responsibilities.
Activities of the Committee during the year
The Committee met twice during the year for the
purposes of:
• appointing an appointment sub‑committee
(chaired by the Senior Independent Non‑Executive)
for the purposes of overseeing the search for a
potential successor to the outgoing Chairman;
A further meeting was held post year‑end for the
purposes of:
• considering the contributions made by the individual
Directors prior to recommending their re‑election at
the AGM, taking account of the outputs from internal
Board Performance Evaluation exercise carried out
during the year;
• discussing the appropriate role specification
and skills required for the appointment of a
new Chairman;
• considering the re‑appointment of the Senior
Independent Director;
• proposing the election of the new Chairman by
• considering and accepting the appointment of
shareholders; and
the Chairman (Elect)/Independent Non‑Executive
Director; and
• ensuring the provision of a tailored induction plan
for the new Chairman.
• reviewing the composition and chairmanship of the
Board sub‑committees.
No Committee member participated in any discussion
relating to their personal position.
McBride plc
Annual Report and Accounts 2016
59
Main duties:
• to review the structure, size and composition of the
Board, including diversity considerations;
• to consider and recommend the nomination of
candidates for appointment as Directors;
• to consider the roles and capabilities required for
each new appointment taking into account the skills
and experience with the existing Directors; and
• to ensure that new appointees are provided with
detailed and appropriate induction training.
Terms of Reference
• These are governed by a Charter which was
reviewed during the year. No substantive changes
were recommended this year. A copy of the Terms
of Reference is available on the Group’s website at
www.mcbride.co.uk.
Attendance at meetings year ended 30 June 2016
The Board is satisfied all members are independent Non‑Executive
Directors, with the exception of Iain Napier and John Coleman
who satisfied the independence condition on their appointment
as Non‑Executive Director in 2007 and 2016 respectively.
Number of meetings held (minimum two per year)
2
Members
Number of meetings
attended (quorum is
two members)
Member
since
John Coleman Chairman(1)
n/a 22/04/2016
Steve Hannam
Neil Harrington
Sandra Turner
Rik De Vos
Iain Napier(2)
(1) From date of joining Company.
(2) To date of leaving Company.
2 04/02/2013
2 03/01/2013
2
01/08/2011
2 02/02/2015
2
19/07/2007
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New appointment
In considering the appointment of a new Chairman,
the Committee, led by the Senior Independent Director,
assessed the range and balance of skills, experience
and knowledge required. The desired characteristics of
the new appointee were built into the role specification
and were taken into account to ensure that a cohesive
balance on the Board would be maintained whilst
also ensuring that the appropriate direction could be
provided to the business. Active consideration was
given to female appointees, with at least one candidate
included on the final list as part of the appointment
process. The proposed recruitment was also considered
in the context of the Company’s need to continue to
develop and realise its strategic plans and objectives.
The appointment was ultimately made based on
assessments against the agreed selection criteria.
The Committee used Korn Ferry as external consultants
to assist in the appointment by identifying prospective
candidates for the role. Korn Ferry are independent and
have no other connection with the Company.
John Coleman
Chairman of the Nomination Committee
7 September 2016
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McBride plc
Annual Report and Accounts 2016
Other statutory information
Reporting requirements
The Group is required to produce a Strategic report
complying with the requirements of section 414A of
the Companies Act 2006 (‘the Act’). The Group has
complied with this requirement and incorporates a
detailed review of the Group’s activities, its business
performance and developments during the year and
an indication of likely future developments on pages 1
to 27.
The corporate governance statement, as required by
Rule 7.2.1 of the Financial Conduct Authority Disclosure
and Transparency Rules, is set out on pages 32 to 63 of
the Corporate governance report and forms part of the
Directors’ report.
For the purposes of DTR 4.1.5R(2) and DTR 4.1.8R the
Directors’ report is the management report.
For the purposes of LR 9.8.4CR, the information
required to be disclosed can be found in the
following locations:
Section Topic
Location
Group results
The results for the year are set out in the Consolidated
income statement on page 70 and a discussion of the
Group’s financial performance and progress are set out
in the Strategic report.
Payments to shareholders
The Company intends that, for the foreseeable future,
all payments to shareholders will be made by the
issue of non‑cumulative redeemable preference shares
(‘B Shares’).
Subject to shareholder approval to renew the B Share
scheme at the AGM, the Board is recommending the
allotment of 24 B Shares (equivalent to 2.4 pence) per
ordinary share held (2015: 1.9p), giving a total allotment
for the year of 36 B Shares (equivalent to 3.6 pence) per
ordinary share (2015: 3.6p). Further details of payments
to shareholders are shown in note 12 to the consolidated
financial statements on pages 88 and 89.
Directors
The Directors who held office during the year were:
Interest capitalised
Not applicable
Directors
Role
Not applicable
John Coleman
Chairman Elect
(appointed 22 April 2016)
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Publication of
unaudited financial
information
Details of long‑term
incentive schemes
Remuneration report,
page 48
Waiver of emoluments
by a director
Not applicable
Waiver of future
emoluments by a
director
Not applicable
Non pre‑emptive issues
of equity for cash
Not applicable
Item (7) in relation
to major subsidiary
undertakings
Parent participation in
a placing by a listed
subsidiary
Contracts of
significance
Provision of services
by a controlling
shareholder
Shareholder waivers of
dividends
Shareholder waivers of
future dividends
Agreements
with controlling
shareholders
Not applicable
Not applicable
Other statutory
information section
page 63
Not applicable
Not applicable
Not applicable
Not applicable
Rik J P D A De Vos
Chief Executive Officer
Chris I C Smith
Chief Finance Officer
Steve J Hannam
Neil S Harrington
Sandra Turner
Iain J G Napier
Senior Independent
Non‑Executive Director
Independent
Non‑Executive Director
Independent
Non‑Executive Director
Chairman
(resigned 30 June 2016)
Biographical details of the Directors appear on pages 30
and 31. Information on the Directors’ remuneration and
service contracts is given in the Remuneration report on
pages 44 to 57.
Directors and their interests
The beneficial interests of the Directors in the share
capital of the Company are shown in the Remuneration
report on page 56.
Related party transactions
Except for Directors’ service contracts, the Company
did not have any material transactions or transactions
of an unusual nature with, and did not make loans to,
related parties in the periods in which any Director,
is or was, materially interested.
McBride plc
Annual Report and Accounts 2016
61
A director of a company who is in any way interested
in a contract or proposed contract with the Company
is to declare the nature of their interest at a meeting of
the Directors of the Company. The definition of ‘interest’
includes the interests of spouses, children, companies
and trusts. The Act also requires that a director must
avoid a situation where a director has, or could have,
a direct or indirect interest that conflicts, or possibly
may conflict, with the Company’s interests. The Act
allows directors of public companies to authorise such
conflicts, where appropriate, if a company’s articles of
association so permit; the Company’s Articles do permit
such authorisation.
Indemnification of Directors
In accordance with the Articles, the Company has
the power (at its discretion) to grant an indemnity
to the Directors in respect of liabilities incurred as a
result of their office. In respect of those liabilities for
which Directors may not be indemnified, the Company
maintained a directors’ and officers’ liability insurance
policy throughout the period.
Although their defence costs may be met, neither the
Company’s indemnity nor the insurance policy provides
cover in the event that the Director is proved to have
acted fraudulently or dishonestly. The Company is
also permitted to advance costs to Directors for their
defence in investigations or legal actions.
There have been no qualifying indemnity provisions or
qualifying pension scheme indemnity provisions in force
either during the year or up to the date of approval of
the Directors’ report.
Employment policies/employees
The Group employed an average of 4,616 people during
the year ended 30 June 2016.
Involvement of employees
Employees are key to the Company’s success and we
rely on a committed workforce to help us achieve our
business objectives.
Employees are encouraged to operate in an open
environment, embracing teamwork and aligning
personal development with the strategy of the business.
We are keen to engage our employees by providing
an environment where they can contribute their own
ideas and challenge those of others. We are committed
to involving employees and we consider that good
communication helps to achieve this. All sites have
regular briefings, listening groups and newsletters which
are designed to keep colleagues informed of, amongst
other things, the financial and economic factors that
affect the Company’s performance. Members of the
ELT regularly visit sites and attend our Management
Development Programmes for open questioning
from employees and to encourage two‑way dialogue.
We recognise the importance of communication
at, and across, all levels of the business and regular
announcements from the Chief Executive Officer are
published which update employees on the Group’s
performance and reports progress against key priorities
and projects.
Most sites are actively engaged in involvement
initiatives to allow all employees to understand and
relate to our business goals. Many sites also hold
open days to allow employees’ families to see the
environment in which their family members work.
Reward and recognition
Eligible employees participate in performance‑related
bonus schemes and some senior management
participate in an LTIP. We respect the right of employees
to join trade unions and appropriate representative
bodies where they choose to do so. We have in place
formal arrangements with recognised national unions
where this is deemed appropriate and Partnerships
or Works Councils (joint management/employee
consultation groups) operate at all UK and other
facilities in Europe. During the year a European Works
Council was also established to provide a Group‑wide
platform for employee engagement and information
sharing. Where these arrangements include nomination
of employee representatives, they are not discriminated
against and they are allowed reasonable time and
facilities to carry out their representative duties.
Employment of disabled persons
We aim to provide a supportive working environment
and to offer terms and conditions of service which
allow disabled people with the necessary skills and
qualifications to obtain employment with the Group.
If employees become disabled during the course of
their employment, they will continue to be employed,
wherever practicable in the same job. If this is not
practicable, every effort is made to find and provide
appropriate retraining and redeployment. Disabled
people are afforded equal opportunities in recruitment
and promotion and full and fair consideration is given
to providing opportunities for training and development
of people with disabilities according to their skills
and capabilities.
Equal opportunities
It is our policy to ensure equal opportunity in
recruitment, selection, promotion, employee
development, training and reward policies and we
have an equal opportunities and diversity policy in
place which is monitored through the HR function. It
is a key objective to ensure that successful candidates
for appointment and promotion are selected taking
account of individual ability, skills and competencies
without regard to age, gender, race, religion, disability
or sexual orientation.
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McBride plc
Annual Report and Accounts 2016
Other statutory information
continued
Political donations
It is the Group’s policy not to make political donations
and no such donations were made during the year
(2015: nil).
Environment and greenhouse gas
emissions reporting
The Group recognises the importance of responsible
environmental management and its obligations to
protect the environment. The Group, therefore, gives
high priority to all environmental matters relevant
to its business. Further information appears in the
Corporate responsibility section on pages 25 to 27 and
in the separate Sustainability Report available from the
Group’s website at www.mcbride.co.uk.
The Group is required to state the annual quantity
of emissions in tonnes of carbon dioxide equivalent
from activities for which the Group is responsible,
including the combustion of fuel and the operation of
any facility. Details of our emissions during the year
ended 30 June 2016 are set out in our in the Corporate
responsibility section.
Research and development
The Group recognises the importance of investing in
research and development which brings new product
development support for its customers, research into
new products and materials and further development
of existing products. Research and development
expenditure in the year was £8.1 million (2015: £6.5m).
Financial instruments
Information on the Group’s financial risk management
objectives, policies and activities and on the exposure
of the Group to relevant risks in respect of financial
instruments is set out in note 21 to the consolidated
financial statements on pages 94 to 99.
Share capital
Details of the Company’s share capital are shown in
note 26 to the consolidated financial statements on
page 105.
The ordinary shares of the Company carry equal
rights to dividends, voting and return of capital on the
winding up of the Company. There are no restrictions
on the transfer of securities in the Company (other than
following service of a notice under section 793 of the
Act) and there are no restrictions on any voting rights
or deadlines, other than those prescribed by law, nor
is the Company aware of any arrangements between
holders of its shares which may result in restrictions on
the transfer of securities or on voting rights. Participants
in employee share schemes have no voting or other
rights in respect of the shares subject to those awards
until the allocations are exercised, at which time the
shares rank pari passu in all respects with shares already
in issue. No such schemes have any rights with regard to
control of the Company.
The holders of B Shares have equal rights to a
preferential dividend and return of capital on the
winding up of the Company, and are entitled to redeem
such B Shares if the Directors believe it is appropriate.
They are not entitled to attend, speak or vote at general
meetings, except on a resolution relating to the winding
up of the Company. The B Shares are not admitted to
the Official List nor are they traded on the London Stock
Exchange or any other recognised trading exchange.
Share repurchases
At the 2015 AGM, shareholder approval was granted
to allow the Company to repurchase up to 18,221,000
ordinary shares. The existing authority will expire on
the date of the 2016 AGM, when the Directors will be
seeking authority from shareholders to buy back shares
which will be cancelled or may be held as treasury
shares for the purpose of meeting obligations under
LTIP and employee share schemes.
At the beginning of the financial year, the Company held
630,992 ordinary shares as treasury shares and during
the financial year no ordinary shares were repurchased.
At the end of the year, 630,992 shares were held as
treasury shares.
Substantial shareholdings
The Company had been notified of the following interests amounting to 3% or more of its issued share capital as at
the end of the financial year and at 25 August 2016 (being the last practical date prior to the date of this report).
Shareholder
Delta Lloyd Asset Management
River & Mercantile Asset Management
BlackRock Investment Mgt (UK)
J O Hambro Capital Management
Copper Rock Capital Partners
Teleios Capital Partners GmbH
Henderson Global Investors
JP Morgan Asset Management
Fidelity Worldwide Investment
Schroder Investment Mgt
Miton Asset Management Limited
Brandes Investment Partners
All the above are institutional holders.
As at
25 August 2016
Number
of shares
14,794,290
12,538,418
10,038,744
9,332,328
9,052,477
8,829,089
8,742,765
8,532,690
8,429,127
7,707,464
5,608,818
%
8.09
6.86
5.49
5.10
4.95
4.83
4.78
4.67
4.61
4.22
3.07
1,640,000
0.90
As at
30 June 2016
Number
of shares
14,310,290
13,238,418
9,966,141
8,877,948
7,021,445
6,044,543
8,763,670
7,139,690
9,115,036
7,536,244
5,426,593
7,518,764
%
7.83
7.24
5.45
4.86
3.84
3.31
4.79
3.90
4.99
4.12
2.97
4.11
McBride plc
Annual Report and Accounts 2016
63
Significant agreements/takeovers directive
There are a number of agreements that take effect,
alter or terminate upon a change of control of the Group
such as commercial contracts, bank loan agreements
and employee share schemes. Other than bank loan
agreements, none of these are deemed to be significant
in terms of their potential impact on the business of the
Group as a whole in the event of a change of control.
Articles of Association
The Articles give power to the Board to appoint
Directors, but also require Directors to retire and submit
themselves for election at the first AGM following
their appointment. Specific information regarding the
re‑election of Directors is contained in the Corporate
governance section on page 32.
The Articles place a general prohibition on a Director
voting in respect of any contract or arrangement in
which they have a material interest other than by virtue
of their interest in shares in the Company.
The Board may exercise all the powers of the Company
subject to the provisions of relevant statutes and the
Articles. The Articles, for instance, contain specific
provisions and restrictions regarding the Company’s
power to borrow money and to the issuing of shares.
A copy of the Articles is available from the Group’s
website at www.mcbride.co.uk.
Going concern
The Group’s business activities, together with the
factors likely to affect its future development,
performance and position, are set out in the Strategic
report. The financial position of the Group, its cash
flows, liquidity position and borrowing facilities are
described in the Executive review on page 12. In
addition, note 21 to the financial statements includes the
Group’s objectives, policies and processes for managing
its capital; its financial risk management objectives;
details of its financial instruments and hedging
activities; and its exposures to credit and liquidity risks.
The Group meets its funding requirements through
internal cash generation and bank credit facilities, most
of which are committed until April 2019 as described
in note 21 to the financial statements. The Group’s
forecasts and projections, taking account of reasonably
possible changes in trading performance, show that
the Group will be able to operate comfortably within its
current bank facilities.
The Group has a relatively conservative level of debt
to earnings. As a result, the Directors believe that
the Group is well placed to manage its business risks
successfully despite the current uncertain economic
outlook. After making enquiries, the Directors have
a reasonable expectation that the Company and
the Group have adequate resources to continue in
operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern
basis in preparing the financial statements.
Viability statement
The Viability statement can be found on page 24 of the
Strategic report.
Directors’ statement regarding disclosure of
information to auditor
The Directors who held office at the date of approval
of this Directors’ report confirm that, so far as they are
each aware, there is no relevant audit information of
which the Company’s auditor is unaware. Each Director
has taken all the steps he or she ought to have taken
as a director to make himself or herself aware of any
relevant audit information (that is, information needed
by the auditor in connection with preparing their report)
and to establish that the Company’s auditor is aware of
that information.
Annual General Meeting
The notice convening the Company’s 2016 AGM at its
Central Park office at Northampton Road, Manchester
M40 5BP on 24 October 2016 at 2.30pm is set out in a
separate document issued to shareholders.
The Annual Report and Accounts for the year ended
30 June 2016 is available from the Group’s website at
www.mcbride.co.uk or can be obtained free of charge
from the Company’s registered office.
Independent auditor
On the recommendation of the Audit Committee, in
accordance with section 489 of the Act, resolutions
are to be proposed at the AGM for the re‑appointment
of PricewaterhouseCoopers LLP as auditor of the
Company and to authorise the Board to fix their
remuneration. The remuneration of the auditor for the
year ended 30 June 2016 is fully disclosed in note 7 to
the consolidated financial statements on page 84.
Signed by order of the Board
Carole Barnet
Company Secretary
7 September 2016
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McBride plc
Annual Report and Accounts 2016
Statement of Directors’
responsibilities
The Directors are responsible for the maintenance
and integrity of the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors consider that the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Company’s performance,
business model and strategy.
Each of the Directors, whose names and functions are
listed in the Other statutory information section of
the Annual Report confirm that, to the best of their
knowledge:
• the Group financial statements, which have been
prepared in accordance with IFRS as adopted by the
EU, give a true and fair view of the assets, liabilities,
financial position and profit of the Group; and
• the Strategic report on pages 1 to 27 includes a fair
review of the development and performance of the
business and the position of the Group, together with
a description of the principal risks and uncertainties
that it faces.
The Directors are responsible for preparing the Annual
Report, the Remuneration report and the Group and
parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group and parent Company
financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the
EU and have elected to prepare the parent Company
financial statements in accordance with UK Accounting
Standards and applicable law (UK Generally Accepted
Accounting Practice). Under Company law the Directors
must not approve the financial statements unless they
are satisfied that they give a true and fair view of the
state of affairs of the Group and the parent Company
and of the profit or loss of the Group and parent
Company for that period. In preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable IFRS as adopted by the
EU have been followed, subject to any material
departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Company and the Group and enable them to ensure
that the financial statements and the Remuneration
report comply with the Companies Act 2006 and,
as regards the Group financial statements, Article 4
of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
Welcome to our
financial statements
McBride plc
Annual Report and Accounts 2016
65
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Group financial statements
Company financial statements
Independent auditors’ report
66
Independent auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Reconciliation of net cash flow to movement
in net debt
Consolidated statement of changes in equity
Notes to the consolidated financial statements
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71
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75
Company balance sheet
Company statement of changes in equity
Notes to the Company financial statements
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McBride plc
Annual Report and Accounts 2016
Independent auditors’ report
to the members of McBride plc
Report on the group financial statements
Our opinion
In our opinion, McBride plc’s group financial statements
(the “financial statements”):
• give a true and fair view of the state of the group’s
affairs as at 30 June 2016 and of its profit and cash flows
for the year then ended;
• have been properly prepared in accordance with
International Financial Reporting Standards (“IFRSs”) as
adopted by the European Union; and
• have been prepared in accordance with the requirements
of the Companies Act 2006 and Article 4 of the IAS
Regulation.
What we have audited
• The financial statements, included within the Annual
Report and Accounts (the “Annual Report”), comprise:
Our audit approach
Overview
• Overall group materiality: £3 million which represents
0.4% of total revenues as disclosed within the
consolidated income statement.
• We conducted our audit work for both Household and
PCA in two key locations. Audit work for Corporate was
done in the UK.
• We performed specific audit work over accounts
receivable in Italy.
• The territories where we conducted audit work, together
with audit work performed at shared service centres and
Group level, accounted for approximately 75% of the
group’s revenue.
Areas of focus
• Risk of impairment of goodwill and property plant and
• the consolidated balance sheet as at 30 June 2016;
equipment.
• the consolidated income statement and consolidated
statement of comprehensive income for the year then
ended;
• the consolidated cash flow statement for the year then
ended;
• the consolidated statement of changes in equity for the
year then ended; and
• the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere
in the Annual Report, rather than in the notes to the
financial statements. These are cross‑referenced from the
financial statements and are identified as audited.
The financial reporting framework that has been applied
in the preparation of the financial statements is IFRSs as
adopted by the European Union, and applicable law.
• Fraud in revenue recognition (including trade allowances
and discounts).
The scope of our audit and our areas of focus
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
(“ISAs (UK & Ireland)”).
We designed our audit by determining materiality and
assessing the risks of material misstatement in the
financial statements. In particular, we looked at where
the directors made subjective judgements, for example in
respect of significant accounting estimates that involved
making assumptions and considering future events that
are inherently uncertain. As in all of our audits we also
addressed the risk of management override of internal
controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material
misstatement due to fraud.
The risks of material misstatement that had the greatest
effect on our audit, including the allocation of our resources
and effort, are identified as “areas of focus” in the table
below. We have also set out how we tailored our audit to
address these specific areas in order to provide an opinion
on the financial statements as a whole, and any comments
we make on the results of our procedures should be read in
this context. This is not a complete list of all risks identified
by our audit.
Area of focus
How our audit addressed the area of focus
Fraud in revenue recognition (including
trade allowances and discounts)
ISAs (UK & Ireland) presume there is a risk of fraud in revenue
recognition because of the pressure management may feel to
achieve the planned results.
In the consumer products industry, rebate agreements with
customers (typically retailers) are common. We identified
this as an area where possible fraud in revenue recognition
could occur, particularly in relation to the accruals at
the year‑end which had not been settled in cash. Whilst
rebates are relatively small in the context of McBride’s
revenue, they are inherently complex, non standardised
and require management judgement to interpret
contractual arrangements.
We agreed rebates recognised to supporting evidence and
underlying data to check they were appropriately calculated
and accounted for. We focused on the period in which the
rebate was recorded and in particular the appropriateness of
the accrual at the year end. We noted no significant issues in
our audit work.
Furthermore we used computer assisted auditing techniques
in order to test revenue and tested a selection of journals
which impacted revenue. No significant issues were identified
from this audit work.
McBride plc
Annual Report and Accounts 2016
67
Area of focus
How our audit addressed the area of focus
Risk of impairment of goodwill and property
plant and equipment
Goodwill of £17.5m primarily relates to the UK sites. This was a
focus given the recent restructuring in the UK.
We focused on this area because the determination of
whether or not an impairment is necessary involves significant
judgement. This judgement includes estimation about future
results of the business and assessment of future plans for the
Group. This is particularly judgemental at the current time, as
the business is currently undergoing a strategic review. This
introduces further uncertainty unpredictability into future
forecasts which could impact the impairment assessment.
The impairment assessment was performed at the Cash
Generating Unit level, which was defined as an individual site.
We evaluated management’s impairment calculations for
all sites, assessing future cash flow forecasts used in the
models, and the process by which they were drawn up,
including comparing them to the latest budgets, and testing
the underlying calculations and assumptions. We noted that
management’s assessments were generally prudent.
We challenged:
•
•
long term growth rates in the forecasts by comparing
them to historical results, future plans for the business and
economic and industry forecasts;
forecast revenue, costs and margins estimated for the short
term cash flows;
• the discount rate by assessing the cost of capital for the
Company and comparable organisations; and
• other assumptions underpinning the forecasts, such as
working capital movements.
We found the long term growth rates in the forecasts to be
prudent, and that forecasted revenue, costs and margins
were appropriate based on historical trends, current market
information, the strategic review and future plans for the
business. We noted no significant issues in the discount rate
applied or the other assumptions.
We also performed sensitivity analysis around the key
assumptions in the cash flow forecasts, including revenue
growth and expected changes in margins. Having ascertained
the extent of change in those assumptions that either
individually or collectively would be required for the goodwill
and property plant and equipment to be impaired, we
considered the likelihood of such a movement in these key
assumptions arising and determined that it was unlikely.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account
the geographic structure of the group, the accounting
processes and controls, and the industry in which the
Group operates.
The Group is a European provider of private label
household and personal care products. It has production
capability in 11 countries plus a sourcing office in Hong
Kong and a sales office in Australia.
The Group is structured in three segments – household,
personal care and corporate. The Group financial
statements are a consolidation of all reporting units within
these segments comprising the Group’s operating business
and centralised functions.
In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed
at the reporting units by us, as the Group engagement
team, or component auditors operating under our
instruction. Where the work was performed by component
auditors, we determined the level of involvement we
needed to have in the audit work at those reporting units
to be able to conclude whether sufficient appropriate audit
evidence had been obtained as a basis for our opinion on
the Group financial statements as a whole.
We conducted our audit work in two key locations: UK,
and Belgium which covered elements across the UK,
France, Belgium and Germany, whereby audit work over
France, Belgium and Germany was performed in the UK and
Belgium. We performed specific audit work over accounts
receivable in Italy.
The territories where we conducted audit work, together
with audit work performed at shared service centre
and Group level, accounted for approximately 75% of
total revenues as disclosed within the consolidated
income statement.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and
in evaluating the effect of misstatements, both individually
and on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
Overall group materiality £3 million (2015: £3 million).
How we determined it 0.4% of total revenues as disclosed
within the consolidated income statement.
Rationale for benchmark applied Consistent with last
year, we applied this benchmark as we believe that revenue
is the most relevant measure of recurring performance.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
£0.15 million (2015: £0.15 million) as well as misstatements
below that amount that, in our view, warranted reporting
for qualitative reasons.
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McBride plc
Annual Report and Accounts 2016
Independent auditors’ report continued
to the members of McBride plc
Going concern
Under the Listing Rules we are required to review the
directors’ statement, set out on page 63, in relation
to going concern. We have nothing to report having
performed our review.
Under ISAs (UK & Ireland) we are required to report to you
if we have anything material to add or to draw attention to
in relation to the directors’ statement about whether they
considered it appropriate to adopt the going concern basis
in preparing the financial statements. We have nothing
material to add or to draw attention to.
As noted in the directors’ statement, the directors have
concluded that it is appropriate to adopt the going
concern basis in preparing the financial statements.
The going concern basis presumes that the group has
adequate resources to remain in operation, and that the
directors intend it to do so, for at least one year from the
date the financial statements were signed. As part of our
audit we have concluded that the directors’ use of the
going concern basis is appropriate. However, because not
all future events or conditions can be predicted, these
statements are not a guarantee as to the group’s ability to
continue as a going concern.
Other required reporting
Consistency of other information
Companies Act 2006 reporting
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
In our opinion, the information given in the Corporate Governance Statement set out in pages 32 to 63 with respect to internal
control and risk management systems and about share capital structures is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you
if, in our opinion:
We have no exceptions to report.
•
information in the Annual Report is:
– materially inconsistent with the information in the
audited financial statements; or
– apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the group
acquired in the course of performing our audit; or
– otherwise misleading.
• the statement given by the directors on page 64, in
accordance with provision C.1.1 of the UK Corporate
Governance Code (the “Code”), that they consider the
Annual Report taken as a whole to be fair, balanced and
understandable and provides the information necessary for
members to assess the group’s position and performance,
business model and strategy is materially inconsistent
with our knowledge of the group acquired in the course of
performing our audit.
• the section of the Annual Report on pages 40 to
43, as required by provision C.3.8 of the Code,
describing the work of the Audit Committee does not
appropriately address matters communicated by us to
the Audit Committee.
We have no exceptions to report.
We have no exceptions to report.
The directors’ assessment of the prospects of the group and of the principal risks that would
threaten the solvency or liquidity of the group
Under ISAs (UK & Ireland) we are required to report to you
if we have anything material to add or to draw attention to
in relation to:
• the directors’ confirmation on pages 22 to 24 of the
Annual Report, in accordance with provision C.2.1 of the
Code, that they have carried out a robust assessment of
the principal risks facing the group, including those that
would threaten its business model, future performance,
solvency or liquidity.
We have nothing material to add or to draw attention to.
• the disclosures in the Annual Report that describe those
risks and explain how they are being managed or mitigated.
We have nothing material to add or to draw attention to.
McBride plc
Annual Report and Accounts 2016
69
The directors’ assessment of the prospects of the group and of the principal risks that would
threaten the solvency or liquidity of the group continued
We have nothing material to add or to draw attention to.
• the directors’ explanation on page 24 of the Annual
Report, in accordance with provision C.2.2 of the
Code, as to how they have assessed the prospects of
the group, over what period they have done so and
why they consider that period to be appropriate, and
their statement as to whether they have a reasonable
expectation that the group will be able to continue
in operation and meet its liabilities as they fall due
over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust assessment
of the principal risks facing the group and the directors’ statement in relation to the longer‑term viability of the group. Our
review was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’
process supporting their statements; checking that the statements are in alignment with the relevant provisions of the Code;
and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our
audit. We have nothing to report having performed our review.
Adequacy of information and explanations received
Under the Companies Act 2006 we are required to report
to you if, in our opinion, we have not received all the
information and explanations we require for our audit. We
have no exceptions to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have no
exceptions to report arising from this responsibility.
Corporate governance statement
Under the Companies Act 2006 we are required to report
to you if, in our opinion, a corporate governance statement
has not been prepared by the parent company. We have no
exceptions to report arising from this responsibility.
Under the Listing Rules we are required to review the part
of the Corporate Governance Statement relating to ten
further provisions of the Code. We have nothing to report
having performed our review.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’
responsibilities set out on page 64, the directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and
ISAs (UK & Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical Standards for
Auditors.
This report, including the opinions, has been prepared for
and only for the parent company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free
from material misstatement, whether caused by fraud or
error. This includes an assessment of:
• whether the accounting policies are appropriate to
the group’s circumstances and have been consistently
applied and adequately disclosed;
• the reasonableness of significant accounting estimates
made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non‑financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements and
to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Other matter
We have reported separately on the parent company
financial statements of McBride plc for the year ended
30 June 2016 and on the information in the Directors’
Remuneration Report that is described as having been
audited.
David Beer (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
St Albans
7 September 2016
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McBride plc
Annual Report and Accounts 2016
Consolidated income statement
for the year ended 30 June 2016
2016
2015
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative costs
Operating profit
Finance costs
Profit before taxation
Taxation
Profit/(loss) for the year attributable
to the owners of the Parent
Earnings per ordinary share
Basic
Diluted
Operating profit
Adjusted for:
Amortisation of intangible assets
Exceptional items
Adjusted operating profit
(437.1)
243.8
(46.5)
(161.1)
36.2
(6.8)
29.4
(9.2)
Adjusting
items
Adjusted (see note 11)
£m
£m
Note
Adjusting
items
Adjusted (see note 11)
£m
£m
Total
£m
4
680.9
—
—
—
—
680.9
704.2
(437.1)
(460.5)
243.8
243.7
(46.5)
(48.0)
—
—
—
—
Total
£m
704.2
(460.5)
243.7
(48.0)
(3.3)
(164.4)
(167.2)
(18.8)
(186.0)
(3.3)
(0.3)
(3.6)
0.4
32.9
(7.1)
25.8
(8.8)
28.5
(18.8)
(6.8)
21.7
(6.5)
(0.3)
(19.1)
3.2
9.7
(7.1)
2.6
(3.3)
20.2
(3.2)
17.0
15.2
(15.9)
(0.7)
9.3p
9.3p
32.9
0.9
2.4
36.2
(0.4p)
(0.4p)
9.7
1.0
17.8
28.5
8
9
10
11
14
5
4
Consolidated statement of comprehensive income
for the year ended 30 June 2016
Profit/(loss) for the year attributable to owners of the Parent
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Note
2016
£m
17.0
2015
£m
(0.7)
Currency translation differences on foreign subsidiaries
12.0
(17.6)
(Loss)/gain on net investment hedges
Gain on cash flow hedges in the year
Loss on cash flow hedges transferred to profit or loss
Taxation relating to items above
Items that will not be reclassified to profit or loss:
Net actuarial loss on post‑employment benefits
Taxation relating to item above
Total other comprehensive income/(expense)
Total comprehensive income/(expense)
10
23
10
(10.4)
12.4
(10.3)
(0.6)
3.1
(2.6)
(0.4)
(3.0)
0.1
17.1
16.4
11.2
(6.7)
(3.0)
0.3
(2.1)
0.4
(1.7)
(1.4)
(2.1)
Consolidated balance sheet
at 30 June 2016
McBride plc
Annual Report and Accounts 2016
71
Non‑current assets
Goodwill
Other intangible assets
Property, plant and equipment
Derivative financial instruments
Deferred tax assets
Other non‑current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets classified as held for sale
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Non‑current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Pensions and other post‑employment benefits
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium account
Other reserves
Accumulated loss
Equity attributable to owners of the Parent
Non‑controlling interests
Total equity
Note
13
14
15
21
10
16
17
21
18
19
20
21
25
19
20
21
23
25
10
26
26
26
26
2016
£m
17.5
2.5
2015
£m
17.7
2.0
136.2
129.8
12.7
9.3
0.5
9.9
11.1
0.5
178.7
171.0
75.7
135.7
2.6
24.8
1.2
240.0
418.7
181.7
30.3
1.2
2.9
3.5
66.8
132.5
1.7
23.3
1.1
225.4
396.4
172.6
35.1
1.8
3.7
4.8
219.6
218.0
2.3
85.4
—
32.9
2.9
6.5
130.0
349.6
69.1
18.3
96.7
44.4
0.4
80.6
0.1
31.4
3.2
5.2
120.9
338.9
57.5
18.3
102.4
35.5
(90.9)
(99.3)
68.5
0.6
69.1
56.9
0.6
57.5
The financial statements on pages 70 to 106 were approved by the Board of Directors on 7 September 2016 and were
signed on its behalf by:
Rik De Vos
Director
Chris Smith
Director
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McBride plc
Annual Report and Accounts 2016
Consolidated cash flow statement
for the year ended 30 June 2016
Operating activities
Profit before tax
Net finance costs
Exceptional items
Share‑based payments charge
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating cash flow before changes in working capital
Decrease/(increase) in receivables
Increase in inventories
(Decrease)/increase in payables
Operating cash flow after changes in working capital
Additional cash funding of pension schemes
Cash generated from operations before exceptional items
Cash outflow in respect of exceptional items
Cash generated from operations
Interest paid
Taxation paid
Net cash generated from operating activities
Investing activities
Proceeds from sale of non‑current assets
Purchase of property, plant and equipment
Purchase of intangible assets
Settlement of derivatives used in net investment hedges
Net cash used in investing activities
Financing activities
Redemption of B Shares
Drawdown of borrowings
Repayment of borrowings
Capital element of finance lease rentals
Net cash used in financing activities
Decrease in net cash and cash equivalents
Net cash and cash equivalents at the start of the year
Currency translation differences
Net cash and cash equivalents at the end of the year
Note
9
5
15
14
14
2016
£m
25.8
7.1
2.4
1.8
18.2
0.9
56.2
11.0
(1.5)
(10.1)
55.6
(3.1)
52.5
(4.2)
48.3
(5.2)
(8.2)
34.9
0.1
(11.5)
(1.3)
(2.5)
2015
£m
2.6
7.1
17.8
—
19.6
1.0
48.1
(3.6)
(5.5)
7.8
46.8
(2.6)
44.2
(10.7)
33.5
(5.7)
(6.9)
20.9
0.2
(21.2)
(0.7)
3.1
(15.2)
(18.6)
12
(5.8)
(8.7)
131.2
103.4
(145.3)
(107.7)
(0.1)
(20.0)
(0.3)
23.3
1.8
24.8
(0.1)
(13.1)
(10.8)
35.3
(1.2)
23.3
Reconciliation of net cash flow to movement in net debt
for the year ended 30 June 2016
McBride plc
Annual Report and Accounts 2016
73
Decrease in net cash and cash equivalents
Net repayment of bank loans and overdrafts
Capital element of finance lease rentals
Change in net debt resulting from cash flows
Inception of finance lease rentals
Currency translation differences
Movement in net debt in the year
Net debt at the beginning of the year
Net debt at the end of the year
Note
2016
£m
2015
£m
(0.3)
(10.8)
14.1
0.1
13.9
—
(12.4)
1.5
(92.4)
(90.9)
4.3
0.1
(6.4)
(0.4)
(0.9)
(7.7)
(84.7)
(92.4)
22
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McBride plc
Annual Report and Accounts 2016
Consolidated statement of changes in equity
for the year ended 30 June 2016
Share
premium
account
£m
Other reserves
Currency
translation
reserve
£m
Cash flow
hedge
reserve
£m
Capital
redemption Accumulated
loss
£m
reserve
£m
Equity
attributable
to owners
of the
Parent
£m
Non‑
controlling
interests
£m
111.5
(5.8)
(1.1)
33.4
(88.3)
68.0
0.6
Issued
share
capital
£m
18.3
Total
equity
£m
68.6
—
—
—
—
—
(0.7)
(0.7)
—
(0.7)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(9.1)
—
—
—
—
11.2
(6.7)
(0.7)
3.8
—
—
—
3.8
3.8
—
—
—
(17.6)
16.4
—
—
(2.3)
(3.5)
—
—
—
(3.5)
(3.5)
—
—
—
18.3
102.4
(2.0)
(4.6)
—
—
—
—
—
—
—
—
—
—
—
—
8.7
—
42.1
—
—
—
—
—
—
(2.1)
0.4
(1.7)
(1.7)
(2.4)
—
(8.7)
0.1
(99.3)
(17.6)
16.4
11.2
(6.7)
(3.0)
0.3
(2.1)
0.4
(1.7)
(1.4)
(2.1)
(9.1)
—
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
56.9
0.6
(17.6)
16.4
11.2
(6.7)
(3.0)
0.3
(2.1)
0.4
(1.7)
(1.4)
(2.1)
(9.1)
—
0.1
57.5
—
—
—
—
—
17.0
17.0
—
17.0
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(5.7)
—
—
—
—
12.4
(10.3)
(0.6)
1.5
—
—
—
1.5
1.5
—
—
—
12.0
(10.4)
—
—
—
1.6
—
—
—
1.6
1.6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5.8
—
—
—
—
—
—
—
(2.6)
(0.4)
(3.0)
(3.0)
14.0
—
(5.8)
0.2
18.3
96.7
(0.5)
(3.0)
47.9
(90.9)
12.0
(10.4)
12.4
(10.3)
(0.6)
3.1
(2.6)
(0.4)
(3.0)
0.1
17.1
(5.7)
—
0.2
68.5
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.6
12.0
(10.4)
12.4
(10.3)
(0.6)
3.1
(2.6)
(0.4)
(3.0)
0.1
17.1
(5.7)
—
0.2
69.1
At 30 June 2014
Year ended 30 June 2015
Loss for the year
Other comprehensive (expense)/income
Items that may be reclassified
to profit or loss:
Currency translation differences
on foreign subsidiaries
Gain on net investment hedges
Gain on cash flow hedges in the year
Loss on cash flow hedges
transferred to profit or loss
Taxation relating to items above
Items that will not be reclassified
to profit or loss:
Net actuarial loss on
post‑employment benefits
Taxation relating to item above
Total other comprehensive expense
Total comprehensive expense
Transactions with owners of the Parent
Issue of B Shares
Redemption of B Shares
Share‑based payments
At 30 June 2015
Year ended 30 June 2016
Profit for the year
Other comprehensive (expense)/income
Items that may be reclassified
to profit or loss:
Currency translation differences
on foreign subsidiaries
Loss on net investment hedges
Gain on cash flow hedges in the year
Loss on cash flow hedges transferred
to profit or loss
Taxation relating to items above
Items that will not be reclassified
to profit or loss:
Net actuarial loss on
post‑employment benefits
Taxation relating to item above
Total other comprehensive expense
Total comprehensive expense
Transactions with owners of the Parent
Issue of B Shares
Redemption of B Shares
Share‑based payments
At 30 June 2016
At 30 June 2016, the accumulated loss included a deduction of £0.8 million (2015: £0.8m) for the cost of own shares held
in relation to employee share schemes. Further information on own shares is presented in note 26.
Notes to the consolidated financial statements
for the year ended 30 June 2016
McBride plc
Annual Report and Accounts 2016
75
1. Basis of preparation
Description of business
McBride plc (‘the Company’) is a company incorporated
and domiciled in the United Kingdom. The Company’s
ordinary shares are listed on the London Stock Exchange.
The registered office of the Company is Middleton Way,
Middleton, Manchester M24 4DP.
The Company and its subsidiaries (together, ‘the Group’)
is Europe’s leading provider of Private Label Household
and Personal Care products, developing, producing and
supplying our products to major retailers throughout
Europe and beyond.
Segmental reporting
The Executive Leadership Team has reviewed the
implementation of the new strategy and what information
should be provided to the Board (Chief Operating Decision
Maker (CODM)). For the year ended June 2016, the
financial information is now presented to the Board by
product category for the purposes of allocating resources
within the Group and assessing the performance of the
Group’s businesses.
Accordingly, the Group’s operating segments are
determined on a category basis.
Segment information is presented in note 4.
Accounting period
The Group’s annual financial statements are drawn up to
30 June. These financial statements cover the year ended
30 June 2016 (‘2016’) with comparative amounts for the
year ended 30 June 2015 (‘2015’).
Basis of accounting
The consolidated financial statements on pages 70
to 106 have been prepared on the going concern basis
in accordance with International Financial Reporting
Standards (IFRS) as adopted for use in the European Union,
IFRS Interpretations Committee and those parts of the
Companies Act 2006 (‘the Act’) applicable to companies
reporting under IFRS. The financial statements have been
prepared under the historical cost convention, modified
in respect of the revaluation to fair value of contingent
consideration, financial assets and liabilities (derivative
financial instruments) at fair value through profit or loss
and assets held for sale.
The Group’s principal accounting policies are set out in
note 2.
Going concern
For the reasons set out on page 12, the Directors have
adopted the going concern basis in preparing the
Company’s and the Group’s financial statements.
Critical accounting judgements and estimates
(i) Background
In applying the Group’s accounting policies, the Directors
are required to make estimates and assumptions that
affect the reported amounts of its assets, liabilities,
income and expenses. Actual outcomes could differ from
those estimates and affect the Group’s results in future
years. The Directors consider the following to be the key
accounting judgements and estimates made in preparing
these financial statements that, if not borne out in practice,
may affect the Group’s results during the next financial year.
(ii) Revenue
Revenue is stated after deduction of rebates and discounts
given or expected to be given, which vary according to
contractual arrangements with individual customers.
Accrual is made at the time of sale for the estimated
rebates or discounts payable, based on, amongst other
things, expected sales to the customer during the period to
which the rebate or discount relates, historical experience
and market information.
The type of rebates and discounts given by the Group include:
• volume related rebates for achieving sales targets within
a set period; and
• promotional, marketing and other allowances to support
specific promotional pricing discounts, in‑store displays
and cost reimbursement.
At 30 June 2016, the carrying amount of accruals relating
to rebates and discounts amounted to £4.7 million
(2015: £4.5m). Rebates equate to less than 3% of revenue.
There is an element of judgement applied to the level of
achieved sales within volume‑related rebates.
(iii) Impairment of long‑lived assets
Impairment testing requires management to estimate
the recoverable amount of an asset or group of assets.
Recoverable amount represents the higher of value in use
and fair value less costs to sell.
Value in use represents the net present value of the cash
flows expected to arise from an asset or group of assets
and its calculation requires management to estimate those
cash flows and to apply a suitable discount rate to them.
Cash flows are estimated by applying assumptions to
budget sales, production costs and overheads over a
five‑year forecast period and by applying a perpetuity
growth rate to the forecast cash flow in the fifth year.
Cash flows are discounted using a discount rate based on
the Group’s weighted average cost of capital adjusted for
risks specific to the asset or group of assets. The weighted
average cost of capital is affected by estimates of interest
rates, equity returns and market and country‑related risks.
At 30 June 2016, the carrying amount of long‑lived assets
was £20.0 million (2015: £19.7m). If cash flow or discount
rate assumptions were to change, further impairment losses
may be recognised in the next financial year.
The sensitivity of the carrying amount of goodwill in
relation to business is presented in note 13.
(iv) Contingent consideration
Contingent consideration payable in a business
combination is generally remeasured at each balance sheet
date and the change in its carrying amount recognised in
profit or loss. Contingent consideration payable is typically
dependent on performance conditions related to the
future revenue or profitability of the acquired business.
Considerable judgement is required in assessing the likely
future performance of the acquired business against such
performance conditions.
At 30 June 2016, the Group recognised contingent
consideration payable of £2.3 million (2015: £0.4m)
as described in note 3.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
Estimation is also required of temporary differences
between the carrying amount of assets and liabilities and
their tax base. Deferred tax liabilities are recognised for
all taxable temporary differences but, where there exist
deductible temporary differences, judgement is required as
to whether a deferred tax asset should be recognised based
on the availability of future taxable profits. At 30 June 2016,
the Group recognised deferred tax assets of £9.3 million
(2015: £11.1m), including £2.1 million (2015: £1.8m) in respect
of tax losses and tax credits. Deferred tax assets amounting
to £6.0 million (2015: £8.5m) were not recognised in
respect of tax losses and tax credits carried forward. It is
possible that the deferred tax assets actually recoverable
may differ from the amounts recognised if actual taxable
profits differ from estimates.
At 30 June 2016, deferred tax liabilities were not recognised
on retained profits of foreign subsidiaries because the
Group is able to control the remittance of those profits to
the UK and it is probable that they will not be remitted in
the foreseeable future. Income tax may be payable on those
profits if circumstances change and their remittance to the
UK can no longer be controlled by the Group or they are
actually remitted to the UK.
Use of adjusted measures
Adjusted operating profit and adjusted earnings per
share exclude specific items that are considered to hinder
comparison of the trading performance of the Group’s
businesses either year‑on‑year or with other businesses and
are used for internal performance analysis and in relation
to employee incentive arrangements. The Directors present
these measures in the financial statements in order to assist
investors in their assessment of the trading performance of
the Group.
During the periods under review, the items excluded from
operating profit in arriving at adjusted operating profit were
the amortisation of intangible assets and exceptional items.
Exceptional items are excluded from adjusted operating
profit because they are not considered to be representative
of the trading performance of the Group’s businesses
during the period.
Adjusted earnings per share is based on the Group’s profit
for the year adjusted for the items excluded from operating
profit in arriving at adjusted operating profit, the unwinding
of the discount on contingent consideration arising on
business combinations, unwind of discount on provisions
and the tax relating to those items.
‘Adjusted operating profit’ and ‘adjusted earnings per
share’ are not defined under IFRS and, therefore, these
measures as defined by the Group may not be comparable
with similarly titled measures used by other companies.
The Directors do not regard these measures as a substitute
for, or superior to, the equivalent measures calculated and
presented in accordance with IFRS.
1. Basis of preparation continued
Critical accounting judgements and estimates continued
(v) Pensions and other post employment benefits
Under IAS 19, ‘Employee Benefits’, the cost of defined
benefit schemes is determined based on actuarial
valuations that are carried out annually at the balance sheet
date. Actuarial valuations are dependent on assumptions
about the future that are made by the Directors on
the advice of independent qualified actuaries. If actual
experience differs from these assumptions, there could
be a material change in the amounts recognised by the
Group in respect of defined benefit schemes in the next
financial year.
At 30 June 2016, the present value of defined benefit
obligations was £147.0 million (2015: £137.1m). It was
calculated using a number of assumptions, including
future CPI rate changes, increases to pension benefits and
mortality rates. The present value of the benefit obligation
is calculated by discounting the benefit obligation using
market yields on high‑quality corporate bonds at the
balance sheet date.
At 30 June 2016, the fair value of the scheme assets was
£114.1 million (2015: £105.7m). The scheme assets consist
largely of securities and managed funds whose values are
subject to fluctuation in response to changes in market
conditions.
Changes in the actuarial assumptions underlying the benefit
obligation, changes in the discount rate applicable to the
benefit obligation and effects of differences between the
expected and actual return on the scheme’s assets are
classified as actuarial gains and losses and are recognised
in other comprehensive income. During 2016, the Group
recognised a net actuarial loss of £2.6 million (2015: £2.1m).
An analysis of the assumptions that will be used by the
Directors to determine the cost of the defined benefit
scheme that will be recognised in profit or loss in the next
financial year and the sensitivity of the benefit obligation to
key assumptions is presented in note 23.
(vi) Provisions
Provision is made for liabilities of uncertain timing or
amount where management considers that the Group has a
present obligation as a result of a past event, it is probable
that payment will be made to settle the liability and the
payment can be measured reliably.
At 30 June 2016, the Group held provisions amounting to
£6.4 million (2015: £8.0m), which principally represented
reorganisation and restructuring costs. Adjustment to the
amounts recognised would arise if it becomes necessary
to revise the assumptions and estimates on which the
provisions are based, if circumstances change such that
contingent liabilities must be recognised or if management
becomes aware of obligations that are currently unknown.
(vii) Taxation
The Group operates in a number of tax jurisdictions.
The Directors are required to exercise significant judgement
in determining the Group’s provision for income taxes.
Estimation is required of taxable profit in order to
determine the Group’s current tax liability and judgement
is required in situations where the Group’s tax position is
uncertain and may be subject to review and challenge by
the tax authorities.
McBride plc
Annual Report and Accounts 2016
77
2. Principal accounting policies
Accounting standards adopted during the year
The accounting policies adopted are consistent with those
of the annual financial statements for the year ended
30 June 2015, except for:
Consideration transferred in a business combination
represents the sum of the fair values at the acquisition
date of the assets given, liabilities incurred or assumed and
equity instruments issued by the Group in exchange for
control over the acquired business.
Acquisition‑related costs are charged to profit or loss in the
period in which they are incurred.
Changes in the amount of contingent consideration payable
that result from events after the acquisition date, such as
meeting a revenue or profit target, are not measurement
period adjustments and are, therefore, recognised in profit
or loss.
Any non‑controlling interest in the acquired business is
measured either at fair value or at the non‑controlling
interest’s proportionate share of the identifiable assets and
liabilities of the business.
Changes in the Group’s ownership interest in a subsidiary
that do not result in a loss of control are accounted for
within equity.
If the Group loses control of a subsidiary, it derecognises
the assets and liabilities and related equity components of
the subsidiary and measures any investment retained in the
former subsidiary at its fair value at the date when control
is lost. Any gain or loss on a loss of control is recognised in
profit or loss.
Foreign currency translation
At entity level, transactions in foreign currencies are
translated into the entity’s functional currency at the
exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated at the exchange rate ruling at the
balance sheet date. Currency translation differences arising
at entity level are recognised in profit or loss.
The Group’s presentation and functional currency
is Sterling.
On consolidation, the results of foreign operations are
translated into Sterling at the average exchange rate for
the period and their assets and liabilities are translated
into Sterling at the exchange rate ruling at the balance
sheet date. Currency translation differences arising on
consolidation are recognised in other comprehensive
income and taken to the currency translation reserve.
In the event that a foreign operation is sold, the gain or loss
on disposal recognised in profit or loss is determined after
taking into account the cumulative currency translation
differences arising on consolidation of the operation
subsequent to the adoption of IFRS.
In the cash flow statement, the cash flows of foreign
operations are translated into Sterling at the average
exchange rate for the period.
• Defined Benefit Plans: Employee Contributions
(Amendments to IAS 19); and
• Annual Improvements Projects 2012.
All of the above changes to accounting policies had no
financial effect on the consolidated financial statements for
the year ended 30 June 2016.
Basis of consolidation
The consolidated financial statements include the results,
cash flows and assets and liabilities of the Company and
its subsidiaries. Details of the Company’s subsidiaries at
30 June 2016 are set out on pages 116 and 117.
A subsidiary is an entity controlled, either directly or
indirectly, by the Company where control is the power to
govern the financial and operating policies of the entity so
as to obtain benefits from its activities. Control generally
exists where the Group owns a shareholding that gives it
more than one half of the voting rights in the entity.
A non‑controlling interest in a subsidiary represents
the share of the net assets of the subsidiary that are
attributable to the equity interests in the subsidiary that
are not owned by the Group. Non‑controlling interests are
presented in the balance sheet within equity, separately
from equity attributable to owners of the Company.
In situations where the Group is contractually committed
to purchase those equity shares in a subsidiary that it does
not already own, a non‑controlling interest in the subsidiary
is recognised only to the extent that the risks and rewards
of ownership are considered to remain with the minority
shareholders.
The Group’s results, cash flows and assets and liabilities
include those of each of its subsidiaries from the date
on which the Company obtains control until such time
as the Company loses control. Intra‑Group balances
and transactions, and any unrealised gains and losses
arising from intra‑Group transactions, are eliminated on
consolidation. Consistent accounting policies are adopted
across the Group.
Business combinations
A business combination is a transaction or other event in
which the Group obtains control of one or more businesses.
Business combinations are accounted for using the
acquisition method.
Goodwill arising in a business combination represents the
excess of the sum of the consideration transferred, the
amount of any non‑controlling interest in the acquired
business and, in a business combination achieved in
stages, the fair value at the acquisition date of the Group’s
previously held equity interest, over the net total of the
identifiable assets and liabilities of the acquired business
at the acquisition date. If the identifiable assets and
liabilities of the acquired business exceed the aggregate
of the consideration transferred, the amount of any
non‑controlling interest in the business and the fair value at
the acquisition date of any previously held equity interest,
the excess is recognised as a gain in profit or loss.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
2. Principal accounting policies continued
Revenue
Revenue from the sale of goods is measured at the invoiced
amount, net of sales rebates, discounts, value added tax
and other sales taxes.
Revenue comprises the fair value of the consideration
received or receivable for the sale of goods.
Revenue is recognised on the transfer of the risks and
rewards of ownership, which generally coincides with the
delivery of the goods to the customer.
Accruals for sales rebates and discounts are established at
the time of sale based on management’s best estimate of
the amounts payable under the contractual arrangements
with the customer.
Interest income is accrued using the effective
interest method.
Exceptional items
Exceptional items are items that are material either
individually or, if of a similar type, in aggregate and which,
due to their nature or the infrequency of the events giving
rise to them, are presented separately to assist users of the
financial statements in assessing the trading performance
of the Group’s businesses either year‑on‑year or with
other businesses.
Borrowing costs
Borrowing costs directly attributable to the construction
of a manufacturing or distribution facility are capitalised
as part of the cost of the facility if, at the outset of
construction, the facility was expected to take a substantial
period of time to get ready for its intended use.
Costs attributable to the arrangement of term borrowing
facilities are amortised over the life of those facilities.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
Goodwill
Goodwill arising in a business combination is recognised as
an intangible asset and is allocated to the cash generating
unit (CGU) or group of CGUs that are expected to benefit
from the synergies of the acquisition.
Goodwill is not amortised but is tested for impairment
annually and whenever there are events or changes in
circumstances that indicate that its carrying amount may
not be recoverable.
Goodwill is carried at cost less any recognised
impairment losses.
Other intangible assets
Other intangible assets are stated at cost less accumulated
amortisation and any recognised impairment loss.
(i) Assets acquired in business combinations
An intangible resource acquired in a business combination
is recognised as an intangible asset if it is separable from
the acquired business or arises from contractual or legal
rights. An acquired intangible asset with a definite useful
life is amortised on a straight‑line basis so as to charge its
fair value at the date of acquisition to profit or loss over its
expected useful life as follows:
Patents, brands and trade marks — up to three years
Customer relationships
— up to five years
(ii) Product development costs
All research expenditure is charged to profit or loss in the
period in which it is incurred.
Development expenditure is charged to profit or loss in
the period in which it is incurred, unless it relates to the
development of a new or significantly improved product
or process whose technical and commercial feasibility is
proven at the time of development.
(iii) Computer software
Computer software and software licences are recognised as
intangible assets measured at cost and are amortised on a
straight‑line basis over their expected useful lives, which are
in the range three to five years.
Directly attributable costs that are capitalised as part
of the computer software product include the software
development employee costs.
Property, plant and equipment
Property, plant and equipment is stated at cost
less accumulated depreciation and any recognised
impairment losses.
Cost includes the original purchase price of the asset and
the costs attributable to bringing the asset to its working
condition for its intended use.
Freehold land and assets under construction are not
depreciated. Otherwise, property, plant and equipment is
depreciated on a straight‑line basis so as to charge its cost,
less any residual value, to profit or loss over the expected
useful life of the asset as follows:
Freehold buildings
Leasehold building
Plant and equipment
— 50 years
— length of the lease
— three to ten years
Property, plant and equipment acquired in a business
combination is depreciated on a straight‑line basis so as
to charge its fair value at the date of acquisition, less any
residual value, to profit or loss over the remaining expected
useful life of the asset.
Leased assets
Leases that confer rights and obligations similar to those
that attach to owned assets are classified as finance leases.
All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets
within property, plant and equipment, initially measured
at the fair value of the leased asset or, if lower, at the
present value of the minimum lease payments, and a
corresponding liability is recognised. Subsequently, the
assets are depreciated over the shorter of the expected
useful life of the asset or term of the lease. At inception of
the lease, the lease payments are apportioned between
an interest element and a capital element so as to achieve
a constant periodic rate of interest on the outstanding
liability. Thereafter, the interest element is recognised as an
expense in profit or loss while the capital element is applied
to reduce the outstanding liability.
Operating lease payments, and any incentives receivable,
are recognised in profit or loss on a straight‑line basis over
the term of the lease.
McBride plc
Annual Report and Accounts 2016
79
Impairment of non‑financial assets
Goodwill, other intangible assets and property, plant and
equipment are tested for impairment whenever events or
circumstances indicate that their carrying amounts may
not be recoverable. Additionally, goodwill is subject to
an annual impairment test whether or not there are any
indicators of impairment.
An asset is impaired to the extent that its carrying amount
exceeds its recoverable amount, which represents the
higher of the asset’s value in use and its fair value less costs
to sell. An asset’s value in use represents the present value
of the future cash flows expected to be derived from the
continued use of the asset. Fair value less costs to sell is the
amount obtainable from the sale of the asset in an arm’s
length transaction between knowledgeable, willing parties,
less the costs of disposal.
Where it is not possible to estimate the recoverable
amount of an individual asset, the recoverable amount is
determined for the CGU to which the asset belongs. An
asset’s CGU is the smallest group of assets that includes
the asset and generates cash inflows that are largely
independent of the cash inflows from other assets or
groups of assets. Goodwill does not generate cash flows
independently of other assets and is, therefore, tested for
impairment at the level of the CGU or group of CGUs to
which it is allocated.
Value in use is based on estimates of pre‑tax cash flows
discounted at a pre‑tax discount rate that reflects the risks
specific to the CGU to which the asset belongs.
Where necessary, impairment of non‑financial assets other
than goodwill is recognised before goodwill is tested for
impairment. When goodwill is tested for impairment and
the carrying amount of the CGU or group of CGUs to
which it is allocated exceeds its recoverable amount, the
impairment is allocated first to reduce the carrying amount
of the goodwill and then to the other non‑financial assets
belonging to the CGU or group of CGUs pro‑rata on the
basis of their respective carrying amounts.
Impairment losses are recognised in profit or loss.
Impairment losses recognised in previous periods for assets
other than goodwill are reversed if there has been a change
in the estimates used to determine the asset’s recoverable
amount, but only to the extent that the carrying amount
of the asset does not exceed its carrying amount had
no impairment been recognised in previous periods.
Impairment losses recognised in respect of goodwill
cannot be reversed.
Assets held for sale
Non‑current assets are classified as held for sale if it is
expected that their carrying amount will be recovered
by sale rather than through continuing use. For this to be
the case, the asset must be available for immediate sale
in its current condition and the sale must be expected to
be completed within twelve months. An extension of the
period required to complete the sale does not preclude
the asset from continuing to be classified as held for sale,
provided the delay was for reasons beyond the Group’s
control and management remains committed to its plan to
sell the asset.
An asset that is classified as held for sale is measured at the
lower of its carrying amount when classified as held for sale
and fair value less costs to sell.
Inventories
Inventories are stated at the lower of cost and net realisable
value with due allowance for any excess, obsolete or
slow‑moving items. Cost represents the expenditure
incurred in bringing each product to its present location
and condition. The cost of raw materials is measured on a
first‑in, first‑out (FIFO) basis. The cost of finished goods
and work in progress comprises the cost of raw materials,
direct labour and other direct costs, together with related
production overheads based on normal operating capacity.
Net realisable value is the estimated selling price less
estimated costs of completion and estimated selling and
distribution costs.
Financial instruments
(i) Trade receivables
Trade receivables represent the invoiced amount of
sales of goods to customers for which payment has not
been received (fair value), less an allowance for doubtful
accounts that is estimated based on factors such as the
period outstanding, the payment history of the customer,
the current economic environment and other information.
(ii) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits
available on demand and other short‑term, highly liquid
investments with a maturity on acquisition of three months
or less and bank overdrafts. Bank overdrafts are presented
as current liabilities to the extent that there is no right of
offset with cash balances.
For cash flow purposes, cash and cash equivalents include
bank overdrafts where right of set off exists.
(iii) Trade payables
Trade payables are initially recognised at fair value and
subsequently held at amortised cost.
(iv) Bank and other loans
Bank and other loans are initially recognised at fair value,
net of directly attributable transaction costs, if any, and
are subsequently measured at amortised cost using the
effective interest rate method.
(v) Derivative financial instruments
The Group uses derivative financial instruments, principally
forward currency contracts and interest rate swaps, to
reduce its exposure to exchange rate and interest rate
movements. The Group does not hold or issue derivatives
for speculative purposes.
Derivative financial instruments are recognised as assets
and liabilities measured at their fair values at the balance
sheet date. Changes in their fair values are recognised in
profit or loss. Derivative financial instruments are, therefore,
likely to cause volatility in profit or loss in situations
where the hedged item is not recognised in the financial
statements or is recognised but its carrying amount is
not adjusted to reflect fair value changes arising from
the hedged risk, or is so adjusted but that adjustment is
not recognised in profit or loss. Provided the conditions
specified by IAS 39, ‘Financial Instruments: Recognition and
Measurement’ are met, hedge accounting may be used to
mitigate this volatility in profit or loss.
Derivative financial instruments are classified as current
assets or liabilities unless they are in a designated
hedging relationship and the hedge item is classified
as a non‑current asset or liability.
Derivative financial instruments that are not in a designated
hedging relationship are classified as held for trading.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
2. Principal accounting policies continued
Financial instruments continued
(vi) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the balance sheet where there is a legally
enforceable right to offset the recognised amounts, and
there is an intention to settle on a net basis or realise the
asset and settle the liability simultaneously.
Hedge accounting
For a hedging relationship to qualify for hedge accounting,
it must be documented on inception together with the
Group’s risk management objective and strategy for
initiating the hedge, and it must both be expected to be
highly effective in offsetting the changes in cash flows or
fair value attributed to the hedged risk and actually be
highly effective in doing so.
When hedge accounting is used, the hedging relationship is
classified as a cash flow hedge, a net investment hedge or a
fair value hedge.
(i) Cash flow hedge
Hedging relationships are classified as cash flow hedges
where the hedging instrument hedges exposure to
variability in cash flows that is attributable either to a
particular risk associated with a recognised asset or liability
(such as interest payments on variable rate debt), a highly
probable forecast transaction (such as forecast revenue) or
a firm commitment that could affect profit or loss.
Where a hedging relationship is classified as a cash flow
hedge, to the extent that the hedge is effective, the change
in the fair value of the hedging instrument is recognised in
other comprehensive income rather than in profit or loss.
When the hedged item affects profit or loss (for example,
when a forecast sale that is hedged takes place), the
cumulative gain or loss recognised in other comprehensive
income is transferred to profit or loss. When a forecast
transaction that has been hedged results in the recognition
of a non‑financial asset (for example, inventory), the
cumulative gain or loss recognised in other comprehensive
income is transferred from equity as an adjustment to the
cost of the asset.
When a hedging instrument expires or is sold, or when a
hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income
statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the
income statement.
(ii) Net investment hedge
A net investment hedge is the hedge of the currency
exposure on the retranslation of the Group’s net investment
in a foreign operation.
Net investment hedges are accounted for similarly to cash
flow hedges. Changes in the fair value of the hedging
instrument are, to the extent that the hedge is effective,
recognised in other comprehensive income.
In the event that the foreign operation is disposed of, the
cumulative gain or loss recognised in other comprehensive
income is transferred to profit or loss and included in the
gain or loss on disposal of the foreign operation.
(iii) Fair value hedge
Hedging relationships are classified as fair value hedges
where the hedging instrument hedges the exposure to
changes in fair value of a recognised asset or liability that
is attributable to a particular risk and could affect profit
or loss.
Where the hedging relationship is classified as a fair value
hedge, the carrying amount of the hedged asset or liability
is adjusted by the change in its fair value attributable to
the hedged risk and the resulting gain or loss is recognised
in profit or loss where, to the extent that the hedge is
effective, it offsets the change in the fair value of the
hedging instrument.
Pensions and other post‑employment benefits
Post‑employment benefits principally comprise pension
benefits provided to employees in the UK and Continental
Europe. The Group operates both defined benefit and
defined contribution pension schemes.
(i) Defined contribution schemes
Under a defined contribution pension scheme, the Group
makes fixed contributions to a separate pension fund.
The amount of pension that the employee will receive
on retirement is dependent entirely on the investment
performance of the fund and the Group has no obligation
with regard to the future pension values received
by employees.
Payments to defined contribution schemes are recognised
in profit or loss in the period in which they fall due.
(ii) Defined benefit schemes
Under a defined benefit pension scheme, the amount of
pension that an employee will receive on retirement is
fixed based on factors such as pensionable salary, years of
service and age on retirement. In most cases, the schemes
are funded by contributions from the Group and the
participating employees. The Group is obliged to make
additional contributions if the fund has insufficient assets
to meet its obligation to pay accrued pension benefits.
Actuarial valuations of the defined benefit schemes
are carried out annually at the balance sheet date by
independent qualified actuaries. Scheme assets are
measured at their fair value at the balance sheet date.
Benefit obligations are measured on an actuarial basis using
the projected unit credit method and are discounted using
the market yields on high‑quality corporate bonds at the
balance sheet date. The defined benefit liability or asset
recognised in the balance sheet comprises the difference
between the present value of the benefit obligations and
the fair value of the scheme assets. Where a scheme is in
surplus, the asset recognised is limited to the present value
of any amounts that the Group expects to recover by way
of refunds or a reduction in future contributions.
Defined benefit schemes are recognised in profit or loss
by way of the service cost and the net interest cost on the
benefit obligation. The service cost represents the increase
in the present value of the benefit obligation relating to
additional years of service accrued during the period, less
employee contributions.
Gains or losses on curtailments or settlements are
recognised in profit or loss in the period in which the
curtailment or settlement occurs.
Actuarial gains and losses are recognised in other
comprehensive income in the period in which they occur.
McBride plc
Annual Report and Accounts 2016
81
Share‑based payments
The Group operates share schemes under which it grants
equity‑settled and cash‑settled awards over ordinary shares
in the Company to certain of its employees. The Group
recognises a compensation expense that is based on the
fair value of the awards measured using the Black‑Scholes
option pricing formula or the Monte Carlo valuation model.
For equity‑settled awards, the fair value reflects market
performance conditions and all non‑vesting conditions.
Fair value is determined at the grant date and is not
subsequently remeasured unless the relevant conditions
are modified. Adjustments are made to the compensation
expense to reflect actual and expected forfeitures due
to failure to satisfy service conditions or non‑market
performance conditions. For cash‑settled awards, the fair
value reflects all the conditions on which the award is
made and is remeasured at each reporting date and at the
settlement date.
Generally, the compensation expense is recognised
on a straight‑line basis over the vesting period. For
equity‑settled awards a corresponding credit is recognised
in equity while for cash‑settled awards a corresponding
liability to settle is recognised in the balance sheet.
In the event of the cancellation of an equity‑settled award,
whether by the Group or by a participating employee, the
compensation expense that would have been recognised
over the remainder of the vesting period is recognised
immediately in profit or loss.
Provisions
A provision is a liability of uncertain timing or amount
and is generally recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that a payment will be required to settle the
obligation and the payment can be estimated reliably.
Provision is made for restructuring costs when a detailed
formal plan for the restructuring has been determined
and the plan has been communicated to the parties
that may be affected by it. Gains from the expected
disposal of assets are not taken into account in measuring
restructuring provisions and provision is not made for
future operating losses.
Provisions are discounted where the effect of the time value
of money is material.
Taxation
Current tax is the amount of tax payable or recoverable in
respect of the taxable profit or loss for the period. Taxable
profit differs from accounting profit because it excludes
income or expenses that are recognised in the period for
accounting purposes but are either not taxable or not
deductible for tax purposes or are taxable or deductible
in earlier or subsequent periods. Current tax is calculated
using tax rates that have been enacted or substantively
enacted at the balance sheet date.
Deferred tax is tax expected to be payable or recoverable
on differences between the carrying amount of an asset or
liability and its tax base used in calculating taxable profit.
Deferred tax is accounted for using the liability method,
whereby deferred tax liabilities are generally recognised for
all taxable temporary differences and deferred tax assets
are recognised to the extent that it is probable that taxable
profits will be available in the foreseeable future against
which the deductible temporary differences may be utilised.
Deferred tax assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of
goodwill or from the initial recognition of other assets and
liabilities in a transaction other than a business combination
that affects neither accounting profit nor taxable profit.
Deferred tax is provided on temporary differences arising
on investments in foreign subsidiaries, except where the
Group is able to control the reversal of the temporary
difference and it is probable that it will not reverse in the
foreseeable future.
Deferred tax is calculated using the enacted or
substantively enacted tax rates that are expected to apply
when the asset is recovered or the liability is settled.
Current tax assets and liabilities are offset when there
is a legally enforceable right to set off the amounts and
management intends to settle on a net basis. Deferred
tax assets and liabilities are offset where there is a legally
enforceable right to set off current tax assets and liabilities
and the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on the same
taxable entity.
Current tax and deferred tax is recognised in profit or loss
unless it relates to an item that is recognised in the same
or a different period outside profit or loss, in which case
it too is recognised outside profit or loss, either in other
comprehensive income or directly in equity.
Payments to shareholders
Subject to shareholder approval at each Annual General
Meeting (AGM), it is the Company’s intention that, for
the foreseeable future, all payments to shareholders will
be made by the issue of non‑cumulative redeemable
preference shares (B Shares). B Shares issued but not
redeemed are classified as current liabilities.
Own shares
Own shares represent the Company’s ordinary shares that
are held by the Company in treasury or by a sponsored
ESOP trust in relation to the Group’s employee share
schemes. When own shares are acquired, the cost of
purchase in the market is deducted from equity. Gains or
losses on the subsequent transfer or sale of own shares are
also recognised in equity.
Accounting standards issued but not yet adopted
Recently issued accounting standards that are relevant
to the Group but have not yet been adopted are
outlined below:
• Amendments to IAS 16, ‘Property, plant and equipment’
and IAS 38, ‘Intangible assets’ on depreciation and
amortisation;
• Amendments to IAS 27, ‘Separate financial statements’
on the equity method;
• Amendments to IFRS 10, ‘Consolidated financial
statements’ and IAS 28, ‘Investments in associates and
joint ventures’;
• Annual Improvements 2014;
• Amendments to IAS 1, ‘Presentation of financial
statements’ on the disclosure initiative;
•
•
IFRS 15, ‘Revenue from contracts with customers’; and
IFRS 9, ‘Financial instruments’.
The Group does not currently believe adoption of these
would have a material impact on the consolidated results
or financial position of the Group.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
3. Acquisitions
Acquisitions in prior years
Contingent consideration is payable by the Group in relation to a prior year acquisition.
At each reporting date, the Directors estimate the contingent consideration payable in relation to the 70% interest
acquired and the liability to acquire the remaining 30% interest.
Movements in the contingent consideration liability which is payable between one and two years were as follows:
At 1 July
Charged to profit or loss:
Unwind of discount (see note 9)
Change in estimate (see note 5)
Currency translation differences
At 30 June
2016
£m
0.4
0.1
1.7
0.1
2.3
2015
£m
0.4
0.1
—
(0.1)
0.4
4. Segment information
Background
Financial information is presented to the Board by product category for the purposes of allocating resources within the
Group and assessing the performance of the Group’s businesses. It is considered that Household Products have different
market characteristics to Personal Care & Aerosols in terms of volumes, market share and production requirements.
Accordingly, the Group’s operating segments are determined by product category.
The Board uses adjusted operating profit to measure the profitability of the Group’s businesses. Adjusted operating profit
is, therefore, the measure of segment profit presented in the Group’s segment disclosures. Adjusted operating profit
represents operating profit before specific items that are considered to hinder comparison of the trading performance
of the Group’s businesses either period‑on‑period or with other businesses. During the periods under review, the items
excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangibles assets and
exceptional items.
Analysis by reportable segment
2016
UK
£m
Household
North(1)
£m
South(2)
£m
Total
East(3) Household
£m
£m
Personal(4)
Care &
Aerosols
£m
Total
segments Corporate(5)
£m
£m
Total
Group
£m
Segment revenue
164.9
179.0
69.2
121.9
535.0
145.9
680.9
—
680.9
Adjusted operating profit/(loss)
Amortisation of intangible assets
Exceptional items (see note 5)
Operating profit
Net finance costs
Profit before taxation
Inventories
Capital expenditure
Amortisation and depreciation
(1) France, Belgium, Holland and Scandinavia.
(2) Italy and Spain.
(3) Germany, Poland, Luxembourg and other Eastern Europe.
(4) Includes Asia.
42.7
2.7
45.4
(9.2)
36.2
(0.9)
(2.4)
32.9
(7.1)
25.8
75.7
12.8
19.1
56.9
10.6
16.0
18.8
2.2
3.1
75.7
12.8
19.1
—
—
—
(5) Corporate represents costs related to the Board, the Executive Leadership Team and key supporting functions.
McBride plc
Annual Report and Accounts 2016
83
2015
UK
£m
Household
North(1)
£m
South(2)
£m
Total
East(3) Household
£m
£m
Personal(4)
Care &
Aerosols
£m
Total
segments Corporate(5)
£m
Segment revenue
180.5
183.9
68.7
119.3
552.4
151.8
704.2
£m
—
Adjusted operating profit/(loss)
Amortisation of intangible assets
Exceptional items (see note 5)
Operating profit
Net finance costs
Profit before taxation
Inventories
Capital expenditure
Amortisation and depreciation
37.8
(1.4)
36.4
(7.9)
50.9
18.9
17.3
15.9
3.0
3.3
66.8
21.9
20.6
—
—
—
Revenue by major customer
In 2016 and 2015, no individual customer provided more than 10% of the Group’s revenue.
During 2016, the top ten customers accounted for 47% of total Group revenue (2015: 46%).
5. Exceptional items
Analysis of exceptional items
Reorganisation and restructuring costs:
Functional reorganisation
UK restructuring
Group reorganisation
Customer choices
Legal case
(Write back)/impairment of long‑lived assets, property, plant and equipment and inventory:
Brno, Czech Republic
Western Europe
Rest of the World
Classification, Labelling and Packaging (CLP)
Change in contingent consideration (see note 3)
Total charged to operating profit
As previously outlined, the Group has implemented a new strategy to lower complexity through the rationalisation of our
customer base down to 25% of our previous customer portfolio. This strategy is substantially complete as at 30 June 2016
with reorganisation costs of £2.2 million charged to exceptional items.
Following our review of the contingent consideration payable arising from the acquisition of the Czech Republic‑based
skincare business at Brno an additional provision of £1.7 million has been recorded to reflect the increase in performance
and our increased liability. This charge is materially offset by a reversal of the impairment charges previously made in
relation to the assets at Brno of £1.7 million.
Exceptional provisions were made in the two prior financial years with regard to the UK restructuring project and the
creation of a functional structure with centralised support services. Work is now substantially complete on both projects
resulting in the release of unused provisions of £0.3 million and £0.7 million respectively.
Total
Group
£m
704.2
28.5
(1.0)
(17.8)
9.7
(7.1)
2.6
66.8
21.9
20.6
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£m
2015
£m
—
(0.3)
(0.7)
2.2
1.2
2.4
(1.7)
—
—
(1.7)
—
1.7
2.4
0.4
0.8
3.1
—
—
4.3
—
9.7
0.1
9.8
3.7
—
17.8
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
5. Exceptional items continued
Analysis of exceptional items continued
In late June 2016, the Group’s Italian business lost a long‑running legal case surrounding costs of reparation to a property
vacated by the Group in 2011. In consideration of the advised worst case position, an existing provision has been increased
by £1.2 million as at 30 June 2016.
In the prior year, the following costs were charged:
• £5.6m impairment of goodwill allocated to its Italian Household liquids business;
•
impairment of £4.2m in relation to fixed assets of its French and Chinese Aircare businesses;
• £3.1m of redundancy and consultancy costs in relation to Group reorganisation; and
• £3.7m incremental staff, artwork and packaging costs to comply with the EU’s Classification, Labelling and Packaging
directive (CLP).
6. Employee information
The monthly average number of persons employed by the Group (including Directors) during the year, analysed by
category, was as follows:
Manufacturing
Sales, general and administration
Total
Aggregate payroll costs were as follows:
Wages and salaries
Social security costs
Other pension costs
Total
2016
Number
2015
Number
4,018
598
4,616
4,078
669
4,747
2016
£m
111.0
22.5
3.2
2015
£m
112.0
23.5
3.3
136.7
138.8
Pension costs comprise the current service cost for defined benefit schemes and payments made by the Group to defined
contribution schemes (see note 23).
7. Auditor’s remuneration
Fees payable by the Group to the Company’s auditor, PricewaterhouseCoopers LLP (PwC), and its associates, were
as follows:
Audit fees:
Audit of the Company’s financial statements
Other services:
Audit of the financial statements of the Company’s subsidiaries
Total fees
2016
£m
2015
£m
0.1
0.1
0.3
0.4
0.3
0.4
Fees for the audit of the Company’s financial statements represent fees payable to PwC in respect of the audit of the
Company’s individual financial statements and the Group’s consolidated financial statements. Non‑audit fees payable to
PwC in relation to other advisory services amounted to £123k (2015: £10k).
McBride plc
Annual Report and Accounts 2016
85
2016
£m
382.8
136.0
0.9
18.2
2015
£m
415.5
138.8
1.0
19.6
—
(1.7)
1.0
0.4
4.4
8.1
0.4
5.6
4.2
1.5
0.5
4.4
6.5
0.8
2016
£m
2015
£m
4.1
0.4
0.1
0.1
0.2
3.8
0.7
0.3
0.1
0.2
(0.9)
(0.6)
0.4
0.5
0.1
1.0
6.0
1.1
7.1
0.3
0.4
0.1
0.5
5.8
1.3
7.1
8. Operating profit/(loss)
Operating profit/(loss) is stated after charging/(crediting):
Cost of inventories (included in cost of sales)
Employee costs (see note 6)
Amortisation of intangible assets (see note 14)
Depreciation of property, plant and equipment (see note 15)
Impairment/(writeback):
Goodwill (see note 13)
Property, plant and equipment (see note 15)
Inventories (see note 16)
Trade receivables (see note 17)
Rentals payable under operating leases
Research and development costs not capitalised
Net foreign exchange losses/(gains)
9. Finance costs
Finance costs
Interest on bank loans and overdrafts
Loss on interest rate swaps transferred to profit or loss
Interest differentials on net investment hedges
Unwind of discount on contingent consideration (see note 3)
Unwind of discount on provisions (see note 25)
Net foreign exchange gains
Amortisation of facility fees
Non‑utilisation fees
Finance lease interest
Premium on average rate currency options
Post‑employment benefits:
Net interest cost on defined benefit obligation (see note 23)
Total finance costs
Interest rate swaps are used to manage the interest rate profile of the Group’s borrowings. Accordingly, net interest
payable or receivable on interest rate swaps is included in finance costs.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
10. Taxation
Income tax expense
Current tax expense:
Current year
Adjustment for prior years
Deferred tax expense:
Origination and reversal of temporary differences
Adjustment for prior years
Impact of change in tax rate
Income tax expense
2016
2015
UK Overseas
£m
£m
Total
£m
UK Overseas
£m
£m
Total
£m
—
—
—
7.9
(0.7)
7.2
1.1
(0.1)
(0.2)
0.8
0.8
0.2
0.6
—
0.8
8.0
7.9
(0.7)
7.2
1.3
0.5
(0.2)
1.6
8.8
—
—
—
0.7
0.7
—
1.4
1.4
4.9
(0.2)
4.7
(2.7)
(0.3)
0.2
(2.8)
1.9
Reconciliation to UK statutory tax rate
The total tax charge on the Group’s profit before tax for the year differs from the theoretical amount that would be
charged at the UK standard rate of corporation tax for the following reasons:
Profit before tax
Profit before tax multiplied by the UK corporation tax rate of 20.0% (2015: 20.75%)
Effect of tax rates in foreign jurisdictions
Non‑deductible expenses
Tax incentives/non‑taxable income
Tax (gains)/losses for which no deferred tax recognised
Change in tax rate
Other differences
Adjustment for prior years
Total tax expense in profit or loss
2016
£m
25.8
5.2
3.1
1.7
(1.0)
(0.2)
(0.2)
0.4
(0.2)
8.8
Taxation is provided at current rates on the profits earned for the year.
To the extent that dividends remitted from overseas affiliates are expected to result in additional taxes, these amounts
have been provided for. No deferred tax has been recognised in respect of timing differences associated with the
unremitted earnings of overseas subsidiaries as these are considered permanently employed in the business of these
companies. Unremitted earnings may be liable to overseas taxes and/or UK taxation (after allowing for double tax relief)
if distributed as dividends. The aggregate amount of temporary differences associated with investments in subsidiaries
and associates for which deferred tax liabilities have not been recognised totalled approximately £4.5 million at
30 June 2016 (2015: £4.1m).
The main rate of UK corporation tax was reduced from 23% to 21% with effect from 1 April 2014 and to 20% from
1 April 2015. The Group’s effective UK corporation tax rate for the year was, therefore, 20.0% (2015: 20.75%).
Factors affecting future tax charges
The Finance (No. 2) Act 2015 which was published on 18 November 2015 includes legislation reducing the main rate of UK
corporation tax from 20% to 19% with effect from 1 April 2017, with a further reduction to 18% with effect from 1 April 2020.
These reductions have been enacted at the balance sheet date and have been reflected in the deferred tax recognised on
the balance sheet. The Finance Bill 2016 announced a further reduction to 17% with effect from 1 April 2020. This reduction
has not been substantially enacted at the balance sheet date and has not been reflected in the deferred tax recognised on
the balance sheet.
4.9
(0.2)
4.7
(2.0)
0.4
0.2
(1.4)
3.3
2015
£m
2.6
0.5
0.6
1.9
(0.8)
0.1
0.2
0.6
0.2
3.3
McBride plc
Annual Report and Accounts 2016
87
Tax on items recognised in other comprehensive income
Items that may be reclassified to profit or loss:
Gain on cash flow hedges in the year
Result/gain on net investment hedges
Items that will not be transferred to profit or loss:
Net actuarial loss on post‑employment benefits:
Deferred tax
Total tax charge in other comprehensive income
Deferred tax
The movement in the net deferred tax balances during the year was:
Accelerated
tax
depreciation
£m
Intangible
Share‑
based
assets payments
£m
£m
Tax
Retirement
benefit
losses obligations
£m
£m
At 30 June 2014
Charge to profit or loss
Credit/(charge) to other
comprehensive income
Effect of the change in tax rate
Exchange movements
At 30 June 2015
Charge to profit or loss
Charge to other comprehensive income
Effect of the change in tax rate
Exchange movements
At 30 June 2016
(7.1)
2.0
(1.8)
(0.2)
—
(0.1)
1.0
(4.2)
(0.5)
—
(0.3)
(1.3)
(6.3)
—
—
(0.1)
(2.1)
(0.1)
—
0.3
0.1
(1.8)
—
—
—
—
—
—
—
—
—
—
—
2.4
5.8
(0.3)
(0.2)
—
0.4
(0.1)
(0.2)
1.8
—
—
—
0.3
2.1
—
—
6.0
(0.2)
(0.4)
0.2
—
5.6
Deferred tax assets and liabilities are presented in the Group’s balance sheet as follows:
Deferred tax assets
Deferred tax liabilities
Total
2016
£m
2015
£m
0.6
—
0.6
0.4
1.0
Other
£m
3.1
0.3
(3.0)
—
(0.1)
0.3
(0.9)
(0.6)
(0.1)
0.4
(0.9)
2016
£m
9.3
(6.5)
2.8
0.7
2.3
3.0
(0.4)
2.6
Total
£m
6.5
1.6
(2.6)
(0.2)
0.6
5.9
(1.7)
(1.0)
0.1
(0.5)
2.8
2015
£m
11.1
(5.2)
5.9
Surplus
ACT
£m
4.1
—
—
—
—
4.1
—
—
—
—
4.1
Deferred income tax assets are recognised for tax losses carry‑forwards to the extent that the realisation of the related tax
benefit through future taxable profits is probable.
Unrecognised deferred tax assets
At 30 June 2016, the Group had unused tax losses of £13.5 million (2015: £14.7m) available for offset against future
profits. No deferred tax asset has been recognised in respect of £6.0 million (2015: £8.5m) of these losses due to the
unpredictability of future profit streams. The majority of these tax losses arise in tax jurisdictions where they do not expire.
However, tax losses of £1.7 million expire between now and 2021.
No deferred tax asset has been recognised in relation to the remaining surplus ACT of £2.9 million (2015: £2.9m) due to
uncertainty as to future ACT capacity.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
11. Earnings per ordinary share
Basic earnings per ordinary share is calculated by dividing the profit for the year attributable to owners of the Company
by the weighted average number of the Company’s ordinary shares in issue during the financial year. The weighted
average number of the Company’s ordinary shares in issue excludes 0.6 million shares (2015: 0.6m shares), being the
weighted average number of own shares held during the year in relation to employee share schemes.
Weighted average number of ordinary shares in issue (million)
Effect of dilutive LTIP awards (million)
Weighted average number of ordinary shares for calculating diluted earnings per share (million)
a
b
Reference
2016
182.2
0.4
182.6
2015
182.2
0.2
182.4
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming
the conversion of all potentially dilutive ordinary shares.
During the year, the Company had equity‑settled LTIP awards with a nil exercise price that are potentially dilutive
ordinary shares.
Adjusted earnings per share measures are calculated based on profit for the year attributable to owners of the Company
before adjusting items as follows:
Earnings for calculating basic and diluted earnings per share
Adjusted for:
Amortisation of intangible assets (see note 14)
Exceptional items (see note 5)
Unwind of discount on contingent consideration (see note 3)
Unwind of discount on provisions (see note 25)
Taxation relating to the above items
Earnings for calculating adjusted earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Reference
c
2016
£m
17.0
0.9
2.4
0.1
0.2
(0.4)
20.2
d
Reference
c/a
c/b
d/a
d/b
2016
pence
9.3
9.3
11.1
11.1
2015
£m
(0.7)
1.0
17.8
0.1
0.2
(3.2)
15.2
2015
pence
(0.4)
(0.4)
8.3
8.3
12. Payments to shareholders
Payments to ordinary shareholders are made by way of the issue of B Shares in place of income distributions. Ordinary
shareholders are able to redeem any number of the B Shares issued to them for cash. Any B Shares that they retain attract
a dividend of 75% of LIBOR on the 0.1 pence nominal value of each share, paid on a twice‑yearly basis.
Payments to ordinary shareholders made or proposed in respect of the year were as follows:
Interim
Final
Total for the year
2016
Pence
per share
1.2
2.4
3.6
2015
Pence
per share
1.7
1.9
3.6
£m
2.2
4.4
6.6
£m
3.1
3.5
6.6
The proposed final payment in respect of 2016 of 2.4 pence per ordinary share is subject to approval by shareholders at
the Company’s 2016 AGM and has therefore not been recognised in these financial statements.
McBride plc
Annual Report and Accounts 2016
89
Movements in the number of B Shares outstanding were as follows:
Issued and fully paid
At 1 July
Issued
Redeemed
At 30 June
2016
Number
000
Nominal
value
£m
2015
Number
000
Nominal
value
£m
969,007
5,650,489
(5,760,968)
858,528
1.0
5.7
(5.8)
0.9
578,451
9,110,465
(8,719,909)
969,007
0.6
9.1
(8.7)
1.0
B Shares carry no rights to attend, speak or vote at Company meetings, except on a resolution relating to the winding up
of the Company.
13. Goodwill
Carrying amount
At 1 July
Impairment recognised in the year
Currency translation differences
At 30 June
Goodwill is allocated to cash generating units (CGUs) as follows:
Household
PCA
At 30 June
2016
£m
2015
£m
17.7
—
(0.2)
17.5
2016
£m
17.3
0.2
17.5
23.9
(5.6)
(0.6)
17.7
2015
£m
17.5
0.2
17.7
S
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a
i
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m
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a
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i
o
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90
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
13. Goodwill continued
Impairment tests carried out during the year
Goodwill is tested for impairment annually at the level of the CGUs to which it is allocated. In each of the tests carried out
during 2016, the recoverable amount of the CGUs concerned was measured on a value in use basis.
Value in use represents the present value of the future cash flows that are expected to be generated by the CGU to
which the goodwill is allocated. Management based its cash flow estimates on the Group’s budget for the 2017 financial
year. Cash flows in the following four years were forecast by applying assumptions to budget sales, production costs
and overheads. Aggregate cash flows beyond the fifth year were estimated by applying a perpetuity growth rate to the
forecast cash flow in the fifth year that was based on long‑term growth rates for the CGU’s products in its end markets.
Management estimates sales growth for each CGU based on forecasts of the future volume of the end markets for the
CGU’s products. CGUs to which significant goodwill is allocated supply the Household Powder market and the Household
liquid market in the UK. The UK Household liquids market is forecast to be flat.
Management estimates the cost of material inputs and other direct and indirect costs based on current prices and
market expectations of future price changes. Beyond the budget period, unless there are reasons to suggest otherwise,
management assumes that future changes in material input prices are reflected in the price of the Group’s products.
General cost inflation is based on market expectations of future inflation rates.
Discount rates applied to the cash flow projections were determined using a capital asset pricing model and reflected
current market interest rates, relevant equity and size risk premiums and the risks specific to the CGU concerned. Pre‑tax
discount rates used in calculating the value in use of those CGUs to which significant amounts of goodwill are allocated
were as follows: UK Household liquids 11% (2015: 11%); UK Household Powders 11% (2015: 11%).
14. Other intangible assets
Cost
At 30 June 2014
Additions
Currency translation differences
At 30 June 2015
Additions
Currency translation differences
At 30 June 2016
Accumulated amortisation and impairment
At 30 June 2014
Charge for the year
At 30 June 2015
Charge for the year
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
Patents,
brands and Computer Customer
software relationships
trade marks
£m
£m
£m
Other
£m
Total
£m
2.0
—
—
2.0
—
—
2.0
(1.9)
(0.1)
(2.0)
—
(2.0)
3.9
0.7
(0.1)
4.5
1.2
—
5.7
(1.8)
(0.7)
(2.5)
(0.8)
(3.3)
8.5
—
—
8.5
—
—
8.5
(8.4)
(0.1)
(8.5)
—
(8.5)
0.5
—
—
0.5
0.2
—
0.7
(0.4)
(0.1)
(0.5)
(0.1)
(0.6)
14.9
0.7
(0.1)
15.5
1.4
—
16.9
(12.5)
(1.0)
(13.5)
(0.9)
(14.4)
—
—
2.4
2.0
—
—
0.1
—
2.5
2.0
McBride plc
Annual Report and Accounts 2016
91
Payments
on account
and assets
in the
course of
Land and Plant and
buildings equipment construction
£m
£m
£m
100.9
413.9
0.5
(0.3)
—
8.4
(1.8)
11.6
2.7
11.5
—
(11.6)
Total
£m
517.5
20.4
(2.1)
—
(8.5)
(23.6)
(0.1)
(32.2)
92.6
408.5
0.4
—
(3.3)
10.1
99.8
8.5
(6.1)
5.8
30.2
446.9
2.5
1.9
—
(2.5)
0.2
2.1
(40.7)
(333.4)
(2.1)
(2.5)
0.2
2.6
(17.5)
(1.7)
1.9
19.4
(42.5)
(331.3)
(1.9)
(16.3)
1.7
—
—
6.1
(0.6)
(27.8)
(43.3)
(369.3)
—
—
—
—
—
—
—
—
—
—
—
503.6
10.8
(6.1)
—
40.5
548.8
(374.1)
(19.6)
(4.2)
2.1
22.0
(373.8)
(18.2)
1.7
6.1
(28.4)
(412.6)
56.5
50.1
77.6
77.2
2.1
2.5
136.2
129.8
15. Property, plant and equipment
Cost
At 30 June 2014
Additions
Disposals
Transfers
Currency translation differences
At 30 June 2015
Additions
Disposals
Transfers
Currency translation differences
At 30 June 2016
Accumulated depreciation and impairment
At 30 June 2014
Charge for the year
Impairment recognised in the year
Disposals
Currency translation differences
At 30 June 2015
Charge for the year
Write back recognised in the year
Disposals
Currency translation differences
At 30 June 2016
Net book value
At 30 June 2016
At 30 June 2015
At 30 June 2016, land and buildings with a carrying amount of £nil (2015: £2.6m) were secured in relation to bank and
other loans.
Net book value of assets held under finance leases amounted to £0.4 million (2015: £2.4m), and is held under plant
and equipment.
16. Inventories
Raw materials, packaging and consumables
Finished goods and goods for resale
Total
2016
£m
38.6
37.1
75.7
2015
£m
37.2
29.6
66.8
S
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92
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
16. Inventories continued
Inventories are stated net of an allowance of £4.9 million (2015: £4.7m) in respect of excess, obsolete or slow‑moving
items. Movements in the allowance were as follows:
At 1 July
Utilisation
Charged to profit or loss
Currency translation differences
At 30 June
17. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
Total
2016
£m
(4.7)
1.2
(1.0)
(0.4)
(4.9)
2016
£m
127.7
3.4
4.6
2015
£m
(4.3)
0.8
(1.5)
0.3
(4.7)
2015
£m
121.9
4.0
6.6
135.7
132.5
Trade receivables amounting to £21.5 million (2015: £30.0m) are secured under the invoice discounting facilities described
in note 21.
Trade receivables are regularly reviewed for bad and doubtful debts. Bad debts are written off and an allowance is
established for specific doubtful debts.
Trade receivables may be analysed as follows:
Amounts neither past due nor impaired
Amounts past due but not impaired:
Less than one month
Between one and three months
Between three and six months
Over six months
Amounts impaired:
Total amounts that have been impaired
Allowance for doubtful debts
Total trade receivables
Movements in the allowance for doubtful debts were as follows:
At 1 July
Charged to profit or loss
Utilisation
Currency translation differences
At 30 June
Trade receivables are generally not interest bearing.
2016
£m
124.2
2015
£m
117.0
2.9
0.2
0.2
0.2
3.5
4.0
0.5
0.2
0.2
4.9
1.4
(1.4)
—
127.7
1.2
(1.2)
—
121.9
2016
£m
1.2
0.4
(0.3)
0.1
1.4
2015
£m
1.8
0.5
(0.9)
(0.2)
1.2
McBride plc
Annual Report and Accounts 2016
93
18. Assets classified as held for sale
At 30 June 2016, assets held for sale amounting to £1.2 million (2015: £1.1m) comprised freehold land and buildings at a
former manufacturing site in Italy.
19. Trade and other payables
Current liabilities
Trade payables
Taxation and social security
Other payables
Accrued expenses
Deferred income
B Shares (see note 12)
Non‑current liabilities
Contingent consideration (see note 3)
Total
Trade payables are generally not interest bearing.
20. Borrowings
Borrowings may be analysed as follows:
Overdrafts
Bank and other loans:
Unsecured loans(1)
Secured loans
Invoice discounting facilities (see note 21)
Finance lease liabilities
Total
(1) Includes two US Private Placements amounting to £67.0 million (2015: £57.2m).
Bank and other loans are repayable as follows:
Within one year
Between one and two years
Between two and five years
More than five years
Total
2016
£m
2015
£m
128.9
129.2
13.8
15.3
21.2
1.6
0.9
11.4
12.0
17.8
1.2
1.0
181.7
172.6
2.3
184.0
0.4
173.0
2016
2015
Current Non‑current
liabilities
£m
liabilities
£m
Total
liabilities
£m
Current Non‑current
liabilities
£m
liabilities
£m
8.3
—
8.3
4.7
—
Total
liabilities
£m
4.7
—
0.3
21.5
21.8
0.2
30.3
83.5
1.6
—
85.1
0.3
85.4
83.5
1.9
21.5
106.9
0.5
115.7
—
0.2
30.0
30.2
0.2
35.1
78.5
1.7
—
80.2
0.4
80.6
2016
£m
21.8
0.2
54.6
30.3
78.5
1.9
30.0
110.4
0.6
115.7
2015
£m
30.2
0.2
22.1
57.9
106.9
110.4
Details of the Group’s bank facilities are presented in note 21. Amounts payable under finance leases are as follows:
Present value
Within one year
Between one and five years
Total
2016
£m
0.2
0.3
0.5
2015
£m
0.2
0.4
0.6
S
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94
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
21. Financial risk management
Risk management policies
The Group’s central treasury function is responsible for procuring the Group’s capital resources and maintaining an
efficient capital structure, together with managing the Group’s liquidity, foreign exchange and interest rate exposures.
All treasury operations are conducted within strict policies and guidelines that are approved by the Board. Compliance
with those policies and guidelines is monitored by the regular reporting of treasury activities to the Board following
regular treasury committee meetings.
Financial assets and financial liabilities
Fair value through
profit or loss
and amortised
Loans Liabilities at Designated
hedging
cost relationships
£m
£m
receivables
£m
At 30 June 2016
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Financial assets held at fair value
Derivative financial instruments (Level 2)
Forward currency contracts
Interest rate swaps
Commodity swaps
Total financial assets
Financial liabilities
Trade payables
Other payables
Accrued expenses
Unredeemed B Shares
Bank overdrafts
Bank and other loans
Obligations under finance leases
Financial liabilities held at fair value
Derivative financial instruments (Level 2)
Forward currency contracts
Interest rate swaps
Contingent consideration (Level 3)
Total financial liabilities
Total
127.7
3.4
24.8
155.9
—
—
—
—
155.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(128.9)
(15.3)
(21.2)
(0.9)
(8.3)
(106.9)
(0.5)
(282.0)
—
—
—
—
—
(282.0)
155.9
(282.0)
—
—
—
—
2.4
12.7
0.2
15.3
15.3
—
—
—
—
—
—
—
—
(1.2)
—
(1.2)
—
(1.2)
(1.2)
14.1
Total
carrying
amount
£m
Other
£m
Fair
value
£m
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2.3)
(2.3)
127.7
3.4
24.8
155.9
2.4
12.7
0.2
15.3
171.2
127.7
3.4
24.8
155.9
2.4
12.7
0.2
15.3
171.2
(128.9)
(128.9)
(15.3)
(21.2)
(0.9)
(8.3)
(15.3)
(21.2)
(0.9)
(8.3)
(106.9)
(106.9)
(0.5)
(0.5)
(282.0)
(282.0)
(1.2)
—
(1.2)
(2.3)
(3.5)
(1.2)
—
(1.2)
(2.3)
(3.5)
(2.3)
(285.5)
(285.5)
(2.3)
(114.3)
(114.3)
McBride plc
Annual Report and Accounts 2016
95
Fair value through
profit or loss
and amortised
Loans Liabilities at Designated
hedging
cost relationships
£m
£m
receivables
£m
At 30 June 2015
Financial assets
Trade receivables
Other receivables
Cash and cash equivalents
Financial assets held at fair value
Derivative financial instruments (Level 2)
Forward currency contracts
Interest rate swaps
Commodity swaps
Total financial assets
Financial liabilities
Trade payables
Other payables
Accrued expenses
Unredeemed B Shares
Bank overdrafts
Bank and other loans
Obligations under finance leases
Financial liabilities held at fair value
Derivative financial instruments (Level 2)
Forward currency contracts
Interest rate swaps
Contingent consideration (Level 3)
Total financial liabilities
Total
121.9
4.0
23.3
149.2
—
—
—
—
149.2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(129.2)
(12.0)
(17.8)
(1.0)
(4.7)
(110.4)
(0.6)
(275.7)
—
—
—
—
—
(275.7)
149.2
(275.7)
—
—
—
—
1.3
9.9
0.4
11.6
11.6
—
—
—
—
—
—
—
—
(1.5)
(0.4)
(1.9)
—
(1.9)
(1.9)
9.7
Total
carrying
amount
£m
Other
£m
Fair
value
£m
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(0.4)
(0.4)
121.9
4.0
23.3
121.9
4.0
23.3
149.2
149.2
1.3
9.9
0.4
11.6
1.3
9.9
0.4
11.6
160.8
160.8
(129.2)
(129.2)
(12.0)
(17.8)
(1.0)
(4.7)
(12.0)
(17.8)
(1.0)
(4.7)
(110.4)
(110.4)
(0.6)
(0.6)
(275.7)
(275.7)
(1.5)
(0.4)
(1.9)
(0.4)
(2.3)
(1.5)
(0.4)
(1.9)
(0.4)
(2.3)
(0.4)
(278.0)
(278.0)
(0.4)
(117.2)
(117.2)
In the above tables, the financial assets and financial liabilities held by the Group are categorised according to the basis on
which they are measured. Financial assets and liabilities that are held at fair value are further categorised according to the
degree to which the principal inputs used in determining their fair value represent observable market data as follows:
• Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities;
• Level 2 – inputs other than Level 1 that are observable for the asset or liability, either directly (prices) or indirectly
(derived from prices); and
• Level 3 – inputs that are not based on observable market data (unobservable inputs).
Derivative financial instruments comprise the foreign currency derivatives, non‑deliverable commodity derivatives
and interest rate derivatives that are held by the Group in designated hedging relationships. Foreign currency forward
contracts are measured by reference to prevailing forward exchange rates. Commodity forward contracts are measured by
difference to prevailing market prices. Foreign currency options are measured using a variant of the Monte Carlo valuation
model. Interest rate swaps and caps are measured by discounting the related cash flows using yield curves derived from
prevailing market interest rates.
S
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a
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m
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96
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
21. Financial risk management continued
Financial assets and financial liabilities continued
Contingent consideration is measured at fair value based upon management’s estimates of the future sales and
profitability of the acquired business. Details are presented in note 3.
Cash and cash equivalents and bank and other loans largely attract floating interest rates. Accordingly, management
considers that their carrying amount approximates to fair value.
Finance lease obligations attract fixed interest rates that are implicit in the lease rentals and their fair value has been
assessed relative to prevailing market interest rates.
There were no transfers between levels during the period and no changes in valuation techniques.
Credit risk
Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
The Group’s cash balances are managed such that there is no significant concentration of credit risk in any one bank or
other financial institution. Management monitors closely the credit quality of the institutions with which it holds deposits.
Similar considerations are given to the Group’s portfolio of derivative financial instruments.
Before accepting a new customer, management assesses the customer’s credit quality and establishes a credit limit. Credit
quality is assessed using data maintained by reputable credit rating agencies, by the checking of references included in
credit applications and, where they are available, by reviewing the customer’s recent financial statements. Credit limits
are subject to multiple levels of authorisation and are reviewed on a regular basis. Credit insurance is employed where it is
considered to be cost effective. At 30 June 2016, the majority of trade receivables were due from major retailers in the UK
and Europe.
At 30 June 2016, the Group’s maximum exposure to credit risk was as follows (there was no significant concentration of
credit risk):
Trade and other receivables:
Trade receivables
Other receivables
Derivative financial instruments
Cash and cash equivalents
Total
2016
£m
2015
£m
127.7
3.4
15.3
146.4
24.8
171.2
121.9
4.0
11.6
137.5
23.3
160.8
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities.
The Group’s borrowing facilities are monitored against forecast requirements and timely action is taken to put in place,
renew or replace credit lines. Management’s policy is to reduce liquidity risk by diversifying the Group’s funding sources
and staggering the maturity of its borrowings.
The Group has an unsecured €140 million revolving credit facility that is committed until April 2019. At 30 June 2016, the
amount undrawn on the facility was €120 million (2015: €110m). The Group is subject to covenants, representations and
warranties which are typical for unsecured borrowing facilities, including two financial covenants. Debt cover (the ratio of
net debt to EBITDA) may not exceed 3:1 and interest cover (the ratio of EBITDA to net interest) may not be less than 4:1.
For the purpose of these calculations, net debt excludes amounts drawn under the invoice discounting facilities and
net interest comprises interest payments and receipts on net debt. The Group remains comfortably within these
covenants. Any future non‑compliance with the covenants could, if not waived, constitute an event of default and may,
in certain circumstances, lead to an acceleration of the maturity of borrowings drawn down and an inability to access
committed facilities.
The Group has two US Private Placements (USPP) with major US financial institutions. These loans are denominated
in US Dollars, each repayable in a single instalment at maturity and carrying a fixed rate of interest. The first USPP, for
$50 million, matures in November 2020, the second, for $40 million, matures in April 2022. Both loan obligations have
been swapped using derivative instruments into Euro fixed rate liabilities in order to hedge the Group’s Euro assets.
The Group has a number of facilities whereby it can borrow against certain of its trade receivables. In the UK, the Group
has a £25 million facility that was renewed in August 2014 and is committed until November 2016. In France and Belgium,
the Group has an aggregate €30 million facility, which has a rolling notice period of six months for the French part and
three months for the Belgian part. Under these arrangements, the Group transfers trade receivables to the providers of the
facilities at a discount to the face value of the underlying invoices. The Group can borrow from the provider of the relevant
facility up to the lower of the facility limit and the discounted value of the receivables transferred. The Group does not
derecognise the receivables transferred because it continues to be exposed to the credit risk associated with them.
McBride plc
Annual Report and Accounts 2016
97
At 30 June 2016, the carrying amount of trade receivables eligible for transfer and the amounts borrowed under the
facility were as follows:
Trade receivables available
Amount borrowed
Amount undrawn
2016
£m
29.9
2015
£m
46.3
(21.5)
(30.0)
8.4
16.3
The Group also has access to uncommitted working capital facilities amounting to £48.2 million (2015: £46.9m).
At 30 June 2016, £8.3 million (2015: £4.7m) was drawn against these facilities in the form of overdrafts and
short‑term borrowings.
In the following tables, estimated future contractual cash flows in respect of the Group’s financial liabilities are analysed
according to the earliest date on which the Group could be required to settle the liability. Floating rate interest payments
are estimated based on market interest rates prevailing at the balance sheet date. Payments and receipts in relation to
derivative financial instruments are shown net if they will be settled on a net basis.
At 30 June 2016
Bank overdrafts
Bank and other loans:
Principal
Interest payments
Finance lease obligations
Other liabilities
Within
1 year
£m
Between
1 and 2
years
£m
Between
2 and 3
years
£m
Between
3 and 4
years
£m
Between
4 and 5
years
£m
After 5
years
£m
Total
£m
(8.3)
—
—
—
—
—
(8.3)
(21.8)
(0.2)
(16.8)
(4.2)
(0.2)
(166.3)
(4.1)
(0.1)
—
(4.1)
(0.2)
—
(0.3)
(4.1)
—
—
(37.5)
(30.3)
(106.9)
(3.0)
(1.9)
—
—
—
—
(21.4)
(0.5)
(166.3)
Cash flows on non‑derivative liabilities
(200.8)
(4.4)
(21.1)
(4.4)
(40.5)
(32.2)
(303.4)
S
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a
n
c
e
Cash flows on derivative liabilities
Payments
Cash flows on financial liabilities
Cash flows on derivative assets
Receipts
At 30 June 2015
Bank overdrafts
Bank and other loans:
Principal
Interest payments
Finance lease obligations
Other liabilities
Cash flows on non‑derivative liabilities
Cash flows on derivative liabilities
Payments
Cash flows on financial liabilities
Cash flows on related derivative assets
Receipts
(61.3)
(262.1)
(3.0)
(7.4)
(3.0)
(24.1)
(3.0)
(7.4)
(32.1)
(25.4)
(127.8)
(72.6)
(57.6)
(431.2)
65.6
4.1
4.1
4.1
40.2
31.7
149.8
(196.5)
(3.3)
(20.0)
(3.3)
(32.4)
(25.9)
(281.4)
Within
1 year
£m
Between
1 and 2
years
£m
Between
2 and 3
years
£m
Between
3 and 4
years
£m
Between
4 and 5
years
£m
After 5
years
£m
Total
£m
(4.7)
—
—
—
—
—
(4.7)
(30.2)
(3.5)
(0.2)
(160.0)
(198.6)
(0.2)
(3.5)
(0.2)
—
(0.2)
(3.5)
(0.2)
—
(21.6)
(3.5)
—
—
(0.3)
(3.5)
—
—
(57.9)
(110.4)
(4.2)
—
—
(21.7)
(0.6)
(160.0)
(3.9)
(3.9)
(25.1)
(3.8)
(62.1)
(297.4)
(53.8)
(252.4)
(2.6)
(6.5)
(2.6)
(6.5)
(2.6)
(27.7)
(2.6)
(6.4)
(3.0)
(67.2)
(65.1)
(364.6)
54.7
3.5
3.5
3.5
3.5
4.2
72.9
(197.7)
(3.0)
(3.0)
(24.2)
(2.9)
(60.9)
(291.7)
i
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98
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
21. Financial risk management continued
Interest rate risk
Interest rate risk is the risk that the fair value of, or future cash flows associated with, a financial instrument will fluctuate
because of changes in market interest rates.
The Group is exposed to interest rate risk on its floating rate borrowings, which it has mitigated using interest rate
derivatives. The revolving credit facility drawings were hedged using fixed rate swaps in 2015, replaced by interest rate
caps in 2016 which allow interest rates to float up to the capped level. After taking into account the Group’s currency and
interest rate hedging activities, the currency and interest rate profile of the Group’s interest‑bearing financial assets and
financial liabilities was as follows:
Floating rate
Bank overdrafts
Bank and other loans
Cash and cash equivalents
Fixed rate
Bank and other loans
Finance lease obligations
2016
Euro
£m
Other
Sterling currencies
£m
£m
Total
£m
Euro
£m
2015
Other
Sterling currencies
£m
£m
Total
£m
(4.4)
(3.1)
(0.8)
(8.3)
(26.6)
(13.3)
15.6
6.3
(15.4)
(10.1)
—
2.9
2.1
(39.9)
24.8
(23.4)
(2.7)
(8.0)
9.4
(1.3)
(0.2)
(22.0)
11.7
(10.5)
(1.8)
(4.7)
—
2.2
0.4
(30.0)
23.3
(11.4)
(67.0)
—
(67.0)
—
(0.3)
(0.3)
—
(67.0)
(80.4)
(0.2)
(0.2)
(0.5)
(0.4)
(67.5)
(80.8)
—
—
—
—
(80.4)
(0.2)
(0.2)
(0.6)
(81.0)
Total
(82.4)
(10.4)
1.9
(90.9)
(82.1)
(10.5)
0.2
(92.4)
Interest payable on bank overdrafts and floating rate loans is based on base rates and short‑term interbank rates
(predominantly LIBOR, EURIBOR and some EONIA). At 30 June 2016, the weighted average interest rate payable on bank
and other loans was 4.6% (2015: 3.9%). At 30 June 2016, the weighted average interest rate receivable on cash and cash
equivalents was 0.1% (2015: 0.1%).
At 30 June 2016, the Group held interest rate caps with a notional principal amount of €30 million, which cap the
maximum rate payable but allows the rate to float below this maximum.
The USPP loans are fixed at an average rate of 5.45% payable in Euros.
Interest rate derivatives held by the Group at 30 June 2016 were as follows:
Maturity
February 2017
March 2017
June 2018
November 2020
April 2022
Notional
principal
amount
€ million
10.0
10.0
10.0
36.2
29.2
Fixed
rate
payable
or rate
%
1.700
1.690
1.600
5.509
5.376
Variable
rate
receivable
%
n/a
n/a
n/a
n/a
n/a
Nature of
contract
Cap
Cap
Cap
Xccy/swap
Xccy/swap
All interest rate derivatives held by the Group are indexed to three‑month EURIBOR.
Fixed or capped interest rates shown in the above table do not include the margin over market interest rates payable on
the Group’s borrowings.
For accounting purposes, the Group has designated a part of its cross currency interest rate swaps as cash flow hedges.
At 30 June 2016, the fair value of the interest rate caps was nil (2015: nil) and the fair value of the cross currency interest
rate swaps was £12.7 million (2015: £9.9m). During 2016, a gain of £10.4 million (2015: gain of £7.8m) was recognised in
other comprehensive income in respect of these derivatives.
On the assumption that a change in market interest rates would be applied to the interest rate exposures that were in
existence at the balance sheet date and that designated cash flow hedges are 100% effective, an increase/decrease of
100 basis points in market interest rates would have decreased/increased the Group’s profit before tax by £0.2m (2015: nil).
Foreign currency risk
(i) Transaction risk
Foreign currency transaction risk arises on sales and purchases denominated in currencies other than the functional
currency of the entity that enters into the transaction. While the magnitude of these exposures is relatively low, the
Group’s policy is to hedge committed transactions in full and to hedge a proportion of highly probable forecast
transactions on a twelve‑month rolling basis. Foreign currency transaction risk also arises on financial assets and
liabilities denominated in foreign currencies and Group policy also allows for these exposures to be hedged using
forward currency contracts.
McBride plc
Annual Report and Accounts 2016
99
At 30 June 2016, the notional principal amount of outstanding foreign currency contracts (net purchases) that are held
to hedge the Group’s transaction exposures was £48.3 million (2015: £38.4m). For accounting purposes, the Group
has designated the foreign currency contracts as cash flow hedges. At 30 June 2016, the fair value of the contracts
was £2.4 million (2015: loss of £1.3m). During 2016, a gain of £3.7 million (2015: loss of £0.6m) was recognised in other
comprehensive income and a gain of £0.2 million (2015: loss of £2.3m) was transferred from the cash flow reserve to the
income statement in respect of these contracts.
(ii) Translation risk
Foreign currency translation risk arises on consolidation in relation to the translation into Sterling of the results and net
assets of the Group’s foreign subsidiaries. The Group’s policy is to hedge a substantial proportion of overseas net assets
using a combination of foreign currency borrowings and foreign currency swaps. The Group hedges part of the currency
exposure on translating the results of its foreign subsidiaries into Sterling using average rate options and a part of its cross
currency interest rate swaps. This exposure is also mitigated by the natural hedge provided by the interest payable on the
Group’s foreign currency borrowings. At 30 June 2016, the fair value of the average rate options was a loss of £0.9 million
(2015: £1.3m).
At 30 June 2016, the Group had designated as net investment hedges £54.1 million (2015: £46.5m) of its
Euro‑denominated borrowings and three‑month rolling foreign currency forward contracts with a notional principal
amount of £33.6 million (2015: £29.4m). During 2016, a loss of £10.4 million (2015: gain of £16.4m) was recognised in other
comprehensive income in relation to the net investment hedges.
The currency profile of the Group’s net assets (excluding non‑controlling interests) before and after hedging currency
translation exposures was as follows:
2016
2015
Net assets
before
hedging
£m
forward
Currency Net assets Net assets
before
hedging
£m
after
contracts(1) hedging
£m
£m
Currency Net assets
after
hedging
forward
contracts
£m
Sterling
Euro
Polish Zloty
Czech Koruna
Malaysian Ringgit
Other
Total
21.7
21.2
16.8
2.6
3.5
2.7
68.5
31.2
(12.4)
(14.6)
(1.4)
(2.8)
—
—
52.9
8.8
2.2
1.2
0.7
2.7
36.7
(0.8)
15.1
1.4
2.5
2.0
68.5
56.9
27.2
(10.5)
(13.2)
(1.0)
(2.5)
—
—
£m
63.9
(11.3)
1.9
0.4
—
2.0
56.9
(1) Based on the Group’s position before the impairment of long‑lived assets and property, plant and equipment.
The Group’s exposure to a +/‑ 10% change in EUR/GBP and USD/GBP exchange rate are as follows:
Impact on equity
Impact on profit
2016
EUR +10% EUR ‑10% USD +10% USD ‑10%
8.3
1.2
(8.8)
(1.5)
—
—
—
—
The impact on equity shown above predominantly relates to EUR/GBP contracts that qualify for net investment and cash
flow hedge accounting. Impact on equity includes £6.3 million and (£6.8 million) relating to items that are designated in
net investment hedges; and as such there is a materially equal and opposite movement arising from the Group’s exposure
to the net investment in EUR assets. The impact on profit primarily relates to movements on intercompany loans which are
within the control of the Company.
22. Capital and net debt
The Group’s capital comprises total equity and net debt.
The Directors manage the Group’s capital to safeguard its ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders. The Directors aim to maintain an efficient capital structure with a
relatively conservative level of debt‑to‑equity gearing so as to ensure continued access to a broad range of financing
sources in order to provide sufficient flexibility to pursue commercial opportunities as they arise.
The Group’s capital was as follows:
Total equity
Net debt
Capital
2016
£m
69.1
90.9
160.0
2015
£m
57.5
92.4
149.9
2014
£m
68.6
84.7
153.3
S
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100
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
22. Capital and net debt continued
Gearing(1)
(1) Gearing represents net debt/average year end capital.
Movements in net debt were as follows:
Cash and cash equivalents
Overdrafts
Bank and other loans
Finance lease liabilities
Net debt
Cash and cash equivalents
Overdrafts
Bank and other loans
Finance lease liabilities
Net debt
2016
%
59
2015
%
61
At
30 June
2015
£m
23.3
(4.7)
(110.4)
(0.6)
(92.4)
At
30 June
2014
£m
35.3
(0.4)
(119.3)
(0.3)
Other
Currency
non‑cash translation
Cash
flows movements differences
£m
£m
£m
(0.3)
(3.3)
17.4
0.1
13.9
—
—
—
—
—
Other
Currency
Cash
non‑cash translation
flows movements differences
£m
£m
£m
(10.8)
(4.5)
8.8
0.1
—
—
—
(0.4)
(0.4)
At
30 June
2016
£m
24.8
(8.3)
1.8
(0.3)
(13.9)
(106.9)
—
(0.5)
(12.4)
(90.9)
At
30 June
2015
£m
23.3
(4.7)
(110.4)
(0.6)
(1.2)
0.2
0.1
—
(84.7)
(6.4)
(0.9)
(92.4)
23. Pensions and other post employment benefits
Overview
The Group provides a number of post employment benefit arrangements. In the UK, the Group operates a defined benefit
pension scheme and defined contribution pension schemes. Elsewhere in Europe, the Group has a number of smaller
unfunded post employment benefit arrangements that are structured to accord with local conditions and practices in the
countries concerned.
At 30 June 2016, the Group’s post‑employment benefit obligations outside the UK amounted to £1.8 million (2015: £1.6m).
Post‑employment benefits had the following effect on the Group’s results and financial position:
Profit or loss
Operating profit/(loss)
Defined contribution schemes
Contributions payable
Defined benefit schemes
Service cost (net of employee contributions)
Net charge to operating profit/(loss)
Finance costs
Net interest cost on defined benefit obligation
Net charge to profit/(loss) before taxation
Other comprehensive income
Defined benefit schemes
Net actuarial loss
Balance sheet
Defined benefit obligations
UK – funded
Other – unfunded
Fair value of scheme assets
Deficit on the schemes
Related deferred tax asset
2016
£m
2015
£m
(1.7)
(1.6)
(1.5)
(3.2)
(1.1)
(4.3)
(1.7)
(3.3)
(1.3)
(4.6)
(2.6)
(2.1)
(145.2)
(135.5)
(1.8)
(1.6)
(147.0)
(137.1)
114.1
105.7
(32.9)
(31.4)
5.6
6.0
McBride plc
Annual Report and Accounts 2016
101
UK Defined Benefit Pension Scheme
(i) Background
In the UK, the Robert McBride Pension Fund (‘the Fund’) provides pension benefits based on the final pensionable salary
and period of qualifying service of the participating employees. Following consultation with staff and the UK plan’s
Trustees, the UK Defined Benefit plan was closed to future service accrual from 29 February 2016. Staff affected by this
change were offered a new defined contribution scheme from that date. The closure of this plan is one of the key actions
in the ‘Repair’ phase to limit the growth of fund liabilities, reducing the risks and uncertainty over future cash costs
associated with providing an active Defined Benefit Pension Scheme.
The Fund is administered and managed by Robert McBride Pension Fund Trustees Limited (‘the Trustee’), in accordance
with the terms of a governing Trust Deed and relevant legislation. Regular assessments of the Fund’s benefit obligations
are carried out by an independent actuary on behalf of the Trustee and long‑term contribution rates are agreed between
the Trustee and the Company on the basis of the actuary’s recommendations. Following the last triennial valuation at
March 2015, the Company and Trustees agreed a new deficit reduction plan based on the scheme funding deficit of
£44.2 million. This gave rise to an increase in the deficit cash funding requirements of £0.4 million to £3.0 million per
annum with effect from 31 March 2015.
(ii) Assumptions and sensitivities
For accounting purposes, the Fund’s benefit obligation has been calculated based on data gathered for the 2015 triennial
actuarial valuation and by applying assumptions made by the Company on the advice of an independent actuary in
accordance with IAS 19, ‘Employee Benefits’, which differ in certain respects from the assumptions made by the Trustee
for the purpose of the actuarial valuation.
The principal assumptions used in calculating the benefit obligation at the end of the year were as follows:
Discount rate
Inflation rate:
Retail Prices Index (RPI)
Consumer Prices Index (CPI)
Future salary increases
Revaluation of deferred pensions (in excess of GMP)
Accrued before 6 April 2009
Accrued on or after 6 April 2009
Increase in pensions in payment (in excess of GMP):
Accrued before 1 April 2011
Accrued on or after 1 April 2011
2016
2015
3.05%
3.85%
2.95%
1.95%
3.25%
2.25%
n/a
2.00%
1.95%
1.95%
2.25%
2.25%
2.91%
2.14%
3.11%
2.12%
From 29 February 2016 the UK Defined Benefit plan was closed to future service accrual. Prior to closure, future increases
to pensionable salaries were limited to the rate of growth in the CPI up to 2.0%. The closure has resulted in neither a
curtailment gain nor loss in the financial statements.
Assumptions regarding future mortality rates are made based on published statistics and taking into account the profile
of the Fund’s members. Mortality rates are based on the PCMA 00 (male) and PCFA 00 (female) mortality tables adjusted
for both males and females to assume 8% more deaths than average in any one year. Life expectancies are assumed to
increase in future in line with the CMI standard projection model, with a minimum long‑term rate of improvement of 0.75%
per annum. On this basis, the average life expectancies assumed for members of the Fund after retirement at age 65 are
as follows:
Member retiring in the next year:
Male
Female
Member retiring 20 years from now:
Male
Female
2016
Years
2015
Years
21.9
24.1
22.8
25.6
22.0
23.9
22.5
24.6
S
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a
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s
t
a
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102
McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
23. Pensions and other post employment benefits continued
UK Defined Benefit Pension Scheme continued
At 30 June 2016, the sensitivity of the benefit obligation to changes in the principal assumptions was as follows (assuming
in each case that the other assumptions are unchanged):
Discount rate
Inflation rate
Life expectancy
Change in assumption
Increase in assumption Decrease in assumption
+/– 0.1% Decrease by £2.7m
Increase by £2.7m
+/– 0.1%
Increase by £2.4m Decrease by £2.4m
+/– 1 year
Increase by £3.8m Decrease by £3.8m
(iii) Fund’s assets
The Fund’s assets are held separately from those of the Group and are managed by professional investment managers on
behalf of the Trustee.
During 2013, the Trustee conducted an investment strategy review and decided to increase the proportion of the Fund’s
assets held in low risk investments that match as closely as practicable the profile of its liabilities. Due to the favourable
matching properties exhibited, the Trustee invested in synthetic gilt instruments that will provide returns in line with the
yields on UK government bonds.
The Trustee maintains a significant portfolio of return‑seeking assets that are expected to produce returns in excess of
the yield on UK government bonds. The Fund’s return‑seeking assets continue to be predominantly held within managed
funds that are designed to achieve equity‑like returns over the long term but with significantly less volatility than would be
experienced if the Fund had invested directly in equities.
The Fund holds no investment in securities issued by, nor any property used by, McBride plc or any of its subsidiaries.
The fair value and expected return on the Fund’s assets at the end of the year was as follows:
Return‑seeking assets:
Equities
Property
Other
Matching assets:
Bonds
Other
Cash
Total
2016
Fair
value
£m
49.4
—
28.0
77.4
12.0
23.3
35.3
1.4
114.1
2015
Fair
value
£m
54.6
—
28.1
82.7
9.8
11.2
21.0
2.0
105.7
2014
Fair
value
£m
40.2
3.1
30.6
73.9
7.1
9.1
16.2
2.5
92.6
All of the Fund’s assets are held in pooled funds. They are classified as Level 2 instruments, as they are not quoted on any
stock exchange, although their value is directly related to the value of the underlying holdings.
The expected return on the Fund’s assets must be set to be in line with the discount rate used to value the Fund’s
liabilities. This equates to an expected return over the year of £4.0 million (2015: £4.1m).
The actual return on the Fund’s assets during the year was £10.1 million (2015: £12.9m).
(iv) Movements in the Fund’s assets and liabilities
Movements in the fair value of the Fund’s assets during the year were as follows:
At 1 July
Expected return on plan assets
Actuarial gain
Employer’s contributions
Employees’ contributions
Benefits paid
Administration expenses
At 30 June
2016
£m
105.7
4.0
6.1
3.7
0.3
(5.2)
(0.5)
114.1
2015
£m
92.6
4.1
8.8
3.7
0.4
(3.6)
(0.3)
105.7
McBride plc
Annual Report and Accounts 2016
103
Movements in the benefit obligation during the year were as follows:
At 1 July
Service cost
Interest cost
Actuarial gain arising from changes in financial assumptions
Actuarial gain arising from changes in demographic assumptions
Experience gains on liabilities
Employees’ contributions
Benefits paid
At 30 June
2016
£m
2015
£m
(135.5)
(121.0)
(0.8)
(5.1)
(11.9)
0.1
3.1
(0.3)
5.2
(1.4)
(5.4)
(10.9)
—
—
(0.4)
3.6
(145.2)
(135.5)
(v) Experience gains and losses
Actuarial gains and losses recognised in other comprehensive income represent the effect of the differences between the
actuary’s assumptions and actual outcomes.
The history of actuarial gains and losses in relation to the Fund is as follows:
Present value of the Fund’s benefit obligation
Fair value of the Fund’s assets
Deficit in the Fund
Actuarial gains and losses:
2016
£m
2015
£m
2014
£m
2013
£m
2012
£m
(145.2)
(135.5)
(121.0)
(108.7)
(95.9)
114.1
(31.1)
105.7
92.6
84.5
78.0
(29.8)
(28.4)
(24.2)
(17.9)
Experience adjustments on the Fund’s benefit obligations
(8.7)
(10.9)
(8.0)
(10.5)
Experience adjustments on the Fund’s assets
Total recognised in other comprehensive income
6.1
(2.6)
8.8
(2.1)
2.8
(5.2)
3.3
(7.2)
(2.2)
(3.6)
(5.8)
At 30 June 2016, the cumulative net actuarial loss in relation to the Fund that has been recognised in other comprehensive
income amounted to £32.3 million (2015: £29.7m).
24. Employee share schemes
Share awards
The Group operates a performance‑based Long Term Incentive Plan (LTIP) for the Executive Directors and certain other
senior executives. Awards made under the LTIP vest provided the participant remains in the Group’s employment during
the three‑year vesting period and the Group achieves relative total shareholder return (TSR) and earnings per share (EPS)
targets. Up to 50% of each award vests dependent on the TSR of the Company’s ordinary shares compared with the TSR
of the FTSE SmallCap Ex. Investment Companies Index (a market condition). Up to 50% of each award vests dependent on
the growth in the Group’s EPS (a vesting condition).
Vested awards are settled either in the form of the Company’s ordinary shares (equity‑settled) or by the payment of cash
equivalent to the market value of the Company’s ordinary shares on the vesting date (cash‑settled).
Further information on the LTIP is set out in the Remuneration report.
Movements in LTIP awards outstanding were as follows:
Outstanding at 1 July
Granted
Forfeited
Lapsed
Outstanding at 30 June
2016
Equity‑settled
Number
553,375
536,081
(217,160)
—
872,296
Cash‑settled
Number
3,230,021
988,769
(259,445)
(958,158)
3,001,187
2015
Equity‑settled
Number
1,637,260
1,354,514
(1,880,258)
(558,141)
553,375
Cash‑settled
Number
3,291,472
1,420,328
(550,883)
(930,896)
3,230,021
Unvested at 30 June
872,296
3,001,187
553,375
3,230,021
Awards made under the LTIP have a nil exercise price.
During 2016 and 2015, no equity‑settled or cash‑settled LTIP awards vested.
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
24. Employee share schemes continued
Share awards continued
At 30 June 2016, the liability recognised in relation to cash‑settled awards was £1.6 million (2015: nil).
At the grant date, the weighted average fair value of LTIP awards granted during the year was 104.5 pence (2015: 87.7p).
Fair value was measured using a variant of the Monte Carlo valuation model based on the following assumptions:
Risk‑free interest rate
Share price on grant date
Dividend yield on the Company’s shares
Volatility of the Company’s shares
Expected life of LTIP awards
September
October October
2015 issue 2015 issue 2014 issue 2013 issue
February
0.7%
121.3p
3.1%
0.8%
86.8p
5.6%
1.4%
0.7%
87.8p
123.5p
5.7%
4.1%
27.0%
28.5%
29.0%
34.0%
3 years
3 years
3 years
3 years
Expected volatility was determined based on weekly observations of the Company’s share price and the FTSE SmallCap
Ex. Investment Companies Index (2015 and 2014 issues) and FTSE 250 Ex. Investment Companies Index (2013 issue) over
the three‑year period immediately preceding the grant date.
Compensation expense recognised in profit or loss in relation to employee share schemes was as follows:
LTIP:
Equity settled awards
Cash‑settled awards
Total expense
25. Provisions
At 30 June 2014
Charged to profit or loss
Unwind of discount
Utilisation
Currency translation differences
At 30 June 2015
Charged/(released) to profit or loss
Unwind of discount
Utilisation
Currency translation differences
At 30 June 2016
Analysis of provisions:
Current
Non‑current
Total
Reorganisation
and
restructuring dilapidations
£m
£m
Leasehold Environmental
remediation
£m
8.4
3.0
—
(6.9)
—
4.5
2.4
—
(3.7)
0.2
3.4
—
0.7
—
—
—
0.7
—
—
—
—
0.7
2.5
—
0.2
(0.2)
(0.3)
2.2
—
0.2
(0.3)
0.2
2.3
2016
£m
2015
£m
0.2
1.6
1.8
0.1
(0.1)
—
Other
£m
0.5
0.2
—
—
(0.1)
0.6
(0.5)
—
—
(0.1)
—
2016
£m
3.5
2.9
6.4
Total
£m
11.4
3.9
0.2
(7.1)
(0.4)
8.0
1.9
0.2
(4.0)
0.3
6.4
2015
£m
4.8
3.2
8.0
Reorganisation and restructuring provisions as at 30 June 2016 principally comprise of redundancies in relation to the
Group reorganisation and UK restructuring.
Environmental remediation provision relates to historical environmental contamination at a site in Belgium.
Other provisions relating mainly to trading costs in France, have been released during the year due to changes in local
legal requirements.
McBride plc
Annual Report and Accounts 2016
105
26. Share capital and reserves
Share capital
Ordinary shares of 10 pence each
At 1 July 2014, 30 June 2015 and at 30 June 2016
Allotted and fully paid
Number
£m
182,840,301
18.3
Ordinary shares carry full voting rights and ordinary shareholders are entitled to attend Company meetings and to receive
payments to shareholders.
Reserves
(i) Share premium account
The share premium account records the difference between the nominal amount of shares issued and the fair value of the
consideration received. The share premium account may be used for certain purposes specified by UK law, including to
write‑off expenses incurred on any issue of shares or debentures and to pay up fully paid bonus shares. The share premium
account is not distributable but may be reduced by special resolution of the Company’s ordinary shareholders and with
court approval.
(ii) Cash flow hedge reserve
The cash flow hedge reserve comprises the cumulative net change in the fair value of hedging instruments in designated
cash flow hedging relationships recognised in other comprehensive income.
(iii) Currency translation reserve
The currency translation reserve comprises cumulative currency translation differences on the translation of the Group’s
net investment in foreign operations into Sterling together with the cumulative net change in the fair value of hedging
instruments in designated net investment hedging relationships recognised in other comprehensive income.
(iv) Capital redemption reserve
The capital redemption reserve records the cost of shares purchased by the Company for cancellation or redeemed in
excess of the proceeds of any fresh issue of shares made specifically to fund the purchase or redemption. The capital
redemption reserve is not distributable but may be reduced by special resolution of the Company’s ordinary shareholders
and with court approval.
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Own shares
Held in treasury
At cost
At 1 July
Shares transferred to employees
At 30 June
2016
2015
Number
£m
Number
£m
630,992
0.8 630,992
—
—
—
630,992
0.8 630,992
0.8
—
0.8
Own shares represent the Company’s ordinary shares that are acquired to meet the Group’s expected obligations under
employee share schemes.
At 30 June 2016, the market value of own shares held was £1.0 million (2015: £0.6m).
Non‑controlling interests
Non‑controlling interests relates to Fortune Organics (F.E.) Sdn Bhd, Malaysia
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McBride plc
Annual Report and Accounts 2016
Notes to the consolidated financial statements continued
for the year ended 30 June 2016
27. Commitments
Operating leases
Future minimum lease payments under non‑cancellable operating leases are as follows:
Rentals payable:
Within one year
In the second to fifth years inclusive
After more than five years
Total
Capital expenditure on property, plant and equipment
Contracted but not provided
2016
£m
4.2
9.8
1.9
15.9
2016
£m
4.2
2015
£m
3.7
7.6
2.6
13.9
2015
£m
1.0
28. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated
on consolidation and, therefore, are not required to be disclosed in these financial statements. Details of transactions
between the Group and other related parties are disclosed below.
(i) Post‑employment benefit plans
As shown in note 23, contributions amounting to £5.4 million (2015: £5.3m) were payable by the Group to pension
schemes established for the benefit of its employees. At 30 June 2016, £0.2 million (2015: £0.2m) in respect of
contributions due was included in other payables.
(ii) Compensation of key management personnel
For the purposes of these disclosures, the Group regards its key management personnel as the Directors and certain
members of the senior executive team.
Compensation payable to key management personnel in respect of their services to the Group was as follows:
Short‑term employee benefit:
Compensation for loss of office
Post employment benefits
Share‑based payments
Total
2016
£m
2.6
0.6
0.3
0.2
3.7
2015
£m
1.9
0.7
0.3
0.1
3.0
29. Exchange rates
The principal exchange rates used to translate the results, assets and liabilities and cash flows of the Group’s foreign
operations into Sterling were as follows:
Euro
US Dollar
Polish Zloty
Czech Koruna
Hungarian Forint
Malaysian Ringgit
Australian Dollar
Chinese Yuan
Average rate
Closing rate
2016
£m
1.34
1.48
5.74
2015
£m
1.31
1.58
5.48
2016
£m
1.21
1.34
5.37
36.19
36.24
32.83
2015
£m
1.41
1.57
5.89
38.31
418.05 406.07
383.62
442.69
6.14
2.04
9.55
5.44
1.89
9.75
5.36
1.81
8.92
5.93
2.05
9.75
Independent auditors’ report
to the members of McBride plc
McBride plc
Annual Report and Accounts 2016
107
Report on the parent company financial statements
Our opinion
In our opinion, McBride plc’s parent company financial
statements (the “financial statements”):
• give a true and fair view of the state of the parent
company’s affairs as at 30 June 2016;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report
and Accounts (the “Annual Report”), comprise:
• the Company balance sheet as at 30 June 2016;
• the Company statement of changes in equity for the
year then ended; and
• the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied
in the preparation of the financial statements is United
Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law
(United Kingdom Generally Accepted Accounting Practice).
Other required reporting
Consistency of other information
(i) Companies Act 2006 reporting
In our opinion, the information given in the Strategic Report
and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the
financial statements.
(ii) ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and Ireland)
(“ISAs (UK & Ireland)”) we are required to report to you if,
in our opinion, information in the Annual Report is:
• materially inconsistent with the information in the
audited financial statements; or
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the parent company
acquired in the course of performing our audit; or
• otherwise misleading.
We have no exceptions to report arising from this
responsibility.
(iii) Adequacy of accounting records and information
and explanations received
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
• we have not received all the information and
explanations we require for our audit; or
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the financial statements and the part of the Directors’
Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
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McBride plc
Annual Report and Accounts 2016
Independent auditors’ report continued
to the members of McBride plc
We primarily focus our work in these areas by assessing the
directors’ judgements against available evidence, forming
our own judgements, and evaluating the disclosures in the
financial statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non‑financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements and
to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing
the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the
implications for our report.
Other matter
We have reported separately on the group financial
statements of McBride plc for the year ended 30 June 2016.
David Beer (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
St Albans
7 September 2016
Directors’ remuneration
Directors’ remuneration report –
Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006 we are required to report
to you if, in our opinion, certain disclosures of directors’
remuneration specified by law are not made. We have no
exceptions to report arising from this responsibility.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’
responsibilities set out on page 64, the directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable
law and ISAs (UK & Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for
and only for the parent company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies
Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report
is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK
& Ireland). An audit involves obtaining evidence about
the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to
the parent company’s circumstances and have been
consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates
made by the directors; and
• the overall presentation of the financial statements.
Company balance sheet
at 30 June 2016
Fixed assets
Investments in subsidiary undertakings
Receivables
Cash and cash equivalents
McBride plc
Annual Report and Accounts 2016
109
Note
3
2016
£m
2015
£m
158.2
158.2
4
206.9
0.3
158.2
158.2
178.6
0.8
Creditors: amounts falling due within one year
5
(106.1)
(77.9)
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provisions for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Cash flow hedge reserve
Profit and loss account
Total shareholders’ funds
6
9
10
101.1
259.3
101.5
259.7
(83.5)
(78.6)
(0.6)
175.2
(2.0)
179.1
18.3
96.7
47.9
(0.3)
12.6
175.2
18.3
102.4
42.1
(0.9)
17.2
179.1
The financial statements on pages 109 to 115 were approved by the Board of Directors on 7 September 2016 and were
signed on its behalf by:
Rik De Vos
Director
Chris Smith
Director
McBride plc
Registered number: 2798634
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McBride plc
Annual Report and Accounts 2016
Company statement of changes in equity
for the year ended 30 June 2016
Called up
share
capital
£m
Share
premium redemption
reserve
account
£m
£m
Capital Cash flow
hedge
reserve
£m
At 1 July 2014
Profit for the year
Net changes in fair value
Loss on cash flow hedges transferred to profit or loss
Foreign exchange movement
Issue of B Shares
Redemption of B Shares
Share‑based payments
At 30 June 2015
At 1 July 2015
Profit for the year
Net changes in fair value
Loss on cash flow hedges transferred to profit or loss
Foreign exchange movement
Issue of B Shares
Redemption of B Shares
Share‑based payments
At 30 June 2016
18.3
111.5
33.4
—
—
—
—
—
—
—
—
—
—
—
(9.1)
—
—
18.3
102.4
18.3
102.4
—
—
—
—
—
—
—
—
—
—
—
(5.7)
—
—
—
—
—
—
—
8.7
—
42.1
42.1
—
—
—
—
—
5.8
—
(3.1)
—
6.6
(4.4)
—
—
—
—
(0.9)
(0.9)
—
10.4
(9.8)
—
—
—
—
18.3
96.7
47.9
(0.3)
Profit
and loss
account
£m
12.6
9.5
—
4.4
(0.6)
—
(8.7)
—
17.2
17.2
4.7
—
9.8
(13.5)
—
(5.8)
0.2
12.6
Total
£m
172.7
9.5
6.6
—
(0.6)
(9.1)
—
—
179.1
179.1
4.7
10.4
—
(13.5)
(5.7)
—
0.2
175.2
Notes to the Company financial statements
for the year ended 30 June 2016
McBride plc
Annual Report and Accounts 2016
111
1. Principal accounting policies
Description of business
McBride plc (‘the Company’) is the ultimate parent
Company of a group of companies that together is Europe’s
leading provider of Private Label Household and Personal
Care products, developing, producing and supplying our
products to major retailers throughout Europe and beyond.
Basis of preparation
The Company’s financial statements have been prepared on
a going concern basis in accordance with the Companies
Act 2006 (‘the Act’) and Financial Reporting Standard
101, ‘Reduced Disclosure Framework’ (FRS 101). FRS 101
sets out a reduced disclosure framework for a ‘qualifying
entity’ as defined in the standard which addresses the
financial reporting requirements and disclosure exemptions
in the individual financial statements of qualifying entities
that otherwise apply the recognition, measurement and
disclosure requirements of EU‑adopted IFRS.
These are the first financial statements of the Company
prepared in accordance with FRS 101. The Company’s date
of transition to FRS 101 is 1 July 2014. The Company has
notified its shareholders in writing about, and they do not
object to, the use of the disclosure exemptions used by the
Company in these financial statements.
FRS 101 sets out amendments to EU‑adopted IFRS that are
necessary to achieve compliance with the Act and related
Regulations. The prior year financial statements were
restated for material adjustments on adoption of FRS 101 in
the current year.
As permitted by FRS 101, the Company has taken
advantage of the disclosure exemptions available under
that standard in relation to business combinations,
financial instruments, capital management, presentation
of comparative information in respect of certain assets,
presentation of a cash flow statement, standards not
yet effective, impairment of assets and related party
transactions. Where required, equivalent disclosures
are given in the consolidated financial statements of
McBride plc.
The Directors have taken advantage of the exemption
available under section 408 of the Companies Act 2006
and not presented an income statement or a statement of
comprehensive income for the Company alone. A summary
of the Company’s significant accounting policies is set
out below.
Investments in subsidiary undertakings
A subsidiary is an entity controlled, either directly or
indirectly, by the Company, where control is the power to
govern the financial and operating policies of the entity
so as to obtain benefit from its activities. Investments in
subsidiaries represent interests in subsidiaries that are
directly owned by the Company and are stated at cost less
any provision for permanent diminution in value.
Financial instruments
(i) Bank and other loans
Bank and other loans are initially measured at fair value,
net of any directly attributable transaction costs, and
are subsequently measured at amortised cost using the
effective interest method.
(ii) Derivative financial instruments
The Company uses derivative financial instruments to
hedge its exposure to foreign exchange and interest
rate risks arising from operating, financing and investing
activities. The Company does not hold or issue derivative
financial instruments for trading purpose; however if
derivatives do not qualify for hedge accounting they are
accounted for as such.
Derivative financial instruments are recognised and stated
at fair value. Where derivatives do not qualify for hedge
accounting, any gains or losses on remeasurement are
immediately recognised in the Company income statement.
Where derivatives qualify for hedge accounting, recognition
of any resultant gain or loss depends on the nature of the
hedge relationship and the items being hedged. In order
to qualify for hedge accounting, the Company is required
to document from inception, the relationship between the
item being hedged and the hedging instrument.
The Company is also required to document and
demonstrate an assessment of the relationship between the
hedged item and the hedging instrument, which shows that
the hedge will be highly effective on an ongoing basis. This
effectiveness testing is performed at each reporting date to
ensure that the hedge remains highly effective.
Derivative financial instruments with maturity dates of more
than one year from the balance sheet date are disclosed as
non‑current.
The Company has entered into a number of financial
derivative contracts and each is discussed in turn.
The Company enters into forward foreign exchange contracts
to mitigate the exchange risk for certain foreign currency
receivables. At 30 June 2016, the outstanding contracts all
mature within twelve months (2015: twelve months) of the
year end. The Company is committed to sell CZK, PLN, EUR
and receive a fixed EUR and Sterling amounts.
The Company also enters into foreign exchange options
contracts to mitigate the GBP:EUR exchange risk for
currency sales. At 30 June 2016, the outstanding contracts
all mature within twelve months (2015: twelve months) of
the year end. These contracts are measured at fair value
with movements reflected in the income statement.
The Company enters into cross currency interest rate
swaps to mitigate the interest rate risk on USD debt by
swapping it into a EUR cash flow. The underlying USD
liability is also swapped into a EUR liability and the resulting
exchange risk is mitigated through means of intra‑Group
loans. At 30 June 2016, the outstanding contracts mature
in November 2020 and April 2022 (2015: November 2020
and April 2022).
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McBride plc
Annual Report and Accounts 2016
Notes to the Company financial statements continued
for the year ended 30 June 2016
1. Principal accounting policies continued
Financial instruments continued
(ii) Derivative financial instruments continued
The Company also had interest rate swap contracts that
matured during the financial year with the impact reflected
in the income statement.
The contracts are all measured at fair value, which
is determined using valuation techniques that utilise
observable inputs. The key assumptions used in valuing
derivatives are the exchange rates for GBP:EUR, GBP:CZK,
GBP:PLN, EUR:PLN and EUR:USD as well as USD and EUR
interest rates.
Foreign currency translation
Transactions denominated in foreign currencies are
translated into Sterling at the exchange rate ruling on the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at
the exchange rate ruling on the balance sheet date.
Currency translation differences are recognised in the
income statement.
Leases
Leases that confer rights and obligations similar to those
that attach to owned assets are classified as finance leases.
All other leases are classified as operating leases.
Operating lease payments are charged to the profit and
loss account on a straight‑line basis over the lease term.
Lease incentives are credited to the profit and loss account
on a straight‑line basis over the lease term or, if the initial
rent is above the prevailing market rent, over the shorter of
the lease term and the period to the first rent review from
which it is expected that the prevailing market rent will
be payable.
Share‑based payments
The Company operates incentive share schemes under
which it grants equity‑settled and cash‑settled awards
over its own ordinary shares to certain employees of its
subsidiaries. The Company recognises a capital contribution
to the subsidiaries concerned that is based on the fair value
of the awards measured using the Black‑Scholes option
pricing formula or the Monte Carlo valuation model.
For equity‑settled awards, the fair value reflects market
performance conditions and all non‑vesting conditions.
Fair value is determined at the grant date and is not
subsequently remeasured unless the relevant conditions
are modified. Adjustments are made to the compensation
expense to reflect actual and expected forfeitures due
to failure to satisfy service conditions or non‑market
performance conditions. For cash‑settled awards, the fair
value reflects all the conditions on which the award is
made and is remeasured at each reporting date and at the
settlement date.
Generally, the capital contribution is recognised on
a straight‑line basis over the vesting period. For
equity‑settled awards a corresponding credit is
recognised directly in reserves while for cash‑settled
awards a corresponding liability to settle is recognised
in the balance sheet.
Taxation
Current tax is the amount of tax payable in respect of the
taxable profit or loss for the period. Taxable profit differs
from accounting profit because it excludes income or
expenses that are recognised in the period for accounting
purposes but are either not taxable or not deductible for
tax purposes or are taxable or not deductible in earlier or
subsequent periods.
Deferred tax is recognised on temporary differences
between the recognition of items of income or expenses for
accounting purposes and their recognition for tax purposes.
A deferred tax asset in respect of a deductible temporary
difference or a carried forward tax loss is recognised
only to the extent that it is considered more likely than
not that sufficient taxable profits will be available against
which the reversing temporary difference or the tax loss
can be deducted. Deferred tax assets and liabilities are
not discounted.
Current and deferred tax is measured using tax rates that
have been enacted or substantively enacted at the balance
sheet date.
Provisions
A provision is a liability of uncertain timing or amount and
is recognised when the Company has a present obligation
as a result of a past event, it is probable that payment will
be made to settle the obligation and the payment can be
estimated reliably.
Provision is made for restructuring costs when a detailed
formal plan for the restructuring has been determined
and that plan has started to be implemented or has been
announced to the parties that may be affected by it.
Provisions are discounted where the effect of the time value
of money is material.
Guarantees
From time to time, the Company provides guarantees
to third parties in respect of the indebtedness of its
subsidiaries. The Directors consider these guarantees to
be insurance arrangements and, therefore, the Company
recognises a liability in respect of such guarantees only in
the event that it becomes probable that the guarantee will
be called upon and the Company will be required to make
a payment to the third party.
Payments to shareholders
Subject to shareholder approval at each AGM, it is the
Company’s intention that, for the foreseeable future, all
payments to shareholders will be made by the issue of
non‑cumulative redeemable preference shares (‘B Shares’).
B Shares issued but not redeemed are classified as
current liabilities.
Own shares
Own shares represent the Company’s ordinary shares that
are held by the Company in treasury or by an employee
benefit trust to employee share schemes. When own
shares are acquired, the cost of purchase in the market is
deducted from the profit and loss account reserve. Gains
and losses on the subsequent transfer or sale of own shares
are recognised directly in the profit and loss account.
Cash flow statement
A cash flow statement is not presented in these financial
statements on the grounds that the Company’s cash flows
are included in the consolidated financial statements of the
Company and its subsidiaries.
Critical accounting policies
The Company has a number of forward exchange contracts
and interest rate swaps. Under FRS 101, movements in these
financial instruments need to be recognised within other
comprehensive income in the financial statements; there
was no such requirement under UK GAAP as previously
adopted by the Company. Changes in the fair value of the
hedging instrument are, to the extent that the hedge is
effective, recognised in other comprehensive income.
McBride plc
Annual Report and Accounts 2016
113
2. Profit for the financial year
As permitted by section 408(3) of the Act, the Company’s income statement or a statement of comprehensive income are
not presented in these financial statements.
The Company has no employees.
Fees payable to the Company’s auditor, PricewaterhouseCoopers LLP, in respect of the audit of the Company’s financial
statements were £0.1 million (2015: £0.1m).
The Company’s profit for the financial year was £4.7 million (2015: £9.5m).
3. Investments in subsidiary undertakings
At 1 July 2015 and at 30 June 2016
£m
158.2
The Directors have reviewed the recoverability of the carrying amount of the Company’s investments and have concluded
that there is no impairment in their value.
Details of the Company’s subsidiaries at 30 June 2016 are set out on pages 116 and 117.
Details of the share‑based payments provided by the Company to employees of its subsidiaries are presented in note 24
to the consolidated financial statements.
4. Receivables
Amounts falling due within one year
Amounts owed to subsidiary undertakings
Derivative financial instruments
Other debtors
Prepayments and accrued income
Amounts falling due greater than one year
Derivative financial instruments
Total
5. Creditors: amounts falling due within one year
Amounts owed to subsidiary undertakings
Derivative financial instruments
Deferred tax liabilities (see note 8)
B Shares (see note 7)
Other creditors
Accruals and deferred income
Bank overdrafts
Total
6. Creditors: amounts falling due after more than one year
Bank and other loans
2016
£m
2015
£m
192.2
164.3
0.1
—
1.9
1.9
0.1
3.0
12.7
206.9
9.3
178.6
2016
£m
95.8
1.0
1.8
0.9
0.6
3.2
2.8
2015
£m
73.1
0.6
1.8
1.0
0.6
0.8
—
106.1
77.9
2016
£m
83.5
2015
£m
78.6
Bank and other loans represent amounts drawn down under a €140 million revolving credit facility, which is committed
until April 2019 and two US Private Placements for $50 million (maturing in November 2020) and $40 million (maturing
April 2022).
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McBride plc
Annual Report and Accounts 2016
Notes to the Company financial statements continued
for the year ended 30 June 2016
7. Payments to shareholders
Payments to ordinary shareholders are made by way of the issue of B Shares in place of income distributions. Ordinary
shareholders are able to redeem any number of the B Shares issued to them for cash. Any B Shares that they retain attract
a dividend of 75% of LIBOR on the 0.1 pence nominal value of each share, paid on a twice‑yearly basis.
Payments to ordinary shareholders made or proposed in respect of the year were as follows:
Interim
Final
Total for the year
2016
Pence
per share
1.2
2.4
3.6
2015
Pence
per share
1.7
1.9
3.6
£m
2.2
4.4
6.6
£m
3.1
3.5
6.6
The proposed final payment in respect of 2016 of 2.4 pence per ordinary share is subject to approval by shareholders at
the Company’s AGM and has therefore not been recognised in these financial statements.
Movements in the number of B Shares outstanding were as follows:
Issued and fully paid
At 1 July
Issued
Redeemed
At 30 June
2016
Number
000
Nominal
value
£m
2015
Number
000
Nominal
value
£m
969,007
5,650,489
(5,760,968)
858,528
1.0
5.7
(5.8)
0.9
578,451
9,110,465
(8,719,909)
969,007
0.6
9.1
(8.7)
1.0
B Shares carry no rights to attend, speak or vote at Company meetings, except on a resolution relating to the winding up
of the Company.
8. Deferred tax liabilities
At 1 July 2015
Charge to the profit and loss account
At 30 June 2016
9. Provisions for liabilities
At 1 July 2015
Release to the profit and loss account
Utilisation
At 30 June 2016
£m
1.8
—
1.8
£m
2.0
(0.8)
(0.6)
0.6
Provisions represent costs relating to the Group’s reorganisation and are expected to be utilised during 2017.
10. Called up share capital
Ordinary shares of 10 pence each
At 30 June 2015 and at 30 June 2016
Allotted and fully paid
Number
£m
182,840,301
18.3
Ordinary shares carry full voting rights and ordinary shareholders are entitled to attend Company meetings and to receive
payments to shareholders.
At 30 June 2016, awards were outstanding over 872,296 ordinary shares (2015: 553,375 ordinary shares) in relation to the
equity‑settled employee share schemes that are operated by the Company. Further information on the employee share
schemes is presented in note 24 to the consolidated financial statements.
McBride plc
Annual Report and Accounts 2016
115
11. Guarantees
The Company has guaranteed the indebtedness of certain of its subsidiaries up to an aggregate amount of £3.8 million
(2015: £4.4m).
12. Related party transactions
As permitted by FRS 101, ‘Related Party Disclosures’, transactions between the Company and its wholly‑owned subsidiaries
are not disclosed in these financial statements.
13. Explanation of transition to FRS 101
As stated in note 1, these are the Company’s first financial statements prepared in accordance with FRS 101.
In preparing its opening FRS 101 balance sheet, the Company has adjusted amounts reported previously in financial
statements prepared in accordance with its old basis of accounting (UK GAAP). An explanation of how the transition from
previously adopted UK GAAP to FRS 101 has affected the Company’s financial position and financial performance is set out
in the following table.
Recognition
For the year of financial For the year
30 June
2015
FRS 101
£m
30 June instruments
in profit
and loss(1)
2015
UK GAAP
£m
£m
Fixed assets
Investments in subsidiary undertakings
Receivables
Cash and cash equivalents
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Provisions for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Cash flow hedge reserve
Profit and loss account
Total shareholders’ funds
158.2
178.6
0.8
(77.9)
101.5
259.7
(78.6)
(2.0)
179.1
18.3
102.4
42.1
—
16.3
179.1
—
—
—
—
—
—
—
—
—
—
—
—
(0.9)
0.9
158.2
178.6
0.8
(77.9)
101.5
259.7
(78.6)
(2.0)
179.1
18.3
102.4
42.1
(0.9)
17.2
—
179.1
(1) Primarily represents the USD:GBP element of the gross currency interest rate swap in the cash flow hedge reserve.
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McBride plc
Annual Report and Accounts 2016
Subsidiaries
Details of the Company’s subsidiaries at 30 June 2016 are as follows. In each case, the Company’s equity interest is in the
form of ordinary shares which, unless stated otherwise, are indirectly owned. Full information of all interests are given in
the Company’s annual return.
The business activity of each of the Company’s trading subsidiaries is the manufacture, distribution and sale of Household
and Personal Care products.
Subsidiaries
Trading subsidiaries
Robert McBride Ltd(1)
McBride S.A.
McBride S.A.S.
McBride S.p.A.
Problanc S.A.S.
Vitherm France S.A.S.
McBride B.V.
Chemolux Germany GmbH
Chemolux S.a.r.l.
Intersilesia McBride Polska Sp. z o.o
McBride S.A.U.
McBride Czech a.s.(2)
McBride Australia Pty Ltd
McBride Zhongshan Ltd
McBride Hong Kong Limited
Fortune Laboratories Sdn. Bhd.
Newlane Cosmetics Company Limited
Fortune Organics (F.E.) Sdn. Bhd.
Holding companies
McBride Holdings Limited
McBride CE Holdings Limited
McBride spol. s r.o.
McBride Asia Holdings Limited
McBride Hong Kong Holdings Limited
Fortlab Holdings Sdn. Bhd.
CNL Holdings Sdn. Bhd.
Equity interest
Country of
incorporation
and operation
100%
100%
100%
100%
99%
100%
100%
100%
100%
100%
100%
70%
100%
100%
100%
100%
100%
55%
100%
100%
100%
100%
100%
100%
100%
England
Belgium
France
Italy
France
France
Netherlands
Germany
Luxembourg
Poland
Spain
Czech Republic
Australia
China
Hong Kong
Malaysia
Vietnam
Malaysia
England
England
Czech Republic
Hong Kong
Hong Kong
Malaysia
Malaysia
(1) McBride plc directly owns 100% of McBride Holdings Limited and 57.7% of Robert McBride Ltd.
(2) McBride Holdings Limited is committed to purchase the 30% equity interest in McBride Czech a.s. that it does not already own on terms which are
such that the Group does not recognise any non‑controlling interest in McBride Czech a.s.
McBride plc
Annual Report and Accounts 2016
117
Equity interest
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Country of
incorporation
and operation
Singapore
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Spain
Subsidiaries
Dormant
CM Nouvelle Holdings Pte. Ltd.
Breckland Mouldings Limited
Camille Simon Holdings Limited
Camille Simon Limited
Culmstock Limited
Darcy Bolton Limited
Darcy Bolton Property Limited
Darcy Limited
Detergent Information Limited
G.Garnett & Sons Limited
G.Garnett Estates Limited
Globol Properties (UK) Limited
H.H. Limited
HomePride Limited
Hugo Personal Care Limited
International Consumer Products Limited
Longthorne Laboratories Limited
McBride Aircare Limited
McBride Business Services Limited
McBride UK Limited
McBrides Limited
Milstock Limited
RMG (Droylsden) Limited
Robert McBride (Aerosols) Limited
Robert McBride (Bradford) Limited
Robert McBride (Properties) Limited
Robert McBride Homecare Limited
Robert McBride Household Limited
Savident Limited
McBride Holdings S.L.
Other
Robert McBride Pension Fund Trustees Limited
100%
England
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McBride plc
Annual Report and Accounts 2016
Group five‑year summary
Revenue
Adjusted operating profit
Amortisation of intangible assets
Exceptional items
Operating profit/(loss)
Net finance costs
Profit/(loss) before tax
Taxation
Profit/(loss) after tax
Earnings per share
Diluted
Adjusted diluted
Payments to shareholders (per ordinary share)
Non‑current assets
Property, plant and equipment
Intangible assets
Other assets
Current assets
Current liabilities
Non‑current liabilities
Net assets
Net debt
Year ended 30 June
2016
£m
2015
£m
2014
£m
680.9
704.2
744.2
2013
£m
761.4
23.6
(1.1)
(7.5)
15.0
(6.0)
9.0
(3.5)
5.5
28.5
(1.0)
22.0
(1.4)
(17.8)
(34.5)
9.7
(7.1)
2.6
(3.3)
(0.7)
(13.9)
(7.4)
(21.3)
2.2
(19.1)
(0.4p)
(10.5p)
8.3p
3.6p
5.3p
5.0p
3.0p
7.3p
5.0p
2012
£m
813.9
29.5
(1.7)
(9.7)
18.1
(6.0)
12.1
(3.0)
9.1
5.0p
9.7p
5.0p
36.2
(0.9)
(2.4)
32.9
(7.1)
25.8
(8.8)
17.0
9.3p
11.1p
3.6p
At 30 June
2016
£m
2015
£m
2014
£m
2013
£m
2012
£m
136.2
20.0
22.5
178.7
240.0
129.8
143.4
173.6
19.7
21.5
171.0
225.4
26.3
14.6
184.3
245.8
34.1
6.2
213.9
231.9
175.6
35.7
2.9
214.2
229.8
(219.6)
(218.0)
(229.8)
(246.9)
(252.9)
(130.0)
(120.9)
(131.7)
(92.2)
(78.7)
69.1
57.5
68.6
106.7
112.4
90.9
92.4
84.7
86.8
81.2
Useful information for shareholders
McBride plc
Annual Report and Accounts 2016
119
Financial calendar
Next key dates for shareholders in 2016 and 2017:
Record date for entitlement to B Shares 21 October 2016
Record date for entitlement to B Share
allotments payable on B Shares issued
and not previously redeemed
Annual General Meeting
2016/17 Q1 interim
management statement
Ex‑entitlement to B Shares date
Credit CREST accounts with
B Share entitlements
Latest date for receipt by registrar
of completed election forms and
submitting CREST elections
21 October 2016
24 October 2016
24 October 2016
24 October 2016
24 October 2016
14 November 2016
Despatch of cheques in respect of
B Shares which have been redeemed
25 November 2016
Payment into bank accounts in respect
of B Shares which have been redeemed
by certificated shareholders who have
valid mandate instructions in place
25 November 2016
Despatch of share certificates
for B Shares not being redeemed
Payments on redeemed B Shares
issued in CREST
Payments of B Share allotments
payable on B Shares issued and
not previously redeemed
2016/17 Half year end
2016/17 Half year trading statement
Interim results announced
2016/17 Q3 interim
management statement
2016/17 Year end
2016/17 Year end trading statement
25 November 2016
25 November 2016
25 November 2016
31 December 2016
January 2017
February 2017
April 2017
30 June 2017
July 2017
Full year preliminary statement
September 2017
These dates are provisional and may be subject
to change.
Payments to shareholders
On 24 March 2011 shareholders approved a proposal for the
implementation of a B Share scheme as a mechanism for
making payments to shareholders. This involves the issue of
non‑cumulative redeemable preference shares (B Shares)
in place of income distributions. Shareholders are able to
redeem any number of their B Shares for cash. B Shares
that are retained attract a dividend of 75% of LIBOR
on the 0.1 pence nominal value of each share, paid on a
twice‑yearly basis.
Shareholders may choose to have payments made directly
into their bank or building society account. Confirmation
of payment is contained in a payment advice which is
posted to shareholders’ registered addresses at the time
of payment. This payment advice should be kept safely for
future reference.
Shareholders who wish to benefit from this service
should complete the relevant section of the election form
accompanying the Notice of Annual General Meeting.
Alternatively, the required documentation can be obtained
by contacting the Company’s registrar using one of the
methods outlined below.
Shareholder queries
Shareholders who change address, lose their share
certificates, wish to amalgamate multiple shareholdings
to avoid receiving duplicate documentation, want to have
payments paid directly into their bank account or otherwise
have a query or require information relating to their
shareholding should contact the Company’s registrar.
This can be done by writing to Capita Asset Services,
The Registry, 34 Beckenham Road, Beckenham BR3 4TU.
Alternatively, shareholders can contact Capita Asset
Services on 0871 664 0300 (calls cost 12 pence per minute
plus network extras; lines are open 9.00am to 5.30pm
Monday to Friday), or on +44 371 644 0300 if calling from
overseas, or email their enquiry to shareholderenquiries@
capita.co.uk, indicating they are a McBride shareholder.
Shareholders are also able to access and amend details
of their shareholding (such as address and distribution
payment instructions), via the registrar’s website at
www.capitashareportal.com. If you have not previously
registered to use this facility you will need your investor
code, which can be found on your proxy card, or on any
share certificate issued by Capita Asset Services.
Electronic communications
Shareholders are able to register to receive communications
from McBride electronically. This service enables shareholders
to tailor their communication requirements to their needs.
McBride is encouraging shareholders to use this service to
elect to receive all communications electronically which
enables more secure and prompt communication and
allows shareholders to:
• receive electronic notification via email and the
internet of the publication and availability of statutory
documents such as financial results, including annual and
interim reports;
• access details of their individual shareholding quickly
and securely on‑line;
• amend their details (such as address or bank details);
• choose the way payments are received; and
• submit proxy voting instructions for shareholder
meetings including the AGM.
It also enables shareholders to contribute directly to
reducing McBride’s costs and environmental impact
through saving paper, mailing and transportation and
reducing unnecessary waste.
You can register directly by visiting
www.capitashareportal.com and following the on‑line
instructions. Alternatively, you can access the service via
the investor relations section of McBride’s website at
www.mcbride.co.uk
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McBride plc
Annual Report and Accounts 2016
Useful information for shareholders continued
On‑line shareholder services
McBride provides a number of services on‑line in
the investor relations section of its website at
www.mcbride.co.uk, where shareholders and other
interested parties may:
• view and/or download annual and interim reports;
• check current or historic share prices (there is an historic
share price download facility);
• check the amounts and dates of historic payments to
shareholders;
• use interactive tools to calculate the value of
shareholdings and chart McBride ordinary share price
changes against indices; and
• register to receive email alerts regarding press releases,
including regulatory news announcements, Annual
Reports and Company presentations.
ShareGift
McBride supports ShareGift, the share donation charity
(registered charity number 1052686). ShareGift was set up
so that shareholders who have only a very small number of
shares which might be considered uneconomic to sell are
able to dispose of them by donating them for the benefit
of UK charities. Donated shares are aggregated and sold by
ShareGift, the proceeds being passed on to a wide range of
UK charities. Donating shares to charity gives rise neither
to a gain nor a loss for UK capital gains purposes and UK
taxpayers may also be able to claim income tax relief on the
value of the donation.
Further information about donating shares to ShareGift is
available either from its website at www.sharegift.org, by
writing to ShareGift at 17 Carlton House Terrace, London
SW1Y 5AH or by contacting them on +44 (0)20 7930 3737.
Even if the share certificate has been lost or destroyed,
the gift can be completed. The service is generally free,
however, there may be an indemnity charge for a lost or
destroyed share certificate where the value of the shares
exceeds £100.
Share price history
The following table sets out, for the five financial years to
30 June 2016, the reported high, low, average and financial
year end (30 June or immediately preceding business day)
closing middle market quotations of McBride’s ordinary
shares on the London Stock Exchange.
2012
2013
2014
2015
2016
Share price (pence)
Low
105
101
93
75
102
Average
Financial
year end
123
127
111
89
149
124
111
96
102
156
High
142
147
135
105
178
Unsolicited mail
The Company is obliged by law to make its share register
publicly available should a request be received. As a
consequence, shareholders may receive unsolicited mail
from organisations that use it as a mailing list. Shareholders
wishing to limit the amount of such mail should either
write to Mailing Preference Service, DMA House,
70 Margaret Street, London W1W 8SS, register on‑line
at www.mpsonline.org.uk or call the Mailing Preference
Service (MPS) on 0845 703 4599. MPS is an independent
organisation which offers a free service to the public.
Warning to shareholders – boiler room scams
Each year in the UK £1.2 billion is lost to investment fraud
and the average investor loses around £20,000. What’s
more, it is estimated that only 10% of the people that
become victims of investment fraud actually report.
Investment scams are becoming ever more sophisticated
– designed to look like genuine investments, they are
increasingly difficult to spot. They are targeted at those
most at risk, typically people in retirement who are actively
seeking an investment opportunity.
Protect yourself
1. Reject cold calls
If you have been cold called with an offer to buy or sell
shares, chances are it is a high risk investment or scam. You
should treat the call with extreme caution. The safest thing
to do is hang up.
If you are offered unsolicited investment advice, discounted
shares, a premium price for shares you own, or free
company or research reports, you should get the name of
the person and organisation contacting you and take these
steps before handing over any money.
2. Check the firm on the FS register at
www.fca.org.uk/register
The Financial Services Register is a public record of all the
firms and individuals in the financial services industry that
are regulated by the FCA.
Use the details on the Register to contact the firm.
3. Get impartial advice
Think about getting impartial financial advice before
you hand over any money. Seek advice from someone
unconnected to the firm that has approached you.
REMEMBER, if it sounds too good to be true,
it probably is!
If you use an unauthorised firm to buy or sell shares or
other investments, you will not have access to the Financial
Ombudsman Service or Financial Services Compensation
Scheme (FSCS) if things go wrong.
Report a scam
If you suspect you have been approached by fraudsters
please tell the FCA using the share fraud reporting form at
www.fca.org.uk/scams, where you can find out more about
investment scams. You can also call the FCA Consumer
Helpline on 0800 111 6768.
If you have lost money to investment fraud, you should
report it to Action Fraud on 0300 123 2040 or on‑line at
www.actionfraud.police.uk
Find out more at www.fca.org.uk/scamsmart
Company’s registered offi ce
McBride plc
Middleton Way
Middleton
Manchester M24 4DP
Telephone: +44 (0)161 653 9037
www.mcbride.co.uk
Independent auditor
PricewaterhouseCoopers LLP
Chartered Accountant and Statutory Auditors
7 More London Riverside
London SE1 2RT
Joint fi nancial advisers and brokers
Investec plc
2 Gresham Street
London EC2V 7QP
Panmure Gordon & Co. plc
One New Change
London EC4M 9AF
Principal bankers
Barclays Bank PLC
Ashton House
497 Silbury Boulevard
Milton Keynes MK9 2LD
BayernLB
Moor House
120 London Wall
London EC2Y 5ET
BNP Paribas
10 Harewood Avenue
London NW1 6AA
HSBC Bank plc
Level 6
Metropolitan House, CBX3
321 Avebury Boulevard
Milton Keynes MK9 2GA
KBC Bank N.V.
5th Floor
111 Old Broad Street
London EC2N 1BR
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Financial public relations advisers
FTI Consulting LLP
200 Aldersgate
London EC1A 4HD
Corporate
McBride plc
Central Park
Northampton Road
Manchester M40 5BP
UK
Robert McBride Ltd
Middleton Way
Middleton
Manchester M24 4DP
Telephone: +44 (0)161 653 9037
Facsimile: +44 (0)161 655 2278
North
McBride S.A.
6 Rue Moulin Masure
7730 Estaimpuis
Belgium
Telephone: +32 56 482111
Facsimile: +32 56 482110
East
Intersilesia McBride Polska Sp. z o.o
Matejki 2a
47100 Strzelce Opolskie
Poland
Telephone: +48 774 049 100
Facsimile: +48 774 049 101
South
McBride S.p.A.
Via F.lli Kennedy, 28/B
24060 Bagnatica (Bergamo)
Italy
Telephone: +39 35 6666411
Facsimile: +39 35 6666401
Personal Care/Aerosols Europe
Robert McBride Ltd
Rook Lane
Dudley Hill
Bradford BD4 9NU
Telephone: +44 1274 844 844
Facsimile: +44 1274 651 071
South East Asia/Australasia
McBride Hong Kong Ltd
Unit 2001-02, 20th Floor, Prosperity Place
6 Shing Yip Street, Kwun Tong, Kowloon
Hong Kong
Telephone: +852 2790 8480
Facsimile: +852 2790 8484
Printed by CPI Colour, a Carbon Neutral® and FSC® chain of custody certifi ed company.
Printed on paper which is ISO 14001 and FSC® certifi ed.
Designed and produced by
www.lyonsbennett.com
McBride plc
Middleton Way
Middleton
Manchester M24 4DP
Telephone: +44 (0)161 653 9037
Facsimile: +44 (0)161 655 2278
www.mcbride.co.uk
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McBride has been accepted into
the FTSE4Good Index Series of
leading companies which meet
globally recognised corporate
responsibility standards.
McBride has been a leading contributor
in the development of the A.I.S.E.
Charter for sustainable cleaning and
was the first Private Label company
to achieve Charter status.