McBride – next Tuesday’s Interim Results announcement is sure to emphasise the undervaluation of this group’s shares, now 147p against brokers 180p Target Price

21.02.2025

Despite its magnificent rise in price since featuring this private label contract packer’s shares at 24p in February 2023, up over 600%, I still believe that the group’s shares offer significant short-term upside.

The Interim Trading Update from McBride (LON:MCB), issued on Friday 17th January this year, gave investors further confidence of better times ahead.

The leading European manufacturer and supplier of private label and contract manufactured products for the domestic household and professional cleaning and hygiene markets, reported continued progress in revenue growth, profitability improvement and net debt reduction.

The Business

Established way back in 1927, this £256m-capitalised Manchester-based group is now exceptionally well embedded with its client base, manufacturing from facilities across the UK, Europe and Asia Pacific.

For over five decades McBride has been a leader in private label cleaning and laundry products.

The company supports its customers across the supply chain from sourcing and formulating, to production, packing and delivery.

The company operates through five segments: Liquids, Powders, Unit Dosing, Aerosols, and Asia Pacific.

It employs over 3,400 people across 18 locations in 13 countries.

The group develops, manufactures and distributes products for both Private Label clients in the retail segment and Contract Manufacturing for established brands.

In addition, it also has a growing portfolio of its own successful brands within the household category, including Surcare, Oven Pride, Hospec, Actiff and Clean n Fresh.

We all know this group’s household and personal care products and it sells over 1bn of them a year.

Its Liquids segment produces a range of household cleaning products sold in a bottle or pouch, including laundry detergent, dishwasher liquids and surface cleaners, this division supplies over 90% of the leading retail multiples and similar customers in Europe.

The Unit Dosing segment produces cleaning products in individually packaged single dose measures, including dishwasher tablets and laundry capsules.

The company’s Powders segment produces powdered cleaning products, primarily for laundry, but also for dishwashers.

Its Aerosols segment produces a range of household, personal care, and professional cleaning products.

The Latest Trading Update

For the six months to end-December 2024, the group expects to report its ongoing strong trading performance, with its first half adjusted operating profit some 8% ahead of the same period last year, while the Full year adjusted operating profit is expected to be in line with expectations.

The Interims are likely to show that group revenue was 2.9% higher than the prior year period, with volumes up 5.9%.

Private label volumes grew by 2.4% and contract manufacturing volumes increased by an impressive 69.0%, driven mostly by the successful launch of two new multi-year contracts with large fast-moving consumer goods clients over those six months.

Impressively it also continued to make good progress on its debt management, with its net debt at the period end was £117.6m (30th June 2024: £131.5m).

The company late last year declared new long-term financing facilities, which will enable it to re-instate its annual dividend payments, with details expected in September when the group announces its annual results.

Analyst’s View

Analysts Nick Spoliar and Charlie Cullen, at Zeus Capital, upgraded their estimates after the update.

They also upped their Buy rating, with a 180p a share Price Objective, while their discounted cash flow target is 192p.

For the current year to end-June 2025 they are now going for revenues of £952.1m (£934.8m), with adjusted pre-tax profits of £49.0m (£53.1m), earnings of 20.8p (21.7p) and paying a 2.5p (nil) per share dividend.

The 2026 year could see £971.1m sales, £52.4m profits, 22.2p earnings and a 2.8p dividend.

Further out the brokers go for 2027 to report some £990.6m in sales, £53.3m profits, earnings of 22.6p and a dividend of 3.0p per share.

In My View

With its shares now trading at just 147p, after having hit 158p a week ago, they are rated out on only 7.1 times current year earnings, dropping to 6.6 times prospective – that is far too low a valuation, in my view.

I look for them to react well to further good corporate news, with 180p a share being an easy level at which to aim, which even then would only put them out on 8.6 times price-to-earnings, which is half of the UK average estimated PE/Ratio level of 17.52.