• Mark Watson-Mitchell

McBride – on just seven times earnings and with a big buyer in the wings

10th March 2021


Way back on 2 November Chief Executive Chris Smith informed his group’s shareholders that

"We believe that McBride's current share price does not reflect the value of the underlying business. We have resilient revenues, a strong balance sheet and highly visible cash flows. We therefore think it is in the interests of all shareholders to commence this programme."


The programme that he was referring to is a share buy-back exercise that would cost up to £12m in purchasing up to 18.3m shares for cancellation.


Issue reduction


The aim is to cancel up to 10% of the issued shares of the company.


By Monday of this week the McBride (LON:MCB) group had completed the acquisition of some 6m shares, just a third of the way through the programme – there are now 176.8m shares in issue.


Even the Chairman is buying


And what I consider is even more impressive is the fact that Jeff Nodland, the group’s Chairman, even bought more shares last week, another 84,000 @ 82.68p each, taking his holding up to 464,600 shares in the company.


He has been an ongoing buyer of the shares since his first purchase in October 2019, then paying 57.4p per share for just 20,000 shares. On six occasions since then he has increased his purchases and the prices paid.


We all know of its products


It is a leading European manufacturer and supplier of contract manufactured and private label products for the domestic household, professional cleaning and hygiene markets.


McBride’s core business is ‘Private Label’, but it also has a growing portfolio of its own successful brands within the household category.


Its Oven Pride brand includes cleaning solutions, bags and gloves. It is classed as the UK’s No1 single usage all-in-one cleaning system.


The group’s Surcare brand takes in non-bio laundry powder, liquid and capsules, as well as fabric softener and washing up liquid.


The Hospec brand includes various products for laundry, dishwashing detergents, general disinfectants and sanitisers, and general cleaner lines.


Its Clean N Fresh products are a budget friendly household cleaning range, covering cleaners, laundry and dishwash.


Recent interims were excellent


Just three weeks ago the group announced its interim results to end December 2020. It also stated that its divisional reorganisation is now complete and from the start of this year it is now split into five divisions – Liquids, Unit Dosing, Powders, Asia Pacific and Aerosols.


Its Management considers that it is a much leaner group structure. And all of this reorganisation took place during the Covid-19 hassles.


The interims showed a very healthy and robust response to the pandemic, scoring revenues 3.6% up at £362.9m and an adjusted pre-tax profit some 74% higher at £16.9m.


Bouncing back


It appears that by the halfway stage overall customer service levels had recovered to over 90%.


It showed that the group’s Household Contract Manufacturing side had delivered strong growth.


Overall, the profit performance was strongly driven by increased demand for cleaning, dishwash and aerosol products outweighing weakness in the group’s laundry products, and a slight softening of certain raw material and packaging pricing.


11p of earnings this year


For the year to end June estimates are now for around £720m of sales, with £27.5m of pre-tax profits, worth just over 11p a share, able to easily cover a 2.2p dividend.


The next year could see nearly £730m of revenues and £29.5m of profits, with earnings close to 12p per share.


Interesting holders


Large shareholders in the equity include the Swiss-based Teleios Capital Partners (24.5%), the Duke University investment managers DUMAC (17.4%), the New York- based investment group Zama Capital (11.42%), Premier Miton (4.98%), and Invesco (2.55%).


My view


I like good steady businesses like McBride. There will always be a demand for its products, as long as it stays aware of its marketplace.


It may never set the world alight, but at the current 79.5p its shares do offer some very inexpensive value, trading on 7 times current year earnings, and giving a 2.77% yield. And there is a certain safety in so much as a major ongoing buyer of the group’s shares – itself.


I now set a Target Price of 99.5p.

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