Mcbride (LON:MCB) is halfway through its restructuring plan, having completed the Repair phase, and is now implementing the Prepare part. This should set McBride up for more sustainable and profitable growth. What sets this programme apart from previous attempts is management’s absolute focus on tight cost control and business simplification. This should avoid increased overheads and complexity creeping back into the system as the business starts to grow again.
Holding steady
H1 results were in line with expectations, and guidance for the year remains unchanged, which is positive in a volatile environment. In H2, McBride faces challenges with sterling weakness and raw material cost increases, and there is likely to be the usual lag in passing on the higher costs to customers. In addition, the current consumer trend to revert towards brands is not helpful, though it is more pronounced in the much smaller personal care category than in the household space. Customer service is now at best-in-class levels, which is a step change from previous legacy issues and should stand the business in good stead for expansion.
Contract manufacturing: A new growth area?
We are encouraged by the increased trend for contract manufacturing. McBride’s engagement here is testament to management’s simplification of the business, investment in technology and hugely improved customer service levels. With branded manufacturers increasingly under pressure to review cost structures, we believe contract manufacturing could prove to be a new area of growth.
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