McBride plc: A Hidden Gem in the Cleaning Products Sector

McBride plc (LON:MCB), a leading European manufacturer and supplier of private label and contract manufactured products for the domestic household and professional cleaning/hygiene markets, has caught the attention of institutional investors, with 37% of the company owned by this group. This article explores the reasons behind this interest and delves into the company's strategy, financial performance, and undervalued assets.

Strategy and Financial Performance

McBride's strategy remains focused on being the leading value producer of everyday cleaning products, leveraging scale and unrivaled product expertise to deliver a segmented product and customer proposition with a cost-aware sustainability agenda (McBride, 2023). This strategy has led to an impressive turnaround, with the Group delivering an excellent full-year performance in 2023, setting a strong platform for further financial success.

Financial highlights for the year ended 30 June 2023 include:

* Revenue of £889.0m, up 0.6% from the previous year
* Adjusted EBITDA of £34.1m, a significant improvement from the adjusted operating loss of £24.5m in 2022
* Adjusted operating profit of £13.5m, compared to an operating loss of £26.7m in 2022
* Operating profit of £10.3m, up from an operating loss of £35.3m in 2022 (McBride, 2022)

Undervalued Assets and Opportunities

McBride's sector presents several undervalued assets and opportunities for potential capital gains. Some key areas include:

1. Energy efficiency and green electricity usage: McBride has made significant progress in improving energy efficiency and increasing its consumption of energy from green sources. In 2024, they increased their consumption of energy from green sources to 54.9%, exceeding their 2025 target of 30%. This focus on sustainability can lead to cost savings and improved environmental performance, which could be undervalued in the current market (Source: "Operating sustainably" section).
2. Plastic recyclability and reduction: McBride has been working on improving the recyclability of their plastic products and reducing their total use of plastic. They have increased their weight of PCR (post-consumer recycled) in their PET portfolio from 60.2% to 65.5%. This focus on sustainable packaging can lead to cost savings and improved environmental performance, which could be undervalued in the current market (Source: "Fit for future products" section).
3. Responsible sourcing and supplier engagement: McBride is focusing on engaging with their suppliers to understand and reduce the carbon footprint of their components. They aim to work with their suppliers to set science-based targets and request emission factors for purchased chemicals and packaging. This focus on responsible sourcing can lead to cost savings and improved environmental performance, which could be undervalued in the current market (Source: "Responsible sourcing and supplier engagement" section).
4. Private label share growth: Despite the difficult market backdrop in 2022, McBride was able to grow its private label share. Early signs indicate that private label share is growing as 'cost of living' rises impact consumers. This growth in private label share can lead to increased revenue and market share, which could be undervalued in the current market (Source: "Actions implemented to support financial recovery in FY23 and Group's strategic direction" section).

Conclusion

McBride plc's strategy, financial performance, and undervalued assets make it an attractive investment opportunity for institutional investors. The company's focus on growth, cost management, and sustainability aligns with an income-focused investment philosophy, and its progress in these areas has led to improved financial performance. Additionally, McBride's sector presents several undervalued assets and opportunities for potential capital gains, further enhancing the company's appeal as an investment.