McBride said it had been hit by a “tsunami” of cost increase but was optimistic a recovery was underway

Shares at McBride have rallied today after the embattled own-label household goods manufacturer agreed revised terms for its financing arrangements with lenders.

CFO Mark Strickland said the amended financing agreement was “an excellent outcome” following a “very difficult” trading period that provided the group with funding certainty as its propsects recover.

McBride also this afternoon released full-year results, which had been scheduled for first thing this morning, showing it made a pre-tax loss of £35.3m in the 12 months to 30 June 2022, compared with profits of £11.3m in the prior year.

The group said it had been the toughest trading year it had ever experienced, with a “tsunami” of cost increases.

“The external factors of rampant and unpredictable inflation, supply chain disruptions, residual Covid-19 impacts, staff shortages and weak demand levels have challenged the business, its management teams and its usually ample funding capacity,” McBride added.

The busines revealed the scale of the challenge from cost rises had reached more than £200m on an annualised basis in the final quarter, with total costs for its entire range of raw materials and packaging soaring 51% between December 2020 and June 2022.

McBride has pushed through multiple price rises to its customers to recover the cost inflation but the time lag between the increases and the recovery stretched the group’s finances forcing it to issue several profit warnings in the past year.

Revenues in the year fell 0.6% to £678.3m as volumes declined 6%, offset by a 9% increase in prices.

CEO Chris Smith said the trading performance was “improving” in the new financial year as volumes showed early signs of recovery against an economic backdrop that should favour private label products as consumers look to make savings.

He added that, with the with the support of lenders, “we have a reset funding arrangement to provide a clear runway for the group to pursue its strategic objectives”.

McBride’s €175m revolving credit facility remains in place to its original maturity date of May 2026. However, there will be no covenant tests until September 2024, other than a liquidity limit, which has been reduced to £15m from the £40m in place since the first covenant waiver in December 2021.

Additionally, the invoice discounting lines, totalling £83m, have been extended and committed to September 2024.

The business added its new cost savings programme was on track to achieve its target of £20m by the end of the new financial year, with £11.6m achieved in in 2021/22.

Shares in McBride shot up more than 14% on the news to 27.8p, but fell back to just 1.3% higher by the end of trading. The stock remains more than 50% down in the year to date.

Broker Peel Hunt said the company should benefit from the increase in own label and discounter growth and maintained its ‘hold’ rating on the stock, with a target price of 30p.