McBride plcAnnual Report and Accounts 2022 ## Everyday cleaning products, ## expertly made ## McBride plc ### Annual Report and Accounts 2022 ## What’s inside | Strategic report | Directors’ report | | --- | --- | | Our highlights 1 | Chairman’s introduction to the Directors’ report 80 | | McBride at a glance 2 | Board of Directors 82 | | Chairman’s statement 4 | Compliance with the UK Corporate | Governance Code 2018 84 Q&A with our CEO 6 Corporate governance statement 85 Market context 8 Nomination Committee report 92 Business model 10 Audit and Risk Committee report 98 Our culture 12 Remuneration Committee report 105 Living our values 13 Statutory information 132 Our strategy 14 Statement of Directors’ responsibilities CEO’s report 16 in respect of the financial statements 136 Our divisions 20 CFO’s report 30 ### Financial statements Key performance indicators 36 Our stakeholders 38 Independent auditors’ report to the members of McBride plc 137 Environmental, social and governance 42 Consolidated income statement 144 Climate-related financial disclosures 56 Consolidated statement of Group non-financial information statement 70 comprehensive income 145 Principal risks and uncertainties 71 Consolidated balance sheet 146 Going concern and viability statement 79 Consolidated cash flow statement 147 Consolidated statement of changes in equity 148 Notes to the consolidated financial statements 150 Company balance sheet 199 Company statement of changes in equity 200 Notes to the Company financial statements 201 ### Additional information Group five-year summary 209 Useful information for shareholders 210 Registered oce and advisers 212 Strategic report # Our highlights ## Financial For the year ending 30 June 2022 Revenue £678.3m (2021: £682.3m) Adjusted EBITDA(1) £(3.6)m (2021: £45.5m) Adjusted operating (loss)/profit(1) £(24.5)m (2021: £24.1m) Operating (loss)/profit £(26.7)m (2021: £15.5m) Adjusted (loss)/profit before tax(1) £(29.6)m (2021: £19.9m) (Loss)/profit before tax £(35.3)m (2021: £11.3m) Adjusted EDCE(1) (11.4)% (2021: 11.5%) Debt/adjusted EBITDA(1) (45.7)x (2021: 2.6x) Free cash flow(1) £(22.7)m (2021: £33.1m) ## Non-financial(2) Health & safety accident frequency 0.48 (2021: 0.46) Customer service level 85.4% (2021: 80.8%) Gender split - female(1) 38.5% (2021: 38.6%) ### Alternative performance measures This review includes alternative performance measures (APMs) that are presented in addition to the standard IFRS metrics. The APMs are adjusted operating (loss)/profit, adjusted EBITDA, adjusted finance costs, adjusted (loss)/profit before tax, adjusted earnings per share, free cash flow and cash conversion %, adjusted return on capital employed and net debt. The definitions of the APMs used are listed below: - adjusted operating (loss)/profit is operating (loss)/profit before the amortisation of intangible assets and exceptional items; - adjusted EBITDA means adjusted operating (loss)/profit before depreciation and amortisation; - adjusted finance costs refers to figures excluding the unwind of the discount on environmental remediation provision; - adjusted (loss)/profit before tax is based on adjusted operating (loss)/profit less adjusted finance costs; - adjusted earnings per share is based on the Group's (loss)/profit for the year adjusted for the items excluded from operating (loss)/profit in arriving at adjusted operating (loss)/profit, the unwinding of discount on provisions and the tax relating to those items; - free cash flow is defined as cash generated from continuing operations before exceptional items and cash conversion % is defined as free cash flow as a percentage of adjusted EBITDA; - adjusted return on capital employed is defined as total adjusted operating (loss)/profit from continuing operations divided by average period-end capital employed. Capital employed is defined as the total of goodwill and other intangible assets, property, plant and equipment, right-of-use assets, inventories, trade and other receivables less trade and other payables; and - net debt consists of cash and cash equivalents, overdrafts, bank and other loans and lease liabilities. (1) Further details on APMs can be found in note 2 to the consolidated financial statements on page 160. (2) Please refer to Key performance indicators on pages 36 and 37 for further details. (3) Includes employees, third-party contractors and agency workers. McBride plc Annual Report and Accounts 2022 1 Strategic report ## McBride at a glance ## With trading roots dating back to 1927, McBride boasts a strong ## heritage. We are private label experts in our segments. We o er ## end-to-end development and manufacturing capabilities to a ## wide range of customers across Europe and Asia Pacifi c. ## 76.5% ## >90% ## 907m 3,253 of revenue from top European (1) top fi ve European units sold colleagues globally retailers supplied economies ## Our manufacturing locations Asia Europe Pacifi c Ho Chi Minh City Holstebro Middleton Kuala Lumpur Hammel eper Strzelce Moyaux Estaimpuis Etain Foetz Rosporden (1) Includes employees, third-party contractors and agency workers. Bagnatica Sallent McBride plc Annual Report and Accounts 2022 2 Strategic report Group functions maximising Products: Products: synergy benefi ts: • Laundry liquids and • Auto dishwasher tablets • Purchasing fabricconditioner • Laundry capsules • Logistics • Washing up liquid • Water softener tablets • Corporate Finance • Surface cleaners • IT • Bleach and toilet cleaners • HR Group sales Group sales Group sales ## £678.3m 56.6% 25.3% Group sales Group sales Group sales ## 10.1% 4.7% 3.3% Products: Products: Products: • Laundry • Household • Hand/bodywash and hair care • Auto dishwash • Personal care • Skin care • Stain remover • Insecticides • Auto dishwasher tablets • Water softener • Sanitisers • Laundry liquids McBride plc Annual Report and Accounts 2022 3 Strategic report ## Chairman’s statement Je Nodland Chairman ## Despite the year being dominated by essential short-term ## actions to mitigate rampant input cost infl ation and supply chain ## di culties, we have re-confi rmed and made progress withour ## medium-term Compass strategies. Dear shareholder External factors Welcome to the McBride plc 2022 Annual Report and The most signifi cant external factor experienced this Accounts. Without doubt, the past fi nancial year has past year related to the unprecedented infl ationary been the most challenging faced by the Group in recent environment experienced across our industry. Whilst the times. A range of pricing and cost actions has been Group has strong and long-lasting relationships across pushed through to o set the e ect of the rapid and its supplier base, many materials are linked to feedstock extraordinary rise in virtually all input costs absorbed pricing which have risen outside our control and through the year. Whilst these are now close to covering signifi cantly beyond forecast levels. Alongside trying to the rises in costs we have seen, negotiation lags mitigate the challenges of infl ation, supply chains have through the year in the acceptance of our new pricing been constrained through global shortages of materials levels has meant the Group su ered losses this past and logistics networks short of resources, adding further twelve months. The teams at McBride plc have worked challenges for the business teams aiming to ensure tirelessly throughout to recover profi tability and as we our customers’ shelves remained stocked. Thewar enter the new fi nancial year, it is pleasing to see the in Ukraine has led to signifi cant global uncertainty, business recovering and building to improve through further disruptions to supply chains and additional cost the next year. pressures. As a business, we do not have any operations or key suppliers in Russia or Ukraine; however, we continue to monitor and e ectively manage any impact of the wider macro environment on the Company’s supply chain. The Group continued to manage the e ects of the Covid-19 pandemic well, keeping the wide-ranging day-to-day operational measures put in place last year under constant review, and adapting regularly to refl ect the changing environment in which the Company operates. This kept colleagues safe, sites operational and customers stocked with our products. McBride plc Annual Report and Accounts 2022 4 Strategic report # Strategic progress The past twelve months have not been the trading backdrop expected so early in the deployment of the Compass strategies, launched in January 2021. Despite the necessary and near 100% focus on immediate short-term margin recovery actions, it is pleasing to see the new divisional business teams develop and mature over the year. The development of an improved 'specialist' proposition through the divisional focus is making good progress and it is pleasing to recently record a number of long-term structural contract manufacturing wins, due to start in 2023. As a Board, we have reviewed the strategic direction of each division during the year and we remain confident in our strategy direction across the Group. # Environmental, social and governance (ESG) and sustainability We remain committed to maintaining a responsible business by building on our newly established ESG agenda, led directly by our CEO. This consolidates our existing Corporate Social Responsibility (CSR) programme and any specific, separate sustainability initiatives to a single, joined-up, integrated approach, with clear ambitions and objectives in support of our ESG agenda and designed to position McBride plc as a responsible corporate citizen. The past twelve months have focused on further developing the ESG framework concluded in 2021 to drive, assess, monitor and improve upon our ESG baselines and ambitions. During the year, we have completed our corporate carbon footprint assessment using an external agency and we will now begin defining our journey towards a Net Zero carbon ambition. We have also embraced the requirements of the Task Force on Climate-related Financial Disclosures (TCFD), having begun the process of integrating TCFD best practice requirements into our established ESG programme. Over the next twelve months, our focus will continue to be that we prioritise and commit to the most impactful areas in the most cost-conscious way. On pages 42 to 55 we explain our approach to enhancing the sustainability of our business, whilst outlining some of the key initiatives we are taking to create value for our customers, employees, shareholders and society. # Governance The Board remains focused on ensuring that the UK Corporate Governance Code's principles are applied. My introduction to the Directors' report on pages 80 and 81 sets out how the Board has complied with the principles of the UK Corporate Governance Code 2018 ('the Code'), which applied throughout the financial year ended 30 June 2022. # Board At the November 2022 AGM, Steve Hannam, Senior Independent Director, will step down, by which time he will have completed nine years as a Non-Executive Director. I would like to thank Steve for his valuable contribution and long service and wish him well for the future. Elizabeth McMekan will replace Steve as Senior Independent Director. On 2 August 2021 we appointed Alastair Murray as a Non-Executive Director. Alastair took over from Neil Harrington as Chair of the Audit and Risk Committee when Neil stepped down from the Board in October 2021. On 14 March 2022, we appointed Regi Aalstad as a Non-Executive Director to the Board. The past year has seen much change and challenge for the business, and I would like to extend my thanks to all Board members for their input, support and wise counsel. # Our people The Board would like to thank all colleagues across the Group for their efforts during a year that saw unprecedented external pressures on our business, soon after having implemented major transformation and change, through Programme Compass during 2021. We have learned a lot in the past year about managing inflationary costs and our end-to-end supply chain, and importantly, about how the organisation needs to adapt with speed and flexibility in a fast-changing competitive landscape. We need to build on the progress we have already made in managing the business responsibly and sustainably through an unprecedented set of external challenges and constraints, and these past twelve months have demonstrated many strong examples of the resilience and commitment of our teams. I look forward to the ongoing contribution of all our colleagues in continuing to drive the ambitions of the Compass strategy in the coming years and deliver a strong, resilient and sustainable business performance going forward. Jeff Nodland Chairman McBride plc Annual Report and Accounts 2022 5 Strategic report ## Q&A with our CEO ### Have the divisional structures ### been operating as you expected, ### even with the distraction of the ### huge infl ation pressures? It is fair to say that when we launched the new Compass structures in January 2021, the business was quickly confronted with supply chain shortages and rapid infl ation beginning to emerge. Therefore the focus, six months in, became very short term in nature, covering pricing actions and securing supplies. The commercial teams responded well, demonstrating the ‘one McBride’ principle in front of our customers, working collectively across the product ranges to secure the appropriate pricing recovery. On the supply side, we saw the focus from the divisional supply chain teams linking very well with the Chris Smith central purchasing group as we negotiated and Chief Executive O cer secured materials from our suppliers, seeing no major disruption to factory operations. ### What is the latest outlook ## As we emerge from the challenges ### forinfl ationary pressures? ## of maintaining supply chains, A feature of the materials and other ## mitigating unpredictable and infl ationthat we have experienced in the ## extraordinary input costinfl ation, past18 months has been not just the feedstock ## and stabilising our fi nances, the infl uence on downstream materials but also the premium that comes from supply/demand ## business canstart focusing on imbalance. As we compile this Annual ## delivering the mid-term Compass Report, there are some signals that certain feedstock pricing is stabilising and some of ## benefi ts of improved profi tability the supply/demand challenges are steadying. ## and growth. This may signal that some materials may startfalling in the coming months. At the same time, some materials (such as cardboard, salts and other ECU derivatives) continue to rise and overall, the entire supply side remains volatile and di cult to predict. Other infl ation ### Have the challenging past however, is more permanent with extremely ### twelvemonths changed the high rises for transport, energy, labour and ### coreCompass strategies? general supplies feeding through into our pricing andmarginactions. The Board and senior teams completed a review and update of each divisional strategy earlier this calendar year. The review confi rmed the Compass approach and the divisional organisation and our purpose, vision and values continue to set the right objectives for the Group. The recent challenging trading situation has clearly reset the start points for each division, but the individual strategies for each division remain appropriate, each division having some element of ‘course correction’ and will continue to guide the key activities and priorities for the divisions and Group as awhole. McBride plc Annual Report and Accounts 2022 6 Strategic report | With the cost of living crisis | A key part of Compass related | | --- | --- | | hitting all your major markets, | to margin development from | | will private label volumes benefit | eciency and eectiveness | | as consumers trade away from | improvements; where does | | more expensive brands? | thisagenda now sit? | | There is increasing evidence that consumers | It is absolutely part of the mid-term plans I | | are changing their buying behaviour as a | have for the business. We will be establishing | | result of the inflationary pressures being felt | an internal ‘Transformation team’ charged with | | by all. Whether this is a product switch to | an‘Excellence’ agenda aimed at delivering | | private label in a general retailer or consumers | more resilient and eective processes in a | | switching to discount stores from general | number of key day-to-day activities such as | | retailers, both hold good prospects for private | customer service levels, inventory management, | | label volumes. With many branded products | commercial processes, logistics and warehouse | | reducing product quality to oset inflation, | network. Additionally, working with our IT | | the value proposition of price versus quality | colleagues, this Group will lead the business | | of private label oers becomes even more | teams as we embark on the journey in the | | compelling. | coming 12-24 months of moving to the latest | generation business systems platforms. Thiswillallow McBride plc to better digitalise and standardise our processes, driving eciency ### What have been the key and eectiveness in our core activities. ### priorities for your ESG agenda ### inthe current year? ### The environment element of our ESG agenda Recent announcements refer ### is understandably highly visible and a crucial to needing to find additional element of our business model. In order to ### liquidity, can you expand more? establish our baseline, during the past year | we have completed the measurement of our | The past 18 months have significantly aected | | --- | --- | | corporate carbon footprint. As a result, we can | the Group’s level of debt. This has been | | now see the shape of our emissions and the | impacted by trading losses and higher levels of | | areas of our operations we need to prioritise | working capital, both driven by unprecedented | | in order to have the biggest impact on our | inflationary pressures. The amended terms of | | corporate footprint. During 2023 we will set | the Group’s revolving credit facility announced | | Science Based Targets with respect to Scope | on 29 September 2022, provide the Group | | 1, 2 and 3 greenhouse gas emissions and | with the required levels of liquidity headroom | | define our strategy for climate-related risks. | to successfully run the business. | We continue to drive product sustainability options with our customers mainly focused on improving the recyclability of packaging. This year we have stopped the use of all flexible PVC pouches, moving them to a new mono-material to improve recyclability. Additionally, we continue to make good progress on moving more of our mixed plastic doypacks to mono-material format. OurLiquids and Unit Dosing divisions are both working on non-plastic packaging solutions, with both business units bringing cardboard alternatives to market in the next twelve months. McBride plc Annual Report and Accounts 2022 7 Strategic report ## Market context ## A closer and better understanding of our direct ## customers and the end consumer, enables ## us to better align our business to the current ## and evolving needs of the markets we serve. ## Raw materials Sustainability Regulation Sales channels Consumers Brand owners | Global supply chain disruptions | Our customers, consumers | The legislative landscape that | Consumers are continuing to | Consumers are now facing | Owners of household cleaning | | --- | --- | --- | --- | --- | --- | | over the last 18 months have | and our employees continue to | McBride plc operates within | change the way they shop across | unprecedented infl ation and | and personal care brands | | led to widespread shortages | place a high level of importance | continues to evolve with new | multiple di erent outlets and | cost of living increases, with | continue to use private | | across multiple raw material | on the sustainability of our | legislation and amendments to | online platforms, rather than the | a large number of shoppers | label suppliers to contract | | categories, which in turn have | manufactured products. | existing legislation. This impacts | traditional single large weekly | needing to restrict their spend | manufacture their products. | | led to unprecedented and | | on the production, useand | shop. Shopper habits evolved | at the till. As a result, we are | | | sustained increases of material | | disposal of our products, | during the Covid-19 pandemic, | increasingly seeing retailers help | | | prices. Theextent to which this | | driving a cost increase in the | with increased growth of online | their customers by navigating | | | infl ationary pressure can be | | development, production, | and convenience channels, | them towards lower cost retailer | | | passed through to consumers by | | distribution and use of products. | the profi le of which continues | brand o eringsin store. | | | retailers will support either price | | | to adapt as economies relax | | | | rises or product engineering | | | or emerge from Covid-19 | | | | solutions. | | | restrictions. | | | | Response | Response | Response | Response | Response | Response | | --- | --- | --- | --- | --- | --- | | The Group has continued | We continue to work towards | McBride plc treats compliance | Work continues to ensure that | McBride plc always endeavours | Our long-standing reputation | | to drive focused margin | our 2025 targets for reducing | with legislative requirements | we have the optimum product | to provide optimum value | as a leading manufacturer of | | recovery measures, with | our environmental impact | asan essential part of the | portfolio for all our customers | product o erings for the end | quality products allows us to | | targeted price increases and | from our products through | service that we o er to our | across di erent retail channels, | consumer. We are working | continue to work closely with a | | product engineering options | the reduction of plastic and | customers, embracing initiatives | including discounter, bargain | with our customers to support | number of major brand owners | | in development. A signifi cant | responsible sourcing. In the | to improve safety/sustainability | stores, online and convenience | the value positioning of their | to contract manufacture their | | number of cost initiatives are | coming year we will focus | for the consumer and the | channels. We are continuing to | private label ranges. By o ering | products. Such contracts o er | | being accelerated, with the | further on the footprint of | environment. We make | work with all retailers to provide | a wide range of formulation and | signifi cant growth opportunities, | | expectation that they will deliver | our chemical portfolio as we | signifi cant investments in our | them with a range of products | packaging options, retailers can | de-risked marginsand help | | value in the coming months. | recognise the importance this | factories and improvements to | that meet the needs of their | ‘design to value’ their o er to | drive operational e ciencies | | The Group continues to explore | plays in our ability to be Net | our product portfolio to ensure | customers. | customers. | by increasing asset utilisation. | | all avenues to create increased | Zero in the future. | that we fully comply with all | | | The Group is seeing more | | pricing stability across our raw | | relevant product legislation. | | | longer-term structural supply | | material spend, building further | | | | | arrangements. | on existing initiatives taken over the last few years in this area (e.g. short-term pricing agreements with retailers). McBride plc Annual Report and Accounts 2022 8 Strategic report ## Raw materials Sustainability Regulation Sales channels Consumers Brand owners | Global supply chain disruptions | Our customers, consumers | The legislative landscape that | Consumers are continuing to | Consumers are now facing | Owners of household cleaning | | --- | --- | --- | --- | --- | --- | | over the last 18 months have | and our employees continue to | McBride plc operates within | change the way they shop across | unprecedented infl ation and | and personal care brands | | led to widespread shortages | place a high level of importance | continues to evolve with new | multiple di erent outlets and | cost of living increases, with | continue to use private | | across multiple raw material | on the sustainability of our | legislation and amendments to | online platforms, rather than the | a large number of shoppers | label suppliers to contract | | categories, which in turn have | manufactured products. | existing legislation. This impacts | traditional single large weekly | needing to restrict their spend | manufacture their products. | | led to unprecedented and | | on the production, useand | shop. Shopper habits evolved | at the till. As a result, we are | | | sustained increases of material | | disposal of our products, | during the Covid-19 pandemic, | increasingly seeing retailers help | | | prices. Theextent to which this | | driving a cost increase in the | with increased growth of online | their customers by navigating | | | infl ationary pressure can be | | development, production, | and convenience channels, | them towards lower cost retailer | | | passed through to consumers by | | distribution and use of products. | the profi le of which continues | brand o eringsin store. | | | retailers will support either price | | | to adapt as economies relax | | | | rises or product engineering | | | or emerge from Covid-19 | | | | solutions. | | | restrictions. | | | | Response | Response | Response | Response | Response | Response | | --- | --- | --- | --- | --- | --- | | The Group has continued | We continue to work towards | McBride plc treats compliance | Work continues to ensure that | McBride plc always endeavours | Our long-standing reputation | | to drive focused margin | our 2025 targets for reducing | with legislative requirements | we have the optimum product | to provide optimum value | as a leading manufacturer of | | recovery measures, with | our environmental impact | asan essential part of the | portfolio for all our customers | product o erings for the end | quality products allows us to | | targeted price increases and | from our products through | service that we o er to our | across di erent retail channels, | consumer. We are working | continue to work closely with a | | product engineering options | the reduction of plastic and | customers, embracing initiatives | including discounter, bargain | with our customers to support | number of major brand owners | | in development. A signifi cant | responsible sourcing. In the | to improve safety/sustainability | stores, online and convenience | the value positioning of their | to contract manufacture their | | number of cost initiatives are | coming year we will focus | for the consumer and the | channels. We are continuing to | private label ranges. By o ering | products. Such contracts o er | | being accelerated, with the | further on the footprint of | environment. We make | work with all retailers to provide | a wide range of formulation and | signifi cant growth opportunities, | | expectation that they will deliver | our chemical portfolio as we | signifi cant investments in our | them with a range of products | packaging options, retailers can | de-risked marginsand help | | value in the coming months. | recognise the importance this | factories and improvements to | that meet the needs of their | ‘design to value’ their o er to | drive operational e ciencies | | The Group continues to explore | plays in our ability to be Net | our product portfolio to ensure | customers. | customers. | by increasing asset utilisation. | | all avenues to create increased | Zero in the future. | that we fully comply with all | | | The Group is seeing more | | pricing stability across our raw | | relevant product legislation. | | | longer-term structural supply | | material spend, building further | | | | | arrangements. | on existing initiatives taken over the last few years in this area (e.g. short-term pricing agreements with retailers). McBride plc Annual Report and Accounts 2022 9 Strategic report ## Business model ## Driven by our purpose, our business model builds on ## thekeyattributes that set us apart in order to create ## value forour customers, our people, our shareholders ## andourwiderstakeholder community. What How we we do do it ### Our purpose ## everyday value cleaning ## products so every home ## canbe clean and hygienic Inputs: Production ### process: Market intelligence We are end-to-end producers Customer partnerships From: We are a producer of cleaning products Know-how in: • Resins primarily for the home. • Formulation • Base chemicals • Prototyping • Packaging We define the home as the dwelling that • Manufacturing To: welive in and the people who live there. • Packaging options • Shelf-ready finished • Sourcing expertise products Our products clean laundry, dishes and general surfaces. In addition, we oer Our in-house processes: specialist aerosol products in Europe • Blow/injection andpersonal cleaning in Asia Pacific. moulding • Liquid and powder Our aim is to provide ranges of quality mixing • Bottle filling at value prices to permit our retailer • Capsule forming and customers to oer an aordable quality filling alternative to higher-cost brands. • Tablet pressing • Powder filling Our value engineering, quality and scale of operations provide aordable cleaning products for our customers’ end How we consumers, helping ensure all homes are make clean and hygienic. money ### We sell to retailers and branders ### their finished products, aswell as ### asmall number of McBridebrands McBride plc Annual Report and Accounts 2022 10 Strategic report ## We seek to provide our customers a compelling ## overalloer,balancing price, service and quality ## prioritiesforthe productsthey require. What sets us apart Wide market coverage/knowledge from pan-European operations Manufacturing excellence ### Distribution Sustainable Supply chain co-ordination and capabilities ### platform: outputs: Reduced risk from customer diversification Strong commitment to: Consolidating the customer requirements • Ethical trading Size to scale advantage: #1 volume player via: • Sustainability- orientated innovation McBride • Waste reduction Innovation – specialisation and focus warehouse network Sustainable product expertise – formulation Into and packaging Experienced management and dedicated Customer employees distribution hubs Blue-chip reputation How we allocate capital | | | | | 1. | 2. | | --- | --- | --- | --- | --- | --- | | | 82.9% | | 2.1% | Debt management | Reinvest for growth | | | Retailers’ | Professional and | | (including | | | | private label | cleaning suppliers | | deleveraging) | | | | 11.2% | | 3.8% | | | | | | | | 3. | 4. | | International and | | | McBride | | | | | | | | Strategic | Distributions to | | regional branders | | | brands | | | | | | | | investments | shareholders | McBride plc Annual Report and Accounts 2022 11 Strategic report ## Our culture ## While McBride operates through fi ve divisional teams ## supported by certain Group central functions, we ## remain One McBride with a single, unifying purpose ## and a common shared vision. ## Our Our values ## purpose Giving and taking ## everyday value cleaning Always accountability committed ## products, so every ## home can be clean ## and hygienic. Working Aspire to Read more on together bethebest pages 10 and 11 ## Our Our guiding ## vision principles ## McBride will extend its ## positionas the ## leading value producer of Focused ## everyday consumer hygiene growth ## products, ## taking ## revenue to €1 billion ## through Proud of our E ective ## focused and sustainable identity execution ## divisional strategies. Read more on pages 14 and 15 McBride plc Annual Report and Accounts 2022 12 Strategic report ## Living our values ## Our purpose and vision are founded on a set of common ## values, enabling our focused divisional teams to enhance ## our specialist reputation in the market and better target ## opportunities for growth and excellence. ## Always Giving and taking ## committed accountability | • Our Vietnam site team chose to sleep on site | | • The HR leadership took on an accelerated | | | --- | --- | --- | --- | | | for a period of time, in order to keep the site | | programme to launch Workday across the | | | operational during local government movement | | business in Europe. The new processes have | | | restrictions due to Covid-19. | | been launched on time with excellent colleague | | • Securing raw material and packaging supplies | | | engagement, modernising the ways of working | | | within a very dicult market place, ensuring | | for HR processes. | | | continual product supply to our customers. | • Our newly created divisions drive our Compass | | | • Strong and continual engagement with | | | strategy and have taken full responsibility for their | | | customers to openly explain inflationary | | performance and results, translating the Group’s | | | challenges and working towards solutions | | vision into divisional strategies and action plans. | | | overmultiple iterations. | | During the year, the divisions made good progress | in the execution of these plans. • A number of colleagues were seconded into Germany to lead dierent aspects of the recovery plan for our logistics service in Germany, involving extensive periods of time at our German warehouses to speed up their recovery. ## Working Aspire to be ## together the best • Rapid establishment of a German logistics • A number of exciting product innovations recovery team to focus on cross-divisional across the business, including Ecocert products, strategies and solutions in a ‘war-room’ style compressed aerosols, carton packaging for approach, to drive improvements in our logistics capsules, compact laundry powders and service resulting from driver shortages and mono-material refill pouches. unreliable supplier arrangements. • Winning of new multi-year contract • Qualifying new and lower cost raw material manufacturing supply agreements demonstrated options to help mitigate the challenges of a our new divisional specialism andeective highly inflationary marketplace. This required contract and project management, where we close co-operation with the customers and expect to see deliveries starting in the next cross-functional teams involving colleagues financial year. from the Group Purchasing, Technical, • Introduction of new tools and training Operations and Commercial teams. programmes to further improve safety in our • During the implementation of a new HR digital operations, including behavioural safety and platform, we witnessed excellent multi-user comprehensive gap analysis reviews as part of engagement across all of Europe with training our zero lost time accident journey. and deployment of this new way of working. McBride plc Annual Report and Accounts 2022 13 Strategic report ## Our strategy ## Be the leading value producer of everyday cleaning ## products,leveraging scale and unrivalled product expertise ## todeliver a segmented product and customer proposition ## witha cost-aware sustainability agenda. ## One McBride ## Five divisions Each division has dierent Market factors Market factors Market factors Market factors Market factors opportunities, initiatives, challenges • Large, stable market • Dynamic market • Asset-heavy competitive • Well-established market • Return to rapid market growth and improvement options in their • Commoditised product • Brander-led innovation market • Leverage new opportunities • Population and income growth business; all reinforcing the need for categories • Sustainability is a key driver • Slowing market decline with contract manufacturing • Rapid urbanisation varying strategies for the dierent • Fragmented competition • E-commerce potential • Consumer transitioning • Niche, specialist player • Maturing retail infrastructure parts of this business. • Cost competitiveness • Market consolidating Hence, the Group continues to be paramount managed as a series of portfolio businesses, each with its own identity, strategy, operating model Strategy = Optimise to grow Strategy = Accelerate to grow Strategy = Revitalise to grow Strategy = Develop to grow Strategy = Deliver to grow and role within the Group. Separate, focused and accountable divisional teams continue to McBride approach McBride approach McBride approach McBride approach McBride approach strengthen our specialist position • Low-cost oer • Specialist supplier • Low cost • Capitalise on ‘Made in France’ • High quality and service and improve speed and agility in all • Reliable and trustworthy • Embedded in industry • Technical capability drive • Build on eco credentials • Develop key relationships our dealings and activities. • Delivering sustainable • Ecient innovator • Asset utilisation • Beyond France • Continue to add growth Central support services such as (innovative) products • Right and flexible asset base • Targeted markets/ capacity purchasing, logistics, finance, HR • Build on our local strengths • Cost competitive by opportunities • Remain cost focused and IT continue to drive and deliver scaleandoering scale advantages to the entire Group. Focus areas Focus areas Focus areas Focus areas Focus areas • Transform our cost through • Continued focus on dishwasher • Cost optimisation • Cost optimisation • Exploit new Malaysia facility operational excellence tablets and laundrycapsules • Expand contract • Expand volumes in Germany • Expand Vietnam output • Value engineer/simplify our • Sustainable formulations and manufacturing • Best-in-class commercial and • Expand into household product portfolio packaging development • Continue technical innovations technical approach • Capture and develop contract • Sustainability-oriented • Continued adaptation of core • Reinvigorate market position manufacturing opportunities innovation oering • Continue to capitalise on • Partner with focus customers environmental leadership Cost Product leadership leadership Cash Strategic generation growth McBride plc Annual Report and Accounts 2022 14 Strategic report ## We support divisional success by leveraging the scale of ## theGroup through eective central teams for purchasing, ## talentmanagement and other shared services. Market factors Market factors Market factors Market factors Market factors • Large, stable market • Dynamic market • Asset-heavy competitive • Well-established market • Return to rapid market growth • Commoditised product • Brander-led innovation market • Leverage new opportunities • Population and income growth categories • Sustainability is a key driver • Slowing market decline with contract manufacturing • Rapid urbanisation • Fragmented competition • E-commerce potential • Consumer transitioning • Niche, specialist player • Maturing retail infrastructure • Cost competitiveness • Market consolidating paramount Strategy = Optimise to grow Strategy = Accelerate to grow Strategy = Revitalise to grow Strategy = Develop to grow Strategy = Deliver to grow McBride approach McBride approach McBride approach McBride approach McBride approach • Low-cost oer • Specialist supplier • Low cost • Capitalise on ‘Made in France’ • High quality and service • Reliable and trustworthy • Embedded in industry • Technical capability drive • Build on eco credentials • Develop key relationships • Delivering sustainable • Ecient innovator • Asset utilisation • Beyond France • Continue to add growth (innovative) products • Right and flexible asset base • Targeted markets/ capacity • Build on our local strengths • Cost competitive by opportunities • Remain cost focused scaleandoering Focus areas Focus areas Focus areas Focus areas Focus areas • Transform our cost through • Continued focus on dishwasher • Cost optimisation • Cost optimisation • Exploit new Malaysia facility operational excellence tablets and laundrycapsules • Expand contract • Expand volumes in Germany • Expand Vietnam output • Value engineer/simplify our • Sustainable formulations and manufacturing • Best-in-class commercial and • Expand into household product portfolio packaging development • Continue technical innovations technical approach • Capture and develop contract • Sustainability-oriented • Continued adaptation of core • Reinvigorate market position manufacturing opportunities innovation oering • Continue to capitalise on • Partner with focus customers environmental leadership Cost Cost Product and value leadership leadership leadership Cash Value Strategic generation optimisation upside McBride plc Annual Report and Accounts 2022 15 Strategic report # CEO's report ![img-0.jpeg](img-0.jpeg) Chief Executive Officer Business performance improving after a difficult year; reset financing agreements supporting the Group's future progress. ## Overall business performance Without doubt, the last financial year was the toughest trading year the Group in its current form has ever experienced. 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. The scale of the challenge from cost rises, mostly materials, reached over £200 million on an annualised basis in the final quarter. Our progressive actions to mitigate have seen success, but time lags have meant cost rises outweighed recovery benefits in the period to June. Consequently, the financial performance for the past year has been very poor. However, the response of the McBride team to this 'avalanche' of challenges has been excellent and the ongoing recovery actions support an improved financial outlook into the new year. Full-year Group revenue at £678.3 million was 0.6% lower as reported, but 2.9% higher than the prior year at constant currency$^{(1)}$. On a constant currency basis, following sales declines of 6.6% in the first half, second half revenue grew by 13.4% as we were able to partially offset exceptional input cost pressures by passing on those costs in the form of higher prices to our customers. Adjusted operating loss$^{(2)}$ for the year was £24.5 million compared to a profit in the previous year of £24.1 million. Following the first half adjusted operating loss$^{(3)}$ of £14.8 million (2021 profit of £19.0m), the rate of losses slowed in the second half and were in line with our expectations. Total sales volumes have seen a decline of 6% with volumes to contract customers falling 32%, mostly as a result of post-Covid-19 'fif volumes' falling away. Private label volumes saw a smaller effect with a decline of 2% across the year but flat in the second half. This volume effect was offset by average selling price increases of over 9% for the year and 18% in the second half. Whilst it is disappointing to see the Group's volumes lower, the performance is good against a market backdrop of a 6% fall in the overall market, with equal impact in both branded and private label volumes. At a category level, total market volumes declined most heavily in cleaners, seeing a twelve-month volume fall of 9% as Covid-19 behaviours adapted; McBride volumes fell 6% in this category. In dishwash, whilst the overall market reduced 5%, we saw volumes rise 2% and for laundry, where market volumes fell 3%, the Group's volumes rose just under 1%. (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 16 Strategic report ## Having had no choice but to pass on the higher prices to our ## customers, our open and transparent approach resulted in ## strong support and co-operation from customers. The year was dominated by actions to oset the rapid Programme Compass and exceptional input cost inflation. The size of the The Compass operating model has now become fully impact was changing rapidly and dicult to predict. embedded in the Group, despite the trading challenges Asa Group we have taken all necessary steps to control experienced in the early stages of deploying our and reduce our own costs and cash outlays, but the Compass strategies, which were launched in January scale of increases meant we were left with no choice 2021. It has been particularly encouraging to see the but to apply a series of price rises to our customers. new divisional business teams develop and mature over These discussions were dicult and tough, but we the year, despite having had to focus on short-term believe our open and transparent approach has resulted margin recovery actions for almost the entire year. in strong support and co-operation from customers. Our divisionally focused approach has allowed us to These significant price rises were delivered in a series develop an improved ‘specialist’ proposition across of waves progressively through the year, with additional all our geographies and product categories, which rises still in discussion in the new year as we also is a key outcome from Compass. Ensuring we are deal with energy, transport, labour and other inflation closer to our key customers, listening and acting to rises. Increasingly, customers are pursuing the various support their needs and requirements, partnering options we have presented for product cost mitigation and jointly developing the right value proposition is alongside pure price increases. key to our growth plans and our ambition to be the preferred choice to our retail customers and their Input prices consumers. Thisnew focus also benefits our contract The severe supply chain challenges and exceptional customers, which has already resulted in several input cost pressures seen across many industries have contract manufacturing wins due to start in the next continued to heavily impact McBride. The financial financialyear. impact from this environment has been very significant, which together with availability pressures has created We completed a review and update of each divisional a ‘tsunami’ of cost increases, the annual eect being strategy earlier this calendar year. The review confirmed in excess of £200 million, for the business to handle. the Compass approach, divisional organisation and the Across the entire range of raw materials and packaging, strategic direction of each division, whilst rearming we expect total costs to have risen by 51% between the fact that our purpose, vision and values continue December 2020 and June 2022. The whole industry has to set the right objectives for the Group. The recent been aected, whether branded or private label, and challenging trading situation has clearly required each the size of the increases has warranted urgent pricing division to modify and adapt their strategic pathways conversations with customers alongside many branders in light of recent macro factors but the individual publicly warning of price rises for their products. strategies for each division continue to remain Throughout the year we continued to experience appropriate for the Group. challenges with logistics availability and freight costs, As we stabilise and see improving financial outcomes whilst surging energy prices and increases in labour from trading, the element of the Compass strategy costs in the second half of the year have added further that will deliver more eective and ecient processes inflationary pressures. Maintaining a reliable supply and thus improved margins from lower structural costs into our factories has been challenging, but with the will launch in the new financial year. An Excellence support of some key suppliers and the tenacity of the and Transformation team is being recruited to lead the purchasing team both in minimising cost rises and deployment of multiple work streams in support of securing supplies, we have been successful in this area the Compass margin ambitions, initially targeting £50 with disruption limited. million of benefit over five years. McBride plc Annual Report and Accounts 2022 17 Strategic report ## CEO’s report continued Covid-19 Unit Dosing revenue declined 1.9% on a constant (2) We have continued to work with colleagues across the currency basis . Following a revenue decline of 8.7% in Group to maintain a Covid-19 secure work environment. the first half of the financial year, the division recorded We have continuously reviewed and regularly updated revenue growth of 5.0% in the second half. This was the wide-ranging day-to-day operational measures driven by the impact of price increases and through put in place last year on an ongoing basis through the volume improvements in the capsule product line. (1) year as we responded to the evolving nature of the Adjusted operating loss of £0.8 million (2021: £16.7m pandemic and the changing environment within which profit) was driven by unprecedented input cost inflation the Company operates. in raw materials, energy, transport and labour cost, which were not immediately recovered through cost All of our factories remained operational throughout the price increases to our customers. year, and as lockdowns have lifted, we have reopened oce facilities and welcomed colleagues back to the Full-year revenue in Powders was 7.2% higher on a (2) oce, many of whom have continued to work in a constant currency basis . The demand for laundry hybrid way this year. Our operations in the Asia Pacific products recovered versus the previous year as Covid-19 division were once again aected by a higher level of restrictions were lifted and volumes to professional Covid-19 related disruption this year. We had to host cleaning companies recovered. Adjusted operating (1) workers within our Vietnam site for a few months, to losses increased from £2.3 million to £2.5 million. allow the site to remain operational during peaks in the Pricing actions and volume growth initiatives are in pandemic, while strict lockdown rules in Malaysia led place to get the business back to at least break-even to a shortage of foreign workers, thereby impacting inthe near term. our output and service levels. It has been encouraging Aerosols revenue of £31.9 million was 2.1% lower to note that our Asia Pacific division has successfully (1) and full-year adjusted operating loss of £1.5 million overcome these Covid-19 challenges and has made a was down £2.2 million, both on a constant currency positive contribution to the Group’s results. (2) basis . Following a first-half revenue decline of 11.0%, Divisional portfolio performance strongly impacted from the reduction in Covid-19 Following all divisions posting lower year-on-year sanitiser product sales, the second half saw sales sales in the first half, all divisions returned to revenue increase by 8.9%. Aerosols was also heavily impacted growth in the second half, with Liquids and Powders by unpredictable and successive waves of raw material reporting sales growth for the year on a constant price increases. Customer acceptance of price increases (2) lagged the input cost inflation by up to three months currency basis . Revenue growth in the second half in Unit Dosing, Aerosols and Asia Pacific was not sucient on each pricing wave, leading to a full-year adjusted (1) for those divisions to report growth for the year, with operating loss of £1.5 million (2021: profit £0.7m). (2) their revenue on a constant currency basis being lower Asia Pacific revenue of £22.4 million was lower by 6.7%, than2021. with severe Covid-19 pandemic lockdowns continuing Liquids volumes were 4.9% lower than prior year as toreduce footfall in stores across the region, particularly the prior period was positively impacted by Covid-19, in the first three quarters of the fiscal year. Adjusted (1) | particularly due to heightened demand in the cleaners | | operating profit | of £0.7 million (2021: £1.9m) was | | --- | --- | --- | --- | | category. Liquids revenue grew by 5.6% on a constant | | lowerdue to exceptional input cost increases which | | | | (2) | were not immediately recovered through customer | | | currency basis | as cost price increases were actioned | | | | with customers in the second half. Adjusted operating | | priceincreases. | | (1) loss of £15.9 million (2021: £11.7m profit) was driven by unprecedented input cost inflation not immediately being recovered through cost price increases to our customers. Whilst the second half was still loss-making, losses were 40% lower compared to the first half. Although fourth quarter exit rate margins were still not back at historical levels, these were nonetheless stronger than the full-year average due to the timing ofthe price increase implementation. (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 18 Strategic report | Revenue | Year to 30 June 2022 £m | Year to 30 June 2021 £m | Reported change | Constant currency (1) | | --- | --- | --- | --- | --- | | Liquids | 383.9 | 376.1 | 21% | 5.6% | | Unit Dosing | 171.5 | 181.5 | (5.5)% | (1.9)% | | Powders | 68.6 | 66.3 | 3.5% | 7.2% | | Aerosols | 31.9 | 34 | (6.1)% | (2.1)% | | Asia Pacific | 22.4 | 24.4 | (8.2)% | (6.7)% | | Group | 678.3 | 682.3 | (0.6)% | 2.9% | | Adjusted operating (loss)/profit (2) | Year to 30 June 2022 £m | Year to 30 June 2021 £m | Reported change £m | Constant currency (1) £m | | Liquids | (15.9) | 11.7 | (27.6) | (26.9) | | Unit Dosing | (0.8) | 16.7 | (17.5) | (16.8) | | Powders | (2.5) | (2.3) | (0.2) | (0.2) | | Aerosols | (1.5) | 0.8 | (2.3) | (2.2) | | Asia Pacific | (0.7) | 1.9 | (1.2) | (1.2) | | Corporate | (4.5) | (4.7) | 0.2 | 0.2 | | Group | (24.5) | 24.1 | (48.6) | (47.1) | (1) Please refer to APPI in note 2. (2) Comparatives translated at 2021/22 exchange rates. ### Current trading and outlook The early months of the new financial year have seen trading in line with our internal plans. Volumes are showing some early signs of recovery against a backdrop of an environment that should favour private label products. This, together with an improving service performance, provides reassurance both on our revenue outlook and factory loading levels. Recent months have seen overall raw material costs steadying but with widely varying trends between material groups. Energy and currency variations add further uncertainty to the cost environment and hence margin improvement actions from price rises or product engineering remain key activities. At this stage the Group is maintaining its view that full-year earnings will be in line with our expectations. Chris Smith Chief Executive Officer 29 September 2022 The Strategic report was approved and signed by the Board on 29 September 2022 and signed on its behalf by: Chris Smith Chief Executive Officer McBride plc Annual Report and Accounts 2022 19 Strategic report ## Our divisionsOur divisions Peter Ingelse Managing Director Liquids Performance review Liquids revenue grew by 5.6% on a (2) | | | This past year has seen margins | constant currency basis | , the net | | --- | --- | --- | --- | --- | | | | heavily impacted due to | of an overall fall in volumes in the | | | | Revenue | unprecedented and relentless | period of 4.9% o set by the e ects | | | | | input cost infl ation in all areas of | of price increases. | | | £383.9m | | raw materials, packaging, energy, | The volume performance for Liquids | | | | | logistics and labour, with the e ect | was mostly impacted by volumes | | 2021: £363.5m | building from the second quarter. | to our contract manufacturing | | --- | --- | | Cost infl ation in the later part of | customer (down38%), with private | | thefi nancial year was brought about | label lower by 1.2%. This private label | | indirectly by the Russia-Ukraine war | performance compares favourably | | and the subsequent surge in oil and | with the volumes for the fi ve key | | fuelcosts. | private label markets in Europe, | | The key focus for the team has | which declined on average by 5.6% | Adjusted been to recover margins by taking versus the prior year, as some of the operating (loss)/ (1) necessary steps to control our positive impact in prior periods from profi t own costs before passing this Covid-19 unwound. Our volumes into extraordinary input cost infl ation contract manufacturing customers ## £(15.9)m on to customers, as well as to work reduced as the need for top-up 2021: £11.0m | | with them to reduce product costs | volumes fromthe branders fell post | | --- | --- | --- | | | as an alternative to pure price rises. | Covid-19. | | | Retailers have understood the need | Volume of laundry products for | | | for price increases and have in the | private label grew by 3.8% versus | | | main been supportive. On average, | prior year, again outperforming | | | however, it has typically taken three | the fi ve key private label markets | | | months to pass infl ationary costs | in Europe, which declined on | | (1) | into agreed selling prices, which has | average by 0.2%. For consumers, | Adjusted ROCE been detrimental to in-year margins daily laundry habits were disrupted and this lag has ultimately led to during the two years of Covid-19 ## (13.0)% losses in the fi nancial year. lockdowns and curfews. McBride plc Annual Report and Accounts 2022 20 Strategic report Volumes have not returned to ### Q&A with Peter Ingelse pre-pandemic levels however, which is thought to be due to the increased prevalence of remote or hybrid How are you progressing against your working. costleadership strategic priorities? (1) | Adjusted operating loss | of | | | | --- | --- | --- | --- | | £15.9million was £26.9 million lower | | | Work on the Simply 30 project continues. Working | | | | (2) | with our customers to identify simplifi cation-led | | than prior year at constant currency | | , | | | and whilst the second half was still loss | | | e ciency savings has proven to be even more | | making, profi t performance improved | | | important during this period of high input cost | | with losses lower by 40% compared | | | infl ation. | | to the fi rst half. Fourth quarter exit | | | In order to further optimise our cost base, in addition | | rate margins, whilst still not back at | | | to range simplifi cation, we have embarked on the | | historical levels, were stronger than | | | fi rst phase of our ‘lean’ conversion programme in | | the full-year average due to the timing | | | recent months. This focus on operational excellence | | of the price increase implementation. | | | is expected to unlock capacity in our factories, | | These higher prices are expected to | | | improve the e ectiveness of back-o ce processes | | annualise in the next fi nancial year. | | | and ultimately right-size our cost base. | Service levels were impacted by disrupted raw material supply, driver availability and Covid-19-related sta How do you propose to partner with absences. This negatively impacted volumes in the period and led to an focuscustomers? increase in customer penalties. Global | supply chains remain unstable, with | Considerable focus has gone into setting up our | | --- | --- | | uncertainty around supply of key | Partnership Champion model. This means that Tier 1 | | materials and with logistics routes | customers have one point of contact to interface into | | disrupted. Good progress has been | all divisions as required, which we expect will further | | made with committed Compass cost | strengthen our customer relationships. | | reduction actions, with in-year savings | O ering our customers sustainability-orientated | | in line with target. Given the challenge | innovation is another focus area of our strategy. | | to margins, management action has | Our work on building a more sustainable product | | been taken to further tighten spending | portfolio led to a number of new product | | controls and restrict capital investment | development initiatives which will gradually hit | | to conserve cash. | themarket during the next fi nancial year. | It is encouraging to note that there was a net positive balance of newly communicated gains and losses during the year, including growth with a key global contract manufacturing partner and in the German private label market, which is expected to positively impact volumes in the next fi nancial year. (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 21 Strategic report ## Our divisions continued Lennard Markestein Managing Director Unit Dosing | | | Performance review | The division saw exceptional cost | | --- | --- | --- | --- | | | | The Unit Dosing division had | infl ation throughout the year in | | | | a challenging year, due to a | all areas including raw materials, | | | Revenue | combination of extreme input cost | energy, transport and labour | | | | infl ation and softer underlying sales | cost. By the end of the year the | | £171.5m | | volumes. | business realised signifi cant price | increases to help o set this infl ation, 2021: £174.9m Revenue for the full year was lower inconjunction with many other cost by 1.9% on a constant currency | | (2) | reduction initiatives. | | --- | --- | --- | | basis | and on a full-year adjusted | | | basis the division recorded an | | Revenue in private label grew by | (1) | operating loss | of £0.8 million (2021: | 3% while contract manufacturing | | --- | --- | --- | | operating profi t of £16.0m), resulting | | business revenue declined by | | in an adjusted operating loss margin | | 21% as peak pandemic volumes | | of 0.5% (2021:adjusted operating | | reduced and thus the need to | Adjusted profi t margin of 9.2%). supply ‘fi ll volumes’ also fell. Overall, operating (loss)/ (1) dishwash sales decreased by 1% as profi t Following a year-on-year revenue volume run-rates saw a downward decline of 8.7% in the fi rst half of correction as Covid-19 restrictions ## £(0.8)m the fi nancial year, the business ended. Since May 2022, volumes grew by 5.0% in the second half. 2021: £16.0m have been improving as a result of This was driven by the impact of the positive impact of new wins for price increases and through volume classic and all-in-one dishwasher improvements in laundry capsules. tablets and descaler tablets. Whilst now improving, unfortunately, Thelaundry capsules business has service challenges, specifi cally stabilised in the second half of the in Germany, continued tohave year, with revenue higher by 13% a negative impact on dishwash (1) year over year following a three-year Adjusted ROCE revenue in the second half. period of decline where the business recorded a negative balance ## (1.2)% between contract gains and losses. McBride plc Annual Report and Accounts 2022 22 Strategic report Additionally, though still in its infancy, ### Q&A with Lennard Markestein good progress has been seen from the new revenue stream for refill tablets for liquid cleaners. Have you delivered the product innovation priorities that you targeted for this fiscal year? Each of the factories faced varying operational issues during the year. | Acombination of high absence | Despite the challenging market environment, our | | --- | --- | | rates due to Covid-19, high attrition | team has maintained focus and made good progress | | rates fortechnical roles and multiple | against our product leadership strategy. In the first | | first-time operational events, led to | half, we launched a new, smaller mono-laundry | | weaker eciency levels and higher | capsule and a new premium triple capsule design. | | waste rates. By the fourth quarter, | The introduction of our sustainable carton box | | these issues were largely resolved, | packaging for capsules – Superior Child Impeding | | which supports improved momentum | Closure (SCIC) with a safe but customer-friendly | | into the new financial year. Throughout | opening/closing functionality (Click-to-Lock) – | | the year, the division successfully | has been a success. Our compact packaging for | | exerted tight cost controls on divisional | our premium tab-in-tab dishwash product has | | fixed cost, inventory levels and capex | been adopted by many customers. The first set of | | spend as a response to the challenging | customers have chosen our new three-chamber | | financial performance. | powder liquid dishwash product, recognised for an | appealing and compact design. Looking towards Though challenged by the dicult 2023, we will continue to strengthen our ranges market conditions and the short-term with new sustainable product format and packaging focus this required, the division has oerings. Even more emphasis than before will made good progress with its innovation be placed on improving the aordability of our agenda. New capsule shapes have productportfolio. been launched and multiple sustainable packaging options introduced based on carton or Post-Consumer Recycled (PCR) plastics. Significant eort has Can you further improve eciencies gone intoredesigned formulations for andreducecosts in your factories? manyproducts, helping to partly oset raw material cost inflation, which have been progressively introduced to our During this year, our factories in Hammel, Foetz customers. and Estaimpuis each had to overcome significant operational challenges. All in all, these issues have The team’s innovative strength was aected our financial performance by approximately demonstrated at a leading brander £2 million. In the later months of the year, we have where the contract manufacturing seen our eciencies improve and our waste rates agreement was secured, which will reduce. Webelieve substantial eciency gains feature the launch of an innovative new can be realised with limited capex investment. cleaning product in the second half of Thedivision is increasingly deploying ‘lean’ the next financial year. methodology solutions to optimise operations and The Unit Dosing team faced and reduce downtime and change-over times. Each of weathered a perfect storm in 2022 our factories is in a position to increase volumes, and remains confident that despite while improving eciencies. this turmoil, the right steps have been taken towards placing the division on arobust growth trajectory. The team continues to demonstrate its value to customers and be their proactive partner of choice for Unit Dosing products. The mission of the division is to be recognised for its ability to develop and supply aordable, sustainable, safe and convenient single-use cleaning products. (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 23 Strategic report ## Our divisions continued Marielle Claudon Managing Director Powders | Performance review | These sales trends were refl ected | | --- | --- | | Full-year revenue in Powders was | across the entire European region, | | 7.2% higher on a constant currency | although the two largest countries, | (2) Revenue basis , but adjusted operating UK and Germany, recorded higher (1) | | loss | increased from £2.3 million | than average increases. Private | | --- | --- | --- | --- | | £68.6m | to £2.5 million, with £0.2 million | | label sales grew slightly despite | | | ongoing cost actions and volume | | the loss of one major contract in | 2021: £64.0m growth targeting in place to get the laundry powder tablets. Contract business back to at least break-even manufacturing sales were also in the near term. higher as the industrial and hospitality sectors benefi ted from The demand for laundry products the easing of restrictions in eating recovered versus the previous year out and travel. as the Covid-19 restrictions were lifted. The impact is being driven Gross margins declined Adjusted by people returning to work and signifi cantlyversus the previous operating (loss)/ (1) being able to socialise, with the year due to the signifi cant and profi t knock-on e ect of washing their unprecedented increases in raw clothes more frequently, although material and logistics costs. ## £(2.5)m this has not reached pre-pandemic Too set this infl ationary pressure, 2021: £(2.3)m levels. The improvement in rates a series of price increases were of sale in both private label and negotiated with customers as well contract manufacturing for laundry as making improvements in product powder that was witnessed at the and other costs. end of the previous fi nancial year was sustained over the course of thecurrent year. (1) Adjusted ROCE ## (11.5)% McBride plc Annual Report and Accounts 2022 24 Strategic report As seen across the Group’s divisions, ### Q&A with Marielle Claudon delays in the realisation of price rises meant higher costs exceeded price recovery during the period, What trends do you see in the laundry leading to increased losses for the powdercategory for theCompany? year. Thedivision also continued to maintain a strong cost focus across the The overall decline of the powders market is business which enabled a reduction in continuing. While this is especially accelerating with the overheads cost base. As a result, laundry tabs, in the case of laundry powders we are (1) overall, the adjusted operating loss seeing some stabilisation in countries such as the of the Powders division increased by UK and Germany. In this market context, branders £0.2 million but with an improving are already starting to outsource more of their profi tability trend as the business manufacturing and smaller competitors have exited exited the fi nancial year. Despite the the category. The intense infl ationary pressures poor profi t performance, actions were weare seeing have further accelerated this trend. implemented to reduce inventories to Inline with our Compass expectations, thismeans improve the working capital position. that private label, contract manufacturing and supply As initiated last year, the Powders to the professional cleaning industry will become division has continued to strengthen concentrated amongst fewer manufacturers. With the the technical capability of its team, focus on cost and quality performance, the Powders thereby accelerating product division is showing it is well positioned to operate a development for a number of exciting profi table business in this sector. initiatives which are already under discussion with key customer partners. The cost leadership strategy and the plans around product innovation are What are the commercial priorities for showing benefi ts, which together with Powdersgoing forward? an expected trend of shoppers turning to powders as a lower cost solution The fi rst focus of the business is to recover and/or given consumer infl ationary pressures, o set the infl ationary pressures we currently face. is expected to see better volumes in The commercial teams are actively engaging with the next fi nancial year. our customers to mitigate the issue through price increases or revised product o erings. In terms of overall strategy, our developed understanding of the laundry powder market and our customer segmentation has provided clear targets for the right regions and products. We will continue to build further on our private label business with key customers while also actively targeting contract manufacturing opportunities with branders and professional cleaning customers. We will succeed by o ering the best quality for price solutions thanks to improved formulation and packaging solutions. (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 25 Strategic report ## Our divisions continued Marc Marot Managing Director Aerosols | Performance review | As a result of these di erent | | --- | --- | | Aerosols revenue of £31.9 million | dynamics, following a fi rst half | | was 2.1% lower and full-year adjusted | revenue performance adversely | (1) Revenue operating loss of £1.5million impacted from the reduction in was down £2.2 million, both on a sanitiser product sales, the second (2) ## £31.9m constant currency basis compared half saw sales increase by 3.1% to the prior year. This resulted in across all ourcore categories. 2021: £32.6m an adjusted operating loss margin The Aerosols division was also of 4.6% (2021: adjusted operating heavily impacted by unpredictable profi t margin of 2.1%). and successive waves of raw The four main product categories material price increases. As with of the Aerosols division are: the other divisions and despite household (air fresheners and the e orts of our teams, customer cleaners), personal care (deodorants acceptance of price increases Adjusted and shaving), insecticides and lagged the input cost infl ation by operating (loss)/ (1) hydroalcoholic (hand and ‘one-shot’ circa three months on each pricing profi t sanitisers). While the household and wave, leading to margin squeeze personal care ranges saw increasing for much of the year. The operating ## £(1.5)m demand in the year, insecticides profi t impact of these pricing 2021: £0.7m declined slightly due to seasonal recovery lags and the adverse sales timing impacts, with hydroalcoholic mix was mitigated to some extent sanitiser categories mostly by overhead cost control. disappearing post the high early Covid-19 demand in 2020. (1) Adjusted ROCE ## (13.1)% McBride plc Annual Report and Accounts 2022 26 Strategic report However, after two successive years of ### Q&A with Marc Marot generating profi ts, this year the division delivered a full-year adjusted operating (1) loss of £1.5million (2021: adjusted What will drive sales growth in the operating profi t of £0.8 million. nextfi nancialyear? The Aerosols division continues to | pursue its strategy of supplying niche | The previous demand for sanitiser products | | --- | --- | | products to a limited range of markets, | has heavily diminished over the course of the | | while pursuing targeted geographical | last year, due to market saturation and reduced | | expansion. The division is keenly | ‘panic’ usage by consumers as Covid-19 risks | | focused on meeting customers’ needs | fall. Hence, the Aerosols division is building on | | in the most cost-e ective way. This | category growth opportunities within insecticides | | approach has already secured new | and household products as well as regional sales | | contracts that launched in the third | growthopportunities in Germany. | quarter with others planned for next fi nancial year, supporting a positive growth momentum in the next year. What are the profi t recovery actions in place? Our division is focused on implementing price increases to o set the high raw material prices thatare coming primarily from metals (aluminium and steel) as well as gases. Our market position and close relationships with our customers has shown good success with negotiating new prices, albeit withdelays. Next year we expect to see good growth from the actions to secure new business over the past 18 months. Ensuring this growth delivers the expected improved profi tability is a key priority for the team. Additionally, cost control and product engineering will continue to be a constant focus for the local team to secure improved profi tability. (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 27 Strategic report ## Our divisions continued Teong Dee Ong Managing Director Asia Pacifi c | Performance review | The overall fall in sales of 6.6% was | | --- | --- | | Asia Pacifi c revenue of £22.4million | primarily due to Australia being | | was lower by 6.7%, adjusted | lower year-on-year. Nevertheless, | (1) Revenue operating profi t of £0.7million was thanks to the strong resilience of lower by 61.1%, bothon a constant the local teams and our customers’ (2) ## £22.4m currency basis . This resulted in an trust as we were slowly exiting out adjusted operating profi t margin of of Covid-19, we could see a recovery 2021: £24.0m 3.3%. appearing in the fourth quarter of the fi scal year, with sales picking up The division’s performance has again in Malaysia and South-East been hit signifi cantly for the second Asia, while demand in Australia has year in a row by external factors. also been recovering. The extended and severe pandemic lockdowns created reduced demand The impact of Covid-19 was evident in the stores. Footfall in stores in our operations. Strict lockdown Adjusted across the region decreased due rules meant shortages of foreign operating (loss)/ (1) to Covid-19 and our run rates have workers able to enter Malaysia, profi t been notably hit, especially in the impacted output and service fi rst three quarters of the fi scal levels. At our site in Vietnam, ## £0.7m year. In addition, some of the usual wehad to review our operational 2021: £1.9m promotional activities did not take set-up by hosting workers on site place as planned in the third quarter. for a few months. Ontop of this, unprecedented fl oods in Malaysia temporarily blocked access to the production facility. (1) Adjusted ROCE ## 5.7% McBride plc Annual Report and Accounts 2022 28 Strategic report Lastly, the disrupted global supply ### Q&A with Teong Dee Ong chain aected export shipments as container availability was erratic while costs increased significantly. Has the business environment changed post Covid-19 and how does this aect the growth Our adjusted operating profit of £0.7million was £1.2 million lower ambitions for the division? than last year. This was driven by As we come out of the pandemic, consumer demand the same exceptional raw material is recovering. Therefore, our key private label cost increases experienced in all the customers are looking to grow volumes through divisions. However, we successfully store expansions, aggressive marketing campaigns oset those costs with some price and new product launches. In addition, an increasing increases to our main customers in number of branded companies are mitigating their retail and contract manufacturing, centralised regional product manufacturing base risk but could not completely balance the to multiple ‘closer to home’ supply sources. higher costs we incurred. Managing our With our new Malaysia production facility being cost base has remained a priority to fully operational, we are in a better position to grow try and combat the general inflationary our business, by oering increased manufacturing pressures we experienced. capacity to multinational branders and our retail While our operating profit margin partners, both on personal care and household has declined versus last year, the categories across the region. division still reported a profit, a good Innovation and cost eciency are particularly performance considering the general important considerations in the post Covid-19 environment and trading conditions environment as inflationary pressures impact our of the past year. Along with the recent retailers and their end consumers. This is especially change in Regional Managing Director, key for success in Australia, in order to oset the further reinforcement of the local higher costs arising from logistics. management team is planned in the coming year to support future growth Our local team is now well positioned to capitalise for the division. onthese trends and to engage more actively with all our customers who are seeking a high-quality, reliable and blue-chip regional partner. How do you intend to develop and grow your household business credentials in the region? Our ambition is to fast-track growth in Asia Pacific by leveraging McBride plc’s household sector expertise in laundry, cleaners and dishwashing products. New focus will be placed on R&D through improved coordination between our commercial and operational teams to ensure we provide a smart and ecient process to transfer knowledge. We also have access to our Group R&D sector specialists in our European Centres of Excellence, to work on key projects. We will be investing in household production capabilities in Malaysia to build on our reputation as a low-cost/high-quality manufacturer. This will enable us to compete eectively for household business in private label and also branded contract manufacturing opportunities. Our commercial teams are also engaging actively with our key private label customers to expand our partnership into household products. We are also looking to compete eectively for branded contract manufacturing opportunities through the relationships already established by our European (1) Please refer to APM in note 2. divisions. (2) Comparatives translated at 2021/22 exchange rates. McBride plc Annual Report and Accounts 2022 29 Strategic report # CFO's report ![img-1.jpeg](img-1.jpeg) Mark Strickland Chief Financial Officer With the success of our pricing actions and our revised financing arrangements now in place, we emerge from a disappointing year impacted by unprecedented input cost inflation with optimism that we are still well placed to deliver our Compass strategic plans. ## Group operating results The full-year operating loss from continuing operations of £26.7 million was a significant reduction from the prior year (2021: profit of £15.5m). Full-year adjusted operating loss(1) of £24.5 million was also significantly lower than the prior year (2021: profit of £24.1m) and adjusted operating profit margin decreased from 3.5% to (3.6)%. During the year, the Group experienced rapid input cost inflation and supply chain disruptions, exacerbated further in the second half of the year by the conflict in Ukraine. These impacts have been predominantly offset through pricing and value engineering actions. However, the time lag between the exceptional levels of input cost inflation hitting our business and the mitigating actions being agreed with, and then implemented by, our customers, significantly impacted our profitability. ## Group EBITDA Full-year adjusted EBITDA(2) of £(3.6) million (2021: £45.5m) reflected the challenging trading conditions. | | 2022 £m | 2021 £m | | --- | --- | --- | | Operating (loss)/profit | (27.1) | 14.8 | | Add back operating loss from discontinued operations | 0.4 | 0.7 | | Operating (loss)/profit from continuing operations | (26.7) | 15.5 | | Exceptional items in operating profit | (0.4) | 6.2 | | Amortisation | 2.6 | 2.4 | | Adjusted operating (loss)/profit(3) | (24.5) | 24.1 | | Depreciation of property, plant and equipment | 16.9 | 17.6 | | Depreciation of right-of-use assets | 4.0 | 3.8 | | Adjusted EBITDA(4) | (3.6) | 45.5 | (1) Please refer to APM in note 2. McBride plc Annual Report and Accounts 2022 30 Strategic report Exceptional items Finance costs (1) Total exceptional items of £3.1 million were recorded At £5.1 million, adjusted finance costs were during the period in relation to continuing operations £0.9million higher than the prior year, driven by net (2021: £6.2m), including £3.5 million exceptional foreign exchange losses (2021: £4.2m). finance costs and a £0.4 million exceptional credit Loss before tax and taxation within operating profit. The charges primarily Reported loss before taxation from continuing comprised the following: operations was £35.3 million (2021: profit of £11.3m). | • £3.5 million of costs in relation to the independent | | | (1) | | | --- | --- | --- | --- | --- | | | | Adjusted loss before taxation | from continuing | | | | business review programme, recognised within | operations was £29.6 million (2021: profit of £19.9m). | | | | | finance costs; | | | (1) | The tax credit on continuing adjusted loss before tax • £0.7 million cost relating to the Group’s logistics for the year is £9.3 million (2021: £1.1m credit) and the transformation programme, including £0.8 million eective tax rate is 31% (2021: (6)%). of consultancy costs and £0.2 million of redundancy The statutory eective tax rate on continuing operations costs, oset by £0.3 million of profit on sale of a for the year is 32% (2021: (24)%). warehouse in France; The Group operates across a number of jurisdictions • £0.6 million additional costs relating to the and tax risk can arise in relation to the pricing of revaluation of the ongoing environmental cross-border transactions, where a taxation authority’s remediation liability in Belgium; interpretation of the arm’s length principle can diverge • £0.1 million in respect of one-o legacy costs in from the approach taken by the Group. During the year relation to the former UK Aerosols site in Hull; the Group made minor changes to the Group’s transfer partially oset by: pricing policy to update it for changes to operating • £1.8 million profit on the sale of the Barrow site, structures and accountabilities following Programme which ceased operations in October 2020, oset by Compass changes that are now fully embedded. £0.4 million clearance and site closure costs; and Earnings per share • £0.4 million gains relating to Programme Compass, (1) On an adjusted basis, diluted loss per share from including £1.6 million profit on sale of a factory in continuing operations was 11.7 pence (2021: earnings Malaysia, oset by £0.9 million impairment of fixed (1) of 11.7p). Total adjusted diluted loss per share was 11.7 assets and £0.3 million in consulting support and pence (2021: earnings of 11.7p), with basic loss per share other project expenses. at 14.0 pence (2021: earnings of 7.5p). (1) Please refer to APM in note 2. McBride plc Annual Report and Accounts 2022 31 Strategic report # CFO's report continued ## Payments to shareholders On 2 November 2020, the Company announced that it would commence a share buy-back programme of up to £12 million in McBride plc ordinary shares, running from 2 November 2020 through to the date of the Company's next AGM. During the year, the Group purchased and cancelled 0.2 million ordinary shares (2021: 8.6m) representing 0.1% (2021: 4.7%) of the issued ordinary share capital as at 2 November 2020. The shares were acquired at an average price of 77.0 pence (2021: 79.3p) per share, with prices ranging from 73.3 pence per share to 78.6 pence per share (2021: 61.0p per share to 90.0p per share). The total cost of £0.1 million (2021: £6.8m) was deducted from equity. A transfer of £nil (2021: £0.9m) was made from share capital to the capital redemption reserve. The Board ended the share buy-back programme on 7 September 2021. Investing in the business to drive mid-term sustainable profitable growth is a key priority of the Group. The Group's flexible policy on payments to shareholders makes distributions when appropriate and affordable. More specifically, annual payments will be payable only when the net debt(1) to adjusted EBITDA(2) leverage ratio (on an accounting basis) is 2.0x or less. Once this ratio is 2.0x or less the Group has indicated a progressive dividend policy, as follows: | 1.5x to 2.0x | Base dividend – one sixth of EPS | Cash | | --- | --- | --- | | 1.0x to 1.49x | Additional distribution – one sixth of EPS | Cash/share buy-back/retain | | Below 1.0x | Special distribution | At Board's discretion | Since the ratio was over 2.0x at 30 June 2022, and per the agreement with our lender group not to pay dividends for the duration of the new banking agreement, the Board does not propose a distribution to shareholders. Cash flow and balance sheet | Free cash flow(1) | 2022 £m | 2021 £m | | --- | --- | --- | | Adjusted EBITDA(2) | (3.6) | 45.5 | | Working capital excluding provisions and pensions | (15.3) | (9.4) | | Share-based payments | – | 0.3 | | Loss on disposal of fixed assets | 0.3 | 0.4 | | Non-exceptional impairment | (0.1) | 0.3 | | Pension deficit reduction contributions | (4.0) | (4.0) | | Free cash flow(3) | (22.7) | 33.1 | | Exceptional items | (4.1) | (8.0) | | Interest on borrowings and lease liabilities less interest receivable | (3.3) | (3.2) | | Tax paid | (0.1) | (7.3) | | Net cash (used)/generated from operating activities | (30.2) | 14.6 | | Net capital expenditure(1) | (13.2) | (28.5) | | Debt financing and refinancing activities | 22.9 | 1.1 | | Settlement of derivatives | 0.4 | 3.8 | | Free cash flow to equity(2) | (20.1) | (9.0) | | Dividends paid/redemption of B Shares | (0.1) | (2.0) | | Share buy-back | (0.1) | (6.8) | | Purchase of own shares held by Employee Benefit Trust | – | (0.3) | | Net decrease in cash and cash equivalents | (20.3) | (18.1) | Net cash absorbed by continuing operations before exceptional items was £22.7 million (2021: net cash generated of £33.1m) in the year to 30 June 2022. Working capital outflows increased compared to the prior year primarily due to the effects of inflation rolled up in net working capital, combined with reductions in creditor payment terms driven by the loss of credit insurance. (1) Please refer to APM in note 2. (2) Net capital expenditure is capital expenditure including capital payments on lease liabilities less proceeds from sale of fixed assets. (3) Free cash flow to equity excludes cash flows relating to transactions with shareholders. (4) Oparing is defined as net debt/average year-end capital. McBride plc Annual Report and Accounts 2022 32 Strategic report During the year, capital expenditure, including capital The facility, which is aligned with the Loan Market payments on lease liabilities less proceeds from the Association’s ‘Sustainability Linked Loan Principles’, sale of fixed assets, was £13.2 million (2021: £28.5m) incorporates three sustainability performance targets in cash terms. The reduction in capital expenditure which are central to McBride plc’s commitment to levels resulted from careful management of cash maintaining a responsible business and contributing flows to mitigate increases in net debt during the actively to a more sustainable future: current challenging trading conditions. We continue 1. Renewable energy: McBride plc strives to to prioritise capital expenditure to underpin our reduce its environmental impact by increasing strategy of focused investment in our growth the percentage of energy from renewable sources categories. from 5.9% in 2020 to 70.0% in 2026. During this In the final months of its share buy-back programme, financial year, 25.5% of the Group’s energy came the Group bought back shares for a total cash from renewable sources, beating the target of 15.0% outflow of £0.1 million (2021: £6.8m) in the year. by 30 June 2022. This was driven by an increase in The Employee Benefit Trust purchased none (2021: renewable energy into the Moyaux manufacturing £0.3m) of McBride plc shares. site. The Group’s net assets decreased to £57.0 million 2. Recycled content: As plastics are a significant (4) (2021: £69.8m). Gearing increased to 80% (30 element in many of the final products of McBride June 2021: 66%), resulting from the increase in net plc, the Company targets to increase significantly (1) debt, and adjusted return on capital employed of the post-consumer recycled content of polyethylene (11.4)% was lower compared to the prior year (2021: terephthalate (PET) plastic packaging sourced for 11.5%). manufacturing its products, from 64.0% in 2020 to (1) 94.0% in 2026. During this financial year, 81.0% of Bank facilities and net debt (1) PET bought had post-consumer recycled content, Net debt at 30 June 2022 increased by £46.0million exceeding the target of 74.0%. to £164.4 million (30 June 2021: £118.4m), as aresult | of both the significant reduction in adjusted | | | 3. Responsible sourcing: McBride plc targets | | --- | --- | --- | --- | | | (1) | | the sourcing of all paper and card components | | EBITDA | , and working capital increases caused by | | | | the exceptional input cost inflation experienced in | | | responsibly via FSC® approved suppliers, with the | | | | (1) | percentage of virgin carton sourced from FSC® | | the year. Net debt | | , excluding IFRS 16, increased | | | by £45.3 million to £152.4 million (30 June 2021: | | | approved suppliers increasing from 50.0% in 2020 | | £107.1m), again mainly due to challenging trading | | | to100.0% in 2026. By 30 June 2022, the percentage | | conditions. | | | of skillets sourced that are FSC® certified was 60.5%, | slightly ahead of the target of 60.0% by 30June2022. Throughout the year the Group had an unsecured €175 million multi-currency, sustainability-linked Successful achievement of all three annual targets revolving credit facility (RCF). Thefacility was will result in a reduction of 0.05% of the margin of agreed initially for a five-year tenor to May 2026, the facility. with the option to be extended to 30 September Position prior to 29 September 2022 2027, and is provided by a syndicate of supportive The Group’s revolving credit facility (RCF) funding international bank lenders. The facility also includes arrangements are subject to banking covenants, a €75 million uncommitted accordion feature which representations and warranties that are customary could provide additional commitments for potential for unsecured borrowing facilities, including two acquisitions in support of our Programme Compass financial covenants: debt cover (the ratio of net debt strategy. to EBITDA) may not exceed 3.0x and interest cover (the ratio of EBITDA to net interest) may not be less than 4.0x. For the purpose of these calculations, net debt excludes IFRS 16 leases and amounts drawn under the Group’s invoice discounting facilities. McBride plc Annual Report and Accounts 2022 33 Strategic report # CFO's report continued # Bank facilities and net debt(1) continued Position prior to 29 September 2022 continued On 22 December 2021, the Group announced that its lender group waived the December 2021 covenant tests, following the significant deterioration of EBITDA due to unprecedented levels of input cost inflation. In reaching the agreement of the waiver, the Group agreed to maintain liquidity (cash plus facility headroom) of at least £40 million and not to pay dividends until the Group evidences compliance with its existing covenants. On 29 June 2022, the Group announced that its lender group waived the June 2022 covenant tests until 30 September 2022, with the same conditions. As at 30 June 2022, the debt cover ratio under the RCF funding arrangements was (93.3)x (2021: 1.5x) and the interest cover was (0.2)x (2020: 11.0x). The amount undrawn on the facility was €64.5 million (2021: €87.0m). At 30 June 2022, the Group had a number of facilities whereby it could borrow against certain of its trade receivables. In the UK, the Group had a £20 million facility that was committed until October 2022. In France and Belgium, the Group had an aggregate €30 million facility, on which a maximum of €25 million can be borrowed, with a rolling notice period of six months for the French part and three months for the Belgian part. In Germany, the Group had a €35 million facility committed until December 2023. The Group can borrow from the provider of the relevant facility up to the lower of the facility limit and the value of the respective receivables. The Group also has access to uncommitted working capital facilities amounting to £22.7 million at 30 June 2022 (2021: £44.3m). At 30 June 2022, £6.8 million (2021: £5.9m) was drawn against these facilities in the form of overdrafts and short-term borrowings. # Position post 29 September 2022 On 29 September 2022, the Group announced that it had agreed an amended RCF with its lender group, ensuring the Group has sufficient levels of liquidity headroom and can comply with revised covenant requirements. Key provisions of the revised agreement are: - €175 million sustainability-linked RCF confirmed to May 2026; - the option to extend to 30 September 2027 and the €75 million accordion feature previously agreed have been removed; - RCF shall be secured against material asset, share and inter-company balances; - RCF commitments to reduce, and be cancelled, in the amount of the Euro equivalent of £2.5 million every three months from September 2024 up until the termination date; - existing bilateral overdraft facilities shall become ancillary facilities committed until 30 September 2024; - invoice discounting facilities shall be committed to 30 September 2024; - liquidity shall not be less than £15 million when tested on or prior to 30 September 2024; - liquidity shall not be less than £25 million when tested post 30 September 2024; - net debt cover and interest cover covenants to be tested quarterly from 30 September 2024; - no dividends will be paid to shareholders until there is an 'exit event', being a change of control, refinancing of the RCF in full, prepayment and cancellation of the RCF in full or upon the termination date of the RCF, being May 2026; and - the arrangement includes an 'upside sharing' mechanism whereby a fee will become payable by the Group to members of the lender group upon the occurrence of an exit event. Such fee to be determined as a percentage of any increase from the current market capitalisation of the Group to the market capitalisation of the Group at the date of such exit event. (1) Please refer to APM in note 2. McBride plc Annual Report and Accounts 2022 34 Strategic report The Group considers that the arrangement achieves an appropriate balance between the interests of all stakeholders of the Group. In particular, we have been in regular discussion and consultation with the Trustee of the Group's defined benefit pension scheme in the UK. In order to preserve and support the position of the scheme, with the support of the lender group, we have agreed to provide in favour of the scheme a package of additional credit support in the UK, as well as a new information sharing protocol to ensure ongoing communication between the Group and the Trustee remains comprehensive. The Group is currently negotiating to further increase liquidity by £25 million through extension of invoice discounting facilities to unencumbered receivables ledgers. However, there is no certainty that these negotiations will be successful. The Group continues to explore and assess all avenues to improve liquidity and create additional funding for the benefit of all stakeholders. We are fully appreciative of the support that the lender group has given and continues to give the Group through this period of uncertainty caused by macroeconomic factors, which have resulted in rapid and unprecedented rises in input costs, and ongoing global supply chain challenges. #### Pensions In the UK, the Group operates a defined benefit pension scheme, which is closed to new members and to future accrual. A cash flow driven investment (CDI) strategy was implemented during the first half of the financial year to 30 June 2020. Using credit/bond investments, the CDI strategy delivers a stable, more certain, expected return and reduced volatility in the reported accounting deficit as assets and liabilities of the fund are better matched. At 30 June 2022, the Group recognised a deficit on the scheme of £14.4 million (30 June 2021: £29.3m). The deficit decreased significantly during the year primarily due to an increase in corporate bond yields. Following the triennial valuation at 31 March 2021, the Company and Trustee agreed a new deficit reduction plan based on the scheme funding deficit of £48.0 million. The current level of deficit contributions of £4.0 million per annum, payable until 31 March 2028, will continue and this is expected to eliminate the deficit by 31 March 2028. The Company has separately agreed that (from 1 October 2024) if EBITA exceeds £30 million in any year following the year ending 31 March 2023, additional annual deficit contributions of £0.34 million for each £1 million of EBITA above £30 million, up to a maximum of £1.7 million, will become payable (monthly in arrears). Also, the Company has agreed to make additional contributions such that the total deficit contributions in any year match the value of any dividend paid. These arrangements will provide scope to de-risk and/or accelerate the recovery plan, where affordability of the business allows. The funding arrangements and recovery plan will next be reviewed by the Company and Trustee as part of the 31 March 2024 valuation. The Group has other post-employment benefit obligations outside the UK that amounted to £1.7 million (30 June 2021: £2.6m). **Mark Strickland** Chief Financial Officer McBride plc Annual Report and Accounts 2022 35 Strategic report ## Key performance indicators ## Financial (1) Revenue Cost savings Adjusted EBITDA margin (£m) (£m) advances (%) Definition and why we measure Definition and why we measure Definition and why we measure (1) | Revenue from contracts with | Cost savings achieved from the | The calculation of adjusted EBITDA | | , | | --- | --- | --- | --- | --- | | customers from the sale of goods is | implementation of strategy. Cost | which when divided by revenue gives | | | | measured at the invoiced amount, | optimisation is the backbone of | this EBITDA margin, is defined in the | | | | net of sales rebates, discounts, value | the first two years of our five-year | adjusted measures section of note 2 | | | | added tax and other sales taxes. | Compass plan. As such, we are | tothe accounts. | | | | | committing to deliver annualised | | (1) | | | A key performance indicator of | | We measure adjusted EBITDA | | | costsavings of £20 million by the commercial performance, this marks margin to get a good view of the endof 2023. the progress that we are making underlying profitability of the Group, towards our strategic objective of having adjusted for the impact of How we’ve performed growing to €1 billion revenue. discontinued operations, exceptional In 2022 £11.6 million cost savings items, depreciation and amortisation. have been achieved, this being the How we’ve performed first full financial year that the new | Headline revenue declined by | | | How we’ve performed | | --- | --- | --- | --- | | | (2) | organisation structure was in eect. | | | £4million, buton a constant currency | | | The time lag between the benefits of | Cost savings have resulted from cost basis grew by £19.3 million or 2.9%. price rises with customers and when of product initiatives, warehouse | Revenue in the second half was | | | the Group was aected by the impact | | --- | --- | --- | --- | | | (2) | optimisation and reductions in | | | 13.4% up in constant currency | | | of inflationary costs pushed the Group | overheads. terms. Reduced volumes in contract into losses this year and hence led to manufacturing and weaker private label a reduction in margin performance. salesin Unit Dosing were oset by pricerisesacross all divisions. 8.2 | | 721.3 | 706.2 | | | 11.6 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 689.8 | | | 682.3 | 678.3 | | | 7.0 | | | | | | | | | 6.6 | | 6.7 | 0.5 (0.5) 18 18 22 22 2221 21 2120 2019 19 | | | (1) | | | (1) | | | --- | --- | --- | --- | --- | --- | --- | | Free cash flow | | increase | Adjusted ROCE | | improvement | | | (£m) | | | (%) | | | | | Definition and why we measure | | | Definition and why we measure | | | | | | (1) | | | (1) | | (1) | | Free cash flow | is an important indicator of our overall | | Adjusted ROCE | is defined as total adjusted operating profit | | | | operational performance as it reflects the cash we generate | | | from continuing operations divided by the average period-end | | | | (1) from operations. Free cash flow is defined as cash capital employed. Capital employed is defined as the total generated from continuing operations before exceptional of goodwill and other intangible assets, property, plant and items (see note 2). equipment, right-of-use assets, inventories, trade and other receivables less trade and other payables (see note 2). How we’ve performed (1) Adjusted ROCE serves as an indicator of how eciently (1) Free cash flow declined by £55.8 million, driven by a wegenerate returns from the capital invested in the business. £49.4million year-on-year reduction in adjusted EBITDA It is a Group KPI that is directly relatable to the outcome of and£5.8 million increased working capital outflows. investment decisions. How we’ve performed (1) Adjusted ROCE has reduced from 11.5% to (11.4%). Capital employed has increased to £218.7 million (2021: £209.3m). 64.9 The key driver of the decrease is the decline in adjusted (1) operating profit to a loss of £24.5 million (2021: profit of 43.0 £24.1m). 33.1 25.7 | | (22.7) | | | | | (11.4) | | --- | --- | --- | --- | --- | --- | --- | | | | 19.2 | 13.1 | 12.8 | 11.5 | | | 18 18 | 22 2221 2120 2019 19 | | | | | | McBride plc Annual Report and Accounts 2022 36 Strategic report ## Non-financial | Health and safety Customer service level | | Gender split – female | | --- | --- | --- | | | (%) | (%) | | Definition and why we measure | Definition and why we measure | Definition and why we measure | | We define our lost time frequency | We define customer service level as: | We define gender split as the | | rate as number of lost time injuries x | the volume of products delivered | proportion of our total workforce that | | 100,000 divided by total number of | in thecorrect volumes and within | is female. | | man-hours worked. | requested timescales, as a percentage | | We value diversity and inclusion in of total volumes ordered by customers. We measure this to track performance all forms, with gender split just one against our key imperative of ensuring We strive to deliver a high and measure of this. We endeavour to that all of our colleagues return home consistent customer service level to promote diversity in our workplace to safe and healthy at the end of every allow customers to operate their supply enhance the success of our business. working day. chains eciently and eectively. How we’ve performed | How we’ve performed | How we’ve performed | Our proportion of female colleagues | | --- | --- | --- | | Our accident frequency rate fell by | 2022 has been particularly challenging | has remained broadly stable in the | | 40% with accident numbers falling | as a result of supply shortages and | past few years at between 37.5% | (3) | 45%. These are the lowest levels | disruptions together with a dicult | and38.5% | . | | --- | --- | --- | --- | | achieved by the Group in at least | logistics environment. As we enter the | | | | thepast 15 years. | new financial year, focused actions | | | are resulting in improvements in our service performance. | | | | | | | 38.4 | 38.5 | 38.6 | 38.5 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 1.18 | 95.1 | 94.6 | | | 37.5 | | | | | | | | | 90.8 | 90.8 | | | | | | 85.4 0.87 0.80 0.67 0.48 18 18 18 22 22 2221 21 2120 20 2019 19 19 Customer quality Research & development expenditure (%) (%) Definition and why we measure Definition and why we measure We measure customer quality using a customer satisfaction We define this as total research and development expenditure index which combines critical issues, audit results, returns as a percentage of Group revenue. We measure this to ensure and complaints. that we are investing at the required levels in order to meet ourproduct innovation and sustainability objectives. How we’ve performed We continued to perform well in 2022 with appropriate How we’ve performed action plans in place to further upgrade our standards in Our research and development expenditure as a percentage line with evolving customer and contract manufacturing of Group revenue has reduced to 1.00%, down from 1.11% in requirements. There continues to be an improvement in the the previous year, mainly due to cost management measures reduction of microbiological contamination risks despite put in place across the business. increased limitations on the use of restricted preservatives. 97.0 97.0 1.1197.5 95.0 95.0 1.05 1.00 0.96 0.96 18 18 22 2221 2120 2019 19 (1) Please refer to APM in note 2. (2) Comparatives translated at 2021/22 exchange rates. (3) Includes employees, third-party contractors and agency workers. McBride plc Annual Report and Accounts 2022 37 Strategic report ## Our stakeholders ## Section 172(1) statement ## How we engage and foster strong relationships ## withsomeofour key stakeholders. The Directors are fully aware of their responsibilities to Factors taken into account in the Board’s promote the success of the Group in accordance with decision-making included: section 172 of the Companies Act 2006. The Board • likely consequences of any decisions in the long term; considers it has acted in good faith and made decisions • the interests and wellbeing of our people, including which promote the long-term success of the Group health and safety risks; for the benefit of its shareholders and its people. In • the need to foster the Company’s business doing so, it considered the interests of stakeholders relationships with suppliers, customers and others; impacted by the business as well as its legal duties. • the impact of the Company’s operations on the Itacknowledges that as it works towards securing the community and environment; Group’s success and sustainability and delivering on • the desirability of the Company maintaining a our strategy it needs to build and maintain successful reputation for high standards of business conduct; relationships with a wide range of stakeholders within an interconnected society. The Board has identified • the compliance and financial risks to the Company five key stakeholder groups and recognises that it and our stakeholders; and must ensure the perspectives, insights and opinions • the need to act fairly between shareholders of the ofstakeholders are understood and taken into account Company. when key decisions are being made. Equally, not Examples of how the Board had oversight of all decisions will result in a positive outcome for all stakeholder matters and had regard for these matters stakeholders; however, the Board recognises that and the potential impact on stakeholders when making its decisions should nonetheless be justifiable in decisions, are set out here. themselves. ## Workforce ## Customers ## Suppliers ## Shareholders ## Communities McBride plc Annual Report and Accounts 2022 38 Strategic report ## Workforce Why significant Outcomes and impact of key decisions We are committed to providing a strong and positive We recognise that our colleagues are fundamental and (1) culture for our 3,253 colleagues in twelve countries core to our business and the delivery of our strategic and recognise that culture plays a fundamental role in priorities. The success of our business depends the delivery of our strategic priorities. on attracting, retaining and motivating talented employees. How we engage The Executive Committee is ultimately responsible Over the past year, we have made some great for ensuring that our activities reflect the culture we progress, demonstrated by engagement and pride wish to instil in our colleagues and other stakeholders in McBride plc, which has supported the business to drive the right behaviours. Our culture comes through a very challenging period. to life through our three core values, which remain • From June 2022 all colleagues had access to a unchanged. These values underpin our purpose and digital learning platform containing modules, have become a vital part of our culture. allowing them to build broad, future-fit skills across We are committed to providing an open and inclusive a wide range of topics. This new learning journey culture, where colleagues have the opportunity to allows colleagues to access a broader range of progress and where they are supported in their career and learning opportunities at McBride plc. development. • We continued to roll out our ‘Let’s Grow’ development programmes with 126 colleagues 2022 highlights attending courses on ‘Investing in Me’, ‘Learning 2 Our hard-working and committed colleagues have Lead’ and ‘Leading with Impact’. continued to demonstrate extraordinary levels of teamwork, agility and resilience over the last year • Our McBride Cares Employee Assistance when we have faced a significant period of uncertainty Programme continues to provide a confidential caused by macroeconomic factors which have telephone counselling support line 24/7/365 for impacted our trading position. Working together to do colleagues and their direct families. the right thing by each other, for our customers, our • We have continued to operate with an interim smart shareholders and our communities has been critical. home working programme for eligible oce-based We continued to work closely with the European colleagues, allowing them to work in a hybrid way Works Council (EWC) members over the last year, spending 50% of their working time from home. with the aim of eectively engaging employee representatives from the dierent European countries in which we operate. (1) Includes employees, third-party contractors and agency workers. McBride plc Annual Report and Accounts 2022 39 Strategic report ## Our stakeholders continued ## Customers Why significant 2022 highlights Good relationships with our customers are the This past year has seen frequent interactions with fundamental bedrock of our business. Under our new all our customers, primarily around the subject of divisional structure, a core ambition is to provide inflation in the supply side requiring customer support focused and specialist insight to help our customers for price rises. Our interactions have reached varying with the optimal portfolio proposition that best suits levels within our customers, from CEO to junior buyer. their business. At all times in these dicult conversations McBride plc has provided transparency and co-operated with How we engage the demands and requests from customers. Wehave We aim to deliver industry-leading value, service and increasingly oered customers other solutions quality for our customers. Our specialist commercial to oset inflation in pricing, demonstrating our and technical teams, supported by central teams understanding of the diculty ofdealing with inflation such as logistics and purchasing, look to drive for our customers. long-lasting, trusted relationships with dierent teams in our customers, ultimately providing a compelling Outcomes and impact of key decisions and valuerange of products. Reacting quickly and Our position on requested price increases was eectively to changing requirements is increasingly to look to recover short-term cost rises to cover acore competence in our customer proposition. known inflation in the coming months and not rely on long forward estimates and then to seek revision if these estimates proved inaccurate. We consider our approach, supported by real data, assisted in delivering the level of price increases achieved. ## Suppliers Why significant Outcomes and impact of key decisions Raw materials drive the vast majority of our product Having a centralised Group Purchasing function has costs. Price increases, delays or interruption in the allowed us to leverage long-standing relationships supply of raw materials could significantly aect with suppliers across our network in order to keep our bothour operations and financial position. factories supplied. Our teams have worked tirelessly to negotiate improved pricing and supply terms with How we engage all suppliers, delaying increases or minimising their Our Supplier Code of Conduct, which is visible on impact where possible. The close collaboration with our website, sets out the standards of behaviour we the divisional R&D teams has been critical in ensuring expect from all of our suppliers. We continually seek to that we minimise supply disruption risks by being able establish mutually beneficial relationships with each of to access multiple sourcing options identified through our suppliers and encourage them to match our high our risk assessment exercises. standards. Our centralised Group Purchasing function is dedicated to sourcing the Group’s key materials and The last twelve months has further demonstrated that maintaining constructive and collaborative two-way the Group is not overly reliant on any single supplier. communication across our supplier base. A due The Board recognises the importance of strong diligence exercise is carried out on new suppliers and supplier relationships to the overall success of the regular audits take place. business. Our UK payment practices reports are filed 2022 highlights on the government website by our trading subsidiary Over the last twelve months we have seen global Robert McBride Ltd. supply chains struggle to cope with the plethora of daily challenges they have faced. These have ranged from shipping container availability through to surging energy prices, creating availability pressures in multiple areas, with rapid and extraordinary increases in virtually all raw material and other input costs. Maintaining a reliable supply into our factories has been challenging, but with the support of some key suppliers we have been hugely successful in this area. McBride plc Annual Report and Accounts 2022 40 Strategic report ## Shareholders Why significant 2022 highlights A key objective of the Board is to create value for During the year: shareholders and deliver long-term, sustainable • McBride plc undertook its regular programme of growth. By engaging with our shareholders we ensure engagement with shareholders, which included: confidence and continued support from shareholders thefinancial reporting cycle comprising full-year and alignment ofinterests. and half-year results; quarterly trading statements; How we engage and the AGM; We place considerable importance on maintaining • Director-investor meetings covered the two key eective and balanced dialogue with all shareholders announcements regarding the ongoing support todiscuss the Company’s strategy and other fromthe Company’s lender group; associated objectives. The Chairman and Executive • the Board received updates from the Company’s Directors proactively engage with both existing and brokers; potential shareholders. In addition, the Executive • the Chairman and Chief Executive Ocer engaged Directors deliver formal presentations of full-year and with four of the Company’s shareholders to secure half-year results and attend meetings with analysts, support for an increase in the Group’s borrowing brokers and fund managers to promote a better limit, which was subsequently approved at the understanding of the business and its strategic plans. General Meeting held on 25August2022; and The Board is kept informed of investors’ views through • shareholder feedback was provided by the Chairman the distribution and regular discussion of analysts’ and or Chief Executive Ocer to the Board following all brokers’ briefings and through summaries of investor meetings or conversations with shareholders. opinion feedback. Outcomes and impact of key decisions All Directors are available at the AGM, either in person Shareholder views consistently inform McBride plc’s or virtually, to answer questions. strategic activities and during the recent period of economic uncertainty, the views of the Company’s major shareholders have informed the actions of the Board in the recovery of the financial situation facing the Group. ## Communities Why significant • supporting the children of McBride plc colleagues We continue to recognise our responsibility to actively with educational grants; engage and support the local communities in which we • continuing to support In Kind Direct with product live and work beyond simply providing employment. and cash donations; How we engage • providing local employment opportunities; and The Company proactively supports and encourages • providing development opportunities through our colleagues from all locations to come together to Let’s Grow development programmes and the support local initiatives, organise product donations, Workday learning platform. raise funds for chosen charities and volunteer for More information on this can be found in the ESG local organisations. Examples are provided in the ESG report under ‘Community and social vitality’ on pages report under ‘Community and social vitality’ on pages 42 to 55, which highlights some of the charitable 42 to 55. activities over the last financial year. 2022 highlights Outcomes and impact of key decisions Each of our McBride sites continues to support their Helping and supporting local communities and local community through specific eorts such as: improving the living conditions in the areas where • donating products to a range of local organisations we operate remains high on our priorities. We also including schools, hospitals, aid organisations, recognise that, whilst we have made good progress churches, shelters and foundations in the countries in recent years, there is still much for us to do this in which we operate; coming year. McBride plc Annual Report and Accounts 2022 41 Strategic report Strategic report ## Environmental, ## social and governance Our contribution to our Our impact on the world colleagues and the communities How we conduct ourselves where we do business Operations Dignity and equality Governance body quality Products Health and wellbeing Stakeholder engagement Transport Skills for the future Ethical behaviour Waste Employment/wealth generation Risk and opportunity oversight Water Community and social vitality McBride plc Annual Report and Accounts 2022 42 Strategic report ## Our ESG agenda is successfully aligned to our ## cost-conscious approach and we are now actively ## reportingonourclear ambitions and responsibilities. McBride plc works to integrate the principles of In 2020, we set ambitious targets for 2025 on product long-term environmental and social sustainability within sustainability and our operations covering packaging its business strategy. Our approach to sustainability recyclability, energy eciency and waste. This year is underpinned by an analysis of the environmental, we have completed the external assessment of our social and governance issues that are most relevant corporate carbon footprint (CCF) where we can now and important in the context of McBride plc’s business see the shape of our emissions to enable our teams activities. Whilst the Company recognises it must tackle to target the most impactful areas of our operations, climate change to remain sustainable, it also places products, transport and employee travel. This data will environmental, social and governance issues at the core allow us to set our future targets to be Net Zero Carbon of its approachto sustainability. and define the action plans we need to successfully deliver the reduction required. We continue with our Given their strategic significance, our ESG priorities are ethos on product development to ensure that any new actively driven and managed by a cross-functional ESG development is more sustainable than the product it is Committee, overseen directly by the CEO and reported replacing and we are working with an external partner to the Board. The Board: to measure the carbon footprint of individual products • oversees strategies to manage social and as well. This data helps to make even better choices in environmental risks, including management our product formulation and packaging to ensure the processes and standards; end result has a lower impact on the world than the • reviews the eectiveness of management policies previous product. and procedures relating to safety, health and employment practices; • monitors our key performance indicators against agreed commitments; • approves recommendations from the executive ESG Committee in respect of key ESG issues and related objectives; • monitors the level of resource, competence and commitment applied to the management of ESG issues to ensure a culture of continuous improvement; and • supports McBride plc’s commitment to make a positive contribution to the communities in which itoperates. We have developed a framework of non-financial key indicators and metrics to assess our performance against our ongoing environmental, social and governance objectives which sit alongside our obligations under the UK Corporate Governance Code (‘the Code’). Progress is regularly monitored bythe ESGCommittee and reported on to our Boardforreview. McBride plc Annual Report and Accounts 2022 43 Strategic report ## Environmental, ## social and governance continued ## Environmental Our impact on the world We recognise the criticality of the environmental Impact – Operations element of ESG to our business model Energy consumption We continue to work on initiatives supporting In the past twelve months, the Environmental eective process design, production and operational sub-team (focusing on the ‘E’ element of ESG) has sustainability to reduce the impact our operations have been working with an external consultant, Climate on the environment. It should be pointed out that the Partner®, to measure our corporate carbon footprint. impact of Scope 1 and 2 in our overall carbon footprint Themeasurement was based on the twelve months is low and whilst any reduction in energy usage is good, to 30June2021 and we plan to update this with data it is not the highest of our environmental priorities. forthe twelve months to 30 June2022. Whilst we have reduced the absolute level of energy Establishing this calculation is the crucial next step in consumption by 5.2% in year and by 13.0% since 2019, setting our priorities for carbon reduction and setting as a result of product mix and slightly lower output our Paris targets for Net Zero. levels, the eciency measure is showing a flatter The work with Climate Partner® covered Scope 1, 2 and performance. In the next year, we will look to increase 3 emissions for our operations, including upstream the activity in energy eciency, targeting a range of and downstream activities. The outcome of the study energy eciency opportunities across dierent sites calculated our footprint, excluding the ‘products in use’ depending on the process technology deployed for component of 1.01 million tonnes of CO e. Thelargest 2 powders or liquids and the volume of in-house blow contribution to our carbon footprint is driven by the moulding machines. following areas which collectively accounted for over 90% of our total emissions: ## 79% 160,000,000 6.60 145,424,095 | | | 136,936,256 | 133,528,505 | | | | --- | --- | --- | --- | --- | --- | | | 140,000,000 | | | | 6.55 | | purchased goods | | | | 126,484,015 | | 6.55 120,000,000 6.50 100,000,000 6.48 6.45 6.47 80,000,000 ## 11% 6.40 60,000,000 upstream transport and distribution 6.35 40,000,000 6.35 | 20,000,000 | | | | 6.30 | | --- | --- | --- | --- | --- | | | 0 | | | 6.25 | | | | 2019 2021 2022 | 2020 | | ## 3% Oil Gas Electricity Electricity Eciency own operations Scope 1 and 2 emissions (1) Total energy consumption for 2022 of 126 million kWh relates to 18 million kWh for the UK (14.3%) and 108 kWh for the rest of the world Within the 79% associated with purchased goods, 71% (85.7%). is attributed to the chemicals we use and 29% of the Methodology note: This GHG inventory has been calculated in accordance footprint is from packaging materials. This interesting with the GHG Protocol Corporate Accounting Standard using the insight will ensure we prioritise and focus our eorts operational control approach. UK Government GHG Conversion Factors (1) for Company Reporting 2020 have been used to calculate GHG emissions. McBride plc total energy consumption not only relating to our packaging portfolio (which due Electricity – Calculated from supplier invoices using metered kWh to our plastic reduction ambitions is very high profile), data. The Shared Services oce has been estimated based on historic but also on the choices we make on our chemicals and consumption as there was no up-to-date information available from the their sources going forward. landlord (>1% of Scope 2 emissions). Market-based emissions have been calculated using supplier specific fuel As we digest this data and move towards developing mix disclosures along with the UK residual fuel mix. our plans and timeline for Net Zero, we continue Natural gas – Calculated from supplier invoices using metered kWh data. to work on our early targets and actions, with our Gas oil – Calculated based on the volume of fuel delivered to site. UK kWh performance towards our 2025 targets reported in the Government conversion factors were used to convert the volumetric following pages. datato kWh. kg production per kWh McBride plc Annual Report and Accounts 2022 44 Non-Green Green Strategic report ## We are continuing to drive innovation to deliver more ## sustainable formulations and packaging for our customers ## following our sustainable product guidelines. Encouragingly, we see good progress in the Impact – Products development of the levels of ‘green’ electricity in our Following eco-design principles, our teams are driven total consumption. In 2021, green electricity represented todesign, create and supply everyday cleaning products 7.0% of total energy consumption across our business, that are safe to use whilst minimising our environmental but in 2022 our green energy consumption has impact. We continue to use the ambition that every new increased to 24.4%, mainly as a result of a move to 25% development is more sustainable than the product it | renewable energy in our Moyaux powder plant, meaning | | replaces. | | --- | --- | --- | | over 30 tonnes of CO | e reduction in its carbon footprint. | | | | 2 | Our areas of focus continue to be to develop solutions | This is a signifi cant step forward towards meeting that: ourtarget to procure 30% of renewable energy across our locations. 1. Improve rid mix 2021-2022 plastic recyclability Solar power 1.1% Certified green 24.4% Fuel oil 0.4% 4. Increase 2. Reduce Gas 27.6% responsible plastic in total Supplier mix with sourcing zero carbon 28.0% Supplier non-green 18.5% 3. Drive Greenhouse gases (GHG) product We have been calculating our Scope 1 and Scope 2 GHG compaction emissions since 2008 in accordance with the relevant GHG Protocol Corporate Accounting and Reporting Standards and latest emissions factors from recognised sources, based upon market values. The overall impact on our operations for Scope 1 and Scope 2 emissions over the last four years is shown below. The substantial increase of 19% in the e ciency of CO e per tonne of production is driven by our 2 increase in usage of renewable green energy. 2 2 38,347 30,781 32,287 29,879 30,000 | | | | 22,400 | 19,170 | | | | --- | --- | --- | --- | --- | --- | --- | | | | 23,470 | | | 14,199 | 20,000 | | 10,000 | | | | | | 10,000 | | | | 8,589 | 7,615 7,642 | | 7,141 | | | | 0 | | | | | 0 | 2019 2020 2021 2022 Scope 1 Scope 2 CO 2 e eciency Split of energy source including green element of supplier g (1) Net Scope 1 and 2 CO e emissions (tonnes CO e) 40,000 40,000 (1) Total emissions for 2022 of 21,340 tonnes relate to 2,815 tonnes for 30,000 the UK (13.2%) and 18,525 tonnes for the rest of the world (86.8%). 20,000 McBride plc Annual Report and Accounts 2022 45 Strategic report ## Environmental, ## social and governance continued ## Environmental continued Our impact on the world Impact – Products continued Area of focus 2021 2022 2025 target FSC® sourced 90.6% 91.4% 100% 100% recyclable 98.5% 98.5% 100% | 50% PCR in our plastic packaging | 15.6% | 17.6% | 50% | | --- | --- | --- | --- | | – PET | 47.0% | 52.2% | | | – PE | 4.7% | 5.1% | | | Flexible multi-plastic moved to | 21% 39% 100% | | | mono-material plastic Sustainability is built into our product development Our commitment to sustainability is also underlined processes; from the sourcing of appropriate raw via our membership of the A.I.S.E Charter 2020+, materials, to developing new products, we ensure that which is the detergent industry fl agship approach to all legal and McBride plc policy requirements are met, sustainability practice and reporting. o ering not only excellent performance but also proven Products carrying the Charter icon demonstrate to sustainability benefi ts. our value chain partners, stakeholders, customers and Microplastics are under continual scrutiny and in consumers that we are actively working towards critical 2019, in line with the draft Registration, Evaluation, sustainability actions, such as the UN Sustainable Authorisation and Restriction of Chemicals (REACh) Development Goals, EU Circular Economy and Plastics restriction on microplastics, we identifi ed two existing Strategy. The Charter is a comprehensive sustainability in-use materials that met this draft defi nition. The scheme for steering best practice for the cleaning and evolution of this defi nition is continuing to develop and hygiene industry. it is likely that other materials will become within scope. Impact – Transport McBride plc will meet all legal requirements with regard As a result of the completion of our carbon footprint to the fi nal REACh restriction on microplastics and calculations, we now know that transport comprises will make sure that all products follow new guidelines 10% of our overall footprint. Going forward, we can within the legally mandated timelines. We will be use this data to inform on logistics solutions and ready such that customers wishing to remove raw options concerning the carbon footprint impact of materials considered today asmicroplastics (opacifi ers, transport operations. McBride plc does not own or run encapsulated fragrances) can have a product solution its own truck fl eet, hence there is no impact in Scope that does not use these materials. 1 emissions. Data for company cars is included in our As part of our plans to improve packaging recyclability GHGemissions fi gures on page 45. we have now exited all PVC fl exible laminate fi lm used Impact – Waste in our berlingot refi lls and moved to a mono-material We are continuing to reduce our waste to landfi ll year PE laminate. This signifi cantly improves the recyclability on year and we now have seven sites that are zero of this refi ll concept and production is now available in waste to landfi ll within the Group. In the last fi nancial our Italian and Spanish plants. This project is helping year, 378 tonnes were sent for landfi ll, a 25% reduction McBride plc to move closer to our target that all when compared to 507 tonnes in 2021. Proactive actions our fl exible plastic packaging will be produced with taken by our site leaders included raising awareness mono-material laminate by 2025. through colleague engagement to help reduce and We have continued to make progress on the use of segregate better the waste produced as well as seeking recycled plastics, particularly in PET. Further progress alternative options for waste that needs to be disposed on the overall target will depend on the success of of. Wecontinue to drive for all sites to get to zero waste being able to incorporate more recycled HDPE, where to landfi ll. currently impurities can prevent its use in certain homecare products. McBride plc Annual Report and Accounts 2022 46 Strategic report ### Case study on laundry unit-dose Case study for homecare liquids Disruptive innovation in Disruptive innovation in laundry capsules packaging homecare liquid packaging Our liquids development team are also driving We are introducing a plastic-free packaging solution sustainable innovations in homecare liquid packaging. for compacted laundry capsules. This newinnovation, In 2023 we will start to fi ll homecare liquids into developed in conjunction with Smurfi t Kappa, not cardboard cartons, in our drive to reduce plastic only protects the laundry capsules from water and packaging within our portfolio. This investment in humidity but also prevents children from easily innovation o ers great benefi ts in the overall carbon accessing the detergent capsules when stored in footprint of the product and supports a reduction thehome. in plastic by 80%. The format also supports an Our Click-to-Lock package is made from more than improved pallet utilisation and thus has a positive 97% of FSC® (Forest Stewardship Council) certifi ed benefi t on our logistic footprint. Overall, when paper and contains 91% of recycled paper. This compared to an equivalent PET plastic bottle, we packaging is also 100% recyclable and suitable for can reduce the packaging carbon footprint of the EU-Ecolabel application. product by 50%. This innovation, together with the The impact of this innovation on our carbon footprint progress we have made on incorporating more PCR is evident, as every 100,000 Click-to-Lock packages into our plastic packaging, o ers our customers remove 8.5 tons of plastic from the environment many choices in their and our quest to reduce the when compared to the plastic tub equivalent. The carbon footprint and environmental impact of the new innovation also improves logistics by reducing packaging of products. the number of trucks needed for transport by 25% compared to the plastic tub packaging and by 78% compared to bag/doypack packaging. McBride plc Annual Report and Accounts 2022 47 Strategic report ## Environmental, ## social and governance continued ## Our contribution to our colleagues and ## Social ## the communities where we do business We have continued our commitment to create a positivesocial impact for our colleagues, stakeholders Giving and taking and local communities, during a year of significant Always accountability uncertainty and challenge. committed This has been driven by a clear commitment to our purpose, vision and values, helping to further develop a sense of teamwork and belonging during these challenging times. Our framework for our societal contribution will Working Aspire to continue to guide the focus of our eorts in the together bethebest comingyears. Dignity and equality This year we have maintained our focus on increasing the diversity of our external hires as part of our aim to As at 30 June 2022 create an inclusive and supportive culture for all. Our aim across the business is to ensure that we recruit, ## develop and reward our colleagues based on the 25% (2/8) role they perform and their performance in that role, Female Directors regardless of identity, background or circumstance. We strive to ensure that McBride plc is an employer where everyone, regardless of background, is valued, ## respected, and has the opportunity to shine. We look 43% (3/7) to embrace our dierences and value the creative Female Executive Committee members opportunities that an inclusive culture can bring for ourbusiness. We report annually on the UK Government website and ## 38.9% (7/18) our corporate website our Gender Pay Gap statistics to meet our UK legal obligations. As at 30 June 2022, (1) Female senior managers female membership of the Board was 25% and of the Executive Committee was 42.8%. Our published ambition for Board diversity can be found on page 97. ## 39% (1,252/3,253) (2) Female total global workforce (1) Includes the Executive Committee and Directors of overseas and UK subsidiaries. (2) Includes employees, third-party contractors and agency workers. McBride plc Annual Report and Accounts 2022 48 Strategic report Health and wellbeing Ensuring the wellbeing of our colleagues by providing Health, safety and wellbeing is taken very seriously a safe place of work and minimising potential exposure and remains a primary focus that is refl ected in to harm, is a key component of our McBride Cares our improved lost time injury frequency rate. To programme. We have continued to work with colleagues demonstrate this primary focus, the Group H&S Lead and their representatives to maintain a Covid-19 reports directly into the CEO, supported by dedicated secure work environment and, to date, have been health and safety professionals at a local site level able to continue our operations without disruption. in every country. The dedicated local teams are Aslockdowns have lifted, we have reopened o ce responsible for the implementation of Group standards, facilities and welcomed colleagues back. processes and procedures and to ensure site teams have Many of our colleagues have continued to work in clear roles and responsibilities and to drive prevention a hybrid way this year. We recognise that one size measures and programmes as well as investigations. does not fi t all and that support for fl exible and Thelocal teams also lead all communication and hybrid waysof working can help colleagues perform information across all levels, including information on better and enable us to attract and retain a more near misses, incident reviews, KPI trends and general diverse range of talented people. We believe it is performance reporting. about balance–balancing the needs of the individual, There have been no work-related fatalities in the theteam and thebusiness. business during the 2021/22 fi nancial year. We utilise We will continue to assess the e ectiveness of our a mixture of lagging and leading indicators to assess approach, updating our SMART Working Principles as the health and safety performance of our operations. needed. We have supported this by enhancing our IT Lagging indicators include lost time accidents (see platforms, including the introduction of more virtual our non-fi nancial KPIs on page 37), whilst our leading anddigital learning. indicators include near miss reporting, corrective Our commitment to supporting colleagues and actions completed, risk assessments created/reviewed, their families through our McBride Cares Employee and safety observational walks undertaken. Assistance Programme, providing confi dential 24/7/365 All our fi rst line managers across the business counselling and advice, remains in place in all countries. completed behavioural safety training during the year tofurther our maturity in our health and safety approach, encouraging a culture of ‘coaching’ and colleague support. This training has helped to further embed our safety walk initiative, which has been a key contributor in demonstrating management’s commitment to reinforce the required health and safety ## practices, eliminate dangerous acts and dangerous Case study conditions that cause accidents and ultimately improve our health and safety culture. Our Estaimpuis plant organised for all colleagues A comprehensive health and safety gap analysis working in production to attend a cultural safety programme has also been established and a schedule event, whereby they invited an external local of visits agreed for each site to identify common speaker who had been severely injured as a result trends and areas of improvement. The Health & Safety of a work accident (not in any McBride site) where Council, together with the Group H&S Lead, defi ne he lost one leg. During the event he explained how the prioritisation and support the required changes his behaviour caused the accident as well as the in each division and individual site. This gap analysis impact on his personal and professional life as a programme will complete in the next fi nancial year result of the accident. to provide an overall health check of the Group and a defi ned strategy that includes priority objectives to further improve our performance. Read more about ourGender Pay Gap www.mcbride. co.uk/about-us/ corporate-policies/ gender-pay-gap/ McBride plc Annual Report and Accounts 2022 49 Strategic report ## Environmental, ## social and governance continued ## Our contribution to our colleagues and ## Social continued ## the communities where we do business Skills for the future In addition, this year we have invested in our HR Digital We are committed to providing development Transformation, by introducing: opportunities for all colleagues. • learning management functionality, delivering a Over the last year, as part of our commitment to grow sustainable, accessible and measurable learning internal capability and invest in our colleagues, we have and development proposition for all, incorporating continued to enhance the ‘Let’s Grow’ development a comprehensive self-paced learning library of framework. Three programmes are now available to programmes in all languages; and colleagues across the Group, including: • an online process for our annual individual • Investing in ME, which is our individual contributor performance and development review, providing programme, designed to provide colleagues with colleagues with support and accountability for the opportunity to identify their potential, raise their own development as part of our aim to drive self-awareness and develop skills to be personally ahigh-performance culture. eective. We have facilitated eight cohorts in six Our internal coaching scheme, which allows colleagues to languages covering 80 colleagues from across the work with a qualified internal coach in a safe space, has Group. continued over the last year, and we have continued to • Learning 2 Lead is our frontline leader programme, support the development of internal accredited coaches. designed to support colleagues to transition from We are passionate about providing all our colleagues being a great individual contributor to a frontline with opportunities to grow in and from their current leader of others, developing critical people skills. roles to meet aspirations for the future. We have facilitated three cohorts in two languages Employment and wealth generation covering 34 colleagues from across the Group. Our sta turnover figures have been consistent over the • Leading with IMPACT: this programme supports period, with high levels of turnover in certain countries. mid-senior level leaders who have been identified Details can be found in the non-financial KPIs on page as having potential through our talent management 37. process. The first cohort of twelve colleagues have We have continued to work closely with the European completed this programme over the last year. Works Council (EWC) over the last year. The EWC brings together employee representatives from the dierent European countries where we operate, with Exec the aim of engaging employees through an eective information and consultation process focused on business decisions which aect the workforce and Strategic leadership impact on the interests of colleagues. This improves Senior leader business outcomes, individuals’ contribution to the business and development opportunities. Our meetings over the past year have continued to be virtual. Leading with IMPACT Community and social vitality Mid-level leader We believe that community involvement and engagement programmes enhance our relationships with our communities and colleagues, which in turn Learning 2 Lead strengthens our Company, benefiting our shareholders. Frontline leader Our charitable aims look to support colleagues, community and wider society, through giving cash, timeor products. Investing in ME Individual contributor Let’s grow McBride plc Annual Report and Accounts 2022 50 Strategic report Supporting McBride plc children In the past twelve months we have awarded a total of £16,095 to 87 children, supporting their learning and further education. Supporting future talent is of great importance to us. Supporting charitable bodies This year, we supported Cancer Research and KinderKankerFonds. A total of £962.50 was donated to Cancer Research, matching what had already been raised by a colleague completing a 5km run. A total of £1,000 was donated to KinderKankerFonds, adding to the €5,000 already raised by colleagues selling succulents to raise money for children with cancer. We support the UK charity In Kind Direct through monthly product donations from our UK site, providing essential cleaning products to those less fortunate in the UK. We have also made an annual monetary donation of £30,000. Our teams in all locations have continued to support local charities, associations, schools, missions and municipalities. The following pages show some of the activities across the business: ### UK: Raising money for a local hospital In the UK, we supported organising a charity football match to raise money for Salford Hospital, who had cared for a colleague’s six-year-old daughter who had a stroke last year. McBride plc colleagues and relatives participated and the site donated rae prizes. The UK business came together andraised £11,000 in total. McBride plc Annual Report and Accounts 2022 51 Strategic report ## Environmental, ## social and governance continued ## Our contribution to our colleagues and ## Social continued ## the communities where we do business ### Spain: Supporting a local charity and team building for healthy habits Our team in Sallent, Spain: • Hosted a site visit for the Special Employment Centre who support local disabled people. • Organised a walking activity to promote healthy habits and to increase relationships with colleagues. Thisturned out to be a family event with many colleagues bringing their families. ### Belgium: Cleaning the town and participating in a sporting event Our Belgian teams organised a range of community and colleague initiatives, which included: • A big cleaning event, where colleagues from the plant and oce come together to clean the entire outdoorarea of the plant and the local village of Estaimpuis. • On a Friday evening in September 2021, a small team from our Estaimpuis plant participated at a beach volleyball tournament with other local businesses. McBride plc Annual Report and Accounts 2022 52 Strategic report ### Poland: Supporting Ukrainian refugees and other community initiatives The Polish team worked on driving colleague and community engagement through a range of localinitiatives: • In December and January, colleagues engaged in fundraising and collecting items for local families in need. • The team planted shrubs as part of Earth Day and spent time cleaning the outdoor area to the site. • 74 local institutions have been supported with our products – 37,705 cartons. • A range of fundraising activities to support Ukrainian refugees. • Colleagues participated in the annual Strzelce Charity Street Run. ### France: A number of dierent fundraising activities Our colleagues in Rosporden: • Participated in the financing of a ‘push bike’ which has been dedicated to people with reduced mobility. This action is part of the site’s approach to improving the quality of life of its colleagues and people in contact with the company and the community, while respecting the environment and sustainable development. • Colleagues actively participated in walking a total of 350km and raised €6,400, which was donated to the association Cornouaille Enfance Solidarité Afrique. In addition, our sites continued to support through homecare product donations. McBride plc Annual Report and Accounts 2022 53 Strategic report ## Environmental, ## social and governance continued ## How we conduct ourselvesGovernance As a public company, we consider that our governance We monitor the employment practices of our supply processes are already well established but we recognise chain and we carry out third-party ethical audits utilising these processes need to be maintained and regularly the Sedex system wherever possible or, alternatively, reviewed to ensure we continue to govern our activities under a specific retailer’s own system. Theaudits in accordance with best practice. conform with the Ethical Trading Initiative (ETI). Our sites are independently audited at a frequency Governance body quality determined by risk. We retain all audit data under the Our guide to how we have complied with each principle Sedex system for all sites, regardless of audit frequency. in the UK Corporate Governance Code (‘the Code’) Our Supplier Code of Conduct sets out the standards is set out on page 84. Our metrics on tenure, gender, of behaviour we expect from all of our suppliers. As a nationality and Board members’ relevant experience is minimum standard, we adhere to the provisions of the set out on page 88. Our metrics on Board activity and ETI and require every supplier to comply with our Code attendance at Board and Committee meetings are set of Conduct, along with national and other applicable out on pages 87, 91, 92, 98 and 105. laws. Our Supplier Code of Conduct is published on Stakeholder engagement our website and any breach of the code may result in How we engage with our stakeholders is set out in our termination of our business relationship with a supplier. section 172(1) statement on pages 38 to 41 and in our Ethical behaviour Corporate governance statement on pages 85 to 91. Our Business Ethics Policy, which can be found on Both the quality and frequency of our engagement our website, is a guide for our employees to promote with our key stakeholders are reviewed regularly by the right behaviours and to help them make the the Board. During a dicult trading year, we have had right decisions. McBride plc’s Business Ethics Policy increased levels of interaction with customers, suppliers is updated annually and reviewed by the Board. and shareholders. We are open and transparent in all It is promoted to all employees through internal our dealings with our stakeholders, which we consider communication channels and is highlighted to suppliers. as fundamental to our way of working. Monitored via To ensure a constant minimum standard across the our framework of key indicators and metrics, we strive workforce on good business ethics, McBride plc is in the to improve our customer experience, our impact on course of introducing a new suite of mandatory ethics our communities, including our environmental and and compliance training modules. This includes modules social impact, and the quality of engagement with on anti-bribery and corruption, conflicts of interest, gifts allstakeholders. and hospitality, data protection and cyber security, with additional training on competition law and economic sanctions for selected employees. We have also taken steps during the year to strengthen our compliance monitoring programme in these areas. McBride plc Annual Report and Accounts 2022 54 Strategic report Protecting human rights and mitigating against Risk and opportunity oversight the risk of modern slavery is the foundation of any The Board is responsible for overseeing and monitoring good business. We take the issue of human rights the management of risks and opportunities. Our seriously and continue to strengthen our policies and governance framework of committees and advisory management systems in this area. Our Anti-Slavery and forums provide updates and information to the Board Human Tracking Statement enshrines our obligations to ensure it is able to make informed decisions. Details under the Modern Slavery Act 2015. We are committed on the roles of the Board and its Committees are set out to ensuring there is transparency in both our own in the schedule of matters reserved for the Board and business and in our approach to identifying modern Committee Terms of Reference, which are available on slavery in our supply chain. The outcome of our policies our website. and procedures is that there have been no known Our risk management framework and oversight instances of any form of discrimination, slavery or of risk is set out in the Audit and Risk Committee human rights violation. report on pages 98 to 104 and in the Principal risks While McBride plc aims to reinforce a healthy and uncertainties section on page 71. This is our culture at all levels of the organisation, it knows that first year of reporting our climate-related financial sometimes things go wrong. McBride plc therefore has disclosures. Governance around climate-related risk introduced an independent whistleblowing channel, andopportunities can be found on pages 56 to 59. provided by NAVEX Global, as well as local internal channels which employees can use to speak up against wrongdoing. Our Whistleblowing Policy encourages employees to report genuine concerns they may have about possible malpractice or wrongdoing by any employee, supplier, customer, competitor or contractor without fear of detriment or retribution. During the year ended 30 June2022, there was one report of suspected wrongdoing which was passed on for formal investigation. The investigation established there was no evidence to support the allegation of wrongdoing. McBride plc Annual Report and Accounts 2022 55 Strategic report ## Climate-related financial disclosures The Task Force on Climate-related Financial Disclosures According to the Financial Conduct Authority listing rule (TCFD) was established by the Financial Stability LR 9.8.6 R(8), reporting is on a ‘comply or explain’ basis. Board to improve reporting of climate-related risks McBride plc is consistent with the TCFD recommendations and opportunities (CROs). McBride plc has structured and recommended disclosures, with the exception of its climate disclosures according to the TCFD Strategy 2b and 2c and Metrics and Targets 4a, 4b and 4c. recommendations on the basis that good-quality Pages 66 and 69 explain the work to be completed to information about its CROs supports shareholders ensure consistency with the TCFD recommendations inmaking long-term investment decisions. and set out the activities McBride plc has planned during 2023, as it continues on its journey towards increased consistency. Governance Board oversight of climate issues Governance framework The Board The governance framework of committees and advisory The Board is responsible for providing strategic forums provides updates and information to the Board guidance in respect of McBride plc’s ESG programme, to ensure it can make informed decisions. The Board including actions to address climate-related matters is also responsible for overseeing and monitoring the as well as how McBride plc adapts its strategy to take management of risks and opportunities, including with account of potential CROs. It reviews climate-related respect to CROs. reporting as part of the overall assessment of the The Board-agreed division of responsibilities across key Annual Report. areas of McBride plc’s governance framework is set out Nomination Committee in the Board’s schedule of matters reserved and the The Nomination Committee is responsible for Board Terms of Reference of the Board Committees. appointments and ensures the Board possesses the In terms of reporting lines, the TCFD Working Group correct depth and balance of capabilities to support identifies CROs and develops climate-related financial McBride plc’s long-term position, including the ability disclosures, which are reported to the Risk Council, toassess the impact of climate change. which has direct responsibility for principal risks and Audit and Risk Committee uncertainties and challenges the outputs of the TCFD The Audit and Risk Committee oversees the assurance Working Group. model and supports the Board on matters relating The Risk Council reports to the Audit and Risk to financial reporting, internal control and risk Committee, communicating any key climate-related management. The Committee assesses and appraises risks on a twice-yearly basis. the integrity of McBride plc’s climate-related financial The Executive Committee and ESG Committee (both reporting and the process used to develop McBride plc’s led by the CEO and with direct reporting to the Board) TCFD-aligned disclosures. provide advice and inputs to the TCFD Working Remuneration Committee Group, during the preparation of the TCFD disclosures. The Remuneration Committee supports the future Thegovernance of climate-related issues is set out in implementation of Board-approved policy on CROs the graphic on the adjacent page. including climate factors and sustainability goals withinperformance-related pay for Executive Directors and senior management. McBride plc Annual Report and Accounts 2022 56 Strategic report Governance continued TCFD governance structure McBride plc Board CEO Nomination Audit and Risk Remuneration Committee Committee Committee Decision-making Executive Committee ESG Committee Risk Council Advisory Reporting line Exchange of information and TCFD Working Group insights Role of senior management It provides information to the Executive Committee on Executive Committee any business risks, both existing and emerging, that may The Executive Committee is responsible for the impact our strategic objectives. It reports to the Audit implementation of strategy through the operational and Risk Committee on McBride plc’s principal risks. management of McBride plc’s divisions and monitoring The Risk Council also reports on the performance of the of performance in line with agreed plans. It is also TCFD Working Group, including progress against the responsible for managing financial risks, including those four TCFD recommendations and eleven recommended of meeting the Group’s climate-related goals. disclosures, as well as outcomes of the scenario analysis and proposed disclosures. The Executive Committee receives information periodically from the Risk Council and ESG Committee TCFD Working Group on progress towards the Group’s climate goals. Reporting to the Risk Council is a TCFD Working Group. This is a cross-functional working group responsible for ESG Committee the development of climate-related financial disclosures The ESG Committee is responsible for the Group’s including defining climate scenarios, identifying programme on environmental, social and governance climate-related risks to the Group under articulated issues. Each committee member is responsible for the scenarios, assessing the business and financial execution of an action plan within their own business impacts, identifying potential responses and ensuring area. The key responsibilities of the ESG Committee are: appropriate stakeholder input. • delivery of the ESG programme and action plans and The TCFD Working Group works in collaboration monitoring progress against ESG key indicators; with the ESG Committee developing and adhering to • developing and adhering to a Board-approved a Board-approved roadmap of emissions reduction roadmap of emissions reduction opportunities and opportunities and developing and monitoring progress developing and monitoring progress against Science against Science Based Targets for the purposes of Based Targets; and consistency with the TCFD recommendations. • providing oversight and maintaining the focus External advice of the Executive Committee on ESG matters and McBride plc engaged expert external advice to collaborating with subject matter experts within supplement the capabilities within the Company and McBride plc to deliver objectives around responsible assist in establishing initial data systems and reporting sourcing, compaction, plastics and packaging. frameworks for our Scope 1, 2 and 3 emissions and will Risk Council be engaging expert external advice in 2023 to assist in The Risk Council is responsible for managing climate setting Science Based Targets. Expert advice has also risks through its existing risk management process and been engaged to assist McBride plc in identifying and assessing existing and proposed mitigating activities analysing CROs and to understand the potential impacts and controls. It is also responsible for review and from physical climate change risks and risks associated oversight of the underlying activities, processes, risks with the transition to a decarbonised economy. Further and impacts surrounding our climate-related financial details can be found on pages 59 to 66. disclosures. McBride plc Annual Report and Accounts 2022 57 Strategic report ## Climate-related financial disclosures continued Governance continued Role of senior management continued Details of communications between management and the Board, along with key activities and immediate focus areas, are set out in the table below. Key activities 2022 Focus areas 2023 Board level • The CEO presented the Group’s overall • Board to review and approve the framework in relation to climate action plans. Group’s roadmap of emissions reduction ESG key indicators were also explained, opportunities. along with the implications in relation to • Board to receive updates on progress against thestrategy. the key indicators in the ESG actions plans. • The divisional leadership teams presented • Remuneration Committee to consider how a strategy review to the Board including remuneration of the Executive Directors is market insights into customers’ focus shift to linked to progress towards building a more sustainable product solutions, explaining how sustainable future for the business, including sustainability trends were impacting strategy, reference to its climate-related goals. to inform the Board’s decision-making around CROs. • The Head of Regulatory Aairs provided the Board with an overview of the regulatory landscape with reference to the European Green Deal and UK Environment Act; this included updates on the EU’s Chemical Strategy for Sustainability, updates to the Packaging and Packaging Waste Directive, EU REACh, EU CLP, and new legislation such as Eco-design requirements for sustainable products, explaining the eect on the legislative landscape and indicating the risks and opportunities in relation to the Group’s products. • The Board reviewed and validated the CROs identified by the TCFD Working Group facilitated by Willis Towers Watson (WTW) • Review and challenge by the Audit and Risk Committee of the approach to climate-related financial disclosures and associated assurance arrangements. Executive • The ESG Committee, led by the Chief • The ESG Committee will monitor progress Executive Ocer, reviewed and updated of the execution of the ESG action plans in level environmental, societal and business ethics each business area and develop our Net Zero goals and ambitions and finalised targeted roadmap. It will also conduct a detailed analysis action plans. to build our prioritised initiatives for emissions • Risk Council review of governance and controls reduction, to develop a roadmap of emissions for climate-related financial disclosures. reduction opportunities and to develop Science Based Targets aligned to the roadmap. • The Risk Council will continue to identify, assess and manage climate risks through its existing risk management process on an annual basis. It will also review the more detailed scenario analyses in 2023 conducted by the TCFD Working Group. McBride plc Annual Report and Accounts 2022 58 Strategic report Key activities 2022 Focus areas 2023 Operational • The TCFD Working Group (in conjunction with • The TCFD Working Group will work with the external advisers) identified climate-related ESG Committee in conducting detailed analysis level risks under certain agreed scenarios, assessed to build our prioritised initiatives for emissions the impact on the Group and identified reduction, to develop a roadmap of emissions potential responses. reduction opportunities and to develop Science Based Targets aligned to the roadmap. • During 2023, the TCFD Working Group will conduct a more granular risk assessment for the most material risks under the two articulated scenarios, and consider financial impact assessment in more detail. Strategy Overview of scenario analysis McBride plc engaged Willis Towers Watson (WTW) to work with the TCFD Working Group to facilitate the identification of CROs it could be exposed to over the short, medium and long term and to begin to assess what thepotential impact of these could be on McBride plc’s business. The 15 identified CROs were assessed on an inherent risk basis i.e. prior to consideration of mitigating actions. The distinctive nature of climate risks poses a challenge for standard risk assessment. This is because there is a high degree of certainty that some combination of climate risks will materialise, but the exact outcomes are dependent on short-term actions and therefore still unclear. Scenario analysis provides a flexible ‘what if’ framework that enables the exploration of potential economic outcomes and financial risks under a range of dierent future pathways. As such, qualitative scenario analysis was used to start to assess McBride plc’s strategy against two contrasting climate scenarios: a 1.5°C Low Carbon WorldScenario and a 4°C Hot House World Scenario. The approach taken for the assessment is detailed in the risk management part of this disclosure on page 67. Further work will be conducted in 2023 to describe in more detail the impact of the most material CROs on McBride plc’s business, strategy and financial planning, and to describe the resilience of its strategy under each of the climate scenarios (TCFD Strategy recommended disclosures (b) and(c)). Selection of climate scenarios We constructed scenarios by referencing a collection of published scenarios developed by widely used sources. These sources are detailed in the following table and provided the assumptions underpinning the analysis as detailed further below. McBride plc Temperature Policy Informed scenario rise by 2100 action by (1) Low Carbon World Not likely to exceed + Aggressive mitigation RCP 1.9 Scenario 1.5°C by 2100 to bring about a (2) IEA NZ2050 reduction in emissions (3) NGFS NZ2050 (4) SSP1 (5) Hot House World Likely to exceed + 4°C Minimal policy action RCP 8.5 Scenario by 2100 taken (6) SSP5 (1) Technical Summary, IPCC, 2018. (5) Technical Summary, IPCC, 2018. (2) World Energy Outlook 2021, IEA, 2021. (6) SSP5 – The roads ahead: Narratives for shared socioeconomic (3) NGFS Climate Scenarios, NGFS, 2021. pathways describing world futures in the 21st century, O’Neill, B et al, (2015). (4) SSP1 – The roads ahead: Narratives for shared socioeconomic pathways describing world futures in the 21st century, O’Neill, B et al, (2015). McBride plc Annual Report and Accounts 2022 59 Strategic report ## Climate-related financial disclosures continued | Strategy continued | [Intro para] | | | --- | --- | --- | | Selection of climate scenarios continued | | Hot House World Scenario (4°C) | | Details of the sources and key indicators are | | The Hot House World Scenario is aligned with RCP | | shownbelow. | | 8.5. It envisions that, due to limited government | policy and international eort, emissions continue to Low Carbon World Scenario (1.5°C) grow and consequently global warming exceeds 4°C The Low Carbon World Scenario presents a world temperature rise by the end of the century. The scenario where global warming is limited to 1.5°C by the end assumes current policies promoting sustainability of the century. This will be achieved through stringent are removed, there is no carbon pricing and there is climate policies, innovation and demand-led change, increasing adoption of resource and energy intensive where global Net Zero CO emissions will be reached 2 lifestyles around the world. As a result, economies fail around 2050. Examples of climate policies include to transition to a low carbon world and the physical carbon pricing in advanced economies of US$130/tCO , 2 impacts of climate change become increasingly major emerging economies of US$90/tCO and other 2 (1) severe. There is assumed to be longer and more severe emerging economies of US$15/tCO by 2030 . For 2 heatwaves and droughts and there is an increase in McBride plc, the impacts of environmental taxes etc. frequency and severity of flooding and other natural are included in our three year forward forecasts where catastrophe events. As a result of failing to transition, they are either already legislated or have already been the transition risks are relatively low, whilst the physical flagged up for specific timebound implementation by risks are considered to be severe. a particular government or authority. There will also be policies supporting circular economies; material Climate risks and opportunities eciency strategies and policies promoting production Fifteen climate risks and opportunities were identified and use of alternative fuels and technologies such as as having the potential to impact McBride plc under hydrogen, biogas, biomethane and carbon capture the two scenarios outlined above. The risks and utilisation and storage across sectors. In addition opportunities have been identified over short (before to meeting all current Net Zero pledges, additional 2025), medium (2025 to 2030) and long-term pledges from countries would be made and met. (post 2030) time horizons. The time horizons were Theshare of renewables by 2030 in the global selected because of the longer-term timeframe some electricity supply would increase to approximately climate-related risks will have. (2) 61% , shifting economies from being fossil fuel As part of the assessment, consideration was given dependent to renewable energy driven. The scenario to the likelihood of the risk impacting McBride plc assumes proactive and sustained action to reduce and the most likely time horizon of impact as shown carbon emissions over the next 30 years to build a low in the graph opposite. The TCFD Working Group also carbon economy. It assumes low growth in material qualitatively assessed the potential impact the risks consumption and increasing consumer pressure on andopportunities could have, to help prioritise the (3) businesses to drive sustainability . Those companies mostmaterial risks ahead of a deeper dive assessment which fail to transition their businesses to a low carbon in 2023. model will be adversely impacted. Whilst the transition risks associated with this scenario are assumed to be high, the physical risks are expected to be relatively low. (1) Macro drivers, 2021, IEA. (3) SSP1 – The roads ahead: Narratives for shared socioeconomic pathways (2) World Energy Outlook 2021, IEA, 2021 (pg. 37). describing world futures in the 21st century, O’Neill, B et al, (2015). McBride plc Annual Report and Accounts 2022 60 Strategic report Strategy continued 8 3 4 10 11 1 9 12 13 6 Likelihood 5 15 14 7 Low Medium High 2 Short-term Medium-term Long-term Timeframe Transition risks Transition opportunities Physical risks 1 Pricing of GHG emissions 9 Operational decarbonisation 12 Heat stress (heatwaves) through low-emission sources of 2 Climate change litigation energy 13 Drought stress (prolonged drought period) | 3 | Mandates and regulation | 10 | Use of more ecient production | | | | --- | --- | --- | --- | --- | --- | | | | | and distribution processes | 14 | Floods, storm surge and sea | | 4 | Increased cost of raw materials | | | | level rise | | | | 11 | Development of new products | | | | 5 | Change in consumer demands | | or services through R&D and | 15 | Windstorms | innovation | 6 | Investment and finance risk | | --- | --- | | 7 | Employee risk | | 8 | Substitution of existing tech to | lower emission options Note: Relative position of risks/opportunities within grid boxes does not reflect relative ranking (e.g. for 1, 4 and 9). These 15 risks and opportunities are described in the following tables, which also include detail regarding the potential impact on McBride plc’s business and financial planning and potential management actions to minimise the risks and capitalise on the potential opportunities. Note that the risks and opportunities have been assessed prior to consideration of any mitigating actions. McBride plc Annual Report and Accounts 2022 61 Strategic report ## Climate-related financial disclosures continued Strategy continued Transition risks – Policy and legal Risk Impact assessment Based on our Scope 1 and 2 emissions, McBride plc would be materially impacted by 1 Pricing of GHG emissions carbon taxation. Climate change litigation EU Green Deal and UK Environment Act creating legislative changes that will impact 2 McBride plc business. 3  Mandates on and regulation of Greenwashing is not currently a major concern for McBride plc; it has controls in products and services place to ensure it does not overstate its environmental claims. McBride plc provides guidance for its customers and is well prepared for mitigating this risk and avoiding potential reputational exposure. Risk response • Accelerating the shift from gas/oil to renewable electricity. • Procure 30% of energy from renewables by 2025. • Develop Net Zero targets and action plan. • Internally communicate the risks associated with carbon emissions. • Continue to monitor new/amended legislation via working with industry groups and internal processes. • Technology scanning to ensure McBride plc is up to date. • Automation to process for tracking plastic tax liability. • Clarify contracts with customers to establish McBride plc’s liability in the event that a retail client faces climate change litigation. Transition risks – Market Risk Impact assessment Suppliers could pass on the costs of carbon taxation. Suppliers have already done 4 Increased cost of raw materials this for fuel, palm oil and the UK plastics tax. Change in consumer demands Consumer demand for more sustainable products increases; this could require 5 changes to our product portfolio and impact on demand for some existing products. Risk response • Attempt to influence suppliers to adopt more renewable approaches. • Assess supply base and where raw materials are bought from. • Continue to monitor consumer demands, particularly around buying trends for sustainable products. • As a private label manufacturer, continue to closely follow actions of major brands to meet consumer preferences. • Invest in alternative technologies and reformulation to increase sustainability of products and meet changing consumer demands. Note: All the transitional risks outlined above and opposite are only considered within the Low Carbon World Scenario (1.5˚C). McBride plc Annual Report and Accounts 2022 62 Strategic report Strategy continued Transition risks – Investment/finance risk and reputational Risk Impact assessment Sustainability, ESG and Net Zero are key topics for investors, increased questions on 6 Investment and finance risk the topic are expected and it is anticipated to possibly deter potential investors if McBride plc suers sustainability-linked reputational damage. 7 Employee risk Major McBride plc shareholders rank sustainability highly, but not as highly as financial performance. Cost of capital could potentially increase if climate credentials are poor and climate KPIs are not met. As workforce become more climate conscious, there is a risk that talent attraction and retention could become increasingly dicult if McBride plc fails to meet its climate commitments. Risk response • Continued investment in carbon reduction eorts. • Set clear Net Zero SBTi targets and develop a plan for achieving them. • Proactively promoting sustainability achievements. • Increased Board focus on ESG/Net Zero as an integral part of the Company’s strategy. • Ensure that McBride plc’s sustainability agenda and achievements are highlighted in recruitment campaigns. • Continue to detail climate credentials in Annual Report. Risk Impact assessment Investing in lower emission technology requires significant initial outlay but is 8  Substitution of existing accepted as almost certain to be required by McBride plc, as part of the climate technologies to lower emission transition. options McBride plc has already invested £4-5 million capex in new sustainable technology for detergent packaging. Investments have thus already begun; however, the main impact of this risk is likely to be felt between 2030 and 2050 as pressure to achieve Net Zero, and thus invest in lower emission technology, intensifies. Risk response • A future-proofed manufacturing plan could be required, focused on reduced energy, reduced footprint and reduced water. • Commercial strategy adaptation could be required, with nuances between geographies and divisions. McBride plc Annual Report and Accounts 2022 63 Strategic report ## Climate-related financial disclosures continued Strategy continued Opportunities | | | Description | Impact assessment | | --- | --- | --- | --- | | 9 |  Operational | | | | | decarbonisation | • Reduce direct costs | Use of renewable Purchase Price Agreements | | | through low-emission | | (PPAs) could reduce energy costs in the future as | | | sources of energy | | carbon taxation is implemented. | This will help to achieve the Net Zero strategy and create additional opportunities to attract investors, lenders, customers and consumers. Opportunity response • Continue monitoring the cost dierence in renewables versus non-renewables so that the shift to increased renewables can be timed correctly. • Seek relatively short-term PPAs (i.e. maximum three years) to avoid being locked into expensive contracts and being able to possibly accrue cost savings. • Pursue plans to increase renewable energy as part of McBride plc’s energy mix up to 30% by 2025. | | | Description | Impact assessment | | --- | --- | --- | --- | | 10 |  Use of more ecient | | | | | production and | • Reduce direct costs | Adopting low-emission technologies such as | | | distribution processes | | fitting air source heat pumps and developing | products with more recycled content will require upfront capex costs but could develop cost savings through production eciencies over time. Better pallet utilisation to reduce transportation emissions via enabling more goods to be transported from the same space also helps todevelop transportation eciencies and reducecosts. Opportunity response • Improve communication of financial benefits – via cost savings and energy eciency – of investment in more ecient low-emission processes. • Closely monitor technological developments and major brand behaviour to be able to act as a fast follower. | | | Description | | Impact assessment | | --- | --- | --- | --- | --- | | 11 |  Development of new | | | | | | products or services | • Increased revenues resulting from | | Increasing consumer demand for sustainable | | | through R&D and | | increased demand for products | products could enable McBride plc to increase its | | | innovation | | and services | market share. | This opportunity will be maximised if sustainable products are aordable to consumers, otherwise consumers may choose more aordable less sustainable products due to budget constraints. Opportunity response • Continue monitoring consumer demand for sustainable products. • Ensure continued capex investment in sustainable technology to ensure readiness to meet rising demand. Note: All the opportunities outlined above are only considered within the Low Carbon World Scenario (1.5˚C). McBride plc Annual Report and Accounts 2022 64 Strategic report Strategy continued Physical risks | | | Description | | Impact assessment | | --- | --- | --- | --- | --- | | 12 |  Heat stress | | | | | | | • Periods of time with sustained high | | Increased opex, energy consumption and carbon | | 13 |  Drought stress | | temperatures more than 30°C. | emissions due to increased cooling demand. | | | | • Period of abnormally dry weather | | Failure of cooling systems may interrupt business | | | | | suciently prolonged for the | and manufacturing. Potential delays in supply | | | | | lack of water to cause serious | chain, bottlenecks in logistics and distribution. | | | | | hydrologic imbalances and regional | Reduced labour productivity/ineective work | | | | | water scarcity. | performance. | Impact to water-intensive manufacturing processes. Potable and process water supply reduction/disruption could impact manufacturing and commercial operations. High water costs. Impact to raw materials. Risk response • Consider, review and plan for a range of specific measures, including, but not limited to: • Review operating temperature tolerances for machinery and computer equipment. • Review building design and HVAC for ineciencies. • Consider additions such as solar shading, trees, double glazed windows, thermal insulation. • Consider introduction of natural cooling and ventilation solutions. • Maintain a good practice fire loss control maintenance and mitigation. • Understand suppliers’ preparedness for future heat stress. • Water system audits, pipe repair and leak maintenance. • Explore options for water saving in the manufacturing process. • Look at incentivising and encouraging water saving by employees. • Look to introduce grey/rainwater collection and input to non-potable uses. | | | Description | Impact assessment | | --- | --- | --- | --- | | 14 |  Floods | | | | | | • Includes inland floods caused by | Factory and infrastructure damage. | (inland flood, storm surge and sea level heavy precipitation (flash floods) Damage to contents stored on ground and rise) and/or by riverbank overflow basement level. (riverine). Coastal flooding caused Possible long disruptions for repairs or installation by storms. of critical utilities. • Sea level rise plays an important Impact on emergency services. role on the severity of storm surges. Delays in supply chain and distribution. Long-term/temporary road and railroad damage and closure. Threat to life. Risk response • Consider, review and plan for a range of specific measures, including, but not limited to: • Risk transfer/insurance. • Consider deep dive (engineering) assessment for high-risk assets to gauge the flood risk. • Prepare business continuity and emergency response plans and create stress test ‘what if’ scenarios. • Consider temporary and portable flood defence systems. • Look to reduce critical equipment and operations in basements. • Engage with suppliers currently at risk and for those having future risk of flooding. • Monitor and warn employees using government/local authorities/flood (and coastal) warnings and associated guidanceon personal protection. Note: All the physical risks outlined above and on the following page are only considered within the Hot House World Scenario (4˚C). Any specific risk responses will be reviewed annually and actively considered if the scenario becomes increasingly relevant. McBride plc Annual Report and Accounts 2022 65 Strategic report ## Climate-related financial disclosures continued Strategy continued Physical risks continued | | | Description | | Impact assessment | | --- | --- | --- | --- | --- | | 15 |  Windstorms | | | | | | | • Includes the wind-related impact | | Factories and infrastructure damage. | | | | | of dierent types of storms such | Impact to utilities (water supply, energy supply, | | | | | as winter storms, extratropical | telecoms/internet). | cyclones or hurricanes. Possible long disruptions for repairs or installation of critical utilities. Delays in supply chain and distribution. Long-term/temporary road and railroad damage and closure. Threat to life. Risk response • Consider, review and plan for a range of specific measures, including, but not limited to: • Risk transfer/insurance. • Consider deep dive (engineering) assessment for high-risk assets to gauge the windstorm risk. • Make sure that any critical equipment and utilities attached to the building and installed on rooftops are well fixed andsecured. • Prepare business continuity and emergency response plans and create stress test ‘what if’ scenarios. • Engage with suppliers currently at risk and for those having future risk of tropical and extratropical cyclones. • Monitor and warn employees of government/Met Oce windstorm and tornado warnings and associated guidance onpersonal protection. Informing resilience and strategy planning Focus going forward to meet recommended Noting the importance of mitigating the potential disclosures b) and c) impacts of these risks and enabling McBride plc to We have made good progress in identifying the CROs capitalise on the identified opportunities, the table we could be exposed to over dierent time horizons. above outlines actions McBride plc is currently We have also started to describe the impact of CROs undertaking and additional plans it intends to take to on our business, which has helped inform its risk ensure resilience in the face of both the Low Carbon management response and potential adaptations to its World (1.5°C) and Hot House World (4°C) Scenarios. strategy and financial planning. In 2023, McBride plc intends to conduct a more granular risk assessment for the most material risks under the two articulated scenarios. The most material risks have been prioritised based on their gross risk score; a combination of their impact, likelihood and time horizon assessment. In2023we will start considering risks on a residual basis, i.e.after management response and strategies have been implemented and consideration of the resilience ofour strategy under the two articulated scenarios will be given. McBride plc Annual Report and Accounts 2022 66 Strategic report Risk management Defining a process for climate risk identification In advance of the workshop, WTW modelled the and management exposure of McBride plc’s own manufacturing locations As detailed on pages 71 to 78, the Company has a together with a selection of its suppliers and supplier rigorous process in place to report the organisation’s regions against both climate scenarios. The modelling principal and emerging risks. Through this process, provided the likelihood of occurrence and the most climate change and environmental concerns was likely time horizon of impact and the workshop was identified as a principal risk and was assessed then used to discuss the potential impact to McBride accordingly. Aspects of climate change risk are also plcas a result of its exposure. captured in other principal risks; notably supply chain Throughout the assessment process, participants were resilience; changing market dynamics; and increased asked to consider existing mitigation actions that were regulatory focus. In addition, we conducted a thorough in place and what more is required to reduce future risk climate risk assessment in 2022 with third-party and capitalise on potential opportunities. consultants from WTW. The process used for identifying, Following the assessment of both transition and assessing and managing climate-related risks under physical risks and the identification of risk management dierent climate scenarios is detailed in the graphic actions, a final validation assessment workshop was held below. with the TCFD Working Group and the outputs from the Under the articulated climate scenarios, a list of potential assessment were then shared with the Audit and Risk CROs that could impact McBride plc’s business were Committee to communicate exposure to inherent risk. identified. This involved considering each of our business In2023, risk assessment of the most material CROs will units and all activities performed across its value be conducted, considering risks on a residual risk basis. chain. The list of risks and opportunities was drawn Integration of climate risk management into up using details from the scenarios, knowledge of the McBride plc’s wider risk management business and its value chain, industry reports and peer The climate risk assessment conducted in 2022 benchmarking. These risks were then validated by the assessed risks against an adapted version of our TCFD Working Group. Enterprise Risk Management (ERM) scales. The adapted In order to assess the identified risks and opportunities, scales allowed for longer time horizons due to the workshops were held with the cross-functional senior nature of climate risk and the assessment of upside individuals from across the Group. The first workshop opportunities. Using aligned scales has enabled McBride focused on the assessment of transition risks, which plc to integrate the assessment of its climate risks into wereassessed under the 1.5°C Low Carbon World its corporate risk register. We will continue to identify, scenario. The scenario was articulated to workshop assess and manage climate risks through the existing participants who were then asked to assess the risk risk management process on an annual basis. We will or opportunity in terms of impact, the most likely also conduct more detailed scenario analyses in 2023. timeframeof impact and the likelihood of impact. Following completion of the 2023 study, we intend to Impacts were considered in terms of a potential hit update our climate scenario analysis at least every three to financial performance (profit & loss) and financial years, when scenario indicators change, or if there is a position (balance sheet). The second workshop assessed material change to our business. physical risks under both the 1.5°C and 4°C climate scenarios. | 1. Define climate | 2. Identify climate- | | 3. Assess business | | 4. Identify potential | | | --- | --- | --- | --- | --- | --- | --- | | scenarios | | related risks to | | impacts to | | responses | | | | McBride plc under | | McBrideplc | | | articulated scenarios Policy and Market legal risks risks Transition risk Impact on: Responses might o | 1.2 | C | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Physical asset portfolio | | include: | | | | Reputation | | Technology | | | | | | | | | risks | | risks | | Input costs | | Changes to Operational costs business model Revenues Portfolio mix Acute Chronic Supply chain Investments in capabilities Physical risk | | | | physical | physical | | and technology | | --- | --- | --- | --- | --- | --- | --- | | | o | o | | | Business interruption | | | 1.5 | C and 4 | C | | | | | | | | | risk | risk | | | McBride plc Annual Report and Accounts 2022 67 Strategic report # Climate-related financial disclosures continued ## Metrics and targets We have been calculating our Scope 1 and Scope 2 GHG emissions since 2008 in accordance with the relevant GHG Protocol Corporate Accounting and Reporting Standards and latest emissions factors from recognised sources, based upon market values. Details of the Group's Scope 1 and 2 carbon emissions for the financial year ended 30 June 2022 are set out on page 45. In addition, during the fiscal year we engaged Climate Partner¹, to validate the Group's Scope 1 and 2 GHG emissions and to calculate the Group's Scope 3 emissions for the year ending 30 June 2021. Climate Partner² are also currently repeating this exercise for the year ending 30 June 2022, expected for completion during October 2022. Currently, the Group is not consistent with recommended disclosures 4(a) - 4(c). Whilst Scope 1 and Scope 2 GHG emissions have been calculated since 2008 in accordance with the relevant GHG Protocol Corporate Accounting and Reporting Standards and latest emissions factors from recognised sources, based upon market values, Scope 3 emissions data for 2022 is currently being finalised. The next stage in the Group's journey towards consistency with the TCFD recommended disclosures 4(a) - 4(c) is to work with an external partner during the financial year ending 30 June 2023 to: - set appropriate metrics and targets for the careful management of resource use and efficiency, to drive a reduction in emissions; - conduct an analysis and to develop a set of prioritised initiatives for emission reduction; - identify GHG emission abatement potential and related abatement costs; - develop a roadmap of emissions reduction opportunities; - develop Science Based Targets and KPIs aligned to the roadmap; and - include Scope 3 emissions for financial year ending June 2023. ## Focus for 2023 McBride plc commits to building on the progress achieved in 2022 in relation to the impact our operations have on the world. Our strategy outlines our commitments to reduce carbon emissions. The results of these commitments will be externally validated by setting appropriate Science Based Targets and our performance will be benchmarked by the Carbon Disclosure Project (CDP). We are also very aware of the impact that climate change may have on us as an organisation. The CRO identification process is now an established tool for us to identify the inherent risks that McBride plc faces. Following risk identification and scenario analysis in 2022, we remain committed to prioritising and further embedding the appropriate mitigating actions within our strategy to ensure we address the assessed material climate-related risks. This will be centred around ensuring we build on our existing goals and ambitions, whilst developing appropriate metrics and Science Based Targets (to be initiated during 2023), with a view to monitoring and assessing those risks whilst focusing on maximising the climate-related opportunities within our business model. McBride plc Annual Report and Accounts 2022 68 Strategic report Location of TCFD aligned disclosures within the Annual Report Governance Disclose the Company’s governance around climate-related risks and opportunities See page(s) a) Describe the Board’s oversight of climate-related risks and opportunities Climate-related financial disclosures 56 to 59 Audit and Risk Committee report 102 b) Describe management’s role in identifying, assessing and managing climate-related risks and opportunities Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the Company’s business, strategy and financial planning where material a) Describe the climate-related risks and opportunities that the organisation has identified over the short, medium and long term b) Describe the impact of climate-related risk and opportunities on the Climate-related financial disclosures 59 to 66 Company’s business, strategy and financial planning Principal risks and uncertainties 77 c) Describe the resilience of the organisation’s strategy, taking into consideration dierent climate-related scenarios, including a 2°C or lowerscenario Risk management Disclose how the Company identifies, assesses and manages climate-related risks and opportunities a) Describe the Company’s process for identifying and assessing climate-related risks and opportunities b) Describe the Company’s process for managing climate-related risks Climate related-financial disclosures 67 and opportunities Principal risks and uncertainties 77 Audit and Risk Committee report 102 to 104 c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management Metrics and targets Disclose the metrics and targets used to assess and manage climate-related risks and opportunities a) Disclose the metrics used by the organisation to assess climate- related risks and opportunities in line with its strategy and risk management process Climate-related financial disclosures 68 b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks Environmental, social and governance 45 c) Describe the targets used by the organisation to manage climate- related risks and opportunities and performance against targets McBride plc Annual Report and Accounts 2022 69 Strategic report ## Group non-financial information statement Understanding the impact of our activities with regard tospecified non-financial matters. In accordance with sections 414CA and 414CB of the Companies Act 2006 which outline new requirements for non-financial reporting, the table below is intended to provide our stakeholders with the content they need to understand our development, performance, position and the impact of our activities with regard to specified non-financial matters. Policy embedding, due diligence, outcomes and | Reporting requirement and | Relevant Group | Relevant Group | key performance indicators | | --- | --- | --- | --- | | ourmaterial areas of impact | principal risks | policies | – page references | | Environmental matters | Consumer and | • Group ESG Policy Environmental, social and | | | | customer trends | | governance, pages 44 to 47 | • Responsible approach to product design and production | Employees | | Legislation | • Group Quality, | | Environmental, social and | | --- | --- | --- | --- | --- | --- | | • Responsible for the health and | | | | Health, Safety and | governance, page 49 and | | | safety of our workforce | | | Environment Policy | policies, page 91 | Workforce engagement, page85 Our stakeholders, workforce,page 39 | Social matters | | Financial risks | • Tax Strategy | | Environmental, social and | | --- | --- | --- | --- | --- | --- | | • Responsible approach to | | | | Statement | governance, pages 50 to 52 | | | taxation | | • Business Ethics Policy | | | | Respect for human rights, | Legislation | • Business Ethics Policy | | Environmental, social and | | --- | --- | --- | --- | --- | | anti-bribery and corruption | | • Supplier Code of | | governance, pages 54 and 55 | | | | | Conduct | andpolicies, page 91 | • Reinforcing an ethical • Anti-Bribery and businessculture Corruption Policy • Gifts and Hospitality Policy • Policy on the use of independent auditor for non-audit services • Whistleblowing Policy • Anti-slavery and Human Tracking Statement Business model All risks Pages 10 and 11 Non-financial key Page 37 performance indicators Description of principal risks Pages 71 to 78 McBride plc Annual Report and Accounts 2022 70 Strategic report ## Principal risks and uncertainties ## An eective risk management process is a fundamental ## cornerstone of good corporate governance, essential ## inenabling the business to achieve its overall strategic and ## day-to-day operational objectives and in delivering on its ## commitments to all stakeholders. The Group’s established risk management framework, high levels of input price inflation and a time-lag in which is aligned to ISO 31000:2018, was enhanced recovering these in the form of price increases from during the year to formalise a defined risk taxonomy our customers, product re-design initiatives and cost structure. This is to guide risk identification and to reduction exercises conducted by the Group. This has help with the categorisation of the types of risk to impacted McBride plc from both a global supply chain which McBride plc is exposed, whilst establishing a perspective as well as the more regional/local retailer common language for the reporting of risk across the and consumer behavioural aspects. organisation. Additionally, a comprehensive risk appetite This has been accompanied with a heightened focus framework was established during the year. This is to on climate and environmental considerations from help with the assessment, escalation and reporting of both consumers and governments, a complex and principal risks, through the identification and regular evolving set of legislative requirements across individual monitoring of key risk indicators tracked bysenior jurisdictions, as well as the increased risk to sensitive business leaders. business data as a result of legacy systems, potential Further detail on the risk management process can security breaches and cyber threats. The Board also befound on page 103. considered the specific risks and opportunities relating to the Group’s level of debt, largely driven by higher This process has allowed the Board to identify those levels of working capital and trading losses. Over the risks which are deemed fundamental to the business course of the year, this has squeezed our liquidity as they potentially threaten the delivery of the Group’s headroom with our funders, although this risk has been strategic priorities. reduced post year end as a result of the revised funding The Group continues to review its overall risk framework agreement announced on 29 September 2022. within the context of an ever shifting and dynamic post-Covid-19 environment, which has resulted in 1 Almost certain 2 6 3 LikelyPossibleUnlikelyRare 4 7 5 Likelihood Minimal Minor Moderate Major Catastrophic Impact | 1 | Financing risks | 3 | Changing market, customer | 5 | Challenges in attracting | 7 | Increased regulation | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | and consumer dynamics | | and retaining talent | | | | 2 | Supply chain resilience | | | | | | | | | | 4 | Disruption to systems and | 6 | Climate change and | | | | | | | processes | | environmental concerns | | | McBride plc Annual Report and Accounts 2022 71 Strategic report ## Principal risks and uncertainties continued The set of principal risks and uncertainties provided on the following pages is not intended to be an exhaustive list. Additional risks not presently known to management, or risks currently deemed to be less material/ strategically important, may also have the potential to cause an adverse impact on our business. The Board has confidence in the ongoing risk horizon scanning and monitoring activities embedded within the Group’s existing risk management processes, to provide early notification of emerging, potentially significant and strategically importantrisks on a regular basis. ### 1 Financing risks Risk trend/change: The Company is potentially exposed to financing risks aecting liquidity and funding that could threaten the ongoing operation and financial viability of the Company | Risk impact | | Mitigation Key developments | | | | | --- | --- | --- | --- | --- | --- | | • Inability to oset in a timely | | • Divisional Managing Directors | | • Our lender group waived the | | | | manner the significant input | | are accountable for developing | | December 2021 and June 2022 | | | cost inflation by raising prices, | | and executing pricing plans or | | covenant tests. In reaching the | | | has resulted in a significant | | cost-saving product redesigns to | | agreement of the waiver, the Group | | | deterioration of the Group’s | | recover gross margins through cost | | agreed to maintain liquidity (cash | | | profitability and liquidity. | | price increases to customers. | | plus facility headroom) of at least | | • Not achieving historic levels | | • A comprehensive governance | | | £40 million and not pay dividends | | | of profitability and cash flows | | process of divisional performance | | until it is in compliance with its | | | increases the risk that banking | | reviews is in place to monitor actual | | existing covenants. | | | facilities may be withdrawn due to | | performance versus pricing and | • At 29 September 2022, the Group | | | | breach of banking covenants. | | financial targets. This includes the | | announced that it had agreed an | | | | | Executive Committee’s weekly | | amended RCF with its lender group, | | | | | review of key operational and | | ensuring the Group has sucient | | | | | financial performance metrics, | | levels of liquidity headroom and | | | | | including health and safety, volume, | | can comply with revised covenant | | | | | customer service, trading and | | requirements. Key provisions of the | | | | | pricing, meaning that risks can be | | revised agreement are set out in the | | | | | identified and mitigating actions | | CFO’s report on page 34. | agreed in a timely manner. Risk appetite rating: Low Low Moderate High Very HighAverse McBride plc recognises that it is not possible to fully eliminate financing risk, but will deploy a one-time robust and proportionate level of control to ensure material instances of risk are minimised. McBride plc Annual Report and Accounts 2022 72 Strategic report ## [Intro para] ### 2 Supply chain resilience Risk trend/change: Raw materials continue to drive a significant proportion of our product costs, thereby resulting in key underlying risks associated with commodity markets and their heightened volatility | Risk impact | | Mitigation Key developments | | | | --- | --- | --- | --- | --- | | • Global supply chains were | | • An appropriately resourced and | | • In addition to the continued | | | stretched beyond breaking point | | skilled Group Purchasing function | investment in training and | | | in many areas as demand bounced | | with the requisite market and | development, access to market | | | back from Covid-19-driven lows | | industry knowledge providing the | intelligence and analytical resources | | | which saw capacity reduced in | | ability to spot market trends and | has been improved. | | | many sectors. | | developments. | • The continual improvement of | | • Pressures on material and freight | | • Long-standing and strong supplier | | the high-level early warning tool | | | availability, along with underlying | | relationships allowing McBride | already in place, along with a more | | | labour challenges in the market, | | plc to leverage scale and push for | automated, rolling forecasting | | | aects our ability to ship products | | prioritisation in times of material | process, capturing both feedstock | | | out on time, ultimately posing a risk | | shortages. Divisional teams taking | and supply/demand influences, | | | to our customer service levels. | | full responsibility for demand | embedded in the organisation. | | • Uncertainty over forward input price | | | forecasting providing forward views | • Key risk indicators (KRIs) in | | | inflation will restrict the Group’s | | of requirements. | place to monitor progress and | | | ability to implement plans for | • Reliable and regular forecasting | | drive appropriate action, where | | | recovery through pricing initiatives. | | capability in order to equip the | necessary. | | • A growing trend of some customers | | | Group with forward visibility of | • A continued focus on contractual | | | moving to a more transactional | | both the direction and magnitude | cover, with closer alignment | | | approach to relationship | | of input cost evolution, along with | between the Group Purchasing, | | | management leading to lengthy | | a well-structured and controlled | Commercial and Legal functions. | | | and prolonged discussions on the | | information flow through the supply | | • Group Purchasing provide the implementation of the required chain into the Divisional Commercial divisional sales teams with regular pricing actions. This has the teams to help position each wave of ‘commercial packs’ to help explain potential to have a significant pricing actions with our customers. the markets within which we impact on the Group’s profitability. • Clearly defined account plans across operate from a pricing and supply • An increased focus on our customer base to ensure that we chain perspective, and how that environmental considerations in create the appropriate engagement, translates into the products that we the form of sustainability demands at the right level and at the right sell. poses a risk from both a cost and time. • McBride plc already has a set of complexity perspective. • A clearly defined set of corporate published sustainability targets • Over-reliance on any one supplier goals underpinned by specific which are monitored on a regular poses a significant risk to the metrics and targets, with basis, and have started on the TCFD business. well-articulated plans to achieve reporting journey to drive further them, that are shared with our improvements in this area. customers. • Specific actions taken during the • A strong and eective risk year to broaden our supplier base, management ethos, driving the in areas of increased supply risk. most opportune sourcing decisions to ensure McBride plc is not overly exposed to any single supplier. Risk appetite rating: Moderate Low Moderate High Very HighAverse McBride plc accepts a moderate level of concentration risk in relation to raw material suppliers to maximise economies of scale and leverage pricing strategies. The Company is also prepared to accept a moderate level of risk exposure in the supply chain to optimise pricing strategies whilst maintaining a certain level of flexibility across the value chain to be able to absorb disruptions and quickly adapt to change. McBride plc Annual Report and Accounts 2022 73 Strategic report ## Principal risks and uncertainties continued ## [Intro para] ### 3 Changing market, customer and consumer dynamics Loss of key product categories and/or customer positions could arise due to an Risk trend/change: inability to maintain supply or through an uncompetitive cost position. Additionally, the demand in sustainability trends in product technology, formats and usage has increased significantly, and speed to market is essential and is required by our customers and end consumers | Risk impact | | Mitigation Key developments | | | | | --- | --- | --- | --- | --- | --- | | • The ‘post-Covid-19’ consumer is | | • An appropriate amount of | | • Having centralised our approach | | | | adapting to a higher cost of living | | resource and attention to the | | to market data, we are using this | | | in an inflationary environment, | | understanding of consumer trends. | | eectively to drive decision-making | | | also marked by a heightened | | This includes an established ESG | | and inform longer-term strategy. | | | sustainability agenda and a | | forum where sustainability insights | • We have accelerated our approach | | | | significant demand for e-commerce. | | and Group-wide ESG targets are | | in R&D in respect of two major | | | The lack of an appropriate product | | monitored to drive actions through | | pillars around cost saving and | | | portfolio would be a risk to our | | divisional deployment. | | sustainability – working closely | | | sales performance. | • A flexible approach to product | | | with suppliers to achieve speed to | | • Shifts in purchasing habits due to | | | portfolio management that can | | market and capital eciency. | | | ‘sticky post-Covid-19 factors’ (such | | adapt with agility to changes in | • The ESG Group has made great | | | | as working from home) may mean | | consumer needs. This could include | | progress in measuring the | | | that there are permanent shifts in | | a range of alternative oerings | | Company’s environmental impact | | | product choices misaligned to the | | to minimise the price impact to | | and setting appropriate targets | | | capacity in the business. | | consumers. | | to support ongoing business | | • Key international retailers face | | • A five-year strategic plan, reviewed | | | performance and growth. | | | significant pressure to be the | | on an annual basis, in order to | • The five-year plan has been | | | | ‘backstop’ of grocery inflation and | | balance capital allocation between | | reviewed and adjusted in the short | | | therefore continue to resist price | | new initiatives and supporting | | term to take account of latest | | | increases. | | existing business. | | market priorities. | | • Despite an increasing number | | • Strengthened partnerships with key | | • We have been proactive and | | | | of high-profile failures in our | | retailers to avoid one-dimensional | | reacted quickly to assist retailers | | | competitor set, together with global | | discussions solely focused on price. | | where they have had disruptions | | | pressures on supply chain networks, | • Clear cost-saving initiatives in each | | | in supply due to competitors’ | | | continuity of supply of essential | | area of the business to mitigate the | | financial and operational diculties, | | | hygiene products remains critical. | | eects of input price increase. | | demonstrating our agility and role | | | High levels of CSL are therefore | | | | as a valued supplier of choice. | being demanded, and failure to • We have developed new deliver jeopardises our reputation relationships with direct and indirect and sales performance. suppliers in order to ensure best • There is a risk that in addressing pricing and continuity of supply in the short-term issues faced by volatile circumstances. customers and consumers that • All divisions and Group functions innovation becomes a lower priority have clear cost-saving targets and risks medium-term sales growth enabled by continued investment in and profitability. business processes. • As part of the TCFD risk assessment performed during the year, climate-related changes to market factors were considered and risk responses explored. Risk appetite rating: Moderate to High Low Moderate High Very HighAverse We strive to uphold strong relationships with our customers during a period of dynamic market conditions. We accept a moderate to high level of risk in our relationships with customers whilst these are being tested by increased product prices to take account of increased input costs, market factors, competitor actions and customer responses. McBride plc Annual Report and Accounts 2022 74 Strategic report ## [Intro para] ### 4 Disruption to systems and processes Reliability, availability and security of our business systems and processes continue to Risk trend/change: be a focus area to avoid business disruption. Availability of core systems is targeted, as a minimum, to be at the levels required to maintain the day-to-day operations of the business. The risk has increased due to an increase in the number of external cyber-attacks and elevated threat levels globally. This trend is expected to continue for the foreseeable future Risk impact Mitigation Key developments • Loss of key and sensitive business • Continual review and investment • Recruitment of additional IT data as a result of security breaches, in security policies, controls and security resource to strengthen external hacking and/or cyber technologies to protect commercial focus in this area. attacks. and sensitive data. • External vulnerability testing • The loss of data or the inability • Continued monitoring of undertaken. to obtain data – due to issues developments in cyber security • Security key risk indicators (KRIs) with physical storage (e.g. data including engaging with third-party in place to monitor progress and destruction), logical storage penetration testers and other drive appropriate action, where (e.g.deletion) and data corruption specialists, where appropriate. necessary. (e.g. software errors). • Alignment to changes in legislation • Development and rollout of an • Physical damage to key computer assessed and implemented, employee education programme to equipment – e.g. due to fire, theft, including GDPR. improve cyber risk awareness. flood, malicious damage, etc which • Ongoing hardware and software • Cyber simulation exercise would disrupt a physical location refresh and upgrade programmes conducted. which hosts critical IT services. to ensure performance can be • Upgrading critical infrastructure and • Internet/World Wide Web monitored and systems and ensuring the correct patch levels are disrupted/unavailable due to an technologies adequately supported applied. external, global event aecting our to combat against any potential loss • Moving critical systems away from systems, data, connectivity and of data and/or cyber-attacks. our sites into an external cloud operations. • Formal disaster recovery planning infrastructure. • Increased incidence of security to ensure critical systems have a • Review of disaster recovery breaches due to high volumes of clear plan for recovery. processes for all business-critical home working experienced during • The IT team has continued to systems and ensuring relevant the pandemic and a move to flexible support the business during the back-up and recovery plans are working patterns. transition from oce-based to inplace. • Underinvesting in IT leads to home working experienced during • Introduction of new secure access outdated technologies with weak IT the year, by continuing to roll mechanisms when employees General Controls (ITGCs), potentially out processes and solutions that connect to the corporate systems leading to increased overhead maintain strong access controls to away from the oce. mitigation costs, a higher risk of our systems. • Core business system reviewed and cyber-attack, loss of key data, failure • Review of the business systems key actions in progress. to adequately harness digitalisation roadmap to ensure relevance. • Investments in updated applications and significant business disruption. to modernise the workplace. Risk appetite rating: Moderate Low Moderate High Very HighAverse We have a moderate appetite for risk in relation to IT resilience and to manage our IT infrastructure, in order to ensure the security of confidential information and the availability of our critical systems are not compromised. McBride plc Annual Report and Accounts 2022 75 Strategic report ## Principal risks and uncertainties continued ### 5 Challenges in attracting and retaining talent Risk trend/change: Failure to attract, retain and develop the required capabilities and to embed our values in our culture, which could impact the delivery of our purpose, vision and business performance Risk impact Mitigation Key developments • Our ability to attract, develop and • People performance, potential and • Our talent planning and people retain a diverse workforce with a succession management is formally development processes are wide range of skills is critical for the reviewed and subject to calibration established and are being rolled eective delivery of our strategies. by senior management each year. out, utilising our new Human Capital • The loss of key leadership and Core skills gaps are identified Management (HCM) system across talented colleagues and the inability to inform clear action plans and the Group. to replace them could make it address key talent retention or • There are frequent discussions dicult to manage the business, attraction risks. on talent and retention with the ultimately adversely aecting • Our Remuneration Committee Executive Committee, with regular operations and financial results. agrees the objectives and oversight by the Board. • Market competition for key remuneration arrangements for • Investment in our learning leadership and talent remains strong senior leaders. management system, providing all across the wider economy and • Agile ways of working (including colleagues with access to online specifically in some of the countries smart home working) frequently self-paced development, supporting within which we operate. Whilst we reviewed, to unlock internal skills growth internally. continue to have strong response capacity and support our ability to • We continue to roll out measures mechanisms in place, we face motivate, retain and attract talent. to ensure the wellbeing of our complexities posed by uncertain • Regular review of our ways of colleagues, with a number of macroeconomic conditions, working to drive speed and specific initiatives launched during intense competition for talent and simplicity through our business, the year. significant wage inflation. allowing us to remain agile and responsive to marketplace trends. Risk appetite rating: Low Low Moderate High Very HighAverse McBride plc has a low appetite in relation to people risks. It acknowledges that there is a core dependency on people and their knowledge in order to provide an eective service both within the business and to our customers. McBride plc Annual Report and Accounts 2022 76 Strategic report ### 6 Climate change and environmental concerns An evolving, multi-dimensional risk influencing our ability to continue to produce Risk trend/change: and deliver appropriate goods and services in a sustainable and environmentally responsible manner, leading to a lack of alignment with key retail customers, a loss of revenue, supply disruptions and an inability to deliver a reduction on our corporate carbon footprint | Risk impact | | Mitigation Key developments | | | | --- | --- | --- | --- | --- | | • Failing to adapt our business | | • The immediate focus of our | | • We engaged Willis Towers Watson | | | models and strategies could | | mitigation activities is on our | (WTW) to work with the TCFD | | | influence our ability to continue to | | preparedness for both supply | Working Group to facilitate the | | | produce and deliver appropriate | | disruptions (e.g. through flexible | identification of CROs over the | | | goods and services in a sustainable | | sourcing policies in place) and | short, medium and long term and | | | and environmentally responsible | | the ongoing reduction of our | to begin to assess their potential | | | manner. This could lead to | | operational carbon footprint. | impact on the Group’s business. | | | reputational damage for the | • A full understanding of our | | Further details are provided on | | | Company, whilst impacting our | | customers’ needs, goals and | pages 59 to 66. | | | customers and consumers and | | objectives to mitigate their overall | • Measurement of our corporate | | | ultimately aecting our growth, | | carbon footprint, aligning our own | carbon footprint to set future | | | competitiveness and profitability. | | climate change action plans as | science based targets. | | • The increased incidence of extreme | | | appropriate. | • Working with our energy suppliers | | | weather events could impact | • Measurement of our corporate | | to increase the proportion of our | | | our ability to sustainably source | | carbon footprint with external | energy from renewable sources at | | | essential components for our | | consultants, driving action plans | minimal additional cost, to meet | | | products and services, potentially | | to reduce our carbon-intense | our 2025 target (30%), starting | | | leading to supply disruptions. | | production areas. | January2023. | | • Failing to be eligible as a preferred | | • A focused cross-functional | | • Completion of the 2022 CDP | | | supplier by our customers due to | | ESG forum continues to | disclosure on climate action. | | | lack of our commitment to measure | | operate eectively, leading the | | • Successful submission of our our corporate carbon footprint Company’s environmental, social climate and sustainability data to and to set and realise appropriate and governance activities and EcoVadis for a revised business targets. specifically driving our response to sustainability rating. climate change and environmental • Advances in product development concerns. with capex approved for new • An established ESG framework in packaging solutions that reduce place that continues to drive and plastic consumption in the laundry steer our overall ESG approach, category. including climate and environmental considerations. Risk appetite rating: Low Low Moderate High Very HighAverse We have a low tolerance for risk in this area but recognise external factors can be dicult to mitigate as they are often outside our control. McBride plc Annual Report and Accounts 2022 77 Strategic report ## Principal risks and uncertainties continued ## [Intro para] ### 7 Increased regulation Risk trend/change: The regulatory environment is increasing in complexity with requirements for increased monitoring, governance and reporting. McBride plc is subject to laws and regulations in the markets in which it operates and compliance with these is an essential part of our business operations Risk impact Mitigation Key developments • Non-compliance with relevant • Continued focus on product • Continual improvement of laws and regulations could expose compliance processes and controls, monitoring and oversight systems, McBride plc and/or our customers which are regularly monitored to processes and activities to respond to civil and/or criminal actions. drive improvement. to increased emerging regulatory This could result in possible • Communication to relevant compliance and reporting damages, fines, criminal sanctions, employees ensures that compliance obligations. and damage to our corporate is embedded within key roles. • Specific systems, process reputation. rationalisation and standardisation • All raw material suppliers must | • Some examples of the heightened | | verify compliance to relevant legal | projects are in place and McBride plc | | --- | --- | --- | --- | | | regulatory landscape for 2022 | and safety requirements, with these | continues to look for opportunities | | | include: | standards continually monitored | to leverage technology to improve | | | • Climate regulation (incl TCFD) | and updated. | automation and increase process | uniformity. This has already • EU Chemical Strategy for • Legal and regulatory specialists helped drive improvements in Sustainability continue to monitor the relevant regulatory compliance, with • UK Environment Act legislative framework that McBride further improvements to resilience, plc operates under, to provide • Plastic taxes eciency and performance assurances of compliance with all • Post Brexit increased expected. existing and new legal obligations. intra-European regulatory External legal guidance is sought, • Monitoring of the legislative requirements and regulatory where appropriate. landscape continues to be a priority, divergence particularly in relation to the EU • McBride plc is an active member • Changes to and introduction of Chemical Strategy for Sustainability. of relevant trade associations and additional laws and regulations also industry bodies. Where appropriate, • McBride plc has successfully have a material impact on the cost we can provide input into contributed to the detergent of doing business via increased government consultations which industry impact assessment report reporting and/or growing resource aect our products or industry. via AISE. requirements to meet heightened, • Communication of legislative complex, and frequently evolving requirements now fully formalised compliance needs. via specific divisional briefing, leadership briefings and specific project teams. • Increased regulation has also been assessed as a transitional risk as part of the work undertaken by the TCFD Working Group. Further details are in pages 61 and 62. Risk appetite rating: Low Low Moderate High Very HighAverse So far as legal compliance and safety of consumers and employees are concerned, the Company has a zero tolerance for risk. McBride plc recognises the need to adopt a risk-based approach to managing regulatory risk that is proportionate to the risk, delivers acceptable outcomes for its customers and is financially sustainable and practical to operate. In accordance with the UK Corporate Governance Code 2018, the Board has taken into consideration these principal risks and uncertainties when determining whether to adopt the going concern basis of accounting andwhen assessing the prospects for the Group when preparing its viability statement. McBride plc Annual Report and Accounts 2022 78 Strategic Report # Going concern and viability statement In accordance with the UK Corporate Governance Code 2018, the Board has taken into consideration the Group's principal risks and uncertainties when determining whether to adopt the going concern basis of accounting and when assessing the prospects for the Group when preparing its viability statement. # Going concern statement The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the report of the CFO on pages 30 to 35. In addition, note 21 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit and liquidity risks. The Group meets its funding requirements through internal cash generation and bank credit facilities. At 30 June 2022, committed undrawn facilities and net cash position amounted to £70.6 million. The Group's base case forecasts are based on the Board-approved budget and three-year plan. They indicate sufficient liquidity throughout the going concern review period to ensure compliance with its minimum liquidity banking covenant. The Group's base case scenario assumes: - revenue growth of c.5%, driven predominantly by the wrap-around effect of pricing already agreed with customers; - raw material prices marginally reducing compared to the June 2022 levels, which in themselves were significantly higher than pre-Covid-19 pandemic levels; - interest rates increasing by c.150 basis points; and - Sterling: Euro exchange rate of £1.€1.185. The Directors have considered a severe but plausible downside scenario including several downside assumptions to stress test the Group's financial forecasts; - zero revenue growth from volumes, with revenue growing in 2023 just for pricing already agreed with customers; - higher than forecast raw material and packaging input costs and additional inflationary pressures driven particularly by energy, distribution and labour, ultimately being recovered through pricing actions, but only after a lag; - worsening trade working capital, caused by deterioration in both customer and supplier payment terms; - interest rates increasing by a further 100 basis points; and - Sterling appreciating significantly against the Euro to £1.€1.22. In the event that such a severe but plausible downside risk scenario occurs, the Group would incur a covenant breach and a liquidity shortfall. In this downside risk scenario, the Group would therefore need to obtain a covenant waiver and increase its funding facilities compared to those that are currently committed, to ensure that the business can meet its obligations for the next eighteen months. To mitigate against these risks, the Group is currently negotiating to further increase liquidity by £25 million by extending invoice discounting facilities to unencumbered receivables ledgers, however there is no certainty that these negotiations will be successful. After reviewing the current liquidity position, financial forecasts, stress testing of potential risks and considering the uncertainties described above, and based on the currently committed funding facilities, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence and without significant curtailment of operations for the foreseeable future. For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the Group financial statements. However, the occurrence of multiple downside trading and liquidity risks represents a material uncertainty at 29 September 2022 that could cast significant doubt upon the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. # Viability statement In accordance with the requirements of the UK Corporate Governance Code ('the Code'), the Directors have performed a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. The Board has determined that a three-year period to 30 June 2025 constitutes an appropriate period over which to provide its viability statement. In assessing the Group's viability, the Directors have considered the current financial position of the Group and its principal risks and uncertainties. The analysis considers a severe but plausible downside scenario, incorporating the principal risks from a financial and operational perspective, with the resulting impact on key metrics, such as debt headroom and covenants. The downside risk scenario assumes sensitivity around exchange rates and interest rates, along with significant reductions in revenue, margins and cash flow over the three-year period. The Group's global footprint, product diversification and access to external financing all provide resilience against these factors and the other principal risks that the Group is exposed to. After conducting their viability review, the Directors confirm that subject to the material uncertainty noted in the basis of preparation in note 2 of the financial statements they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment to 30 June 2025. McBride plc Annual Report and Accounts 2022 79 Directors' report ## Chairman's introduction to the Directors' report ![img-2.jpeg](img-2.jpeg) Jeff Nodland Chairman The Board continues to support and challenge management as we strive to deliver the next chapter of our strategic goals and vision. Dear shareholder On behalf of the Board, I am pleased to present this year's Directors' report and to update you on the work of the Board and its Committees and how we have discharged our responsibilities during this financial year. Board leadership As Chairman, I am responsible for leading and ensuring an effective Board. The current period of economic uncertainty has impacted the way the Board and its Committees worked throughout 2021/22. During the last few months of the financial year 2022 the Board convened additional meetings to receive and consider financial updates, and updates on progress with the Company's pricing initiatives. These meetings have continued into the financial year 2023. I would like to pay tribute to my Board colleagues for their flexibility and outstanding support throughout the year. Governance The application of the Principles of the UK Corporate Governance Code 2018 ('the 2018 Code') is evidenced throughout this Annual Report. We are accountable to all of our stakeholders for ensuring that governance processes are in place and we are fully committed to meeting the standards of the 2018 Code as far as it applies to a FTSE Pledgling company. The table on page 84 provides details of our compliance with the 2018 Code for the financial year 2021/22. Board changes In October 2021, Neil Harrington retired from the Board at the conclusion of the 2021 AGM following nine years' service. During his tenure, Neil was Chair of the Audit and Risk Committee and his contribution and insights were valued greatly. As previously disclosed, Alastair Murray became Chair of the Audit and Risk Committee in October 2021 and the transition has been seamless. Following a recruitment process led by the Nomination Committee, we were delighted to appoint Regi Aalstad to the Board as an independent Non-Executive Director on 14 March 2022. Regi brings with her a wealth of knowledge in the fast-moving consumer goods sector and strong experience as a Non-Executive Director. Information on her induction process can be found within the Nomination Committee report on page 93. In line with our succession plans and in anticipation of Steve Hannam not seeking re-election at the 2022 AGM since he has served nine years on the Board, Elizabeth McMeikan will be appointed as Senior Independent Director from the conclusion of the 2022 AGM. Elizabeth already has extensive experience as a Senior Independent Director which she will bring to the role. Regi Aalstad will be appointed as the Non-Executive Director responsible for employee engagement, continuing Steve's good work in this area once he has stepped down from the Board. McBride plc Annual Report and Accounts 2022 80 Directors' report I would like to thank Steve for his dedicated service over the nine years he has been on the Board and for his unwavering support, particularly during the challenges over the last twelve months. As required by Provision 10 of the 2018 Code, the Board considered the independence of Steve Hannam at the point he had served on the Board for nine years, and again as at the date of this report. The Board concluded that the objectivity of Steve Hannam was not impaired by his length of tenure and he continues to demonstrate his commitment to making decisions that are in the best interests of the business. # Dividend The Board has agreed with its lender group that no dividends will be paid until it is in compliance with its banking covenants. Therefore, the Board is not recommending a final dividend in 2022. Future dividends will be final dividends paid annually in cash, not by the allotment and issue of B Shares. Existing B Shares will continue to be redeemable but limited to one redemption date per annum, in November of each year. # S172 of the Companies Act 2006 Stakeholder interests are at the heart of every strategic and operational decision taken by the Board. Our focus on discharging our responsibilities to promote the success of the Company in accordance with section 172 of the Companies Act 2006 and the impact our decisions will have on our stakeholder groups is at the forefront of our minds at each and every Board and Committee meeting. Further information on our stakeholders, how we have considered them in decisions during the year and our engagement with these stakeholders is set out on pages 38 to 41. # Board effectiveness As Chairman, I am responsible for ensuring we continue to have an effective and functioning Board. We review our effectiveness as a Board on an annual basis, including an assessment of its Committees. The internally led Board evaluation undertaken in May 2022 gave us the opportunity to reflect on our own performance and consider areas of focus which will drive positive change over the coming years. Further details of the Board evaluation can be found in the Nomination Committee report on page 95. I will continue to work with my fellow Directors and with the Company Secretary to seek enhancements to the effectiveness of the Board and its Committees and create further focus on those areas that the Board believes will make the most impact in achieving long-term sustainable success for the business. # General Meeting As explained in the Strategic Report, the rapid and unprecedented rise in input costs and macroeconomic supply chain challenges, exacerbated by the war in Ukraine, had a negative effect on the financial performance and cash flows of the Group during the financial year ended 30 June 2022. This resulted in an increase in the Group's borrowings and a reduction to the value of the adjusted capital and reserves in the Company's balance sheet. As the borrowing limit in the Articles of Association ('Articles') is calculated by reference to the adjusted capital and reserves in the Company's latest audited consolidated balance sheet, when the accounts for the financial year 2022 were published it was expected that the Group's borrowings would exceed the limit in the Articles. Consequently, in anticipation of the borrowing limit set out in the Company's Articles being exceeded, at a General Meeting of the Company held on 25 August 2022, the prior sanction of shareholders was sought to the borrowing limit being exceeded and subject to a new higher borrowing limit of the higher of £500 million and an amount equal to five times the aggregate of (i) the amount paid up on the issued share capital of the Company; and (ii) the total of the capital and reserves of the Group. I am pleased to report that the ordinary resolution to sanction the borrowing limit being exceeded and to approve an increased borrowing limit was passed with 99.98% votes in favour. # Annual General Meeting The 2022 AGM will be held at Building C, Central Park, Northampton Road, Manchester M40 5BP on 16 November 2022 at 2.00pm. Each ordinary share of the Company carries one vote at General Meetings of the Company. Any ordinary shares held in treasury and the B Shares have no voting rights. A shareholder entitled to attend, speak and vote at a General Meeting may exercise their right to vote in person, by proxy, or in relation to corporate members, by corporate representatives. To be valid, notification of the appointment of a proxy must be received not less than 48 hours before the General Meeting at which the person named in the proxy notice proposes to vote. As a Board, we have adapted to reflect the changing times we have all experienced. We would like to thank our colleagues, suppliers, investors, lender group and customers for their continued support during this period of economic uncertainty. As we look forward to the future, I believe that your Board has the right balance of skills and expertise to continue to support and challenge management as we strive to deliver the next chapter of our strategic goals and vision. Jeff Nodland Chairman McBride plc Annual Report and Accounts 2022 81 Directors’ report ## Board of Directors ## The Board of Directors is collectively responsible ## for the long-term success of the Company. ### Je Nodland Chris Smith Mark Strickland Steve Hannam Chairman Chief Executive O cer Chief Financial O cer Senior Independent Non-Executive Director | Appointed to Board: | Appointed to Board: | Appointed to Board: | Appointed to Board: | | --- | --- | --- | --- | | June 2019 | January 2015 | January 2021 | February 2013 | | Skills and experience: | Skills and experience: | Skills and experience: | Skills and experience: | | Je has eleven years’ experience | Chris joined the Company in | Mark has operated at the | Steve brings extensive | | in consumer chemicals | 2015 as Chief Financial O cer. | C-Suitelevel for more than | experience of independent | | manufacturing businesses, | During the period 22 July2019 | 25years, possessing extensive | Board-level scrutiny, having | | including both private label | to 1 November 2019 he held | and hands-on fi nance | held a number of positions as | | and contract manufacturing | the position of Interim Chief | experienceacross chemicals, | Chairman and Non-Executive | | activities. He was most recently | Executive O cer and on | logistics, retail/own label food | Director in listed companies | | President and CEO of one | 11June2020 he was appointed | businesses, B2B/B2C services, | during his career, as well as | | of North America’s largest | Chief Executive O cer. | insurance and fi nancial services. | senior executive positions both | | independent manufacturers | Chris’s career spans over | More recently, Mark has been | internationally and in the UK. | | of consumer packaged goods | 30 years working in listed | involved in a number of business | Steve brings diversity of style, | | (including branded and private | manufacturing businesses | turnarounds/transformations | skill and experience, which | | label products), KIK Custom | in highly competitive global | and has delivered a number of | makes him ideally suited for | | Products, retiring in February | industries. He brings extensive | successful private equity exits | the role of Senior Independent | | 2019 after eleven years in the | experience of international | (having worked with CBPE, | Director, ensuring a challenging | | role. During that time Je led the | leadership in multi-site and | Apollo and Promethean). | mindset when setting and | | fi nancial turnaround and growth | multi-country organisations, | Immediately prior to joining | monitoring implementation of | | of the business both organically | covering mostly the UK, Europe | McBride plc, he was Interim Chief | the Group’s strategy. | | and via acquisition. | and Asia Pacifi c. From 2008 to | Financial O cer at The AA plc. | Steve’s previous positions have | | Previously, Je held executive | 2014, Chris was Group Finance | Mark has an MBA from | included Chairman of Aviagen | | positions at specialty chemical | Director at API Group plc, the | Manchester Business School and | International Inc, Non-Executive | | businesses including Hexion | AIM-listed specialty metallic | is a Fellow member of CIMA. | Director of Clariant AG and AZ | | Speciality Chemicals, Inc., | fi lm, foil and laminates producer. | | Electronic Materials Services | | McWhorter Technologies and | Other previous roles have | | Limited, Group Chief Executive | | The Valspar Corporation, with | included Scapa plc, where he | | of BTP Chemicals plc and, most | | responsibility for activities at a | was Finance and IT Director | | recently, Chairman of Devro plc | | number of chemical plants in | for Europe & Asia and also a | | and Senior Independent Director | | Europe. | number of senior fi nance roles | | of Low & Bonar plc. | | Other roles: | at Courtaulds plc, where he | | Committees: | | Independent Non-Executive | gained extensive international | | | | Director of EcoSynthetix. He | experience, including overseas | | | | is also a board member of | positions based in Germany and | | | | the Augsburg University in | Hong Kong. | | | Minneapolis, Minnesota, USA and Pioneer Recycling Inc. Committees: McBride plc Annual Report and Accounts 2022 82 Directors’ report ### Elizabeth McMeikan Alastair Murray Igor Kuzniar Regi Aalstad Independent Independent Non-Executive Director Independent Non-ExecutiveDirector Non-Executive Director Non-ExecutiveDirector | Appointed to Board: | Appointed to Board: | Appointed to Board: | Appointed to Board: | | --- | --- | --- | --- | | November 2019 | 2 August 2021 | June 2019 | 14 March 2022 | | Skills and experience: | Skills and experience: | Skills and experience: | Skills and experience: | | Elizabeth has extensive | Alastair, a chartered | Igor brings a strong background | Regi has extensive leadership | | experience within the consumer | management accountant, brings | in fi nance, operational e ciency | experience in global fast-moving | | goods and retail sectors, | a strong fi nancial background, | and strategy. He has more | consumer goods. She has held | | including senior management | having operated as Chief | than 15 years’ experience as an | Regional General Manager and | | roles in operations and | Financial O cer of Premier | investor in mid-sized European | Vice President positions with | | marketing at Colgate Palmolive | Foods plc until August 2019. | companies. He also has | Procter & Gamble (P&G) in | | and Tesco. This, combined | Alastair has recent and relevant | experience as a management | Europe, Asia, the Middle East | | with her strong non-executive | fi nancial experience across a | consultant advising multinational | and Africa. She fi rst joined | | experience, makes her an | number of listed companies, | corporations across various | P&G in the Nordics within the | | excellent addition to the Board. | including Premier Foods plc, | industries. | laundry and cleaning sector. Regi | | Elizabeth is currently Senior | Dairy Crest plc and The Body | In 2013, Igor co-founded Teleios | is currently a Non-Executive | | Independent Director at Unite | Shop International plc. As well as | Capital Partners. Teleiosis an | Director at the Ontex Group | | Group plc, a Non-Executive | a background in fi nance, Alastair | investment fi rm that acquires | and at several tech start-ups in | | Director of Dalata Hotel | has signifi cant experience in | ownership positions in European | Switzerland, where she resides. | | Groupplc, Senior Independent | corporate strategy, restructuring | public companies, seeking | She also works as an adviser to | | Director of property investment | and M&A. | to help them maximise their | private equity companies and as | | trust Custodian REIT plc and | Other roles: | long-term potential by working | a coach. | | a Non-Executive Director | Independent Member of the | constructively with management | Regi holds a Master of | | of private company Fresca | Audit and Risk Committee for | and other shareholders. Prior | BusinessAdministration from the | | Group, where she chairs the | the Department for Education. | to Teleios, he was a Partner at | University of Michigan, USA. | | Audit Committee. Her past | Committees: | the investment fi rm Octavian | Regi has previously held | | appointments include Senior | | Advisors and a management | Non-Executive Director positions | | Independent Director at | | consultant for McKinsey & | at Telenor ASA, Geberit AG and | | J.D. Wetherspoon plc and | | Company. | as chair of aninternational NGO. | | Remuneration Committee | | Other roles: | | Other roles: chairat Flybe plc. Managing Partner of Teleios Regi is a Non-Executive Other roles: Capital Partners GmbH. Directorat Ontex Group NV, Senior Independent Director Committees: Gmelius SA and Plair SA. and Remuneration Committee Committees: Chair of Unite Group plc, Non-Executive Director and ESG Committee Chair of Dalata Hotel Group plc, Senior Independent Director at Custodian REIT plc, Non-Executive Director and Audit and Risk Committee Chair of the Audit Committee ofFresca Group. Nomination Committee Committees: Remuneration Committee   Chair McBride plc Annual Report and Accounts 2022 83 Directors’ report ## Compliance with the UK Corporate ## Governance Code 2018 The Board is pleased to report that the Company has applied the Principles and complied with the Provisions of the UK Corporate Governance Code 2018 for its financial year ended 30 June 2022, except in relation to Provision6, which states ‘there should be a means for the workforce to raise concerns in confidence and – if theywish – anonymously’. However, a new, externally supported Whistleblowing Reporting Line was introduced in June 2022, which complies with the EU Whistleblower Directive as far as this has been transposed into national law by the relevant countries. Further work to promote and improve understanding of the Whistleblowing Reporting Line within the Group is underway. The table below provides a guide to the most relevant explanations for how the Company has complied with eachPrinciple. Board leadership and Company purpose Page reference A. An eective and entrepreneurial Board promotes the long-term sustainable success of the Company, pages 1 to 79, 82 generating value for shareholders and contributing to wider society. to 83 and 86 to 91 B. Purpose, values and strategy are set and align with culture, which is promoted by the Board. pages 12 to 15, 48, 85 to 91 and 109 C. Resources allow the Company to meet its objectives and measure performance. A framework of pages 55, 67, 71 to controls enables assessment and management of risk. 79, 103 and 104 D. Engagement with shareholders and stakeholders is eective and encourages their participation. pages 38 to 41 and 85 to 86 E. Oversight of workforce policies and practices ensures consistency with values and supports long-term pages 39, 48 to sustainable success. The workforce is able to raise matters of concern. 53, 85 to 86 and 91 Division of responsibilities Page reference F. The Chairman is objective and leads an eective Board with constructive relations. pages 81, 82 to 83 and 88 to 91 G. The Board comprises an appropriate combination of Non-Executive and Executive Directors, with a pages 80 to 83 clear division of responsibilities. and 89 H. Non-Executive Directors commit appropriate time in line with their role. pages 91, 92, 98 and 105 I. The Company Secretary and the correct policies, processes, information, time and resources support pages 86 to 87 Board functioning. and 91 to 93 Composition, succession and evaluation Page reference J. There is a procedure for Board appointments and succession plans for Board and senior management pages 80 and 91 which recognise merit and promote diversity. to 97 K. There is a combination of skills, experience and knowledge across the Board and its Committees. pages 82 to 83, 88, Tenure and membership are regularly considered. 90 and 92 to 97 L. Annual evaluation of the Board and Directors considers overall composition, diversity, eectiveness pages 81and 95 and contribution. Audit, risk and internal control Page reference M. Policies and procedures ensure the independence and eectiveness of internal and external audit pages 98 to 103 functions. The Board satisfies itself of the integrity of financial and narrative statements. N. A fair, balanced and understandable assessment of the Company’s position and prospects is pages 1 to 79, 104 presented. and 136 to 203 O. Procedures manage and oversee risk, the internal control framework and the extent of principal risks pages 71 to 78, 87 the Company is willing to take to achieve its long-term strategic objectives. and 98 to 104 Remuneration Page reference P. Remuneration policies and practices are designed to support strategy and promote long-term pages 106 and 108 sustainable success, with executive remuneration aligned to Company purpose, values and strategic to 118 delivery. Q. A transparent and formal procedure is used to develop policy and agree executive and senior pages 106, 108 and | | management remuneration. | 109 | | --- | --- | --- | | R. Independent judgement and discretion is exercised over remuneration outcomes taking account of the | | pages 106 and 108 | | | relevant wider context. | to 118 | The Code is published by the Financial Reporting Council, a full copy of which can be viewed on its website www.frc.org.uk McBride plc Annual Report and Accounts 2022 84 Directors’ report ## Corporate governance statement ## Board leadership and Company purpose Introduction McBride plc continues to encourage a sense In this Annual Report we report on how we have applied ofbelonging and employee engagement to ensure the main Principles of the 2018 Code and followed its a motivated and productive workforce. We are recommendations. A cross-referencing table to each continuing to focus on the development of our people Code Principle can be found on page 84. and on promoting a diverse and inclusive culture. Themeasurements the Board uses to evaluate culture The Directors’ report complements the Strategic report are evolving and include senior leaders’ pulse surveys and explains how the Board operates in support of and monitoring HR statistics such as absenteeism, fulfilling McBride plc’s purpose. The Board’s role is employee turnover, learning and development promoting the Group’s long-term success; setting its completion rates and safety incidents. Some of these strategic aims and values; supporting leadership to are already part of ournon-financial KPIs as set out in put them into eect; supervising and constructively the Strategic report. challenging leadership on the operational running of the business; ensuring a framework of prudent and eective Stakeholder engagement controls; and reporting to shareholders on the Board’s The Board is aware of its obligations both collectively stewardship. We trust that the Strategic and Directors’ and individually to promote the success of the Company reports together enable our stakeholders to assess the for the benefit of its stakeholders as a whole: its eectiveness of those frameworks and the quality of workforce, its customers, its suppliers, its shareholders their outcomes. and its communities. Having an overall understanding of our stakeholders’ perspectives and values, and Business model, strategy and risks considering them in our decision-making and planning, Strategy is crucial to the Group’s continued success and we Throughout the year, the Board’s focus shifted to value their broad range of perspectives. Comprehensive immediate short-term margin recovery actions. Despite engagement allows us to make informed decisions, this, the divisional business teams still managed to while taking into account the consequences of our develop and mature over the year in line with our actions on the dierent stakeholder groups. The Board strategy, Programme Compass. As a Board, we reviewed is mindful of all of the Group’s stakeholders when the strategic direction of each division during the year. making decisions of strategic importance. The review confirmed the Compass approach, divisional organisation and the strategic direction of each division, Workforce engagement whilst rearming the fact that our purpose, vision In accordance with Provision 5 of the 2018 UK Corporate and values continue to set the right objectives for the Governance Code, the Board appointed SteveHannam, Group. On pages 42 to 55 we explain our approach Senior Independent Director, as the dedicated to enhancing the sustainability of our business, whilst Non-Executive Director for workforce engagement. outlining some of the key initiatives we are taking to When Steve steps down from the Board in create value for our customers, employees, shareholders November2022, Regi Aalstad will take on the role and society. Further details on strategic topics assessed of dedicated Non-Executive Director for workforce by the Board during 2022/23 can be found on page 87. engagement andcontinue with the good work that Purpose, values and culture Steve started. McBride plc’s purpose, values and strategy, Programme During the year, the Board visited a number of the Compass, have sustainability at their heart. Whilst we Group’s manufacturing plants and spent time with our operate through five divisions, we have a single vision and colleagues. Engaging with the workforce, both formally purpose and common values. Our guiding principles of and informally, is a priority for the Board to ensure that focused profitable growth, backed by eective execution we are aware of the views of the workforce and can and a strong McBride plc identity, provide strategic address any concerns they may have. direction towards achieving our vision and purpose and achieving long-term sustainable success. As explained in the Strategic report, to fulfil our commitment to our stakeholders to govern responsibly, we need to ensure that we have a full understanding of the impact of our products and the way we conduct business, on people and the environment. Our sustainability framework is therefore based around four objectives: • product and design; • production and operations; • our people; and • community and society. McBride plc Annual Report and Accounts 2022 85 Directors’ report ## Corporate governance statement continued ## Board leadership and Company purpose continued ## Case study ## Dialogue between the Board and ## employees is achieved through ## dierent forums. Face-to-face ## discussions during site visits as well as ## frequent interaction with the divisional ## leadership teams have proved ## eective this past year. As soon as coronavirus restrictions were lifted, the Board took the opportunity to reconnect in person, visiting the sites in Middleton, UKandEstaimpuis, Belgium. More site visits are planned, to enable the Board to build an appreciation of our colleagues’ experience of their working environment and how this diers by site. The site visits provided the opportunity for informal discussions and deeper two-way dialogue between Board members and individual colleagues working in the manufacturing facilities and in roles such as R&D and H&S. Meetings with divisional leadership teams provided the Board with theopportunity to interact with employees in various roles from diverse geographies, providing insight of the challenges of day-to-day life in McBride. A meeting with the European Works Council employee representative spokesperson provided the Board with greater appreciation of the issues of importance to the workforce. | Stakeholder engagement continued | Supplier engagement | | --- | --- | | Customer engagement | Further details on engagement with our suppliers can | | Engagement with customers is at operational level. | be found on page 40. | The Board receives regular updates from the CEO Communities and members of the senior management team on The Board is conscious of the need to positively sales performance and customer metrics. Updates impactthe communities living and working around us are also shared in relation to evolving relationships by providing employment within our communities and with customers as we respond to market conditions. by our increased focus on ESG initiatives. Further details During the course of the year, there have been global of engagement within our communities can be found challenges with raw material price increases, availability onpage 41. of certain raw materials and packaging, together with Shareholder engagement distribution and wider macroeconomic supply chain The Board recognises the importance of regular, open issues. Engagement with our customers has been and constructive dialogue with shareholders throughout vital at these times to ensure that we were able to the year. The Board welcomes the opportunity to openly agree price increases with our customers that would engage with shareholders and help them understand reduce the impact of raw material price increases our business. Details of engagement with shareholders whilst still fostering a good working relationship with can be found on page 41. our customers. These updates assist the Board in developing and maintaining its understanding of any potential issues and how these could be addressed. McBride plc Annual Report and Accounts 2022 86 Directors’ report Board activity in 2022 Below is a non-exhaustive list of areas of focus, actions and decisions taken by the Board during the year. | Governance | Market and economic | | --- | --- | | and risk | environment | | 15% | 15% | | Trading, financial and | Strategic development | | --- | --- | | operational performance | opportunities | | 38% | 32% | Market and economic environment Matters considered • Pricing indexation reviews • Market and customer development updates • Review of trading in Russia • Competitor activity analysis • Sales and pricing activity reviews • Raw material market updates • Purchasing performance and feedstock forecasts • Forward outlook for FX and interest rates Strategic development opportunities Matters considered • Key operational project progress reviews, including major capital expenditure investment proposals • Overseeing strategic implementation • Business excellence initiative review • Programme Compass – review of divisional strategies and organisational strategy • Review of talent strategy Trading, financial and operational performance Matters considered • Reviewed the funding and management of the defined benefit pension scheme • Financial management and performance • Considered the share price performance • Approval of budget • Covenant waiver • Banking, tax and treasury strategy and policy reviews • Banking and liquidity reviews • Review and approval of five-year plans • Approval of amendment to revolving credit facility • Approval of full-year and half-year announcements • Considered the impact of raw material price and other trading updates increases on the business • Annual Report and Accounts review and approval • Reviewed customer price increase progress • Consideration of shareholder views and analyst • Divisional trading reports expectations Governance and risk Matters considered • Approval of the modern slavery statement • Approved the business to be considered at • Received updates from the Audit and Risk the 2022 AGM Committee,Nomination Committee and Remuneration Committee • Insurance programme renewal • Approved the 2022 Annual Report and Accounts • Corporate policies review and approval • Approved the risk appetite framework • Health and safety updates • Approved Committee Terms of Reference • Directors’ duties training • Litigation updates • Approved the business to be considered atthe2022General Meeting • Corporate governance horizon scanning • Approved the appointment of Non-Executive Director, Regi Aalstad McBride plc Annual Report and Accounts 2022 87 Directors’ report ## Corporate governance statement continued ## Division of responsibilities The Board Details of its composition and work during the year The Board has collective responsibility for leading are set out in the Audit and Risk Committee report theGroup and promoting its long-term success. on pages 98 to 104. The Board is satisfied that the Ithasthe prime role of confirming the Group’s Chair of the Audit and Risk Committee has recent and purposeand vision and agreeing a sustainable strategy relevant financial experience including competence that supports its purpose. It is responsible for setting inaccounting. cultural expectations that drive ethical and responsible The Remuneration Committee business conduct. The Board has established a Remuneration Committee, As of 30 June 2022, the Board of Directors comprised the composition and role of which is set out in the the Non-Executive Chairman, four independent Remuneration report. The Remuneration Committee Non-Executive Directors, one non-independent ensures that the remuneration policies and practices Non-Executive Director, representing McBride plc’s are designed to support the Company’s strategy and largest shareholder, and two Executive Directors. promote long-term sustainable success. Further details Additional responsibilities assigned to certain of the work of the Remuneration Committee throughout Non-Executive Directors are explained on page 89. the year can be found on pages 106 and 107. The composition of the Board is subject to review and is The Nomination Committee a responsibility delegated to the Nomination Committee. The Board has established a Nomination Committee. Details of the tenure, gender, nationality and relevant The Nomination Committee is responsible for setting experience of Board members are set out below. out and monitoring the Board’s succession plans, reviewing composition and diversity of the Board and Board Committees proposing new appointments to the Board. Further The Board is directly assisted in the discharge of its detail of the composition of the Nomination Committee duties by three Board Committees: the Nomination and its work during the year can be found on pages 92 Committee, the Audit and Risk Committee and the to 97. Remuneration Committee. The remit, authority and composition of the Committees is monitored to ensure Operational management eective Board support. Each Committee provides The management of the Group’s business activities is dedicated focus to a defined area of responsibility delegated to the Chief Executive Ocer (CEO), who with the nature of delegated work ranging from a is ultimately responsible for establishing objectives recommendation being made to the Board or, if within its and monitoring executive actions and for the agreed authority, a final decision being taken on behalf overall performance of the business. The day-to-day of the Board. Further information on the specific role of management and global governance of the business each Committee is set out in their respective reports on isdelegated to members of the Executive Committee pages 92 to 131. on a structured functional basis. The Audit and Risk Committee As at 30 June 2022, the membership of the Executive The Board has established an Audit and Risk Committee Committee comprised the Chief Executive Ocer, of independent Non-Executive Directors. The Audit the Chief Financial Ocer, the Divisional Managing and Risk Committee is responsible for monitoring the Directors of the three largest divisions, namely Liquids, integrity of the financial statements, reviewing the Unit Dosing and Powders, the Chief HR Ocer and the eectiveness of internal controls and risk management Chief Legal Ocer and Company Secretary. systems, and overseeing the relationship with the independent auditor. Board composition as at 30 June 2022 Tenure Gender Relevant experience Nationality | 0-5 years 6 | Male 6 | Manufacturing 5 | Norwegian 1 | | --- | --- | --- | --- | | 6-8 years 1 | Female 2 | Retail 2 | Swiss 1 | | 8+ years 1 | | Chemicals 2 | American 1 | | | | Finance 5 | British 5 | McBride plc Annual Report and Accounts 2022 88 Directors’ report Roles within the Board The roles of the Chairman and the Chief Executive Ocer are separate and there is a clear division of responsibility between the executive and non-executive members of the Board. Details of these responsibilities are set out below: Chairman of the Board Chief Executive Ocer Responsible for: Responsible for: • overall leadership and governance of the Board, • eective leadership and development of the executive ensuring it operates eectively in terms of agenda management team and operational running of the setting, information management, induction, Group; development and performance evaluation; • developing and implementing the Group’s business • maintaining a focus on strategy, performance and value model and strategy; creation and the assessment of significant risks in the • eectively communicating the Group’s strategy and implementation of strategy; performance; and • ensuring the Board as a whole has a clear • building positive relationships by engaging understanding of shareholder, customer and workforce appropriately with all internal and external stakeholders. views; • promoting a healthy culture of challenge and debate at Board and Committee meetings and encouraging constructive debate and decision-making; Chief Financial Ocer Responsible for: • fostering eective relationships and open communication between all Directors; • deputising for the Chief Executive Ocer; • ensuring both Board and shareholder meetings are • proposing policy and actions to support sound financial properly conducted; and management, including in relation to funding and • developing a supportive working relationship with the netdebt; Chief Executive Ocer. • leading the Finance, Tax, Treasury and IT functions; • leading on mergers and acquisitions; and • overseeing the defined benefit pension scheme. Senior Independent Director Responsible for: • providing a sounding board for the Chairman and acting Company Secretary as an intermediary between other Directors when Responsible for: necessary; • compliance with Board procedures and supporting the • evaluating the performance of the Chairman on behalf Chairman of the Board; of the Directors; and • ensuring the Board has high-quality information, • being available to shareholders, where contact through adequate reading time and the appropriate resources; the Chairman or Executive Directors is not appropriate. • advising and keeping the Board updated on corporate governance developments; • considering Board eectiveness in conjunction with the Chairman; Non-Executive Directors • facilitating the Directors’ induction programmes and Responsible for: assisting with professional development; and • providing the skills, experience and knowledge toassist • providing advice, services and support to the Directors the Board’s decision-making; as and when required. • challenging and assisting with developing and establishing objectives and monitoring the Group’s business model and strategy; • measuring and reviewing the performance of the Executive Directors; • providing independent insight and support and advice to the Executive Directors; • reviewing Group financial information and overseeing the eectiveness of the Company’s internal controls; • reviewing succession plans for Board Directors and senior managers and supporting inclusion and diversity; and • setting policy in respect of Executive Director remuneration. McBride plc Annual Report and Accounts 2022 89 Directors' report # Corporate governance statement continued Division of responsibilities continued ### How the Board operates #### Boardroom culture The Board recognises the importance of establishing the right culture and values and communicating this message consistently throughout the organisation. It is important that the Board provides strong and effective leadership, constructive challenge and accepts collective accountability for the long-term sustainable success of the Group. In so doing, it will continue to drive and deliver our strategy in the best interests of all our stakeholders. A strong feature of the Board's effectiveness in delivering the Group's strategy is our inclusive and open style of interaction which benefits from a free flow of information between the Executive and Non-Executive Directors. The size of our Board encourages Directors to discuss matters openly and freely and to make individual contributions through the exercise of their personal skills and experience. No one individual has unfettered powers of decision-making. All Directors communicate with each other on a regular basis and contact with the Group's senior managers is sought and encouraged. In-person Board meetings have been held at various site locations across the Group in 2021/22. #### Independence All Non-Executive Directors have been appointed for their specific areas of knowledge and expertise. They are independent of management and exercise their duties in good faith based on judgements informed by their personal experience. This ensures that matters can be debated constructively in relation to both the development of strategy and assessment of performance against the objectives set by the Board. In line with the 2018 Code, the Board has determined that Igor Kuzmiar is not considered independent as he is an appointed representative of McBride plc's largest shareholder, Teleios Capital Partners GmbH. Despite the long tenure of Steve Hannam, the Board resolved that Steve remains independent at the date of this report and would continue to serve on the Board until the 2022 AGM to allow the new Board members to become accustomed with the business. It is believed that the balance between non-executive and executive representation continues to encourage healthy independent challenge. #### Powers of Directors The powers of the Directors are determined by the Articles of Association ('Articles'), which are available on our website, UK legislation, including the Companies Act 2006, and any directions given by the Company in a General Meeting. The Directors are authorised by the Company's Articles to issue and allot ordinary shares and to make market purchases of its own shares. These powers are referred to shareholders for renewal at each AGM. Further information is set out on page 133 of the Directors' report. The appointment and replacement of Directors is governed by the Company's Articles, the 2018 Code, the Companies Act 2006 and related legislation. The Directors may from time to time appoint one or more Directors. As required by the Articles, any Director appointed during the year will be required to step down and stand for re-election at the next Annual General Meeting. Any amendments to the Articles can only be made by special resolution at a General Meeting of shareholders. Subject to the Articles and the Companies Act 2006 and any directions given by special resolution, the business of the Company is managed by the Board who may exercise all the powers of the Company. #### Conflicts of interest In line with the Companies Act 2006 and the Articles, the Company has a strict process in place to manage conflicts of interest. A Director who becomes aware that they or their Connected Persons have an interest in an existing or proposed transaction with the Company is required to declare that interest at a meeting of the Board. Such disclosures are recorded and compliance reviewed at each meeting. Under the powers granted by the Articles, the Board is authorised to approve such conflicts where appropriate. During the period to 30 June 2022, the Board authorised Igor Kuzmiar's conflict of interest as an appointed representative of McBride plc's largest shareholder, Teleios Capital Partners GmbH. No Director had a material interest at any time in any contract of significance with the Company other than their service contract or letter of appointment. #### Re-election of Directors The Board is satisfied that all the Directors standing for re-election perform effectively and demonstrate commitment to their roles. This has been demonstrated during the year by the willingness of the Directors to attend additional Board meetings as well as from the general support they have given to the Executive Directors and senior managers. When appropriate, any changes to the commitments of any Director are considered in advance by the Board to ensure they are still able to fulfil their duties satisfactorily. Although the Articles require the Directors to submit themselves for re-election at every third AGM, in line with the requirements of the 2018 Code, all Directors are subject to annual re-election at the AGM. The biographies for each Director seeking re-election are set out on pages 82 and 83 of the 2022 notice of meeting. These provide details of the skills and experience which demonstrates why each Director's contribution is, and continues to be, important to the Company's long-term sustainable success. McBride plc Annual Report and Accounts 2022 90 Directors’ report The Board, its Committees and the individual Time commitment Directorsparticipate in an annual performance The expected time commitment of the Chairman and evaluation. Furtherdetails of the performance Non-Executive Directors is agreed and set out in writing evaluation process can be found in the Nomination in the letters of appointment confirming their position. Committee report on pages 92 to 97. The existing demands on a Non-Executive Director’s Theperformance evaluation process confirmed time are assessed on appointment to confirm their thecontinuing independent and objective judgement capacity to take on the role. The Nomination Committee of all the Non-Executive Directors. Theprocess also reviews Directors’ external commitments annually confirmed that the performance of all the current to ensure they still have sucient capacity to fulfil Directors standing for re-appointment and appointment their role. Further appointments which could impair continued to be eective and that they continue to their ability to meet these arrangements can only be demonstrate commitment in their respectiveroles. accepted following approval by the Board. Thetaking on of any external appointment by an Executive Policies Director is subject to Board consent. Whilst the Board takes overall responsibility for There were seven scheduled meetings in the year to approving Group policies, including those relating to 30June 2022. Scheduled meetings of the Board follow business ethics, health and safety, environmental matters, an agreed format, with agendas developed by the anti-bribery and corruption, and whistleblowing, their Chairman, Chief Executive Ocer and Company implementation is delegated to the Chief Executive Secretary who consider the Board’s annual plan of Ocer and cascaded throughout the organisation via the business and the current status of projects, strategic Executive Committee and the various functional teams. workstreams and overarching operating content. Adequate time is allocated to support eective and constructive discussion of each item. An electronic Attendance at meetings year ended 30 June 2022 resources portalallows ecient navigation of Number of scheduled Board meetings held: 7 Boardpapers. Number of Board and other meetings scheduled Board papers are prepared and issued prior to each meetings Eligible to Members of the Board attended attend Board meeting to allow Directors sucient time to givedue consideration to all matters. Directors are able Je Nodland to take independent professional advice, if necessary, Chairman 7 7 atthe Company’s expense. Chris Smith The Board holds a minimum of seven meetings a year Chief Executive Ocer 7 7 at regular intervals. Additional meetings are held as Mark Strickland required. During the last few months of the financial Chief Financial Ocer 7 7 year 2022 the Board convened additional meetings (2) Regi Aalstad toreceive and consider financial updates, and updates Independent on progress with the Company’s pricing initiatives. Non-Executive Director 2 2 These meetings have continued into the financial year2023. Steve Hannam From time to time, the Board authorises the Senior Independent establishment of an additional committee or Non-Executive Director 7 7 (1) sub-committee to consider and, if thought fit, approve Neil Harrington certain items of business. Independent During the year, the Non-Executive Directors have met Non-Executive Director 2 2 without Executive Directors being present after each Igor Kuzniar scheduled Board meeting. The Senior Independent Non-Executive Director 7 7 Director and the Non-Executive Directors have also | Elizabeth McMeikan | conversed by telephone without the presence of | | --- | --- | | Independent | the Chairman as part of the Board performance | | Non-Executive Director 7 7 | evaluationexercise. | (2) | Alastair Murray | The Corporate governance statement was approved | | --- | --- | | Independent | by the Board on 29 September 2022 and signed on its | | Non-Executive Director 6 6 | behalf by: | (1) To date of resigning as a Director. (2) From date of joining Board. Je Nodland Chairman McBride plc Annual Report and Accounts 2022 91 Directors’ report ## Nomination Committee report ## Composition, succession and evaluation Je Nodland Chair of the Nomination Committee ## The Committee focused on the appointment of a new ## Non-Executive Director in line with the succession plans for ## Steve Hannam and continued to strive towards greater diversity ## on the Board and at a senior level within the business. Dear shareholder Committee membership and meetings 2021/22 On behalf of the Nomination Committee, I am pleased The Committee held two scheduled meetings during to present the Nomination Committee report for the the year. Details of attendance by all members at year ended 30 June 2022. scheduled meetings can be found below: The Committee’s key objective is to ensure that the Number of meetings Board comprises individuals with the appropriate skills, attended knowledge, experience and diversity to ensure that (quorum is Eligible McBride plc can fulfi l its purpose, achieve its vision Members three members) to attend andexecute its strategy. Je Nodland (Chair) 2 2 On 14 March 2022, we welcomed Regi Aalstad to the Board. Regi brings with her a wealth of knowledge in Regi Aalstad — — the fast-moving consumer goods sector and strong experience as a Non-Executive Director. She has already Steve Hannam 2 2 brought signifi cant value to the Board, and we look Igor Kuzniar 2 2 forward to the contribution she will make to enrich ourBoard discussions. Elizabeth McMeikan 2 2 Elizabeth McMeikan has agreed to take on the role of Alastair Murray 2 2 Senior Independent Director following Steve Hannam stepping down at the 2022 AGM. Elizabeth already has strong experience as a Senior Independent Director so we are confi dent that she will excel in this role. McBride plc Annual Report and Accounts 2022 92 Directors’ report As announced on 18 February 2022, Steve Hannam will The Board recognises the importance of ongoing training be stepping down from the Board immediately following and development to ensure Directors have the skills and the Annual General Meeting on 16 November2022. knowledge to discharge their duties eectively. This can TheBoard would like to thank Steve for his wise counsel take the form of briefing papers and/or presentations and guidance over the last nine years. Steve’s insight on strategic, regulatory and legislative developments and contribution to discussions have been invaluable and other topics of specific relevance to ensure that the to both the Board and the business, from which we Directors continually update their knowledge of, and will continue to benefit until the AGM. The Committee familiarity with, the Group’s business and the markets extended Steve’s term of appointment in February2022 in which we operate. During the year, the Board was to allow Regi time to settle into her role whilst he provided with external training on directors’ duties and continued to provide experienced advice. the market abuse regulations. Composition of the Nomination Committee All Directors have access to the Company Secretary, I chair the Nomination Committee and I was regarded who is responsible for ensuring that Board procedures as independent on appointment. I will not chair the are followed and that the Company complies with all Committee when it is dealing with matters of succession applicable rules, regulations and obligations governing to the Chairmanship of the Board. The Committee itsoperations. also comprises four other independent Non-Executive Key responsibilities of the Nomination Committee Directors, Steve Hannam, Elizabeth McMeikan, Alastair Board composition Murray and Regi Aalstad, and one non-independent • Review the ongoing composition of the Board and Non-Executive Director, Igor Kuzniar, representing our its Committees to ensure they have the necessary largest shareholder. expertise to discharge their role now and in the future. Further details on our key responsibilities can be found • Lead the appointment process for new Directors. inour Terms of Reference at www.mcbride.co.uk Succession planning and talent management Induction, development and support • Ensure adequate plans are in place for eective On appointment, all new Directors undergo formal succession planning at management and Board level. and in-depth induction programmes to provide them • Review the measures in place for the development with an appropriate understanding of the business and and retention of senior management. what is expected of them in their role as a director. This Diversity and inclusion involves site visits, meetings with senior management • Ensure a balance of skills, knowledge, experience and and provision of access to key documents relating to diversity on the Board. their role. External training may also be provided by • Encourage diversity throughout the Group and independent legal advisers in relation to the key duties oversee a diverse pipeline for succession. ofDirectors and required governance principles. • Review the Board’s monitoring of diversity and In March 2022 Regi Aalstad joined the Board. The Chief inclusion initiatives to ensure compliance with the Executive Ocer and Company Secretary assisted the Board’s policy. Chairman with the preparation and delivery of a tailored Governance comprehensive induction programme, designed to give • Oversee the Board performance and evaluation Regi a thorough overview and understanding of our process. business, with a focus on purpose, strategy and wider • Agree an action plan addressing the results of the business objectives. The induction sessions were mainly annual performance evaluation process. face to face, complemented by visits to our Middleton and Manchester sites, which involved a factory tour, meetings with senior management and the wider workforce and a meeting with the Company Secretariat. McBride plc Annual Report and Accounts 2022 93 Directors’ report ## Nomination Committee report continued ## Composition, succession and evaluation continued Committee activities Our principal activities during 2021/22 and up to the date of approval of this Annual Report were as follows: Board composition Discussed and recommended proposed changes to the Board of Directors. Non-Executive Director Oversaw the search and appointment for new Non-Executive Director, recruitment Regi Aalstad. Re-election of Directors After considering the individual contributions made by the Directors, recommended to the Board that all Directors be proposed for re-election at the 2022 AGM, other than Steve Hannam who is not standing for re-election. Review of performance Undertook a review of the Board and the Committee’s performance and and eectiveness during eectiveness as part of the Board evaluation. 2020/21 Conflicts of interest Informed the Board of updates to the Conflicts of Interest Register. and independence Reviewed the independence of all independent Non-Executive Directors. TheCommittee considered the following when assessing the independence ofSteveHannam, who has now served over nine years on the Board: • continuing to provide challenge to the Board and Committees; • eective workforce engagement as the designated Non-Executive Director for workforce engagement; • continuing eectively to act as a sounding board for the Chairman and provide support to the other Directors where necessary; and • remaining objective despite deep understanding of the business. It was agreed that Steve Hannam remains independent, despite serving over nine years, and would continue to serve on the Board until the 2022 AGM to allow our new Board member time to become accustomed with the Board. All other independent Non-Executive Directors were considered to have maintained independence throughout the year. External commitments During the year, Je Nodland was appointed to the Board of Pioneer Recycling and Director Inc. The Committee carefully considered the additional external commitment, performance review considering his other commitments and the time commitment that each appointment aorded. The Committee also took into consideration his level of contribution at Board and Committee meetings. Having carefully considered the appointment, the Board agreed that Je Nodland continued to be eective as Chairman and that an additional appointment would not aect this. The Committee will continue to review the external commitments of each Director on an annual basis. The performance of all Directors was assessed during the year and discussed with the Chairman. Details of the Directors’ external commitments can be found on pages 82 and 83. Board Inclusion and Received for review a Board-level policy on inclusion and diversity to ensure the Diversity Policy ongoing relevance of Board membership to a global manufacturing company in today’s world. The Committee updated the policy to bring it in line with Listing Rule 9.8.6R(9) that will be applicable to the Company for the financial year ending 30June 2023. McBride plc Annual Report and Accounts 2022 94 Directors’ report Board evaluation The Senior Independent Director, Steve Hannam, also As a constituent of the FTSE Fledgling, McBride plc led a meeting of the Non-Executive Directors (without is not required to conduct an externally facilitated the Chairman being present) to appraise the Chairman’s Board evaluation; however, the Board recognises the performance separately to the Board evaluation. Steve importance and benefits of continually monitoring discussed the feedback and any areas of development the Board’s eectiveness. In May 2022, the Board with the Chairman. conducted an online evaluation, led by the Chairman. The Board’s main strengths identified by the evaluation Theevaluation used BoardClic’s online system as the were: basis of the review. The respondents consisted of the • the Chairman’s ability to promote open discussion Board and the Company Secretary who anonymously that leverages the Board’s collective knowledge and answered questions derived from the BoardClic experience; question libraries. A report was prepared by BoardClic • a spirit of trust and openness between the Board and based on the results of the self-assessment. No the Executive Committee; interviews or document reviews were conducted as part • Director contribution to the formation of strategy; of this exercise, and the report was based solely on the information gathered through the questionnaires. • making a positive contribution to the organisation; and The evaluation covered themes regarding the operation • the eectiveness of the Committees. of the Board, value creation and strategy, talent and culture, management of risk, Board composition and dynamics, the Chairman and the Committees. Subsequently, the Chairman held one-to-one discussions with each Director to discuss areas of focus for the year ahead. Key areas of focus from our 2021/22 evaluation Actions to be implemented during 2022/23 Value creation More time to be set aside in Board meetings for strategic discussions; to identify and strategy Group strategic priorities and to assess and support the implementation of agreed strategic objectives. Talent management Continue to engage with employees through site meetings, manufacturing plant and culture visits and social occasions to provide the Board with better oversight of any issues. Continue to focus on talent and capability across senior leadership and developing further bench strength. Oversight of ESG Oversight of ESG ambitions and targets and how to further embed ESG intostrategy. McBride plc Annual Report and Accounts 2022 95 Directors’ report ## Nomination Committee report continued ## Composition, succession and evaluation continued Succession planning During the year, the Committee continued to develop its succession plan for all Board roles to ensure that appointments are made of individuals who have the appropriate skills, experience and personal characteristics. Our succession planning involves the following steps: | Identify those Identify those | Define the skills, | Identify | | Assess the | | Appoint | | --- | --- | --- | --- | --- | --- | --- | | | | | 4.3.2.1. | | 5. | | | roles that roles that | competencies | internal talent | | individuals to | | Individuals. | | are subject are subject | and experience | or external | | undertake the | | | | to formal to formal | required of | sources | | roles. | | | | succession succession | individuals | to which | | | | | | planning. planning. | to undertake | recruitment will | | | | | | | thoseroles. | be directed. | | | | | In 2020/21 the Board approved a formal succession The search was led by the Nomination Committee plan considering the Group’s strategy and structure, and co-ordinated by the Chief HR Ocer. Our search the size and composition of the Board, the terms of partners, Warren Partners, conducted an extensive appointment for the current Directors and the skills search to identify and engage with a diverse and broad and expertise that McBride plc will need going forward. pool of candidates across the agreed industry sectors. Short-term and medium-term plans were put in place At the longlist stage, Warren Partners engaged with for all roles subject to formal succession planning. 13candidates. They included commercial leaders, past The Committee has continued to work towards this and present, with deep experience in the consumer succession plan throughout 2021/22. products and/or retail sectors in Europe. Every eort was made to identify and approach suitably experienced Over the next year, the Committee will continue to female Non-Executive Directors in the region. Warren review the succession plan to ensure that it continues Partners’ research showed that the number of women to support the development of a diverse pipeline with on boards in markets such as France, Germany and particular focus on key senior employees. Where internal Holland are increasing, but only very slowly. There candidates are identified, ongoing development will be was also a higher number of women on boards across put in place to ensure that they are prepared for the role. the FMCG sector than in retailing. Therewere many Board appointments more experienced female Non-Executive Directors in The Committee has overall responsibility for leading Scandinavia – with countries such as Norway one of the the process for new appointments to the Board and first to introduce quotas. Thepicture was much bleaker ensuring that the Board has Non-Executive Directors for ethnicminorities. with relevant, diverse and complementary skills. During the search, several candidates based in Europe Prior to the appointment of Regi Aalstad, the Board had to consider whether they could meet the time reviewed the size and composition of the Board. demands of a Non-Executive Director appointment The Board also took into consideration the recent alongside their executive role and/or factoring the appointment of Alastair Murray, who joined the Board travel and logistics of flying into Manchester/London in August 2021 to replace Neil Harrington who stepped (or indeed other locations). Some needed to seek down as a Director and Chair of the Audit and Risk the necessary permissions from their Board before Committee, and the planned departure of Steve progressing their candidature. Hannam as a Director and Senior Independent Director Warren Partners was pleased to present and shortlist immediately after the 2022 AGM. three strong female candidates. This led to the successful The Nomination Committee was keen to add a appointment of Regi Aalstad on 14March2022. Regi Non-Executive Director with European experience in brings with her a wealth of knowledge in the fast-moving the consumer, own label and/or retailing sector and in consumer goods sector and strong experience as a due course to promote a current Board Director to the Non-Executive Director. Regi is a member of the Senior Independent Director role to oer continuity and Nomination, Remuneration and Audit and provide the Board with the required depth of experience RiskCommittees. of UK listed companies’ governance. The Board engaged Warren Partners to assist with the recruitment process. Warren Partners has no other connection with the Company or its individual Directors. The candidate specification was drawn up and agreed with Warren Partners for the European Non-Executive Director appointment. Besides focusing on specific knowledge and experience, the brief highlighted the benefit of all types of diversity, including gender. McBride plc Annual Report and Accounts 2022 96 Directors’ report Diversity and inclusion In 2022, the Committee approved a Board Diversity Policy, which sets out a commitment to encourage diversity and inclusion in the boardroom. The policy sets out to ensure that appointments are based on the best individual for the role and that the Board’s composition should have an appropriate balance of skills and diversity to meet the requirements of the business. TheCommittee considers that it has successfully achieved diversity in terms of diering experience, education, background, thinking styles and gender both on the Board and Executive Committee. However, the Committee acknowledges it must continue to move forward to embrace all aspects of diversity. As a global company with manufacturing sites in the EU and Asia, with six non-UK nationals on the Board and Executive Committee, the Company is well placed to continue on this journey. At 30 June 2022, two members of the Board were female (25%), three out of seven members (43%) of the Executive Committee were female and 34% of the direct reports to the Executive Committee were female. The objectives of the Board Diversity Policy are reviewed and recommended to the Board for adoption annually by the Committee. This year the Board updated the policy as it continues to strive for greater diversity on the Board and at executive and senior management level. The Board’s objectives are set out below: Objective Implementation and progress To ensure so far as McBride continues to work towards its diversity target of 40% female representation. possible that the The Committee is hopeful that any future recruitment will bring the Board closer to proportion of women achieving this target. on the Board is not less than40%. To ensure that at least In November 2022, Elizabeth McMeikan will take on the role of Senior Independent one of the senior Board Director when Steve Hannam steps down from the Board. positions (Chair, CEO, SID or CFO) is a woman. To ensure so far as The minimum target for female representation within the Executive Committee possible that the and their direct reports has been achieved and maintained throughout the year. proportion of women TheCompany will continue to ensure that there are no barriers for women rising to within the Executive senior positions within McBride. Committee and their direct reports is not less than 25%. To ensure so far as During the search for our new Non-Executive Director, our search partner, Warren possible that there is one Partners, uncovered ethnically diverse talent using technology such as LinkedIn and member of the board other online search engines, identifying potential candidates across a list of target from a minority ethnic companies as well as assessing ‘first-time’ Non-Executive Directors or candidates background. operating below board level. We will continue to ensure that these methods are used during recruitment to identify ethnically diverse talent to enable the Board to achieve this target. The Committee will continue to make recommendations for new appointments to the Board based on the best individual for the role, whilst ensuring that the Board’s composition has an appropriate balance of skills and diversity to meet the requirements of the business. 2022/23 objectives The Committee’s focus for 2022/23 will be on talent and capability across senior leadership and senior leaders’ development to support future plans. Je Nodland Chair of the Nomination Committee McBride plc Annual Report and Accounts 2022 97 Directors’ report ## Audit and Risk Committee report ## Audit, risk and internal control Alastair Murray Chair of the Audit and Risk Committee ## Over the course of 2022, we focused on the impact of ## signifi cant changes in the external environment, regulatory ## frameworks and macroeconomic conditions in our key markets. Dear shareholder Committee membership and meetings 2021/22 On behalf of your Board, I am pleased to present the The Committee met fi ve times in the year ended Audit and Risk Committee report for the year ended 30 June 2022, at appropriate times in the fi nancial 30June 2022. reporting and audit cycle. Details of attendance can In March 2021, the Department for Business, Energy be found below: and Industrial Strategy (BEIS) published a consultation Number of paper on its proposals for signifi cant reform to UK meetings audit and corporate governance. Recognising the attended (quorum is Eligible AuditCommittee’s responsibility for oversight of Members three members) to attend risk and internal controls, the Audit Committee was re-named in July 2021 as the Audit and Risk Committee (1) Alastair Murray (Chair) 4 4 (‘the Committee’). (2) The Committee is responsible for monitoring and Regi Aalstad — — reviewing the integrity of the Group’s fi nancial reporting Steve Hannam 5 5 systems and for assessing and providing assurance on the adequacy and e ectiveness of internal control (3) Neil Harrington 3 3 policies and procedures in place for the identifi cation, Elizabeth McMeikan 5 5 assessment and reporting of risk. The Committee also reviews and oversees the relationship with the (1) Alastair Murray was appointed as a Director on 2 August 2021. independent auditor, PwC, including the approval of the (2) Regi Aalstad was appointed as a Director on 14 March 2022. terms of their engagement and fees, their independence (3) Neil Harrington stepped down as a Director on 19 October 2021. and expertise, and the e ectiveness of the audit process. In addition to the disclosure requirements relating to audit and risk committees under the Code, the Committee’s report sets out areas of signifi cant andparticular focus for the Committee. McBride plc Annual Report and Accounts 2022 98 Directors' report Over the course of 2021/22, we carried out our usual work as set out on page 87. In addition, given the unprecedented inflationary impact on commodity prices due to global supply chain shocks post the Covid-19 pandemic, we gave special consideration to the impact of macroeconomic conditions and the external environment in our principal geographies and on the Group as a whole, especially as regards Group funding. # Composition of the Audit and Risk Committee Steve Hannam and Elizabeth McMeikan served on the Committee throughout the year. Neil Herrington stepped down on 19 October 2021 following the conclusion of the 2021 AGM, at which point I replaced him as Chair of the Committee. Regi Aalstad joined the Committee on 14 March 2022 when she was appointed as a Non-Executive Director. For the purposes of the UK Corporate Governance Code, I qualify as a person with 'recent and relevant financial experience' being a Fellow of the Chartered Institute of Management Accountants and having previously been the Chief Financial Officer for Premier Foods plc. I have previously held other senior finance roles at Dairy Crest plc and The Body Shop International plc. All members of the Committee are independent Non-Executive Directors, with a broad range of fast-moving consumer goods (FMCG), commercial, operational and financial experience relevant to the Group's business. In addition to the Committee members, the Chief Executive Officer, Chief Financial Officer, Chairman, Group Financial Controller, Head of Internal Audit and independent audit partner are regularly invited to attend and present at the Committee's meetings. During the year, PwC attended all five meetings. During the year I met separately with representatives of the independent auditor in the absence of the Executive Directors. I also had regular meetings with senior members of the Finance team and the Head of Internal Audit. This provided me with a better understanding and insight of the key risk and control issues raised, and ensured sufficient time was devoted to them at subsequent meetings. # Effectiveness of the Audit and Risk Committee As part of the annual Board evaluation, the effectiveness of the Committee was reviewed by questionnaire. It was determined that the Committee continues to be effective in its role. More details on how the annual Board evaluation was conducted can be found on page 95 of the Nomination Committee report. The Board is satisfied that each of the Committee members is independent and that the Committee as a whole has the necessary commercial, financial and audit expertise required to fulfil its responsibilities. The members of the Committee have a wide range of business, international and governance expertise both within the sector and elsewhere, as shown in their biographies on pages 82 and 83. The Board has determined that the Committee, as a whole, has competence relevant to the sector in which the Group operates. # Independent auditor The Audit and Risk Committee has primary responsibility for making recommendations to the Board on the appointment, re-appointment and removal of the independent auditor. This is submitted to shareholders for their approval at the Company's AGM. Following the audit tender carried out during 2021/22 and pursuant to the Committee's recommendation, a resolution for the re-appointment of PwC as independent auditor for the Company was proposed and passed at the last AGM in October 2021. As part of its oversight of the independent auditor, the Committee has undertaken its annual assessment of the auditor and audit process. This included the Committee's own evaluation of the reports and services received, such as the scope, strategy, approach, audit hours, quality of reports presented to the Committee, value added and outcome of the interim and year-end audits. The Committee also considered the professionalism, competence and objectivity, constructive challenge of management and key judgements of the auditor. In its assessment the Committee took account of the views of management and the Committee's own experience and interactions with the independent auditor throughout the year. The Committee has sought assurance from PwC of their compliance with applicable ethical guidance and, in addition, has taken account of the appropriate independence and objectivity guidelines. The Committee considers the risk of PwC withdrawing from the market as remote, since they are one of the top four accounting firms globally. The Committee has considered and approved the terms of engagement and fees of PwC for the year ended 30 June 2022. Fees payable by the Group to PwC totalled £1.1 million (2021 £0.9m) in respect of audit services. There were no contingent fee arrangements with PwC. # Audit tenure PwC was appointed as the Group's auditor on 14 November 2011. In accordance with the Companies Act 2006 and the EU Audit Regulation forming part of UK law (as amended by the EU Exit Regulations), a full tender for the appointment of the independent audit firm was undertaken during 2021, as a result of which, PwC were re-appointed as our independent auditor from 2021/22. The Committee remains satisfied with the level of independence, objectivity, expertise, fees, resources and general effectiveness of PwC and, accordingly, the Committee recommends (and the Board agrees) that a resolution for the re-appointment of PwC as independent auditor for the Company should be proposed at the forthcoming AGM in November 2022. The independent auditor is required to rotate the audit engagement partner every five years. The current audit engagement partner, Graham Parsons, began his appointment in September 2018, so this is his fourth audit cycle. McBride plc Annual Report and Accounts 2022 99 Directors’ report ## Audit and Risk Committee report continued ## Audit, risk and internal control continued Non-audit services The main roles and responsibilities of the Committee The Company maintains a detailed policy on the are set out in its Terms of Reference. The Committee engagement of the independent auditor for non-audit is authorised by the Board to investigate any matters services, designed to preserve their independence when within its Terms of Reference. The Terms of Reference performing the statutory audit. To avoid any conflict are reviewed annually to ensure that they are aligned of interest, types of non-audit work are categorised with best practice, including the recommendations of asthose: the ICSA: The Chartered Governance Institute. A copy ofthe Committee’s Terms of Reference is available on • for which the auditor can be engaged without referral the Group’s website www.mcbride.co.uk. to the Committee; • for which a case-by-case decision is necessary; and Committee activities The Committee received regular reports on the Group’s • from which the independent auditor is excluded. trading performance, as well as progress on both the In accordance with this policy, other providers are interim and full-year financial statements. Papers and considered for non-audit work and such work is other regular updates from both management and awarded on the basis of expertise, service and cost. PwC have also been provided to assist the Committee Thispolicy is regularly reviewed and a copy is available in assessing whether suitable accounting policies have from the Group’s website at www.mcbride.co.uk. been adopted and appropriate judgements made Fees payable by the Group to PwC totalled £2,000 bymanagement. (2021: £23,000) in respect of non-audit services, The significant matters considered, and judgements equating to 0.2% of audit fees received by PwC undertaken during the financial year, are set out during the same period (2021: 2.6%). These non-audit overleaf. The Committee is satisfied that the services involved other non-audit assurance services. presentation of the financial statements is appropriate TheCommittee is of the view that this has not and in accordance with the Group’s accounting policies. threatened the independence or objectivity of the The Committee concluded that there were no major independent auditor. concerns that had not been addressed, that there was The Company’s policy on the employment of former no evidence of systemic control weaknesses and that employees of the independent auditor was adhered the overall control environment was acceptable for a to during the financial year. No such employees were group of McBride’s size and nature. employed by any company in the Group. Going concern and viability In all other respects, the Committee is satisfied that the The Code requires the Board to state whether it independent auditor has exercised an appropriate level considers it appropriate to adopt the going concern of scepticism and challenge in relation to the Company’s basis of accounting in preparing the financial control environment. statements and identify any material uncertainties to Responsibilities of the Audit and Risk Committee the Company’s ability to do so over a period of at least The Committee’s principal responsibility is to monitor twelve months from the date of approval of the financial the Group’s financial reporting process and the integrity statements. Details of the Group’s going concern of the Group and Company financial statements, statement are on page 79. reviewing any significant financial reporting judgements The Committee thoroughly considered and contained therein. constructively questioned the forecast assumptions Additional responsibilities of the Committee are: underlying the going concern and viability statements • to review the formal announcements of the Group’s presented by management. The Committee assessed performance; the prospects of the Company over a three-year period • to consider the Group’s viability statement; following a robust assessment of principal and emerging risks aecting the Company, the business model, • to review the Internal Audit programme and forecasts and strategic plans. It also reviewed stress test the consideration of findings of any internal scenarios. Details of the assessment and the viability investigations and management’s response, and statement are set out on page 79. to review the eectiveness of the Internal Audit function; • to review and monitor the eectiveness of the Group’s financial, operational and compliance internal controls and risk management systems; and • to oversee the appointment, objectivity, independence, eectiveness and remuneration of the independent auditor, including the policy on the engagement of the independent auditor for non-audit services. McBride plc Annual Report and Accounts 2022 100 Directors' report # Significant judgements and estimates | Matters considered | Committee review and conclusions | | --- | --- | | Impairment reviews | Management's judgement on the need (or otherwise) to take impairment charges for goodwill or fixed assets was reviewed, considering the trading performance of, and the prospects for, each cash-generating unit (CGU). Recommendations were discussed and agreed with PwC. Details of the impairment reviews performed are outlined in note 12 to the financial statements. The reviews concluded that no impairment was required. | | Going concern status and longer-term viability statements | In line with typical market practice for most UK companies, the Board considered that an eighteen-month period from the reporting date, constitutes an appropriate period over which to provide its going concern statement. The Board determined that a three-year period to 30 June 2025 constitutes an appropriate period over which to provide its viability statement. Reviews of the Group's going concern status were carried out by the Committee at both the half and full-year period ends. Detailed papers setting out all the relevant considerations were tabled by management and discussed by the Committee together with PwC. The Group's base case forecasts, based on the Board-approved budget and three-year plan, indicate sufficient liquidity throughout the going concern and viability review period to ensure compliance with its minimum liquidity banking covenant. The Committee noted that if a severe but plausible downside risk scenario occurs, the Group would need to obtain a covenant waiver and increase its funding facilities compared to those that are currently committed, to ensure that the business can meet its obligations for the next eighteen months. To mitigate against these risks, the Group is currently negotiating to further increase liquidity by £25 million by extending invoice discounting facilities to unencumbered receivables ledgers, however there is no certainty that these negotiations will be successful. After reviewing the Group's liquidity position, financial forecasts, stress testing of potential risks and uncertainties, and based on the current funding facilities, the Directors have a reasonable expectation that the Group has sufficient resources to be able to meet its liabilities as they fall due over the three-year period ending 30 June 2025. The risk that the Group would become insolvent during this timeframe was considered remote. The Committee recommended to the Board that the going concern and viability statements on page 79 be approved. | | Exceptional items | The Committee reviewed the accounting treatment of exceptional items and agreed that the items listed in note 4 are exceptional in size and nature in relation to the Group and therefore it is appropriate to disclose them separately. | | Quality of earnings | Reviews of the quality of the earnings (material items of income or expense) and one-off items included in cash flow were carried out by the Committee both at the half and full-year period ends. The Committee agreed that sufficient disclosure has been made in the financial statements. | | Tax and treasury matters | The Committee continued to review the Group's tax strategy and monitor tax governance and compliance with transfer pricing rules. The Committee approved the Group's tax strategy for 2022; this can be found in the Corporate Policies section of the Group's website at www.mcbride.co.uk. The Committee received updates regarding the project to update the Group's transfer pricing policy for changes to operating structures and accountabilities following Programme Compass changes. The Committee approved the minor changes made to the Group's transfer pricing policy and were satisfied that Programme Compass did not result in any cross-border reorganisation or transfer of significant functions, assets or risks, meaning that the risk of exit tax is considered low. The Committee reviewed the Group's debt funding strategy and compliance with policies on currency, interest rate and commodity hedging transactions. The Committee continued to monitor performance versus all relevant covenants, to ensure the Group could continue to have sufficient funding capacity to deliver its strategy. The worsening financial performance in 2022, driven by exceptional input cost inflation, meant that normal debt cover and interest cover covenants had to be waived at the 31 December 2021 test date, and deferred at the 30 June 2022 test date. In the second half of the financial year, the Committee reviewed the Group's short-term cash flow forecasts to ensure that these remained above the minimum liquidity covenant agreed with RCF lenders following the waiver of the 31 December 2021 covenant test. | | Pensions | The Committee reviewed the performance of the Robert McBride Pension Fund ('the Fund'), a defined benefit pension scheme, closed to new members and future accrual, operated in the UK. The Cash flow Driven Investment (CDI) strategy, implemented during the first half of 2025, continues to operate in line with expectations, reducing volatility in the reported accounting deficit as the assets and liabilities of the Fund are better matched. Following the triennial valuation at 31 March 2021, the Company and Trustee agreed a new deficit reduction plan based on the scheme funding deficit of £48.0 million. The current level of deficit contributions of £4.0 million per annum, payable until 31 March 2028, will continue and this is expected to eliminate the deficit by 31 March 2028. | McBride plc Annual Report and Accounts 2022 101 Directors’ report ## Audit and Risk Committee report continued ## Audit, risk and internal control continued Significant judgements and estimates continued Matters considered Committee review and conclusions Covid-19 The Committee reviewed the impact of Covid-19 on the Group’s financial performance and the steps taken by management to mitigate supply risks as well as other risk considerations relating to the pandemic. This has resulted in a number of short-term operational issues, requiring tactical responses from the business, as well as long-term strategic matters and emerging risk considerations, incorporated into the significant and strategic risk topics identified by the Group’s risk management process. Task Force on The Committee provides oversight of the Group’s compliance with the recommendations Climate-related Financial ofTCFD. Disclosures (TCFD) A TCFD working group has been established to develop the Group’s approach to TCFD, raise awareness of climate-related risks around the business and to report on progress to the Committee. The TCFD working group also co-ordinates the adoption of TCFD best practices into the Group’s risk management processes and ensures visibility and oversight of the programme by the ESG Governance Committee. The Committee has reviewed progress against the various workstreams, the Group’s TCFD roadmap and the four disclosure pillars (Governance, Strategy, RiskManagement, and Metrics and Targets). The Group’s TCFD disclosure is set out on pages 56 to 69. Risk management framework The Risk Council considered any contextual changes The Group has an established risk management to the risks and whether over the course of the year framework to identify, evaluate, mitigate and monitor the risks had become more or less material based on the risks facing the business. The risk management impact and likelihood and ensured procedures were framework, which is aligned to ISO 31000:2018, in place for controlling the risks. Climate change and incorporates both a top-down approach to identify the environmental concerns, and increased regulation were Group’s principal risks and a bottom-up approach to both recognised as principal risks this year, having identify the Group’s operational risks. The framework previously been regarded as emerging risks. was updated and enhanced during the year to The principles of risk management have also been formalise a risk taxonomy framework, to help with embedded into the day-to-day operations of the the categorisation of risk types to which McBride is divisions and corporate functions, who are primarily exposed, whilst providing a common language for responsible for identifying and evaluating key risks the management and reporting of risk across the in their functional, operational and geographical organisation. In addition, a risk appetite framework domains, and escalating the same to the Risk Council. was also established during the year, to help with the TheCommittee monitors and challenges the adequacy assessment, communication, escalation and reporting of the Company’s procedures in respect of business risk of principal risks, within the context of determining the identification, assessment, monitoring and reporting. amount of risk that the Board is prepared to accept, On behalf of the Board, the Committee specifically tolerate or be exposed to at any point in time. considered those risks and uncertainties which Responsibility for the ongoing monitoring, were deemed significant and sought comfort from review, reporting and oversight of risks lies with management on any specific and underlying mitigating a cross-functional Risk Council made up of senior factors being used to manage, monitor and address employees from across the business. The council acts these. The current principal risks and uncertainties as a focal point for the exploration and evaluation of aecting the Group can be found on pages 71 to 78. strategic and emerging risks faced by the Group in The Committee ratifies the Risk Council’s Terms of pursuit of its strategic objectives. It provides regular Reference and is provided with biannual updates of reporting on key risk indicators to the Executive matters the Risk Council has considered. Information Committee and makes recommendations for on the matters considered by the Risk Council can be appropriate mitigation strategies in line with the Group’s found on page 71. risk appetite. It supports the embedding of the Group’s risk management framework through improved risk awareness, a more joined-up discussion on risk and the consideration of risk in key decision-making across the organisation. During the fourth quarter of the financial year 2022, an assessment of each principal risk was completed by the Risk Council. McBride plc Annual Report and Accounts 2022 102 Directors’ report Risk management framework Risk Council Executive Audit and Risk The Board • Provides a Group-wide Committee Committee • Monitors and reviews cross-functional forum • Reviews the strategic • Ensures actions to the eectiveness for the discussion, risk register and ratifies mitigate risks are of the Group’s risk monitoring and the assessment and put in place with management and oversight of risks and evaluation of risks ownership and internal control controls arising from conducted by the timescales to ensure systems business activities RiskCouncil the Group’s strategy • Approves the risk • Explores and evaluates • Agrees actions to can be delivered in appetite of the Group strategic, significant mitigate key risks the context of the • Reviews reports from and emerging risks facing the business risk management the Audit and Risk through access to that are escalatedto it framework Committee on risk internal and external • Monitors and management and • Ensures risk knowledge, expertise reviews keyfinancial, internal controls management is and insight non-financial and embedded across • Reviews key risk thebusiness internal controls, indicators submitted as well as the • Defines and establishes periodically by independent audit the risk appetite of individual functions process and reports. theGroup and divisions, before These include key risk • Considers key risk reporting and indicators escalated indicators escalated escalating the same by the Risk Council bythe Risk Council to the Executive and the Executive and works with the Committee Committee on an business to ensure • Supported by various ongoing basis adequate and eective risk forums within • Receives and reviews risk mitigation actions individual functions a report from the are in place for risks and divisions, focusing Risk Council on outside acceptable on the identification, the principal risks, tolerance thresholds assessment and discusses and confirms monitoring of risks the risk trend, overall andcontrols within eectiveness of the risk each division and control and monitoring function environment and considers whether any additional control improvement actions arerequired Risk management and internal control environment The Audit and Risk Committee is delegated the The Group’s risks are identified and managed through responsibility for reviewing the eectiveness of the various activities, including: Group’s systems of internal control, including all material financial, operational and compliance controls, key • business risk reviews; corporate policies, financial reporting framework and • major project and investment reviews; processes, the preparation of the Group’s consolidated • strategic risk assessments and specific functional risk financial statements, and also the overall risk mapping activities; management system in place throughout the year under • year-end self-assessment questionnaires supporting review, uptothe date of this Annual Report. key internal control procedures, with an in-built The Committee receives regular reporting from senior control validation, review and reporting mechanism; management and it has concluded that there continues • a quarterly follow-up process to review outstanding to be a robust and eective control environment in internal control actions; and place. The Committee also confirms that it has not been • a programme of audits within and across individual advised of any failings, breaches or weaknesses which processes, functions and sites by various internal it considers to be significant during the financial year, stakeholders, including Internal Audit and other and which had a material eect on the Group’s financial assurance providers within the business. performance. McBride plc Annual Report and Accounts 2022 103 Directors’ report ## Audit and Risk Committee report continued ## Audit, risk and internal control continued Risk management and internal control environment Regular meetings are held between the Head of Internal continued Audit and the Chair of the Audit and Risk Committee Key control procedures undertaken by the Group during and the Committee actively engages the Internal Audit the year included: function to determine the extent to which the overall internal control environment is robust and eective • monthly consolidated management accounts and how it can be enhanced further by considering and reviewed by the Executive Committee; evaluating specific process and control enhancements. • monthly reporting on commercial, operational, At the start of each financial year, the Committee financial and non-financial KPIs, with performance reviews and agrees the Internal Audit Plan, confirming discussed at both functional and Group level; its alignment with the Group’s strategic priorities • regular updates to the Board on the Group’s and key current and emerging risk management financialperformance and position against targets; considerations, whilst also ensuring there is appropriate • a comprehensive annual budgeting process focus on essential and integral compliance monitoring ultimately approved by the Board; requirements. There are in-built mechanisms to ensure • ongoing monitoring of the Group’s cash and debt the Internal Audit Plan remains flexible and agile in position with monthly reviews of working capital order to address any new and emerging risks that balances; mayarise throughout the year. • authorisation and control procedures in place for Every six months, the Committee considers the capital expenditure and other major projects, with resultsof any audits undertaken and the adequacy post-completion reviews to highlight issues and andtimeliness of management’s response to matters learnings, and to improve future performance and raised. Any recurring themes across processes, functions delivery; and or locations are challenged and these, along with • regular meetings and site visits with insurance and any significant audit findings, could result in specific risk advisers to discuss risk assessments, safety follow-up reviews or separate assurance projects, audits and performance against agreed objectives. informing and influencing the scope of workundertaken The Internal Audit function provides independent in the Internal Audit Plan, both forthecurrent year and assurance on the adequacy and eectiveness of the for subsequent years. Group’s risk management framework and is responsible The Committee continues to be satisfied that the for overseeing and monitoring the eective design Internal Audit function has sucient resource and and operation of internal control processes across provides a critical and eective assurance role to theGroup. Further details are set out below. theorganisation. Recommendations arising from the independent Fair, balanced and understandable auditor’s internal controls report are reviewed and Having given due and full consideration to all the actions to implement enhanced policies, processes matters referred to above, the Committee is satisfied andprocedures are discussed and agreed. that the financial statements present a fair, balanced The Board, through the Audit and Risk Committee, and understandable view and provide shareholders confirms that a robust assessment of the Company’s risk with the necessary information to assess the Group’s management and internal controls has been carried out position, performance, strategy and business model, and that no significant failings or weaknesses have been andhas undertaken to report accordingly to the Board. identified. The assessment covered financial, operational The Audit and Risk Committee report was approved and compliance controls together with financial bythe Board on 29 September 2022 and signed on its reporting processes. behalf by: Internal Audit The Internal Audit function provides assurance to Alastair Murray the Committee that the overall control environment Chair of the Audit and Risk Committee and specific control activities across the Group are adequate, eective and fit-for-purpose. The Internal Audit function provides a range of financial, operational, regulatory and compliance-driven audit activities, either performed by our independent, experienced and qualified in-house internal audit professionals, or in conjunction with skilled and experienced in-house personnel, at a central functional or a local divisional level. For specific audits, services have also been co-sourced from external professional firms, providing experienced, local resources to perform audit reviews, under the supervision and direction of the Internal Auditfunction. McBride plc Annual Report and Accounts 2022 104 Directors' report # Remuneration Committee report Annual statement ![img-3.jpeg](img-3.jpeg) Elizabeth McMeikan Chair of the Remuneration Committee The Committee seeks to support the delivery of McBride's strategy through establishing appropriate remuneration arrangements. Committee membership and meetings 2021/22 The Committee met five times in the year ended 30 June 2022. Details of attendance can be found below: | Members | Number of meetings attended (quorum a three members) | Eligible to attend | | --- | --- | --- | | Elizabeth McMeikan | 5 | 5 | | Regi Aalstad(1) | 1 | 1 | | Steve Hannam | 5 | 5 | | Neil Harrington(2) | 2 | 2 | | Alastair Murray(3) | 4 | 4 | | Jeff Nodland | 5 | 5 | (1) Regi Aalstad joined the Board as an independent Non-Executive Director on 14 March 2022. (2) Neil Harrington stepped down as a Non-Executive Director on 19 October 2021. (3) Alastair Murray joined the Board as a Non-Executive Director on 2 August 2021. # Dear shareholder On behalf of the Remuneration Committee, I am pleased to present the Directors' Remuneration report ('the Report') for the year ended 30 June 2022. This Report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule B of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 as amended ('the Regulations'), the UK Corporate Governance Code 2018 and the Financial Conduct Authority's Listing Rules and takes into account the accompanying Directors' Remuneration Reporting Guidance and the relevant policies of the shareholder representative bodies. The Report is split into three sections: the Remuneration Committee Chair's annual statement, Annual Report on Remuneration and the Remuneration Policy. At the 2022 AGM, we will be asking shareholders to vote on a single resolution: an advisory vote on the Annual Report on Remuneration, which provides details of how we have operated the approved policy, the remuneration earned by Directors for performance in the year ended 30 June 2022 and how the approved Remuneration Policy will be implemented for the coming year. McBride plc Annual Report and Accounts 2022 105 Directors' report # Remuneration Committee report continued Annual statement continued # Performance of the business The most significant external factor overshadowing this past year related to the unprecedented inflationary environment experienced across our industry. As we now emerge from the challenges of maintaining supply chains, mitigating unpredictable and extraordinary input cost inflation, and stabilising our finances, the business can start focusing on delivering the mid-term Compass benefits of improved profitability and growth. # 2021/22 remuneration outcomes All awards in relation to the financial year 2021/22 were made in accordance with our Remuneration Policy. The key decisions made by the Committee in respect of Directors' remuneration were as follows: - annual bonus (Executive Directors) - The outcomes for the Chief Executive Officer and Chief Financial Officer were determined by reference to performance against the agreed financial measure of Group adjusted EBITA(1) and the Committee's assessment of their individual performance during a challenging year. The methodology used to calculate the financial performance determined that there would be no payout this year. The Committee considered the progress against each Executive Director's personal objectives for the year across all aspects of the Company's strategy, cost reduction and value creation. Despite the progress made against these objectives, payout being contingent upon attainment of threshold performance of the financial measure; no payment against these objectives was made; - vesting of 2019 LTIP awards - Following a review of the last three years' performance against the pre-agreed measures, the Committee determined that the 2019 LTIP awards would not vest, as the performance measures had not been satisfied. Further detail can be found on page 122; and - taken as a whole, the Committee is satisfied that the overall pay outcomes for the year ended 30 June 2022 are appropriate and, accordingly, we have not applied any discretion to this year's outturns. # Remuneration principles and structure The Committee seeks to support the delivery of McBride's strategy through establishing appropriate remuneration arrangements. The link to strategy for each element of the Executive Directors' remuneration is described in the Remuneration Policy. The Committee has adopted remuneration principles which are designed to ensure that executive remuneration: - is transparent in respect of elements of remuneration, quantum, the rationale for targets and performance outcomes; - is simple to ensure that remuneration structures act as intended and are clearly understood; - discourages inappropriate behaviours or excessive risk-taking through clawback provisions and holding periods; - is predictable through the use of a range of outcomes and individual caps; - is aligned to the Group's strategy and the long-term sustainable development of the business; and - is aligned to the Company's purpose, values and strategy and to the Group's culture. These principles apply equally to those of senior management. # Directors' remuneration matters considered during and in respect of 2021/22 A summary of the key matters considered by the Committee during the year and since the year end in respect of 2021/22 is as follows: - the committee determined that the Executive Directors would not receive any increase to salary in 2021/2022; - in relation to the annual bonus, the Committee determined after the year end that no bonus would be payable to Executive Directors covering this period. No discretion was applied in reaching this decision. Further details can be found on page 121; - in relation to the LTIP awards granted in September 2019, the Committee reviewed the performance conditions after the year end and determined that performance for these awards was below the threshold levels. No discretion was applied in determining the level of vesting. The awards have, therefore, lapsed; - the Committee approved the grant of the 2021 LTIP and RSU awards; and - the Committee reviewed and approved the Chief Executive Officer's and Chief Financial Officer's personal objectives under the annual bonus scheme. (1) Please refer to APM in note 2. McBride plc Annual Report and Accounts 2022 106 Directors' report # Main duties: • to review the ongoing appropriateness and relevance of the Remuneration Policy; • to apply formal and transparent procedures regarding executive remuneration packages; • to consider and make recommendations to the Board on remuneration issues for the Chairman, Executive Directors and other senior executives, taking into account the interests of relevant stakeholders; • to ensure that failure is not rewarded and that steps are taken to mitigate loss on termination to contractual obligations where appropriate; and • to review the implementation and operation of any Company share option schemes, bonus schemes and Long-Term Incentive Plans (LTIPs) and to review the formal policy for shareholding requirements, both in employment and post-cessation. # Committee membership and attendance at meetings year ended 30 June 2022 Jeff Nodland satisfied the independence condition on his appointment as a Non-Executive Director. The Board is satisfied that the remaining members during the year were independent Non-Executive Directors. Meetings may be attended by the Chief Executive Officer on all matters except those relating to his own remuneration. The Chief Financial Officer, Igor Kuzmar (a Non-Executive Director), the Chief Hill Officer and the Company's independent remuneration consultants also attend meetings by invitation. The Company Secretary attended each meeting as Secretary to the Committee. No Director participates in any discussion relating to their own remuneration. The Terms of Reference of the Committee were reviewed during the year and a copy of the Committee's Terms of Reference is available on the Group's website www.mcbride.co.uk. # Remuneration Policy and shareholder engagement The Remuneration Policy, approved at the 2020 AGM, has operated as intended in year one and year two. Further details on application of the Policy can be found on pages 110 to 120. # Looking forward 2022/2023 • 2022 LTIP awards granted will change from ROCE measure to statutory net debt to EBITDA ratio, to ensure that the business focuses on maintaining a healthy cash flow, along side EPS with equal weighting. • 2022 LTIP the number of shares to be granted will be determined using the share price of 35 pence or the prevailing share price on the day of grant, if higher. The share price of 35 pence has been chosen as it reflects the consensus forecast of McBride's share price in the forthcoming year. The Committee will also carry out an overall assessment of the Company's underlying performance and the vesting outcome of the LTIP to ensure the vesting reflects Company performance and that there is no windfall gain. # Looking ahead Looking to the future, the Committee intends to continue to seek to align Executive Director remuneration with the experience of our shareholders. During the year ending 30 June 2023, the Committee will carry out a review of the Policy and consult with shareholders on any proposed significant changes in preparation for our next triennial binding vote on the Policy at our 2023 AGM. We shall continue to ensure appropriate alignment between executive pay arrangements and the wider workforce. We also look to continue to enhance our alignment of pay with McBride's strategy, Programme Compass. # Elizabeth McMelkan Chair of the Remuneration Committee McBride plc Annual Report and Accounts 2022 107 Directors’ report ## Remuneration Committee report continued ## Remuneration Policy The Remuneration Policy was approved by shareholders at the AGM held on 23 November 2020. The Remuneration Policy as approved by shareholders is available on our website www.mcbride.co.uk. We have included a version of the Remuneration Policy below, which has been updated where appropriate to reflect the passage of time. Remuneration Policy principles The Group’s approach for all employees, including executives, is to set remuneration that is closely aligned with our underlying Group strategy, takes account of market practice, economic conditions, the performance of the Group and of teams or individuals, recognising any collective agreements that may apply as well as any legal or regulatory requirements in jurisdictions where it operates. Our Policy aims to attract, motivate and retain suitably eectiveemployees. The Committee follows the following broad principles when considering the design, implementation and assessment of remuneration in line with the recommendations set out in Provision 40 of the 2018 UK Corporate Governance Code: Clarity The Committee is committed to being transparent in respect to the elements of remuneration, quantum, the rationale for targets set and performance outcomes. The Committee engages with shareholders and is keen to understand their views and priorities when considering key remuneration issues and any major changes. Simplicity The Committee is mindful of the need to avoid overly complex remuneration structures which can be misunderstood and deliver unintended outcomes. TheCommittee is confident that the remuneration structure and its operation isunderstood by participants and supports the overall strategic objectives. Risk Targets are reviewed to ensure they reflect the overall risk appetite set by the Boardand do not encourage inappropriate behaviours or excessive risk-taking. Mitigation is provided through the clawback provisions (which are in line with current best practice expectations) and through the discretion the Committee hastooverride the vesting result in exceptional circumstances. In addition, holding periods are in place for awards under the RSU plan, the DBP andthe LTIP. Predictability The Committee assesses the potential outcome of future reward by reference to potential payouts that can be received at a range of outcomes (minimum, mid-point and maximum). Individual caps apply to participation in our incentive plans. McBride plc Annual Report and Accounts 2022 108 Directors’ report Proportionality The Committee seeks to ensure that targets for annual bonus and long-term incentives are aligned with the Group’s strategy and the long-term sustainable development of the business. The focus of our remuneration strategy is on rewarding performance – the majority of executive remuneration is performance based and only payable if demanding performance targets are met. The majority of variable pay is delivered in the form ofshares. When setting targets for variable elements of pay, the Committee carefully considers the targets to minimise the risk of excessive reward by reference to the maximum potential award that could be achieved. When assessing performance against annual bonus and LTIP, the Committee also considers: • the overall performance of the business; • the quality of earnings when assessing the achievement of financial targets; and • the market in which the Company operates. Both annual bonus and LTIP payments are at the ultimate discretion of the Committee. The Committee retains discretion to override formulaic outcomes produced by the assessment of performance against predetermined performance conditions and scale back awards where, in the Committee’s view, the payout levels do not reflect the performance of the wider business over the period, individual performance or where events happen that cause the Committee to determine that the conditions are unable to fulfil their original intended role. Any exercise of discretion will be fully disclosed to shareholders. Notwithstanding that the RSUs, which are an element of our fixed pay, are not subject to performance conditions, the Committee is mindful of the potential for windfall gains when awards vest and downward discretion may also be applied to the actual number of shares to be granted and the vesting of RSU awards where exceptional circumstances exist. Alignment to culture The Committee believes that the overall design of the Group remuneration strategy is consistent with the Company’s purpose, values and strategy and is aligned with the Group’s culture. In particular, the Committee has taken steps to improve the alignment of interests between senior management and shareholders through the RSU plan and the matching awards under the DBP, both of which are designed to increase share ownership. McBride plc Annual Report and Accounts 2022 109 Directors’ report ## Remuneration Committee report continued ## Remuneration Policy continued Remuneration Policy table The following table summarises each element of our Remuneration Policy for the Executive Directors, explaining how each element operates. Element: Executive Director base salary Purpose and link • To ensure the Group is able to recruit and retain high-calibre executives. to strategy Operation • Salaries are set by the Committee taking into account individual experience, performance, skills and responsibilities, prevailing market conditions (by reference to companies of a similar size and complexity and other companies in the same industry) and internal relativities. • Salaries are paid monthly in arrears by bank transfer and are normally reviewed annually with any changes eective from January. Maximum • Details of current salaries of the Executive Directors are detailed on page 121. • Salaries are normally reviewed annually and may be increased each year. There is no maximum, but increases will generally be in line with those awarded to the Group’s workforce, as well as reflective of the overall financial performance of theGroup. • Increases beyond this may be awarded in limited circumstances, such as where there is a change in responsibility, experience or a significant change in the scale of the role and/or size, value and/or complexity of the Group. Performance measures • Not applicable. Element: RSUs Purpose and link to • To ensure the Group is able to recruit and retain high-calibre executives. strategy • To provide enhanced alignment to shareholders. Operation • Annual awards, as part of fixed pay. • Awards will normally vest three years from the date of grant. • Awards will be subject to a two-year post-vesting holding period, less any shares required to be sold to cover withholding tax. • Not pensionable, or ‘salary’, for the purposes of bonus, LTI or payments for loss of oce. (1) | | • Subject to malus and clawback | . | | --- | --- | --- | | Maximum | • Awards of up to 15% of salary may be granted annually. | | | Performance measures | • Not applicable. | | (1) Malus and clawback apply in the event of an error in calculation, a material misstatement of the financial results, serious misconduct by a participant, corporate failure or reputational damage. McBride plc Annual Report and Accounts 2022 110 Directors’ report Element: benefits Purpose and link to • To provide market-competitive benefits, in line with those provided to other strategy Group employees. Operation • Benefits may include private medical insurance, sick pay, a fully expensed car (orequivalent cash allowance), disability and life assurance cover. • Some benefits may be provided in the case of relocation, such as removal expenses, and in the case of international relocation might also include such items as cost of accommodation, children’s schooling, home leave, tax equalisation and professional advice etc. • The Company has the ability to reimburse the tax payable (grossed up) on any business expenses captured as taxable benefits. Maximum • The benefit provision is reviewed periodically. No maximum level is set on the value or cost of benefits provided. Performance measures • Not applicable. Element: pension Purpose and link to • Retirement benefits are regarded as an important element of the Group’s basic strategy benefits package to attract and retain talent. Operation • Membership of the Company’s defined contribution, or similar, pension scheme, or in agreed circumstances, a cash allowance in lieu of pension. Maximum • Up to 8% of base salary, or such other amount in line with that available to the majority of the UK general workforce, from time to time. Performance measures • Not applicable. McBride plc Annual Report and Accounts 2022 111 Directors’ report ## Remuneration Committee report continued ## Remuneration Policy continued Remuneration Policy table continued Element: annual bonus Purpose and link to • The purpose of the annual bonus is to incentivise delivery of the Group’s financial strategy and non-financial objectives and to ensure that Executive Directors and senior executives are fairly rewarded for their contribution to the success of the Group. • To provide alignment of Directors’ interests to the interests of shareholders through enhanced shareholdings. Operation • Performance conditions are set independently by the Committee at the start of each year. • Performance criteria include the financial targets of the Group as agreed by the Board and specific annual targets based on clear and measurable objectives that underpin, and are key to achievement of, the Group’s strategy. • Personal objectives are reviewed by the Committee to ensure they contribute to the strategic aims of the Group. • To further align the interests of Directors with shareholders, 30% of the bonus is paid via the Deferred Annual Bonus Plan (DBP). • Executive Directors can voluntarily invest any remaining bonus, up to a maximum of 70% of salary, into the DBP. Invested sums will be matched with additional shares on a 1:2 ratio. • Awards granted under the DBP vest after three years and are normally subject tothe Director remaining employed by the Group at the end of that period. • A ‘dividend equivalent’ provision is also available on the DBP shares at the discretion of the Committee, enabling dividend equivalent payments to be paid, in cash or shares, on any shares that vest. • All bonus payments are at the ultimate discretion of the Committee and the Committee retains an overriding ability to ensure that overall bonus payments reflect its view of corporate performance during the year when determining the final bonus amount to be awarded. • Both the cash and deferred share elements of the annual bonus are subject to (1) | | | malus and clawback | . | | --- | --- | --- | --- | | Maximum | • 100% of base salary. | | | | Performance measures | • At least 80% of the bonus will be assessed against a sliding scale of challenging | | | and stretching financial performance targets, with no more than 20% of the bonus being based on the achievement of specific and measurable personal targets. Irrespective of achievement against the personal targets, no bonus is payable unless a minimum level of financial performance is achieved. • The Committee retains the ability in exceptional circumstances to adjust the targets and/or set dierent measures and alter weightings for the annual bonus if certain events occur, such as a material divestment of a Group business, which cause it to determine they are no longer appropriate and a change is required to ensure that they achieve their original purpose and are not materially less dicult to satisfy. (1) Malus and clawback apply in the event of an error in calculation, a material misstatement of the financial results, serious misconduct by a participant, corporate failure or reputational damage. McBride plc Annual Report and Accounts 2022 112 Directors’ report Element: LTIP Purpose and link to • The objectives of the LTIP are to align the long-term interests of shareholders strategy andmanagement and reward achievement of long-term, stretching targets. • Awards are made to Executive Directors and to senior executives who have asignificant influence over the Group’s ability to meet its strategic objectives. Whilst it is not a requirement of the LTIP, senior executives are encouraged to usethe scheme to increase their share ownership in the Company. Operation • Annual awards are granted, subject to individual performance and Committee discretion. The awards vest after three years subject to continued employment and the satisfaction of challenging performance conditions. A two-year post-vesting holding period applies to all shares (less any shares required tobesold to cover withholding tax) that vest. (1) • LTIP awards are subject to malus and clawback . • The Committee will operate the LTIP according to its respective rules and in accordance with the Listing Rules and HMRC rules, where relevant. Maximum • 125% of salary for the Chief Executive Ocer and 110% of salary for the ChiefFinancial Ocer and any other Executive Director in any financial year. TheCommittee reviews the quantum of awards annually to ensure they are in line with market levels and appropriate given the performance of the individual and the Company. • Actual award levels to Executive Directors are set out in the Annual Report on Remuneration. Performance measures • Vesting of awards would normally be based on key financial measures of performance (such as, but not limited to, earnings per share (EPS), ROCE), selected by the Committee and measured over a period of no less than three financial years. EPS is a measure of the Company’s overall financial success and ROCE is a key performance indicator for the Group. • Dierent performance measures and/or weightings may be used for future awards to help drive the strategy of the business. • Targets are set by the Committee for each award on a sliding scale basis. No more than 25% of awards will vest for threshold performance, with full vesting taking place for equalling or exceeding maximum performance conditions. • The Committee retains the ability in exceptional circumstances to adjust the targets and/or set dierent measures and alter weightings for the LTIP if events occur, such as a material divestment of a Group business, which cause it to determine they are no longer appropriate and a change is required to ensure that they achieve their original purpose and are not materially less dicult to satisfy. (1) Malus and clawback apply in the event of an error in calculation, a material misstatement of the financial results, serious misconduct by a participant, corporate failure or reputational damage. McBride plc Annual Report and Accounts 2022 113 Directors’ report ## Remuneration Committee report continued ## Remuneration Policy continued Remuneration Policy table continued Element: Non-Executive Director fees Purpose and link • To ensure the Group is able to attract and retain experienced and skilled to strategy Non-Executive Directors able to advise and assist with establishing and monitoring the strategic objectives of the Company. Operation • The remuneration of the Chairman and the Non-Executive Directors is payable in cash fees. • They are not eligible to participate in bonus or share incentive schemes. • Their services do not qualify for pension or other benefits. • Expenses incurred for advice in respect of UK tax returns for non-UK NEDs may be reimbursed. • Fees are paid monthly and reasonable expenses are reimbursed where appropriate. Tax may be reimbursed if these expenses are determined to be a taxable benefit. • Fee levels are determined by the full Board with reference to those paid by other companies of similar size and complexity, and to reflect the amount of time they are expected to devote to the Group’s activities during the year (and may include additional ad-hoc payments to reflect increased time commitments over a short period). • A supplementary fee is also paid to Committee Chairs and to the Senior Independent Director to reflect their additional responsibilities. • An additional allowance of up £50,000 p.a. may be payable to the Chairman to compensate for the additional time commitment involved in travelling both to attend Board meetings and to generally carry out the duties as Chairman. • An additional allowance of up to £15,000 p.a. may be paid to NEDs based overseas for any additional time commitment involved in travelling both to attend Board meetings and to generally carry out the duties as a NED. Maximum • Details of the current fees for the Chairman and Non-Executive Directors are set out on page 130. The aggregate annual sum for Non-Executive Director fees cannot exceed £600,000 p.a. The Company does not intend to seek shareholder approval for any increase to this maximum in the short to medium term. Performance measures • No element of the Chairman’s nor Non-Executive Directors’ fees is performance related. McBride plc Annual Report and Accounts 2022 114 Directors’ report Element: share ownership guidelines/requirements Purpose and link to • Executive Directors and other senior executives are required to build and strategy maintain a shareholding in the Company as this represents the best way to align their interests with those of shareholders. Levels are set in relation to earnings and according to the post held in the Company. • Non-Executive Directors are encouraged to build and maintain a shareholding. Operation • The expectation is that executives will build up to these levels over a period of time, through retaining shares received under the Company’s incentive arrangements, net of sales to settle tax and/or shares purchased in their own right. • Vested but unexercised LTIP awards, unvested RSU awards and deferred shares will count towards this requirement, on a net of tax basis. • The Executive Directors are also required to maintain their shareholding requirement or the actual shareholding on departure, if lower, for a minimum of twelve months after cessation of employment. The post-cessation shareholding obligation will apply to shares acquired (net of tax) under awards granted under this and future policies. Shares purchased from the executives’ own funds would not be included. Maximum • There is no maximum; however, Executive Directors are required to build and maintain a shareholding equivalent to 200% of salary, 300% for the CEO and 50% of salary for other senior executives. • Newly appointed Executive Directors would normally be required to achieve the required shareholding within a five-year period of appointment to the Board. • The guideline for NEDs is to hold shares equivalent to 100% of their annual fee. Performance measures • Not applicable. Committee discretion in the operation of variable pay schemes The Committee operates the Group’s incentive plans according to their respective rules and in accordance with HMRC requirements and the Listing Rules, where relevant. The Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and administration of the plans. The extent of such discretion is set out in the relevant plan rules and the Remuneration Policy table above. The Committee will apply certain operational discretions to ensure the ecient administration of the plans which include, but are not limited to: • selecting the participants; • timing; • quantum of awards, including determining the actual number of shares granted, taking into account share price and wider factors; • setting the performance criteria and respective weightings of performance measures; • determining the extent of vesting based on the assessment of performance; • determining ‘good leaver’ status; • the form of payment; and • making appropriate adjustments required in certain circumstances, including overriding formulaic outcomes and scaling back awards in respect of variable pay outturns. The Committee may vary the performance conditions applying to share-based awards if an event occurs which causes the Committee to consider it would be appropriate to amend the performance conditions, if the Committee considers the varied conditions are fair and reasonable and not materially less challenging than the original conditions. Any use of such discretion would, where relevant, be explained in the Annual Report on Remuneration. Anyproposed application of this discretion to make an upward adjustment would be the subject of consultationwith shareholders. McBride plc Annual Report and Accounts 2022 115 Directors’ report ## Remuneration Committee report continued ## Remuneration Policy continued Remuneration Policy table continued Statement of consideration of shareholder views The Committee considers the feedback from shareholders at the AGM each year and guidance from shareholder representative bodies more generally. In addition, the Committee consulted proactively with major shareholders in the development of the approved Policy and, based on shareholder feedback, changes were made to the Policy that was approved. Statement of consideration of employment conditions elsewhere in the Group Workforce remuneration data is provided to the Committee on a regular basis by the Chief HR Ocer. Recognising there are good reasons for the level and structure of executive pay to dier from that of the wider employee population, the Committee will continue to consider pay across McBride, reflecting on the appropriate alignment with the principles which guide executive remuneration across the wider employee population. Dierences in the Policy for executives relative to the broader employee population The Policy for the Executive Directors is informed by the structure operated for the broader employee population. Pay levels and components vary by organisational level but the broad themes and philosophy remain consistent across the Group: • salaries are reviewed annually with regard to the same factors as those set out in the Policy table for Executive Directors; • members of the Executive Committee participate in an annual bonus plan aligned with that oered to the Executive Directors. Other members of senior management participate in the same plan, dependent on performance of the Group or performance of business division, according to their role and level; • members of the senior management team can be considered for awards under the LTIP. This is intended to encourage share ownership in the Company and align the management team with the strategic business plan; and • eligibility for and provision of benefits and allowances varies by level and local market practice. Element: recruitment remuneration Purpose and link • To ensure the Group is able to recruit and retain high-calibre Executive and to strategy Non-Executive Directors. Operation • New Director remuneration arrangements will be based upon and within the limits of the various elements as set out on pages 129 and 130. In addition: • Executive Director buy-out payments may be made in exceptional circumstances, typically when these are considered to be in the best interests of the Company to facilitate the buy-out of value forfeited on joining the Company for an external appointment. These payments would typically be in the form of an enhanced LTIP award under the rules and maximums permitted under the Company’s LTIP rules at that time or under the new Restricted Share Plan, if required, using Listing Rule 9.4.2. Such payment would take account of remuneration being relinquished, including the nature and time horizons attached to such remuneration and the impact of any performance conditions. In exceptional circumstances, payments could be made in the form of a cash payment which would normally be subject to clawback in certain situations, in line with other elements under the Company’s Remuneration Policy. • Relocation packages, generally consisting of out-of-pocket expenses, together with any additional costs solely attributable to the relocation may be oered in situations deemed essential in order to carry out the relevant role successfully. Any package will be designed to ensure the new recruit becomes eective in their role as soon as possible, with minimal distractions from any relocation. • In respect of internal promotions, any remuneration commitments made before such promotion (whether or not they would fall within the principles of the Company’s current Remuneration Policy) may form part of that Director’s remuneration package, with the expectation that any such commitments would be phased out over time. Maximum • It is intended that the value of any element of normal remuneration will generally be on the same basis as the existing Directors (pro-rated where appropriate dependent on time of joining the Company) and elements such as buy-out payments being no higher than the expected value of the forfeited arrangements. McBride plc Annual Report and Accounts 2022 116 Directors’ report Element: Executive Director compensation on loss of oce Purpose • On termination of an Executive Director’s service contract, the Committee will seek to and link to provide the minimum compensation applicable to the individual’s employment contract. strategy • The Committee will take into account the departing Director’s duty to mitigate their loss when determining the amount of compensation. Operation • In the event of an early termination, any compensation commitments will be within the principles of the Company’s approved Remuneration Policy (or if an amendment to the Policy authorising the Company to make the payment has been approved by shareholders). • Directors’ service contracts confirm that the Company may terminate the contract with immediate eect by making a payment equal to base salary for any unexpired period of notice. The Company also has the option to pay notice month by month that would reduce or cease if the departing Director obtained other employment. • There are no agreements between the Company and its Directors or employees providing for additional compensation for loss of oce or employment (whether through resignation, purported redundancy or otherwise) that may occur in the event of a takeover bid. It is also the Company’s policy not to include liquidated damages clauses in service contracts, unless there is a clear explainable benefit for the Company in doing so. None of the Executive Director service contracts contain any such liquidated damages provision. • Statutory redundancy payments will be made as appropriate. • Costs attributable to outplacement and/or legal fees associated with the termination of an Executive Director’s service contract may be paid by the Company, where appropriate. • Payments may be made by the Company where appropriate to settle claims brought against the Company, such as unfair dismissal. Maximum In circumstances in which a leaving Director may be entitled to pursue a legal claim, the Company may negotiate settlement terms if it considers this to be in the best interests of the Company and, with the approval of the Committee on the remuneration elements therein, enter into a settlement agreement. McBride plc Annual Report and Accounts 2022 117 Directors’ report ## Remuneration Committee report continued ## Remuneration Policy continued Remuneration Policy table continued Element: Executive Director compensation on loss of oce continued Normal exit Good leaver Change of control (termination for (termination for reasons of (excludes a reorganisation or reasons of resignation death, ill health, retirement, reconstruction where ownership or dismissal where the redundancy, or at the does not materially change). Committee does not discretion of the Committee). exercise discretion to treat the leaving Director as a good leaver). | Base salary, | Base salary, pension | Base salary, pension and | If within twelve months of a | | --- | --- | --- | --- | | RSUs, | and benefits will be | benefits will be paid/provided | change of control the individual | | pension | paid/provided to the | to the date employment ends | is given notice or there is a | | andbenefits | date employment | or payment in lieu of notice | material change to their duties | | | ends or payment in | made. Any untaken holiday is | precipitating departure, there | | | lieu of notice made. | pro-rated to the leaving date. | would be an additional payment | | | Any untaken holiday is | | due of 18months’ salary for the | Unvested RSUs (at Committee pro-rated to the leaving CEO and twelve months’ salary discretion) will vest at the date. for the CFO and other Executive normal vesting date unless the Directors. Unvested RSUs will Committee determines they lapse. Any vested RSUs shall vest on an earlier date. Any unvested RSUs will vest on will normally remain the date of the relevant event, Any vested RSUs will normally subject to the two-year subject to pro-ration by reference remain subject to the two-year post-vesting holding to a twelve-month period from post-vesting holding period. period. the grant date (as defined) and the two-year post-vesting holding period will end. Annual No entitlement for year Annual bonus is pro-rated Extent to which performance bonus of exit. Payments in (based upon timing) and requirements are satisfied in year earlier years may be subject to performance for determines level of annual bonus. subject to clawback in year of exit. If within twelve months of a certain circumstances. | Any DBP awards, which include | change of control the individual | | --- | --- | | compulsory and voluntary | is given notice or there is a | | deferral and matching shares, | material change to their duties | | (at Committee discretion) | precipitating departure, there | | vest in full at either the normal | would be an additional payment | | vesting date or on cessation | due of 150% of target bonus for | | ofemployment. | the CEO and 100% for the CFO | and any other Executive Directors. Any unvested DBP awards will vestin full on the date of the relevant event. LTIP Unvested awards lapse. Unvested awards may be Unvested awards may be Vested awards may be pro-rated based upon the rules pro-rated based upon the rules subject to clawback in of the LTIP plan (at Committee of the LTIP plan (at Committee certain circumstances. discretion) and vest on either discretion) andvest on the date of Anyvested awardswill the normal vesting date or the relevant event. Vested awards normally remainsubject cessation of employment. may be subject to clawback in to the two-year Vested awards may be certain circumstances and the post-vesting holding subject to clawback in certain two-year post-vesting holding period. circumstances. Anyvested period willend. awards will normally remain subject to the two-year post- vesting holding period. McBride plc Annual Report and Accounts 2022 118 Directors’ report Executive Directors’ service contracts Service contracts stipulate that the Executive Directors will provide services to the Company on a full-time basis. Copies of the Executive Directors’ service contracts are available for inspection at the Company’s registered oce. Date of service Notice Executive Director (1) contract period (2) Chris Smith 11 June 2020 6 months Mark Strickland 4 January 2021 6 months (1) All Directors are re-elected on an annual basis. (2) By either the Company or the Executive Director. In exceptional circumstances, notice periods of up to a maximum of twelve months may be oered to newly recruited Directors. The service contract is of an unlimited duration. The contracts contain restrictive covenants for periods of up to six months post-employment relating to non-competition and non-solicitation of the Group’s customers, suppliers and employees and indefinitely with respect to confidential information. In addition, they provide for the Group to own any intellectual property rights created by the Directors in the course of their employment. The employment contracts for Executive Directors are structured on a similar basis to the US ‘double trigger’ in the event of a change of control. If the change of control is followed within twelve months by the Executive Director being given notice or there is a material change in their duties precipitating their departure, the Chief Executive Ocer would receive an additional payment equivalent to 18 months’ salary and 150% of target bonus for the relevant period. For the Chief Financial Ocer and any other Executive Director, this payment will be by reference to twelve months’ salary and 100% of target bonus. Remuneration performance scenarios 2022/23 The Executive Directors’ remuneration packages comprise both core fixed elements (base salary, RSUs, pension and benefits) and performance-based variable pay. The charts below illustrate the composition of the Chief Executive Ocer’s and Chief Financial Ocer’s remuneration packages (£’000) at minimum, target, maximum andmaximum +50% share price growth for 2022/23 in line with policy. £1,817,000 | 1,800,000 | | | 1,800,000 | | --- | --- | --- | --- | | 1,600,000 | £1,542,000 | | 1,600,000 | | 1,400,000 | | 45% | 1,400,000 | 36% | 1,200,000 | | 1,200,000 | | | | --- | --- | --- | --- | --- | | | £1,048,000 | | | £1,038,000 | | 1,000,000 | | 1,000,000 | £892,000 | | 26% | 800,000 | | | | | 800,000 | | | 42% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 28% | 24% | | | 32% | | | | | 21% | | | | £615,000 | | | | 600,000 | £554,000 | | | | 600,000 | | | | 24% | | | | | | | | | | | | | | | 30% | | 25% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 400,000 | | | | | | | | | 400,000 | | £338,000 | | 21% | | | | | | | | 100% | | 53% | 36% | | 31% | | | | | | | | | | 200,000 | | | | | | | | | 200,000 | | 100% | | 55% | 38% | | 33% | | | 0 | | | | | | | | | 0 | | | | | | | | | | | Minimum Maximum | | Target | | Maximum +50% | | | | Minimum Maximum | | Target | | Maximum +50% | | | | | | | | | | share price growth | | | | | | | | share price growth | | | | | Fixed pay | | Annual bonus Long-term incentive | | | | | | | Fixed pay | Annual bonus Long-term incentive | | | | | (1) Fixed pay comprises salary for the financial year beginning 1July2022, RSUs, benefits and cash allowance in lieu of pension. (2) Bonus includes both the cash element and the deferred share element but it is assumed that no voluntary deferral takes place and therefore no matching award is made. (3) Assumptions when compiling the charts are: • minimum = fixed pay only (i.e. salary, RSUs face value at grant (i.e. 15% of annual salary), benefits and pension); • target = fixed pay plus 50% of annual bonus payable and 50% vesting of LTIP; • maximum = fixed pay plus 100% of annual bonus payable and 100% of LTIP vesting; and • maximum +50% share price growth = fixed pay plus 100% of annual bonus payable and 100% of LTIP vesting at a 50% higher share price than when the LTIP was awarded. CEO CFO 2,000,000 2,000,000 McBride plc Annual Report and Accounts 2022 119 Directors' report # Remuneration Committee report continued ## Remuneration Policy continued ### External appointments Executive Directors are permitted, where appropriate and with Board approval, to assume non-executive directorships of other organisations. Where the Company releases the Executive Directors to carry out non-executive duties, they will be required to disclose the fact that they retain any earnings and the amount of such remuneration. During the year ended 30 June 2022, neither Executive Director held any external non-executive directorships. ### Non-Executive Directors' letters of appointment Set out below is information regarding the dates of the letters of appointment and notice periods for the Chairman and the Non-Executive Directors. Copies of the letters of appointment are available for inspection at the Company's registered office. | Director^{(1)} | Latest letter of appointment | Date first appointed to the Board | Notice period^{(2)} | | --- | --- | --- | --- | | Jeff Nodland | 21/06/2019 | 26/06/2019 | 3 months | | Steve Hannam | 03/09/2019 | 04/02/2013 | 3 months | | Elizabeth McMekan | 14/11/2019 | 14/11/2019 | 3 months | | Neil Harrington^{(3)} | 03/09/2019 | 03/01/2012 | 3 months | | Igor Kuznar | 31/05/2019 | 03/06/2019 | 3 months | | Alastair Murray | 01/07/2021 | 02/08/2021 | 3 months | | Regi Aalstad | 17/02/2022 | 14/03/2022 | 3 months | (1) All Directors stand for re-election on an annual basis at the AGM. (2) Terminable at the discretion of either party. Appointments may be terminated without compensation in the event of them not being re-elected by shareholders or otherwise in accordance with the Articles. Appointments are of an unlimited duration subject to note 1 above. (3) Neil Harrington stood down as a Non-Executive Director on 18 October 2021. Any appointment for more than nine years in total will be subject to annual review by the Board, as well as shareholder approval. Consideration will be given to the importance of refreshing the membership of the Board and avoiding any undue reliance on any particular individual, whilst assessing the contribution made by that individual, together with the ongoing commitment required to the role and the benefit gained from any continuity of handover with newer members of the Board. Further information on the Board's assessment of independence and succession planning can be found in the Nomination Committee report on pages 92 to 97. McBride plc Annual Report and Accounts 2022 120 Directors' report # Annual Report on Remuneration Application of the shareholder-approved 2020 Remuneration Policy for 2021/22 Single total remuneration figure for the Executive Directors (audited) The table below sets out a single total remuneration figure for the position of the Executive Directors in office for the 2021/22 financial year: | | Fixed remuneration | | | | | Performance-related remuneration | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Base salary £'000 | BSU^{(1)} £'000 | Benefits^{(2)} £'000 | Pension^{(3)} £'000 | Total fixed remuneration £'000 | Annual bonus £'000 | LTIPs £'000 | Total variable remuneration £'000 | Total £'000 | | Chris Smith | | | | | | | | | | | 2021/22 | 439 | 64 | 13 | 35 | 551 | — | — | — | 551 | | 2020/21 | 437 | 65 | 14 | 35 | 551 | — | — | — | 551 | | Mark Strickland^{(4)} | | | | | | | | | | | 2021/22 | 264 | 40 | 13 | 21 | 338 | — | — | — | 338 | | 2020/21 | 134 | 20 | 7 | 10 | 171 | — | — | — | 171 | (1) Mark Strickland was appointed CPO on 4 January 2021. (2) The BSU grants have been included for Chris Smith: (i) using the closing share price for the day prior to the effective date of grant of 11 June 2020 for the initial award as the sole effectively considered to the date he was appointed as CVO with 20/365ths of this included in 2019/2020 and 345/365ths of this included in 2020/21; (ii) using the closing share price for the day prior to the date of grant of 11 June 2021 for the second award with 20/365ths of this included in 2020/2021 with the remaining 345/365ths of this included in 2021/22; and (iii) using the closing share price for the day prior to the date of grant of 11 June 2022 for the third award with 30/365ths of this included in 2021/22 with the remaining 345/365ths of this to be included in 2022/23. (3) The BSU grants have been included for Mark Strickland: (i) using the closing share price for the day prior to the effective date of grant of 25 February 2021 for the initial award with 6/18ths of this included in 2020/2021 and the remaining 2/18ths of this included in 2021/22; and (ii) using the closing share price for the day prior to the date of grant of 9 September 2021 for the second award with 10/12ths of this included in 2021/22 and the remaining 2/12ths of this to be included in 2022/23. (4) Benefits consist of the provision of a company car and fuel (or cash equivalent), private healthcare, disability insurance and life cover. (5) The pension figure represents the value of the Company's contribution to the individual's pension scheme and/or the cash value of payments in lieu of pension contribution. ## Pension (audited) Both Chris Smith and Mark Strickland receive a pension supplement in lieu of contributions to a pension scheme of 8% of salary, which is in line with that available to the majority of the UK general workforce. The Company has a contracted agreement with the Executive Directors that this payment relieves the Company of any liability for pension provision on their behalf. ## Annual bonus (audited) For the 2021/22 financial year, the maximum bonus opportunity for the Executive Directors was 100% of base salary. 80% of bonus was based upon financial performance and 20% for performance against demanding specific measurable personal objectives. Financial element outcomes | | Performance targets^{(1)} (£m) | | | Actual performance £m (% of salary) | Payout | | --- | --- | --- | --- | --- | --- | | | Threshold | Target | Stretch | | | | Group adjusted EBITA^{(1)(2)} | 15.39 | 16.2 | 20.25 | £(24.5)m | — | (1) Please refer to APM in note 2. (2) Excludes amortisation of intangibles and exceptional costs. (3) EBITA as a percentage of target will be calculated on a straight-line basis between the threshold and target and between target and stretch. ## Personal element outcomes Both Executive Directors were set two personal objectives to be measured as a whole, weighted at a maximum of 20% as follows: 1. For both Executive Directors: develop a series of options/ideas for value creation that go beyond Programme Compass, which could include: big ideas on efficiencies, commercial targets, absolute costs, reduce earnings volatility - pricing and input cost mitigations; and acquisition or disposals or co-operation arrangements. 2. For Chris Smith, ensure Programme Compass continues to deliver on its strategic objectives. 3. For Mark Strickland: cost reduction plan that goes beyond the planned reductions for 2020/21 and 2021/22 with specific timelines. Notwithstanding Chris and Mark performed well against their personal objectives throughout the year, the Committee determined that no payment would be payable in respect of their personal objectives in line with the scheme rules, as the outcome of the financial element did not meet the threshold performance target. McBride plc Annual Report and Accounts 2022 121 Directory report # Remuneration Committee report continued ## Annual Report on Remuneration continued ### LTIP (audited) In the year under review, LTIP awards were granted to both Executive Directors in September 2021 under the McBride plc 2014 LTIP. These awards were granted in the form of conditional share awards. Detailed assumptions used in calculating the fair value of the awards are outlined in note 24 to the consolidated financial statements on page 193. Interests of Directors under the McBride plc 2014 LTIP at 1 July 2021 and 30 June 2022 are set out below: | Director | Date of award | Number of awards at 1 July 2021 | Allocated in year | Awards vested in year | Allocations lapsed in year | Number of awards at 30 June 2022 | Market price the day before the date of award (€) | Visiting date | Performance period | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Chris Smith | 10/09/2018 | 248,006 | — | — | 248,006 | — | 1.3040 | 11/09/2021 | 1 July 2018-30 June 2021 | | | 07/10/2019 | 585,870^{(1)} | — | — | — | 585,870 | 0.552 | 08/10/2022 | 1 July 2019-30 June 2022 | | | 10/09/2020 | 877,016 | — | — | — | 877,016 | 0.62 | 10/09/2023 | 1 July 2020-30 June 2023 | | | 09/09/2021 | — | 716,955^{(2)} | — | — | 716,955 | 0.766 | 09/09/2024 | 1 July 2021-30 June 2024 | | Total | | 1,710,892 | 716,955 | — | 248,006 | 2,179,841 | | | | | Mark Strickland | 25/02/2021 | 178,378 | — | — | — | 178,378 | 0.8140 | 25/02/2024 | 1 July 2020-30 June 2023 | | | 09/09/2021 | — | 379,112^{(2)} | — | — | 379,112 | 0.766 | 09/09/2024 | 1 July 2021-30 June 2024 | | Total | | 178,378 | 379,112 | — | — | 557,490 | | | | (1) The LTIP awards granted on 7 October 2019 were based on performance over the three years to 30 June 2022. On 27 July 2022 the Committee reviewed the related performance conditions (as detailed in the tables below) and determined that the Company had not achieved threshold performance in either element and all the awards therefore lapsed on 7 October 2022. (2) Awards were granted on the basis of 125% of salary for Chris Smith and 110% of salary for Mark Strickland. The face value of the awards are Chris Smith: $549,988 and Mark Strickland: $295,400. The performance conditions attaching to awards under the LTIP included in the preceding table are: ### Grant October 2019 a) 50% of the award is subject to a relative Total Shareholder Return (TSR) performance condition measured against the FTSE SmallCap Ex. Investment Companies Index as the comparator group. If the Company's TSR performance is lower than the median of the comparator group, awards subject to the TSR condition will lapse. The TSR measure is based upon the average of three months' share prices immediately preceding the relevant performance date and is independently calculated for the Committee. | TSR performance of the Company relative to the comparator group^{(1)} | % of total award vesting (max 50%) | | --- | --- | | Below the median | — | | Equal to the median (threshold) | 12.5 | | Upper quartile (maximum) | 50 | (1) The awards vest on a straight-line basis between threshold and maximum. b) 50% of the award is subject to a performance condition based on the compound annual growth rate in earnings per share (EPS) as set out in the table below. Awards subject to the EPS condition will lapse if below the stated minimum growth rate in each year. | Grant Oct 2019 | % of total award vesting (max 50%)^{(1)} | | --- | --- | | <8% p.a. | — | | 8% p.a. (threshold) | 10 | | 17% p.a. (maximum) | 50 | (2) The awards vest on a straight-line basis between threshold and maximum. McBride plc Annual Report and Accounts 2022 122 Directors' report TSR and EPS performance are measured over the period of three consecutive financial years of the Company, beginning with the year of grant of the award. There will be no resetting or retesting of the performance conditions, other than in exceptional circumstances as set out on page 113. The Committee has noted the decrease in the issued share capital during 2020/21 due to the share buy-back. Following a careful review of the last three years' performance against the pre-agreed measures, the Committee determined that the 2019 LTIP awards would not vest, as the performance measures had not been satisfied. # Grant September 2020, Grant February 2021 and Grant September 2021 a) 50% of the award is subject to a ROCE performance condition. ROCE is defined as the adjusted operating profit(1) as a percentage of average capital employed in the period. Operating profit is defined as EBITA adjusted for the amortisation of tangible assets and exceptional items. Capital employed is defined as tangible and intangible fixed assets, including goodwill plus inventories and current trade and other receivables less current trade and other payables. | ROCE Grant Sept 2020 and February 2021 | % of total award vesting (max 50%)(2) | | --- | --- | | <14.8% | — | | 14.8% | 5 (threshold) | | 17.2% | 25 (target) | | 18.6% | 50 (maximum) | | ROCE Grant Sept 2021 | % of total award vesting (max 50%)(2) | | <11.6% | — | | 11.6% | 5 (threshold) | | 14.0% | 25 (target) | | 15.4% | 50 (maximum) | (1) Please refer to APM in note 3. (2) The awards vest on a straight-line basis between threshold and target and between target and maximum b) 50% of the award is subject to an EPS performance condition as set out in the table below. | EPS Compound Annual Growth Rate (CAGR)(1) Grant Sept 2020 and February 2021 | % of total award vesting (max 50%)(2) | | --- | --- | | <7% p.a. | — | | 7% p.a. | 5 (threshold) | | 14.3% p.a. | 25 (target) | | 21.1% p.a. | 50 (maximum) | | EPS Compound Annual Growth Rate (CAGR)(1) Grant Sept 2021 | % of total award vesting (max 50%)(2) | | <12.6% p.a. | — | | 12.6% p.a. | 5 (threshold) | | 21.95% p.a. | 25 (target) | | 31.3% p.a. | 50 (maximum) | (1) Adjusted to include effects of amortisation of intangible assets and exceptional items. (2) The awards vest on a straight-line basis between threshold and target and between target and maximum. ROCE and EPS performance are measured over the period of three consecutive financial years of the Company, beginning with the year of grant of the award. There will be no resetting or retesting of the performance conditions, other than in exceptional circumstances as set out on page 113. McBride plc Annual Report and Accounts 2022 123 Directory report # Remuneration Committee report continued ## Annual Report on Remuneration continued ### Restricted Share Unit Plan (RSU) (audited) The RSU was approved by shareholders at the 2020 AGM on 23 November 2020. In the year under review, RSU awards were granted to Chris Smith and Mark Strickland under the McBride plc 2020 RSU. These awards were granted in the form of conditional share awards. Interests of Directors under the McBride plc 2020 RSU at 1 July 2021 and 30 June 2022 are set out below: | Director | Date of award | Number of awards at 1 July 2021 | Allocated in year | Awards vested in year | Allocations lapsed in year | Number of awards at 30 June 2022 | Market price: the day before the date of award (£) | Vesting date | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Chris Smith | 23 December 2020^{(1)} | 98,864 | — | — | — | 98,864 | 0.66^{(1)} | 11 June 2023^{(1)} | | | 11 June 2021^{(2)} | 74,382 | — | — | — | 74,382 | 0.886 | 11 June 2024 | | | 13 June 2022^{(3)} | — | 216,073 | — | — | 216,073 | 0.305 | 13 June 2025 | | **Total** | | 173,246 | 216,073 | — | — | 389,319 | | | | Mark Strickland | 25 February 2021^{(4)} | 32,432 | — | — | — | 32,432 | 0.814 | 25 February 2024 | | | 9 September 2021^{(5)} | — | 51,697 | — | — | 51,697 | 0.766 | 9 September 2024 | | **Total** | | 32,432 | 51,697 | — | — | 84,129 | | | (1) The RSU plan was approved by shareholders at the 2020 AGM on 23 November 2020. Following the approval of the RSU, McBride plc required to grant RSU awards on 23 December 2020, with a deemed grant date of 5 June 2021, being the date that Chris Smith was appointed as CEO. The bid to two grants in the financial year 2020/21. This was because the award formed part of his CEO remuneration package from his date of appointment. The share price disclosed of £0.66 was the closing share price on 10 June 2021 which was used by the Committee to determine the number of shares subject to the award such that the total value would be 15% of his salary and has therefore been included above. Based on this price, the face value of the award was £65,250, being 15% of his base salary. The closing share price on the day prior to the actual date of grant was £0.886. (2) The face value of the award granted to Chris Smith on 11 June 2021 was £65,902, being 15% of his base salary. (3) The face value of the award granted to Chris Smith on 13 June 2022 was £65,902, being 15% of his base salary. (4) The face value of the award granted to Mark Strickland on 25 February 2021 was £26,400, being 15% of 8/12ths of his base salary (as the RSU award was only meant to cover the period from January to August with future awards being made in September each year). (5) The face value of the award granted to Mark Strickland on 9 September 2021 was £39,599, being 15% of his base salary. ### Deferred Annual Bonus Plan (DBP) (audited) No awards were made under the McBride plc 2012 Deferred Annual Bonus Plan during the year. Neither of the Executive Directors currently have any outstanding awards under this plan. ### Single total remuneration figure for the Non-Executive Directors (audited) | | 2021/22 | | | | 2020/21 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Base fee £'000 | Committee Chair/ 5/0 fee £'000 | Benefits^{(1)} £'000 | Total £'000 | Base fee £'000 | Committee Chair/ 5/0 fee £'000 | Benefits^{(1)} £'000 | Total £'000 | | Jeff Nodland^{(2)} | 200 | — | 49 | 249 | 200 | — | 1 | 201 | | Steve Hannam | 50 | 8 | — | 58 | 49 | 8 | — | 57 | | Neil Harrington^{(3)} | 20 | — | — | 20 | 49 | 9 | — | 58 | | Igor Kuzmiar | 50 | — | 1 | 51 | 49 | — | — | 49 | | Elizabeth McMekan | 50 | 8 | — | 58 | 49 | 8 | — | 57 | | Alastar Murray^{(4)} | 46 | 6 | — | 52 | — | — | — | — | | Regi Aalstad^{(5)} | 15 | — | — | 15 | — | — | — | — | (1) Benefits comprise reimbursement of expenses on a gross of tax basis incurred by Non-Executive Directors in the course of carrying out their roles which are considered by HMRC to be taxable. (2) Jeff Nodland received a travel allowance of £45,833 during the year. (3) Neil Harrington stepped down as Chair of the Audit and Risk Committee and from the Board on 19 October 2021. (4) Alastar Murray joined the Board on 2 August 2021 and was appointed the Chair of the Audit and Risk Committee on 19 October 2021. (5) Regi Aalstad joined the Board on 14 March 2022. McBride plc Annual Report and Accounts 2022 124 Directors' report # Statement of Directors' shareholding and share interests (audited) | | At 30 June 2022 | | | | | At 28 September 2022 | | At 1 July 2021 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Total shares beneficially owned^{(1)} | Value of shares £'000 | % of annual base salary | Shareholding requirement/ guideline %^{(2)} | Shareholding requirement/ guideline met^{(3)} | Conditional share awards^{(4)} | Share holding | Total shares beneficially owned^{(1)} | Conditional share awards^{(2)} | | Jeff Nockland | 664,600 | 103 | 51.5 | 100 | Below guideline | N/A | 664,600 | 464,600 | N/A | | Steve Hannam | 75,126 | 9 | 23.2 | 100 | Below guideline | N/A | 75,126 | 75,126 | N/A | | Neil Harrington^{(5)} | 64,395 | 10 | — | 100 | — | N/A | N/A^{(6)} | 64,395 | N/A | | Igor Kuzmiar^{(7)} | — | — | — | N/A | — | N/A | — | — | — | | Elizabeth McMekan | 29,000 | 4 | 0.09 | 100 | Below guideline | N/A | 29,000 | 15,790 | N/A | | Alastair Murray | — | — | — | 100 | Below guideline | N/A | — | N/A^{(8)} | N/A | | Regi Aalstad | 80,000 | 12 | 24.8 | 100 | Below guideline | N/A | 80,000 | N/A^{(8)} | N/A | | Chris Smith^{(7)} | 436,928 | 68 | 15.4 | 300 | Below requirement | 2,569,160 | 436,928 | 393,669 | 1,884,138 | | Mark Strickland^{(8)} | 45,923 | 7 | 0.03 | 200 | Below requirement | 641,619 | 45,923 | — | 210,810 | (1) Changes in the current Directors' interests in shares in the Company and those of their Connected Persons between the end of the financial year and 28 September 2022 are shown in the table above. (2) Executive Directors have a shareholding requirement equal to a multiple of base salary, 300% in the case of the CEO and 200% in the case of the CFO which they are expected to reach within five years of their appointment. NEOs have a shareholding guideline equivalent to 100% of their annual base fee. (3) The conditional share awards have been made under the McBride plc 2014 LTRF, 2020 Restricted Share Unit Plan and the 2020 Deferred Annual Bonus Plan. The conditions to which the share awards are subject are set out on pages 122 to 124. (4) Neil Harrington slapped down from the Board on 19 October 2021. This sets out his shareholding at the time of his slapping down from the Board. (5) Igor Kuzmiar is the appointed representative of McBride plc's largest shareholder Teleco Capital Partners GmbH and therefore the NED guidelines do not apply to him. (6) Not in employment at this date, therefore N/A. (7) Of the CEO's 2,569,160 shares subject to conditional awards (2020/21: 1,884,138), 389,319 (2020/21: 173,246) were granted as RSUs and hence are not subject to performance measures and are only subject to continued employment. (8) Of the CFO's 641,619 shares subject to conditional awards (2020/21: 210,810), 84,129 (2020/21: 32,432) were granted as RSUs and hence are not subject to performance measures and are only subject to continued employment. None of the Directors had any interest in the shares of any subsidiary company. ### Shareholder dilution Awards under executive share plans are currently being satisfied by market purchase shares acquired by the Employee Benefit Trust which held 587,159 shares at 30 June 2022 that were available to satisfy subsisting awards. However, newly issued shares may be used in future to satisfy these awards. There are no all-employee share plans. The Company monitors the number of shares issued under these schemes and their impact on dilution limits. The Company's maximum usage of shares compared with the dilution limits set by the Investment Association in respect of executive share plans (5% in any rolling ten-year period) as at 30 June 2022 is as follows: Executive share plans ![img-4.jpeg](img-4.jpeg) This reduces to 3.17% following the Committee determining on 27 July 2022 that the remaining 1,562,107 September 2019 awards lapsed in full. McBride plc Annual Report and Accounts 2022 125 Directors' report # Remuneration Committee report continued Annual Report on Remuneration continued Review of past performance The graph below charts the TSR (share value movement plus reinvested dividends), over the ten years to 30 June 2022, of shares in McBride plc compared with that of a hypothetical holding in the FTSE SmallCap Ex. Investment Companies Index. The Directors consider this index to be an appropriate comparator group for assessing the Company's TSR as it provides a well-defined, understood and accessible benchmark. ![img-5.jpeg](img-5.jpeg) This graph shows the value, by 30 June 2022, of £100 invested in McBride plc on 30 June 2012, compared with the value of £100 invested in the FTSE SmallCap Index (excluding Investment Trusts) on the same date. The following table shows the historic Chief Executive Officers' levels of total remuneration (single figure of total remuneration), together with annual bonus and LTIP awards as a percentage of the maximum available. | CEO/Financial year | Total remuneration, £'000 | Annual bonus % of maximum | LTIP % of maximum vested (1) | | --- | --- | --- | --- | | Chris Smith(2) | | | | | 2021/22 | 552 | — | — | | 2020/21 | 551 | — | — | | 2019/20(3) | 497 | 24.8 | — | | Ludwig de Mol(4) | | | | | 2019/20(5) | 368 | — | — | | Rik De Vos(6) | | | | | 2018/19 | 592 | — | — | | 2017/18 | 890 | — | 62.5 | | 2016/17 | 1169 | 70.8 | 100.0 | | 2015/16 | 893 | 98.5 | — | | 2014/15 | 357 | 89.0 | — | | Chris Bull(7) | | | | | 2014/15 | 253 | — | — | | 2013/14 | 512 | — | — | | 2012/13 | 512 | — | — | (1) Chris Smith was appointed CEO with effect from 11 June 2020 having previously been CPD since 15 July 2014. (2) For 2019/20, the total remuneration has been adjusted to include the single figure calculation. (3) Ludwig de Mol was appointed CEO with effect from 1 November 2019 and left the business on 10 June 2020. (4) Rik De Vos was appointed CEO with effect from 2 February 2019 and left the business on 31 August 2019. (5) Chris Bull was appointed CEO with effect from 4 May 2010 and left the business on 18 December 2014. (6) The LTIP % of maximum is the percentage of shares vesting compared to the maximum that could have vested. McBride plc Annual Report and Accounts 2022 126 Directors' report ### Annual percentage change in remuneration of Directors and employees The table below shows the annual percentage change in remuneration of Directors and UK employees over the last two financial years. Although the Company has an international workforce, this group has been chosen as it continues to represent the most meaningful comparator group to compare to the UK-based Executive Directors. Where there are no prior years to compare to, the value is marked as not applicable. | | Salary/fees change^{(1)} | | | Benefits change^{(1)} | | | Bonus change^{(1)} | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2020 | 2021 | 2022 | 2020 | 2021 | 2022 | 2020 | 2021 | 2022 | | **Executive Directors** | | | | | | | | | | | Chris Smith^{(2)} | 17.0% | 27.0% | 0.5% | 22.8% | (6.6%) | (2.0%) | N/A | (100.0%) | N/A | | Mark Strickland^{(3)} | N/A | N/A | 96.47% | N/A | N/A | 102.57% | N/A | N/A | N/A | | **Non-Executive Directors** | | | | | | | | | | | Steve Harinam | — | 8.7% | 2.7% | 89.9% | (100.0%) | — | N/A | N/A | N/A | | Neil Harrington^{(4)} | — | 10.1% | (65.7%) | (100.0%) | — | 100% | N/A | N/A | N/A | | Igor Kuzniar | N/A | — | 2.56% | N/A | (100.0%) | 100% | N/A | N/A | N/A | | Elizabeth McMekan | N/A | 91.6% | 2.65% | N/A | — | — | N/A | N/A | N/A | | Jeff Nodland^{(5)} | N/A | 62.9% | —% | N/A | (95.9%) | 3,602.8% | N/A | N/A | N/A | | **Comparator group** | | | | | | | | | | | Average for UK employees^{(6)} | 1.3% | 7.6% | 2.1% | N/A | (65.7%) | (21.5%) | 0.5% | 417.4% | (18%) | (1) Footnotes in relation to 2020 and 2021 percentage changes can be found in the Annual Report and Accounts for the relevant year. (2) No bonus was paid in respect of 2018/19, 2020/21 and 2021/22. (3) Mark Strickland was appointed CEO pathway through 2020/21 on 4 January 2021, hence the significant percentage increase in salary and benefits in 2021/22 when he served a full year. (4) Neil Harrington stepped down as Chair of the Audit and Risk Committee and from the Board on 18 October 2021. (5) The Chairman received a travel allowance of $45,833 during 2021/22, whereas in 2020/21 he only received £1,523 as a result of Covid-19-related restrictions on travel, resulting in the significant percentage increase in benefits. (6) The calculations for the comparator group are based upon the average values for UK-based employees (other than Directors) that were employed by Robert McBride Ltd versus the same criteria for the previous financial year. Last financial year there were 481 employees in the comparator group versus 471 employees at the end of this financial year. Pension benefits and long-term incentive awards are excluded from the calculation. The comparator group data is being reported in this way as all of the employees of McBride plc are Directors and therefore the comparison required by the Regulations cannot be shown. ### CEO pay ratio Under Option B of The Companies (Miscellaneous Reporting) Regulations 2018, the latest available gender pay gap data was used to identify the best equivalent comparison for the three UK-based employees whose pay is at the 25th, 50th (median) and 75th percentiles of the comparator group. There were 465 UK-based employees in the comparator group. This calculation methodology was selected as it provides the most consistent company approach for identifying meaningful equivalents which are reasonably representative of the percentiles and are aligned to our approach to UK gender pay gap reporting. The ratios shown in the table compare the total remuneration for the relevant UK-based employees to the current CEO single total remuneration figure. The ratios continue to reduce in 2021/22, primarily as a result of the fact that the CEO did not receive an annual bonus in respect of 2020/21. This means that in future years the pay ratio may increase if a bonus award is paid to the CEO. Our ratio for 2021/22 of 14.8:1 to our median employee total remuneration, is also lower than the median of the ratios in other FTSE SmallCap companies, which is around 27:1. This relatively low ratio is consistent with the pay, reward and progression policies applicable to the Company's employees as a whole. All employees are eligible for incentives, salaries are based on role size and market benchmarks, and there are similar pension contributions (in terms of percentage of salary) for the Executive Directors compared to the median employee. It is also worth noting that the CEO's single figure for 2019/20 was calculated using a cumulative pro-rata single figure to represent the pay of the three different CEOs that had been appointed throughout that year. | Year | Method | 25th percentile pay ratio | Median pay ratio | 75th percentile pay ratio | | --- | --- | --- | --- | --- | | 2021/22^{(1)} | Option B | 17.8:1 | 14.8:1 | 9.6:1 | | 2020/21^{(2)} | Option B | 20.5:1 | 16.6:1 | 11.1:1 | | 2019/20 | Option B | 23.1:1 | 19.7:1 | 14.2:1 | (1) The ratios shown in the table compare total remuneration for the three relevant UK-based employees to a CEO single total remuneration figure that includes book salary, RPLD, benefits and pension only as there were no incentive payments in respect of 2020/21 and 2021/22. Typically, a significant proportion of the CEO's pay is delivered through incentives where performance conditions are met. This means that in future years the pay ratio may increase if incentive awards are paid to the CEO. McBride plc Annual Report and Accounts 2022 127 Directors' report # Remuneration Committee report continued Annual Report on Remuneration continued CEO pay ratio continued The table below shows the total remuneration and salary for each quartile of UK employees as at 23 April 2021. | | 25th percentile | Median | 75th percentile | | --- | --- | --- | --- | | Salary | £27,968 | £32,836 | £51,867 | | Total remuneration | £30,979 | £37,288 | £57,324 | Relative importance of spend on pay The table below shows the total amount of distributions to shareholders and the amount paid to buy back shares compared to the total payroll costs for the Group for the financial years ended 30 June 2021 and 30 June 2022. | | Year ended 30 June | | | | --- | --- | --- | --- | | | 2021 | 30 June 2022 | | | | £m | £m | % change | | Shareholder distribution | Nil | Nil | N/A | | Amounts paid to buy back shares | 6.8 | Nil | N/A | | Total payroll costs(1) (of all Group employees including Directors) | 128.9 | 126.2 | (2.3) | (1) Total payroll costs excludes termination benefits Compliance with the UK Corporate Governance Code ('the Code') The table below summarises how we have complied with the Code during the year. | Remuneration provision of the Code | Alignment with Policy | | --- | --- | | Five-year period between the date of grant and realisation of equity incentives | The LTIP has a three-year performance period and a two-year post-vesting holding requirement. | | Post-cessation shareholding requirement | There is a formal post-cessation holding policy, requiring Executive Directors to maintain their in-employment shareholding for a minimum of twelve months post-cessation. | | Pension alignment | The pension contribution/allowance for all Executive Directors is aligned with the workforce level of 8% of salary. Only basic salary is pensionable. | | Discretion to override formulaic outcomes | Discretion to override formulaic outcomes and scale back awards is included for the annual bonus and Long-Term Incentive Plan. | | Extended malus and clawback | Malus and clawback triggers apply to the RSU, annual bonus (both cash and deferred) and Long-Term Incentive Plan in the event of an error in calculation, a material misstatement of the financial results, serious misconduct by a participant, corporate failure or reputational damage. | | Notice periods should be a year or less | Executive Directors have a six-month notice period. | McBride plc Annual Report and Accounts 2022 128 Directors’ report Application of the Remuneration Policy for the 2022/23 financial year The table below sets out how the Remuneration Policy is intended to be applied for the 2022/23 financial year for Chris Smith and Mark Strickland. There is no change to the way the Remuneration Policy will be implemented in the current financial year compared to the previous financial year. Element Application of Policy for 2022/23 Explanation | Executive Director base salary | The Executive Directors’ salaries will | The Committee believes the Executive | | --- | --- | --- | | | remain unchanged in 2022/23 at | Directors’ current salaries remain at | | | £439,350 for the CEO and £264,000 | an appropriate level for 2022/23. | for the CFO. | RSUs | An award of £65,902 (15% of | In line with the Remuneration Policy, | | --- | --- | --- | | | salary) was made to Chris Smith | the Committee wishes to increase | | | on13June2022 in line with the RSU | the rate at which Executive Directors | | | plan, in respect of the twelve-month | acquire shares in the Company and | | | period from 13 June 2022 to | hence continue to structure part of | | | 12June2023. | their fixed pay as RSUs. | An award of £39,600 (15% of salary) will be made to Mark Strickland during October 2022 in line with the RSU plan, pending Committee approval, in respect of the twelve-month period from 3 October 2022 to 3 October 2023. | Benefits | Pension contribution (or cash | Pension and private medical | | --- | --- | --- | | | allowance in lieu of pension) of 8% | allowance is fully aligned with the | | | ofsalary. Car allowance of £12,180 per | majority of the UK general workforce. | annum and private medical coverage Car allowance is based on the of £1,428 per annum. Company Car Policy. | Annual bonus | The structure and operation of the | The Committee considers that | | --- | --- | --- | | | annual bonus scheme will continue | the forward-looking targets are | | | inline with the previous financial year. | commercially sensitive and has, | | | The maximum bonus opportunity | therefore, chosen not to disclose | | | continues to be 100% of salary. 40% | them in advance. Details of the | | | of the award will be subject to a | targets will be set out retrospectively | | | sliding scale of challenging operating | in next year’s Remuneration report; | | | profit targets, 40% of the award | however, the targets are considered | | | will be subject to a sliding scale of | to be demanding in the context of the | | | working capital targets and 20% will | Company’s circumstances. | be subject to specific measurable personal targets. McBride plc Annual Report and Accounts 2022 129 Directors’ report ## Remuneration Committee report continued ## Annual Report on Remuneration continu ed Application of the Remuneration Policy for the 2022/23 financial year continued Element Application of Policy for 2022/23 Explanation | LTIP | The LTIP awards to be granted in | The past eighteen months have | | --- | --- | --- | | | 2022/23 will be subject to EPS and | significantly aected the Group’s | | | net debt to EBITDA ratio with equal | level of debt. This has been impacted | | | weighting. | by higher levels of working capital | as well as trading losses arising from The intended Executive Director grant inflationary pressures. As the Group level for the LTIP is 125% of salary continues to manage the impact of for the CEO and 110% of salary for unprecedented inflation and disruption the CFO. The number of shares to to supply chains in the next few years, be granted will be determined using it remains a focus of the business to the share price of 35 pence or the maintain a healthy cash flow and level prevailing share price on the day of of debt relative to profit. grant, if higher. The Committee will also carry out an overall assessment of the The EPS performance measure has Company’s underlying performance been selected as it is one of the KPIs and the vesting outcome of the LTIP to used in the business and is a measure ensure the vesting reflects Company well understood by the senior performance and that there is no executives. It is also something which windfall gain. they can influence directly. TheCommittee is mindful of the current share price compared to a year ago and the resulting increase in number of shares that will be granted. The share price of 35 pence has been chosen as it reflects the consensus forecast of McBride’s share price in the forthcoming year. Non-Executive Director fees The fee policy for the Chairman and The Chairman’s fees were reviewed Non-Executive Directors is as follows: and increased in 2020. The current fee is considered to be • base Chairman fee: £200,000; commensurate with market rate and • base Non-Executive Director fee: the time commitments of the role. £50,000; The other NED fees were reviewed • Chair of the Audit and Risk and increased in 2020. The fees are Committee: £9,000 (additional fee); considered to reflect market rate • Chair of the Remuneration and the time commitments of the Committee: £8,000 (additional NEDs, therefore no fee increases fee); are proposed by the Board. The • Senior Independent Director: introduction of international travel £8,000 (additional fee); allowances was to ensure that the | • international travel allowance for | | Company could continue to appoint | | --- | --- | --- | | | the Chairman up to £50,000; and | and retain overseas-based NEDs when | | • international travel allowance | | appropriate without needing to pay | | | for NEDs based overseas up to | higher base fees than are paid to | | | £15,000. | UK-based NEDs. There is no current | intention to provide an additional allowance for any Non-Executive Director other than the Chairman. McBride plc Annual Report and Accounts 2022 130 Directors' report # **Exit payments (audited)** No exit payments were made to Executive Directors in the financial year. # **Payments to past Directors (audited)** No payments to past Directors were made in the financial year. # **Payments to third parties** No payments were made to third parties for making available the services of any of the Directors during 2021/22. # **Remuneration Committee and advisers** At the time of this report, the members of the Remuneration Committee are Elizabeth McMeikan (Chair), Jeff Nodland, Steve Hannam, Regi Aalstad and Alastair Murray. Alastair Murray was appointed to the Committee with effect from his appointment to the Board on 2 August 2021 and Regi Aalstad was appointed to the Committee with effect from her appointment to the Board on 14 March 2022. In determining the remuneration structure, the Committee appoints and receives advice from independent remuneration consultants on the latest developments in corporate governance and the pay and incentive arrangements prevailing in comparably sized manufacturing companies. Alvanz & Marsal Tax and UK LLP ('A&M') were appointed by the Committee in June 2020 when the lead adviser moved from Aon plc to A&M. A&M received £37,945 in respect of the services provided for the 2021/22 financial year. A&M is a member of the Remuneration Consultants Group and is a signatory to its Code of Conduct which sets out guidelines to ensure that any advice is independent and free of undue influence. The Committee is satisfied that the advice provided by A&M was independent and objective. The Committee is also satisfied that the team who provided that advice do not have any connection to McBride that may impair their independence or objectivity. # **Statement of shareholder voting** The table below shows the voting outcome at the November 2021 AGM for the approval of the Company's 2020/21 Remuneration report: | Resolution | Votes for | % | Votes against | % | Votes withheld | | --- | --- | --- | --- | --- | --- | | Approval of Remuneration report (advisory vote) | 95,445,753 | 98.43 | 1,520,894 | 1.57 | 19,248,352 | The Remuneration report was approved by the Board on 29 September 2022 and signed on its behalf by: **Elizabeth McMeikan** Chair of the Remuneration Committee McBride plc Annual Report and Accounts 2022 131 Directors’ report ## Statutory information Reporting requirements Directors The Group is required to produce a Strategic report The Directors who held oce at any time during complying with the requirements of section 414A of the the year were JeNodland, Chris Smith, Mark Companies Act 2006. The Strategic report is set out on Strickland, SteveHannam, Neil Harrington, Elizabeth pages 1 to 79. McMeikan, Alastair Murray, Regi Aalstad and Igor Kuzniar. NeilHarrington stepped down from the Board As permitted by section 414C(11) of the Companies Act on19October 2021. 2006, the below matters have been disclosed in the Strategic report. Alastair Murray joined the Board on 2 August 2021 as an independent Non-Executive Director. Details on his An indication of likely future appointment were included in our Annual Report for development in the business thefinancial year ended 30 June 2021. of the Company pages 14 and 15 Regi Aalstad joined the Board on 14 March 2022 | Particulars of important events | as an independent Non-Executive Director. Further | | --- | --- | | aecting the Company since | information on Regi Aalstad’s appointment can | | the financial year end pages 183 and 198 | be found in the Nomination Committee report. | | Greenhouse gas emissions pages 44 and 45 | The biographical details of all Directors serving at | | Employee engagement | 30June2022 appear on pages 82 and 83. | and involvement page 39 Dividends Engagement with suppliers, The Group’s results and performance highlights for the customers and others in a business year are set out on pages 1 to 79. The Board has agreed relationship with the Company pages 40 and 41 with its lender group that no dividends will be paid until A summary of the principal risks it is in compliance with its banking covenants. Therefore, facing the Company pages 71 to 79 the Board is not recommending a final dividend in 2022. Continuing the policy outlined last year, future dividends The Corporate governance statement, as required by will be final dividends paid annually in cash, not by the Disclosure and Transparency Rules (DTR) 7.2.1, is set the allotment and issue of B Shares. Existing B Shares out on pages 85 to 91 of the Directors’ report. will continue to be redeemable but limited to one For the purposes of DTR 4.1.8R the Strategic report and redemption date per annum in November of each year. the Directors’ report together form the management Details of the scheme can be found in the booklet report. entitled ‘Your Guide to B Shares’ and on the Company’s For the purposes of Listing Rule 9.8.4R, the information website at www.mcbride.co.uk. required to be disclosed can be found on the following Sanne Fiduciary Services Limited, in its capacity as pages: trustee of the McBride Employee Benefit Trust, has Listing Rule Topic Location waived its entitlement to dividends on ordinary shares 4 Details of Remuneration in the Company comprised in the trust fund where long-term report, pages no beneficial interest in the shares has vested in a incentive 122 to 124 beneficiary. This waiver will continue unless and until schemes theCompany directs the trustee otherwise. 13 Dividend waiver Statutory information, Directors’ interests in the Company’s shares page 132 The interests of persons who were Directors of the Company (and of their Connected Persons) at Contracts with controlling shareholders 30June2022 in the issued shares of the Company (orin During the year, there were no contracts of significance related derivatives or financial instruments) which have (as defined in the FCA’s Listing Rules) between any been notified to the Company in accordance with the Group undertaking and a controlling shareholder and Market Abuse Regulation are set out in the Remuneration no contracts for the provision of services to any Group report on page 125. The Remuneration report also sets undertaking by a controlling shareholder. out details of any changes in those interests between 30June 2022 and 5 October 2022. Group results The results for the year are set out in the consolidated income statement on page 144 and a discussion of the Group’s financial performance and progress is set out inthe Strategic report on pages 1 to 79. McBride plc Annual Report and Accounts 2022 132 Directors' report # Indemnification of Directors The Directors have the benefit of an indemnity provision contained in the Articles of Association of the Company. In addition, under deeds of indemnity, the Company has granted indemnities in favour of each Director of the Company in respect of any liability that he or she may incur to a third party in relation to the affairs of the Company or any Group company. Consequently, qualifying third-party indemnity provisions for the purposes of section 234 of the Companies Act 2006 were accordingly in force during the course of the financial year and remain in force at the date of the approval of this report. During the financial year ended 30 June 2022 and up to the date of this Directors' report, the Company has appropriate Directors' and officers' liability insurance cover in place in respect of legal action against its Directors. # Directors' interests in contracts Other than service contracts, no Director had any interest in any material contract with any Group company at any time during the year. There were no contracts of significance (as defined in the FCA's Listing Rules) during the year to which any Group undertaking was a party and in which a Director of the Company is, or was, materially interested. # Share capital As at 29 September 2022, the issued share capital of the Company was 174,015,287 ordinary shares (20.717% of total year-end capital) of 10 pence each (excluding treasury shares), 42,041 treasury shares (0.005% of total year-end capital) and 665,888,258 B Shares (79.278% of total year-end capital). There were no purchases, sales or transfers of treasury shares during the year. There were no allotments of ordinary shares during the year. Details of the issued share capital, together with details of movement in the issued share capital of the Company during the year, are shown in note 26 to the financial statements. This is incorporated by reference and deemed to be part of this report. The Company has one class of ordinary shares, which carries no right to fixed income. The ordinary shares are listed on the Official List and traded on the London Stock Exchange. All issued shares are fully paid. The Company was authorised at the 2021 AGM to allot shares, or grant rights over shares, up to an aggregate nominal amount equal to £5,800,309 (representing 58,005,095 ordinary shares of 10 pence each excluding treasury shares) representing approximately one-third of its issued share capital. A renewal of this authority will be proposed at the 2022 AGM. The Company was authorised at the 2021 AGM to allot up to an aggregate nominal amount of £870,076 (representing 8,700,764 ordinary shares of 10 pence each and approximately 5% of the issued share capital) for cash without first offering them to existing shareholders in proportion to their holding. A renewal of this authority will be proposed at the 2022 AGM. There are no restrictions on the transfer of ordinary shares or B Shares in the Company, other than certain restrictions that may from time to time be imposed by law. The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and/or voting rights. # Purchase by the Company of its own shares At the 2021 AGM, shareholders authorised the Company to make market purchases of up to 17,401,528 ordinary shares of 10 pence each, representing 10% of the issued share capital of the Company (excluding treasury shares). Any shares so purchased by the Company may be cancelled or held as treasury shares. This authority will cease at the date of the 2022 AGM. On 7 September 2021, as stated in its final results announcement, the Board ended the share buy-back programme announced on 2 November 2020. During the year, the Group purchased and cancelled 185,375 ordinary shares representing 0.1% of the issued ordinary share capital as at 2 November 2020. The buy-back and cancellation was approved by shareholders at the 2020 AGM. The shares were acquired at an average price of 77.0 pence per share, with prices ranging from 73.3 pence per share to 78.6 pence per share. The total cost of £0.1 million was deducted from equity. A transfer of £nil was made from share capital to the capital redemption reserve. McBride plc Annual Report and Accounts 2022 133 Directory report # Statutory information continued # Substantial shareholdings The Company had been notified in accordance with Chapter 5 of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules of the following interests amounting to 3% or more of its issued share capital as at the end of the financial year and at 28 September 2022 (being the last practicable date prior to the date of this report). | Shareholder | As at 28 September 2022 | | As at 30 June 2022 | | | --- | --- | --- | --- | --- | | | Number of shares | % | Number of shares | % | | Teleios Capital Partners | 43,335,757 | 24.01 | 43,335,757 | 24.01 | | DUMAC, Inc. | 30,716,748 | 16.80 | 30,716,748 | 16.80 | | Zama Capital | 21,007,962 | 12.07 | 19,872,045 | 11.01 | | NN Investment Partners | 9,085,000 | 4.97 | 9,085,000 | 4.97 | | Aberforth Partners LLP | 9,072,968 | 5.21 | 9,072,968 | 5.21 | | Invesco Ltd. | 8,952,597 | 4.89 | 8,952,597 | 4.89 | | Premier Miton Investors | 8,347,899 | 4.76 | 8,347,899 | 4.76 | No changes have been disclosed in the period since 28 September 2022. # Accounting policies Information on the Group's financial risk management objectives, policies and activities and on the exposure of the Group to relevant risks in respect of financial instruments is set out in note 21 to the consolidated financial statements on pages 179 to 188. # Political donations It is the Group's policy not to make political donations or to incur political expenditure. During the year, no political donations were made by the Group to any EU or non-EU political party, political organisation or independent election candidate. During the year, no EU or non-EU political expenditure was incurred. In keeping with the Group's approach in prior years, shareholder approval is being sought at the forthcoming AGM, as a precautionary measure, for the Company and its subsidiaries to make donations and/or incur expenditure, which may be construed as political by the wide definition of that term included in the relevant legislation. Further details are provided in the Notice of AGM. # Research and development The Group is involved in a range of activities in the field of research and development. A number of these activities are referred to in the Strategic report on pages 45 to 47. # Employment of disabled people Our people policies are designed to provide equal opportunities and create an inclusive culture in line with our values and in support of our long-term success. They also reflect relevant local employment law in our countries of operation. We expect our colleagues to treat each other with dignity and respect, and do not tolerate discrimination, bullying, harassment or victimisation on any grounds. We are committed to recruiting, training and paying our people fairly and equitably relative to their role, skills, experience and performance - in a way that balances the needs of all our business. It is our policy to give full and fair consideration to applications for employment received from people with disabilities, having regard to their particular aptitudes and abilities. Wherever possible we will continue the employment of, and arrange appropriate training for, colleagues who have become disabled during the period of their employment. We provide the same opportunities for training, career development and promotion for colleagues with disabilities as for other colleagues. Creating an inclusive and supportive culture is not only the right thing to do, but also best for our business. It creates a sense of belonging and value and enables colleagues to perform at their best. # Colleague engagement We recognise the importance of keeping all colleagues at all levels across the business up to date on the strategy, performance and progress of the divisions and Group through multi-communication channels. This combines leader-led communication at a site, divisional and Group level supported by emails, intranet, the Group's employee self-service portal, announcements and bulletins. Colleague engagement at all levels is a crucial element of embedding our core and aspirational values, allowing us to help colleagues see how their efforts contribute to their site, division or function's strategic objectives. We also engage with our colleagues collectively through a strong and effective partnership with our European Works Council, which represents all colleagues within the European Union, which meet biannually in addition to other local works council forums. Eligible employees participate in performance-related bonus schemes and some senior managers participate in an LTIP or RSU scheme. McBride plc Annual Report and Accounts 2022 134 Directors’ report Change of control 2022 Annual General Meeting As at 30 June 2022 and at 5 October 2022, the nearest The Company’s 2022 AGM will be held on 16November practicable date prior to approval of this report, the 2022 at Central Park, Northampton Road, Manchester Company and its subsidiaries were party to a number M40 5BP at 2.00pm. Details of the resolutions to be of commercial contracts, contract manufacturing proposed, how to vote and ask questions are set out in and brand licensing agreements that may allow the a separate Notice of Annual General Meeting which counterparties to alter or terminate the agreements accompanies this report for shareholders receiving hard on achange of control of the Company following a copy documents, and which is available on our website takeover bid. The Group has a syndicated multi-currency at www.mcbride.co.uk for those who have elected to revolving loan facility for €175 million which may require receive documents electronically. The results will be prepayment if there is a change of control of the announced as soon aspossible and posted on Company. The rules of the discretionary share schemes ourwebsite. set out the consequences of a change of control of the Disclosure of information to the auditor Company on participants’ rights under the schemes. Each of the Directors who held oce at the date of Generally, the rights will vest and become exercisable approval of this Directors’ report confirms that, so far on a change of control subject to the satisfaction as each Director is aware, there is no relevant audit of relevant performance conditions. There are no information of which the Company’s auditor is unaware arrangements between the Company and its Directors and each Director has taken all the steps that ought or employees providing for compensation for loss of to have been taken in his or her duty as a Director to oce or employment that occurs specifically because make himself or herself aware of any relevant audit of a takeover, merger or amalgamation. For further information and to establish that the Company’s information on the change of control provisions in the auditoris aware of that information. Company’s share plans and service agreements, please The Directors’ report was approved by the Board on refer to the Directors’ Remuneration Policy, which is set 29September 2022 and signed on its behalf by: out in full in the Directors’ Remunerationreport. Branches The Company has no overseas branches. TheCompany’s Glenda MacGeekie subsidiaries are detailed in note 14 to the financial Chief Legal Ocer and Company Secretary statements. McBride plc Annual Report and Accounts 2022 135 Directors’ report ## Statement of Directors’ responsibilities ## inrespect of the financial statements ## The Directors are responsible for preparing the Annual ## Reportand Accounts and the financial statements in ## accordancewith applicable law and regulation. Company law requires the Directors to prepare financial The Directors are responsible for the maintenance statements for each financial year that give a true and and integrity of the Company’s website. Legislation fair view of the state of aairs of the Group and the inthe United Kingdom governing the preparation and Company as at the end of the financial year, and of dissemination of financial statements may dier from the profit or loss of the Group for the financial year. legislation in other jurisdictions. Under that law the Directors have prepared the Group Directors’ confirmations financial statements in accordance with UK-adopted The Directors consider that the Annual Report and international accounting standards and the Company financial statements, taken as a whole, are fair, balanced financial statements in accordance with United Kingdom and understandable and provide the information Generally Accepted Accounting Practice (United necessary for shareholders to assess the Group’s and Kingdom Accounting Standards, comprising FRS 101 Company’s position and performance, business model ‘Reduced Disclosure Framework’, and applicable law). and strategy. Under company law, the Directors must not approve Each of the Directors, whose names and functions are the financial statements unless they are satisfied that listed in the Board of Directors, confirms that, to the they give a true and fair view of the state of aairs of best of their knowledge: the Group and Company and of the profit or loss of • the Group financial statements, which have the Group for that period. In preparing the financial been prepared in accordance with UK-adopted statements, the Directors are required to: international accounting standards, give a true and • select suitable accounting policies and then apply fair view of the assets, liabilities, financial position them consistently; and loss of the Group; • state whether applicable UK-adopted international • the Company financial statements, which have accounting standards have been followed for the been prepared in accordance with United Kingdom Group financial statements and United Kingdom Accounting Standards, comprising FRS 101, give a Accounting Standards, comprising FRS 101, have true and fair view of the assets, liabilities and financial been followed for the Company financial statements, position of the Company; and subject to any material departures disclosed and • the Strategic report and Directors’ report include explained in the Group and Company financial a fair review of the development and performance statements respectively; of the business and the position of the Group, • make judgements and accounting estimates that are together with a description of the principal risks reasonable and prudent; and anduncertainties that it faces. • prepare the financial statements on the going In the case of each Director in oce at the date the concern basis unless it is inappropriate to presume Directors’ report is approved: that the Group and Company will continue • so far as the Director is aware, there is no relevant inbusiness. audit information of which the Group’s and The Directors are responsible for safeguarding the Company’s auditor is unaware; and assets of the Group and Company and hence for taking • they have taken all the steps that they ought to reasonable steps for the prevention and detection of havetaken as a Director in order to make themselves fraud and other irregularities. aware of any relevant audit information and to The Directors are also responsible for keeping adequate establish that the Group’s and Company’s auditor accounting records that are sucient to show and isaware of that information. explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Directors’ Remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. McBride plc Annual Report and Accounts 2022 136 Financial statements ## Independent auditors’ report ## to the members of McBride plc Report on the audit of the financial statements Material uncertainty related to going concern Opinion In forming our opinion on the financial statements, which In our opinion: is not modified, we have considered the adequacy of the disclosure made in note 2 to the group financial statements • McBride plc’s group financial statements and company and note 2 to the company financial statements concerning financial statements (the “financial statements”) give a the group’s and the company’s ability to continue as true and fair view of the state of the group’s and of the a going concern. The Group’s base case forecasts and company’s aairs as at 30 June 2022 and of the group’s projections are based on the board approved budget loss and the group’s cash flows for the year then ended; and indicate continued compliance with its liquidity • the group financial statements have been properly headroom covenant and sucient liquidity throughout the prepared in accordance with UK-adopted international going concern review period. However, in the event of a accounting standards; severe but plausible downside scenario, in which revenue • the company financial statements have been properly volume growth is zero, with revenue growing in 2023 just prepared in accordance with United Kingdom Generally for pricing already agreed with customers; higher than Accepted Accounting Practice (United Kingdom forecast raw material and packaging input costs and Accounting Standards, comprising FRS 101 “Reduced additional inflationary pressures driven particularly by Disclosure Framework”, and applicable law); and energy, distribution and labour, ultimately being recovered • the financial statements have been prepared in through pricing actions, but only after a time lag; working accordance with the requirements of the Companies capital worsens through a deterioration in both customer Act2006. and supplier payment terms; interest rates increase We have audited the financial statements, included within by a further 100 basis points; and Sterling appreciates the Annual report and Accounts (the “Annual Report”), significantly against the Euro to £1:€1.22, the group would which comprise: the Consolidated and Company balance incur a covenant breach and a liquidity shortfall. In this sheets as at 30 June 2022; the Consolidated income downside risk scenario, the group would therefore need statement, the Consolidated statement of comprehensive to obtain a covenant waiver and increase its funding income, the Consolidated cash flow statement and the facilities compared to those that are currently committed, Consolidated and Company statements of changes in to ensure that the business can meet its obligations for equity for the year then ended; and the notes to the the next 18 months. These conditions, along with the other financial statements, which include a description of the matters explained in note 2 to the financial statements, significant accounting policies. indicate the existence of a material uncertainty which Our opinion is consistent with our reporting to the Audit may cast significant doubt about the group’s and the and Risk Committee. company’s ability to continue as a going concern. The financial statements do not include the adjustments that Basis for opinion would result if the group and the company were unable to We conducted our audit in accordance with International continue as a going concern. Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further In auditing the financial statements, we have concluded that described in the Auditors’ responsibilities for the audit of the directors’ use of the going concern basis of accounting the financial statements section of our report. We believe in the preparation of the financial statements is appropriate. that the audit evidence we have obtained is sucient and Our evaluation of the directors’ assessment of the group’s appropriate to provide a basis for our opinion. and the company’s ability to continue to adopt the going Independence concern basis of accounting included: We remained independent of the group in accordance • We obtained management’s assessment that supports with the ethical requirements that are relevant to our the Board’s conclusions with respect to the disclosures audit of the financial statements in the UK, which includes provided around going concern; the FRC’s Ethical Standard, as applicable to listed public • We obtained management’s severe but plausible interest entities, and we have fulfilled our other ethical downside scenario and discussed the assumptions that responsibilities in accordance with these requirements. were applied in order to understand the rationale and To the best of our knowledge and belief, we declare that the appropriateness of those assumptions; non-audit services prohibited by the FRC’s Ethical Standard • We corroborated the key assumptions in the base case were not provided. and severe but plausible downside scenario to third Other than those disclosed in note 6, we have provided party evidence and/or our knowledge of the business; no non-audit services to the company or its controlled • We assessed the availability of liquid resources under undertakings in the period under audit. dierent scenarios modelled by management, and the associated covenant test applied; • We checked the banking agreement for the terms of the financing facilities which were put in place during the year and post year end, and agreed these facilities to management’s cash flow forecasts. McBride plc Annual Report and Accounts 2022 137 Financial statements # Independent auditors' report to the members of McBride plc continued Report on the audit of the financial statements continued Material uncertainty related to going concern continued In relation to the directors' reporting on how they have applied the UK Corporate Governance Code, other than the material uncertainty identified in note 2 to the group financial statements and note 2 to the company financial statements, we have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting, or in respect of the directors' identification in the financial statements of any other material uncertainties to the group's and the company's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Our audit approach Overview ![img-6.jpeg](img-6.jpeg) Audit scope - Our work incorporated full scope audits of the Group's components in the UK, France, Belgium and Germany plus limited scope procedures in relation to some of the Group's other components. - The territories where we conducted audit work, together with audit work performed at the group's shared service centre and at the consolidated level, accounted for approximately 83% of the group's revenue and 91% of the group's loss before tax. Key audit matters - Material uncertainty related to going concern - Valuation of goodwill, other intangible assets and property plant and equipment (group) - Valuation of investments in subsidiaries and recoverability of amounts owed by subsidiaries (company) Materiality - Overall group materiality: £1.7m (2021: £1.7m) based on 0.25% of Revenue. - Overall company materiality: £1.5m (2021: £1.5m) based on 1% of Total assets, capped at 90% of the group materiality. - Performance materiality: £1.3m (2021: £1.3m) (group) and £1.1m (2021: £1.2m) (company). The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. Key audit matters Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks identified by our audit. Valuation of investments in subsidiaries and recoverability of amounts owed by subsidiaries is a new key audit matter this year. Impact of COVID-19 and Fraud in relation to rebates, which were key audit matters last year, are no longer included because of the impact of the pandemic becoming embedded within the economic environment and due to there not being a track record of errors in relation to rebates. Otherwise, the key audit matters below are consistent with last year. McBride plc Annual Report and Accounts 2022 138 Financial statements # Key audit matter # Valuation of goodwill, other intangible assets and property plant and equipment (group) Refer to notes 12, 13, and 14 to the Group financial statements. Goodwill of £19.7m (2021: £19.7m), Other intangible assets of £7.3m (2021: £8.2m) and Property, plant and equipment of £122.3m (2021: £129.8m) are material to the Group financial statements. The carrying values of the Group's cash generating units (CGUs) are considered annually for impairment with reference to a value in use model. This model incorporates a number of estimates, including: forecast cash flows for the three years subsequent to the balance sheet date; long-term growth rates; and discount rates. The Directors have sensitised the value in use model to assess the financial impact of several risks that the Directors believe have a reasonable likelihood of occurrence. An impairment of £0.8m (2021: £0.3m) has been recognised against Property, plant and equipment. No impairment has been recognised against Goodwill and Other intangible assets. # Valuation of investments in subsidiaries and recoverability of amounts owed by subsidiaries (company) Refer to notes 5 and 6 in the company financial statements. Investment in subsidiaries of £158.4m (2021: £158.4m) and amounts owed by subsidiary undertakings of £154.4m (2021: £148.6m) are material to the company financial statements. Due to the performance of the group, impairment indicators exist in the current year and management have assessed the balances for impairment. # How our audit addressed the key audit matter We evaluated and assessed the Group's future cash flow forecasts, the process by which they were drawn up and tested the underlying value in use calculations. We compared the Group's forecasts to the latest Board approved budget and found them to be consistent. We discussed the cash flow forecasts with management and compared these to external market research in order to identify any inconsistencies. We compared actual results with previous forecasts to assess historical accuracy of the forecasts and incorporated the variances identified into the sensitivity analysis performed. We also assessed management's key assumptions for long-term growth rates and margins by comparing with external forecasts of long-term growth rates and historical data, and the discount rates used by assessing the cost of capital calculations for the Group and comparing against comparable organisations. We challenged management to the extent of which climate change has been reflected within management's impairment assessment process. We have considered management's analysis of the potential impact of reasonably possible changes in key assumptions. This work included consideration of all key assumptions and changes that could be considered to be reasonably possible based on the related risks. We have also reviewed the disclosures made regarding the assumptions and are satisfied that these are appropriate. We evaluated and assessed the company's investments in subsidiaries with reference to the Group's future cash flow forecasts, and checked the allocation of this by legal entity, the process by which they were drawn up and tested the underlying value in use calculations. We compared the Group's forecasts to the latest Board approved budget and found them to be consistent. We discussed the cash flow forecasts with management and compared these to external market research in order to identify any inconsistencies. We compared the current period's actual results with previous forecasts to assess historical accuracy of the forecasts and incorporated the variances identified into the sensitivity analysis performed. We also assessed management's key assumptions for long-term growth rates by comparing with external forecasts of long-term growth rates and the discount rates used by assessing the cost of capital calculations for the Group and comparing against comparable organisations. We have obtained management's intercompany recoverability model and assessed whether the methods applied were consistent with IFRS 9. We checked the calculations within the model and agreed the figures included to the relevant financial information included in the Group consolidation schedules. We have considered management's analysis of the potential impact of reasonably possible changes in key assumptions. This work included consideration of all key assumptions and changes that could be considered to be reasonably possible based on the related risks. We have also reviewed the disclosures made regarding the assumptions and are satisfied that these are appropriate. McBride plc Annual Report and Accounts 2022 139 Financial statements ## Independent auditors’ report ## to the members of McBride plc continued Report on the audit of the financial Our work incorporated full scope audits of the Group’s statementscontinued legal entities in the UK, France, Belgium and Germany plus Our audit approach continued limited scope procedures in relation to some of the Group’s How we tailored the audit scope other jurisdictions. The territories where we conducted We tailored the scope of our audit to ensure that we audit work, together with audit work performed at the performed enough work to be able to give an opinion Group’s shared service centre and at a consolidated level, on the financial statements as a whole, taking into accounted for approximately 83% of the group’s revenue account thestructure of the group and the company, the and 91% of the group’s loss before tax. accountingprocesses and controls, and the industry in Materiality which they operate. The scope of our audit was influenced by our application The group is a manufacturer of private label household and of materiality. We set certain quantitative thresholds for personal care products. It operates across 15 manufacturing materiality. These, together with qualitative considerations, facilities in Europe and Asia. The group is structured in helped us to determine the scope of our audit and the five operating segments: Liquids, Powders, Unit dosing, nature, timing and extent of our audit procedures on the Aerosols and Asia as well as Corporate. The group financial individual financial statement line items and disclosures and statements are a consolidation of the Group’s 22 reporting in evaluating the eect of misstatements, both individually units within these segments comprising the group’s and in aggregate on the financial statements as a whole. operating businesses, holding entities and centralised functions. In establishing the overall approach to the group audit, we determined the type of work that needed to be performed at the reporting units by us, as the group engagement team, or component auditors operating under our instruction. Where work was performed by component auditors, we determined the level of involvement we needed to have in this work to be able to conclude that sucient appropriate audit evidence had been obtained. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Financial statements – group Financial statements – company Overall materiality £1.7m (2021: £1.7m). £1.5m (2021: £1.5m). How we determined it 0.25% of Revenue 1% of Total assets, capped at 90% of the group materiality | Rationale for benchmark | We considered materiality in a | We believe that calculating statutory | | --- | --- | --- | | applied | number of dierent ways, and used | materiality based on 1% of total assets | | | our professional judgement having | is a typical primary measure for users | | | applied ‘rule of thumb’ percentages | of the financial statements of holding | | | to a number of potential benchmarks. | companies, and is a generally accepted | | | On the basis of this, we concluded that | auditing benchmark. | 0.25% of revenue is an appropriate level of materiality considering the overall scale of the business. For each component in the scope of our group audit, we In determining the performance materiality, we considered allocated a materiality that is less than our overall group a number of factors – the history of misstatements, risk materiality. The range of materiality allocated across assessment and aggregation risk and the eectiveness of components was £0.7m – £1.5m. controls – and concluded that an amount at the upper end of our normal range was appropriate. We use performance materiality to reduce to an appropriately low level the probability that the aggregate We agreed with the Audit and Risk Committee that we of uncorrected and undetected misstatements exceeds would report to them misstatements identified during our overall materiality. Specifically, we use performance audit above £86k (group audit) (2021: £85k) and £77k materiality in determining the scope of our audit and the (company audit) (2021: £58k) as well as misstatements nature and extent of our testing of account balances, below those amounts that, in our view, warranted reporting classes of transactions and disclosures, for example in for qualitative reasons. determining sample sizes. Our performance materiality was 75% (2021:75%) of overall materiality, amounting to £1.3m (2021:£1.3m) for the group financial statements and £1.2m (2021: £1.2m) for the company financial statements. McBride plc Annual Report and Accounts 2022 140 Financial statements Reporting on other information Based on the work undertaken as part of our audit, we The other information comprises all of the information in have concluded that each of the following elements of the the Annual Report other than the financial statements and corporate governance statement is materially consistent our auditors’ report thereon. The directors are responsible with the financial statements and our knowledge obtained for the other information, which includes reporting based during the audit, and, except for the matters reported in on the Task Force on Climate-related Financial Disclosures the section headed ‘Material uncertainty related to going (TCFD) recommendations. Our opinion on the financial concern’, we have nothing material to add or draw attention statements does not cover the other information and, to in relation to: accordingly, we do not express an audit opinion or, except • The directors’ confirmation that they have carried out a to the extent otherwise explicitly stated in this report, any robust assessment of the emerging and principal risks; form of assurance thereon. • The disclosures in the Annual Report that describe those In connection with our audit of the financial statements, principal risks, what procedures are in place to identify our responsibility is to read the other information and, emerging risks and an explanation of how these are in doing so, consider whether the other information is being managed or mitigated; materially inconsistent with the financial statements or our • The directors’ statement in the financial statements knowledge obtained in the audit, or otherwise appears to about whether they considered it appropriate to adopt be materially misstated. If we identify an apparent material the going concern basis of accounting in preparing them, inconsistency or material misstatement, we are required and their identification of any material uncertainties to to perform procedures to conclude whether there is a the group’s and company’s ability to continue to do so material misstatement of the financial statements or a over a period of at least twelve months from the date of material misstatement of the other information. If, based approval of the financial statements; on the work we have performed, we conclude that there • The directors’ explanation as to their assessment of is a material misstatement of this other information, we the group’s and company’s prospects, the period this are required to report that fact. We have nothing to report assessment covers and why the period is appropriate; based on these responsibilities. and With respect to the Strategic report and Directors’ report, • The directors’ statement as to whether they have a we also considered whether the disclosures required by the reasonable expectation that the company will be able UK Companies Act 2006 have been included. to continue in operation and meet its liabilities as they Based on our work undertaken in the course of the audit, fall due over the period of its assessment, including any the Companies Act 2006 requires us also to report certain related disclosures drawing attention to any necessary opinions and matters as described below. qualifications or assumptions. Strategic report and Directors’ report Our review of the directors’ statement regarding the In our opinion, based on the work undertaken in the course longer-term viability of the group was substantially less in of the audit, the information given in the Strategic report scope than an audit and only consisted of making inquiries and Directors’ report for the year ended 30 June 2022 and considering the directors’ process supporting their is consistent with the financial statements and has been statement; checking that the statement is in alignment with prepared in accordance with applicable legal requirements. the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent In light of the knowledge and understanding of the group with the financial statements and our knowledge and and company and their environment obtained in the course understanding of the group and company and their of the audit, we did not identify any material misstatements environment obtained in the course of the audit. in the Strategic report and Directors’ report. In addition, based on the work undertaken as part of Directors’ Remuneration our audit, we have concluded that each of the following In our opinion, the part of the Remuneration Committee elements of the corporate governance statement is Report to be audited has been properly prepared in materially consistent with the financial statements and our accordance with the Companies Act 2006. knowledge obtained during the audit: Corporate governance statement • The directors’ statement that they consider the The Listing Rules require us to review the directors’ Annual Report, taken as a whole, is fair, balanced and statements in relation to going concern, longer-term understandable, and provides the information necessary viability and that part of the corporate governance for the members to assess the group’s and company’s statement relating to the company’s compliance with position, performance, business model and strategy; the provisions of the UK Corporate Governance Code • The section of the Annual Report that describes the specified for our review. Our additional responsibilities review of eectiveness of risk management and internal with respect to the corporate governance statement as control systems; and other information are described in the Reporting on other information section of this report. • The section of the Annual Report describing the work of the Audit and Risk Committee. We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors. McBride plc Annual Report and Accounts 2022 141 Financial statements ## Independent auditors’ report ## to the members of McBride plc continued Report on the audit of the financial Based on our understanding of the group and industry, statementscontinued we identified that the principal risks of non-compliance Responsibilities for the financial statements with laws and regulations related to health and safety and the audit regulations, environmental laws and employment laws, and we considered the extent to which non-compliance Responsibilities of the directors for the might have a material eect on the financial statements. financialstatements We also considered those laws and regulations that As explained more fully in the Statement of Directors’ have a direct impact on the financial statements such responsibilities in respect of the financial statements, the as the listing rules, local and international tax laws and directors are responsible for the preparation of the financial the Companies Act 2006. We evaluated management’s statements in accordance with the applicable framework incentives and opportunities for fraudulent manipulation and for being satisfied that they give a true and fair view. of the financial statements (including the risk of override The directors are also responsible for such internal control of controls), and determined that the principal risks were as they determine is necessary to enable the preparation related to posting inappropriate journal entries to improve of financial statements that are free from material financial performance, and management bias in accounting misstatement, whether due to fraud or error. estimates and judgements. The group engagement team In preparing the financial statements, the directors are shared this risk assessment with the component auditors responsible for assessing the group’s and the company’s so that they could include appropriate audit procedures ability to continue as a going concern, disclosing, as in response to such risks in their work. Audit procedures applicable, matters related to going concern and using the performed by the group engagement team and/or going concern basis of accounting unless the directors either component auditors included: intend to liquidate the group or the company or to cease • challenging assumptions and judgements made by operations, or have no realistic alternative but to do so. management in their significant accounting estimates Auditors’ responsibilities for the audit of the (because of the risk of management bias), in particular financialstatements around the carrying value of goodwill, other intangible Our objectives are to obtain reasonable assurance about assets, and property plant and equipment (see related whether the financial statements as a whole are free from key audit matter above), defined benefit scheme material misstatement, whether due to fraud or error, liabilities and deferred tax assets; and to issue an auditors’ report that includes our opinion. • discussions with the audit committee, management, Reasonable assurance is a high level of assurance, but is not internal audit and the in-house legal team including a guarantee that an audit conducted in accordance with consideration of known or suspected instances of ISAs (UK) will always detect a material misstatement when non-compliance with laws and regulation or fraud; it exists. Misstatements can arise from fraud or error and are • enquired with external legal counsel around actual and considered material if, individually or in the aggregate, they potential litigation and claims; could reasonably be expected to influence the economic • reviewing minutes of meetings of those charged with decisions of users taken on the basis of these financial governance; statements. • auditing the tax computations to ensure compliance with Irregularities, including fraud, are instances of non- tax legislation; compliance with laws and regulations. We design • identifying and testing journal entries, in particular procedures in line with our responsibilities, outlined above, any journal entries posted with unusual account to detect material misstatements in respect of irregularities, combinations; and including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is • reviewing financial statements disclosures and testing to detailed below. supporting documentation, where appropriate, to assess compliance with applicable laws and regulations. McBride plc Annual Report and Accounts 2022 142 Financial statements There are inherent limitations in the audit procedures Other required reporting described above. We are less likely to become aware of Companies Act 2006 exception reporting instances of non-compliance with laws and regulations that Under the Companies Act 2006 we are required to report are not closely related to events and transactions reflected to you if, in our opinion: in the financial statements. Also, the risk of not detecting • we have not obtained all the information and a material misstatement due to fraud is higher than the explanations we require for our audit; or risk of not detecting one resulting from error, as fraud may • adequate accounting records have not been kept by the involve deliberate concealment by, for example, forgery or company, or returns adequate for our audit have not intentional misrepresentations, or through collusion. been received from branches not visited by us; or Our audit testing might include testing complete • certain disclosures of directors’ remuneration specified populations of certain transactions and balances, possibly by law are not made; or using data auditing techniques. However, it typically • the company financial statements and the part of the involves selecting a limited number of items for testing, Remuneration Committee Report to be audited are not rather than testing complete populations. We will often in agreement with the accounting records and returns. seek to target particular items for testing based on their We have no exceptions to report arising from this size or risk characteristics. In other cases, we will use audit responsibility. sampling to enable us to draw a conclusion about the population from which the sample is selected. Appointment Following the recommendation of the Audit and Risk A further description of our responsibilities for the audit of Committee, we were appointed by the directors on the financial statements is located on the FRC’s website at: 14November 2011 to audit the financial statements for the www.frc.org.uk/auditorsresponsibilities. This description year ended 30 June 2012 and subsequent financial periods. forms part of our auditors’ report. The period of total uninterrupted engagement is 10 years, Use of this report covering the years ended 30 June 2012 to 30 June 2022. This report, including the opinions, has been prepared for and only for the company’s members as a body in Other matter accordance with Chapter 3 of Part 16 of the Companies As required by the Financial Conduct Authority Disclosure Act 2006 and for no other purpose. We do not, in giving Guidance and Transparency Rule 4.1.14R, these financial these opinions, accept or assume responsibility for any statements form part of the ESEF-prepared annual financial other purpose or to any other person to whom this report report filed on the National Storage Mechanism of the is shown or into whose hands it may come save where Financial Conduct Authority in accordance with the ESEF expressly agreed by our prior consent in writing. Regulatory Technical Standard (‘ESEF RTS’). Thisauditors’ report provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in the ESEF RTS. Graham Parsons (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Manchester 29 September 2022 McBride plc Annual Report and Accounts 2022 143 Financial statements # Consolidated income statement Year ended 30 June 2022 | Continuing operations | Note | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Adjusted (note 2) £m | Adjusting items (note 2) £m | Total £m | Adjusted (note 2) £m | Adjusting items (note 2) £m | Total £m | | Revenue | 3 | 678.3 | — | 678.3 | 682.3 | — | 682.3 | | Cost of sales | | (487.5) | — | (487.5) | (445.3) | — | (445.3) | | Gross profit | | 190.8 | — | 190.8 | 237.0 | — | 237.0 | | Distribution costs | | (64.3) | — | (64.3) | (56.0) | — | (56.0) | | Administrative costs | | (148.8) | (5.0) | (153.8) | (154.9) | (8.6) | (183.5) | | Impairment of trade receivables | | (2.0) | — | (2.0) | (1.3) | — | (1.3) | | (Loss)/gain on disposal of property, plant and equipment | | (0.3) | 3.7 | 3.4 | (0.4) | — | (0.4) | | Impairment of property, plant and equipment | | 0.1 | (0.9) | (0.8) | (0.3) | — | (0.3) | | Operating (loss)/profit | 7 | (24.5) | (2.2) | (26.7) | 24.1 | (8.6) | 15.5 | | Finance costs | 8 | (5.1) | (3.5) | (8.6) | (4.2) | — | (4.2) | | (Loss)/profit before taxation | | (29.6) | (5.7) | (35.3) | 19.9 | (8.6) | 11.3 | | Taxation | 9 | 9.3 | 2.0 | 11.3 | 1.1 | 1.6 | 2.7 | | (Loss)/profit for the year from continuing operations | | (20.3) | (3.7) | (24.0) | 21.0 | (7.0) | 14.0 | | Discontinued operations | | | | | | | | | Loss for the year from discontinued operations | 4 | — | (0.3) | (0.3) | — | (0.6) | (0.6) | | (Loss)/profit for the year | | (20.3) | (4.0) | (24.3) | 21.0 | (7.6) | 13.4 | | (Loss)/earnings per ordinary share from continuing and discontinued operations attributable to the owners of the parent during the year | 10 | | | | | | | | Basic (loss)/earnings per share | | | | | | | | | From continuing operations | | | | (13.8)p | | | 7.8p | | From discontinued operations | | | | (0.2)p | | | (0.3)p | | From (loss)/profit for the year | | | | (14.0)p | | | 7.5p | | Diluted (loss)/earnings per share | | | | | | | | | From continuing operations | | | | (13.8)p | | | 7.8p | | From discontinued operations | | | | (0.2)p | | | (0.3)p | | From (loss)/profit for the year | | | | (14.0)p | | | 7.5p | McBride plc Annual Report and Accounts 2022 144 Financial statements # Consolidated statement of comprehensive income Year ended 30 June 2022 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | (Loss)/profit for the year | | (24.3) | 13.4 | | Other comprehensive income/(expense) | | | | | Items that may be reclassified to profit or loss: | | | | | Currency translation differences on foreign subsidiaries | | 0.2 | (4.6) | | Gain on net investment hedges | | 0.5 | 3.7 | | Gain/(loss) on cash flow hedges in the year | | 2.4 | (0.1) | | Cash flow hedges transferred to profit or loss | | — | (0.5) | | Taxation relating to items above | 9 | (0.5) | — | | | | 2.6 | (1.5) | | Items that will not be reclassified to profit or loss: | | | | | Net actuarial gain/(loss) on post-employment benefits | 23 | 12.4 | (4.2) | | Taxation relating to item above | 9 | (3.1) | 4.1 | | | | 9.3 | (0.1) | | Total other comprehensive income/(expense) | | 11.9 | (1.6) | | Total comprehensive (expense)/income | | (12.4) | 11.8 | | Total comprehensive (expense)/income attributable to equity shareholders arises from: | | | | | Continuing operations | | (12.1) | 12.4 | | Discontinued operations | | (0.3) | (0.6) | | | | (12.4) | 11.8 | McBride plc Annual Report and Accounts 2022 145 Financial statements # Consolidated balance sheet At 30 June 2022 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **Non-current assets** | | | | | Goodwill | 12 | 19.7 | 19.7 | | Other intangible assets | 13 | 7.3 | 8.2 | | Property, plant and equipment | 14 | 122.9 | 129.8 | | Derivative financial instruments | 21 | 1.9 | 0.1 | | Right-of-use assets | 15 | 11.3 | 10.0 | | Deferred tax assets | 9 | 29.7 | 22.8 | | | | 192.8 | 190.6 | | **Current assets** | | | | | Inventories | 16 | 118.9 | 92.9 | | Trade and other receivables | 17 | 145.4 | 117.9 | | Current tax assets | | 3.9 | 3.7 | | Non-current assets classified as held for sale | 18 | — | 1.6 | | Derivative financial instruments | 21 | 0.6 | 0.2 | | Cash and cash equivalents | | 4.5 | 24.9 | | | | 273.3 | 241.2 | | **Total assets** | | 466.1 | 431.8 | | **Current liabilities** | | | | | Trade and other payables | 19 | 206.9 | 169.2 | | Borrowings | 20 | 60.5 | 53.7 | | Lease liabilities | 15, 20 | 3.9 | 3.4 | | Derivative financial instruments | 21 | — | 0.3 | | Current tax liabilities | | 5.3 | 4.2 | | Provisions | 25 | 3.4 | 2.7 | | | | 280.0 | 233.5 | | **Non-current liabilities** | | | | | Borrowings | 20 | 96.4 | 78.3 | | Lease liabilities | 15, 20 | 8.1 | 7.9 | | Perisons and other post-employment benefits | 23 | 16.1 | 31.9 | | Provisions | 25 | 3.8 | 3.7 | | Deferred tax liabilities | 9 | 4.7 | 6.7 | | | | 129.1 | 128.5 | | **Total liabilities** | | 409.1 | 362.0 | | **Net assets** | | 57.0 | 69.8 | | **Equity** | | | | | Issued share capital | 26 | 17.4 | 17.4 | | Share premium account | 26 | 68.6 | 68.6 | | Other reserves | 26 | 77.2 | 76.0 | | Accumulated losses | | (106.2) | (92.2) | | **Total equity** | | 57.0 | 69.8 | The financial statements on pages 144 to 198 were approved by the Board of Directors on 29 September 2022 and were signed on its behalf by: Chris Smith Director McBride plc Annual Report and Accounts 2022 146 Financial statements # Consolidated cash flow statement Year ended 30 June 2022 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | Operating activities | | | | | (Loss)/profit before tax | | | | | Continuing operations | | (35.3) | 11.3 | | Discontinued operations | | (0.4) | (0.7) | | Finance costs | 8 | 8.6 | 4.2 | | Exceptional items excluding finance costs | 4 | — | 6.9 | | Share-based payments charge | 5 | — | 0.3 | | Depreciation of property, plant and equipment | 14 | 16.9 | 17.6 | | Depreciation of right-of-use assets | 15 | 4.0 | 3.8 | | Loss on disposal of fixed assets | | 0.3 | 0.4 | | Amortisation of intangible assets | 13 | 2.6 | 2.4 | | (Reversal of) impairment of property, plant and equipment | 14 | (0.1) | 0.3 | | Operating cash flow before changes in working capital before exceptional items | | (3.4) | 46.5 | | (Increase)/decrease in receivables | | (27.4) | 13.2 | | Increase in inventories | | (25.7) | (0.4) | | Increase/(decrease) in payables | | 37.8 | (22.2) | | Operating cash flow after changes in working capital before exceptional items | | (18.7) | 37.1 | | Additional cash funding of pension schemes | 23 | (4.0) | (4.0) | | Cash (used)/generated from operations before exceptional items | | (22.7) | 33.1 | | Cash inflow/(outflow) in respect of exceptional items | | (4.1) | (8.0) | | Cash (used)/generated from operations | | (26.8) | 25.1 | | Interest paid | | (3.3) | (3.2) | | Taxation paid | | (0.1) | (7.3) | | Net cash (used)/generated from operating activities | | (30.2) | 14.6 | | Investing activities | | | | | Proceeds from sale of property, plant and equipment | | 6.1 | 0.2 | | Purchase of property, plant and equipment | 14 | (12.6) | (21.6) | | Purchase of intangible assets | 13 | (1.7) | (2.2) | | Settlement of derivatives used in net investment hedges | | 0.4 | 3.8 | | Net cash used in investing activities | | (7.8) | (19.8) | | Financing activities | | | | | Redemption of B Shares | 11 | (0.1) | (2.0) | | Drawdown of overdrafts | | 0.7 | 2.8 | | Drawdown of other loans | | 6.0 | 25.9 | | Drawdown of bank loans | | 18.0 | 76.2 | | Repayment of bank loans | | — | (103.8) | | Refinancing costs paid | | (1.8) | — | | Repayment of IFRS 16 lease obligations | 15 | (5.0) | (4.9) | | Purchase of own shares | | (0.1) | (6.8) | | Purchase of own shares held by Employee Benefit Trust | | — | (0.3) | | Net cash generated/(used) in financing activities | | 17.7 | (12.9) | | Decrease in net cash and cash equivalents | | (20.3) | (18.1) | | Net cash and cash equivalents at the start of the year | | 24.9 | 44.2 | | Currency translation differences | | (0.1) | (1.2) | | Net cash and cash equivalents at the end of the year | | 4.5 | 24.9 | McBride plc Annual Report and Accounts 2022 147 Financial statements # Consolidated statement of changes in equity Year ended 30 June 2022 | | Note | Issued share capital £m | Share premium account £m | Other reserves | | | | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Cash flow hedge reserve £m | Currency translation reserve £m | Capital redemption reserve £m | Accumulated losses £m | | | At 1 July 2020 | | 18.3 | 70.6 | 0.5 | (0.1) | 74.2 | (96.6) | 66.9 | | **Year ended 30 June 2021** | | | | | | | | | | **Profit for the year** | | — | — | — | — | — | 13.4 | 13.4 | | **Other comprehensive (expense)/income** | | | | | | | | | | Items that may be reclassified to profit or loss: | | | | | | | | | | Currency translation differences of foreign subsidiaries | | — | — | — | (4.6) | — | — | (4.6) | | Gain on net investment hedges | 21 | — | — | — | 3.7 | — | — | 3.7 | | Loss on cash flow hedges in the year | 21 | — | — | (0.1) | — | — | — | (0.1) | | Cash flow hedges transferred to profit or loss | 21 | — | — | (0.5) | — | — | — | (0.5) | | | | — | — | (0.6) | (0.9) | — | — | (1.5) | | Items that will not be reclassified to profit or loss: | | | | | | | | | | Net actuarial loss on post-employment benefits | 23 | — | — | — | — | — | (4.2) | (4.2) | | Taxation relating to items above | 9 | — | — | — | — | — | 4.1 | 4.1 | | | | — | — | — | — | — | (0.1) | (0.1) | | **Total other comprehensive expense** | | — | — | (0.6) | (0.9) | — | (0.1) | (1.6) | | **Total comprehensive (expense)/income** | | — | — | (0.6) | (0.9) | — | 13.3 | 11.8 | | **Transactions with owners of the parent** | | | | | | | | | | Issue of B Shares | 11 | — | (2.0) | — | — | — | — | (2.0) | | Redemption of B Shares | 11 | — | — | — | — | 2.0 | (2.0) | — | | Share-based payments | 24 | — | — | — | — | — | 0.3 | 0.3 | | Purchase of own shares | 26 | — | — | — | — | — | (6.8) | (6.8) | | Purchase of own shares held by Employee Benefit Trust | 26 | — | — | — | — | — | (0.3) | (0.3) | | Transfers between reserves | | (0.9) | — | — | — | 0.9 | — | — | | Taxation relating to items above | 9 | — | — | — | — | — | (0.1) | (0.1) | | At 30 June 2021 | | 17.4 | 68.6 | (0.1) | (1.0) | 77.1 | (92.2) | 69.8 | McBride plc Annual Report and Accounts 2022 148 Financial statements | | Note | Issued share capital £m | Share premium account £m | Other reserves | | | | Total equity £m | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Cash flow hedge reserve £m | Currency translation reserve £m | Capital redemption reserve £m | Accumulated losses £m | | | **Year ended 30 June 2022** | | | | | | | | | | Loss for the year | | — | — | — | — | — | (24.3) | (24.3) | | **Other comprehensive income/(expense)** | | | | | | | | | | Items that may be reclassified to profit or loss: | | | | | | | | | | Currency translation differences of foreign subsidiaries | | — | — | — | 0.2 | — | — | 0.2 | | Gain on net investment hedges | 21 | — | — | — | 0.5 | — | — | 0.5 | | Gain on cash flow hedges in the year | 21 | — | — | 2.4 | — | — | — | 2.4 | | Taxation relating to the items above | | — | — | (0.5) | — | — | — | (0.5) | | | | — | — | 1.9 | 0.7 | — | — | 2.6 | | Items that will not be reclassified to profit or loss: | | | | | | | | | | Net actuarial gain on post-employment benefits | 23 | — | — | — | — | — | 12.4 | 12.4 | | Taxation relating to items above | 9 | — | — | — | — | — | (3.1) | (3.1) | | | | — | — | — | — | — | 9.3 | 9.3 | | **Total other comprehensive income** | | — | — | 1.9 | 0.7 | — | 9.3 | 11.9 | | **Total comprehensive income/(expense)** | | — | — | 1.9 | 0.7 | — | (15.0) | (12.4) | | **Transactions with owners of the parent** | | | | | | | | | | Redemption of B Shares | 11 | — | — | — | — | 0.1 | (0.1) | — | | Purchase of own shares | 26 | — | — | — | — | — | (0.1) | (0.1) | | Transfers between reserves | | — | — | — | (1.5) | — | 1.5 | — | | Taxation relating to the items above | 9 | — | — | — | — | — | (0.3) | (0.3) | | **At 30 June 2022** | | 17.4 | 68.6 | 1.8 | (1.8) | 77.2 | (106.2) | 57.0 | At 30 June 2022, the accumulated losses include a deduction of £0.5 million (2021: £0.5m) for the cost of own shares held in relation to employee share schemes. Further information on own shares is presented in note 26. McBride plc Annual Report and Accounts 2022 149 Financial statements # Notes to the consolidated financial statements ## Year ended 30 June 2022 ### 1. Corporate information McBride plc ('the Company') is a public company limited by shares incorporated and domiciled in the United Kingdom and registered in England and Wales. The Company's ordinary shares are listed on the London Stock Exchange. The registered office of the Company is Middleton Way, Middleton, Manchester M24 4DP. For the purposes of DTR 6.4.2R, the Home State of McBride plc is the United Kingdom. The Company and its subsidiaries (together, 'the Group') is Europe's leading provider of private label and contract manufactured products for the domestic household and professional cleaning/hygiene markets. The Company develops and manufactures products for the majority of retailers and major brand owners throughout the UK, Europe and Asia. ### 2. Accounting policies #### Accounting period The Group's annual financial statements are drawn up to 30 June. These financial statements cover the year ended 30 June 2022 ('2022') with comparative amounts for the year ended 30 June 2021 ('2021'). #### Basis of preparation The consolidated financial statements on pages 144 to 198 have been prepared on the going concern basis in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The financial statements have been prepared under the historical cost convention, modified in respect of the revaluation to fair value of financial assets and liabilities (derivative financial instruments) at fair value through profit or loss, assets held for sale and defined benefit pension plan assets. A summary of the significant accounting policies is set out below. The accounting policies that follow set out those policies that apply in preparing the financial statements for the year ended 30 June 2022 and the Group and Company have applied the same policies throughout the year. #### Going concern The Group's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the report of the OFO on pages 30 to 35. In addition, note 21 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives, details of its financial instruments and hedging activities, and its exposures to credit and liquidity risks. The Group meets its funding requirements through internal cash generation and bank credit facilities. At 30 June 2022, committed undrawn facilities and net cash position amounted to £70.6 million. The Group's base case forecasts are based on the Board-approved budget and three-year plan. They indicate sufficient liquidity throughout the going concern review period to ensure compliance with its minimum liquidity banking covenant. The Group's base case scenario assumes: - revenue growth of c.5%, driven predominantly by the wrap-around effect of pricing already agreed with customers; - raw material prices marginally reducing compared to the June 2022 levels, which in themselves were significantly higher than pre-Covid-19 pandemic levels; - interest rates increasing by c.150 basis points; and - Sterling: Euro exchange rate of £1.61.185. The Directors have considered a severe but plausible downside scenario including several downside assumptions to stress test the Group's financial forecasts: - zero revenue growth from volumes, with revenue growing in 2023 just for pricing already agreed with customers; - higher than forecast raw material and packaging input costs and additional inflationary pressures driven particularly by energy, distribution and labour, ultimately being recovered through pricing actions, but only after a lag; - worsening trade working capital, caused by deterioration in both customer and supplier payment terms; - interest rates increasing by a further 100 basis points; and - Sterling appreciating significantly against the Euro to £1.61.22. In the event that such a severe but plausible downside risk scenario occurs, the Group would incur a covenant breach and a liquidity shortfall. In this downside risk scenario, the Group would therefore need to obtain a covenant waiver and increase its funding facilities compared to those that are currently committed, to ensure that the business can meet its obligations for the next 18 months. To mitigate against these risks, the Group is currently negotiating to further increase liquidity by £25 million by extending invoice discounting facilities to unencumbered receivables ledgers, however there is no certainty that these negotiations will be successful. After reviewing the current liquidity position, financial forecasts, stress testing of potential risks and considering the uncertainties described above, and based on the currently committed funding facilities, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence and without significant curtailment of operations for the foreseeable future. For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the Group financial statements. However, the occurrence of multiple downside trading and liquidity risks represents a material uncertainty at 29 September 2022 that could cast significant doubt upon the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. McBride plc Annual Report and Accounts 2022 150 Financial statements Segmental reporting Basis of consolidation Operating segments are reported in a manner consistent The consolidated financial statements include the results, with the internal reporting provided to the chief operating cash flows and assets and liabilities of the Group and decision maker. The Board of McBride plc assesses the its subsidiaries. Details of the Group’s subsidiaries at financial performance and position of the Group and makes 30June2022 are set out on pages 207 and 208. strategic decisions. Therefore, the Board of McBride plc has Subsidiaries are all entities over which the Group has been identified as the chief operating decision maker. control. The Group controls an entity where the Group Financial information is presented to the Board by product is exposed to, or has rights to, variable returns from its technology for the purposes of allocating resources involvement with the entity and has the ability to aect within the Group and assessing the performance of the those returns through its power to direct the activities of Group’s businesses. There are five separately managed and the entity. The Group’s results, cash flows and assets and accountable business divisions: liabilities include those of each of its subsidiaries from the date on which the Group obtains control until such time as • Liquids; the Group loses control. • Unit Dosing; • Powders; Intra-group balances and transactions, and any unrealised gains and losses arising from intra-group transactions, are • Aerosols; and eliminated on consolidation. Consistent accounting policies • Asia Pacific. are adopted across the Group. Intra-group revenue from the sale of products is agreed Business combinations between the relevant customer-facing units and eliminated A business combination is a transaction or other event in in the segmental presentation that is presented to the which the Group obtains control of one or more businesses. Board. Programme Compass is delivering an increased Business combinations are accounted for using the focus on cost optimisation and has meant that most acquisition method. overhead costs are now directly attributed within the respective divisions’ income statements. The only costs Goodwill arising in a business combination represents the now allocated out to the divisions are central overheads, excess of the sum of the consideration transferred, the with corporate costs being retained at a Group level. amount of any non-controlling interest in the acquired Central overheads are allocated to a reportable segment business and, in a business combination achieved in proportionally using an appropriate cost driver. Corporate stages, the fair value at the acquisition date of the Group’s costs, which include the costs associated with the Board previously held equity interest, over the net total of the and the Executive Leadership Team, governance and identifiable assets and liabilities of the acquired business at listed company costs and certain central functions (mostly the acquisition date. If the identifiable assets and liabilities associated with financial disciplines such as treasury), are of the acquired business exceed the aggregate of the reported separately. Exceptional items are detailed in note consideration transferred, the amount of any non-controlling 4 and are not allocated to the reportable segments as interest in the business and the fair value at the acquisition this reflects how they are reported to the Board. Finance date of any previously held equity interest, the excess is expense and income are not allocated to the reportable recognised as a gain in profit or loss. The fair value of assets segments, as the central treasury function manages this and liabilities can be revised up to twelve months following activity, together with the overall net debt position of the date of acquisition. Consideration transferred in a theGroup. business combination represents the sum of the fair values at the acquisition date of the assets given, liabilities incurred The Board uses adjusted operating profit to measure the or assumed and equity instruments issued by the Group in profitability of the Group’s businesses. Adjusted operating exchange for control over the acquired business. profit is, therefore, the measure of segment profit presented in the Group’s segment disclosures. Adjusted operating Acquisition-related costs are charged to profit or loss in the profit represents operating profit before specific items period in which they are incurred. that are considered to hinder comparison of the trading Changes in the amount of contingent consideration payable performance of the Group’s businesses either year-on-year that result from events after the acquisition date, such as or with other businesses. During the years under review, the meeting a revenue or profit target, are not measurement items excluded from operating profit in arriving at adjusted period adjustments and are, therefore, recognised in profit operating profit were the amortisation of intangible assets or loss. and exceptional items. Adjusted operating profit is not Any non-controlling interest in the acquired business is defined under IFRS and is therefore termed a non-GAAP measured either at fair value or at the non-controlling measure. The rationale for using this measure, along with interest’s proportionate share of the identifiable assets and a reconciliation from the nearest measures prepared liabilities of the business. in accordance with IFRS, is discussed in alternative Changes in the Group’s ownership interest in a subsidiary performance measures on page 160. that do not result in a loss of control are accounted for Segment information is presented in note 3. within equity. Principal accounting policies If the Group loses control of a subsidiary, it derecognises The Group and Company financial statements are presented the assets and liabilities and related equity components of in Pounds Sterling and all values are rounded to the nearest the subsidiary and measures any investment retained in the million Pounds (£m) except where otherwise indicated. former subsidiary at its fair value at the date when control is lost. Any gain or loss on a loss of control is recognised in profit or loss. McBride plc Annual Report and Accounts 2022 151 Financial statements ## Notes to the consolidated financial statements continued ## Year ended 30 June 2022 2. Accounting policies continued At 30 June 2022, the carrying amount of accruals relating Principal accounting policies continued to rebates and discounts amounted to £2.1 million (2021: Foreign currency translation £2.4m). Rebates equate to less than 1.0% (2021: less than The Group’s presentational currency is Pound Sterling. 1.0%) of revenue and are not considered to be a critical At an entity level, transactions in foreign currencies judgement. There is an element of judgement applied to are translated into the entity’s functional currency at the level of future achieved sales within volume-related the exchange rate ruling at the date of the transaction. rebates. Monetary assets and liabilities denominated in foreign Payment is typically due 60 days after despatch. currencies are translated at the exchange rate ruling at TheGroup has an obligation for returns due to damages the balance sheet date. Currency translation dierences and recognises a credit note provision and corresponding arising at entity level are recognised in profit or adjustment to revenue. loss. Onconsolidation, the results of foreign operations are Exceptional items translated into Pound Sterling at the average exchange rate Exceptional items are material either individually or, if of for the period and their assets and liabilities are translated a similar type, in aggregate and which, due to their nature into Pound Sterling at the exchange rate ruling at the or the infrequency of the events giving rise to them, balance sheet date. Currency translation dierences arising are presented separately to assist users of the financial on consolidation are recognised in other comprehensive statements in assessing the underlying trading performance income and taken to the currency translation reserve. and trends of the Group’s businesses either year-on-year or In the event that a foreign operation is sold, the gain or loss with other businesses. on disposal recognised in profit or loss is determined after Examples of exceptional items include, but are not limited taking into account the cumulative currency translation to, the following: dierences arising on consolidation of the operation • restructuring and other expenses relating to the subsequent to the adoption of IFRS. integration of an acquired business and related expenses In the cash flow statement, the cash flows of foreign for reconfiguration of the Group’s activities; operations are translated into Sterling at the average • impairment of current and non-current assets; exchange rate for the period. • gains/losses on disposals of businesses; Revenue • acquisition-related costs, including adviser fees incurred Revenue from contracts with customers from the sale of for significant transactions, and adjustments to the fair goods is measured at the invoiced amount, net of sales values of assets and liabilities that result in non-recurring rebates, discounts, value added tax and other sales taxes. charges to the income statement; and Revenue is recognised on the transfer of the control of • costs arising because of material and non-recurring goods upon delivery of the goods to the customer, when regulatory and litigation matters. the significant risks and rewards of ownership are passed Borrowing costs to the customer and when all contractual performance Borrowing costs directly attributable to the construction obligations have been met. of a manufacturing or distribution facility are capitalised Accruals for sales rebates and discounts are established at as part of the cost of the facility if, at the outset of the time of sale based on management’s judgement of the construction, the facility was expected to take a substantial amounts payable under the contractual arrangements with period of time to get ready for its intended use. the customer. The estimated rebates or discounts payable Costs attributable to the arrangement of term do not contain significant estimates as they are mostly borrowing facilities are amortised over the life of those contractually driven and are based on, amongst other facilities. Allother borrowing costs are recognised in profit things, expected sales to the customer during the period to or loss in the period in which they are incurred. which the rebate or discount relates, historical experience and market information. Goodwill Goodwill arising in a business combination is recognised as The type of rebates and discounts given by the Group an intangible asset and is allocated to the cash-generating include: unit (CGU) or group of CGUs that are expected to benefit • volume-related rebates for achieving sales targets within from the synergies of the acquisition. a set period; and Goodwill is not amortised but is tested for impairment • promotional, marketing and other allowances to support annually and whenever there are events or changes in specific promotional pricing discounts, in-store displays circumstances that indicate that its carrying amount may and cost reimbursement. not be recoverable. Goodwill is carried at cost less any recognised impairment losses. Impairment charges are recognised in administrative expenses. McBride plc Annual Report and Accounts 2022 152 Financial statements Other intangible assets Right-of-use assets Other intangible assets are stated at cost less accumulated The Group recognises right-of-use assets at the amortisation and any recognised impairment loss. commencement date of the lease (i.e. the date the Amortisation is recognised in administrative expenses. underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated (i) Assets acquired in business combinations depreciation and impairment losses, and adjusted for any An intangible resource acquired in a business combination remeasurement of lease liabilities. The cost of right-of-use is recognised as an intangible asset if it is separable from assets includes the amount of lease liabilities recognised, the acquired business or arises from contractual or legal initial direct costs incurred, and lease payments made on or rights. An acquired intangible asset with a definite useful before the commencement date less any lease incentives life is amortised on a straight-line basis so as to charge its received. Unless the Group is reasonably certain to obtain fair value at the date of acquisition to profit or loss over its ownership of the leased asset at the end of the lease term, expected useful life as follows: the recognised right-of-use assets are depreciated on a Patents, brands and trademarks – up to five years straight-line basis over the shorter of its estimated useful Customer relationships – up to eight years life and the lease term. Right-of-use assets are subject (ii) Product development costs toimpairment. All research expenditure is charged to profit or loss in the Lease liabilities period in which it is incurred. The Group recognises lease liabilities measured at the Development expenditure is charged to profit or loss in present value of lease payments to be made over the lease the period in which it is incurred, unless it relates to the term. The lease payments include fixed payments (including development of a new or significantly improved product in-substance fixed payments), variable lease payments that or process whose technical and commercial feasibility depend on an index or a rate, amounts expected to be paid is proven at the time of development and therefore under residual value guarantees, less any lease incentives capitalised as an intangible asset. Development expenditure receivable. is measured at cost and amortised on a straight-line basis In determining the relevant cash flows within a contract over the expected useful life, which is in the range of three for each lease component, the Group has made use of the to five years. practical expedient available under IFRS 16 not to separate (iii) Computer software non-lease components from lease components, and instead Computer software and software licences are recognised accounts for each lease component and any associated asintangible assets measured at cost and are amortised on non-lease components as a single lease component. a straight-line basis over their expected useful lives, which The lease payments also include the exercise price of a are in the range of three to five years. purchase option reasonably certain to be exercised by the Directly attributable costs that are capitalised as part Group and payments of penalties for terminating a lease, of computer software include the related software ifthe lease term reflects the Group exercising the option to development employee costs. terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the Property, plant and equipment period in which the event or condition that triggers the Property, plant and equipment is stated at cost less payment occurs. accumulated depreciation and any recognised impairment losses. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease Cost includes the original purchase price of the asset and commencement date if the interest rate implicit in the the costs attributable to bringing the asset to its working leaseis not readily determinable. After the commencement condition for its intended use by management. date, the amount of lease liabilities is increased to reflect Freehold land and freehold buildings are presented as land the accretion of interest and reduced for the lease and buildings. Freehold land and payments on account and payments made. In addition, the carrying amount of lease assets in the course of construction are not depreciated. liabilities is remeasured if there is a modification, a change Otherwise, property, plant and equipment is depreciated in the lease term, a change in the in-substance fixed lease on a straight-line basis so as to charge its cost, less any payments or a change in the assessment to purchase the residual value, to profit or loss over the expected useful life underlying asset. of the asset as follows: The Group determines the lease term as the Freehold buildings – 50 years non-cancellable term of the lease, together with any Plant and equipment – three to ten years periods covered by an option to extend the lease if it is Property, plant and equipment acquired in a business reasonably certain to be exercised, or any periods covered combination is depreciated on a straight-line basis so as by an option to terminate the lease, if it is reasonably to charge its fair value at the date of acquisition, less any certain not to be exercised. residual value, to profit or loss over the remaining expected useful life of the asset. McBride plc Annual Report and Accounts 2022 153 Financial statements ## Notes to the consolidated financial statements continued ## Year ended 30 June 2022 2. Accounting policies continued Inventories Principal accounting policies continued Inventories are stated at the lower of cost and net realisable Short-term leases and leases of low-value assets value with due allowance for any excess, obsolete or The Group applies the short-term lease recognition slow-moving items. Cost represents the expenditure exemption to its short-term leases of machinery and incurred in bringing each product to its present location equipment (i.e. those leases that have a lease term of and condition. The cost of raw materials is measured on a twelve months or less from the commencement date and first-in, first-out (FIFO) basis. The cost of finished goods do not contain a purchase option). It also applies the and work in progress comprises the cost of raw materials, lease of low-value assets recognition exemption to leases direct labour and other direct costs, together with related of oce equipment that are considered of low value production overheads based on normal operating capacity. (i.e.below £5,000). Lease payments on short-term leases Net realisable value is the estimated selling price less and leases of low-value assets are recognised as an expense estimated costs of completion and estimated selling and on a straight-line basis over the lease term. distribution costs.  Impairment of non-financial assets Financial instruments Goodwill, other intangible assets and property, plant and The Group classifies its financial assets in the following equipment are tested for impairment whenever events or categories: circumstances indicate that their carrying amounts may • those to be measured subsequently at fair value (either not be recoverable. Additionally, goodwill is subject to through other comprehensive income (OCI) or through an annual impairment test whether or not there are any profit or loss); and indicators of impairment. • those to be measured at amortised cost. An asset is impaired to the extent that its carrying amount The classification depends on the Group’s business model exceeds its recoverable amount, which represents the for managing the financial assets and the contractual higher of the asset’s value-in-use and its fair value less costs terms of the cash flows. For assets measured at fair value, of disposal. An asset’s value-in-use represents the present gains and losses will either be recorded in profit or loss or value of the future cash flows expected to be derived from OCI. The Group reclassifies debt instruments when, and the continued use of the asset. Fair value less costs of only when, its business model for managing those assets disposal is the amount obtainable from the sale of the asset changes. in an arm’s length transaction between knowledgeable, At initial recognition, the Group measures a financial asset willing parties, less the costs of disposal. at its fair value plus, in the case of a financial asset not at Where it is not possible to estimate the recoverable fair value through profit or loss (FVPL), transaction costs amount of an individual asset, the recoverable amount is that are directly attributable to the acquisition of the determined for the cash-generating unit (CGU) to which financial asset. Transaction costs of financial assets carried the asset belongs. An asset’s CGU is the smallest group of at FVPL are expensed in profit or loss. assets that includes the asset and generates cash inflows Financial assets with embedded derivatives are considered that are largely independent of the cash inflows from other in their entirety when determining whether their cash flows assets or groups of assets. Goodwill does not generate cash are solely payment of principal and interest. flows independently of other assets and is, therefore, tested Subsequent measurement of debt instruments depends for impairment at the level of the CGU or group of CGUs to on the Group’s business model for managing the asset and which it is allocated. the cash flow characteristics of the asset. There are three Value-in-use is based on estimates of pre-tax cash flows measurement categories into which the Group classifies its discounted at a pre-tax discount rate that reflects the risks debt instruments: specific to the CGU to which the asset belongs. • amortised cost: Assets that are held for collection Where necessary, impairment of non-financial assets other of contractual cash flows where those cash flows than goodwill is recognised before goodwill is tested for represent solely payments of principal and interest are impairment. When goodwill is tested for impairment and measured at amortised cost. Interest income from these the carrying amount of the CGU or group of CGUs to financial assets is included in finance income using the which it is allocated exceeds its recoverable amount, the eective interest rate method. Any gain or loss arising impairment is allocated first to reduce the carrying amount on derecognition is recognised directly in profit or loss of the goodwill and then to the other non-financial assets and presented in other gains/(losses) together with belonging to the CGU or group of CGUs pro-rata on the foreign exchange gains and losses. Impairment losses basis of their respective carrying amounts. are presented as a separate line item in the statement of Impairment losses are recognised in profit or loss. profit or loss. The Group assesses on a forward-looking Impairment losses recognised in previous periods for assets basis the expected credit losses (ECL) associated other than goodwill are reversed if there has been a change with its debt instruments carried at amortised cost. in the estimates used to determine the asset’s recoverable Theimpairment methodology applied depends on amount, but only to the extent that the carrying amount whether there has been a significant increase in credit of the asset does not exceed its carrying amount had risk. ECLs are recognised in two stages. For credit no impairment been recognised in previous periods. exposures for which there has not been a significant Impairment losses recognised in respect of goodwill increase in credit risk since initial recognition, ECLs cannotbe reversed. are provided for credit losses that result from default events that are possible within the next twelve months (atwelve-month ECL). McBride plc Annual Report and Accounts 2022 154 Financial statements For those credit exposures for which there has been a (iii) Trade payables significant increase in credit risk since initial recognition, Trade payables are initially recognised at fair value and a loss allowance is required for credit losses expected subsequently held at amortised cost. over the remaining life of the exposure, irrespective of (iv) Bank and other loans the timing of the default (a lifetime ECL); Bank and other loans are initially recognised at fair value, • fair value through other comprehensive income net of directly attributable transaction costs, if any, and (FVOCI): Assets that are held for collection of are subsequently measured at amortised cost using the contractual cash flows and for selling the financial eective interest rate method. assets, where the assets’ cash flows represent solely (v) Net debt payments of principal and interest, are measured at Net debt comprises cash and cash equivalents, overdrafts, FVOCI. Movements in the carrying amount are taken bank and other loans and lease liabilities. through OCI, except for the recognition of impairment (vi) Derivative financial instruments gains or losses, interest income and foreign exchange The Group uses derivative financial instruments, principally gains and losses which are recognised in profit or loss. forward currency contracts and interest rate swaps, to When the financial asset is derecognised, the cumulative reduce its exposure to exchange rate and interest rate gain or loss previously recognised in OCI is reclassified movements. The Group does not hold or issue derivatives from equity to profit or loss and recognised in other for speculative purposes. gains/(losses). Interest income from these financial assets is included in finance income using the eective Derivative financial instruments are recognised as assets interest rate method. Foreign exchange gains and losses and liabilities measured at their fair values at the balance are presented in other gains/(losses) and impairment sheet date. Changes in their fair values are recognised in expenses are presented as a separate line item in the profit or loss. Derivative financial instruments are, therefore, statement of profit or loss; and likely to cause volatility in profit or loss in situations • fair value through profit or loss (FVPL): Assets that do where the hedged item is not recognised in the financial not meet the criteria for amortised cost or FVOCI are statements or is recognised but its carrying amount is measured at FVPL. A gain or loss on a debt investment not adjusted to reflect fair value changes arising from that is subsequently measured at FVPL is recognised the hedged risk, or is so adjusted but that adjustment is in profit or loss and presented net within other not recognised in profit or loss. Provided the conditions gains/(losses) in the period in which it arises. specified by IFRS 9, ‘Financial instruments’ are met, hedge accounting may be used to mitigate this volatility in profit (i) Trade and other receivables or loss. Trade and other receivables are recognised initially at Derivative financial instruments are classified as current fair value and subsequently measured at amortised cost assets or liabilities unless they are in a designated using the eective interest method, less provision for hedging relationship and the hedge item is classified impairment. Under the Group’s business model, trade as a non-current asset or liability. Derivative financial andother receivables are held for collection of contractual instruments that are not in a designated hedging cash flows and represent solely payments of principal and relationship are classified as FVPL. interest. Aprovision for impairment of trade receivables is established based on the expected credit loss. (vii) Osetting financial instruments For trade receivables and contract assets, the Group Financial assets and liabilities are oset and the net amount applies the IFRS 9 simplified approach in calculating ECLs. reported in the balance sheet where there is a legally Therefore, the Group does not track changes in credit risk, enforceable right to oset the recognised amounts, and but instead recognises a loss allowance based on lifetime there is an intention to settle on a net basis or realise the ECLs at each reporting date. The Group has established asset and settle the liability simultaneously. a provision matrix that is based on shared credit risk Hedge accounting characteristics, its historical credit loss experience and days For a hedging relationship to qualify for hedge accounting, past due, adjusted for forward-looking factors specific to it must be documented on inception together with the the debtors and the economic environment. The amount of Group’s risk management objective and strategy for the provision is recognised in the balance sheet within trade initiating the hedge, and it must both be expected to be receivables. Movements in the provision are recognised in highly eective in osetting the changes in cash flows or the profit and loss account in administrative expenses. fair value attributed to the hedged risk and actually be (ii) Cash and cash equivalents highly eective in doing so. When hedge accounting is Cash and cash equivalents comprise cash in hand, deposits used, the hedging relationship is classified as a cash flow available on demand and other short-term, highly liquid hedge or a net investment hedge. investments with a maturity on acquisition of three months When forward contracts are used to hedge forecast or less and bank overdrafts. Bank overdrafts are presented transactions, the Group generally designates the change as current liabilities to the extent that there is no right of in the fair value of the forward contract related to both oset or intention to oset with cash balances. the spot component and forward element as the hedging instrument. For option contracts the change in the fair value of the option contract related to the intrinsic value is designated as the hedging instrument. The time value of money is treated as the cost of hedging. McBride plc Annual Report and Accounts 2022 155 Financial statements ## Notes to the consolidated financial statements continued ## Year ended 30 June 2022 2. Accounting policies continued Payments to defined contribution schemes are recognised Principal accounting policies continued in profit or loss in the period in which they fall due. To the Hedge accounting continued extent defined contribution scheme contributions are due (i) Cash flow hedge but unpaid, amounts outstanding are recognised in other Hedging relationships are classified as cash flow hedges payables. where the hedging instrument hedges exposure to (ii) Defined benefit schemes variability in cash flows that is attributable either to a Under a defined benefit pension scheme, the amount of particular risk associated with a recognised asset or liability pension that an employee will receive on retirement is (such as interest payments on variable rate debt), a highly fixed based on factors such as pensionable salary, years of probable forecast transaction (such as forecast revenue) service and age on retirement. In most cases, the schemes ora firm commitment that could aect profit or loss. are funded by contributions from the Group and the Where a hedging relationship is classified as a cash flow participating employees. The Group is obliged to make hedge, to the extent that the hedge is eective, the change additional contributions if the Fund has insucient assets in the fair value of the hedging instrument is recognised to meet its obligation to pay accrued pension benefits. in other comprehensive income rather than in profit or Actuarial valuations of the defined benefit schemes loss. The gain or loss relating to the ineective portion are carried out annually at the balance sheet date by is recognised immediately in profit and loss. When the independent qualified actuaries. Scheme assets are hedged item aects profit or loss (for example, when a measured at their fair value at the balance sheet date. forecast sale that is hedged takes place), the cumulative Benefit obligations are measured on an actuarial basis using gain or loss recognised in other comprehensive income is the projected unit credit method and are discounted using transferred to profit or loss. When a forecast transaction the market yields on high-quality corporate bonds at the that has been hedged results in the recognition of a balance sheet date. The defined benefit liability or asset non-financial asset (for example, inventory), the cumulative recognised in the balance sheet comprises the dierence gain or loss recognised in other comprehensive income between the present value of the benefit obligations and is transferred from equity as an adjustment to the cost of the fair value of the scheme assets. Where a scheme is in theasset. surplus, the asset recognised is limited to the present value When a hedging instrument expires or is sold, or when a of any amounts that the Group expects to recover by way hedge no longer meets the criteria for hedge accounting, of refunds or a reduction in future contributions. any cumulative gain or loss existing in equity at that time Defined benefit schemes are recognised in profit or loss remains in equity and is recognised when the forecast by way of the service cost and the net interest cost on the transaction is ultimately recognised in the income benefit obligation. The service cost represents the increase statement. When a forecast transaction is no longer in the present value of the benefit obligation relating to expected to occur, the cumulative gain or loss that was additional years of service accrued during the period, less reported in equity is immediately transferred to the employee contributions. incomestatement. Gains or losses on curtailments or settlements are (ii) Net investment hedge recognised in profit or loss in the period in which the A net investment hedge is the hedge of the currency curtailment or settlement occurs. exposure on the retranslation of the Group’s net investment Actuarial gains and losses are recognised in other in a foreign operation. Net investment hedges are comprehensive income in the period in which they occur. accounted for similarly to cash flow hedges. Changes in the Share-based payments fair value of the hedging instrument are, to the extent that The Group operates share schemes under which it grants the hedge is eective, recognised in other comprehensive equity-settled and cash-settled awards over ordinary shares income. In the event that the foreign operation is disposed in the Company to certain of its employees. The Group of, the cumulative gain or loss recognised in other recognises a compensation expense that is based on the comprehensive income is transferred to profit or loss and fair value of the awards measured using the Black-Scholes included in the gain or loss on disposal of the foreign option pricing formula or the Monte Carlo valuation model. operation. For equity-settled awards, the fair value reflects market Pensions and other post-employment benefits performance conditions and all non-vesting conditions. Post-employment benefits principally comprise pension Fair value is determined at the grant date and is not benefits provided to employees in the UK and Continental subsequently remeasured unless the relevant conditions Europe. The Group operates both defined benefit and are modified. Adjustments are made to the compensation defined contribution pension schemes. expense to reflect actual and expected forfeitures due (i) Defined contribution schemes to failure to satisfy service conditions or non-market Under a defined contribution pension scheme, the performance conditions. For cash-settled awards, the fair Group makes fixed contributions to a separate pension value reflects all the conditions on which the award is fund. The amount of pension that the employee will made and is remeasured at each reporting date and at the receive on retirement is dependent entirely on the settlement date. investment performance of the Fund and the Group has no obligationwith regard to the future pension values receivedby employees. McBride plc Annual Report and Accounts 2022 156 Financial statements Generally, the compensation expense is recognised Deferred tax assets and liabilities are not recognised if the on a straight-line basis over the vesting period. For temporary dierence arises from the initial recognition of equity-settled awards, a corresponding credit is recognised goodwill or from the initial recognition of other assets and in equity while for cash-settled awards a corresponding liabilities in a transaction other than a business combination liability to settle is recognised in the balance sheet. that aects neither accounting profit nor taxable profit. In the event of the cancellation of an equity-settled Deferred tax is provided on temporary dierences arising award, the compensation expense that would have been on investments in foreign subsidiaries, except where the recognised over the remainder of the vesting period is Group is able to control the reversal of the temporary recognised immediately in profit or loss. dierence and it is probable that it will not reverse in the foreseeable future. Provisions A provision is a liability of uncertain timing or amount Deferred tax is calculated using the enacted or and is generally recognised when the Group has a present substantively enacted tax rates that are expected to apply obligation (legal or constructive) as a result of a past event, when the asset is recovered or the liability is settled. it is probable that a payment will be required to settle the Current tax assets and liabilities are oset when there obligation and the payment can be estimated reliably. is a legally enforceable right to set o the amounts and Provision is made for restructuring costs when a detailed management intends to settle on a net basis. Deferred formal plan for the restructuring has been determined tax assets and liabilities are oset where there is a legally and the plan has been communicated to the parties enforceable right to set o current tax assets and liabilities that may beaected by it. Gains from the expected and the deferred tax assets and liabilities relate to income disposal of assets are not taken into account in measuring taxes levied by the same taxation authority on the same restructuringprovisions and provision is not made for taxable entity. future operating losses. Current tax and deferred tax is recognised in profit or loss At 30 June 2022, the Group held provisions amounting to unless it relates to an item that is recognised in the same £7.2 million (2021: £6.4m), which principally represented or a dierent period outside profit or loss, in which case reorganisation and restructuring costs and environmental it too is recognised outside profit or loss, either in other remediation provisions. Adjustment to the amounts comprehensive income or directly in equity. recognised would arise if it becomes necessary to revise Where there is uncertainty as to whether treatments in the assumptions and estimates on which the provisions the tax return will be accepted by a taxation authority, are based, if circumstances change such that contingent the judgements and estimates made in recognising and liabilities must be recognised or if management becomes measuring the uncertainty are based on information aware of obligations that are currently unknown. available at the time. The Group reassesses these Provisions are discounted where the eect of the time value judgements and estimates if the facts and circumstances of money is material. change or new information becomes available. This may include, but is not restricted to, examination by a taxation Contingent liabilities authority, implicit or explicit acceptance by a taxation The Group recognises provisions for liabilities when it is authority of a particular tax treatment, the expiry of the more likely than not that a settlement will be required and taxation authority’s right to examine or re-examine a tax the value of such a payment can be reliably estimated. treatment and changes in legislation. There are a number of contingent liabilities that arise in the normal course of business which, if realised, are not Payments to shareholders expected to result in a material liability to the Group. Dividends paid and received are included in the Company financial statements in the period in which the related Taxation dividends are actually paid or received or, in respect of Current tax is the amount of tax payable or recoverable in the Company’s final dividend for the year, approved by respect of the taxable profit or loss for the period. Taxable shareholders. profit diers from accounting profit because it excludes income or expenses that are recognised in the period for It is the Board’s intention that any future dividends accounting purposes but are either not taxable or not will be final dividends paid annually in cash, not by the deductible for tax purposes or are taxable or deductible allotment and issue of B Shares. Consequently, the Board in earlier or subsequent periods. Current tax is calculated is not seeking shareholder approval at the 2022 AGM to using tax rates that have been enacted or substantively capitalise reserves for the purposes of issuing B Shares or enacted at the balance sheet date. to grant Directors authority to allot such shares. Existing B Shares will continue to be redeemable but limited to Deferred tax is tax expected to be payable or recoverable one redemption date per annum in November of each on dierences between the carrying amount of an asset or year. BShares issued but not redeemed are classified liability and its tax base used in calculating taxable profit. ascurrentliabilities. Deferred tax is accounted for using the liability method, whereby deferred tax liabilities are generally recognised for Own shares all taxable temporary dierences and deferred tax assets Own shares represent the Company’s ordinary shares that are recognised to the extent that it is probable that taxable are held by the Company in treasury or by a sponsored profits will be available in the future against which the Employee Share Ownership Plan (ESOP) trust in relation to deductible temporary dierences may be utilised. the Group’s employee share schemes. When own shares are acquired, the cost of purchase in the market is deducted from equity. Gains or losses on the subsequent transfer or sale of own shares are also recognised in equity. McBride plc Annual Report and Accounts 2022 157 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 2. Accounting policies continued ### New accounting standards and interpretations The following standards and amendments were effective for periods beginning on or after 1 January 2021 and as such have been applied in these financial statements. The Group has not early adopted any other standard or interpretation that is issued but not yet effective. The following standards and amendments had no impact on the financial statements of the Group: - Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39 regarding replacement issues in the context of the IBOR reform; and - Amendments to IFRS 16 to extend the exemption from assessing whether a Covid-19-related rent concession is a lease modification (only effective for periods beginning on or after 1 April 2020). ### New accounting standards and interpretations issued but not yet effective The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. - Amendments to IFRS 1 resulting from Annual Improvements to IFRS Standards 2019-2020 (subsidiary as a first-time adopter) – effective for annual periods beginning on or after 1 January 2022. - Amendments to IFRS 3 updating a reference to the Conceptual Framework – effective for annual periods beginning on or after 1 January 2022. - Amendments to IFRS 4 regarding the expiry date of the deferral approach – the fixed expiry date for the temporary exemption in IFRS 4 from applying IFRS 9 is now 1 January 2023. - Amendments to IFRS 9 resulting from Annual Improvements to IFRS Standards 2019-2020 (fees in the '10 per cent' test for derecognition of financial liabilities) – effective for annual periods beginning on or after 1 January 2022. - The original issue of IFRS 17 and amendments to address concerns and implementation challenges that were identified after IFRS 17 was published – effective for annual periods beginning on or after 1 January 2023. - Amendments to IAS 1 regarding the classification of liabilities and the disclosure of accounting policies – effective for annual periods beginning on or after 1 January 2023. - Amendments to IAS 8 regarding the definition of accounting estimates – effective for annual periods beginning on or after 1 January 2023. - Amendments to IAS 12 regarding the deferred tax on leases and decommissioning obligations – effective for annual periods beginning on or after 1 January 2023. - Amendments to IAS 16 prohibiting a company from deducting from the cost of property, plant and equipment amounts received from selling items produced while the company is preparing the asset for its intended use – effective for annual reporting periods beginning on or after 1 January 2022. - Amendments to IAS 37 regarding the costs to include when assessing whether a contract is onerous – effective for annual reporting periods beginning on or after 1 January 2022. None of the amendments are expected to have a significant impact on the Group; however, the Group will continue to consider these and any additional amendments, interpretations and new standards to identify potential future impact. ### Critical accounting judgements and key sources of estimation uncertainty In applying the Group's accounting policies as described in this note, the Directors are required to make judgements, and estimates and assumptions, that affect the reported amounts of its assets, liabilities, income and expenses that are not readily identifiable from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual outcomes could differ from those estimates and affect the Group's results in future years. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The Directors consider the following to be the critical judgements and key sources of estimation uncertainty made in preparing these financial statements that, if not borne out in practice, may affect the Group's results during the next financial year: #### Critical judgements ##### Determination of cash-generating units (CGUs) A CGU is the smallest group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment testing requires management to determine the net discounted cash flows expected to arise from a CGU. Management are therefore required to determine the Group's CGUs and judgement is applied as to which groups of assets generate largely independent cash flows. In the year, the CGUs have been determined as Liquids, Unit Dosing, Powders, Aerosols and Asia Pacific, these being based on product technologies and the separate Asia Pacific location. All CGUs are lower than, or equal to, operating segments. #### Key sources of estimation uncertainty ##### (i) Impairment of goodwill, other intangible assets and property, plant and equipment Impairment testing requires management to estimate the recoverable amount of an asset or group of assets. The recoverable amount represents the higher of value-in-use and fair value less costs of disposal. Where the recoverable amount is lower than the carrying amount, an impairment charge is recognised in profit and loss in the year in which the impairment is identified. Value-in-use represents the net present value of the net cash flows expected to arise from an asset or group of assets and its calculation requires management to estimate those cash flows and to apply a suitable discount rate to them. McBride plc Annual Report and Accounts 2022 158 Financial statements Cash flows are estimated by applying assumptions to budgeted sales, production costs and overheads over a five-year forecast period and by applying a perpetuity growth rate to the forecast cash flow in the fifth year. Forecasts are reviewed and approved by the Board. Cash flows are discounted using a discount rate that reflects current market assessments of the time value of money. The discount rate used in each CGU is adjusted for risks specific to the asset or group of assets. The weighted average cost of capital is affected by estimates of interest rates, equity returns and market and country-related risks. Carrying values of goodwill, other intangible assets and property, plant and equipment are subject to a significant risk of material adjustment due to reasonably possible changes in assumptions in the next twelve months. Sensitivity analysis has been performed in order to assess the extent to which carrying values of such assets are at risk of impairment. During the year, impairment charges of £0.8 million were recognised (2021: £0.3m). At 30 June 2022, the carrying amount of goodwill, other intangible assets and property, plant and equipment was £149.9 million (2021: £157.7m). Details of the assumptions applied and the sensitivity of the carrying amount of goodwill in relation to the business are presented in note 12. (ii) Pensions and other post-employment benefits Under IAS 19, 'Employee benefits', the cost of defined benefit schemes is determined based on actuarial valuations that are carried out annually at the balance sheet date. Actuarial valuations are dependent on assumptions about the future that are made by the Directors on the advice of independent qualified actuaries. If actual experience differs from these assumptions, there could be a material change in the amounts recognised by the Group in respect of defined benefit schemes in the next financial year. At 30 June 2022, the present value of defined benefit obligations in relation to the UK scheme was £116.6 million (2021: £161.9m), it was calculated using a number of assumptions, including future Consumer Price Index rate changes, increases to pension benefits and mortality rates. The present value of the benefit obligation is calculated by discounting the benefit obligation using market yields on high-quality corporate bonds at the balance sheet date. At 30 June 2022, the fair value of the scheme assets of the UK scheme was £102.2 million (2021: £132.6m). The scheme assets consist largely of securities and managed funds whose values are subject to fluctuation in response to changes in market conditions. A portion of unquoted investments have valuations which precede the reporting date and where the valuations have been adjusted for cash movements between the last valuation date and 30 June 2022, using the valuation approach and inputs as at the last valuation date. Changes in the actuarial assumptions underlying the benefit obligation, changes in the discount rate applicable to the benefit obligation and effects of differences between the expected and actual return on the scheme's assets are classified as actuarial gains and losses and are recognised in other comprehensive income. During 2022, the Group recognised a net actuarial gain of £12.4 million (2021: loss of £4.2m). An analysis of the assumptions that will be used by the Directors to determine the cost of the defined benefit scheme that will be recognised in profit or loss in the next financial year and the sensitivity of the benefit obligation to key assumptions is presented in note 23. (iii) Taxation Judgements and estimates are required in order to determine the appropriate amount of tax provided for issues under dispute with taxation authorities and for tax matters which are considered uncertain and on which it is probable that a future tax liability will arise. The amount provided is management's best estimate of the tax liability taking into consideration external advice, known outcomes on similar tax treatments and experience of tax authority custom and practice. At 30 June 2022, the Group estimated its maximum possible tax exposure for ongoing tax audits and uncertain tax treatments to be £16.2 million, of which £2.0 million is provided against in current tax. The Group operates across a number of jurisdictions and tax risk can arise in relation to the pricing of cross-border transactions, where a taxation authority's interpretation of the arm's length principle can diverge from the approach taken by the Group. Transfer pricing is inherently subjective and in determining the appropriate level of provision, the Group considers the probability of a range of outcomes, using a weighted average methodology to focus risk on the most likely outcomes in the event of an audit. The amount provided also takes account of international dispute resolution mechanisms, where available, to mitigate double taxation. The analysis is reassessed at each period end and the estimates refined as additional information becomes available. The Group believes it has made adequate provision for the liabilities likely to arise from periods which are open and not yet agreed by tax authorities. The ultimate liability for such matters may vary from the amounts provided however and is dependent upon the outcome of agreements with relevant tax authorities, dispute resolution processes in the relevant jurisdictions or litigation where appropriate. The Group has tax losses and other deductible temporary differences that have the potential to reduce future tax liabilities. Deferred tax assets are recognised to the extent that recovery is probable against the future reversal of taxable temporary differences and projected taxable income. At 30 June 2022, the Group recognised deferred tax assets of £29.7 million (2021: £22.8m), including £22.0 million (2021: £8.9m) in respect of tax losses. Deferred tax assets amounting to £8.3 million (2021: £7.7m) were not recognised in respect of tax losses and tax credits carried forward. The profit projections used to estimate deferred tax asset recoverability are the same as those used to assess the carrying value of goodwill and the estimate is therefore sensitive to the same factors as those set out in note 12. Management estimates that a reduction in the perpetual growth rate to 0.0% would not result in an impairment of the deferred tax asset. McBride plc Annual Report and Accounts 2022 159 Financial statements # Notes to the consolidated financial statements continued ## Year ended 30 June 2022 ### 2. Accounting policies continued #### Alternative performance measures Introduction The performance of the Group is assessed using a variety of adjusted measures that are not defined under IFRS and are therefore termed non-GAAP measures. The non-GAAP measures used are: adjusted operating profit, adjusted EBITDA, adjusted finance costs, adjusted profit before tax, adjusted earnings per share, free cash flow and cash conversion %, adjusted return on capital employed and net debt. The rationale for using these measures, along with a reconciliation from the nearest measures prepared in accordance with IFRS, are presented below. The alternative performance measures we use may not be directly comparable with similarly titled measures used by other companies. #### Adjusted measures Adjusted measures exclude specific items that are considered to hinder comparison of the trading performance of the Group's businesses either year-on-year or with other businesses. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and Executive Committee, and is used for internal performance analysis and in relation to employee incentive arrangements. The Directors present these measures in the financial statements in order to assist investors in their assessment of the trading performance of the Group. Directors do not regard these measures as a substitute for, or superior to, the equivalent measures calculated and presented in accordance with IFRS. During the years under review, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items. Exceptional items and amortisation are excluded from adjusted operating profit because they are not considered to be representative of the trading performance of the Group's businesses during the year. Adjusted EBITDA means adjusted operating profit before depreciation. A reconciliation between adjusted operating profit, adjusted EBITDA and the Group's reported statutory operating profit is shown below. | | 2022 £m | 2021 £m | | --- | --- | --- | | Operating (loss)/profit | (27.1) | 14.8 | | Add back: operating loss from discontinued operations | 0.4 | 0.7 | | Operating (loss)/profit from continuing operations | (26.7) | 15.5 | | Exceptional items in operating profit (note 4) | (0.4) | 6.2 | | Amortisation of intangibles (note 13) | 2.6 | 2.4 | | Adjusted operating (loss)/profit from continuing operations | (24.5) | 24.1 | | Depreciation of property, plant and equipment (note 14) | 16.9 | 17.6 | | Depreciation of right-of-use assets (note 15) | 4.0 | 3.8 | | Adjusted EBITDA | (3.6) | 45.5 | Adjusted profit before tax is based on adjusted operating profit less adjusted finance costs. The table below reconciles adjusted profit before tax to the Group's reported profit before tax. | | 2022 £m | 2021 £m | | --- | --- | --- | | (Loss)/profit before tax | (35.7) | 10.6 | | Add back: loss before tax from discontinued operations | 0.4 | 0.7 | | (Loss)/profit before tax from continuing operations | (35.3) | 11.3 | | Exceptional items (note 4) | 3.1 | 6.2 | | Amortisation of intangibles (note 13) | 2.6 | 2.4 | | Adjusted (loss)/profit before tax from continuing operations | (29.6) | 19.9 | Adjusted earnings per share is based on the Group's profit for the year adjusted for the items excluded from operating profit in arriving at adjusted operating profit and the tax relating to those items (note 9). McBride plc Annual Report and Accounts 2022 160 Financial statements # Free cash flow and cash conversion % Free cash flow is one of the Group's key performance indicators by which our financial performance is measured. It is primarily a liquidity measure. However, we also believe that free cash flow and cash conversion % are important indicators of our overall operational performance as they reflect the cash we generate from operations. Free cash flow is defined as cash generated from continuing operations before exceptional items. Cash conversion % is defined as free cash flow as a percentage of adjusted EBITDA. A reconciliation from net cash generated from operating activities, the most directly comparable IFRS measure, to free cash flow, is set out as follows. | | 2022 £m | 2021 £m | | --- | --- | --- | | Net cash (used in)/generated from operating activities | (30.2) | 14.6 | | Add back: | | | | Taxation paid | 0.1 | 7.3 | | Interest paid | 3.3 | 3.2 | | Cash (inflow)/outflow from exceptional items | 4.1 | 8.0 | | Free cash flow | (22.7) | 33.1 | | Adjusted EBITDA | (3.6) | 45.5 | | Cash conversion % | n/a | 73% | # Adjusted return on capital employed (ROCE) Adjusted ROCE serves as an indicator of how efficiently we generate returns from the capital invested in the business. It is a Group KPI that is directly relatable to the outcome of investment decisions. Adjusted ROCE is defined as total adjusted operating profit from continuing operations divided by the average year-end capital employed. Capital employed is defined as the total of goodwill and other intangible assets; property, plant and equipment, right-of-use assets, inventories, trade and other receivables less trade and other payables. There is no equivalent statutory measure within IFRS. Adjusted return on capital employed is calculated as follows: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Goodwill (note 12) | 19.7 | 19.7 | 19.9 | | Other intangible assets (note 13) | 7.3 | 8.2 | 8.5 | | Property, plant and equipment (note 14) | 122.9 | 129.8 | 134.7 | | Right-of-use assets (note 15) | 11.3 | 10.0 | 7.3 | | Inventories (note 16) | 118.9 | 92.9 | 97.5 | | Trade and other receivables (note 17) | 145.4 | 117.9 | 138.3 | | Trade and other payables (note 19) | (206.9) | (169.2) | (198.1) | | Capital employed | 218.6 | 209.3 | 208.1 | | Average year-end capital employed | 214.0 | 208.7 | 221.1 | | Adjusted operating (loss)/profit from continuing operations | (24.5) | 24.1 | 28.3 | | Adjusted return on capital employed % | (11.4)% | 11.5% | 12.8% | McBride plc Annual Report and Accounts 2022 161 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 2. Accounting policies continued ### Adjusted measures continued #### Net debt Net debt consists of cash and cash equivalents, overdrafts, bank and other loans and lease liabilities. Net debt is a measure of the Group's net indebtedness that provides an indicator of overall balance sheet strength. It is a key indicator used by management to assess both the Group's cash position and its indebtedness. The use of the term 'net debt' does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities included in this measure. Net debt is considered to be an alternative performance measure as it is not defined in IFRS. A reconciliation from loans and other borrowings, lease liabilities and cash and cash equivalents, the most directly comparable IFRS measures to net debt, is set out below: | | 2022 £m | 2021 £m | | --- | --- | --- | | **Current assets** | | | | Cash and cash equivalents | 4.5 | 24.9 | | **Current liabilities** | | | | Borrowings (note 20) | (60.5) | (53.7) | | Lease liabilities (note 15) | (3.9) | (3.4) | | | (64.4) | (57.1) | | **Non-current liabilities** | | | | Borrowings (note 20) | (96.4) | (78.3) | | Lease liabilities (note 15) | (8.1) | (7.9) | | | (104.5) | (86.2) | | **Net debt** | **(164.4)** | **(118.4)** | ## 3. Segment information ### Background #### Segmental reporting Financial information is presented to the Board by product technology for the purposes of allocating resources within the Group and assessing the performance of the Group's businesses. There are five separately managed and accountable business divisions: - Liquids; - Unit Dosing; - Powders; - Aerosols; and - Asia Pacific. Intra-group revenue from the sale of products is agreed between the relevant customer-facing units and eliminated in the segmental presentation that is presented to the Board, and therefore excluded from the below figures. Programme Compass is delivering an increased focus on cost optimisation and has meant that most overhead costs are now directly attributed within the respective divisions' income statements. The only costs now allocated out to the divisions are central overheads, with corporate costs being retained at a Group level. Central overheads are allocated to a reportable segment proportionally using an appropriate cost driver. Corporate costs, which include the costs associated with the Board and the Executive Leadership Team, governance and listed company costs and certain central functions (mostly associated with financial disciplines such as treasury), are reported separately. Exceptional items are detailed in note 4 and are not allocated to the reportable segments as this reflects how they are reported to the Board. Finance expense and income are not allocated to the reportable segments, as the central treasury function manages this activity, together with the overall net debt position of the Group. The Board uses adjusted operating profit to measure the profitability of the Group's businesses. Adjusted operating profit is, therefore, the measure of segment profit presented in the Group's segment disclosures. Adjusted operating profit represents operating profit before specific items that are considered to hinder comparison of the trading performance of the Group's businesses either period-on-period or with other businesses. During the years under review, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of intangible assets and exceptional items. McBride plc Annual Report and Accounts 2022 162 Financial statements | Year ended 30 June 2022 | Liquids £m | Unit Dosing £m | Powders £m | Aerosols £m | Asia Pacific £m | Corporate £m | Group £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Continuing operations | | | | | | | | | Segment revenue | 383.9 | 171.5 | 68.6 | 31.9 | 22.4 | — | 678.3 | | Adjusted operating (loss)/profit | (15.9) | (0.8) | (2.5) | (1.5) | 0.7 | (4.5) | (24.5) | | Amortisation of intangible assets | | | | | | | (2.6) | | Exceptional items (note 4) | | | | | | | 0.4 | | Operating loss | | | | | | | (26.7) | | Finance costs | | | | | | | (8.6) | | Loss before taxation | | | | | | | (35.3) | | Inventories | 57.5 | 35.5 | 13.7 | 9.1 | 3.1 | — | 118.9 | | Capital expenditure | 5.7 | 6.5 | 1.0 | 0.6 | 0.3 | — | 14.1 | | Amortisation and depreciation | 13.7 | 6.5 | 1.4 | 0.5 | 1.4 | — | 23.5 | | Year ended 30 June 2021 | Liquids £m | Unit Dosing £m | Powders £m | Aerosols £m | Asia Pacific £m | Corporate £m | Group £m | | Continuing operations | | | | | | | | | Segment revenue | 376.1 | 181.5 | 66.3 | 34.0 | 24.4 | — | 682.3 | | Adjusted operating profit/(loss) | 11.7 | 16.7 | (2.3) | 0.8 | 1.9 | (4.7) | 24.1 | | Amortisation of intangible assets | | | | | | | (2.4) | | Exceptional items (note 4) | | | | | | | (8.2) | | Operating profit | | | | | | | 15.5 | | Finance costs | | | | | | | (4.2) | | Profit before taxation | | | | | | | 11.3 | | Inventories | 45.0 | 24.6 | 12.4 | 8.4 | 2.5 | — | 92.9 | | Capital expenditure | 12.4 | 5.7 | 0.7 | 0.5 | 2.3 | 3.0 | 24.6 | | Amortisation and depreciation | 13.0 | 6.3 | 1.5 | 0.5 | 1.0 | 1.5 | 23.8 | # Geographical information | | Revenue from external customers | | Non-current assets | | | --- | --- | --- | --- | --- | | | 2022 £m | 2021 £m | 2022 £m | 2021 £m | | United Kingdom | 150.6 | 143.6 | 37.7 | 41.7 | | Germany | 143.3 | 141.5 | — | — | | France | 140.3 | 137.7 | 9.2 | 9.1 | | Other Europe | 217.8 | 227.9 | 108.0 | 109.9 | | Australia | 8.5 | 12.0 | — | — | | Other Asia Pacific | 14.7 | 16.0 | 6.3 | 7.0 | | Rest of the World | 3.1 | 3.6 | — | — | | Total | 678.3 | 682.3 | 161.2 | 167.7 | The geographical revenue information above is based on the location of the customer. Non-current assets for this purpose consist of goodwill, other intangible assets, property, plant and equipment and right-of-use assets. # Revenue by major customer In 2022 and 2021, no individual customer provided more than 10% of the Group's revenue. During 2022, the top ten customers accounted for 50% of total Group revenue (2021: 47%). McBride plc Annual Report and Accounts 2022 163 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 4. Exceptional items ### Analysis of exceptional items | | 2022 £m | 2021 £m | | --- | --- | --- | | **Continuing operations** | | | | **Reorganisation and restructuring costs/(gains):** | | | | UK Aerosols closure | 0.1 | 0.4 | | Factory footprint review | (1.4) | 0.3 | | Review of strategy, organisation and operations | (0.4) | 4.4 | | Logistics transformation programme | 0.7 | 11 | | | (1.0) | 6.2 | | Environmental remediation | 0.6 | — | | **Total (credited)/charged to operating (loss)/profit** | **(0.4)** | **6.2** | | **Group refinancing:** | | | | Independent business review | 3.5 | — | | **Total charged to finance costs** | **3.5** | **—** | | **Total continuing operations** | **3.1** | **6.2** | | **Discontinued operations** | | | | Sale of PC Liquids business | 0.5 | 0.7 | | Other | (0.1) | — | | **Discontinued operations before tax** | **0.4** | **0.7** | | Tax on discontinued operations | (0.1) | — | | **Total discontinued operations** | **0.3** | **0.7** | | **Total exceptional items before tax** | **3.5** | **6.9** | Total exceptional items of £3.5 million were recorded during the year (2021: £6.9m). The charge primarily comprises the following: #### Items relating to continuing operations Total exceptional items incurred in relation to the continuing business of £3.1 million were recorded during the year (2021: £6.2m). The charge comprises the following: - • £0.1 million in respect of one-off legacy costs in relation to the former UK Aerosols site in Hull; - • £1.8 million profit on the sale of the Barrow site, which ceased operations in October 2020, offset by £0.4 million clearance and site closure costs; - • £0.4 million credit relating to Programme Compass, including £1.6 million profit on the sale of a factory in Malaysia, offset by £0.9 million impairment of fixed assets and £0.3 million in consulting support and other project expenses; - • £0.7 million relating to the Group's logistics transformation programme, including £0.8 million of consultancy costs and £0.2 million of redundancy costs, offset by £0.3 million profit on sale of a warehouse in France; - • £0.6 million additional costs relating to the revaluation of the environmental remediation provision; and - • £3.5 million charged to finance costs in respect of the independent business review programme. #### Items relating to discontinued operations An exceptional charge of £0.5 million was incurred in respect of a provision for property repairs and onerous lease obligations relating to the closed St Helens site. McBride plc Annual Report and Accounts 2022 164 Financial statements # 5. Employee information The number of full-time equivalent persons employed by the Group (including Directors) during the year, analysed by category, was as follows: | | 2022 Year and Number | 2022 Average Number | 2021 Year and Number (restated) | 2021 Average Number (restated) | | --- | --- | --- | --- | --- | | Manufacturing | 2,327 | 2,365 | 2,451 | 2,507 | | Sales, general and administration | 594 | 592 | 597 | 583 | | Total | 2,921 | 2,957 | 3,048 | 3,090 | The number of persons employed during the financial year ended 30 June 2021, as previously disclosed, included third-party contractors and agency workers used by the Group. Such workers are not employees of the Group, as defined by section 411 of the Companies Act 2006, and have therefore been excluded from the numbers disclosed above. Aggregate payroll costs were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Wages and salaries | 105.0 | 105.5 | | Social security costs | 17.8 | 19.9 | | Share awards granted to Directors and employees | — | 0.3 | | Other pension costs | 3.4 | 3.2 | | Total | 126.2 | 128.9 | Pension costs comprise the payments made by the Group to defined contribution schemes and the service and administration costs on defined benefit schemes (net of employee contributions). See note 23. Aggregate emoluments of the Directors of the Company were as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Wages and salaries | 1,166 | 1,031 | | Share awards granted to Directors | 28 | 85 | | Other pension costs(1) | 56 | 45 | | Total | 1,250 | 1,161 | The remuneration for the highest paid Director was as follows: | | 2022 £'000 | 2021 £'000 | | --- | --- | --- | | Wages and salaries | 453 | 451 | | Share awards granted | 15 | 65 | | Other pension costs(1) | 35 | 35 | | Total | 503 | 591 | (1) The pension figure represents the value of the Company's contribution to the individual's pension scheme and/or the cash value of payments in lieu of pension contribution. The number of share awards granted during the year for the highest paid Director under the LTIP was 716,955 (2021: 877,016) and under the Restricted Share Unit (RSU) plan was 216,073 (2021: 173,246). The number of share awards exercised by the highest paid Director during the year was nil (2021: 1,064) in relation to the Deferred Annual Bonus Plan. Further information on Directors' emoluments included above is in the Directors' Remuneration report on pages 105 to 131. Aggregate compensation for key management, being the Directors and members of the Executive Committee, is shown in note 29. McBride plc Annual Report and Accounts 2022 165 Financial statements # Notes to the consolidated financial statements continued ## Year ended 30 June 2022 ### 6. Auditor's remuneration Fees payable by the Group to the Company's independent auditor, Pricewaterhouse Coopers LLP (PwC), and its associates, were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Audit fees: | | | | Audit of the Company's financial statements | 0.1 | 0.1 | | Other services: | | | | Audit of the financial statements of the Company's subsidiaries | 1.0 | 0.8 | | Total fees | 1.1 | 0.9 | Fees for the audit of the Company's financial statements represent fees payable to PwC in respect of the audit of the Company's individual financial statements and the Group's consolidated financial statements. Non-audit fees payable to PwC in relation to other advisory services amounted to £2,000 (2021: £23,000). ### 7. Operating (loss)/profit Operating (loss)/profit is stated after charging/(crediting): | | 2022 £m | 2021 £m | | --- | --- | --- | | Cost of inventories (included in cost of sales) | 441.8 | 397.4 | | Employee costs (note 5) | 126.2 | 128.9 | | Amortisation of intangible assets (note 13) | 2.6 | 2.4 | | Depreciation of property, plant and equipment (note 14) | 16.9 | 17.6 | | Depreciation of right-of-use assets (note 15) | 4.0 | 3.8 | | Impairment: | | | | Property, plant and equipment (note 14) | 0.8 | 0.3 | | Right-of-use assets (note 15) | — | 0.7 | | Inventories (note 16) | 2.9 | 2.9 | | Trade receivables (note 17) | 2.0 | 1.3 | | Expense relating to short-term leases (note 15) | 0.3 | 1.0 | | Expense relating to low-value leases (note 15) | 0.2 | 0.3 | | Research and development costs not capitalised | 6.8 | 7.6 | | Net foreign exchange loss/(gain) | 0.3 | (0.4) | ### 8. Finance costs | | 2022 £m | 2021 £m | | --- | --- | --- | | Finance costs | | | | Interest on bank loans and overdrafts | 2.7 | 2.7 | | Interest on lease liabilities (note 15) | 0.4 | 0.3 | | Net foreign exchange loss/(gain) | 0.4 | (0.2) | | Amortisation of facility fees | 0.5 | 0.4 | | Non-utilisation and other fees | 0.6 | 0.6 | | | 4.6 | 3.8 | | Post-employment benefits: | | | | Net interest cost on defined benefit obligation (note 23) | 0.5 | 0.4 | | Adjusted finance costs | 5.1 | 4.2 | | Costs associated with independent business review (note 4) | 3.5 | — | | Total finance costs | 8.6 | 4.2 | Interest rate swaps are used to manage the interest rate profile of the Group's borrowings. Accordingly, net interest payable or receivable on interest rate swaps is included in finance costs. McBride plc Annual Report and Accounts 2022 166 Financial statements # 9. Taxation # Income tax expense/(credit) | From continuing operations | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | UK £m | Overseas £m | Total £m | UK £m | Overseas £m | Total £m | | **Current tax expense/(credit)** | | | | | | | | Current year | — | 3.2 | 3.2 | — | 4.1 | 4.1 | | Adjustment for prior years | (1.0) | (0.9) | (1.9) | — | (2.6) | (2.6) | | | (1.0) | 2.3 | 1.3 | — | 1.5 | 1.5 | | **Deferred tax (credit)/expense** | | | | | | | | Origination and reversal of temporary differences | (7.9) | (2.7) | (10.6) | (5.0) | 0.6 | (4.4) | | Adjustment for prior years | (8.4) | 5.4 | (1.0) | 0.1 | 0.1 | 0.2 | | Impact of change in tax rate | (1.0) | — | (1.0) | — | — | — | | | (15.3) | 2.7 | (12.6) | (4.9) | 0.7 | (4.2) | | **Income tax (credit)/expense** | **(16.3)** | **5.0** | **(11.3)** | **(4.9)** | **2.2** | **(2.7)** | | From discontinued operations | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | UK £m | Overseas £m | Total £m | UK £m | Overseas £m | Total £m | | **Deferred tax credit** | | | | | | | | Origination and reversal of temporary differences | (0.1) | — | (0.1) | (0.1) | — | (0.1) | | | (0.1) | — | (0.1) | (0.1) | — | (0.1) | | **Income tax credit** | **(0.1)** | **—** | **(0.1)** | **(0.1)** | **—** | **(0.1)** | | Total attributable to ordinary shareholders | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | UK £m | Overseas £m | Total £m | UK £m | Overseas £m | Total £m | | **Current tax expense/(credit)** | | | | | | | | Current year | — | 3.2 | 3.2 | — | 4.1 | 4.1 | | Adjustment for prior years | (1.0) | (0.9) | (1.9) | — | (2.6) | (2.6) | | | (1.0) | 2.3 | 1.3 | — | 1.5 | 1.5 | | **Deferred tax (credit)/expense** | | | | | | | | Origination and reversal of temporary differences | (8.0) | (2.7) | (10.7) | (5.1) | 0.6 | (4.5) | | Adjustment for prior years | (8.4) | 5.4 | (1.0) | 0.1 | 0.1 | 0.2 | | Impact of change in tax rate | (1.0) | — | (1.0) | — | — | — | | | (15.4) | 2.7 | (12.7) | (5.0) | 0.7 | (4.3) | | **Income tax (credit)/expense** | **(16.4)** | **5.0** | **(11.4)** | **(5.0)** | **2.2** | **(2.8)** | The current tax adjustment for the prior year includes £0.5 million (2021: £2.2m) credit for the release of a provision following settlement of a tax enquiry and £0.4 million (2021: £0.3m) credit relating to the release of provisions for uncertain tax treatments due to the expiry of statutes of limitation. Transfer pricing is inherently subjective and in determining the appropriate level of provision, the Group considers the probability of a range of outcomes, using a weighted average methodology to focus risk on the most likely outcomes in the event of an audit. The amount provided also takes account of international dispute resolution mechanisms, where available, to mitigate double taxation. This analysis is re-assessed at each period end and the estimates refined as additional information becomes available. At 30 June 2022, the Group estimated its maximum possible tax exposure for ongoing tax audits and uncertain tax treatments to be £16.2 million, against which a provision of £2.0 million has been made, in line with IFRIC 23 requirements. McBride plc Annual Report and Accounts 2022 167 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 9. Taxation continued ### Reconciliation to UK statutory tax rate The total tax charge on the Group's (loss)/profit before tax for the year differs from the theoretical amount that would be charged at the UK standard rate of corporation tax for the following reasons: | | 2022 £m | 2021 £m | | --- | --- | --- | | From continuing operations | | | | (Loss)/profit before tax | (35.3) | 11.3 | | (Loss)/profit before tax multiplied by the UK corporation tax rate of 19.0% (2021: 19.0%) | (6.7) | 2.1 | | Effect of tax rates in foreign jurisdictions | (1.7) | 1.0 | | Non-deductible expenses | 0.6 | 1.4 | | Tax incentives/non-taxable income | (0.4) | (0.1) | | Tax losses and other temporary differences for which no deferred tax recognised | 0.6 | (3.8) | | Change in tax rate | (1.0) | (1.4) | | Other differences | 0.2 | 0.5 | | Adjustment for prior years | (2.9) | (2.4) | | **Total tax credit in profit or loss** | **(11.3)** | **(2.7)** | | Exclude adjusting items (note 2) | 2.0 | 1.6 | | **Total tax credit in profit or loss before adjusting items** | **(9.3)** | **(1.1)** | | | 2022 £m | 2021 £m | | --- | --- | --- | | Taxation is provided at current rates on the profits earned for the year | | | | From discontinued operations | | | | Loss before tax | (0.4) | (0.7) | | Loss before tax multiplied by the UK corporation tax rate of 19.0% (2021: 19.0%) | (0.1) | (0.1) | | **Total tax credit in profit or loss** | **(0.1)** | **(0.1)** | | Exclude adjusting items (note 2) | 0.1 | 0.1 | | **Total tax credit in profit or loss before adjusting items** | **—** | **—** | | | 2022 £m | 2021 £m | | --- | --- | --- | | Taxation is provided at current rates on the profits earned for the year | | | | Total attributable to ordinary shareholders | | | | (Loss)/profit before tax | (35.7) | 10.6 | | (Loss)/profit before tax multiplied by the UK corporation tax rate of 19.0% (2021: 19.0%) | (6.8) | 2.0 | | Effect of tax rates in foreign jurisdictions | (1.7) | 1.0 | | Non-deductible expenses | 0.6 | 1.4 | | Tax incentives/non-taxable income | (0.4) | (0.1) | | Tax losses and other temporary differences for which no deferred tax recognised | 0.6 | (3.8) | | Change in tax rate | (1.0) | (1.4) | | Other differences | 0.2 | 0.5 | | Adjustment for prior years | (2.9) | (2.4) | | **Total tax credit in profit or loss** | **(11.4)** | **(2.8)** | | Exclude adjusting items (note 2) | 2.1 | 1.7 | | **Total tax credit in profit or loss before adjusting items** | **(9.3)** | **(1.1)** | The taxation is provided at current rates on the profits earned for the year. The main rate of UK corporation tax applicable for the financial year is 19.0% (2021: 19.0%). ### Factors affecting future tax charges On 24 May 2021, the increase in the UK corporation tax rate from 19.0% to 25.0% with effect from 1 April 2023 was substantially enacted. Deferred tax has been calculated for the UK based on the expected reversal dates of the temporary differences. However, in the September 2022 UK Mini Budget it was announced that the increase to 25% would now not occur and the UK Corporation Tax Rate would instead be held at 19%. This rate had not been substantively enacted at the balance sheet date, and as the result the UK deferred tax balances as at 30 June 2022 continue to be measured at the 25% rate noted above. The estimated impact of the reversal of the UK corporation tax rate increase would be to reduce the deferred tax assets by £6.8 million. During 2021, the OECD published a framework for the introduction of a global minimum effective tax rate of 15.0%, applicable to large multinational groups. On 20 July 2022, HM Treasury released draft legislation to implement these 'Pillar 2' rules with effect from 31 December 2023. The Group is reviewing these draft rules to understand any potential impacts. McBride plc Annual Report and Accounts 2022 168 Financial statements # Tax on items recognised in other comprehensive income | | 2022 £m | 2021 £m | | --- | --- | --- | | Items that may be reclassified to profit or loss: | | | | Cash flow hedges in the year | 0.5 | — | | | 0.5 | — | | Items that will not be transferred to profit or loss: | | | | Net actuarial gain/(loss) on post-employment benefits: | | | | Deferred tax | 3.1 | (4.1) | | Total tax charged/(credited) in other comprehensive income | 3.6 | (4.1) | # Deferred tax The movement in the net deferred tax balances during the year was: | | Accelerated capital allowance £m | Intangible assets £m | Share-based payments £m | Tax losses £m | Retirement benefit obligations £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | At 1 July 2020 | 0.2 | (2.9) | 0.2 | 0.3 | 6.1 | 3.3 | 7.2 | | (Charge)/credit to profit or loss | (4.1) | 0.2 | 0.2 | 7.8 | (0.9) | 1.1 | 4.3 | | Credit to other comprehensive income | — | — | — | — | 4.1 | — | 4.1 | | Charge to equity | — | — | (0.1) | — | — | — | (0.1) | | Effect of the change in tax rate | 1.3 | (0.7) | — | 0.8 | (1.4) | — | — | | Exchange/other movements | 0.5 | — | — | — | — | 0.1 | 0.6 | | At 30 June 2021 | (2.1) | (3.4) | 0.3 | 8.9 | 7.9 | 4.5 | 16.1 | | (Charge)/credit to profit or loss | (2.9) | 0.2 | 0.1 | 12.8 | (0.9) | 2.4 | 11.7 | | Charge to other comprehensive income | — | — | — | — | (3.1) | (0.5) | (3.6) | | Charge to equity | — | — | (0.3) | — | — | — | (0.3) | | Effect of the change in tax rate | 0.4 | — | — | 0.3 | — | 0.2 | 0.9 | | Exchange/other movements | — | — | — | — | — | 0.2 | 0.2 | | At 30 June 2022 | (4.6) | (3.2) | 0.1 | 22.0 | 3.9 | 6.8 | 25.0 | Deferred tax assets and liabilities are presented in the Group's balance sheet as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Deferred tax assets | 29.7 | 22.8 | | Deferred tax liabilities | (4.7) | (6.7) | | Total | 25.0 | 16.1 | Deferred income tax assets are recognised for deductible temporary differences to the extent that the realisation of the related tax benefit through future taxable profits is probable. The deferred tax asset represents mainly UK deductible temporary differences which are not subject to time expiry. While further tax losses have arisen in the UK in the current financial year, due to the exceptionally difficult trading conditions detailed in the Strategic report, the Group's three-year financial forecast indicates that these temporary differences will start to reverse in the following financial year, moving to 2024 after applying an 18% sensitivity, and are considered to be fully recoverable. There is no significant risk of material adjustment to the carrying amount of the deferred tax asset within the next twelve months. To the extent that dividends remitted from overseas affiliates are expected to result in additional taxes, these amounts have been provided for. No deferred tax is recognised in respect of timing differences associated with the unremitted earnings of overseas subsidiaries as these are considered permanently employed in the business of these companies. Unremitted earnings may be liable to overseas taxes and/or UK taxation (after allowing for double tax relief) if distributed as dividends. The aggregate amount of temporary differences associated with investments in subsidiaries and associates for which deferred tax liabilities have not been recognised totalled approximately £0.8 million at 30 June 2022 (2021: £1.0m). McBride plc Annual Report and Accounts 2022 169 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 9. Taxation continued ### Unrecognised deferred tax assets At 30 June 2022, the Group had unused tax losses of £93.9 million (2021: £39.0m) available for offset against future profits. No deferred tax asset has been recognised in respect of £5.5 million (2021: £2.3m) of these losses due to restrictions over accessing these losses in the future. The majority of these tax losses arise in tax jurisdictions where they do not expire. No deferred tax asset has been recognised in relation to the surplus Advanced Corporation Tax (ACT) of £7.0 million (2021: £7.0m) due to uncertainty as to future ACT capacity and taxable profits. ## 10. (Loss)/earnings per ordinary share Basic (loss)/earnings per ordinary share is calculated by dividing the (loss)/profit for the year attributable to owners of the Company by the weighted average number of the Company's ordinary shares in issue during the financial year. The weighted average number of the Company's ordinary shares in issue excludes 629,200 shares (2021: 372,864 shares), being the weighted average number of own shares held during the year in relation to employee share schemes (note 24). | | Reference | 2022 | 2021 | | --- | --- | --- | --- | | Weighted average number of ordinary shares in issue (million) | a | 173.5 | 179.1 | | Effect of dilutive LTIP and RSU awards (million) | | 1.0 | 0.3 | | Weighted average number of ordinary shares for calculating diluted earnings per share (million) | b | 174.5 | 179.4 | Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming the conversion of all potentially dilutive ordinary shares. Where potentially dilutive ordinary shares would cause an increase in earnings per share, or a decrease in loss per share, the diluted (loss)/earnings per share is considered equal to the basic (loss)/earnings per share. During the year, the Company had equity-settled LTIP and RSU awards with a nil exercise price that are potentially dilutive ordinary shares. Adjusted (loss)/earnings per share measures are calculated based on (loss)/profit for the year attributable to owners of the Company before adjusting items as follows: | From continuing operations | Reference | 2022 6m | 2021 6m | | --- | --- | --- | --- | | (Loss)/earnings for calculating basic and diluted (loss)/earnings per share | c | (24.0) | 14.0 | | Adjusted for: | | | | | Amortisation of intangible assets (note 13) | | 2.6 | 2.4 | | Exceptional items (note 4) | | 3.1 | 6.2 | | Taxation relating to the above items | | (2.0) | (1.6) | | (Loss)/earnings for calculating adjusted (loss)/earnings per share | d | (20.3) | 21.0 | | | Reference | 2022 pencs | 2021 pencs | | --- | --- | --- | --- | | Basic (loss)/earnings per share | c/a | (13.8) | 7.8 | | Diluted (loss)/earnings per share | c/b^{(1)} | (13.8) | 7.8 | | Adjusted basic (loss)/earnings per share | d/a | (11.7) | 11.7 | | Adjusted diluted (loss)/earnings per share | d/b^{(1)} | (11.7) | 11.7 | (1) Diluted loss per share for 2022 is considered equal to the basic loss per share as potentially dilutive ordinary shares cause a decrease in the loss per share. | From discontinued operations | Reference | 2022 6m | 2021 6m | | --- | --- | --- | --- | | Loss for calculating basic and diluted loss per share | e | (0.3) | (0.6) | | Adjusted for: | | | | | Exceptional items (note 4) | | 0.4 | 0.7 | | Taxation relating to the above items | | (0.1) | (0.1) | | Loss for calculating adjusted loss per share | f | — | — | | | Reference | 2022 pencs | 2021 pencs | | Basic loss per share | e/a | (0.2) | (0.3) | | Diluted loss per share | e/b^{(1)} | (0.2) | (0.3) | | Adjusted basic loss per share | f/a | — | — | | Adjusted diluted loss per share | f/b^{(1)} | — | — | (1) Diluted loss per share for 2022 is considered equal to the basic loss per share as potentially dilutive ordinary shares cause a decrease in the loss per share. McBride plc Annual Report and Accounts 2022 170 Financial statements | Total attributable to ordinary shareholders | Reference | 2022 £m | 2021 £m | | --- | --- | --- | --- | | (Loss)/earnings for calculating basic and diluted (loss)/earnings per share | g | (24.3) | 13.4 | | Adjusted for: | | | | | Amortisation of intangible assets (note 13) | | 2.6 | 2.4 | | Exceptional items (note 4) | | 3.5 | 6.9 | | Taxation relating to the above items | | (2.1) | (1.7) | | (Loss)/earnings for calculating adjusted (loss)/earnings per share | h | (20.3) | 21.0 | | | Reference | 2022 pence | 2021 pence | | Basic (loss)/earnings per share | g/a | (14.0) | 7.5 | | Diluted (loss)/earnings per share | g/b^{(1)} | (14.0) | 7.5 | | Adjusted basic (loss)/earnings per share | h/a | (11.7) | 11.7 | | Adjusted diluted (loss)/earnings per share | h/b^{(1)} | (11.7) | 11.7 | (1) Diluted loss per share for 2022 is considered equal to the basic loss per share as potentially dilutive ordinary shares cause a decrease in the loss per share. ## 11. Payments to shareholders Dividends paid and received are included in the Company financial statements in the period in which the related dividends are actually paid or received or, in respect of the Company's final dividend for the year, approved by shareholders. It is the Board's intention that any future dividends will be final dividends paid annually in cash, not by the allotment and issue of B Shares. Consequently, the Board is not seeking shareholder approval at the 2022 AGM to capitalise reserves for the purposes of issuing B Shares or to grant Directors authority to allot such shares. Existing B Shares will continue to be redeemable but limited to one redemption date per annum in November of each year. B Shares issued but not redeemed are classified as current liabilities. No payments to ordinary shareholders were made or proposed in respect of this year or the prior year. As set out in the Half-Year Report, the Group is targeting an accounting basis of net debt/adjusted EBITDA of 2.0x or less. As the ratio at 31 December 2021 was over 2.0x, an interim payment to shareholders was not made. At 30 June 2022, the ratio was also over 2.0x and in line with its revised Distribution Policy set out on pages 32 and 33, the Board is not recommending a final dividend in 2022. Movements in the number of B Shares outstanding were as follows: | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Number 000 | Nominal value £'000 | Number 000 | Nominal value £'000 | | Issued and fully paid | | | | | | At 1 July | 747,399 | 747 | 713,130 | 713 | | Issued | — | — | 2,010,780 | 2,011 | | Redeemed | (81,511) | (81) | (1,976,511) | (1,977) | | At 30 June | 665,888 | 666 | 747,399 | 747 | B Shares carry no rights to attend, speak or vote at Company meetings, except on a resolution relating to the winding up of the Company. ## 12. Goodwill | | £m | | --- | --- | | **Cost** | | | At 1 July 2020, 30 June 2021 and 30 June 2022 | 36.0 | | **Accumulated impairment** | | | At 1 July 2020 | (16.1) | | Currency translation differences | (0.2) | | 30 June 2021 | (16.3) | | Currency translation differences | — | | At 30 June 2022 | (16.3) | | **Net book value** | | | At 30 June 2022 | 19.7 | | At 30 June 2021 | 19.7 | McBride plc Annual Report and Accounts 2022 171 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 12. Goodwill continued From 1 January 2021, the European Household business was restructured into three product technology-led and separately managed and accountable business divisions: - Liquids: anything sold in a bottle or pouch, such as washing up liquid, bleach, disinfecting sprays; - Unit Dosing: single-use products, typically auto dishwasher tablets and laundry capsules; and - Powders: mostly laundry powders, but with some auto dishwasher powder products. The Liquids, Unit Dosing and Powders divisions, plus our Aerosols and Asia Pacific businesses that already had separate management teams and leadership, represent the lowest level within the Group at which goodwill is monitored for internal management purposes. Carrying amount of goodwill allocated to cash-generating units (CGUs): | | 2022 £m | 2021 £m | | --- | --- | --- | | Liquids | 15.9 | 15.9 | | Unit Dosing | 3.3 | 3.3 | | Powders | 0.3 | 0.3 | | Asia Pacific | 0.2 | 0.2 | | **At 30 June** | **19.7** | **19.7** | ## Impairment tests carried out during the year Goodwill is tested for impairment annually at the level of the CGU to which it is allocated. In each of the tests carried out during the current financial year, the recoverable amount of the CGUs concerned was measured on a value-in-use basis. Value-in-use represents the present value of the future cash flows that are expected to be generated by the CGU to which the goodwill is allocated. Management based its cash flow estimates on the Group's Board-approved budget for the 2023 financial year. Cash flows in the following two years were forecast by applying assumptions to budgeted sales, production costs and overheads. Aggregate cash flows beyond the third year were estimated by applying a perpetuity growth rate to the forecast cash flow in the fifth year that was based on long-term growth rates for the CGU's products in its end markets. Management estimates sales growth for each CGU based on forecasts of the future volume of the end markets for the CGU's products. CGUs to which significant goodwill is allocated supply the Liquids and Unit Dosing markets in Europe. Management estimates the cost of material inputs and other direct and indirect costs based on current prices and market expectations of future price changes. Beyond the budget year, unless there are reasons to suggest otherwise, management assumes that future changes in material input prices are reflected in the price of the Group's products. General cost inflation is based on management's expectations of cost increases in the business. In order to forecast growth beyond the detailed cash flows into perpetuity, long-term average growth rates of 1.5% (2021: 1.5%) in Liquids, 2.0% (2021: 2.0%) in Unit Dosing, 1.6% (2021: 1.4%) in Powders, 1.4% (2021: 1.2%) in Aerosols and 3.9% (2021: 5.0%) in Asia Pacific have been applied. These rates are based on a weighted average of country-specific rates that are not greater than the published International Monetary Fund average growth rates in gross domestic product in the territories in which the CGUs operate. Discount rates applied to the cash flow projections were determined using a capital asset pricing model and reflected current market interest rates, relevant equity and size risk premiums and the risks specific to the CGU concerned. Pre-tax discount rates used in calculating the value-in-use of CGUs in the current year were as follows: Liquids 10.8% (2021: 10.5%), Unit Dosing 8.8% (2021: 8.7%), Powders 8.6% (2021: 9.0%), Aerosols 9.3% (2021: 9.7%) and Asia Pacific 13.5% (2021: 15.9%). ## Sensitivity analysis A sensitivity analysis has been performed, focusing on the change required in long-term average growth rates, discount rates and forecast revenue and margin assumptions that would give rise to an impairment. In the case of the Liquids CGU, sensitivities that result in the recoverable amount equalling the carrying value were: - a decrease in long-term average growth rates to (3.5)%; - an increase in pre-tax discount rates of 4.0ppts; - a reduction in forecast revenue of 5.4%; and - a reduction in forecast margins of 1.2ppts. In the case of the Unit Dosing CGU, sensitivities that result in the recoverable amount equalling the carrying value were: - a decrease in long-term average growth rates to (8.1)%; - an increase in pre-tax discount rates of 9.4ppts; - a reduction in forecast revenue of 9.9%; and - a reduction in forecast margins of 2.1ppts. McBride plc Annual Report and Accounts 2022 172 Financial statements In the case of the Powders CGU, sensitivities that result in the recoverable amount equalling the carrying value were: - a decrease in long-term average growth rates to (3.1)%; - an increase in pre-tax discount rates of 3.3ppts; - a reduction in forecast revenue of 4.9%; and - a reduction in forecast margins of 1.0ppts. In the case of the Aerosols CGU, sensitivities that result in the recoverable amount equalling the carrying value were: - a decrease in long-term average growth rates to (17.0)%; - an increase in pre-tax discount rates of 13.5ppts; - a reduction in forecast revenue of 6.5%; and - a reduction in forecast margins of 1.4ppts. In the case of the Asia Pacific CGU, sensitivities that result in the recoverable amount equalling the carrying value were: - a decrease in long-term average growth rates to (6.8)%; - an increase in pre-tax discount rates of 6.3ppts; - a reduction in forecast revenue of 12.6%; and - a reduction in forecast margins of 3.1ppts. If forecast margins used in the value-in-use calculation for Liquids, Powders and Aerosols (being the CGUs most sensitive to reasonably possible changes in margin assumptions) had been 2ppts lower than management's estimates as at 30 June 2022, the Group would have had to recognise impairments as follows: - £15.9 million and £0.3 million against the carrying value of goodwill for Liquids and Powders respectively; - £0.2 million and £0.5 million against the carrying value of other intangible assets for Liquids and Powders respectively; and - £23.0 million, £11.6 million and £2.5 million against the carrying value of property, plant and equipment for Liquids, Powders and Aerosols respectively. Based on the impairment reviews performed, no impairment has been identified. # 13. Other intangible assets | | Patents, brands and trademarks £m | Computer software £m | Customer relationships £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | | Cost | | | | | | | At 1 July 2020 | 3.8 | 12.5 | 12.1 | 0.7 | 29.1 | | Additions | — | 2.1 | — | 0.1 | 2.2 | | Disposals | — | (0.6) | — | — | (0.6) | | Currency translation differences | (0.1) | — | (0.2) | (0.1) | (0.4) | | At 30 June 2021 | 3.7 | 14.0 | 11.9 | 0.7 | 30.3 | | Additions | — | 0.8 | — | 0.9 | 1.7 | | Disposals | — | (2.6) | — | (0.2) | (2.8) | | At 30 June 2022 | 3.7 | 12.2 | 11.9 | 1.4 | 29.2 | | Accumulated amortisation and impairment | | | | | | | At 1 July 2020 | (3.1) | (6.9) | (9.9) | (0.7) | (20.6) | | Disposals | — | 0.6 | — | — | 0.6 | | Charge for the year | (0.4) | (1.5) | (0.5) | — | (2.4) | | Currency translation differences | 0.1 | — | 0.1 | 0.1 | 0.3 | | At 30 June 2021 | (3.4) | (7.8) | (10.3) | (0.6) | (22.1) | | Disposals | — | 2.6 | — | 0.2 | 2.8 | | Charge for the year | (0.3) | (1.7) | (0.5) | (0.1) | (2.6) | | At 30 June 2022 | (3.7) | (6.9) | (10.8) | (0.5) | (21.9) | | Net book value | | | | | | | At 30 June 2022 | — | 5.3 | 1.1 | 0.9 | 7.3 | | At 30 June 2021 | 0.3 | 6.2 | 1.6 | 0.1 | 8.2 | Customer relationships acquired upon the acquisition of McBride Denmark A/S have a carrying value of £1.5 million and a remaining amortisation period of 3.25 years. In addition, a brand name was also acquired on acquisition of McBride Denmark A/S that has a carrying value of £0.1 million and a remaining amortisation period of 0.25 years. McBride plc Annual Report and Accounts 2022 173 Financial statements ## Notes to the consolidated financial statements continued Year ended 30 June 2022 ### 14. Property, plant and equipment | | Land and buildings £m | Plant and equipment £m | Payments on account and assets in the course of construction £m | Total £m | | --- | --- | --- | --- | --- | | **Cost** | | | | | | At 1 July 2020 | 76.6 | 416.0 | 6.8 | 499.4 | | Additions | 1.4 | 17.9 | 3.1 | 22.4 | | Disposal of assets | (0.6) | (60.6) | — | (61.2) | | Transfers to non-current assets held for sale (note 18) | (2.4) | — | — | (2.4) | | Transfers | — | 2.2 | (2.2) | — | | Currency translation differences | (5.1) | (17.6) | (0.3) | (23.0) | | At 30 June 2021 | 69.9 | 357.9 | 7.4 | 435.2 | | Additions | 1.0 | 10.7 | 0.7 | 12.4 | | Disposal of assets | (3.4) | (102.8) | (0.1) | (106.3) | | Transfers | — | 2.0 | (2.0) | — | | Currency translation differences | (0.2) | (0.5) | — | (0.7) | | **At 30 June 2022** | **67.3** | **267.3** | **6.0** | **340.6** | | **Accumulated depreciation and impairment** | | | | | | At 1 July 2020 | (33.1) | (331.6) | — | (364.7) | | Charge for the year | (2.1) | (15.5) | — | (17.6) | | Disposals | 0.6 | 60.0 | — | 60.6 | | Impairment | — | (0.3) | — | (0.3) | | Transfers to non-current assets held for sale (note 18) | 0.8 | — | — | 0.8 | | Currency translation differences | 2.6 | 13.2 | — | 15.8 | | At 30 June 2021 | (31.2) | (274.2) | — | (305.4) | | Charge for the year | (2.0) | (14.9) | — | (16.9) | | Disposals | 2.8 | 102.1 | — | 104.9 | | Impairment | — | (0.8) | — | (0.8) | | Currency translation differences | — | 0.5 | — | 0.5 | | **At 30 June 2022** | **(30.4)** | **(187.3)** | **—** | **(217.7)** | | **Net book value** | | | | | | At 30 June 2022 | 36.9 | 80.0 | 6.0 | 122.9 | | At 30 June 2021 | 38.7 | 83.7 | 7.4 | 129.8 | McBride plc Annual Report and Accounts 2022 174 Financial statements # **15. Leases** Most of the Group's leases are associated with leased properties. The Group also leases a small proportion of its plant and machinery, for example forklift trucks, and vehicles. The movements in the right-of-use assets were as follows: | | Land and buildings £m | Plant and machinery £m | Vehicles £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | | **Right-of-use assets** | | | | | | | Net book value at 1 July 2020 | 2.9 | 1.7 | 2.2 | 0.5 | 7.3 | | New leases recognised | 4.3 | 2.0 | 0.8 | 1.0 | 8.1 | | Lease disposals | (0.3) | — | (0.1) | — | (0.4) | | Impairment | (0.7) | — | — | — | (0.7) | | Currency translation differences | (0.3) | (0.1) | — | (0.1) | (0.5) | | Depreciation | (1.6) | (0.9) | (1.0) | (0.3) | (3.8) | | Net book value at 30 June 2021 | 4.3 | 2.7 | 1.9 | 1.1 | 10.0 | | New leases recognised | 0.2 | 4.0 | 0.8 | — | 5.1 | | Currency translation differences | (0.3) | 0.5 | — | — | 0.2 | | Depreciation | (1.3) | (1.3) | (1.2) | (0.2) | (4.0) | | **Net book value at 30 June 2022** | **2.9** | **5.9** | **1.6** | **0.9** | **11.3** | The movements in the lease liabilities were as follows: | | Total £m | | --- | --- | | **Lease liabilities** | | | Net book value at 1 July 2020 | 8.7 | | New leases recognised | 7.9 | | Lease disposals | (0.3) | | Lease payments | (4.9) | | Currency translation differences | (0.4) | | Finance costs (note 8) | 0.3 | | Net book value at 30 June 2021 | 11.3 | | New leases recognised | 5.1 | | Lease payments | (5.0) | | Currency translation differences | 0.2 | | Finance costs (note 8) | 0.4 | | **Net book value at 30 June 2022** | **12.0** | | | **2022 £m** | | | **2021 £m** | | **Analysed as:** | | | Amounts falling due within twelve months | 3.9 | | Amounts falling due after one year | 8.1 | | | **12.0** | | | **11.3** | McBride plc Annual Report and Accounts 2022 175 Financial statements ## Notes to the consolidated financial statements continued Year ended 30 June 2022 ### 15. Leases continued Note 21 presents a maturity analysis of the payments due over the remaining lease term for those liabilities currently recognised on the balance sheet. This analysis only includes payments to be made over the reasonably certain lease term. Cash outflows may exceed these amounts as payments may be made in optional periods that are not currently considered to be reasonably certain, and in respect of leases entered into in future periods. For the year ended 30 June 2022, expenses for short-term and low-value leases were incurred as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Expenses relating to short-term leases | (0.3) | (1.0) | | Expenses relating to leases of low-value assets not shown as short-term leases above | (0.2) | (0.3) | | **Total** | **(0.5)** | **(1.3)** | At 30 June 2022 the Group was committed to future minimum lease payments of £1.5 million (2021: £3.0m) in respect of leases which have not yet commenced and for which no lease liability has been recognised. ### 16. Inventories | | 2022 £m | 2021 £m | | --- | --- | --- | | Raw materials, packaging and consumables | 61.7 | 45.8 | | Finished goods and goods for resale | 57.2 | 47.1 | | **Total** | **118.9** | **92.9** | Inventories are stated net of an allowance of £5.6 million (2021: £4.1m) in respect of excess, obsolete or slow-moving items. Movements in the allowance were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | At 1 July | (4.1) | (2.8) | | Utilisation | 1.4 | 1.5 | | Charged to profit or loss | (2.9) | (2.9) | | Currency translation differences | — | 0.1 | | **At 30 June** | **(5.6)** | **(4.1)** | The cost of inventories recognised in cost of sales as an expense amounted to £441.8 million (2021: £397.4m). ### 17. Trade and other receivables | | 2022 £m | 2021 £m | | --- | --- | --- | | Trade receivables | 130.3 | 106.8 | | Less, provision for impairment of trade receivables | (2.2) | (0.9) | | Trade receivables – net | 128.1 | 105.9 | | Other receivables | 14.4 | 8.9 | | Prepayments and accrued income | 2.9 | 3.1 | | **Total** | **145.4** | **117.9** | Trade receivables amounting to £53.7 million (2021: £47.8 m) are secured under the invoice discounting facilities described in note 21. Other receivables primarily consist of supplier rebates and recoverable VAT. Trade terms are a maximum of 135 days of credit. Due to their short-term nature, the fair value of trade and other receivables does not differ from the book value. The impairment of trade receivables charged to the income statement was £2.0 million (2021: £1.3m). There are no impairments of any receivables other than trade receivables. Trade receivables are regularly reviewed for bad and doubtful debts. Bad debts are written off and an allowance is established based on the expected credit loss model. The expected loss rates are based on payment profiles of sales over a period of three years before 30 June 2022 or 30 June 2021, respectively, and the corresponding historical credit losses experienced within this period adjusted for forward-looking factors specific to the debtors and the economic environment. McBride plc Annual Report and Accounts 2022 176 Financial statements On that basis, the credit loss allowance as at 30 June 2022 and 30 June 2021 was determined as follows: | 30 June 2022 | Current | More than 30 days past due | More than 60 days past due | More than 90 days past due | More than 180 days past due | Total | | --- | --- | --- | --- | --- | --- | --- | | Expected loss rate | — | 0.1% | 1.0% | 0.8% | 10.6% | | | Gross carrying amount (£m) | 119.8 | 6.7 | 0.8 | 1.3 | 1.7 | 130.3 | | Credit loss allowance (£m) | — | — | — | — | 0.2 | 0.2 | | 30 June 2021 | Current | More than 30 days past due | More than 60 days past due | More than 90 days past due | More than 180 days past due | Total | | --- | --- | --- | --- | --- | --- | --- | | Expected loss rate | — | 0.1% | 0.7% | 0.9% | 20.4% | | | Gross carrying amount (£m) | 104.0 | 0.7 | 0.8 | 0.4 | 0.9 | 106.8 | | Credit loss allowance (£m) | — | — | — | — | 0.2 | 0.2 | In addition to the credit loss allowance, the provision for impairment of trade receivables includes £2.0 million (2021: £0.7m) of credit note provisions. Movements in the allowance for doubtful debts were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | At 1 July | (0.9) | (0.9) | | Utilisation | 0.7 | 1.3 | | Charged | (2.0) | (1.3) | | **At 30 June** | **(2.2)** | **(0.9)** | Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, or a failure to make contractual payments for a period greater than 365 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. The carrying amounts of trade receivables are denominated in the following currencies: | | 2022 £m | 2021 £m | | --- | --- | --- | | Sterling | 25.5 | 15.0 | | Euro | 86.4 | 86.3 | | Polish Zloty | 1.8 | 0.7 | | Danish Krone | 10.4 | 1.7 | | Malaysian Ringgit | 4.1 | 1.5 | | Other | 2.1 | 1.6 | | | **130.3** | **106.8** | Trade receivables are generally not interest bearing. #### 18. Non-current assets classified as held for sale There were no non-current assets held for sale at 30 June 2022 (2021: £1.6m). During 2021, the Group reached a preliminary agreement with a prospective purchaser for the sale of land and buildings at a former manufacturing site in Malaysia. The sale of this site completed during the year ended 30 June 2022. The land and buildings were part of the Asia Pacific segment. During 2021, as part of the logistics transformation programme, a decision was made to exit and actively market for sale land and buildings at a former warehousing facility in Guesnain, France. The sale of the site completed during the year ended 30 June 2022. The land and buildings are central assets. During 2021, on classification as held for sale, the assets were tested for impairment by reference to whether the carrying value of the assets was supported by the fair value less costs to sell. For the Malaysian assets, the indicated selling price agreed with the prospective purchaser was used as the fair value for the impairment test, which was classified as Level 2 on the fair value hierarchy. For the French assets, an independent third-party valuation was used as the fair value for the impairment test, which was classified as Level 2 on the fair value hierarchy. As a result, no impairment charges were recognised. McBride plc Annual Report and Accounts 2022 177 Financial statements # Notes to the consolidated financial statements continued ## Year ended 30 June 2022 19. Trade and other payables | | 2022 £m | 2021 £m | | --- | --- | --- | | Current liabilities | | | | Trade payables | 160.4 | 130.8 | | Taxation and social security | 3.5 | 3.5 | | Other payables | 26.7 | 23.9 | | Accrued expenses | 14.6 | 7.9 | | Deferred income | 1.0 | 2.4 | | B Shares (note 11) | 0.7 | 0.7 | | Total | 206.9 | 169.2 | Trade payables are generally not interest bearing. The Directors consider the carrying amount of trade and other payables to approximate their fair values. 20. Borrowings Borrowings may be analysed as follows: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Current liabilities £m | Non-current liabilities £m | Total liabilities £m | Current liabilities £m | Non-current liabilities £m | Total liabilities £m | | Overdrafts | 6.8 | — | 6.8 | 5.9 | — | 5.9 | | Bank and other loans: | | | | | | | | Unsecured loans | — | 96.4 | 96.4 | — | 78.3 | 78.3 | | Invoice discounting facilities (note 21) | 53.7 | — | 53.7 | 47.8 | — | 47.8 | | | 53.7 | 96.4 | 150.1 | 47.8 | 78.3 | 126.1 | | Lease liabilities | 3.9 | 8.1 | 12.0 | 3.4 | 7.9 | 11.3 | | Total | 64.4 | 104.5 | 168.9 | 57.1 | 86.2 | 143.3 | Bank and other loans are repayable as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 53.7 | 47.8 | | Between one and two years | — | — | | Between two and five years | 96.4 | 78.3 | | More than five years | — | — | | Total | 150.1 | 126.1 | Details of the Group's bank facilities are presented in note 21. Amounts payable under leases are presented in notes 15 and 21. McBride plc Annual Report and Accounts 2022 178 Financial statements # 21. Financial risk management # Risk management policies The Group's Treasury function is responsible for procuring the Group's capital resources and maintaining an efficient capital structure, together with managing the Group's liquidity, foreign exchange and interest rate exposures. All treasury operations are conducted within strict policies and guidelines that are approved by the Board. Compliance with those policies and guidelines is monitored by the regular reporting of treasury activities to the Board following regular Treasury Committee meetings. Financial assets and financial liabilities | | Amortised cost £m | Fair value through profit or loss^{(1)} £m | Total carrying amount £m | Fair value £m | | --- | --- | --- | --- | --- | | At 30 June 2022 | | | | | | Financial assets | | | | | | Trade receivables | 128.1 | — | 128.1 | 128.1 | | Other receivables | 14.4 | — | 14.4 | 14.4 | | Cash and cash equivalents | 4.5 | — | 4.5 | 4.5 | | | 147.0 | — | 147.0 | 147.0 | | Financial assets held at fair value | | | | | | Derivative financial instruments (Level 2) | | | | | | Forward currency contracts | — | 0.4 | 0.4 | 0.4 | | Interest rate swaps | — | 2.1 | 2.1 | 2.1 | | | — | 2.5 | 2.5 | 2.5 | | Total financial assets | 147.0 | 2.5 | 149.5 | 149.5 | | Financial liabilities | | | | | | Trade and other payables | (202.4) | — | (202.4) | (202.4) | | Bank overdrafts | (6.8) | — | (6.8) | (6.8) | | Lease liabilities | (12.0) | — | (12.0) | (12.0) | | Bank and other loans | (150.1) | — | (150.1) | (150.1) | | Total financial liabilities | (371.3) | — | (371.3) | (371.3) | | Total | (224.3) | 2.5 | (221.8) | (221.8) | (1) Financial assets and financial liabilities classified as fair value through profit or loss are designated in hedge relationships as described within the interest risk and foreign exchange risk sections of this note. McBride plc Annual Report and Accounts 2022 179 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 21. Financial risk management continued Financial assets and financial liabilities continued | | Amortised cost £m | Fair value through profit or loss^{(1)} £m | Total carrying amount £m | Fair value £m | | --- | --- | --- | --- | --- | | **At 30 June 2021** | | | | | | **Financial assets** | | | | | | Trade receivables | 105.9 | — | 105.9 | 105.9 | | Other receivables | 8.9 | — | 8.9 | 8.9 | | Cash and cash equivalents | 24.9 | — | 24.9 | 24.9 | | | 139.7 | — | 139.7 | 139.7 | | **Financial assets held at fair value** | | | | | | Derivative financial instruments (Level 2) | | | | | | Forward currency contracts | — | 0.1 | 0.1 | 0.1 | | Interest rate swaps | — | 0.1 | 0.1 | 0.1 | | Contracts for Difference (High-density polyethylene (HDPE)) | — | 0.1 | 0.1 | 0.1 | | | — | 0.3 | 0.3 | 0.3 | | **Total financial assets** | **139.7** | **0.3** | **140.0** | **140.0** | | **Financial liabilities** | | | | | | Trade and other payables (restated^{(2)}) | (163.3) | — | (163.3) | (163.3) | | Bank overdrafts | (5.9) | — | (5.9) | (5.9) | | Lease liabilities | (11.3) | — | (11.3) | (11.3) | | Bank and other loans | (126.1) | — | (126.1) | (126.1) | | | (306.6) | — | (306.6) | (306.6) | | **Financial liabilities held at fair value** | | | | | | Derivative financial instruments (Level 2) | | | | | | Forward currency contracts | — | (0.2) | (0.2) | (0.2) | | Interest rate swaps | — | (0.1) | (0.1) | (0.1) | | | — | (0.3) | (0.3) | (0.3) | | **Total financial liabilities** | **(306.6)** | **(0.3)** | **(306.9)** | **(306.9)** | | **Total** | **(166.9)** | **—** | **(166.9)** | **(166.9)** | (1) Financial assets and financial liabilities classified as fair value through profit or loss are designated in hedge relationships as described within the interest risk and foreign exchange risk sections of this note. (2) Prior year trade and other payables restated to exclude deferred income and corporation tax payable balances. In the above tables, the financial assets and financial liabilities held by the Group are categorised according to the basis on which they are measured. Financial assets and liabilities that are held at fair value are further categorised according to the degree to which the principal inputs used in determining their fair value represent observable market data as follows: - Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities; - Level 2 – inputs other than Level 1 that are observable for the asset or liability, either directly (prices) or indirectly (derived from prices); and - Level 3 – inputs that are not based on observable market data (unobservable inputs). McBride plc Annual Report and Accounts 2022 180 Financial statements Derivative financial instruments comprise the foreign currency derivatives, non-deliverable commodity derivatives and interest rate derivatives that are held by the Group in designated hedging relationships. Foreign currency forward contracts are measured by reference to prevailing forward exchange rates. Commodity forward contracts are measured by difference to prevailing market prices. Foreign currency options are measured using a variant of the Monte Carlo valuation model. Interest rate swaps and caps are measured by discounting the related cash flows using yield curves derived from prevailing market interest rates. Cash and cash equivalents and bank and other loans largely attract floating interest rates. Accordingly, management considers that their carrying amount approximates to fair value. Lease obligations attract fixed interest rates that are implicit in the lease rentals and their fair value has been assessed relative to prevailing market interest rates. There were no transfers between levels during the year and no changes in valuation techniques. #### Credit risk Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has three types of financial assets that are subject to the expected credit loss model: - cash and cash equivalents. Information regarding expected credit losses on trade receivables is disclosed in note 17. While other receivables and cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was minimal. The Group's cash balances are managed such that there is no significant concentration of credit risk in any one bank or other financial institution. Management regularly monitors the credit quality of the institutions with which it holds deposits. Similar considerations are given to the Group's portfolio of derivative financial instruments. The Group uses judgement to determine that the credit risk of financial assets has not significantly changed since initial recognition and regularly monitors the value of the instruments. As such, credit risk is not considered to be a significant factor in changes to the values of financial assets. All of the financial derivatives are deemed to have low credit risk on initial recognition as they are predominantly hedges of foreign exchange risk and executed with a diverse and strong portfolio of counterparties. Before accepting a new customer, management assesses the customer's credit quality and establishes a credit limit. Credit quality is assessed using data maintained by reputable credit rating agencies, by the checking of references included in credit applications and, where they are available, by reviewing the customer's recent financial statements. Credit limits are subject to multiple levels of authorisation and are reviewed on a regular basis. Credit insurance is employed where it is considered to be cost effective. At 30 June 2022, the majority of trade receivables were due from major retailers in the UK and Europe. At 30 June 2022, the Group's maximum exposure to credit risk was as follows (there was no significant concentration of credit risk): | | 2022 £m | 2021 £m | | --- | --- | --- | | Trade and other receivables: | | | | Trade receivables | 128.1 | 105.9 | | Other receivables | 14.4 | 8.9 | | | 142.5 | 114.8 | | Derivative financial instruments | 2.5 | 10.3 | | Cash and cash equivalents | 4.5 | 24.9 | | **Total** | **149.5** | **140.0** | McBride plc Annual Report and Accounts 2022 181 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 21. Financial risk management continued ### Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities. The Group's borrowing facilities are monitored against forecast requirements and timely action is taken to put in place, renew or replace credit lines. Throughout the year the Group had an unsecured €175 million multi-currency sustainability-linked revolving credit facility (RCF). The facility was agreed initially for a five-year tenor to May 2026, with the option to be extended to 30 September 2027 and is provided by a syndicate of supportive international bank lenders. The facility also includes a €75 million uncommitted accordion feature which could provide additional commitments for potential acquisitions in support of our Programme Compass strategy. ### Position prior to 29 September 2022 The Group's revolving credit facility (RCF) funding arrangements are subject to banking covenants, representations and warranties that are customary for unsecured borrowing facilities, including two financial covenants; debt cover$^{(1)}$ may not exceed 3.0x and interest cover$^{(2)}$ may not be less than 4.0x. For the purpose of these calculations, net debt excludes IFRS 16 leases and amounts drawn under the Group's invoice discounting facilities. On 22 December 2021, the Group announced that its lender group waived the December 2021 covenant tests, following the significant deterioration of EBITDA due to unprecedented levels of input cost inflation. In reaching the agreement of the waiver, the Group agreed to maintain liquidity (cash plus facility headroom) of at least £40 million and not to pay dividends until the Group evidences compliance with it existing covenants. On 29 June, the Group announced that its lender group waived the June 2022 covenant tests until 30 September 2022, with the same conditions. As at 30 June 2022, the debt cover ratio under the RCF funding arrangements was (93.3)x (2021: 15x) and the interest cover was (0.2)x (2020: 11.0x). The amount undrawn on the facility was €64.5 million (2021: €87.0m). At 30 June 2022, the Group had a number of facilities whereby it could borrow against certain of its trade receivables. In the UK, the Group had a £20 million facility that was committed until October 2022. In France and Belgium, the Group had an aggregate €30 million facility, on which a maximum of €25 million can be borrowed, with a rolling notice period of six months for the French part and three months for the Belgian part. In Germany, the Group had a €35 million facility committed until December 2023. The Group can borrow from the provider of the relevant facility up to the lower of the facility limit and the value of the respective receivables. The Group also has access to uncommitted working capital facilities amounting to €22.7 million (2021: €44.3m). At 30 June 2022, €6.8 million (2021: €5.9m) was drawn against these facilities in the form of overdrafts and short-term borrowings. (1) Debt cover is the ratio of net debt (excluding lease liabilities and amounts borrowed under invoice discounting facilities) to adjusted EBITDA, adding back cash rental payments in respect of leased. (2) Interest cover is the ratio of adjusted EBITDA to net interest, excluding pension interest. McBride plc Annual Report and Accounts 2022 182 Financial statements # **Position post 29 September 2022** At 29 September 2022, the Group announced that it had agreed an amended RCF with its lender group, ensuring the Group has sufficient levels of liquidity headroom and can comply with revised covenant requirements. Key provisions of the revised agreement are: - • €175 million sustainability-linked RCF confirmed to May 2026; - • the option to extend to 30 September 2027 and the €75 million accordion feature previously agreed have been removed; - • RCF shall be secured against material asset, share and inter-company balances; - • RCF commitments to reduce, and be cancelled, in the amount of the Euro equivalent of €2.5 million every three months from September 2024 up until the termination date; - • existing bilateral overdraft facilities shall become ancillary facilities committed until 30 September 2024; - • invoice discounting facilities shall be committed to 30 September 2024; - • liquidity shall not be less than €15 million when tested on or prior to 30 September 2024; - • liquidity shall not be less than €25 million when tested post-30 September 2024; - • net debt cover and interest cover covenants to be tested quarterly from 30 September 2024; - • no dividends will be paid to shareholders until there is an exit event, being a change of control, refinancing of the RCF in full, prepayment and cancellation of the RCF in full or upon the termination date of the RCF, being May 2026; and - • the arrangement includes an 'upside sharing' mechanism whereby a fee will become payable by the Group to members of the lender group upon the occurrence of an exit event. Such fee to be determined as a percentage of any increase from the current market capitalisation of the Group to the market capitalisation of the Group at the date of such exit event. The Group considers that the arrangement achieves an appropriate balance between the interests of all stakeholders of the Group. In particular, we have been in regular discussion and consultation with the Trustee of the Group's defined benefit pension scheme in the UK. In order to preserve and support the position of the scheme, with the support of the lender group, we have agreed to provide in favour of the scheme a package of additional credit support in the UK, as well as a new information sharing protocol to ensure ongoing communication between the Group and the Trustee remains comprehensive. The Group is currently negotiating to further increase liquidity by €25 million through extension of invoice discounting facilities to unencumbered receivables ledgers. However there is no certainty that these negotiations will be successful. We are fully appreciative of the support that the lender group have given the Group through this period of uncertainty caused by macroeconomic factors, which have resulted in rapid and unprecedented rises in input costs, and ongoing global supply chain challenges. At 30 June 2022, the carrying amount of trade receivables eligible for transfer and the amounts borrowed under the facility were as follows: | | 2022 €m | 2021 €m | | --- | --- | --- | | Trade receivables available | 53.7 | 47.8 | | Amount borrowed | (53.7) | (47.8) | | Amount undrawn | — | — | The Group also has access to uncommitted working capital facilities amounting to €22.7 million (2021: €44.3m). At 30 June 2022, €6.8 million (2021: €5.9m) was drawn against these facilities in the form of overdrafts and short-term borrowings. McBride plc Annual Report and Accounts 2022 183 Financial statements ## Notes to the consolidated financial statements continued Year ended 30 June 2022 ### 21. Financial risk management continued #### Liquidity risk continued In the following tables, estimated future contractual undiscounted cash flows in respect of the Group's financial liabilities are analysed according to the earliest date on which the Group could be required to settle the liability. Floating rate interest payments are estimated based on market interest rates prevailing at the balance sheet date. Payments and receipts in relation to derivative financial instruments are shown net if they will be settled on a net basis. | | Within 1 year £m | Between 1 and 2 years £m | Between 2 and 3 years £m | Between 3 and 4 years £m | Between 4 and 5 years £m | After 5 years £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | --- | | **At 30 June 2022** | | | | | | | | | Bank overdrafts | (6.8) | — | — | — | — | — | (6.8) | | Bank and other loans: | | | | | | | | | Principal | (53.7) | — | — | (96.4) | — | — | (150.1) | | Interest payments | (0.5) | — | — | — | — | — | (0.5) | | Lease liabilities | (4.4) | (3.5) | (2.6) | (2.2) | (0.7) | (0.3) | (13.7) | | Other liabilities | (202.4) | — | — | — | — | — | (202.4) | | **Cash flows on non-derivative liabilities** | **(267.8)** | **(3.5)** | **(2.6)** | **(98.6)** | **(0.7)** | **(0.3)** | **(373.5)** | | **Cash flows on derivative liabilities** | | | | | | | | | Payments | (34.1) | (0.3) | — | — | — | — | (34.4) | | **Cash flows on financial liabilities** | **(301.9)** | **(3.8)** | **(2.6)** | **(98.6)** | **(0.7)** | **(0.3)** | **(407.9)** | | **Cash flows on derivative assets** | | | | | | | | | Receipts | 33.1 | 0.3 | — | — | — | — | 33.4 | | | **(268.8)** | **(3.5)** | **(2.6)** | **(98.6)** | **(0.7)** | **(0.3)** | **(374.5)** | | | Within 1 year £m | Between 1 and 2 years £m | Between 2 and 3 years £m | Between 3 and 4 years £m | Between 4 and 5 years £m | After 5 years £m | Total £m | | **At 30 June 2021** | | | | | | | | | Bank overdrafts | (5.9) | — | — | — | — | — | (5.9) | | Bank and other loans: | | | | | | | | | Principal | (47.8) | (2.1) | — | — | (76.8) | — | (126.7) | | Interest payments | (0.3) | — | — | — | — | — | (0.3) | | Lease liabilities | (3.9) | (3.1) | (2.3) | (1.5) | (1.2) | (0.4) | (12.4) | | Other liabilities | (169.2) | — | — | — | — | — | (169.2) | | **Cash flows on non-derivative liabilities** | **(227.1)** | **(5.2)** | **(2.3)** | **(1.5)** | **(78.0)** | **(0.4)** | **(314.5)** | | **Cash flows on derivative liabilities** | | | | | | | | | Payments | (66.2) | (0.9) | — | — | — | — | (67.1) | | **Cash flows on financial liabilities** | **(293.3)** | **(6.1)** | **(2.3)** | **(1.5)** | **(78.0)** | **(0.4)** | **(381.6)** | | **Cash flows on derivative assets** | | | | | | | | | Receipts | 66.1 | 0.9 | — | — | — | — | 67.0 | | | **(227.2)** | **(5.2)** | **(2.3)** | **(1.5)** | **(78.0)** | **(0.4)** | **(314.6)** | McBride plc Annual Report and Accounts 2022 184 Financial statements # Interest rate risk Interest rate risk is the risk that the fair value of, or future cash flows associated with, a financial instrument will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk on its floating rate borrowings, which it has mitigated using interest rate derivatives in the form of interest rate swaps and interest rate caps with maturities up to 2026. Under the Group's policy the critical terms of the derivatives must align with the hedged items. The interest rate instruments executed are matched against the term, currency and entity where the borrowing exists, fixing the value of interest paid in line with the Group policy. They are monitored to ensure that critical terms of the instrument continue to match the transaction. The hedge ratio is determined by the Group's treasury policy, which states that the Group aims to be circa 50% hedged against the potential adverse effects of interest exposure on its consolidated net debt. The instruments are matched on a 11 ratio with the transaction. Hedge ineffectiveness could be caused through fluctuating forecasts. Forecasts are monitored regularly and the Group intends to repay debt in line with the timeframe of the hedges entered into. If this changes additional hedges are executed in order to maintain the policy level. The changes in the time value of the options that relate to hedged items are deferred in the cash flow hedge reserve and are treated as the cost of hedging. After taking into account the Group's currency and interest rate hedging activities, the currency and interest rate profile of the Group's interest-bearing financial assets and financial liabilities was as follows: | | 2022 | | | | | | 2021 | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Euro £m | Sterling £m | Danish Krone £m | Polish Zloty £m | Other currencies £m | Total £m | Euro £m | Sterling £m | Danish Krone £m | Polish Zloty £m | Other currencies £m | Total £m | | Floating rate | | | | | | | | | | | | | | Bank overdrafts | (6.6) | — | — | — | (0.2) | (6.8) | (5.9) | — | — | — | — | (5.9) | | Bank and other loans | (28.1) | (35.6) | (8.7) | (3.6) | — | (76.0) | (6.2) | (19.6) | (8.7) | (3.8) | (2.1) | (40.4) | | Cash and cash equivalents | 5.9 | (4.8) | 0.6 | 0.6 | 2.2 | 4.5 | 13.6 | 2.2 | 2.6 | 2.1 | 4.4 | 24.9 | | | (28.8) | (40.4) | (8.1) | (3.0) | 2.0 | (78.3) | 1.5 | (17.4) | (6.1) | (1.7) | 2.3 | (21.4) | | Fixed rate | | | | | | | | | | | | | | Bank and other loans | (53.2) | (10.0) | (6.3) | (4.6) | — | (74.1) | (74.7) | — | (6.3) | (4.7) | — | (85.7) | | | (53.2) | (10.0) | (6.3) | (4.6) | — | (74.1) | (74.7) | — | (6.3) | (4.7) | — | (85.7) | | Total | (82.0) | (50.4) | (14.4) | (7.6) | 2.0 | (152.4) | (73.2) | (17.4) | (12.4) | (6.4) | 2.3 | (107.1) | Interest payable on bank overdrafts and floating rate loans is based on base rates and short-term interbank rates (predominantly, EURIBOR and SONIA). At 30 June 2022, the weighted average interest rate payable on bank and other loans was 1.9% (2021: 1.8%). At 30 June 2022, the weighted average interest rate receivable on cash and cash equivalents was 0.0% (2021: 0.0%). McBride plc Annual Report and Accounts 2022 185 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 21. Financial risk management continued Interest rate risk continued At 30 June 2022, the Group held interest rate caps, which cap the maximum rate payable but allow the rate to float below this maximum. | | Interest rate swaps £m | Interest rate caps £m | | --- | --- | --- | | 2022 | | | | Carrying amount | — | 2.2 | | Notional amount | — | 65.4 | | Maturity date | — | June 2022-June 2026 | | Hedging ratio | — | 11 | | Change in value of outstanding hedge instruments since 1 July | — | — | | Change in value of hedged item used to determine hedge effectiveness | — | — | | Weighted average hedged rate for the year | — | 0.00% - 0.75% | | | Interest rate swaps £m | Interest rate caps £m | | --- | --- | --- | | 2021 | | | | Carrying amount | (0.1) | 0.1 | | Notional amount | 27.8 | 57.9 | | Maturity date | June 2021-June 2022 | June 2021-June 2024 | | Hedging ratio | 11 | 11 | | Change in value of outstanding hedge instruments since 1 July | 0.1 | — | | Change in value of hedged item used to determine hedge effectiveness | (0.1) | — | | Weighted average hedged rate for the year | 0.40%-0.53% | 0.00%-0.50% | All interest rate derivatives held by the Group are indexed to three-month EURIBOR, SONIA, WIBOR or CIBOR. Fixed or capped interest rates shown in the above table do not include the margin over market interest rates payable on the Group's borrowings. On the assumption that a change in market interest rates would be applied to the interest rate exposures that were in existence at the balance sheet date and that designated cash flow hedges are 100% effective, an increase/decrease of 100 basis points in market interest rates would have decreased/increased the Group's profit before tax by £0.7 million (2021: £0.2m). Foreign currency risk Transaction risk Foreign currency transaction risk arises on sales and purchases denominated in currencies other than the functional currency of the entity that enters into the transaction. While the magnitude of these exposures is relatively low, the Group's policy is to hedge committed transactions in full and to hedge a proportion of highly probable forecast transactions on a twelve-month rolling basis. Foreign currency transaction risk also arises on financial assets and liabilities denominated in foreign currencies and Group policy allows for these exposures to be hedged using forward currency contracts. The Group determines the economic relationship between the hedged item and the hedging instrument for the purpose of assessing hedge effectiveness. The cost of the transaction increases as the exchange rate weakens, as the hedge instruments in place are foreign currency liabilities. This same movement in exchange rates would result in an increase in the value of the liability. The value of the invoices paid is regularly monitored to ensure the hedges in place continue to meet the monthly exposures and that critical terms of the instrument continue to match the transaction. On maturity of the hedge the gain or loss recorded against the spot rate is recorded in the same income statement line as the invoiced transaction. The hedge ratio is determined by the Group's treasury policy, which provides a maximum and minimum hedge level for a number of time brackets. The compliance with this policy is monitored monthly and new hedges are also added monthly if required. The level of hedges required is reviewed monthly during the Treasury Management Committee meeting. The instruments are matched on a 11 ratio with the transaction. Hedge ineffectiveness could be caused through the different timing of the payment runs so that the hedges mature at a different point to the invoices being paid, fluctuating forecasts or changes to the nature of the business. These risks are mitigated through the following measures: - phasing hedges to cover the change of the timing of payments runs; - monitoring forecasts monthly and adding hedges to reflect any changes; - the percentage of hedges permitted allowing for the potential uncertainty towards the end of the forecast period; and - building significant changes into the forecast, with any changes being allowed for the purchases made. McBride plc Annual Report and Accounts 2022 186 Financial statements At 30 June 2022, the notional principal amount of outstanding foreign currency contracts (net purchases) that are held to hedge the Group's transaction exposures was €13.6 million (2021: €14.8m). For accounting purposes, the Group has designated the foreign currency contracts as cash flow hedges. At 30 June 2022, the fair value of the contracts was €0.2 million (2021: €0.2m). During 2022, a loss of €0.1 million (2021: loss of €0.7m) was recognised in other comprehensive income and a loss of €0.4 million (2021: €0.7m) was transferred from the cash flow reserve to the income statement in respect of these contracts. #### Translation risk Foreign currency translation risk arises on consolidation in relation to the translation into Sterling of the results and net assets of the Group's foreign subsidiaries. The Group's policy is to hedge a substantial proportion of overseas net assets using a combination of foreign currency borrowings and foreign currency swaps. The Group hedges part of the currency exposure on translating the results of its foreign subsidiaries into Sterling using average rate options. This exposure is also mitigated by the natural hedge provided by the interest payable on the Group's foreign currency borrowings. At 30 June 2022, the fair value of the average rate options was €nil (2021: loss of €nil). The Group determines the economic relationship between the hedged item and the hedging instrument for the purpose of assessing hedge effectiveness. The value of Group assets increases as the exchange rate weakens, as the hedge instrument in place is a foreign currency liability. This same movement in exchange rates would result in an increase in the value of the liability. When hedges mature, any settlements offset the gain or loss on translation of the hedged item and are monitored to ensure critical terms of the instrument continue to match the transaction. The hedge ratio is determined by the Group's treasury policy, which states the Group will hedge up to 100% of the budgeted exposure. The instruments are matched on a 1:1 ratio with the transaction. Hedge ineffectiveness could be caused through fluctuations in the forecasted numbers. This is mitigated by hedging a relatively low proportion of the hedged item. At 30 June 2022, the Group had designated as net investment hedges €42.6 million (2021: €25.7m) of its Euro-denominated borrowings and three-month rolling foreign currency forward contracts with a notional principal amount of €24.9 million (2021: €52.3m). During 2022, a gain of €0.5 million (2021: €3.7m) was recognised in other comprehensive income in relation to the net investment hedges. At 30 June 2022, the fair value of the net investment hedges was a gain of €0.2 million (2021: €0.1m). The currency profile of the Group's net assets (excluding non-controlling interests) before and after hedging currency translation exposures was as follows: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | Net assets before hedging €m | Currency forward contracts €m | Net assets after hedging €m | Net assets before hedging €m | Currency forward contracts €m | Net assets after hedging €m | | Sterling | 13.6 | 29.4 | 43.0 | 9.5 | 52.2 | 61.7 | | Euro | 18.3 | (17.2) | 1.1 | 39.2 | (38.6) | 0.6 | | Polish Zloty | 1.9 | (1.8) | 0.1 | 5.1 | (4.8) | 0.3 | | Danish Krone | 12.8 | (10.4) | 2.4 | 7.5 | (5.8) | 1.7 | | Malaysian Ringgit | 4.9 | — | 4.9 | 3.7 | (3.0) | 0.7 | | Other | 5.5 | — | 5.5 | 4.8 | — | 4.8 | | **Total** | **57.0** | **—** | **57.0** | **69.8** | **—** | **69.8** | The Group's exposure to a +/- 10% change in EUR/GBP exchange rate is as follows: | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | EUR +10% €m | EUR -10% €m | EUR +10% €m | EUR -10% €m | | Impact on equity | (1.3) | 1.4 | (1.3) | 1.5 | The impact on equity shown above predominantly relates to EUR/GBP contracts that qualify for net investment and cash flow hedge accounting. The Group uses a combination of foreign currency options and foreign currency forwards to hedge its exposure to foreign currency risk. Under the Group's policy the critical terms of the forwards and options must align with the hedged items. When forward contracts are used to hedge forecast transactions, the Group generally designates the change in the fair value of the forward contract related to both the spot component and forward element as the hedging instrument. For option contracts the change in the fair value of the option contract related to the intrinsic value is designated as the hedging instrument. The time value of money is treated as a cost of hedging. McBride plc Annual Report and Accounts 2022 187 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 21. Financial risk management continued ### Foreign currency risk continued #### Translation risk continued In relation to the hedging activities as described above, the effects of foreign currency related hedging instruments on the Group's financial position and performance are as follows: | 2022 | Foreign currency forwards | | | --- | --- | --- | | | Transactional | Translational | | Carrying amount (£m) | 0.2 | 0.2 | | Notional amount (£m) | 16.3 | 20.9 | | Maturity date | July 2022-July 2023 | September 2022 | | Hedging ratio | 1:1 | 1:1 | | Change in value of outstanding hedge instruments since 1 July (£m) | — | (0.1) | | Change in value of hedged item used to determine hedge effectiveness (£m) | — | 0.1 | | Weighted average hedged rate for the year | €1.1537:£1 | Various^{(1)} | (1) The weighted average hedged rate for the year by currency denomination, was €1.1537:£1, Zloty 5.443:£1, Krone 8.722:£1, Ringgit 5.5457:£1. | 2021 | Foreign currency forwards | | | --- | --- | --- | | | Transactional | Translational | | Carrying amount (£m) | (0.2) | 0.1 | | Notional amount (£m) | 17.0 | 52.3 | | Maturity date | July 2021-Sept 2022 | September 2021 | | Hedging ratio | 1:1 | 1:1 | | Change in value of outstanding hedge instruments since 1 July (£m) | 0.9 | (3.5) | | Change in value of hedged item used to determine hedge effectiveness (£m) | (0.9) | 3.5 | | Weighted average hedged rate for the year | €1.1510:£1 | Various^{(1)} | (1) The weighted average hedged rate for the year by currency denomination, was €1.1537:£1, Zloty 5.0943:£1, Krone 8.3298:£1, Ringgit 5.4767:£1. ## 22. Capital and net debt The Group's capital comprises total equity and net debt. ### Capital management The Directors manage the Group's capital to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders. The Directors aim to maintain an efficient capital structure with a relatively conservative level of debt-to-equity gearing. This is to ensure continued access to a broad range of financing sources in order to provide sufficient flexibility to pursue commercial opportunities as they arise. In order to achieve this overall objective, the Group's capital management, amongst other things, aims to ensure that it meets financial covenants attached to borrowings. Breaches in meeting the financial covenants would permit the bank to call in loans and borrowings immediately. There have been no breaches in the financial covenants of any borrowings in the current year. The capital structure of the Group consists of debt, which includes borrowings disclosed in note 20, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings. The Group may maintain or adjust its capital structure by adjusting the amount of dividends paid to shareholders, returning capital to shareholders, issuing new shares or selling assets to reduce debt. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the Group, and in order to meet the financial covenants described in note 21. The Board regularly reviews the capital structure. No changes were made in the objectives, policies or processes for managing capital during the years ended 30 June 2022 and 30 June 2021. McBride plc Annual Report and Accounts 2022 188 Financial statements The Group's capital was as follows: | | 2022 £m | 2021 £m | 2020 £m | | --- | --- | --- | --- | | Total equity | 57.0 | 69.8 | 66.9 | | Net debt | 164.4 | 118.4 | 101.5 | | Capital | 221.4 | 188.2 | 168.4 | | | | 2022 % | 2021 % | | Gearing^{(1)} | | 80.3 | 66.4 | (1) Gearing represents net debt divided by the average of current and prior year year-end capital. Movements in net debt were as follows: | | At 1 July 2020 £m | IFRS 16 non-cash movements^{(1)} £m | Cash flows £m | Currency translation differences £m | At 30 June 2022 £m | | --- | --- | --- | --- | --- | --- | | Cash and cash equivalents | 24.9 | — | (20.3) | (0.1) | 4.5 | | Overdrafts | (5.9) | — | (0.7) | (0.2) | (6.8) | | Bank and other loans | (126.1) | — | (24.0) | — | (150.1) | | Lease liabilities | (11.3) | (5.5) | 5.0 | (0.2) | (12.0) | | Net debt | (118.4) | (5.5) | (40.0) | (0.5) | (164.4) | (1) IFRS 16 non-cash movements includes additions (£3.1 million), disposals (£0.4 million) and interest charged (£0.4 million). | | At 1 July 2020 £m | IFRS 16 non-cash movements^{(1)} £m | Cash flows £m | Currency translation differences £m | At 30 June 2021 £m | | --- | --- | --- | --- | --- | --- | | Cash and cash equivalents | 44.2 | — | (18.1) | (1.2) | 24.9 | | Overdrafts | (4.1) | — | (2.8) | 1.0 | (5.9) | | Bank and other loans | (132.9) | — | 1.7 | 5.1 | (126.1) | | Lease liabilities | (8.7) | (7.9) | 4.9 | 0.4 | (11.3) | | Net debt | (101.5) | (7.9) | (14.3) | 5.3 | (118.4) | (1) IFRS 16 non-cash movements includes additions (£7.9 million), disposals (£0.3 million) and interest charged (£0.3 million). A reconciliation of the net cash flow to the movement in net debt is shown as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Decrease in net cash and cash equivalents | (20.3) | (18.1) | | Net repayment of bank loans and overdrafts | (24.7) | (1.1) | | Change in net debt resulting from cash flows | (45.0) | (19.2) | | Currency translation differences | (0.3) | 4.9 | | Movement in net debt in the year | (45.3) | (14.3) | | Net debt at the beginning of the year excluding lease liabilities | (107.1) | (92.8) | | Net debt at the end of the year excluding lease liabilities | (152.4) | (107.1) | | Lease liabilities at 1 July | (11.3) | (8.7) | | Lease liabilities non-cash movements | (5.5) | (7.9) | | Repayment of IFRS 16 lease liabilities | 5.0 | 4.9 | | Currency translation differences | (0.2) | 0.4 | | Net debt at the end of the year | (164.4) | (118.4) | McBride plc Annual Report and Accounts 2022 189 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 23. Pensions and other post-employment benefits ### Overview The Group provides a number of post-employment benefit arrangements. In the UK, the Group operates a closed defined benefit pension scheme and a defined contribution pension scheme. Elsewhere in Europe, the Group has a number of smaller post-employment benefit arrangements that are structured to accord with local conditions and practices in the countries concerned. From 1 July 2021, the Group also recognised the assets and liabilities for all members of the defined contribution scheme in Belgium, accounting for the whole defined contribution section as a defined benefit scheme under IAS 19 'Employee Benefits', as there is a risk the underpin will require the Group to pay further contributions to the scheme. The net impact of this on the balance sheet is £nil. At 30 June 2022, the Group's post-employment benefit obligations outside the UK amounted to £1.7 million (2021: £2.6m). Non-governmental collected post-employment benefits had the following effect on the Group's results and financial position: | | 2022 £m | 2021 £m | | --- | --- | --- | | **Profit or loss** | | | | **Operating profit** | | | | Defined contribution schemes | | | | Contributions payable | (2.4) | (2.3) | | Defined benefit schemes | | | | Service cost and administrative expenses (net of employee contributions) | (1.0) | (0.9) | | **Net charge to operating (loss)/profit** | **(3.4)** | **(3.2)** | | **Finance costs** | | | | Net interest cost on defined benefit obligation | (0.5) | (0.4) | | **Net charge to (loss)/profit before taxation** | **(3.9)** | **(3.6)** | | **Other comprehensive income** | | | | Defined benefit schemes | | | | Net actuarial gain/(loss) | 12.4 | (4.2) | | **Balance sheet** | | | | Defined benefit obligations | | | | UK – funded | (116.6) | (161.9) | | Other – unfunded | (12.0) | (2.6) | | | **(128.6)** | **(164.5)** | | Fair value of scheme assets | | | | UK – funded | 102.2 | 132.6 | | Other – unfunded | 10.3 | — | | **Deficit on the schemes** | **(16.1)** | **(31.9)** | | **Related deferred tax asset** | **3.9** | **7.9** | ### UK defined benefit pension scheme #### (i) Background In the UK, the Robert McBride Pension Fund ('the Fund') provides pension benefits based on the final pensionable salary and period of qualifying service of the participating employees. The UK defined benefit fund was closed to future service accrual from 29 February 2016. Staff affected by this change were offered a new defined contribution scheme from that date. The Fund is administered and managed by Robert McBride Pension Fund Trustees Limited ('the Trustee'), in accordance with the terms of a governing Trust Deed and relevant legislation. Regular assessments of the Fund's benefit obligations are carried out by an independent actuary on behalf of the Trustee and long-term contribution rates are agreed between the Trustee and the Company on the basis of the actuary's recommendations. Following the triennial valuation at 31 March 2021, the Company and Trustee agreed a new deficit reduction plan based on the scheme funding deficit of £48.4 million. The current level of deficit contributions of £4.0 million per annum, payable until 31 March 2028, will continue and this is expected to eliminate the deficit by 31 March 2028. The Company has separately agreed that (from 1 October 2024) if EBITA exceeds £30 million in any year following the year ending 31 March 2023, additional annual deficit contributions of £0.34 million for each £1 million of EBITA above £30 million, up to a maximum of £1.7 million, will become payable (monthly in arrears). Also, the Company has agreed to make additional contributions such that the total deficit contributions in any year match the value of any dividend paid. These arrangements will provide scope to de-risk and/or accelerate the recovery plan, where affordability of the business allows. The funding arrangements and recovery plan will next be reviewed by the Company and Trustee as part of the 31 March 2024 valuation. McBride plc Annual Report and Accounts 2022 190 Financial statements # (ii) Assumptions and sensitivities For accounting purposes, the Fund's benefit obligation has been calculated based on data gathered for the 2021 triennial actuarial valuation and by applying assumptions made by the Company on the advice of an independent actuary in accordance with IAS 19 'Employee benefits', which differ in certain respects from the assumptions made by the Trustee for the purpose of the actuarial valuation. The principal assumptions used in calculating the benefit obligation at the end of the year were as follows: | | 2022 | 2021 | | --- | --- | --- | | Discount rate | 3.70% | 1.85% | | Inflation rate: | | | | Retail Prices Index | 3.10% | 3.20% | | Consumer Prices Index | 2.45% | 2.35% | | Revaluation of deferred pensions (in excess of GMP) | | | | Accrued before 6 April 2009 | 2.45% | 2.35% | | Accrued on or after 6 April 2009 | 2.45% | 2.35% | | Increase in pensions in payment (in excess of GMP) | | | | Accrued before 1 April 2011 | 3.04% | 3.12% | | Accrued on or after 1 April 2011 | 2.18% | 2.20% | The duration of the Fund's liabilities is estimated to be 18 years, i.e. the average time until a payment is made is 18 years. In practice, the Fund's liabilities continue for upwards of 50 years. The mortality assumptions are based on a medically underwritten mortality study which was carried out in 2017 to identify the current health of a sample group of Fund members, and a postcode analysis for the remainder of the membership. This was translated into mortality assumptions for use in calculating the IAS 19 scheme liabilities. Specifically, a rating of 102% (2021: 102%) of the standard Self-Administered Pension Scheme (SAPS) 52 tables has been used for the IAS 19 disclosures as at 30 June 2022. As at 30 June 2022, the future mortality improvement model has been updated to reflect the most recent Continuous Mortality Investigation (CMI) 2021 projections with an allowance for long-term rates of improvement of 1.0% p.a. for males and females. Previously, in 2021, this assumption had been CMI 2020 with a long-term rate of improvement of 1.0% p.a. for males and females. In line with the 2020 CMI model, the 2021 CMI model has a smoothing parameter for which the default value of 7.0 (2021: 7.0) has been adopted. There is also an initial addition parameter for which the default value of 0.25% (2021: 0.25%) has been adopted. These assumptions are equivalent to a life expectancy at 65 of 21.2 years (2021: 21.6 years) for males and 23.4 years (2021: 23.6 years) for females. | Life expectancies at age 65 for: | 2022 Years | 2021 Years | | --- | --- | --- | | Member retiring in the next year: | | | | Male | 21.2 | 21.6 | | Female | 23.4 | 23.6 | | Member retiring 20 years from now: | | | | Male | 22.2 | 22.6 | | Female | 24.6 | 24.8 | At 30 June 2022, the sensitivity of the benefit obligation to changes in the principal assumptions was as follows (assuming in each case that the other assumptions are unchanged): | | Change in assumption | Increase in assumption | Decrease in assumption | | --- | --- | --- | --- | | Discount rate | +/- 0.1% | Decrease by £1.6m | Increase by £1.6m | | Inflation rate^{(1)} | +/- 0.1% | Increase by £1.4m | Decrease by £1.4m | | Life expectancy | +1 year | Increase by £3.4m | — | (1) This includes the impact on deferred and in-payment pension increase assumptions. The assumption sensitivities are reasonable expectations of potential changes in the assumptions. McBride plc Annual Report and Accounts 2022 191 Financial statements ## Notes to the consolidated financial statements continued Year ended 30 June 2022 ### 23. Pensions and other post-employment benefits continued #### UK defined benefit pension scheme continued ##### (ii) Fund's assets The Fund's assets are held separately from those of the Group and are managed by professional investment managers on behalf of the Trustee. The Trustee and the Company review the investment strategy from time to time. The last review was carried out during 2018/19 and as part of the agreement, the Trustee amended the Fund's investment strategy with the aim of de-risking the scheme's assets to align the cash inflows from the Fund's assets with the cash flow requirements of the Fund. This Cash Flow Driven Investment (CDI) strategy was implemented during the first half of the financial year 2021. Through the use of credit/bond investments, the CDI strategy delivers a stable, more certain expected return and will reduce volatility in the reported accounting deficit as assets and liabilities are better matched. The Fund holds no investment in securities issued by, nor any property used by, McBride plc or any of its subsidiaries. The fair value of the Fund's assets at the end of the year was as follows: | | 2022 £m | Asset classification | 2021 £m | Asset classification | | --- | --- | --- | --- | --- | | Private markets | 19.3 | Unquoted | 19.3 | Unquoted | | Liability-driven investment | 19.4 | Quoted | 25.1 | Quoted | | Credit default swaps | 63.4 | Unquoted | 86.5 | Unquoted | | Cash and cash equivalents^{(1)} | 0.1 | Quoted | 1.7 | Quoted | | **Total** | **102.2** | | **132.6** | | (1) Cash equivalents includes the net position of the Credit Default Swap held by the scheme. Except for the liability-driven investment (LDI) assets and the credit default swaps (CDS), all of the Fund's assets are held in pooled funds. The liability-driven investment, cash and credit assets are classified as Level 2 instruments, as they are not quoted on any stock exchange, although their value is directly related to the value of the underlying holdings. The private market credit assets are Level 3 instruments, with no daily quoted price available. The expected return on the Fund's assets must be set to be in line with the discount rate used to value the Fund's liabilities. This equates to an expected return over the year of £2.4 million (2021: £2.1m). The actual return on the Fund's assets during the year was a loss of £26.8 million (2021: gain of £0.2m), which was more adverse than expected, but was more than offset by the reduction in scheme liabilities, driven by increases in corporate bond yields. ##### (iv) Movements in the Fund's assets and liabilities Movements in the fair value of the Fund's assets during the year were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | At 1 July | 132.6 | 135.5 | | Expected return on plan assets | 2.4 | 2.1 | | Loss on assets in excess of interest income on Fund assets | (29.2) | (1.9) | | Employer's contributions | 4.0 | 4.0 | | **Benefits paid** | **(7.6)** | **(7.1)** | | **At 30 June** | **102.2** | **132.6** | Movements in the benefit obligation during the year were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | At 1 July | (161.9) | (163.9) | | Interest cost | (2.9) | (2.5) | | Remeasurement gain/(loss) arising from changes in financial assumptions | 38.2 | (1.2) | | Remeasurement gain/(loss) arising from changes in demographic assumptions | 2.4 | (2.0) | | Experience gains on liabilities | — | 0.6 | | **Benefits paid** | **7.6** | **7.1** | | **At 30 June** | **(116.6)** | **(161.9)** | ##### (v) Experience gains and losses Actuarial gains and losses recognised in other comprehensive income represent the effect of the differences between the assumptions and actual outcomes. At 30 June 2022, the cumulative net actuarial loss in relation to the Fund that has been recognised in other comprehensive income amounted to £33.5 million (2021: £45.0m). McBride plc Annual Report and Accounts 2022 192 Financial statements # **Belgium defined contribution pension scheme** # **(i) Background** From 1 July 2021, the Group recognised the assets and liabilities for all members of the defined contribution scheme in Belgium, accounting for the whole defined contribution section as a defined benefit scheme under IAS 19 'Employee Benefits', as there is a risk the underpin will require the Group to pay further contributions to the scheme. # **(ii) Assumptions and sensitivities** The principal assumptions used in calculating the benefit obligation at the end of the year were as follows: | | 2022 | | --- | --- | | Discount rate | 3.10% | | Inflation rate | 2.00% | | Salary increase rate on top of inflation | 2.00% | | Mortality tables | MR-5/FR-5 | | Retirement age | 65 | | Withdrawal rate | 0.00% | At 30 June 2022, the sensitivity of the benefit obligation to a 0.5% increase and decrease in the discount rate assumptions resulted in no change to the scheme liabilities. # **(iii) Experience gains and losses** Actuarial gains and losses recognised in other comprehensive income represent the effect of the differences between the assumptions and actual outcomes. At 30 June 2022, the cumulative net actuarial loss in relation to the Fund that has been recognised in other comprehensive income amounted to *Enil* (2021: *Enil*). # **24. Employee share schemes** # **Share awards** The Group operates a performance-based Long-Term Incentive Plan (LTIP) for the Executive Directors and certain other senior executives. Awards made under the LTIP vest provided the participant remains in the Group's employment during the three-year vesting period and the Group achieves the related performance conditions. In the current year, 50% of the awards granted vest dependent on the growth in the Group's EPS (a vesting condition) and 50% of the awards granted vest dependent on the growth in the Group's adjusted ROCE (a vesting condition). In previous years, up to 50% of each award vests dependent on the TSR of the Company's ordinary shares compared with the TSR of the FTSE SmallCap Ex Investment Companies Index (a market condition) and up to 50% of each award vests dependent on the growth in the Group's EPS (a vesting condition). During the year Restricted Share Units (RSUs) were granted to Executive Directors and certain other senior executives. Awards made under the RSU vest provided the participant remains in the Group's employment during the three-year vesting period. Vested awards are settled either in the form of the Company's ordinary shares (equity-settled) or by the payment of cash equivalent to the market value of the Company's ordinary shares on the vesting date (cash-settled). From 2017, all awards granted result in equity-settled amounts. Further information on the LTIP and RSU awards is set out in the Remuneration Committee report. Movements in LTIP and RSU awards outstanding were as follows: | | 2022 | | | 2021 | | | | --- | --- | --- | --- | --- | --- | --- | | | LTIP Equity-settled Number | RSU Equity-settled Number | Cash-settled Number | LTIP Equity-settled Number | RSU Equity-settled Number | Cash-settled Number | | Outstanding at 1 July | 6,132,039 | 337,815 | 175,213 | 4,224,700 | — | 175,213 | | Granted | 1,830,414 | 1,138,645 | — | 3,514,428 | 425,783 | — | | Vested | — | — | — | — | (7,872) | — | | Forfeited | (1,314,236) | (211,966) | — | (1,064,215) | (80,096) | — | | Lapsed | (890,907) | — | — | (542,874) | — | — | | Outstanding at 30 June | 5,757,310 | 1,264,494 | 175,213 | 6,132,039 | 337,815 | 175,213 | | Unvested at 30 June | 5,757,310 | 1,264,494 | — | 6,132,039 | 337,815 | — | Awards made under the LTIP and RSU have a *Enil* exercise price. McBride plc Annual Report and Accounts 2022 193 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 24. Employee share schemes continued ### Share awards continued The maximum term of equity-settled awards granted in the year is three years. The weighted average remaining life of equity-settled awards at 30 June 2022 is 1.2 years (2021: 1.6 years). The weighted average remaining life of cash-settled awards at 30 June 2022 is 1.7 years (2021: 2.7 years). During 2022, no cash LTIP awards vested (2021: £nil), no equity-settled LTIP awards vested (2021: £nil) and no RSU awards vested (2021: £nil). The weighted average share price on the vesting date of equity-settled awards in 2021 was 60.0 pence. At 30 June 2022, the liability recognised in relation to cash-settled awards was £0.3 million (2021: £0.3m). At the grant date, the weighted average fair value of LTIP awards granted during the year was 74.2 pence (2021: 78.0p). Fair value was measured using a variant of the Black-Scholes valuation model based on the following assumptions: | | October 2021 issue | September 2021 issue | February 2021 issue | October 2020 issue | September 2020 issue | November 2019 issue | October 2019 issue | | --- | --- | --- | --- | --- | --- | --- | --- | | Risk-free interest rate | n/a | n/a | n/a | n/a | n/a | 0.3% | 0.5% | | Share price on grant date | 71.0p | 80.0p | 84.0p | 84.0p | 84.0p | 56.0p | 69.0p | | Dividend yield on the Company's shares | n/a | n/a | n/a | n/a | n/a | nil | nil | | Volatility of the Company's shares | n/a | n/a | n/a | n/a | n/a | 40.6% | 41.9% | | Expected life of LTIP awards | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | Risk-free rate and volatility have no impact on nil cost awards which are subject to non-market-based performance conditions. For the 2019 awards, expected volatility was determined based on weekly observations of the Company's share price and the FTSE SmallCap Ex Investment Companies Index over the three-year period immediately preceding the grant date. At the grant date, the weighted average fair value of RSU awards granted during the year was 69.3 pence (2021: 59.0p). Fair value was based on the share price at the date of grant with the following assumptions: | | Jun 2022 issue | Feb 2022 issue | Oct 2021 issue | 22 Sep 2021 issue | 13 Sep 2021 issue | Jun 2021 issue | Feb 2021 issue | Oct 2020 issue | Sep 2020 issue | Jun 2020 issue | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Risk-free interest rate | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Share price on grant date | 30.8p | 46.0p | 71.0p | 81.0p | 80.0p | 84.0p | 83.0p | 59.0p | 63.0p | 63.0p | | Dividend yield on the Company's shares | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Volatility of the Company's shares | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a | | Expected life of RSU awards | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | 3 years | Risk-free rate and volatility have no impact on nil cost awards which are subject to non-market-based performance conditions. Compensation expense recognised in profit or loss in relation to employee share schemes was as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Equity-settled awards | — | 0.3 | | Total expense | — | 0.3 | ### Deferred Annual Bonus Plan The Group has in force a Deferred Annual Bonus Plan for the main Executive Directors. There is no exercise price for the shares awarded under the plan, which are subject to a vesting period of three years and will normally vest on the expiry of this period and are normally only payable if the Director remains employed by the Group at the end of that period. Awards granted under the Deferred Annual Bonus Plan are eligible for dividend equivalent payments. The total amount included in operating profit in relation to the Deferred Annual Bonus Plan was £nil (2021: £nil). McBride plc Annual Report and Accounts 2022 194 Financial statements # 25. Provisions | | Reorganisation and restructuring £m | Leasehold disputations £m | Environmental remediation £m | Independent business review £m | Other £m | Total £m | | --- | --- | --- | --- | --- | --- | --- | | At 1 July 2020 | 5.6 | 11 | 2.9 | — | 0.3 | 9.9 | | Charged to profit or loss | 3.3 | 0.4 | — | — | 0.1 | 3.8 | | Currency translation difference | (0.1) | — | (0.1) | — | — | (0.2) | | Utilisation | (6.7) | — | (0.4) | — | — | (71) | | At 30 June 2021 | 2.1 | 1.5 | 2.4 | — | 0.4 | 6.4 | | Charged to profit or loss | 0.4 | — | 0.6 | 1.7 | 0.6 | 3.3 | | Utilisation | (1.7) | — | (0.3) | — | (0.5) | (2.5) | | At 30 June 2022 | 0.8 | 1.5 | 2.7 | 1.7 | 0.5 | 7.2 | Analysis of provisions: | | 2022 £m | 2021 £m | | --- | --- | --- | | Current | 3.4 | 2.7 | | Non-current | 3.8 | 3.7 | | Total | 7.2 | 6.4 | Reorganisation costs in the year of £0.4 million comprises £0.5 million of costs associated with the Group's logistics transformation programme and £0.1 million reversal of costs relating to Programme Compass. The closing provision for reorganisation and restructuring relates to the Group's logistics transformation programme only. The provision is expected to be fully utilised within twelve months of the balance sheet date. Leasehold dilapidations provision relates to costs expected to be incurred to restore leased properties to their original condition at the end of the respective lease terms. A provision has been recognised for the present value of the estimated expenditure required to undertake restoration works. Amounts will be utilised as the respective leases end and restoration works are carried out, within a period of approximately two years. Environmental remediation provision relates to historical environmental contamination at a site in Belgium. The additional costs in the year of £0.6 million result from a revaluation of the cost of environmental remediation. The closing provision is expected to be utilised as the land is restored within a period of approximately eight years. During the year, an independent business review (IBR) was initiated to support discussions with banking partners regarding revisions to financing arrangements and banking covenants. A closing provision of £1.7 million has been recognised in relation to consultancy costs directly associated with the IBR. The provision is expected to be utilised within twelve months of the balance sheet date. Other provisions of £0.5 million relate to costs concerning the sale of the PC Liquids business, property repairs and onerous lease obligations. The liability is expected to be settled within twelve months of the balance sheet date. The amount and timing of all cash flows related to the provisions are reasonably certain. McBride plc Annual Report and Accounts 2022 195 Financial statements # Notes to the consolidated financial statements continued Year ended 30 June 2022 ## 26. Share capital and reserves | | Authorised, allotted and fully paid | | | --- | --- | --- | | | Number | £m | | **Ordinary shares of 10 pence each** | | | | At 1 July 2020 | 182,840,301 | 18.3 | | Shares bought back on-market and cancelled | (8,597,599) | (0.9) | | At 30 June 2021 | 174,242,702 | 17.4 | | Shares bought back on-market and cancelled | (185,374) | — | | **At 30 June 2022** | **174,057,328** | **17.4** | Ordinary shares carry full voting rights and ordinary shareholders are entitled to attend Company meetings and to receive payments to shareholders. McBride plc announced on 2 November 2020 that it would commence a share buy-back programme of up to £12 million in McBride plc ordinary shares, running from 2 November 2020 through to the date of the Company's next AGM. The maximum number of shares that could have been repurchased by the Company under the programme was 18.3 million. The purpose of the share buy-back programme was to reduce the share capital of the Company (cancelling any shares repurchased for this purpose). The Board believed that it was in the interests of all shareholders to commence this programme based on the Board's assessment that McBride plc's share price at the time did not reflect the value of the underlying business, which has resilient revenue, a strong balance sheet and highly visible cash flows. In the year to 30 June 2022, the Group purchased and cancelled 185,374 (2021: 8,597,599) ordinary shares, representing 0.1% (2021: 4.7%) of the issued ordinary share capital as at 2 November 2020. The shares were acquired at an average price of 77.0 pence (2021: 79.3p) per share, with prices ranging from 73.3 pence per share to 78.6 pence per share (2021: 61.0p per share to 90.0p per share). The total cost of £0.1 million (2021: £6.8m) was deducted from equity as the purchase of own shares. A transfer of £nil (2021: £0.9m) was made from share capital to the capital redemption reserve. As previously announced, the Board ended the share buy-back programme during the year. ### Reserves #### (i) Share premium account The share premium account records the difference between the nominal amount of shares issued and the fair value of the consideration received. The share premium account may be used for certain purposes specified by UK law, including to write off expenses incurred on any issue of shares or debentures and to pay up fully paid bonus shares. The share premium account is not distributable but may be reduced by special resolution of the Company's ordinary shareholders and with court approval. #### (ii) Cash flow hedge reserve The cash flow hedge reserve comprises the cumulative net change in the fair value of hedging instruments in designated cash flow hedging relationships recognised in other comprehensive income. #### (iii) Currency translation reserve The currency translation reserve comprises cumulative currency translation differences on the translation of the Group's net investment in foreign operations into Sterling together with the cumulative net change in the fair value of hedging instruments in designated net investment hedging relationships recognised in other comprehensive income. #### (iv) Capital redemption reserve The capital redemption reserve records the cost of shares purchased by the Company for cancellation or redeemed in excess of the proceeds of any fresh issue of shares made specifically to fund the purchase or redemption. The capital redemption reserve is not distributable but may be reduced by special resolution of the Company's ordinary shareholders and with court approval. McBride plc Annual Report and Accounts 2022 196 Financial statements # Own shares | | Treasury shares | | Employee Benefit Trust | | Total | | | --- | --- | --- | --- | --- | --- | --- | | | Number | £m | Number | £m | Number | £m | | At 1 July 2020 | 42,041 | — | 247,746 | 0.2 | 289,787 | 0.2 | | Own shares purchased | — | — | 348,574 | 0.3 | 348,574 | 0.3 | | Shares paid out to employees | — | — | (9,161) | — | (9,161) | — | | At 30 June 2021 | 42,041 | — | 587,159 | 0.5 | 629,200 | 0.5 | | Own shares purchased | — | — | — | — | — | — | | Shares paid out to employees | — | — | — | — | — | — | | **At 30 June 2022** | **42,041** | **—** | **587,159** | **0.5** | **629,200** | **0.5** | The treasury shares and the shares in trust represent the Company's ordinary shares that are acquired to satisfy the Group's expected obligations under employee share schemes. The market value of own shares held at 30 June 2022 was £0.1 million (2021: £0.6m). # **27. Acquisitions and disposals** # **Sale of Barrow site, UK** The Barrow production facilities ceased operations in October 2020. On 1 October 2021, proceeds of £2.6 million were received for the sale of the site. After accounting for costs of disposal of £0.8 million, an exceptional gain of £1.8 million has been recognised in the year. # **Sale of factory in Malaysia** On 15 April 2022, the Group completed the sale of the land and buildings at a former manufacturing site in Malaysia. The land and buildings are part of the Asia Pacific segment. Proceeds of £2.8 million were received in respect of this sale. After accounting for costs of disposal of £1.2 million, an exceptional gain of £1.6 million has been recognised in the year. # **Sale of warehouse in Guesnain, France** On 24 June 2022, the land and buildings at a former warehousing facility in Guesnain, France were sold as part of the Group's logistics transformation programme. The land and buildings are central assets. Proceeds of £0.7 million were received in respect of this sale. After accounting for costs of disposal of £0.4 million, an exceptional gain of £0.3 million has been recognised in the year. # **28. Capital commitments** # **Capital expenditure on property, plant and equipment** | | 2022 £m | 2021 £m | | --- | --- | --- | | Contracted but not provided | 4.0 | 1.8 | McBride plc Annual Report and Accounts 2022 197 Financial instruments ## Notes to the consolidated financial statements continued Year ended 30 June 2022 ### 29. Related party transactions Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and, therefore, are not required to be disclosed in these financial statements. Details of transactions between the Group and other related parties are disclosed below. #### Post-employment benefit plans As shown in note 23, contributions amounting to £6.2 million (2021: £6.3m) were payable by the Group to pension schemes established for the benefit of its employees. At 30 June 2022, £0.5 million (2021: £0.4m) in respect of contributions due was included in other payables. #### Compensation of key management personnel For the purposes of these disclosures, the Group regards its key management personnel as the Directors and certain members of the senior executive team. Compensation payable to key management personnel in respect of their services to the Group was as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Short-term employee benefits | 2.2 | 2.4 | | Post-employment benefits | 0.1 | 0.1 | | Share-based payments | — | 0.2 | | **Total** | **2.3** | **2.7** | ### 30. Events after the reporting date An amended revolving credit facility agreement was agreed with the banking syndicate on 29 September 2022. The new financing arrangements will ensure that the Group has sufficient levels of liquidity headroom and can comply with revised covenant requirements. Key provisions of the revised agreement are detailed in note 21. ### 31. Exchange rates The principal exchange rates used to translate the results, assets and liabilities and cash flows of the Group's foreign operations into Sterling were as follows: | | Average rate | | Closing rate | | | --- | --- | --- | --- | --- | | | 2022 | 2021 | 2022 | 2021 | | Euro | 1.18 | 1.13 | 1.17 | 1.17 | | US Dollar | 1.33 | 1.35 | 1.21 | 1.39 | | Danish Krone | 8.78 | 8.40 | 8.67 | 8.67 | | Polish Zloty | 5.45 | 5.09 | 5.47 | 5.27 | | Czech Koruna | 29.57 | 29.59 | 28.83 | 29.70 | | Hungarian Forint | 433.28 | 403.41 | 462.64 | 409.86 | | Malaysian Ringgit | 5.63 | 5.55 | 5.33 | 5.75 | | Australian Dollar | 1.83 | 1.80 | 1.76 | 1.85 | McBride plc Annual Report and Accounts 2022 198 Financial statements # Company balance sheet At 30 June 2022 | | Note | 2022 £m | 2021 £m | | --- | --- | --- | --- | | Fixed assets | | | | | Investments | 5 | 158.4 | 158.4 | | Current assets | | | | | Trade and other receivables | 6 | 155.8 | 149.8 | | Cash and cash equivalents | | 1.0 | 1.1 | | Creditors: amounts falling due within one year | 7 | (86.1) | (95.8) | | Net current assets | | 70.7 | 55.1 | | Total assets less current liabilities | | 229.1 | 213.5 | | Creditors: amounts falling due after more than one year | 8 | (62.7) | (40.2) | | Provision for liabilities | 10 | (1.7) | — | | Net assets | | 164.7 | 173.3 | | Capital and reserves | | | | | Called-up share capital | 12 | 17.4 | 17.4 | | Share premium account | | 68.6 | 68.6 | | Capital redemption reserve | | 77.2 | 77.1 | | Cash flow hedge reserve | | 1.2 | 0.3 | | Retained earnings brought forward | | 9.9 | 22.4 | | Loss for the financial year | | (8.3) | (4.0) | | Other movements | | (1.3) | (8.5) | | Closing retained earnings | | 0.3 | 9.9 | | Total shareholders' funds | | 164.7 | 173.3 | The financial statements on pages 199 to 208 were approved by the Board of Directors on 29 September 2022 and were signed on its behalf by: Chris Smith Director McBride plc Registered number: 02798634 McBride plc Annual Report and Accounts 2022 199 Financial statements ## Company statement of changes in equity Year ended 30 June 2022 | | Issued share capital £m | Share premium account £m | Capital redemption reserve £m | Cash flow hedge £m | Profit and loss £m | Total shareholders' funds £m | | --- | --- | --- | --- | --- | --- | --- | | At 30 June 2020 | 18.3 | 70.6 | 74.2 | (0.3) | 22.4 | 185.2 | | **Year ended 30 June 2021** | | | | | | | | Loss for the year | — | — | — | — | (4.0) | (4.0) | | **Other comprehensive income** | | | | | | | | Items that may be reclassified to profit or loss: | | | | | | | | Net changes in fair value | — | — | — | 0.4 | — | 0.4 | | Cash flow hedges transferred to profit and loss | — | — | — | 0.2 | — | 0.2 | | **Total other comprehensive income** | — | — | — | 0.6 | — | 0.6 | | **Total comprehensive income/(expense)** | — | — | — | 0.6 | (4.0) | (3.4) | | **Transactions with owners of the Parent** | | | | | | | | Issue of B Shares | — | (2.0) | — | — | — | (2.0) | | Redemption of B Shares | — | — | 2.0 | — | (2.0) | — | | Share-based payments | — | — | — | — | 0.3 | 0.3 | | Purchase of own shares | — | — | — | — | (6.6) | (6.6) | | Shares bought back on-market and cancelled | (0.9) | — | 0.9 | — | — | — | | Taxation relating to the above | — | — | — | — | (0.2) | (0.2) | | At 30 June 2021 | 17.4 | 68.6 | 77.1 | 0.3 | 9.9 | 173.3 | | **Year ended 30 June 2022** | | | | | | | | Loss for the year | — | — | — | — | (8.3) | (8.3) | | **Other comprehensive income** | | | | | | | | Items that may be reclassified to profit or loss: | | | | | | | | Net changes in fair value | — | — | — | 0.8 | — | 0.8 | | Cash flow hedges transferred to profit and loss | — | — | — | 0.1 | — | 0.1 | | **Total other comprehensive income** | — | — | — | 0.9 | — | 0.9 | | **Total comprehensive income/(expense)** | — | — | — | 0.9 | (8.3) | (7.4) | | **Transactions with owners of the Parent** | | | | | | | | Redemption of B Shares | — | — | 0.1 | — | (0.1) | — | | Share-based payments | — | — | — | — | 0.1 | 0.1 | | Purchase of own shares | — | — | — | — | (0.6) | (0.6) | | Taxation relating to the above | — | — | — | — | (0.7) | (0.7) | | At 30 June 2022 | 17.4 | 68.6 | 77.2 | 1.2 | 0.3 | 164.7 | McBride plc Annual Report and Accounts 2022 200 Financial statements # Notes to the Company financial statements ## Year ended 30 June 2022 ### 1. Corporate information McBride plc ('the Company') is the ultimate parent Company of a group of companies that together is Europe's leading provider of private label household products. The Company develops and manufactures products for the majority of retailers and major brand owners throughout the UK, Europe and Asia. The Company is a public company limited by shares, with shares traded on the London Stock Exchange, incorporated and domiciled in the United Kingdom and registered in England and Wales. The address of its registered office is McBride plc, Middleton Way, Middleton, Manchester M24 4DP. ### 2. Accounting policies #### Accounting period The Company's annual financial statements are drawn up to 30 June. These financial statements cover the year ended 30 June 2022 ('2022') with comparative amounts for the year ended 30 June 2021 ('2021'). #### Basis of preparation The Company's financial statements have been prepared on a going concern basis in accordance with the Companies Act 2006 ('the Act') as applicable to companies using FRS 101. For further information on going concern, please see note 2 in the consolidated financial statements on page 150. FRS 101 sets out a reduced disclosure framework for a 'qualifying entity' as defined in the standard which addresses the financial reporting requirements and disclosure exemptions in the individual financial statements of qualifying entities that otherwise apply the recognition, measurement and disclosure requirements of UK adopted international accounting standards. These financial statements of the Company are prepared in accordance with FRS 101, under the historical cost convention, modified in respect of the revaluation to fair value of financial assets and liabilities (derivative financial instruments) at fair value through profit or loss. FRS 101 sets out amendments to IFRS that are necessary to achieve compliance with the Act and related regulations. As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to business combinations, financial instruments, share-based payments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, standards not yet effective, impairment of assets and related party transactions. Where required, equivalent disclosures are given in the consolidated financial statements of McBride plc. The Directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented an income statement or a statement of comprehensive income for the Company alone. A summary of the Company's significant accounting policies is set out below. The accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 June 2021. #### Principal accounting policies ##### Investments in subsidiaries Investments in subsidiaries are held at cost, less provision for impairment. Any potential impairment is determined on a basis of the carrying value of the investment against the higher of net assets or discounted future cash flows. ##### Financial instruments The Company classifies its financial assets in the following categories: - those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss); and - those to be measured at amortised cost. The classification depends on the Company's business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. The Company reclassifies debt instruments when, and only when, its business model for managing those assets changes. At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. McBride plc Annual Report and Accounts 2022 201 Financial statements ## Notes to the Company financial statements continued ## Year ended 30 June 2022 2. Accounting policies continued (iii) Trade payables Principal accounting policies continued Trade payables are initially recognised at fair value and Financial instruments continued subsequently held at amortised cost. Subsequent measurement of debt instruments depends on (iv) Bank and other loans the Company’s business model for managing the asset and Bank and other loans are initially recognised at fair value, the cash flow characteristics of the asset. There are three net of directly attributable transaction costs, if any, and measurement categories into which the Company classifies are subsequently measured at amortised cost using the its debt instruments: eective interest rate method. • amortised cost: Assets that are held for collection (v) Derivative financial instruments of contractual cash flows where those cash flows The Company uses derivative financial instruments to represent solely payments of principal and interest hedge its exposure to foreign exchange and interest are measured at amortised cost. Interest income from rate risks arising from operating, financing and investing these financial assets is included in finance income activities. The Company does not hold or issue derivative using the eective interest rate method. Any gain or financial instruments for trading purpose; however, if loss arising on derecognition is recognised directly in derivatives do not qualify for hedge accounting they are profit or loss and presented in other gains/(losses) accounted for as such. together with foreign exchange gains and losses. Derivative financial instruments are recognised and stated Impairment losses are presented as a separate line at fair value. Where derivatives do not qualify for hedge item in the statement of profit or loss. The Company accounting, any gains or losses on remeasurement are assesses on a forward-looking basis the expected credit immediately recognised in the Company income statement. losses associated with its debt instruments carried at Where derivatives qualify for hedge accounting, recognition amortisedcost. The impairment methodology applied of any resultant gain or loss depends on the nature of the depends on whether there has been a significant hedge relationship and the items being hedged. In order increase in credit risk; to qualify for hedge accounting, the Company is required • fair value through other comprehensive income to document from inception, the relationship between the (FVOCI): Assets that are held for collection of item being hedged and the hedging instrument. contractual cash flows and for selling the financial The Company is also required to document and assets, where the assets’ cash flows represent solely demonstrate an assessment of the relationship between the payments of principal and interest, are measured at hedged item and the hedging instrument, which shows that FVOCI. Movements in the carrying amount are taken the hedge will be highly eective on an ongoing basis. This through OCI, except for the recognition of impairment eectiveness testing is performed at each reporting date to gains or losses, interest income and foreign exchange ensure that the hedge remains highly eective. gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative Derivative financial instruments with maturity dates of more gain or loss previously recognised in OCI is reclassified than one year from the balance sheet date are disclosed as from equity to profit or loss and recognised in other non-current. gains/(losses). Interest income from these financial The Company has entered into a number of financial assets is included in finance income using the eective derivative contracts and each is discussed in turn. interest rate method. Foreign exchange gains and losses The Company enters into forward foreign exchange are presented in other gains/(losses) and impairment contracts to mitigate the exchange risk for certain foreign expenses are presented as a separate line item in the currency receivables. statement of profit or loss; and At 30 June 2022, the outstanding contracts all mature • fair value through profit or loss (FVPL): Assets that do within twelve months (2021: twelve months) of the year not meet the criteria for amortised cost or FVOCI are end. The Company is committed to sell PLN and EUR and measured at FVPL. A gain or loss on a debt investment receive a fixed Sterling amount. that is subsequently measured at FVPL is recognised The Company also enters into interest rate swap contracts in profit or loss and presented net within other to mitigate against the floating interest rates on revolving gains/(losses) in the period in which it arises. credit facility debt. At 30 June 2022, there are six (i) Trade and other receivables outstanding contracts: three mature within twelve months Trade and other receivables are recognised initially at fair of the year end with the remaining three maturing more value and subsequently measured at amortised cost using than twelve months after the year end. the eective interest method, less provision for impairment. All contracts are measured at fair value, which is Under the Company’s business model, trade receivables are determined using valuation techniques that utilise held for collection of contractual cash flows and represent observable inputs. The key assumptions used in valuing solely payments of principal and interest. derivatives are the exchange rates for GBP:EUR and (ii) Cash and cash equivalents GBP:PLN as well as EUR and DKK interest rates. Cash and cash equivalents comprise cash in hand, deposits available on demand and other short-term, highly liquid investments with a maturity on acquisition of three months or less and bank overdrafts. Bank overdrafts are presented as current liabilities to the extent that there is no right of oset or intention to oset with cash balances. McBride plc Annual Report and Accounts 2022 202 Financial statements Foreign currency translation Guarantees Transactions denominated in foreign currencies are From time to time, the Company provides guarantees translated into Sterling at the exchange rate ruling on the to third parties in respect of the indebtedness of its date of the transaction. Monetary assets and liabilities subsidiaries. The Directors consider these guarantees to denominated in foreign currencies are retranslated at the be insurance arrangements and, therefore, the Company exchange rate ruling on the balance sheet date. Currency recognises a liability in respect of such guarantees only in translation dierences are recognised in the income the event that it becomes probable that the guarantee will statement. be called upon and the Company will be required to make a payment to the third party. Share-based payments The Company operates incentive share schemes under Payments to shareholders which it grants equity-settled and cash-settled awards Dividends paid and received are included in the Company over its own ordinary shares to certain employees of its financial statements in the period in which the related subsidiaries. The Company recognises a capital contribution dividends are actually paid or received or, in respect of to the subsidiaries concerned that is based on the fair value the Company’s final dividend for the year, approved by of the awards measured using the Black-Scholes option shareholders. pricing formula or the Monte Carlo valuation model. It is the Board’s intention that any future dividends For equity-settled awards, the fair value reflects market will be final dividends paid annually in cash, not by the performance conditions and all non-vesting conditions. allotment and issue of B Shares. Consequently, the Board Fair value is determined at the grant date and is not is not seeking shareholder approval at the 2022 AGM to subsequently remeasured unless the relevant conditions capitalise reserves for the purposes of issuing B Shares or are modified. Adjustments are made to the compensation to grant Directors authority to allot such shares. Existing expense to reflect actual and expected forfeitures due B Shares will continue to be redeemable but limited to to failure to satisfy service conditions or non-market one redemption date per annum in November of each performance conditions. For cash-settled awards, the year. BShares issued but not redeemed are classified fair value reflects all the conditions on which the award ascurrentliabilities. is made and is remeasured at each reporting date and at Own shares thesettlement date. Own shares represent the Company’s ordinary shares that Generally, the capital contribution is recognised on are held by the Company in treasury or by a sponsored a straight-line basis over the vesting period. For ESOP trust to employee share schemes. When own equity-settled awards, a corresponding credit is recognised shares are acquired, the cost of purchase in the market is directly in reserves, while for cash-settled awards a deducted from the profit and loss account reserve. Gains corresponding liability to settle is recognised in the and losses on the subsequent transfer or sale of own shares balancesheet. are recognised directly in the profit and loss account. Taxation Cash flow statement Current tax is the amount of tax payable in respect of the A cash flow statement is not presented in these financial taxable profit or loss for the period. Taxable profit diers statements on the grounds that the Company’s cash flows from accounting profit because it excludes income or are included in the consolidated financial statements of the expenses that are recognised in the period for accounting Company and its subsidiaries. purposes but are either not taxable or not deductible for Critical judgements and key sources of tax purposes or are taxable or not deductible in earlier or estimationuncertainty subsequent periods. In applying the Company’s accounting policies as described Deferred tax is recognised on temporary dierences in this note, the Directors are required to make judgements, between the recognition of items of income or expenses for and estimates and assumptions, that aect the reported accounting purposes and their recognition for tax purposes. amounts of its assets, liabilities, income and expenses A deferred tax asset in respect of a deductible temporary that are not readily identifiable from other sources. dierence or a carried-forward tax loss is recognised only Theestimates and associated assumptions are based on to the extent that it is considered more likely than not that historical experience and other factors that are considered sucient taxable profits will be available against which to be relevant. Actual outcomes could dier from those the reversing temporary dierence or the tax loss can estimates and aect the Company’s results in future years. be deducted. Deferred tax assets and liabilities are not The estimates and underlying assumptions are reviewed discounted. on an ongoing basis. Revisions to accounting estimates are Current and deferred tax is measured using tax rates that recognised in the period in which the estimate is revised have been enacted or substantively enacted at the balance if the revision aects only that period, or in the period of sheet date. the revision and future periods if the revision aects both current and future periods. The Directors consider that no critical judgements are made in preparing these financial statements. The Directors consider the following to be the key sources of estimation uncertainty present in preparing these financial statements. McBride plc Annual Report and Accounts 2022 203 Financial statements ## Notes to the Company financial statements continued Year ended 30 June 2022 ### 2. Accounting policies continued #### Critical judgements and key sources of estimation uncertainty continued ##### Impairment of investments and amounts owed by subsidiary undertakings The Directors have performed an impairment assessment of investments under IAS 36. In light of the forecast profitability of subsidiary undertakings, and their ability to distribute dividends to McBride plc, the Directors have judged that no impairment is required (2021: Enil). An impairment assessment of amounts owed by subsidiary undertakings as at 30 June 2022 was undertaken using the IFRS 9 simplified approach to measuring the expected credit loss. The Directors have judged that no impairment is required (2021: Enil). ### 3. Profit for the financial year As permitted by section 408(3) of the Act, the Company's income statement or a statement of comprehensive income are not presented in these financial statements. The auditor's remuneration for audit and other services is disclosed in note 6 of the Group's consolidated financial statements. The Company's loss for the financial year was £8.3 million (2021: loss of £4.0m). ### 4. Employee information The monthly average number of full-time equivalent persons employed by the Company during the year was as follows: | | 2022 Number | 2021 Number (restated) | | --- | --- | --- | | Directors | 2 | 2 | | Non-Executive Directors | 1 | 5 | | Finance | — | 4 | | Administration | — | 1 | | **Total** | **3** | **12** | Aggregate payroll costs were as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Wages and salaries | 0.9 | 2.5 | | Social security costs | 0.1 | 0.2 | | Other pension costs | 0.1 | 0.1 | | **Total** | **1.1** | **2.8** | (1) Prior year restatement reflects full-time equivalent. Executive Directors' emoluments, which are included in the above, are detailed further in the Directors' Remuneration report on pages 105 to 131. ### 5. Investments | | 2022 £m | 2021 £m | | --- | --- | --- | | Carrying amount | | | | At 1 July | 158.4 | 158.2 | | Additions | — | 0.2 | | **At 30 June** | **158.4** | **158.4** | Additions to investments represent the value of share options issued to employees employed by subsidiary undertakings of McBride plc, in the current year, Enil (2021: £0.2m) has been recognised in respect of such share options. The Directors have reviewed the recoverability of the carrying amount of the Company's investments and have concluded that there is no impairment in their value. A full list of the Company's subsidiaries at 30 June 2022 is set out on pages 207 and 208. Details of the share-based payments provided by the Company to employees of its subsidiaries are presented in note 24 to the consolidated financial statements. McBride plc Annual Report and Accounts 2022 204 Financial statements # 6. Trade and other receivables | | 2022 £m | 2021 £m | | --- | --- | --- | | Amounts falling due within one year | | | | Amounts owed by subsidiary undertakings | 154.4 | 148.6 | | Derivative financial instruments | 0.9 | 0.1 | | Deferred tax asset (note 11) | — | 0.4 | | Prepayments and accrued income | 0.5 | 0.7 | | | 155.8 | 149.8 | Amounts are unsecured and repayable on demand. Amounts owed by subsidiary undertakings include a loan receivable of £98.8 million (2021: £105.2m) which is non-interest bearing with no fixed repayment date, and a group relief receivable of £11.5 million (2021: £11.5m). All remaining amounts owed by subsidiary undertakings are interest bearing, based on external borrowing interest rates. # 7. Creditors: amounts falling due within one year | | 2022 £m | 2021 £m | | --- | --- | --- | | Amounts owed to subsidiary undertakings | 74.6 | 87.9 | | B Shares (note 9) | 0.7 | 0.7 | | Accruals and deferred income | 0.7 | 1.3 | | Bank overdrafts | 10.1 | 5.9 | | Total | 86.1 | 95.8 | Amounts are unsecured and repayable on demand. Amounts owed to subsidiary undertakings include loans payable of £37.0 million (2021: £37.0m) which are non-interest bearing with no fixed repayment date. All remaining amounts owed to subsidiary undertakings are interest bearing, based on external borrowing interest rates. # 8. Creditors: amounts falling due after more than one year | | 2022 £m | 2021 £m | | --- | --- | --- | | Bank and other loans | 62.5 | 40.1 | | Derivative financial instruments | — | 0.1 | | Deferred tax liability | 0.2 | — | | Total | 62.7 | 40.2 | Bank and other loans represent amounts drawn down under a €175 million revolving credit facility which is committed until May 2026. # 9. Payments to shareholders Dividends paid and received are included in the Company financial statements in the period in which the related dividends are actually paid or received or, in respect of the Company's final dividend for the year, approved by shareholders. It is the Board's intention that any future dividends will be final dividends paid annually in cash, not by the allotment and issue of B Shares. Consequently, the Board is not seeking shareholder approval at the 2022 AGM to capitalise reserves for the purposes of issuing B Shares or to grant Directors authority to allot such shares. Existing B Shares will continue to be redeemable but limited to one redemption date per annum in November of each year. B Shares issued but not redeemed are classified as current liabilities. No payments to ordinary shareholders were made or proposed in respect of this year or the prior year. As set out in the Half-Year Report, the Group is targeting an accounting basis of net debt/adjusted EBITDA of 2.0x or less. As the ratio as at 31 December 2021 was over 2.0x, an interim payment to shareholders was not made. At 30 June 2022, the ratio was also over 2.0x and in line with its revised Distribution Policy set out on pages 105 to 131, the Board is not recommending a final dividend in 2022. McBride plc Annual Report and Accounts 2022 205 Financial statements # Notes to the Company financial statements continued Year ended 30 June 2022 ## 9. Payments to shareholders continued Movements in the number of B Shares outstanding were as follows: | | 2022 | | 2021 | | | --- | --- | --- | --- | --- | | | Number 000 | Nominal value €'000 | Number 000 | Nominal value €'000 | | Issued and fully paid | | | | | | At 1 July | 747,399 | 747 | 713,130 | 713 | | Issued | — | — | 2,010,780 | 2,011 | | Redeemed | (81,511) | (81) | (1,976,511) | (1,977) | | At 30 June | 665,888 | 666 | 747,399 | 747 | B Shares carry no rights to attend, speak or vote at Company meetings, except on a resolution relating to the winding up of the Company. ## 10. Provisions for liabilities | | €m | | --- | --- | | At 1 July 2021 | — | | Charge for the year | 1.7 | | At 30 June 2022 | 1.7 | Provision for consultancy support for the independent business review programme, expected to be utilised within twelve months. ## 11. Deferred tax The elements and movements of deferred tax are as follows: | | Share based payments €m | Other short-term differences €m | Total €m | | --- | --- | --- | --- | | At 1 July 2020 | 0.2 | 0.2 | 0.4 | | Credit to income statement | 0.2 | — | 0.2 | | Charge to other comprehensive income | — | (0.1) | (0.1) | | Charge to equity | (0.1) | — | (0.1) | | At 30 June 2021 | 0.3 | 0.1 | 0.4 | | Credit to income statement | 0.1 | — | 0.1 | | Charge to other comprehensive income | — | (0.4) | (0.4) | | Charge to equity | (0.3) | — | (0.3) | | At 30 June 2022 | 0.1 | (0.3) | (0.2) | Deferred tax assets are recognised to the extent that recovery is probable against the future reversal of taxable temporary differences and projected taxable income. Based on the latest profit projections, management considers the deferred tax assets to be recoverable. ## 12. Called-up share capital | | Allotted and fully paid | | | --- | --- | --- | | | Number | €m | | Ordinary shares of 10 pence each | | | | At 30 June 2021 | 174,242,702 | 17.4 | | Shares bought back on-market and cancelled | (185,374) | — | | At 30 June 2022 | 174,057,328 | 17.4 | Ordinary shares carry full voting rights and ordinary shareholders are entitled to attend Company meetings and to receive payments to shareholders. McBride plc announced on 2 November 2020 that it would commence a share buy-back programme of up to £12 million in McBride plc ordinary shares, running from 2 November 2020 through to the date of the Company's next AGM. The maximum number of shares that could have been repurchased by the Company under the programme was 18.3 million. The purpose of the share buy-back programme was to reduce the share capital of the Company (cancelling any shares repurchased for this purpose). The Board believed that it was in the interests of all shareholders to commence this programme based on the Board's assessment that McBride plc's share price at that time did not reflect the value of the underlying business, which has resilient revenue, a strong balance sheet and highly visible cash flows. McBride plc Annual Report and Accounts 2022 206 Financial statements In the year to 30 June 2022, the Group purchased and cancelled 185,375 (2021: 8,597,599) ordinary shares, representing 0.1% (2021: 4.7%) of the issued ordinary share capital as at 2 November 2020. The shares were acquired at an average price of 77.0 pence (2021: 79.3p) per share, with prices ranging from 73.3 pence per share to 78.6 pence per share (2021: 61.0p per share to 80.0p per share). The total cost of £0.1 million (2021: £6.8m) was deducted from equity as the purchase of own shares. A transfer of £nil (2021: £0.9m) was made from share capital to the capital redemption reserve. As previously announced the Board ended the share buy-back programme during the year. At 30 June 2022, awards were outstanding over 7,021,804 ordinary shares (2021: 6,469,854 ordinary shares) in relation to the equity-settled employee share schemes that are operated by the Company. Further information on the employee share schemes is presented in note 24 to the consolidated financial statements. ### 13. Guarantees The Company has guaranteed the indebtedness of certain of its subsidiaries up to an aggregate amount of £4.8 million (2021: £4.9m). ### 14. Related party transactions Other than payments made to Directors, which are set out in the Remuneration Committee report on pages 105 to 131 and note 5 of the consolidated financial statements, there are no other related party transactions to disclose. The Company has taken the exemption available under FRS 101 not to disclose transactions with wholly owned subsidiary companies. ### 15. Subsidiaries Details of the Company's subsidiaries at 30 June 2022 are as follows. In each case, the Company's equity interest is in the form of ordinary shares which, unless stated otherwise, are indirectly owned. The business activity of each of the Company's trading subsidiaries is the manufacture, distribution and sale of household and personal care products. | Subsidiaries | Equity interest and operation | Country of incorporation | | --- | --- | --- | | **Trading subsidiaries** | | | | McBride Australia Pty Ltd^{(1)} | 100% | Australia | | McBride S.A.^{(2)} | 100% | Belgium | | McBride Denmark A/S^{(3)} | 100% | Denmark | | Robert McBride Ltd^{(4)} | 100% | England | | McBride S.A.S.^{(5)} | 100% | France | | Problanc S.A.S.^{(6)} | 100% | France | | Vitherm France S.A.S.^{(7)} | 100% | France | | Chemolux Germany GmbH^{(8)} | 100% | Germany | | McBride Hong Kong Limited^{(9)} | 100% | Hong Kong | | McBride S.p.A.^{(10)} | 100% | Italy | | Chemolux S.a.r.l.^{(11)} | 100% | Luxembourg | | McBride Malaysia Sdn. Bhd.^{(12)} | 100% | Malaysia | | Fortune Organics (F.E.) Sdn. Bhd.^{(13)} | 100% | Malaysia | | Intersilesia McBride Polska Sp. z o.o.^{(14)} | 100% | Poland | | McBride S.A.U.^{(15)} | 100% | Spain | | Newlane Cosmetics Company Limited^{(16)} | 100% | Vietnam | | McBride B.V.^{(17)} | 100% | Netherlands | | **Holding companies** | | | | McBride Holdings Limited^{(18)} | 100% | England | | McBride Asia Holdings Limited^{(19)} | 100% | Hong Kong | | McBride Hong Kong Holdings Limited^{(20)} | 100% | Hong Kong | | Fortlab Holdings Sdn. Bhd.^{(21)} | 100% | Malaysia | | CNL Holdings Sdn. Bhd.^{(22)} | 100% | Malaysia | McBride plc Annual Report and Accounts 2022 207 Financial statements # Notes to the Company financial statements continued # Year ended 30 June 2022 15. Subsidiaries continued | Subsidiaries | Equity interest and operation | Country of incorporation | | --- | --- | --- | | Dormant(1) | | | | Breckland Mouldings Limited(2) | 100% | England | | Camille Simon Holdings Limited(3) | 100% | England | | Camille Simon Limited(4) | 100% | England | | Culmstock Limited(5) | 100% | England | | Darcy Bolton Limited(6) | 100% | England | | Darcy Bolton Property Limited(7) | 100% | England | | Darcy Limited(8) | 100% | England | | Detergent Information Limited(9) | 100% | England | | G.Garnett & Sons Limited(10) | 100% | England | | G.Garnett Estates Limited(11) | 100% | England | | Globol Properties (UK) Limited(12) | 100% | England | | H.H. Limited(13) | 100% | England | | HomePride Limited(14) | 100% | England | | Hugo Personal Care Limited(15) | 100% | England | | International Consumer Products Limited(16) | 100% | England | | Longithorne Laboratories Limited(17) | 100% | England | | McBride Aircare Limited(18) | 100% | England | | McBride UK Limited(19) | 100% | England | | McBrides Limited(20) | 100% | England | | Milstock Limited(21) | 100% | England | | RMG (Drayliden) Limited(22) | 100% | England | | Robert McBride (Aerosols) Limited(23) | 100% | England | | Robert McBride (Bradford) Limited(24) | 100% | England | | Robert McBride (Properties) Limited(25) | 100% | England | | Robert McBride Household Limited(26) | 100% | England | | Savident Limited(27) | 100% | England | | Other | | | | Robert McBride Pension Fund Trustees Limited(28) | 100% | England | (1) McBride plc directly owns 100% of McBride Holdings Limited. (2) Dormant companies listed here are exempt from filing with the registrar individual accounts by virtue of v449A of the Companies Act 2006. # Registered offices: (a) Level 4, 147 Collins Street, Melbourne, Victoria 3000, Australia (b) 6 Rue Moulin Haeuss, 7730 Gibampuis, Belgium (c) Laeglindvej 90-94, 7500 Holstebro, Denmark (d) Middleton Way, Middleton, Manchester M24 4DR, UK (e) 20 rue Gustave Flaubert 14590 Moyeux, France (f) ZAC of Saint René 45 boulevard Ambrose Croizat F-93087 Duxenem, France (g) Rue des Casernes, 93400 Etain, France (h) Henrichstrasse 75, 40259 Düsseldorf, Germany (i) Unit 2001-02, 20th Floor, Prosperity Place, 6 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (j) Corso Garibaldi 49, 20121 Milan, Italy (k) Rue de l'Industrie, Poelz, Luxembourg 3895 (l) Unit 30-01, Level 30, Tower A, Vertical Business Suite, Avenue 2, Banguer South, No. 8, Jalan KerincN, 93200 Kuala Lumpur, Malaysia (m) St. Matejki 2a, 47100 Brzezice Opolskie, Poland (n) Polygon Industrial Hte. C/ Ramon Esteve 30-22, 58650 Salient, Barcelona, Spain (o) 22 VSIF II, Street 1 Vietnam Singapore, Industrial Park 1, Hoa Phu Ward, Thu Dau Mot City, Binh Duong Province, Vietnam (p) From Bernhardplein 200, 1097 JB Amsterdam, Netherlands McBride plc Annual Report and Accounts 2022 208 Additional information # Group five-year summary | | Year ended 30 June | | | | | | --- | --- | --- | --- | --- | --- | | | 2022 £m | 2021 £m | 2020 £m | 2019 £m | 2018 £m | | Total revenue | 678.3 | 682.3 | 706.2 | 743.2 | 755.0 | | Continuing revenue | 678.3 | 682.3 | 706.2 | 721.3 | 689.8 | | Adjusted operating (loss)/profit from continuing operations | (24.5) | 24.1 | 28.3 | 28.1 | 36.2 | | Amortisation of intangible assets | (2.6) | (2.4) | (2.1) | (1.9) | (1.4) | | Exceptional items | — | (6.9) | (11.1) | (5.4) | (21.7) | | Operating (loss)/profit | (27.1) | 14.8 | 15.1 | 20.9 | 13.1 | | Net finance costs | (8.6) | (4.2) | (4.2) | (4.6) | (5.3) | | (Loss)/profit before tax | (35.7) | 10.6 | 10.9 | 16.2 | 7.8 | | Taxation | 11.4 | 2.8 | (4.4) | (8.1) | (4.4) | | (Loss)/profit after tax | (24.3) | 13.4 | 6.5 | 8.1 | 3.4 | | (Loss)/earnings per share | | | | | | | Diluted | (14.0p) | 7.5p | 3.6p | 4.4p | 1.9p | | Adjusted diluted | (11.7p) | 11.7p | 9.5p | 9.4p | 12.1p | | Payments to shareholders (per ordinary share) | — | — | 1.1p | 3.3p | 4.3p | | | At 30 June | | | | | | | 2022 £m | 2021 £m | 2020 £m | 2019 £m | 2018 £m | | Non-current assets | | | | | | | Property, plant and equipment | 122.9 | 129.8 | 134.7 | 136.0 | 135.6 | | Goodwill and other intangible assets | 27.0 | 27.9 | 28.4 | 29.5 | 29.9 | | Other assets | 42.9 | 32.9 | 21.1 | 11.6 | 13.6 | | | 192.8 | 190.6 | 184.2 | 177.1 | 179.1 | | Current assets | 273.3 | 241.2 | 287.6 | 258.0 | 269.0 | | Current liabilities | (280.0) | (233.5) | (253.9) | (237.2) | (256.4) | | Non-current liabilities | (129.1) | (128.5) | (151.0) | (133.7) | (124.1) | | Net assets | 57.0 | 69.8 | 66.9 | 64.2 | 67.6 | | Net debt (1) | 164.4 | 118.4 | 101.5 | 120.9 | 114.3 | (1) Following the adoption of IFRS 16, 'Leases' as at 1 July 2019, leases are recognised as a right-of-use asset and a corresponding lease liability. The Group adopted this new standard with the modified retrospective approach. Comparative information has not been restated and is presented, as previously reported, under IAS 17 and therefore may not be directly comparable. McBride plc Annual Report and Accounts 2022 209 Additional information # Useful information for shareholders Financial calendar Next key dates for shareholders in 2022 and 2023: | Record date for dividend payable on B Shares previously issued and not redeemed | 21 October 2022 | | --- | --- | | Latest date for receipt by registrar of completed election forms and submitting CREST elections | 11 November 2022 (by lpm) | | Annual General Meeting | 16 November 2022 | | Despatch of cheques in respect of B Shares which have been redeemed | 25 November 2022 | | Payment into bank accounts in respect of B Shares which have been redeemed by certificated shareholders who have valid mandate instructions in place | 25 November 2022 | | Payments on redeemed B Shares issued in CREST | 25 November 2022 | | Dividend payments on B Shares issued and not previously redeemed | 25 November 2022 | | 2022/23 Half year end | 31 December 2022 | | 2022/23 Half-year trading statement | January 2023 | | Interim results announced | February 2023 | | 2022/23 Year end | 30 June 2023 | | 2022/23 Year end trading statement | July 2023 | | Full-year preliminary statement | September 2023 | | These dates are provisional and may be subject to change. | | Payments to shareholders At the Company's 2011 General Meeting, shareholders approved the issue of non-cumulative redeemable preference shares with a nominal value of 0.1 pence each ('the B Shares') as a method of making payments to shareholders. At the Company's 2021 Annual General Meeting, the Company did not put forward a resolution to approve the issue of non-cumulative redeemable preference shares. It is the Board's intention that any future dividends will be final dividends paid annually in cash; not by the allotment and issue of B Shares. In accordance with the terms of the scheme, any B Shares may be redeemed immediately for cash and such a redemption would result in a payment to the redeeming shareholder. Shareholders are able to redeem any number of their B Shares for cash. B Shares that are retained currently attract a dividend which is currently 75.0% of Bank of England Base Rate on the 0.1 pence nominal value of each share, paid on a twice-yearly basis. As announced in the 2021 Annual Report, B Share redemptions will only take place in November of each year going forward. Details of the scheme can be found in the booklet entitled 'Your Guide to B Shares' and on the Company's website at www.mcbride.co.uk Shareholders who have valid mandate instructions in place may choose to have payments made directly into their bank or building society account. Confirmation of payment is contained in a payment advice which is posted to shareholders' registered addresses at the time of payment. This payment advice should be kept safely for future reference. Shareholders who wish to benefit from this service should complete the relevant section of the election form accompanying the Notice of Annual General Meeting. Alternatively, the required documentation can be obtained by contacting the Company's registrar using one of the methods outlined below. Shareholder queries Our share register is managed by Link Group (formerly Capita Asset Services), who can be contacted by telephone 0371 644 0300 or on +44 371 644 0300 if calling from overseas. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 and 17:30. Monday to Friday (excluding public holidays in England and Wales). by email shareholdersinquiries@linkgroup.co.uk by post Link Group, Central Square, 10th Floor, 29 Wellington Street, Leeds LS1 4DL When writing, please indicate that you are a McBride plc shareholder. Shareholders are also able to access and amend details of their shareholding (such as address and distribution payment instructions), via the registrar's website at www.signalshares.com. If you have not previously registered to use this facility you will need your investor code, which can be found on your proxy card, or on any share certificate issued by Link Asset Services. ShareGift McBride plc supports ShareGift, the share donation charity (registered charity no. 1052686). ShareGift was set up so that shareholders who have only a very small number of shares which might be considered uneconomic to sell are able to dispose of them by donating them for the benefit of UK charities. Donating shares to charity gives rise neither to a gain nor a loss for UK capital gains purposes and UK taxpayers may also be able to claim income tax relief on the value of the donation. Even if the share certificate has been lost or destroyed, the gift can be completed. Further information about donating shares to ShareGift is available either from its website at www.sharegift.org or by contacting them on +44 (0)20 7930 3737. McBride plc Annual Report and Accounts 2022 210 Additional information Share price history Online shareholder services The following table sets out, for the five financial years to McBride plc provides a number of services online 30 June 2022, the reported high, low, average and financial intheinvestor relations section of its website at year end (30 June or immediately preceding business day) www.mcbride.co.uk, including: closing middle market quotations of McBride plc’s ordinary • view and/or download annual and interim reports; shares on the London Stock Exchange. • check current or historic share prices (there is an historic Share price (pence) share price download facility); Financial • check the amounts and dates of historic payments to High Low Average year end shareholders; 2018 232 121 177 132 • use interactive tools to calculate the value of | 2019 158 77 119 81 | | shareholdings and chart McBride plc ordinary share price | | --- | --- | --- | | 2020 89 49 66 62 | | changes against indices; and | | 2021 94 58 74 91 | • register to receive email alerts regarding press releases, | | including regulatory news announcements, Annual 2022 89 16 58 16 Reports and Company presentations. Shareholder security Cautionary statement The Company is required by law to make its share register This Annual Report has been prepared for the publicly available. As a consequence, shareholders may shareholdersof McBride plc, as a body, and no other receive unsolicited mail from organisations that use it as persons. Its purpose is to assist shareholders of the a mailing list. Shareholders wishing to limit the amount Company to assess the strategies adopted by the Group, of such mail should either write to Mailing Preference the potential for those strategies to succeed and for no Service, DMA House, 70 Margaret Street, London W1W other purpose. TheCompany, its Directors, employees, 8SS, register online at www.mpsonline.org.uk or call the agents or advisers do not accept or assume responsibility MailingPreference Service (MPS) on 020 7291 3310. MPS is to any other person to whom this document is shown or an independent organisation which oers a free service to into whose hands it may come and any such responsibility the public. or liability is expressly disclaimed. Each year in the UK shareholders lose money due to This Annual Report contains certain forward-looking investment fraud. Investment scams are becoming ever statements that are subject to risk factors associated more sophisticated – designed to look like genuine with, amongst other things, the economic and business investments, they are increasingly dicult to spot. circumstances occurring from time to time in the countries, REMEMBER, if it sounds too good to be true, it probably is! sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements If you suspect you have been approached by fraudsters are reasonable but they may be aected by a wide range please tell the Financial Conduct Authority using the share of variables which could cause actual results to dier fraud reporting form at www.fca.org.uk/scams, where you materially from those currently anticipated. can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you No assurances can be given that the forward-looking have lost money to investment fraud, you should report it statements in this Strategic report will be realised. toAction Fraud on 0300 123 2040 or online at Theforward-looking statements reflect the knowledge www.actionfraud.police.uk. Find out more at and information available at the date of preparation of the www.fca.org.uk/scamsmart Strategic report and the Company undertakes no obligation to update these forward-looking statements. Nothing in this Report shall constitute a profit forecast. Electronic communications Shareholders are able to register to receive communications Both the Strategic report and the Directors’ report have from McBride plc electronically. McBride plc encourages been prepared and presented in accordance with the laws shareholders to elect to receive all communications of England and Wales and the liabilities of the Directors electronically, to enable more secure and prompt in connection with those reports shall be subject to communication which reduces cost and environmental the limitations and restrictions provided by such law. impact through saving paper, mailing and transportation. Inparticular, the Directors would be liable to the Company (but not to any third party) if the Strategic report and/or You can register directly by visiting www.signalshares.com Directors’ report contain errors as a result of recklessness and following the online instructions. Alternatively, you or knowing misstatement or dishonest concealment of a can access the service via the investor relations section material fact, but would not otherwise be liable. ofMcBride plc’s website at www.mcbride.co.uk. McBride plc Annual Report and Accounts 2022 211 Additional information ## Registered oce and advisers | Company’s registered oce | Principal bankers | Registrars | | --- | --- | --- | | McBride plc | HSBC Bank plc | Link Group | | Middleton Way | 2nd Floor, Landmark | Central Square | | Middleton | St. Peter’s Square | 10th Floor | | Manchester M24 4DP | 1 Oxford Street | 29 Wellington Street | | Telephone: +44 (0)161 203 7401 | Manchester M1 4PB | Leeds LS1 4DL | | www.mcbride.co.uk | BayernLB | | | | Moor House | Financial public relations advisers | Company number: 02798634 120 London Wall FTI Consulting LLP London EC2Y 5ET 200 Aldersgate Independent auditor London EC1A 4HD | PricewaterhouseCoopers LLP | BNP Paribas London Branch | | --- | --- | | Chartered Accountants and Statutory | 10 Harewood Avenue | | Auditor | London NW1 6AA | | No 1 Spinningfields | KBC Bank N.V. | | 1 Hardman Square | 111 Old Broad Street | | Manchester M3 3EB | London EC2N 1BR | Bank of China, London Branch Corporate brokers 1 Lothbury Investec plc London EC2R 7DB 30 Gresham Street BBVA London Branch London EC2V 7QP Floor 44 Peel Hunt LLP 1 Canada Square 7th Floor, 100 Liverpool St London E14 5AA London EC2M 2AT McBride plc Annual Report and Accounts 2022 212 The Group’s commitment to the environment is reflected in this report, which has been printed Designed and produced by on Munken Kristall Smooth, an FSC® certified material. It also has EU Ecolabel, EMAS, ISO-14001 certification. Arctic Paper Munkedals AB is one of the most environmentally-friendly paper mills www.lyonsbennett.com in the world and meets the requirements for FSC® Chain-of-Custody (“CoC”) certification. FSC® CoCcertification assures that products sold with an FSC® claim originate from well-managed forests,controlled sources, and/or reclaimed materials in their supply chain. It confirms that throughout the production process there is: respect for human rights, adherence to all local applicabletimber legislation and no involvement in the destruction of high conservation areas. ArcticPaper Munkedals’ Munkedal mill is committed to reducing its long-term environmental impactand has the lowest waterconsumption per kilogram of paper in the entire industry, whilst thecompany’s energy usage iswithin or below the EU’s Best Available Techniques. This document was printed by Pureprint Group using its environmental print technology, with 100% ofdry waste diverted from landfill, minimising the impact of printing on the environment. The printer is a CarbonNeutral® company and ISO 14001 registered. McBride plc Middleton Way Middleton, Manchester M24 4DP United Kingdom Telephone: +44 (0)161 203 7401 www.mcbride.co.uk McBride plcAnnual Report and Accounts 2022 McBride plcAnnual Report and Accounts 2022