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Divisional performanceUK business reviewColin McIntyreUK DivisionalManaging Director2011 2010 ChangeTotal reported revenue (1) £310.7m £320.3m -3%Adjusted operating profit (2) £11.9m £22.1m -46%Average employee numbers 2,177 2,268 -4%Proportion of revenuein Household products 75% 74% +1pptProportion of revenuein Personal Care products 25% 26% -1ppt(1)Revenue by origin.(2)Adjusting items include amortisation of intangible assets, exceptional items, changesin estimates of contingent consideration arising on business combinations, and anynon-cash financing costs from unwind of discount on initial recognition of contingentconsideration and any related tax.> Revenue declined 3% reflecting the weak consumerdemand in the UK market> Household Private Label volume share up 3ppt to 30%in last quarter> Core product categories sales grew 3%> Restructuring programme initiated with £9.2 millionpre-tax exceptional charge and £4.0 million of expectedannualised cost savings> Adjusted operating profit (2) declined by 46%, with returnon sales of 3.8% (2010: 6.9%)Business descriptionThe UK business creates, develops and produces Household andPersonal Care products for our Private Label customers. It alsoproduces niche brands such as Surcare, Lime Lite and Oven Pride,and provides contract manufacturing for other Household andPersonal Care sector participants. Retail customers include Aldi,Asda, Co-op, Marks & Spencer, Morrisons, Sainsbury’s, Tescoand Waitrose.OverviewRetail sales declined by 5%, offset by increased contractmanufacturing sales up 3%. Overall, operating profit marginswere impacted by high input costs and very high levels of branderpromotions in 2011. A number of contracts were impacted bythe recovery of selling price increases, but core category salesoutperformed, delivering 3% growth, with particularly stronggrowth in laundry liquid sachets and gels and speciality cleaners.In line with the objectives of Project Refresh to improvecompetitiveness and reduce our cost base, the UK division hasentered into a consultation process which might be expected tolead to 300 redundancies, with the closure of the Burnley Householdliquids factory and production transferred to other manufacturingsites. In addition, following comprehensive cost saving reviewsacross all UK sites, a further 40 staff including operational staffat the Bradford site, and administrative and personnel staff atdivisional headquarters, will be leaving the business.A £9.2 million pre-tax exceptional charge has been chargedto the income statement relating to this UK divisionalrestructuring programme.MarketsThe UK Household products market grew by 6% in value terms forthe period to July 2011, however the market was down 1% on a volumebasis. Laundry liquids, household and toilet cleaners and the Air caresector demonstrated small volume growth with other categoriesbroadly flat. Private Label Household products volume sales weredown 3% for the year as a whole, however Private Label volumeshare recovered significantly in the last quarter of the financial yearto 30% the highest quarterly volume share since Q3 2010; PrivateLabel value share also reached a 12 month peak in the last quarterat 18%. The strongest performing categories for Private Label werelaundry liquids, tablets and sachets, fabric conditioners, householdcleaners and bleach.The overall UK Personal Care market grew by 2% in value termson flat volumes for the year to June 2011, reflecting the highlycompetitive marketplace and promotional activity during theyear. The mouthwash, toothpaste and hairspray sectors werethe strongest performing sectors.Private Label Personal Care sales were influenced by the high levelsof promotional activity from the brand manufacturers with salesdown 3% in value and volume terms. Private Label mouthwash salesgrew strongly to reach a 24% volume share of the category. PrivateLabels held a 28% volume share of the men’s shaving products andliquid soap categories and a 33% volume share in bath foams.Source of market data: McBride estimates based on Kantar Retail retail selling price data.Key business developmentsThe competitive environment in the UK market remains challenging,with the continued impact of increases in raw material pricesand high levels of brander promotions. As a consequence of thisenvironment, one leading European Private Label competitorexited the UK market during the period.Actions taken during the year to mitigate these impacts included:further increases in selling prices, continued roll out of Leanmanufacturing activities across the supply chain, resulting inimprovements in both factory efficiencies and the cost base;initiation of a restructuring programme across the UK sites;and continued development of new products.The UK business increased its investment in research anddevelopment to underpin our objective of providing innovativePrivate Label Household and Personal Care products for ourcustomers. During the year, the UK business announced anagreement to launch Private Label household cleaning productsusing Byotrol TM technology and the first antibacterial cleaner waslaunched in April 2011 with further product extensions planned.Financial reviewRevenue fell by 3% overall to £310.7 million (2010: £320.3m),although core product categories increased by 3%, mainly drivenby laundry liquid sachets and gels and speciality cleaners. Contractmanufacturing revenue grew by 3%. Adjusted operating profit (2)was down 46% to £11.9 million (2010: £22.1m). This was impacted bythe time-lag between raw material input cost increases resultingfrom higher commodity prices, and the resulting recovery actionstaking effect. Capital investment spend in the year was £9.5 million(2010: £9.0m) and included investment for efficiency improvementsand capacity expansion.Future developmentsOur ongoing success depends critically upon our ability to providecustomers with excellent service levels and competitive andinnovative new products. We have continued to increase ourlevel of resource in new product development, as well as investingresource into driving our category management capabilities.McBride continues to press ahead with initiatives outlined inProject Refresh, earlier in the year, to improve operating efficiency,category focus and strengthen key relationships. These activitieswill continue in the coming year, with specific resource allocatedto drive through these key initiatives.Overview Business review Governance Financials Shareholder information40 McBride plc Annual Report and Accounts 2011 McBride plc Annual Report and Accounts 2011 41