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Stakeholder relationshipsand communicationsResourcesMcBride continues to invest in the resources that they consider arekey to maintaining a competitive advantage in the markets in whichit operates. We have a strong code of ethics and promote a culturewhere all employees behave with honesty, discretion and respectwhen dealing with all stakeholders.EmployeesThe Group employed an average of 5,421 people during the yearended 30 June 2011. The effective management of people is criticalto achieving our business objectives and we depend on thecommitment of our employees.We recognise that to be successful the business must recruit, retainand develop its employees and help them achieve their full potential.There is a rolling programme of employee opinion surveys across theGroup and the UK business has received Investors in People bronzeaccreditation. We have recently introduced a Group-wide annualappraisal and talent management system which will provide anopportunity for all employees to review their performance andobtain feedback regarding responsibilities and objectives, trainingand development needs, and link individuals’ needs with thoseof the business.The Mission, Vision and Principles (MVP) programme is helping tobuild a workforce that has behaviours and a culture that is alignedto the Company’s strategy and objectives. Communication is centralto MVP and this is supported around the Group by site visits bysenior management, open discussions and briefings, listeninggroups and Q&A sessions at each site. Regular information bulletinsare cascaded down through the business and a managementconference is held twice a year to publicise the Group’s strategyand performance, and assess how local site objectives supportthe Group objectives.The Group continuously seeks to set and maintain very highstandards of health and safety, and has a robust managementsystem which is embedded at all sites worldwide. There are a numberof policies and procedures in place to guide employees in areas suchas equal opportunities in recruitment and development.CustomersMcBride strives for excellence at all times; to be the chosen providerof Private Label Household and Personal Care products to theleading grocery retailers around the world. By working closely withour customers at all levels of the business we can understand andmeet their needs through consumer focused product and categorydevelopment, excellent customer service and a joint focus onminimising cost.ConsumersThrough a clear market and consumer understanding we treat ourcustomer Private Label product offerings like brands in their ownright, providing guidance in product and category developmentand through regular consumer panels, and ongoing producttesting ensures our products are delivered with the highestconsistent quality.SuppliersIt is key to the continued success of our business that we havebeneficial long-term relationships with suppliers. We rely on thesourcing of goods and services such as raw materials, packagingand indirect services and equipment. The Group is continuallyseeking to optimise the value of its sourcing, through innovation,proposals from its suppliers and evaluation of alternative suppliersand materials. Given the importance of purchasing costs in ourcost structure, as well as the materials in our final products, McBriderecognises its responsibility in sourcing products and servicesin the most cost effective and efficient manner and, to this end,we are constantly searching for suppliers that can meet ourevolving demands and can offer alternative sources whilst,at the same time, having regard to environmental, social andethical aspects of doing business.Group financial reviewRichard ArmitageGroup Finance DirectorGroup summaryGroup revenue was flat year-on-year, being £812.4 million(2010: £812.2m), reflecting 1% growth on a constant currency basis,primarily driven by acquisitions and growth in Central and EasternEurope and a 1% adverse currency impact due to weakening of theEuro against Sterling to 1.17 (2010: 1.14). Adjusted Group profitbefore tax (1) decreased by 49% to £22.5 million (2010: £44.4m).Adjusted diluted earnings per share (1) decreased 49% to 9.3 pence(2010: 18.1p). The proposed final payment to shareholders is4.8 pence per share (2010: 4.8p) which, if approved, will deliverunchanged full year payments to shareholders of 6.8 pence pershare (2010: 6.8p), to be remitted through the B Share scheme.Cash generated from operations, before exceptional items, was£42.6 million (2010: £85.1m). Net debt increased by £23.7 millionto £83.7 million (2010: £60.0m). Pre-tax return on average capitalemployed based on the Group’s adjusted operating profit (1) forthe year decreased to 14.7% (2010: 25.9%).RevenueGroup revenue was flat at £812.4 million (2010: £812.2m).The 1% constant currency growth, referred to above, reflectsa 20% increase in revenue in Central and Eastern Europe includingacquisitions, offset by a 3% decline in revenue in the UK, whilerevenue in Western Continental Europe was flat. There was 2%constant currency growth in the Group’s identified core growthcategories with encouraging performances in laundry liquids,machine dishwashing and specialist cleaners.On the revised segmental reporting basis (see note 2), UK revenuesreduced by 3% to £310.7 million (2010: £320.3m) with Householdsales flat year on year, but Personal Care showing an 11% decline.Western Continental Europe’s revenues declined by 2% to£405.7 million (2010: £414.0m), with the majority of the impactrelated to adverse currency translation while organic sales wereflat. Central and Eastern Europe’s revenues increased 18% to£139.7 million (2010: £118.4m), with 14% organic growth and 6%from the Dermacol acquisition, partially offset by a 2% adversecurrency translation. Asia revenues were £9.3 million (2010: £1.0m)driven by the Fortlab acquisition.“ The Group’s initiativesto reduce supply chain costsare progressing to plan.”Operating profitAdjusted Group operating profit (1) decreased by 42% to £29.0 million(2010: £50.0m). The operating margin reduced from 6.2% to 3.6%reflecting increases in raw material prices and the timelag forrecovery from selling price increases. Group reported operatingprofit fell by 61% to £13.8 million (2010: £35.2m).On the revised segment reporting basis (see note 2), the adjustedoperating profit (1) and margin decreased in both the UK andWestern Continental Europe divisions and while the adjustedoperating profit (1) remained flat in Central and Eastern Europedivision, the operating margin was lower: UK profit was £11.9 million(2010: £22.1m) with a margin of 3.8% (2010: 6.9%), WesternContinental Europe profit was £15.4 million (2010: £28.2m) witha margin of 3.8% (2010: 6.8%) and Central and Eastern Europe profitwas £8.9 million (2010: £8.9m) with a margin of 6.4% (2010: 7.5%).Net finance costsReported net finance costs increased to £6.7 million (2010: £5.6m),driven primarily by a higher level of debt and amortisation of thefees relating to the €175 million revolving credit facility arrangementagreed in June 2010.Exceptional itemsThe Group’s initiatives to reduce supply chain costs are progressingto plan. There was a £12.3 million pre-tax operating exceptionalcharge to the income statement in the year (2010: £12.8m),of which £9.2 million related to a proposed restructuring of thesupply chain in the UK, £0.3 million arose in connection with aproposed restructuring of the supply chain in Continental Europeand £1.2 million of additional costs were incurred in relation to theredundancy programme in Italy in addition to which there was anassociated £1.6 million asset write-off. In total, the pre-tax operatingexceptional charge comprised £4.5 million of redundancy costs,£3.4 million of asset write-offs and £2.8 million of other incrementalitems, including external consultancy costs, legal fees and site cleanup costs. The £1.6 million pre-tax operating charge was in relation toan impairment of an asset held for sale, being the former productionsite of Solaro, due to the weakening of the Italian property marketcaused by the adverse economic conditions in Italy.Overview Business review Governance Financials Shareholder information(1)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.52 McBride plc Annual Report and Accounts 2011 McBride plc Annual Report and Accounts 2011 53