McBride PLC (LSE:MCB) has formed a long-term manufacturing partnership with Vestacy. This deal is expected to bring in about £170 million in annual revenue at full scale. The agreement lasts five to eight years and includes the purchase of two manufacturing plants in Spain and Portugal. Following this news, McBride's shares rose by 16.49% to 195p. Peel Hunt increased its price target from 190p to 230p and kept a 'buy' rating.
Revenue Growth Projections
This new partnership is expected to boost McBride's group revenue by around 15%. The company believes the supply agreement will add 16% to group revenue and 14% to operating profit by the second half of 2028. Vestacy, a joint venture between Advent and Reckitt Benckiser, will shift production volumes to McBride from its sites in Iberia and other locations in Belgium, Italy, Poland, the UK, and France.
McBride noted that most products involved are currently made by a third-party supplier, especially in the laundry category, which is seen as a growth area. The deal aims to reduce upfront costs, with Vestacy investing about £34 million in new manufacturing equipment over the next two years. McBride will spend around £17 million on transition and project costs, with net debt expected to peak at £25 million in the second half of the 2028 financial year.
Strategic Expansion
This partnership is part of McBride's plan to increase contract manufacturing revenue beyond the 25% target of group sales set for its 2024 Capital Markets Day. The factory acquisitions are expected to be completed in early 2027, with the new production network fully operational by early 2028. Peel Hunt pointed out that this transaction marks a significant increase in McBride's corporate scale and earnings potential.
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This announcement is likely to strengthen McBride's position in the household cleaning products market, which may further boost its stock performance. Investors will be looking for updates on the factory acquisitions and the launch of the new production capabilities.
Based on reporting by: proactiveinvestors.co.uk