Increased short-term demand McBride has released a COVID-19 update which reports that, since March, the group has seen an increase in orders across most regions for a range of cleaning products including bleach, anti-bacterial/disinfecting sprays and certain dish and laundry products. In some categories, the increase in demand is as much as 50% but it is not clear to what extent this is due to increased usage (undoubtedly there will be some of this with people at home more and hygiene high on the agenda), but also perhaps some short-term stockpiling. Production inefficiencies Whilst the increase in short-term demand is clearly helpful, the group is encountering some production issues. All of its sites are open and operational, but labour attendance and some raw material supplies have been variable, as have logistics (inbound and outbound). Despite these issues, the group is largely meeting this excess demand, at present, but through stock depletion and production priority. With this fast changing situation, predicting the result for this year is becoming increasingly difficult, although we would not read this as a flag to a significant shortfall. Revenues are favourable and the group is hopeful of seeing improving raw material benefits in Q4. However, production inefficiencies are hard to predict and it is possible production restrictions will increase if more countries impose lockdowns. The group is actively looking at a number of options to counter this, including recruitment and customer prioritisation. Dividend cancelled At the half year (Dec’19), the group reported that net debt/EBITDA was 2.1x (lower than the headline numbers suggest) and comfortably within the group’s 3x covenant, so we see no obvious threat here without a sizeable profit shortfall. However, the group is mindful of preserving its cash resources and has prudently opted to cancel the interim dividend (of 0.8p) which saves c.£1.5m. The group has committed headroom of £60m in its RCF. It will continue to update the market on trading as appropriate, but we make no changes to forecasts at the present time.