TIDMNICL
RNS Number : 9338Q
Nichols PLC
03 March 2021
3 March 2021
Nichols plc
2020 PRELIMINARY RESULT
Resilient financial performance despite challenging trading
conditions
Nichols plc ('Nichols' or the 'Group'), the diversified soft
drinks Group, announces its Preliminary results for the year ended
31 December 2020 (the 'period').
Year ended Year ended Movement
31 December 31 December
2020 2019
GBPm GBPm
------------- ------------- -----------
Group Revenue 118.7 147.0 (19.3%)
------------- ------------- -----------
Adjusted Operating Profit
1 11.7 32.4 (64.1%)
----------------------------- ------------- ------------- -----------
Operating Profit 6.6 32.4 (79.7%)
----------------------------- ------------- ------------- -----------
Adjusted Profit Before
Tax (PBT) 1 11.6 32.4 (64.2%)
------------- ------------- -----------
Profit Before Tax (PBT) 6.5 32.4 (79.8%)
------------- ------------- -----------
Adjusted PBT Margin 1 9.8% 22.1% (12.3ppts)
------------- ------------- -----------
PBT Margin 5.5% 22.1% (16.6ppts)
------------- ------------- -----------
EBITDA 2 16.5 37.0 (55.5%)
------------- ------------- -----------
Adjusted earnings per share
(basic) 1 25.56p 72.81p (64.9%)
------------- ------------- -----------
Earnings per share (basic) 13.14p 72.81p (82.0%)
------------- ------------- -----------
Cash and cash equivalents 47.3 40.9 +15.6%
------------- ------------- -----------
Proposed Final Dividend 8.8p 28.0p 6 (68.6%)
------------- ------------- -----------
Full year dividend 36.8p 12.4p 6 +196.8%
------------- ------------- -----------
-- Vimto Brand Value in the UK +6.7% versus soft drink market of +2.5% 3
-- Vimto Brand 'in-market' Middle East sales remained resilient
through Ramadan despite Sweetened Beverage Tax (SBT) and Covid-19
restrictions
-- Vimto in Africa delivered strong revenue growth of +7.4%
-- Vimto continues to progress across the rest of the world,
delivering revenue growth of 17.3%
-- Out of Home (OoH) significantly impacted by the pandemic with
revenues down 61.4% and fixed costs weighing heavily on overall
financial performance
-- Strong cash performance in the period, Free Cash Flow 4
+GBP17.6m, Cash Conversion 5 at 186%
o Working capital focus with slower end of year 2020 due to
Covid-19
-- Exceptional charge of GBP5.1m
o Of which GBP3.8m, non-cash Impairment of Feel Good Goodwill
and Intangible Assets
o GBP1.3m operational review and restructuring
-- Final dividend proposed of 8.8p reflecting 2x cover 7 for
combined 2019 and 2020 performance period
-- Continued uncertainty for 2021 outlook, guidance remains withdrawn
1 Excluding Exceptional items; impairment charges of GBP3.8m,
operational review and restructuring costs of GBP1.3m (2019:
GBPnil)
2 EBITDA is the statutory profit before tax, interest,
depreciation and amortisation
3 Nielsen Total Coverage Year to Date 26 December 2020
4 Free Cash Flow is the net increase in cash and cash
equivalents before acquisition funding and dividends
5 Cash Conversion is the Free Cash Flow/ Adjusted Profit After
Tax
6 2019 Final Dividend was cancelled on 31 March 2020 due to the
effect of the Covid-19 pandemic
7 Dividend cover is the adjusted basic earnings per share
divided by the dividend per share
John Nichols, Non-Executive Chairman, commented:
"The Covid-19 pandemic presented us with unequalled challenges
in 2020 and our first and most important objective through this
unprecedented period has been the protection and wellbeing of our
employees and customers. Throughout these difficult times, our
colleagues have consistently demonstrated their values and
commitment to our business, and I would like to wholeheartedly
thank everyone for their efforts.
The strength of the Vimto brand, the Group's robust balance
sheet and our diversified business model has ensured a resilient
financial performance in the period despite the challenging trading
conditions across our markets. We have achieved significant
outperformance from the Vimto brand in the UK, solid growth in
Africa and a good performance in the Middle East despite the impact
of the recently introduced Sweetened Beverage Tax (SBT) and
Covid-19 restrictions.
Whilst recognising the current and near-term impact of the
pandemic on the soft drinks market, the Board continues to believe
that Nichols, underpinned by the strength of the Vimto brand, the
Group's diversified business model and the skill and commitment of
our colleagues, remains well placed to deliver its long-term
strategic ambitions. Given the continued near-term uncertainty,
2021 guidance remains withdrawn."
Contacts
Andrew Milne, Group Chief Executive Officer
David Rattigan, Group Chief Financial Officer
Nichols plc
Telephone: 0192 522 2222
Website: www.nicholsplc.co.uk
Alex Brennan / Elfie Kent Steve Pearce / Rachel Hayes
Hudson Sandler N+1 Singer (Nominated Adviser)
Telephone: 0207 796 4133 Telephone: 0207 496 3000
Email: nichols@hudsonsandler.com Website: www.n1singer.com
Notes to Editors:
Nichols plc is an international soft drinks business with sales
in over 85 countries, selling products in both the Still and
Carbonate categories. The Group is home to the iconic Vimto brand
which is popular in the UK and around the world, particularly in
the Middle East and Africa. Other brands in its portfolio include
Feel Good, Starslush, ICEE, Levi Roots and Sunkist.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Chairman's Statement
The Covid-19 pandemic presented us with unequalled challenges in
2020 and our first and most important objective through this
unprecedented period has been the protection and wellbeing of our
employees and customers. Throughout these difficult times, our
colleagues have consistently demonstrated their values and
commitment to our business, and I would like to wholeheartedly
thank everyone for their efforts.
The strength of the Vimto brand, the Group's robust balance
sheet and our diversified business model has ensured a resilient
financial performance in the period despite the challenging trading
conditions across our markets. We have achieved significant
outperformance from the Vimto brand in the UK, solid growth in
Africa and a good performance in the Middle East despite the impact
of the recently introduced Sweetened Beverage Tax (SBT) and
Covid-19 restrictions.
Cash and cash equivalents at the end of the period amounted to
GBP47.3m (2019 GBP40.9m), marginally ahead of the half year
position of GBP46.8m. Management took prudent measures to conserve
cash within the business throughout the year, ensuring that Nichols
is in the best possible place to 'Build Back Better' from the
impact of the pandemic.
Trading
Ahead of the pandemic, the Group was achieving good revenue
growth with a 6.2% increase in Q1 versus the prior year.
The arrival of the pandemic in our markets at the end of Q1 was
a watershed moment for the year. The introduction of social
distancing, the enforced closure of the Group's Out of Home ('OoH')
customers and the various lockdown measures introduced across the
globe materially impacted our business.
Q2-Q4 2020 revenues were 26.1% lower compared to the prior year.
As a result, total Group revenue for the period was 19.3% lower at
GBP118.7m (2019: GBP147.0m).
The Still and Carbonates product categories were impacted
significantly by the pandemic, predominantly as a result of the
enforced closures of the Group's OoH customers. In addition, the
introduction of the SBT (reported against the revenue line) in the
Middle East impacted performance. As a result, revenue of Still
products decreased by 8.3% to GBP65.7m (2019: GBP71.7m). Revenue
from Carbonates was down 29.7% to GBP53.0m (2019: GBP75.3m) as
outlets closed and impulse sales reduced.
In the UK, revenue decreased by 22.0% to GBP91.6m (2019:
GBP117.5m) driven by a 61.4% reduction within the OoH sector.
However, within this, the Vimto brand's value increased by 6.7%
against a soft drinks market performance of +2.5% (Nielsen to 26
December 2020), reflecting further market share gains.
Sales across our International markets were GBP27.0m (2019:
GBP29.5m). This represented a year on year decrease of 8.3%.
Despite Covid-19 restrictions in the Middle East and the
introduction of the SBT, the Vimto brand was resilient throughout
Ramadan and 'in-market' sales were broadly in line with the prior
year. This performance, combined with African sales growth of 7.4%
to GBP14.0m (2019: GBP13.0m) and rest of world sales growth of
17.3% to GBP5.7m (2019: GBP4.9m), demonstrates the continuing
strength of the Vimto brand internationally. The Group supported
its local partner with brand investment to mitigate the impact of
the introduction of the SBT in the Middle East.
Dividend
In March 2020, the Board made the decision to withdraw the final
dividend (28.0p) for 2019, due to the uncertainties concerning the
financial impact of Covid-19. At the half year, the Board agreed
the rebalancing of dividend policy to consider the two financial
years 2019 and 2020 as a single review period and paid 28.0p, as
the Interim Dividend for 2020, in September 2020.
In the second half year, the Board has agreed to evolve the
dividend policy to reflect the balance of shareholder needs and the
clear opportunities for growth that will exist in the soft drinks
market post the pandemic. Dividend cover going forward will move to
broadly 2x.
Therefore, the final dividend proposed is 8.8p, which will
become ex-dividend on the 25 March and paid subject to shareholder
approval on 6 May 2021.
Board Changes during the year
Andrew Milne was appointed CEO of the Group with effect from 1
January 2021, replacing Marnie Millard OBE. Andrew has been with
the Group for eight years and brings significant industry expertise
and excellent knowledge of our business to the role. I am delighted
to welcome Andrew as CEO and wish him every success in leading the
business during the next phase of its development, and I thank
Marnie for her significant contribution over the years.
We were also pleased to welcome David Rattigan to our business
as our new CFO during the year. David became CFO with effect from 2
March 2020, replacing Tim Croston.
The Board entered into a Relationship Agreement with the Nichols
Family on 22 July 2020. The purpose of the Relationship Agreement
is to formalise Board representation for the Nichols Family whilst
also ensuring that the Group conducts its business independently at
all times. As a result, James Nichols joined the Board on the 22
July 2020 as a Non-Executive Director.
Outlook
Whilst recognising the current and near-term impact of the
pandemic on the soft drinks market, the Board continues to believe
that Nichols, underpinned by the strength of the Vimto brand, the
Group's diversified business model and the skill and commitment of
our colleagues, remains well placed to deliver its long-term
strategic ambitions. Given the continued near-term uncertainty,
2021 guidance remains withdrawn.
John Nichols
Non-Executive Chairman
3 March 2021
Chief Executive Officer's Statement
The value of the Group's diversification across multiple
geographies and routes to market has once again been proven during
2020. The foundation of our performance in 2020 has been our unique
Vimto brand, which remains as relevant for our consumers today as
it was when it was established 112 years ago.
In line with the market, trading conditions in the UK on-trade
have been extremely challenging due to closures across the
hospitality sector throughout the majority of the year. However,
the UK retail sector has proved to be more resilient as people have
consumed more products at home, bought from stores or via
fast-growing online platforms.
Operating across a range of International markets has also been
beneficial during the year. Our Middle East markets have been
impacted by the introduction of a sweetened beverage tax at 50%,
but we have achieved good growth across our African, American and
European markets as a result of outstanding in-market execution.
Across all our geographies we have focused on driving strong
in-market execution of our commercial programmes, coupled with
focused new product launches to ensure we have taken market share.
We have also continued to build long term partnerships with all our
key customers and distributors, who I would like to thank for their
continued loyalty and support during 2020.
UK Soft Drinks
(Market statistics given below are as measured by Nielsen in the
year to 26 December 2020)
In 2020, volumes in the GBP8.9bn UK soft drinks market grew by
3% whilst value sales grew by 2.5% versus the prior year.
Within the soft drinks market, the strongest value growth was
delivered across Cola, Mixers, Dilutes and Energy drinks. Plain
water, Flavoured water, Fruit drinks and Sports drinks were all
sectors that suffered declines versus 2019.
The Vimto brand delivered strong value growth of 6.7%, gaining
significant market share and adding GBP6m to its brand value
(Nielsen data) in the twelve-month period to a record GBP96.5m.
The soft drinks category remains intensely competitive and
promotionally driven, but we continue to focus on adding value
through strong in-market execution, product innovation and new
distribution gains.
Within the UK packaged sector, our dilutes portfolio has been at
the heart of our exceptionally strong performance. We have
delivered value sales growth of 24% versus the dilutes sub-category
growth of 12.8% growth. This has further consolidated our position
as the UK's No.2 dilutes brand.
We have also continued to ensure all new product innovation and
marketing activity focuses heavily on driving our 'No Added Sugar'
ranges, promoting healthier options to consumers as part of our
sustainability strategy to achieve a Happier Future. As a result,
we have once again delivered accelerated growth on this part of our
portfolio.
Innovation has again been central to our success in 2020.
Although certain planned new product launches were delayed due to
the pandemic, we added an exciting new flavour to our Remix range
and released a Vimto 'Winter Warmer' limited edition squash
proposition. Offering new flavours and concepts is crucial to
attracting new consumers to the Vimto brand and ensuring we stay
relevant to evolving consumer needs and tastes.
Core to the brand's growth in 2020 has been our award winning 'I
see Vimto in you' marketing campaign. The campaign was first
launched in 2018 and has played a vital role in underpinning our
continued growth over the last three years. We have focused on
delivering a social, digital and influencer communications plan
during 2020 and we have seen our brand penetration reach record
levels at 7.1m households (+407K households vs. 2019 as measured by
Kantar).
During 2020 we had planned to relaunch our Feel Good brand into
the marketplace. We repositioned the brand as a 100% natural
product, targeted to go to market in early April 20. Due to the
pandemic our launch plans have been delayed until 2021.
We continue to work in close collaboration with our customers
across the UK grocery, foodservice, wholesale and discount
channels. Ensuring the strength of these relationships has been
more important than ever during 2020, and we will continue to keep
our customers' needs at the heart of what we do to ensure that
consumers can enjoy our products every day.
The UK On-Trade
(As measured by CGA Total Out of Home, Licensed &
Foodservice. Last 12 months to 30 November 2020)
It has been the most challenging trading period in the on-trade
sector for 80 years, but we believe consumer demand remains strong,
with a clear willingness to re-engage in hospitality once
restrictions eventually ease.
Soft Drinks remain a hugely important part of Out of Home sales,
worth 1.1bn litres, representing GBP3.9bn in the last 12 months. In
Licensed outlets, soft drinks volume is worth 348m litres, GBP2.2bn
in the last year. This represents approximately a quarter share of
total drinks volume.
In comparison to other categories in Licensed, the sales
performance of soft drinks is in line with total drinks sales and
performing at a similar rate to Wine & Spirits. The Eat Out to
Help Out scheme and national heatwave during Q3, combined with the
temporary lifting of certain pandemic-related social restrictions,
contributed towards a lift in sales of soft drinks for a limited
period.
In the UK, sales of soft drinks in Licensed & Foodservice
combined saw a drop in consumption during 2020 vs. 2019 as volume
declined 41%, delivering 1.1bn litres in the year. This was driven
by a 53% decline in Licensed and a 36% decline in Foodservice.
Category performance has retracted significantly due to the
impact of the coronavirus pandemic reflected in the 40% decline in
annual turnover in the overall UK hospitality sector over the past
year. This equates to an annual loss of GBP53bn across the sector
across food and drink sales.
As the pandemic took hold during 2020, 64% of UK consumers ate
and drank out less frequently than they usually would between July
and October. That equates to 88m fewer visits during a key trading
period of the year.
Due to the challenges highlighted above our business was
severely affected by the closures from March onwards. The first two
months of the year proved strong, despite the fact that
traditionally they are the quietest time of the trading year.
During the first quarter we also launched our frozen carbonated
range, ICEE, into the cinema chain Showcase, which we had been
successful in securing as incremental business for 2020.
Throughout the remainder of 2020 our primary focus was on
supporting our customers and partners across our Out of Home
trading division. Making sure we did everything possible to ensure
that these valued customers can survive in the long term as the
hospitality sector re-opens was our team's priority. I am extremely
proud of the effort we have put in to support our partners during
this challenging period.
Vimto International
During 2020, the Covid-19 pandemic affected all our
International regions as lockdowns were put in place on a global
scale.
In our Middle East region this has been coupled with VAT
increases and the implementation of a 50% excise tax on sweetened
beverages. As a result, trading conditions have been extremely
challenging throughout the year.
We have taken the long-term strategic decision in conjunction
with our long standing partner of over 90 years, Aujan Coca-Cola
Bottling Company (ACCBC) to invest in an enhanced marketing
programme to protect our market share of Vimto in this key region,
and I am pleased to report that, as a result, our market share in
the Middle East has not been impacted.
Over the key Ramadan trading period, a comprehensive digital
campaign and outstanding in-store execution delivered one of the
most successful campaigns in the brand's history.
We have accelerated our Innovation pipeline on the Vimto brand
across the region in recent years, and in 2020 we launched new
products including a No Added Sugar cordial product, an orange
still ready-to-drink variant and a sour cherry carbonated drink.
These new products have increased the availability and visibility
of the brand across a number of key customers. Adapting the brand
to changing consumer needs has played a key role in ensuring our
continued success.
During 2020 we again achieved strong growth in our African
region. We delivered sales revenue of GBP14.0m, representing 7.4%
growth versus 2019. This was driven by our core red can carbonated
range, supported by our strong integrated marketing campaign and
new distribution wins. We also successfully launched our Vimto
Watermelon flavour within Algeria and Mali in a bottled format.
Local consumer reaction has been extremely strong, resulting in a
strong sales performance.
We have achieved strong momentum within the USA over recent
years working alongside our partner, Ziyad. 2020 saw another
excellent performance, with double digit sales revenue growth
supported by focusing our commercial activity on key trading
periods.
Across our European territories we continued to focus on
delivering new points of distribution for our core products within
our key customers, which has resulted in the Group making market
share gains and delivering strong sales momentum.
Summary
As we enter 2021, I have no doubt that we will continue to
operate in a challenging and changing environment that will
continue for a sustained period. Over many years soft drinks has
proven to be a highly resilient category and even throughout 2020
during the global pandemic we have seen value growth. I feel
confident that given our strong portfolio of brands, diverse
business model and exceptional people we can continue to deliver
our long-term strategic objectives in 2021 and beyond.
Andrew Milne
Chief Executive Officer
3 March 2021
Chief Financial Officer's Statement
Revenue
Group revenues were GBP118.7m, a decrease of 19.3% compared to
2019, as Covid-19 restrictions significantly impacted the OoH
sector (where revenues were down 61.4%), impacting both Still and
Carbonate performance.
The Group's packaged routes to market had an excellent year,
delivering growth in both the UK and internationally in volume
terms. Across the globe, Vimto performed well and delivered solid
progress. Internationally, reported numbers were impacted in value
terms through the Group's investment to offset some of the pricing
impact of the newly introduced Middle East SBT.
UK packaged revenues improved by 2.7%, driven by the performance
of the Vimto brand, in particular within Multiple and Discount
Retailers, where revenues increased by 9.5%. Revenues across
Convenience, Delivered Wholesale and Cash and Carry fell 10.9% as a
result of Covid-19 closures and restrictions.
Internationally, Middle East volumes performed well through
Ramadan, with 'in market' sales broadly flat year on year. In
Africa, progress continued at pace with revenues improving 7.4%.
Elsewhere, sales into the US performed particularly well.
The impact of movements in foreign exchange rates on revenue
year on year was immaterial, at less than GBP0.1m.
Gross Profit
Gross profit at GBP49.6m was GBP20.4m lower than 2019 (GBP70.0m)
and 5.8 percentage points lower at 41.8% (2019 47.6%). Of this,
GBP11.8m was the net volume effect of the OoH route to market
Covid-19 impact and the growth seen across the UK packaged and
International markets.
The International route to market experienced a range of gross
margin pressures in the period. The Group supported its local
partner with brand investment to mitigate the impact of the
introduction of the SBT in the Middle East and encouragingly 'in
market' volumes were flat in the year despite the impact of the SBT
and Covid-19 restrictions. Additionally, there was a GBP0.4m gross
profit impact across the African business as supply moved to
imported cans from concentrate to support local supply chains
impacted by Covid-19 closures. A further GBP0.3m of gross profit
was invested to develop the Group's rest of world markets which
performed strongly during the year in volume terms.
UK raw material cost increases in the year combined with some
positive one-offs in 2019, resulted in a further negative gross
profit impact of GBP2.3m when compared with 2019.
Within OoH under recovery of costs largely associated with the
factory at Ross-on-Wye led to further gross profit pressure of
GBP1.1m as a result of Covid-19.
In addition, the Group supported OoH customers with new for old
stock following the re-opening from lockdown 1 and provided for
stock write offs as owned stock became obsolete, impacting gross
profit by a further GBP1.0m.
Distribution Expenses
Distribution expenses totalled GBP8.0m (2019 GBP7.4m), an
increase of 7.5%. Distribution costs within the Group are largely
associated with the UK packaged route to market and the increase is
largely due to the higher trading volumes reported in the period
but also additional disruption within our outbound supply chain as
a result of the Covid-19 pandemic.
Administration Expenses
Administration expenses, excluding exceptional items, totalled
GBP30.0m (2019 GBP30.1m), a decrease of 0.3%.
Management focused on reducing discretionary spend and
realigning marketing investment resulting in cost reductions of
GBP1.2m. No bonuses or LTIPs were accrued during the year and
labour costs were managed closely, resulting in cost reductions of
GBP1.1m.
The Group incurred further bad debt provisioning and asset write
offs associated with the OoH business totalling GBP1.9m versus
2019. As smaller customers in the hospitality sector failed to
re-open following lockdowns, the Group has made additional
provisions for bad debt. A detailed exercise been undertaken to
trace and verify assets held at customer outlets and as a result
they have been written off when determined to be obsolete, lost or
unlikely to deliver economic benefit.
The Group's prior year investment in OoH, acquisitions and
machinery increased the Group's depreciation charge by GBP0.4m year
on year.
Exceptional Costs
The Group has incurred GBP5.1m of exceptional costs during the
year (2019: GBPnil).
Following a strategic review of the Group's 'Feel Good' Brand
and its recognition as a separate Cash Generating Unit ('CGU'), the
Group has incurred a non-cash impairment to Goodwill and Intangible
Assets of its 'Feel Good' Brand of GBP3.8m. The Group remains
committed to the 'Feel Good' Brand, which has recently been
relaunched in the UK.
The Group commenced a review of its UK packaged supply chain in
Q4, engaging third party consultants and this is expected to
conclude with implementation through 2021. Costs incurred to date
amount to GBP0.3m with further costs expected in 2021.
The Group completed a review of its operational and leadership
structures in Q4.
Operational changes followed the integration of prior year
acquisitions and the implementation of new systems into the OoH
route to market. These changes were implemented in Q4, making a
number of roles redundant at the year-end incurring costs of
GBP0.7m.
The Group decided to move from three Executive Directors to two
at the year-end following a review of the Executive Board members
portfolios. Early termination costs associated with these changes
were GBP0.3m.
Due to the one off nature of these charges, the Board is
treating these items as exceptional costs and their impact has been
removed in all adjusted measures throughout this report.
Operating Profit
Adjusted Operating Profit was GBP11.7m was down GBP20.7m, a
64.1% decrease on prior year (2019 GBP32.4m). Operating Profit of
GBP6.6m (2019 GBP32.4m) is after charging exceptional items of
GBP5.1m (2019: nil) during the period.
The impact of movements in foreign exchange rates on operating
profit year on year was highly immaterial, amounting to less than
GBP0.1m.
Finance Costs
Net Finance costs of GBPnil (2019: GBP0.1m) were broadly in the
line with the prior year.
Profit before tax and tax rate
Reported profit before tax was GBP6.5m, a decrease of 79.8%
compared to the prior year (2019: GBP32.4m). Adjusted profit before
tax reduced by 64.2% to GBP11.6m (2019: GBP32.4m). The tax charge
on adjusted profit before tax for the period of GBP2.2m (2019:
GBP5.6m) represents an effective tax rate of 18.7% (2019:
17.2%).
Balance Sheet and Cash and Cash Equivalents
Despite the impact of the pandemic on trading, cash and cash
equivalents at the end of the period remained strong at GBP47.3m
(2019 GBP40.9m), marginally ahead of the half year position of
GBP46.8m.
The Group focused significantly on cash management throughout
this unique year with particular emphasis on balancing the needs of
its various stakeholders by working flexibly with shareholders,
staff, customers, and the UK Government as events developed. At the
same time, the Board has remained focused on ensuring the Group
remains well positioned to deliver its long-term growth plans and
exploit growth opportunities across the business as the impact of
the pandemic subsides.
Whilst the Group took mitigating actions to conserve cash,
including the rebalancing of its dividend policy as described in
the Chairman's Statement, Nichols also supported its stakeholders
by:
-- Topping up all furloughed staff's pay to 100% throughout the
furlough period (GBP0.3m) having utilised the Government furlough
scheme (GBP1.4m);
-- Replacing old stock with new (GBP0.4m), free of charge for
its OoH customers following lockdown 1 as well as providing
enhanced credit terms; and
-- Continued full payment of taxes and by not participating in
loan or payment deferral opportunities.
The Group's focus on working capital management, the restriction
of non-essential capital expenditure, and maintenance of customer
relationships resulted in lower debtor and inventory balances than
the prior year. Creditor balances were broadly in line year on
year. The strength of the Group's closing balance sheet reflects
its diversified routes to market, asset light model, and insourced
OoH manufacturing.
The Group was pleased to generate Free Cash Flow of GBP17.6m,
with a cash conversion of 186%, recognising the unwinding of 2019
working capital balances in 2020. Whilst recognising the current
and near-term impact of the pandemic on the soft drinks market, the
Board expects the Group's debtors and inventories to return to 2019
levels over the medium term. As noted at the half year, the Group
benefitted from a prior year insurance claim during the period,
which provided GBP2.0m of cash (there was no 2020 income statement
impact and this is reported within the movement in trade and other
payables line in the Consolidated Cash Flow statement).
Earnings per share
On an adjusted basis, diluted earnings per share (EPS) was 25.54
pence (2019: 72.77p). Total adjusted EPS increased to 25.56 pence
(2019: 72.81p) with basic EPS at 13.14 pence (2019: 72.81p).
Pensions
The Group operates two employee benefit plans, a defined benefit
plan that provides benefits based on final salary, which is now
closed to new members, and a defined contribution group personal
plan. At 31 December 2020, the Group recognised a surplus on its UK
defined benefit scheme of GBP0.3m (31 December 2019: deficit
GBP0.3m).
During the start of 2021, the Group has agreed with the Trustees
a de-risking future funding plan for the defined benefit
scheme.
Brexit
In light of the EU-UK Trade and Cooperation Agreement being
signed on 30 December 2020, the Board continues to monitor the
impact of Brexit. A multi-functional project steering committee has
been working to identify the impact of Brexit on the Group's
operations with a comprehensive mitigation plan now in place.
The free trade agreement implemented between the EU and UK has
eliminated the risk of significant incremental trade tariffs that a
no deal Brexit would have posed to the Group. The Group has
experienced an increased administrative burden post Brexit although
its exposure to EU-UK trade is relatively low given our outsourced
manufacturing supply chain (UK and EU).
The Board will continue to closely monitor the impact of the
agreement and the implications this has on the movement of products
into and from the EU.
David Rattigan
Chief Financial Officer
3 March 2021
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2020
2020 2019
Adjusted Exceptional Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Continuing operations
Revenue 118,657 - 118,657 146,985
Cost of sales (69,021) - (69,021) (77,027)
Gross profit 49,636 - 49,636 69,958
------------------------------- --------- ------------ --------- ---------------------------
Distribution expenses (7,979) - (7,979) (7,423)
Administrative expenses (30,003) (5,074) (35,077) (30,096)
Operating profit 11,654 (5,074) 6,580 32,439
------------------------------- --------- ------------ --------- ---------------------------
Finance income 150 - 150 235
Finance expenses (190) - (190) (252)
Profit before taxation 11,614 (5,074) 6,540 32,422
------------------------------- --------- ------------ --------- ---------------------------
Taxation (2,174) 488 (1,686) (5,587)
Profit for the year 9,440 (4,586) 4,854 26,835
------------------------------- --------- ------------ --------- ---------------------------
Earnings per share (basic) 25.56p 13.14p 72.81p
Earnings per share (diluted) 25.54p 13.13p 72.77p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2020
2020 2019
GBP'000 GBP'000
Profit for the financial year 4,854 26,835
Items that will not be reclassified
subsequently to profit or loss
Re-measurement of net defined benefit
liability (155) 1,704
Deferred taxation on pension obligations
and employee benefits 32 (297)
Other comprehensive (expense)/income
for the year (123) 1,407
Total comprehensive income for the
year 4,731 28,242
-------------------------------------------- -------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2020
2020 2019
ASSETS GBP'000 GBP'000
Non-current assets
Property, plant and equipment 20,126 21,742
Goodwill 36,244 38,585
Intangibles 6,206 8,065
Deferred tax assets - 283
Pension surplus 347 -
------------------------------- -------- --------
Total non-current assets 62,923 68,675
Current assets
Inventories 5,921 8,361
Trade and other receivables 29,814 38,363
Cash and cash equivalents 47,294 40,944
-------------------------------- -------- --------
Total current assets 83,029 87,668
-------------------------------- -------- --------
Total assets 145,952 156,343
-------------------------------- -------- --------
LIABILITIES
Current liabilities
Trade and other payables 21,669 23,260
Current tax liabilities - 2,675
Total current liabilities 21,669 25,935
Non-current liabilities
Other payables 2,922 3,028
Pension obligations and
employee benefits - 253
Deferred tax liabilities 1,485 1,785
-------- --------
Total non-current liabilities 4,407 5,066
-------------------------------- -------- --------
Total liabilities 26,076 31,001
-------------------------------- -------- --------
Net assets 119,876 125,342
-------------------------------- -------- --------
EQUITY
Share capital 3,697 3,697
Share premium reserve 3,255 3,255
Capital redemption reserve 1,209 1,209
Other reserves 394 253
Retained earnings 111,321 116,928
Total equity 119,876 125,342
-------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 31 December 2020
Called Share Capital Other Retained Total
up share premium redemption reserves earnings equity
capital reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2019 3,697 3,255 1,209 666 103,283 112,110
Dividends - - - - (14,466) (14,466)
Movement in ESOT - - - (214) - (214)
Debit to equity
for equity-settled
share based payments - - - (199) - (199)
Movement in deferred
tax - - - - (131) (131)
Transactions with
owners - - - (413) (14,597) (15,010)
----------------------- ---------- --------- ------------ ---------- ---------- ---------
Profit for the
year - - - - 26,835 26,835
Other comprehensive
income - - - - 1,407 1,407
----------------------- ---------- --------- ------------ ---------- ---------- ---------
Total comprehensive
income - - - - 28,242 28,242
----------------------- ---------- --------- ------------ ---------- ---------- ---------
At 1 January 2020 3,697 3,255 1,209 253 116,928 125,342
Dividends - - - - (10,338) (10,338)
Movement in ESOT - - - 24 - 24
Credit to equity
for equity-settled
share based payments - - - 117 - 117
Movement in deferred
tax - - - - - -
Transactions with
owners - - - 141 (10,338) (10,197)
----------------------- ---------- --------- ------------ ---------- ---------- ---------
Profit for the
year - - - - 4,854 4,854
Other comprehensive
income - - - - (123) (123)
----------------------- ---------- --------- ------------ ---------- ---------- ---------
Total comprehensive
income - - - - 4,731 4,731
----------------------- ---------- --------- ------------ ---------- ---------- ---------
At 31 December
2020 3,697 3,255 1,209 394 111,321 119,876
----------------------- ---------- --------- ------------ ---------- ---------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2020
2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Profit for the financial year 4,854 26,835
Adjustments for:
Depreciation and amortisation 4,971 4,541
Impairment losses on goodwill 3,820 -
and intangible assets
Impairment losses on property, 1,016 -
plant and equipment
Loss on sale of property, plant
and equipment 71 19
Finance income (150) (235)
Finance expense 190 252
Tax expense recognised in the
income statement 1,686 5,587
Decrease/(increase) in inventories 2,440 (925)
Decrease in trade and other receivables 9,220 1,263
Decrease in trade and other payables (838) (2,463)
Change in pension obligations (755) (798)
21,671 7,241
Cash generated from operating
activities 26,525 34,076
Tax paid (5,017) (5,887)
--------- ------------
Net cash generated from operating
activities 21,508 28,189
Cash flows from investing activities
Finance income 150 235
Proceeds from sale of property,
plant and equipment 35 11
Acquisition of property, plant
and equipment (2,701) (5,910)
Acquisition of intangible assets (170) -
Acquisition of subsidiary (880) (4,893)
Net cash used in investing activities (3,566) (10,557)
Cash flows from financing activities
Payment of lease liabilities (1,254) (1,118)
Dividends paid (10,338) (14,466)
------------------------------------------ ---------- --------- ---------- ------------
Net cash used in financing activities (11,592) (15,584)
Net increase in cash and cash
equivalents 6,350 2,048
Cash and cash equivalents at 1
January 40,944 38,896
------------------------------------------ ---------- --------- ---------- ------------
Cash and cash equivalents at 31
December 47,294 40,944
------------------------------------------ ---------- --------- ---------- ------------
NOTES
1. Basis of Preparation
The preliminary financial information does not constitute
statutory accounts for the financial years ended 31 December 2020
and 31 December 2019, but has been derived from those accounts. The
accounting policies remained unchanged from those set out in the
2019 annual report.
Statutory accounts for 2019 have been delivered to the Registrar
of Companies and those for the financial year ended 31 December
2020 will be delivered following the Company's Annual General
Meeting. The auditors have reported on those accounts and their
reports were unqualified, did not draw attention to any matters by
way of emphasis, and did not contain a statement under 498(2) or
498(3) of the Companies Act 2006.
2. Going Concern
In assessing the appropriateness of adopting the going concern
basis in preparing the Annual Report and financial statements, the
Directors have considered the current financial position of the
Group, its principal risks and uncertainties and the potential
impact of further Covid-19 restrictions. The review performed
considers severe but plausible downside scenarios that could
reasonably arise within the period.
The estimated impacts of Covid-19 restrictions are primarily
based around our Out of Home market and the length of time that
lockdown restrictions may be in place for the hospitality industry.
Our modelling has sensitised trading within this market to reflect
varying degrees of lockdowns with the most severe scenario assuming
that some restrictions will persist throughout the whole of 2021,
with Out of Home performance only beginning to return to pre
Covid-19 levels during 2022.
In addition to the continued impact of Covid-19, alternative
scenarios, including the potential impact of key principal risks
from a financial and operational perspective, have been modelled
with the resulting implications considered.
In all cases, the busines model remained robust. The Group's
diversified business model and strong balance sheet entering 2021,
combined with its strong cash generation in 2020 all provide
resilience against these factors and the other principal risks that
the Group is exposed to. At the 31 December 2020 the Group had cash
and cash equivalents of GBP47.3m with no external bank borrowings.
This equates to 95% of 2020 gross profit.
On the basis of these reviews, the Directors consider the Group
has adequate resources to continue in operational existence for the
foreseeable future (being at least one year following the date of
approval of the Annual Report) and, accordingly, consider it
appropriate to adopt the going concern basis in preparing the
financial statements.
3. Impact of Covid-19 on Financial Statements
In light of the effects of Covid-19 and social distancing
measures on the Group's business and customers, the Directors have
considered the impact on the accounting judgements and estimates
within the financial statements. All commercial and operational
impacts of Covid-19 have been treated within the underlying results
and no Covid-19 impact has been treated as exceptional.
Expected credit loss provisions on the Group's trade receivables
have been reviewed in light of potential increased risk of bad
debt, particularly in relation to smaller independent
customers.
Reductions in sales, particularly in Out of Home, have increased
the amount of potentially out-of-date and obsolete stock held by
the Group. This has resulted in an increase in stock provisions of
GBP0.7m by 31 December 2020. Following lockdown 1, within Out of
Home the business provided customers with new stock to replace old
out of date stock free of charge.
The Group has accessed the funds made available by the
Government under the Job Retention Scheme. This was used to
partially offset the payroll expense incurred for employees who
were furloughed. In Q2 a large proportion of the UK OoH team were
furloughed, largely returning to work in the early summer. Through
the fourth quarter of the year (Q4) increased customer outlet
closures meant a return to furlough for a number of our OoH team.
The business has paid furloughed employees at 100% of salary
throughout the year and only furloughed employees where reductions
in workload have been deemed temporary due to Government
restrictions. The financial contribution made by the Government
from the scheme to Nichols was GBP1.4m during the year.
Our offices and depots have remained open in a Covid secure
manner throughout the year for wellbeing purposes or office
critical activities, but the vast majority of office-based
employees have worked effectively from home. High levels of service
have continued to be provided to all of our customers.
4. Segmental Reporting
The Board considers the business from a product perspective and
reviews the Group's performance based on the operating segments
identified below. There has been no change to the segments during
the period. Based on the nature of the products sold by the Group,
the types of customers and methods of distribution, management
consider reporting operating segments at the Still and Carbonate
level to be reasonable, particularly in light of market research
and industry data made available by Nielsen. Gross profit is the
measure used to assess the performance of each operating
segment.
Still Carbonate Group
GBP'000 GBP'000 GBP'000
Year ended 31 December 2020
Sales 65,688 52,969 118,657
Gross Profit 32,817 16,819 49,636
Year ended 31 December 2019
Sales 71,661 75,324 146,985
Gross Profit 42,712 27,246 69,958
A geographical split of revenue is provided below:
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
Geographical split of revenue
Middle East 7,309 11,566
Africa 14,010 13,042
Rest of the World 5,712 4,870
United Kingdom 91,626 117,507
-------------- --------------
Total revenue 118,657 146,985
-------------- --------------
5. Exceptional items
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
Impairment of goodwill and intangibles 3,820 -
Review of UK packaged supply chain 277 -
Redundancy costs 723 -
Restructuring costs 254 -
5,074 -
-------------- --------------
Following a strategic review of the Group's 'Feel Good' Brand
and its recognition as a separate Cash Generating Unit ('CGU'), the
Group has incurred a non-cash impairment to Goodwill and Intangible
Assets of its 'Feel Good' Brand of GBP3.8m. The Group remains
committed to the 'Feel Good' Brand, which has recently been
relaunched in the UK.
The Group commenced a review of its UK packaged supply chain in
Q4, engaging third party consultants and this is expected to
conclude with implementation through 2021. Costs incurred to date
amount to GBP0.3m with further costs expected in 2021.
The Group completed a review of its operational and leadership
structures in Q4.
Operational changes followed the integration of prior year
acquisitions and the implementation of new systems into the OoH
route to market. These changes were implemented in Q4, making a
number of roles redundant at the year-end incurring costs of
GBP0.7m.
The Group decided to move from three Executive Directors to two
at the year-end following a review of the Executive Board members
portfolios. Early termination costs associated with these changes
were GBP0.3m.
Due to the nature of these charges, the Board is treating these
items as exceptional costs and their impact has been removed in all
adjusted measures throughout this report.
6. Earnings Per Share
Basic earnings per share is calculated by dividing the profit
after tax for the year of the Group by the weighted average number
of ordinary shares in issue during the financial year. 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.
The earnings per share calculations for the period are set out
in the table below:
Earnings Weighted average Earnings per
number of shares share
GBP'000
31 December 2020
Basic earnings per share 4,854 36,932,032 13.14p
Dilutive effect of share
options 26,551
Diluted earnings per share 4,854 36,958,583 13.13p
Adjusted earnings per share before exceptional items has been
presented in addition to the earnings per share as defined in IAS
33 Earnings per share, since in the opinion of the Directors, this
provides shareholders with a more meaningful representation of the
earnings derived from the Groups' operations. It can be reconciled
from the basic earnings per share as follows:
Earnings Weighted average Earnings per
number of shares share
GBP'000
31 December 2020
Basic earnings per share 4,854 36,932,032 13.14p
Exceptional items after
taxation 4,586
Adjusted basic earnings
per share 9,440 36,932,032 25.56p
Diluted effect of share
options 26,551
Adjusted diluted earnings
per share 9,440 36,958,583 25.54p
7. Non-current Assets
Property, Goodwill Intangibles
Plant
& Equipment
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2020 33,507 38,585 9,590
Additions 3,927 - 170
Adjustment to acquisition
of subsidiary (163) 163
Disposals (1,339) - -
At 31 December 2020 35,932 38,748 9,760
------------- --------- ------------
Depreciation and Amortisation
At 1 January 2020 11,765 - 1,525
Charge for the period 4,258 - 713
On disposals (1,233) - -
Impairment 1,016 2,504 1,316
At 31 December 2020 15,806 2,504 3,554
-------- ------ ------
Net book value
At 31 December 2019 21,742 38,585 8,065
At 31 December2020 20,126 36,244 6,206
------- ------- ------
Goodwill and other intangible assets which have indefinite
useful lives, including the Group's acquired brands, are subject to
annual impairment testing or more frequent testing if there are
indicators of impairment.
The identification of Feel Good as an independent CGU, and the
associated future cash flow forecasts due to its change in focus
following rebranding, were recognised by management as a potential
trigger of impairment. Following review, an impairment totalling
GBP3.8m (GBP2.5m Goodwill and GBP1.5m Intangible assets) has been
recognised as an exceptional item.
Annual impairment reviews were performed on the remaining
Goodwill and Intangible assets with indefinite lives, all of which
relate the Group's Out of Home Business. The discount rate used of
8.2% is a pre-tax rate and reflects the risks specific to the
relevant cash-generating unit. Out of Home business cash flow
projections are based on the most recent financial budgets approved
by management. Management have applied an annual growth rate in
projecting the cash flows for a period of five years in line with
these budgets. Further periods have been included in the impairment
test based on growth into perpetuity of 2% per annum.
When compiling the financial budgets and the annual growth
projections for the five years and into perpetuity, management have
considered the current economic climate, including the impacts of
Covid-19, along with future growth rates reasonable to this market.
The level of growth assumed in these forecasts fully takes into
account the time the hospitality industry is anticipated to take to
recover from the impact of the pandemic.
Based on the review performed no impairment has been made in
relation to the Out of Home business. As part of forming this
conclusion a sensitivity analysis has been performed which focused
on the change required in key assumptions (long-term growth and the
pre-tax discount rate), both individually and collectively, to give
rise to an impairment. If the discount rate were to increase by 1.3
percentage points and the terminal growth rate were to decrease by
1.7 percentage points, which whilst not management's current
expectation is considered to be reasonably possible, this would
lead to an impairment charge.
8. Defined Benefit Pension Scheme
The Group operates a defined benefit plan in the UK. A full
actuarial valuation was carried out on 5 April 2020 and updated at
31 December 2020 by an independent qualified actuary.
A summary of the pension surplus position is provided below:
Pension surplus/(deficit) GBP'000
At 1 January 2020 (253)
Current service cost (24)
Past service cost (64)
Scheme administrative expenses (58)
Net interest income 3
Actuarial losses (155)
Contributions by employer 898
At 31 December 2020 347
--------
9. Contingent Liability
The Group had previously entered into contracts with some of its
senior management relating to incentive schemes which were designed
to motivate, retain and engage those key employees. HMRC have
written to the Group with their initial view that the arrangements
should have been taxed as employment income which the Group and its
advisors dispute.
If HMRC pursues its current position and is successful in its
argument, then the Group may have to pay up to GBP3.4m (2019:
GBP3.2m) in Income Tax and National Insurance. In addition, the
Group may have to pay up to GBP0.7m of interest to HMRC that hadn't
previously been included.
The employees who are party to the contracts have formally
indemnified the Group in relation to income tax and employees'
National Insurance and an amount of up to GBP2.6m (2019: GBP2.4m)
can be requested from them.
The Directors have obtained external advice and on the basis of
this do not believe that the Group has a liability for any
additional tax or National Insurance.
The tribunal appeal is being heard through spring 2021. In
common with such disputes with HMRC it may take some time to settle
and the Directors are unable to assess how long this will take and
the timing of any potential settlement if required. As at the date
of this report, there has been no significant progress in the case
to note since this time last year.
10. Contingent consideration
Within the Consolidated Statement of Cash Flows there is a
GBP0.9m cash outflow in relation to the payment of contingent
consideration. These payments relate to contingent consideration
paid for acquisitions made in previous financial years.
11. Dividends
In March 2020, the Board made the decision to withdraw the final
dividend (28.0p) for 2019, due to the uncertainties concerning the
financial impact of Covid-19. At the half year, the Board agreed
the rebalancing of dividend policy to consider the two financial
years 2019 and 2020 as a single review period and paid 28p, as the
Interim Dividend for 2020, in September 2020.
In the second half year, the Board has agreed to evolve the
dividend policy to reflect the balance of shareholder needs and the
clear opportunities for growth that will exist in the soft drinks
market post the pandemic. Dividend cover going forward will move to
broadly 2x.
Therefore, the final dividend proposed is 8.8p, which will
become ex-dividend on the 25 March and paid subject to shareholder
approval on 6 May 2021.
Annual Report
The annual report will be mailed to shareholders and made
available on our website on or around 16 March 2021. Copies will be
available after that date from: The Secretary, Nichols plc, Laurel
House, Woodlands Park, Ashton Road, Newton-le-Willows, WA12
0HH.
Cautionary Statement
This Preliminary Report has been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. The
Preliminary Report should not be relied on by any other party or
for any other purpose.
-Ends-
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FLFSAVVIFIIL
(END) Dow Jones Newswires
March 03, 2021 02:00 ET (07:00 GMT)
Nichols (LSE:NICL)
Historical Stock Chart
From Apr 2024 to May 2024
Nichols (LSE:NICL)
Historical Stock Chart
From May 2023 to May 2024