Source - LSE Regulatory
RNS Number : 8957F
Nichols PLC
21 July 2021
 

 

21 July 2021                                                                                                                                 

Nichols plc

2021 INTERIM RESULTS

 

Strong performance with robust growth

 

Nichols plc ('Nichols' or the 'Group'), the diversified soft drinks Group, announces its unaudited interim results for the half year ended 30 June 2021 (the 'period').

 

 

Half year ended

30 June 2021

Half year ended

30 June 2020

 

Movement

 

£m

£m

 

 

 

 

 

Group Revenue

67.4

59.2

+13.8%

 

 

 

 

Adjusted Operating Profit1

9.0

6.8

+32.9%

Operating Profit

8.8

3.0

+195.1%

 

 

 

 

Adjusted Profit Before Tax (PBT)1

8.9

6.8

+31.6%

Profit Before Tax (PBT)

8.6

2.9

+193.4%

 

 

 

 

Adjusted PBT Margin1

13.2%

11.5%

+1.7ppts

PBT Margin

12.8%

4.9%

+7.9ppts

 

 

 

 

EBITDA2

11.2

9.3

+20.4%

 

 

 

 

Adjusted Earnings per Share (basic)1

19.52p

14.94p

+30.7%

Earnings per Share (basic)

18.93p

4.59p

+312.4%

 

 

 

 

Cash and Cash Equivalents3

47.4

47.3

+0.2%

 

 

 

 

Interim Dividend

9.8p

28.0p4

(65.0%)

  

 

 

 

Vimto Brand Value in the UK +2.7% YTD with Vimto Dilutes significantly outperforming the market5

UK revenue up +5.5% with Out of Home ("OoH") revenues broadly in line with prior year following encouraging Q2 performance

Vimto international growth of +42.3% versus prior year

Vimto 'in market' Middle East volumes remained resilient through Ramadan with full year 'in market' volumes expected to remain in line with pre-Sweetened Beverage Tax levels

Vimto in Africa delivered strong revenue growth of +22.8%

Vimto continues to progress across the rest of the world, delivering revenue growth of 49.3%

The business continues to invest in UK operational change in order to ensure continued agility and growth given future prospects

Strong cash and cash equivalents at £47.4m (31 December 2020: £47.3m)

Interim dividend of 9.8p

2021 Financial Guidance remains unchanged6

New long-term agreement signed with J & J Snack Foods Corp. to manufacture, manage, distribute and sell the SLUSH PUPPiE brand across the UK, Ireland and Europe

     

 

 

1 Excluding Exceptional items of £0.3m (H1 2020: £3.8m)

2 EBITDA is the statutory profit before tax, interest, depreciation and amortisation

3 The comparison is to 31 December 2020. All other comparatives compare to the six months ending 30 June 2020 unless otherwise stated

4 Final dividend FY19 (28.0p) withdrawn. Same value paid as interim dividend FY20

5 Nielsen Total Coverage Year to Date, 19 June 2021

6 FY21 Adjusted PBT of £18.9m (FY20 Actual £11.6m)

 

 

John Nichols, Non-Executive Chairman, commented:

"Our first and most important objective through the Covid-19 pandemic has been the continued safety and wellbeing of our employees and customers. Throughout these challenging times, our colleagues have consistently demonstrated their commitment to our business and our customers, and I would again like to wholeheartedly thank everyone for their support.

 

The continued strong performance of the Vimto brand, the Group's robust balance sheet and our diversified business model has ensured a resilient financial performance in the period with growth across each of our reporting segments.

 

The UK Government's planned roadmap out of lockdown continues and although at a more cautious pace than originally planned, the Group's positive start to the year means that we remain confident that it will achieve the Board's expectations for the year. Longer term, the Board is currently assessing the impact of inflationary pressures affecting logistics, labour, plastics and costs associated with increasing environmental legislation." 

 

 

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

Singer Capital Markets (Nominated Adviser)

Telephone: 0207 796 4133

Telephone: 0207 496 3000

Email: nichols@hudsonsandler.com

Website: www.singercm.com

 

 

Notes to Editors:

Nichols plc is an international diversified soft drinks business with sales in over 73 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 SLUSH PUPPiE, 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.

 

 

 

Executive Review

 

Revenue

Despite exceptionally tough trading conditions, particularly in the OoH route to market, and against very strong comparatives in packaged routes to market, the Board is pleased to report a strong half year performance with Group revenues of £67.4m, an increase of 13.8% compared to the prior year (H1 2020: £59.2m), and encouragingly with growth achieved across each of our reporting segments.

 

The Still and Carbonate product segments achieved revenue growth of 9.8% (to £35.6m) and 18.6% (to £31.8m) respectively, driven by both strong UK and International Packaged performance.

               

The Vimto brand continues to perform strongly in all of its markets. In the UK the Vimto brand value increased by 2.7%1 according to Nielson. In Africa, the Middle East, Europe and the US we continued to see significant progress year on year, with international revenues increasing 42.3% versus the prior year.

 

Driven by continued progress within the UK packaged route to market, UK revenue increased by 5.5% to £48.4m (H1 2020: £45.9m). UK packaged revenues improved by 5.0%, underpinned by the strong performance of the Vimto brand,  particularly within Dilutes, where the brand's squash products significantly outperformed the market1. Despite the strong H1 2020 comparative (which included a very warm Spring and significant increases in consumer buying as the UK entered its first lockdown), the Group saw revenues increase 5.0% within UK retailers. Revenues within Convenience, Delivered Wholesale and Cash and Carry channels were broadly flat year on year, with both current and prior year periods significantly subdued due to the impact of outlet closures.

 

Within our OoH route to market the Group has worked closely with its partners to support the re-opening of the sector. Pleasingly, we started to see significant numbers of outlets gradually open through Q2, resulting in half year revenues broadly in line with those of the prior year. Q2 revenues were 843.7% ahead of those in the same quarter last year, when the UK was in a period of national lockdown, and the Board believes there is a more stable outlook for H2 given the success of the UK vaccination programme. Given the break in the link between infection and hospitalisation, there is now significant confidence that the re-opening of outlets will be permanent.

 

Towards the end of the period, the Group was pleased to sign a significant new agreement with J & J Snack Foods Corp for Vimto Out of Home to revive the iconic SLUSH PUPPiE frozen drink brand in the UK. The long-term agreement gives Vimto Out of Home, part of Nichols plc, the rights to manufacture, manage, distribute and sell the SLUSH PUPPiE brand across the UK, Ireland, and Europe. Using its expertise as the UK's leading frozen beverage supplier, the Group plans to refresh and relaunch the brand.

 

Sales across our international markets were up 42.3% at £19.0m (H1 2020: £13.3m), with double digit growth in all markets. Despite the ongoing pandemic, Middle East volumes performed resiliently through Ramadan, and 'in market' volumes across the Middle East are expected to be broadly flat through 2021. The Group, alongside its local partner, continues to invest in offsetting some of the pricing impact of the Sweetened Beverage Tax ("SBT"). In Africa, the strong growth seen in the prior year (7.4%) has continued at the start of this year with revenues improving by 22.8% to £10.2m (H1 2020: £8.3m). Rest of World revenues (largely Europe and the US) experienced growth of 49.3% to £3.7m (H1 2020: £2.5m).

 

The impact of movements in foreign exchange rates on revenue year on year was £0.2m adverse as Sterling strengthened against the Euro and US Dollar.

 

 

Gross Profit

Gross profit at £29.9m was £5.4m higher than H1 2020 (£24.6m) and 2.9 percentage points higher at 44.4% (H1 2020: 41.5%) with progress seen in both the Still and Carbonate segments.

 

Of the £5.4m improvement, approximately £2.7m is due to the volume effect of increased revenues from our Packaged routes to markets. Significant OoH stock write offs in H1 2020 provided an additional £0.7m of gross profit year on year whilst the balancing £2.0m is a net price/mix effect of improved contribution from revenues into the Middle East and Africa supported by a positive SBT comparison.

 

 

 

1 Nielsen Total Coverage Year to Date 19 June 2021

 

 

Across the Middle East we remain very pleased with the results reported since the introduction of the SBT, with 'in market' volumes expected to be broadly in line with levels prior to the tax's introduction.

 

 

Distribution Expenses

Distribution expenses totalled £4.2m (H1 2020: £3.8m), an increase of 11.5% versus the same period last year.

 

Although a significant proportion of the increase is volume related, the Group experienced supply and price pressure across its supply chains. Container availability for international shipments has driven up prices and created trading challenges. In the UK, Brexit and the tightening of IR35 legislation have created a shortage of drivers, which, when combined with increasing fuel costs, points to significant inflationary pressure over the coming months.

 

 

Administration Expenses

Administration expenses, excluding exceptional items, totalled £16.7m (H1 2020: £14.0m), an increase of £2.7m or 19.3%.

 

The Group has incurred a number of significant comparative movements year on year which are highlighted below.

 

The Group recommenced its investment in marketing spend with the TV and social media campaign 'Vimto, Find Your Different', increasing comparative costs by £1.2m year on year.

 

In both 2019 and 2020 the Group had administrative credits of £1.1m and £1.3m respectively following the release of unrealised deferred consideration initially recognised at the acquisition of both Adrian Mecklenburgh and Noisy North West. There have been no adjustments in 2021. Of the £1.3m from 2020, £1.1m was released in Q1 2020, therefore increasing comparative costs by a further £1.1m.

 

The Group incurred a foreign exchange loss in the first half year of £0.5m as a result of the strengthening of Sterling against both the Euro and the US Dollar. This compares with a £0.4m gain in H1 2020.

 

Throughout the pandemic the Group has placed a strong focus on controlling overhead costs whilst ensuring the business is able to 'Build Back Better' as restrictions ease. This focus on reducing discretionary spend remained in place at the start of this year whilst recognising the changing environment and the increasing easing of restrictions across the UK, resulting in net comparative savings of £0.5m. This year on year saving largely relates to the organisational changes implemented in H2 2020.       

 

 

Exceptional Costs

As noted in the 2020 Annual Report and Accounts, during Q4 2020 the Group commenced a review of its UK packaged supply chain in order to ensure continued agility and growth given future prospects. This review has continued during the first half year resulting in £0.3m of exceptional costs (project and contract development costs) during the period with further costs expected during the second half of 2021.

 

Exceptional costs in the first half of 2020 were £3.8m and related to the non-cash impairment of the Group's goodwill and intangible assets of its 'Feel Good" brand.

 

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 of £9.0m was up £2.2m, a 32.9% increase on the prior year (H1 2020: £6.8m). Operating profit of £8.8m (H1 2020: £3.0m) is after charging exceptional items during the period.

 

The strengthening of Sterling against the Euro and the US Dollar during the period resulted in an overall foreign exchange loss to operating profit in the year of £0.5m (2020 H1: £0.4m gain).

 

 

Finance Costs

Net Finance costs of £0.1m (H1 2020: £nil) were broadly in the line with the prior year.

 

 

Profit before tax and tax rate

Adjusted profit before tax increased by 31.6% to £8.9m (H1 2020: £6.8m). The tax charge on adjusted profit before tax for the period of £1.7m (H1 2020: £1.2m) represents an effective tax rate of 19% (H1 2020: 18%). Reported profit before tax was £8.6m, an increase of 193.4% compared to the prior year (H1 2020: £2.9m).

 

 

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 £47.4m (H1 2020: £46.8m), broadly in line with the 2020 year end position (£47.3m).

 

The continued strength of the Group's closing balance sheet reflects its diversified routes to market and asset light model. These attributes enable the Group to continue supporting its stakeholders by:

 

·    Replacing old stock with new (£0.3m), free of charge for its OoH customers following the second lockdown as well as   providing enhanced credit terms;

·      Continued full payment of taxes; and

·      Not participating in Government loan or payment deferral opportunities.

 

As expected, following the gradual re-opening of outlets in the Q2, the Group has begun to see a re-investment into working capital as the Group's debtors and inventories begin to return to 2019 levels. The Group's debtors and inventories are £8.4m higher than at the year end, offset by an increase of £4.5m in creditors as volumes have increased. The Group continues to focus on working capital management and has seen very low capital expenditure in the period of £0.6m (H1 2020: £1.9m). Increased investment is expected during the second half as OoH re-opens fully.

 

Despite this working capital outflow, the Group was pleased to generate Free Cash Flow of £3.4m (H1 2020: £6.7m).

 

 

Earnings per share

Total adjusted basic EPS increased to 19.52 pence (H1 2020: 14.94p) with basic EPS at 18.93 pence (H1 2020: 4.59p). On an adjusted basis, diluted EPS was 19.49 pence (H1 2020: 14.93p).

 

 

Dividend

As disclosed in the Group's 2020 Annual Report, the Board evolved 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.

 

In line with the new policy, dividend cover is broadly 2x the adjusted earnings of the Group. As a result, the interim dividend for 2021 will be 9.8p per share to be paid on 10 September 2021 with a record date of 30 July 2021.

 

 

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 30 June 2021, the Group recognised a surplus on its UK defined benefit scheme of £3.9m (31 December 2020: surplus £0.3m).

 

During the start of 2021, the Group has agreed with the Trustees a de-risking future funding plan for the defined benefit scheme. The reinvestment to de-risked funds was largely completed in the first half of 2021.

 

 

Outlook

The UK Government's planned roadmap out of lockdown continues and although at a more cautious pace than originally planned, the Group's positive start to the year means that we remain confident that it will achieve the Board's expectations for the year. Longer term, the Board is currently assessing the impact of inflationary pressures affecting logistics, labour, plastics and costs associated with increasing environmental legislation.

 

Andrew Milne

Chief Executive Officer

 

David Rattigan

Chief Financial Officer

21 July 2021

CONSOLIDATED INCOME STATEMENT

 

 

 

 

 

Unaudited Half year to 30 June

2021

£'000

Unaudited

Half year to

30 June

2020

£'000

Audited

Year ended

31 December 2020

£'000

 

 

 

 

Continuing operations

 

 

 

Revenue

67,392

59,213

118,657

Cost of sales

(37,448)

(34,641)

(69,021)

Gross profit

29,944

24,572

49,636

 

 

 

 

Distribution expenses

(4,244)

(3,806)

(7,979)

Administrative expenses

(16,945)

(17,799)

(35,077)

Operating profit

8,755

2,967

6,580

 

 

 

 

Finance income

24

113

150

Finance expenses

(149)

(139)

(190)

Profit before taxation

8,630

2,941

6,540

 

 

 

 

Taxation

(1,640)

(1,244)

(1,686)

Profit for the period

6,990

1,697

4,854

 

 

 

 

Earnings per share (basic)

18.93p

4.59p

13.14p

Earnings per share (diluted)

18.91p

4.59p

13.13p

 

 

 

 

 

 

 

 

Adjusted for exceptional items

 

 

 

 

 

 

 

Operating profit

8,755

2,967

6,580

Exceptional items

267

3,820

5,074

Adjusted operating profit

9,022

6,787

11,654

 

 

 

 

Profit before taxation

8,630

2,941

6,540

Exceptional items

267

3,820

5,074

Adjusted profit before taxation

8,897

6,761

11,614

 

 

 

 

Adjusted earnings per share (basic)

19.52p

14.94p

25.56p

Adjusted earnings per share (diluted)

19.49p

14.93p

25.54p

 

 

 

 

 

 

 

 

           

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Unaudited Half year to 30 June

2021

£'000

Unaudited

Half year to

30 June

2020

£'000

Audited

Year ended 31 December

2020

£'000

 

 

 

 

Profit for the financial period

6,990

1,697

4,854

 

 

 

 

Items that will not be classified subsequently to profit or loss:

 

 

 

 

 

 

 

Re-measurement of net defined benefit liability

3,176

(2,347)

(155)

Deferred taxation on pension obligations and employee benefits

(603)

295

32

 

 

 

 

Other comprehensive income/(expense) for the period

2,573

(2,052)

(123)

 

 

 

 

Total comprehensive income/(expense) for the period

9,563

(355)

4,731

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

 

 

 

 

 

Unaudited

30 June

2021

Unaudited

30 June

2020

Audited

31 December

2020

ASSETS

 

£'000

£'000

£'000

Non-current assets

 

 

 

 

Property, plant and equipment

 

18,706

22,002

20,126

Goodwill

 

36,244

36,081

36,244

Intangibles

 

5,866

6,470

6,206

Deferred tax assets

 

-

578

-

Pension surplus

 

3,925

-

347

 

 

 

 

 

Total non-current assets

 

64,741

65,131

62,923

 

 

 

 

 

Current assets

 

 

 

 

Inventories

 

6,563

6,787

5,921

Trade and other receivables

 

37,979

33,745

29,814

Cash and cash equivalents

 

47,427

46,781

47,294

 

 

 

 

 

Total current assets

 

91,969

87,313

83,029

 

 

 

 

 

Total assets

 

156,710

152,444

145,952

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

25,860

20,746

21,669

 

 

 

 

 

Total current liabilities

 

25,860

20,746

21,669

 

 

 

 

 

Non-current liabilities

Other payables

 

2,724

 

3,073

 

2,922

Pension obligations and employee benefits

 

-

1,880

-

Deferred tax liabilities

 

2,024

1,701

1,485

 

 

 

 

 

Total non-current liabilities

 

4,748

6,654

4,407

Total liabilities

 

30,608

27,400

26,076

 

 

 

 

 

Net assets

 

126,102

125,044

119,876

 

 

 

 

 

 

EQUITY

 

 

 

 

Share capital

 

3,697

3,697

3,697

Share premium reserve

 

3,255

3,255

3,255

Capital redemption reserve

 

1,209

1,209

1,209

Other reserves

 

306

310

394

Retained earnings

 

117,635

116,573

111,321

 

 

 

 

 

Total equity

 

126,102

125,044

119,876

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

Called up share capital

£'000

Share premium reserve

£'000

Capital redemption reserve

£'000

Other reserves

 

£'000

Retained earnings

 

£'000

Total

equity

 

£'000

 

 

 

 

 

 

 

At 1 January 2020

3,697

3,255

1,209

253

116,928

125,342

Dividends

-

-

-

-

-

Movement in ESOT

-

-

3

-

3

Credit to equity for equity-settled share based payments

-

-

-

54

-

54

Transactions with owners

-

-

-

57

-

57

Profit for the period

-

-

-

-

1,697

1,697

Other comprehensive expense

-

-

-

-

(2,052)

(2,052)

Total comprehensive expense

-

-

-

-

(355)

(355)

At 30 June 2020

3,697

3,255

1,209

310

116,573

125,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Called up share capital

£'000

Share premium reserve

£'000

Capital redemption reserve

£'000

Other reserves

 

£'000

Retained earnings

 

£'000

Total

equity

 

£'000

At 1 January 2021

3,697

3,255

1,209

394

111,321

119,876

Dividends

-

-

-

-

(3,249)

(3,249)

Movement in ESOT

-

-

-

(2)

-

(2)

Debit to equity for equity-settled share based payments

 

-

 

-

 

-

 

(86)

 

-

 

(86)

Transactions with owners

-

-

-

(88)

(3,249)

(3,337)

Profit for the period

-

-

-

-

6,990

6,990

Other comprehensive income

-

-

-

-

2,573

2,573

Total comprehensive income

-

-

-

-

9,563

9,563

At 30 June 2021

3,697

3,255

1,209

306

117,635

126,102

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

Unaudited

Half year to

30 June

2021

 

Unaudited

Half year to

30 June

2020

 

Audited

Year ended

31 December

2020

 

      

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the financial period

 

6,990

 

1,697

 

4,854

 

 

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

 

Depreciation and amortisation

2,464

 

2,434

 

4,971

 

 

Impairment losses on goodwill and intangible assets

-

 

 

3,820

 

3,820

 

 

Impairment losses on property, plant and equipment

-

 

-

 

1,016

 

 

Loss on sale of property, plant and equipment

8

 

58

 

71

 

 

Finance income

(24)

 

(113)

 

(150)

 

 

Finance expense

149

 

139

 

190

 

 

Tax expense recognised in the income statement

1,640

 

1,244

 

1,686

 

 

Change in inventories

(642)

 

1,574

 

2,440

 

 

Change in trade and other receivables

(7,774)

 

4,659

 

9,220

 

 

Change in trade and other payables

4,457

 

(1,677)

 

(838)

 

 

Change in pension obligations

(402)

 

(720)

 

(755)

 

 

 

 

(124)

 

11,418

 

21,671

 

 

 

 

 

Cash generated from operating activities

 

 

6,866

 

 

13,115

 

 

 

26,525

 

 

Tax paid

 

(2,094)

 

(4,047)

 

(5,017)

 

 

 

 

 

 

 

 

 

Net cash generated from operating activities

 

4,772

 

9,068

 

21,508

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Finance income

24

 

113

 

150

 

 

Proceeds from sale of property, plant and equipment

-

 

-

 

35

 

 

Acquisition of property, plant and equipment

(632)

 

(1,888)

 

(2,701)

 

 

Acquisition of intangible assets

-

 

-

 

(170)

 

 

Payment of contingent consideration (note 9)

(67)

 

(880)

 

(880)

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(675)

 

(2,655)

 

(3,566)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

Payment of lease liabilities

(715)

 

 

(576)

 

 

(1,254)

 

 

Dividends paid

(3,249)

 

-

 

(10,338)

 

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(3,964)

 

(576)

 

(11,592)

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

133

 

5,837

 

6,350

 

Cash and cash equivalents at start of period

 

47,294

 

40,944

 

40,944

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

47,427

 

46,781

 

47,294

 

                   

 

 

NOTES

               

1.    Basis of Preparation

 

The financial information set out in this Interim Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2020, prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

 

These condensed consolidated interim financial statements for the half year reporting period ended 30 June 2021 have been prepared in accordance with IAS 34 'Interim financial reporting' and also in accordance with the measurement and recognition principles of UK adopted international accounting standards. The Interim Report has not been audited or reviewed in accordance with the International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

 

The interim financial statements were authorised for issue by the Board of Directors on 21 July 2021.

 

 

2.    Going Concern

 

In assessing the appropriateness of adopting the going concern basis in preparing the Interim 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 OoH 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 remainder of 2021, with OoH performance only beginning to return to pre COVID-19 levels during the second half of 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 business model remained robust. The Group's diversified business model and strong balance sheet, combined with its strong cash generation all provide resilience against these factors and the other principal risks that the Group is exposed to. At the 30 June 2021 the Group had cash and cash equivalents of £47.4m with no external bank borrowings.

 

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 this Interim Report and financial statements) 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.

 

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. Through the first quarter of the year (Q1) continued customer outlet closures meant that a number of our OoH team were furloughed, all returning to work by the half year end. The business has paid furloughed employees at 100% of salary throughout the period 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 £0.7m during the period.

 

 

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 reporting 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

 

£'000

£'000

£'000

Half year to 30 June 2021

 

 

 

Revenue

35,558

31,834

67,392

Gross Profit

18,572

11,372

29,944

 

 

Half year to 30 June 2020

 

 

 

Revenue

32,381

26,832

59,213

Gross Profit

16,391

8,181

24,572

 

Year ended 31 December 2020

 

 

 

Revenue

65,688

52,969

118,657

Gross Profit

32,817

16,819

49,636

 

 

 

A geographical split of revenue is provided below:

 

 

 

Half year to

30 June

2021

Half year to

30 June

2020

Year ended

31 December

2020

 

 

£'000

£'000

£'000

Geographical split of revenue

 

 

 

Middle East

5,126

2,596

7,309

Africa

10,164

8,274

14,010

Rest of the World

3,675

2,462

5,712

United Kingdom

48,427

45,881

91,626

Total revenue

67,392

59,213

118,657

 

 

 

5.    Exceptional items

 

In order to allow a better understanding of the underlying trading performance of the Group, items which by virtue of their nature and size do not reflect the Group's underlying performance have been reported as exceptional items within administrative expenses. These items are as follows:

 

 

 

Half year to

30 June 2021

Half year to

30 June

2020

Year ended

31 December

2020

 

£'000

£'000

£'000

 

 

 

 

Review of UK packaged supply chain

267

-

277

Impairment of goodwill and intangibles

-

3,820

3,820

Redundancy costs

-

-

723

Restructuring costs

-

-

254

 

267

3,820

5,074

 

 

As noted in the 2020 Annual Report and Accounts, during Q4 2020 the Group commenced a review of its UK packaged supply chain in order to ensure continued agility and growth given future prospects. This review has continued during the first half year resulting in £0.3m of exceptional costs (project and contract development costs) during the period, with further costs expected during the second half of 2021.

 

For the prior period ended 30 June 2020, the Group recognised £3.8m of exceptional costs in relation to the non-cash impairment of the Group's goodwill and intangible assets of its 'Feel Good" brand.

 

 

6.    Earnings Per Share

 

Basic earnings per share is calculated by dividing the profit after tax for the period of the Group by the weighted average number of ordinary shares in issue during the period. 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 number of shares

Earnings per share

 

£'000

 

 

30 June 2021

 

 

 

Basic earnings per share

6,990

36,916,403

18.93p

Dilutive effect of share options

 

48,035

 

Diluted earnings per share

6,990

36,964,438

18.91p

 

 

 

 

 

 

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 number of shares

Earnings per share

 

£'000

 

 

30 June 2021

 

 

 

Basic earnings per share

6,990

36,916,403

18.93p

Exceptional items after taxation

216

 

 

Adjusted basic earnings per share

7,206

36,916,403

19.52p

Diluted effect of share options

 

48,035

 

Adjusted diluted earnings per share

7,206

36,964,438

19.49p

 

 

7.    Non-current Assets

 

 

Property, Plant & Equipment

Goodwill

Intangibles

 

£'000

£'000

£'000

Cost

 

 

 

At 1 January 2021

35,932

36,244

9,760

Additions

712

-

-

Disposals

(123)

-

-

At 30 June 2021

36,521

36,244

9,760

 

 

Depreciation and Amortisation

 

 

 

At 1 January 2021

15,806

-

3,554

Charge for the period

2,124

-

340

On disposals

(115)

-

-

At 30 June 2021

17,815

-

3,894

 

 

Net book value

 

 

 

At 1 January 2021

20,126

36,244

6,206

At 30 June 2021

18,706

36,244

5,866

 

 

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 30 June 2021 by an independent qualified actuary.

 

A summary of the pension surplus position is provided below:

 

Pension surplus

£'000

At 1 January 2021

347

Current service cost

(15)

Net interest income

3

Actuarial gains

3,176

Contributions by employer

414

At 30 June 2021

3,925

 

 

9.    Contingent consideration

 

Within the Statement of Cash Flows there is a £0.1m (H1 2020: £0.9m) cash outflow in the period in relation to the payment of contingent consideration. These payments relate to contingent consideration paid for acquisitions made in previous financial years.

 

 

10. 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 £3.4m (H1 2020: £3.4m) in Income Tax and National Insurance. In addition, the Group may have to pay up to £0.7m of interest to HMRC.

 

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 £2.6m (H1 2020: £2.6m) 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 was heard during Spring 2021. However, the outcome is currently pending and unknown. 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.

 

The likelihood and timing of any potential settlement remains unchanged from 31 December 2020.

 

 

11. Dividends

 

During the second half of last year the Board evolved 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 is broadly 2x adjusted earnings of the Group. As a result, the interim dividend for 2021 will be 9.8p per share to be paid on 10 September 2021 with a record date of 30 July 2021.

 

 

 

Cautionary Statement

 

This Interim 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 Interim Report should not be relied on by any other party or for any other purpose.

 

-Ends-

 

 

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