Nichols PLC Preliminary Results (7075Q)

TIDMNICL

RNS Number : 7075Q

Nichols PLC

02 March 2016

 
 Date:       Embargoed until 0700 Wednesday 2 March 
              2016 
 Contacts:   John Nichols, Non-Executive Chairman 
             Marnie Millard, Group Chief Executive Officer 
              Tim Croston, Group Chief Finance Officer 
             Nichols plc 
             Telephone: [phone] 
             Website:www.nicholsplc.co.uk 
 
             Alex Brennan              Richard Lindley 
             Hudson Sandler            N+1 Singer (Nominated Adviser) 
             Telephone:[phone]        Telephone: [phone] 
              4133 
             Email: [e-mail] 
 

Nichols plc

PRELIMINARY RESULTS

Nichols plc ('Nichols' or the 'Group'), the soft drinks Group, announces its Preliminary results for the year ended 31 December 2015 (the 'period').

Nichols plc is a highly focused soft drinks business. Its brand portfolio includes Vimto, which is sold in over 70 countries and Levi Roots, Feel Good, Sunkist and Panda which are sold in the UK. The Group operates in both the "Still" and "Carbonate" drinks categories.

Highlights:

 
                           Year ended     Year ended    % movement 
                           31 Dec 2015    31 Dec 2014 
-----------------------  -------------  -------------  ----------- 
 All references               GBPm           GBPm 
  below and throughout 
  the report are 
  pre-exceptional 
  items recognised 
  in 2014 
-----------------------  -------------  -------------  ----------- 
 
 Group Revenue               109.3          109.2         +0.1% 
-----------------------  -------------  -------------  ----------- 
 
 Operating Profit             27.8           25.6         +8.6% 
-----------------------  -------------  -------------  ----------- 
 Operating Profit 
  margin                      25%            23% 
-----------------------  -------------  -------------  ----------- 
 Profit Before 
  Tax                         28.0           25.7         +8.9% 
-----------------------  -------------  -------------  ----------- 
 Cash and cash 
  equivalents                 35.4           34.5 
-----------------------  -------------  -------------  ----------- 
 
 EPS (basic)                 60.33p         55.03p        +9.6% 
-----------------------  -------------  -------------  ----------- 
 

John Nichols, Non-Executive Chairman, said:

"I am pleased to report another strong performance in 2015 reflecting the strength of our brands and diversified business model. Our financial performance remained strong with international sales up 3.9% on a constant currency basis and Group profit before tax up by 8.9%.

Complementing our organic growth we were delighted to complete the two important strategic acquisitions during the year of the Feel Good brand and Noisy Drinks. These provide exciting extensions to Nichols' brand portfolio and distribution and will have a positive impact on revenue in 2016.

Underpinned by the strengths of our brands, people and business model the Board looks forward with confidence to the year ahead."

Chairman's Statement

I am pleased to report that the Group delivered another strong performance in 2015. Our international sales were up 3.9% year on year (on a constant currency basis), Group profit before tax pre exceptional items increased by 8.9% and we successfully completed two acquisitions.

Trading

Total Group revenue was GBP109.3m and profit before tax increased 8.9% to GBP28.0m (2014: GBP25.7m pre exceptional items). Whilst the headline sales performance was marginally ahead of the prior year, it is important to note that our profit growth was driven by trading activities which delivered a gross profit increase of 5.6% (GBP2.8m).

In the UK markets, sales totalled GBP84.8m, slightly below (-0.3%) the prior year's value of GBP85.1m but ahead of the total UK soft drinks market performance which declined by 0.6% (Nielsen year to 2 Jan 2016). Continuing our strategy of value over volume has once again delivered margin growth. This has been achieved by focusing on the growth of our still products and limiting our participation in deep promotional activity, particularly in carbonates. Also, and with a view to our future growth, we acquired the Feel Good brand in July 2015, which is an established range of premium still and sparkling juice drinks containing no added sugar and 100% natural ingredients. We are putting increased investment behind Feel Good and plan to re-launch in the summer of 2016.

The ongoing challenges in the UK grocery market have been widely reported and emphasise the importance of maintaining a diverse business which is not overly reliant on one market. I am therefore delighted to report that our international sales increased by 3.9% to GBP25.2m (constant currency basis - calculated by translating prior year non-sterling sales at this year's average exchange rate) during the year (1.5% on a reported basis). This performance was delivered from both of our core export markets being the Middle East and Africa. Trading in the Middle East was particularly encouraging given the difficulties in shipping to the Yemen due to the civil unrest in that region.

Full acquisition

Having taken an initial 49% share in The Noisy Drinks Company Limited (Noisy) in March 2015, which is equity accounted as an associate investment at the year-end, we are pleased to announce that the remaining shares were purchased on 8 January 2016. This additional investment is a key step in our strategy to enhance our Out of Home proposition. As a result we can now offer our customers a unique portfolio of still and carbonate products including dispensed soft drinks, packaged soft drinks and frozen drinks.

Noisy is the UK's leading frozen drinks business, supplying the Starslush brand to a number of prestigious customers in both the UK and mainland Europe. In addition to enhancing our product portfolio, the acquisition of Noisy strengthens our supply chain capabilities as the business has an established UK network facilitating direct access to customers on a national basis.

Dividend

The Group has delivered another strong performance in 2015 and as a reflection of the Board's continued confidence in the outlook, I am pleased to recommend a final dividend of 17.6 pence per share (2014: 15.3 pence). If accepted by our shareholders, the total dividend for 2015 will be 25.6 pence (2014: 22.4 pence), an increase of 14.3% on the prior year.

Subject to shareholder approval, the final dividend will be paid on 3 May 2016 to shareholders registered on 1 April 2016; the ex-dividend date is 31 March 2016.

Outlook

During 2016 we will continue to implement our growth strategy which includes further investment in our brands, across the still and carbonate product range, to support distribution growth both in the UK and our export markets. We will also complete the integration of Noisy (acquired in full in January 2016) and the Feel Good brand into the business both of which will have a positive impact on revenue during the year.

In summary, the Board is pleased with the 2015 performance and is confident that the Group is well placed to continue the trend in to 2016.

John Nichols

Non-Executive Chairman

2 March 2016

CHIEF EXECUTIVE OFFICER'S REPORT

Nichols continued to make good progress during the year despite some challenging market conditions, particularly in the UK. Before exceptional items, the Group delivered 8.9% profit before tax growth, 9.6% earnings per share growth and retains its robust financial position with GBP35.4m cash in the bank.

Acquisition formed a large piece of activity for the Group during the year which underpins future growth for the business. The diversification of the organisation remains our core strength, which ensures we are not reliant on one customer, one route to market or one geographical region. The addition of the Feel Good brand strengthens the Brand Portfolio and the integration of Noisy Drinks brings new customers and products into our Vimto Out of Home business.

The Vimto brand heritage remains strong. Created in 1908, it is as relevant in today's global market as it was 108 years ago. Distributed to over 70 markets, Vimto is loved from Manchester to Mali.

The UK Soft Drinks Market

In 2015, volumes in the UK soft drinks market increased by 0.6% (Nielsen year to 2 January 2016). The total value of the UK soft drinks market, excluding the "on trade" channel, decreased by 0.6% to a total value of GBP7.6bn.

The market saw the dilutes sector decrease in value by 7.4% while in contrast Vimto dilutes grew 1%. This growth was achieved whilst maintaining our focus of delivering value over volume.

The Vimto brand is unusual in the context of the soft drinks market as it is present in both the Still and Carbonate sector. The brand saw a pleasing performance in its ready to drink range which again significantly outperformed the market to deliver growth of 15%.

Operational review

Vimto UK

Our strategic focus on Still products continued in 2015 and as a result significant distribution gains were made on the Vimto ready to drink range, particularly in the prominent front of store chiller space.

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The Vimtoad featured in our "above the line" campaign again in 2015 and has been successful in broadening our target audience by encompassing parents and their teenagers. In addition to the national TV campaign we targeted the Midlands area with a regional up weighted communications campaign and a supporting van sales drive. The activity took place over the peak spring/summer period and included TV, radio, outdoor and digital advertising, culminating with the headline sponsorship of the Fusion Festival in Birmingham. The festival appealed to teens and their families with 50,000 people attending the three day event and featured performers such as Ed Sheeran and McBusted. The amplification of the festival sponsorship included radio advertising, sampling and social media. Van sales were designed to increase distribution with independent retailers and secured over 16,000 new listings. As a result of this combined strategy to drive both awareness and trial the Vimto brand sales have grown 9 times faster in the Midlands compared to its national performance. Vimto is now bought by an additional 15,000 households and resulted in the brand being enjoyed in 1 out of 4 households in the Midlands.

Vimto International

Our international business performed strongly during 2015 delivering growth of 3.9% (on a constant currency basis) despite challenges throughout the year of delivering concentrate to the Yemen as a result of conflict in this region.

In-country performance from our partner, Aujan Coca Cola, was very strong with growth of in-market volume of 9% as they executed another outstanding fully integrated marketing campaign during the Ramadan period. The theme focused on "emotional separation" and how the issue resonates in different ways with the Middle Eastern consumer. Through diary style real life stories, Vimto was once again highlighted as central to that special time when their families come together. Digital and social media communication remained key with material viewed online over 17 million times.

A high profile marketing initiative took place in the popular store of Bloomingdales in Dubai. Consumers were able to purchase a bottle of Vimto cordial and have their name personalised on the label.

As well as our business in the Middle East we have a long established trading history in the African region. In the latter half of 2015, six new bottlers were appointed in Africa which creates a platform for concentrate growth in 2016.

A new product launch also took place in 2015 with the launch of Vimto Malt. Dark malt and Vimto provides a great taste combination which meets the local needs of the African consumer and adds a new Vimto product to the International portfolio. This product will be launched via the ethnic channel into Europe as well as the USA in 2016.

For the first time in our history we completed the production of a pan-African TV commercial which will be aired in the region during 2016.

Vimto Out of Home

2015 saw the continued development of our Vimto Out of Home business with the rationalisation of the independent distributors now completed. In order to communicate our position as a one stop shop to the independent on-trade, this part of the organisation has been rebranded as Vimto Out of Home with the strap line "Refreshing Soft Drinks Solutions".

Acquisitions

Two important acquisitions were made during 2015; The Noisy Drinks Company Limited being a 49% associate investment, and the Feel Good brand (trade and assets acquisition).

Noisy was established in 2002 and employs 45 people nationally with its headquarters in Thurrock, Essex. Noisy has a strong track record of delivering high quality service through its UK network. Its product portfolio centres on frozen drinks and includes the Starslush and Slurp brands. With an enviable customer portfolio which ranges from Merlin theme parks such as Legoland, Alton Towers and Chessington to Compass Catering supplying schools, Noisy is a great addition to the Vimto Out of Home business.

Noisy provides a strong platform for product innovation. A new launch in 2015 saw the introduction of a new frozen carbonated product under the Burrst brand, which has particular relevance to the cinema sector. Vimto and Levi Roots Caribbean Crush have both been introduced into the Starslush and Burrst flavour portfolio and will achieve extended distribution in 2016.

The Feel Good brand was founded in 2001. Feel Good drinks is a premium range of 100% natural still and sparkling drinks for adults and kids. The range is available in over 20,000 outlets across 15 different countries. Feel Good is a core element of our future growth strategy which allows us to enter the premium health soft drinks sector. It also has an important part to play in all our routes to market. Whilst it is firmly established in the UK grocery packaged market, the brand has a growing presence in the out of home sector and an international business which we can build on. Feel Good sparkling will be relaunched in summer 2016 with exciting new flavours and new product ranges will be added to the brand ready for launch in early 2017.

Our proposition to the consumer for the brand is to "drink good" and "feel good", using only natural ingredients with uplifting flavours. Our brand values will ensure we always deliver integrity and honesty to our customers which, in turn, will ensure they have trust in the product we make.

Financial review

The Group has delivered sales of GBP109.3m (2014: GBP109.2m) in a challenging global market. The focus has been maintained on our value over volume strategy and the Group's diversification has ensured we have outperformed the markets we operate in.

In summary in 2015 we achieved:

 
      --   Group revenue GBP109.3m (2014: GBP109.2m) 
      --   International growth (constant currency 
            basis) 3.9% (2014: 4.3%) 
      --   Profit before tax GBP28.0m (2014: GBP25.7m 
            pre exceptional items explained in note 
            4 of the financial statements) 
      --   Earnings Per Share 60.33 pence (2014: 
            55.03 pence pre exceptional items) 
      --   14.3% full year dividend growth 
 

Cash flow remained positive in 2015 and as a result we finished the year with GBP35.4m cash in the bank.

Corporate Responsibility

2015 has been another challenging year for the soft drinks industry with many claims for urgent and significant action required by the industry on the issue of obesity. However, it is really important to highlight the progress we have made collectively as producers. Between January 2012 and January 2016 soft drinks volume grew by 2.5% while calories and sugars declined by 13.4% and 13.6%, respectively (BSDA and Kantar Worldpanel Soft Drinks Nutritional Review, 24 November 2015).

We take our responsibility towards the issue of obesity and sugar consumption very seriously. Our marketing strategy has revolved around promoting no added sugar choices in order to achieve our aims of overall sugar reduction across our range of products. As a result we have continued to reduce our total sugar usage from 8,202 tonnes in 2014 to 7,488 tonnes in 2015, which is an 8% reduction year on year. Since 2012 we have reduced the sugar content of our product portfolio by 1,118 tonnes.

Our No Added Sugar products in our dilute range now account for 46% of all purchases and 41% of our Vimto still range in the UK, with Vimto Minis and Squeezy products only available as no added sugar.

We are committed to looking for healthier alternatives and a good example of this is our acquisition of the Feel Good brand, which contains no added sugars and 100% natural ingredients.

Our recent launch of Vimto Remix contains no added sugar and we have recently launched a

5 litre catering pack of Vimto squash which is no added sugar only. This year we introduced front of pack labelling in order to better communicate to the consumer the nutritional content of our products.

Our Community

We are delighted to continue our work with Warrington Youth Club. To support the charity last year over 40 colleagues attempted to climb the Three Peaks during June. They had to combat extremely poor weather, which included snow at the top of Ben Nevis, but defeated the odds to raise over GBP55,000 for the charity.

Our Team

We conducted a staff survey in 2015 and were delighted to receive the following feedback:

 
      --   99% are proud to work at Nichols 
      --   96% still expect to be working at Nichols 
            in 12 months time 
      --   94% find Nichols a positive place to 
            work 
      --   98% share the same values as the company 
 

People remain absolutely core to the continued success of Nichols plc. Working as one team ensures we preserve our culture and its values. I would like to say a huge thank you to the amazing effort and passion my colleagues continue to show the business.

Our Vision

Our five year rolling strategy centres on our Group commercial activities in both the UK and overseas. To support those initiatives we work to ensure we have well established operations and partners to support our business growth and development.

In the UK we will focus on the geographical expansion of the Vimto brand. Feel Good will concentrate on its position as a healthy natural soft drink and will have innovation as the core of its growth. With the newly acquired Noisy Drinks business we will have a unique product portfolio for the out of home sector along with a population of new customers and consumers.

Internationally we will continue to develop and expand our large presence in the Middle East region. There also remain potential new territories in Africa which we will continue to evaluate and introduce new partners to realise further success. In addition we continue to develop opportunities in new export markets to add to our successful international business.

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As a truly diversified business, acquisition remains a key feature in our growth strategy. Any further acquisition either in the UK or overseas would be incorporated into our current business model characterised by outsourcing production and using third party distribution partners in the export markets.

Marnie Millard

Chief Executive Officer

2 March 2016

Consolidated income statement

Year ended 31 December 2015

 
                                    2015                    2014 
                                    Total         Before   Exceptional      Total 
                                             exceptional         items 
                                                   items 
                                  GBP'000        GBP'000       GBP'000    GBP'000 
 
 Revenue                          109,279        109,205             -    109,205 
 Cost of sales                   (56,296)       (59,035)             -   (59,035) 
---------------------  ------------------  -------------  ------------  --------- 
 
 Gross profit                      52,983         50,170             -     50,170 
 Distribution 
  expenses                        (5,483)        (5,271)             -    (5,271) 
 Administrative 
  expenses                       (19,666)       (19,302)       (7,768)   (27,070) 
---------------------  ------------------  -------------  ------------  --------- 
 
 Operating profit                  27,834         25,597       (7,768)     17,829 
 Finance income                       213            257             -        257 
 Finance expense                    (201)          (164)             -      (164) 
 
 Share of income                      190              -             -          - 
  from associate 
 
 
   Profit before 
   taxation                        28,036         25,690       (7,768)     17,922 
 
 Taxation                         (5,803)        (5,413)         1,637    (3,776) 
---------------------  ------------------  -------------  ------------  --------- 
 
 Profit for the 
  financial year 
  attributable 
  to equity holders 
  of the parent                    22,233         20,277       (6,131)     14,146 
 
 Earnings per 
  share (basic)                    60.33p                                  38.39p 
 Earnings per 
  share (diluted)                  60.25p                                  38.34p 
 
 
 All results relate to continuing operations. 
 

Consolidated statement of comprehensive income

Year ended 31 December 2015

 
                                              2015      2014 
                                           GBP'000   GBP'000 
 Profit for the financial 
  year                                      22,233    14,146 
 
 Other comprehensive income/(expense) 
  that will not be reclassified 
  to profit or loss 
 Re-measurement of net 
  defined benefit liability                  1,632   (2,796) 
 Deferred taxation on pension 
  obligations and employee 
  benefits                                   (274)       436 
 
 Other comprehensive income/(expense) 
  for the year                               1,358   (2,360) 
 
 Total comprehensive income 
  for the year                              23,591    11,786 
 

Statement of financial position

Year ended 31 December 2015

 
                                              Group              Parent 
                                       2015      2014      2015      2014 
 ASSETS                             GBP'000   GBP'000   GBP'000   GBP'000 
 Non-current assets 
 Property, plant and equipment        6,061     4,817     3,928     3,759 
 Goodwill                            19,108    16,447     2,504         - 
 Investments                              -         -    16,566    16,566 
 Investment in equity-accounted       2,970         -         -         - 
  associate 
 Intangibles                          1,316         -     1,316         - 
 Deferred tax assets                  1,098     1,699     1,098     1,699 
---------------------------------  --------  --------  --------  -------- 
 
 Total non-current assets            30,553    22,963    25,412    22,024 
 
 Current assets 
 Inventories                          3,945     4,712     2,430     2,634 
 Trade and other receivables         27,860    23,525    20,765    21,120 
 Cash and cash equivalents           35,438    34,483    22,907    19,124 
---------------------------------  --------  --------  --------  -------- 
 
 Total current assets                67,243    62,720    46,102    42,878 
---------------------------------  --------  --------  --------  -------- 
 
 Total assets                        97,796    85,683    71,514    64,902 
---------------------------------  --------  --------  --------  -------- 
 
 LIABILITIES 
 Current liabilities 
 Trade and other payables            18,127    19,486    16,981    17,210 
 Current tax liabilities              2,679     1,859     1,160     1,090 
 Provisions                               -         -         -         - 
 
 Total current liabilities           20,806    21,345    18,141    18,300 
 
 Non-current liabilities 
 Pension obligations                  3,893     6,190     3,893     6,190 
 Deferred tax liabilities                86        70         -         - 
 
 Total non-current liabilities        3,979     6,260     3,893     6,190 
 
 Total liabilities                   24,785    27,605    22,034    24,490 
---------------------------------  --------  --------  --------  -------- 
 
 Net assets                          73,011    58,078    49,480    40,412 
---------------------------------  --------  --------  --------  -------- 
 
 EQUITY 
 Share capital                        3,697     3,697     3,697     3,697 
 Share premium reserve                3,255     3,255     3,255     3,255 
 Capital redemption reserve           1,209     1,209     1,209     1,209 
 Other reserves                       (547)     (560)       228       215 
 Retained earnings                   65,397    50,477    41,091    32,036 
 
 Total equity                        73,011    58,078    49,480    40,412 
---------------------------------  --------  --------  --------  -------- 
 

Consolidated statement of cash flows

Year ended 31 December 2015

 
                                            2015                2014 
                                      GBP'000   GBP'000   GBP'000   GBP'000 
 
 Cash flows from operating 
  activities 
 
 Profit for the financial 
  year                                           22,233              14,146 
 
 Adjustments for: 
 Depreciation                             502                 480 
 Loss/(profit) on sale of 
  property, plant and equipment            16                (80) 
 Finance income                         (213)               (257) 
 Tax expense recognised in 
  the income statement                  5,803               3,776 
 Change in inventories                    767               (568) 
 Change in trade and other 
  receivables                         (4,335)               (787) 
 Change in trade and other 
  payables                            (1,359)               1,324 
 Change in provisions                       -             (2,018) 
 Change in pension obligations          (665)               (653) 
                                                    516               1,217 
 
 Cash generated from operating 
  activities                                     22,749              15,363 
 Tax paid                                       (4,639)             (3,465) 
                                               --------            -------- 
 
 Net cash generated from operating 
  activities                                     18,110              11,898 
 
 
 Cash flows from investing 
  activities 
 Finance income                           213                 239 
 Proceeds from sale of property, 
  plant and equipment                       5                 124 
 Acquisition of property, 
  plant and equipment                 (1,768)             (4,034) 
 Acquisition of subsidiary, 
  net of cash acquired                  (157)                (85) 
 Acquisition of trade and 
  assets                              (3,820)               (305) 
 Acquisition of associate             (2,970)                   - 
  investment 
 
 Net cash used in investing 
  activities                                    (8,497)             (4,061) 
 
 Cash flows from financing 
  activities 
 Acquisition of own shares               (69)               (129) 
 Dividends paid                       (8,589)             (7,518) 
-----------------------------------  --------  --------  --------  -------- 
 
 Net cash used in financing 
  activities                                    (8,658)             (7,647) 
 
 Net increase in cash and 
  cash equivalents                                  955                 190 
 Cash and cash equivalents 
  at 1 January                                   34,483              34,293 
-----------------------------------  --------  --------  --------  -------- 
 
 Cash and cash equivalents 
  at 31 December                                 35,438              34,483 
-----------------------------------  --------  --------  --------  -------- 
 
 

Consolidated statement of changes in equity

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