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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Nichols PLC | AQSE:NICL.GB | Aquis Stock Exchange | Ordinary Share | GB0006389398 | Ordinary Shares 10p |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-10.00 | -0.96% | 1,027.50 | 990.00 | 1,065.00 | 1,032.50 | 1,003.50 | 1,017.00 | 1,641 | 15:04:11 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMNICL
RNS Number : 8298T
Nichols PLC
27 July 2022
27 July 2022 Nichols Plc
2022 INTERIM RESULTS
Encouraging revenue and earnings growth as Out of Home recovers from the pandemic
Nichols plc ('Nichols' or the 'Group'), the diversified soft drinks Group, announces its unaudited Interim Results for the half year ended 30 June 2022 (the 'period').
Half year Half year ended ended Movement 30 June 2022 30 June 2021 GBPm GBPm -------------- -------------- ----------- Group Revenue 80.2 67.4 +19.1% -------------- -------------- ----------- Adjusted Operating Profit 1 11.2 9.0 +24.2% ----------------------------- -------------- -------------- ----------- Operating Profit 10.0 8.8 +14.6% ----------------------------- -------------- -------------- ----------- Adjusted Profit Before Tax (PBT) 1 11.3 8.9 +26.7% -------------- -------------- ----------- Profit Before Tax (PBT) 10.1 8.6 +17.0% -------------- -------------- ----------- Adjusted PBT Margin 1 14.0% 13.2% +0.8ppts -------------- -------------- ----------- PBT Margin 12.6% 12.8% (0.2ppts) -------------- -------------- ----------- EBITDA 2 12.4 11.2 +10.6% -------------- -------------- ----------- Adjusted Earnings per Share (basic) 1 24.80p 19.52p +27.0% -------------- -------------- ----------- Earnings per Share (basic) 22.22p 18.93p +17.4% -------------- -------------- ----------- Cash and Cash Equivalents 3 49.2 56.7 (13.2%) -------------- -------------- ----------- Return on capital employed 4 25.2% 14.6% +10.6% -------------- -------------- ----------- Interim Dividend 12.4p 9.8p +26.5% ----------------------------- -------------- -------------- ----------- -- Vimto Brand value in the UK +5.7%(5)
o Vimto continues to outperform the dilutes market, by +9.1%(5)
-- UK revenues increased by 29.3% to GBP62.6m (H1 2021: GBP48.4m)
o UK Packaged route to market volume flat versus UK soft drinks down 4.3% as consumer spending slows
o Out of Home (OoH) continues to recover from the pandemic, with revenues +131.9%
-- Strategic review of OoH progressing -- I nternational revenues -7.2% to GBP17.6m (H1 2021: GBP19.0m), (Q2 +4%)
o Middle East phasing of shipments largely weighted to H2
-- 'In-market' volume of cordial Oct to Apr, +10%, post completion of marketing investment
o Continued progress in Africa, +2.0%
-- Q2 +11%, Q1 -4% impacted by national driver industrial action in Spain
o US shipments constrained through 2022 due to ongoing container shortages
-- Gross margin 42.8% (H1 2021: 44.4%)
o Higher proportion of lower margin UK carbonate revenues as OoH recovers
-- Exceptional charge of GBP1.2m largely relating to Operational Change Programme
o Transfer of Dilutes contract manufacturing successfully completed
-- Strong cash and cash equivalents at GBP49.2m (31 December 2021: GBP56.7m)
o Completion of the Group's treasury share buyback programme (H1 2022 spend GBP5.5m)
-- Facilitates the Group's SAYE Option Scheme and/or Long-Term Incentive Plan
o Renewed post pandemic working capital investment, net GBP5.9m outflow
-- Interim dividend of 12.4p, +26.5% (H1 2021: 9.8p) -- 2022 Group expectations(6) remain unchanged
o Significant and accelerating inflationary pressures, particularly ingredient and packaging costs
o Customer, supplier and operational mitigation actions underway
1 Excluding Exceptional items of GBP1.2m (H1 2021: GBP0.3m)
2 EBITDA is the statutory profit before tax, interest, depreciation, and amortisation
3 The comparison is to 31 December 2021. All other comparatives compare to the six months ending 30 June 2021 unless otherwise stated
4 Return on Capital Employed is the rolling 12 months adjusted operating profit as a percentage of the average period-end capital employed, excluding the effect of Goodwill impairment
5 Source: Nielsen IQ RMS data for the Total Soft Drinks category for the YTD ending 18 June 2022 for the GB Total Coverage market
6 FY22 expectations refers to a Group compiled market consensus of adjusted PBT GBP25.2m
John Nichols, Non-Executive Chairman, commented:
"I'm pleased to report an encouraging financial performance in the first half of the year with 27% increases to both Adjusted PBT(1) and the half year dividend. In the UK, the Vimto brand continues to outperform the broader squash market, and the Group's Out of Home route to market experienced good growth as the wider leisure sector continues to recover from the impact of the pandemic. After some disruption to shipments affecting our International business in Q1, I am pleased to report a recovery in Q2 which has so far continued into the second half of the year.
Whilst the Group is not immune to the significant and accelerating inflationary pressures impacting the consumer and the soft drinks market, we have taken swift mitigating actions where possible and the Group's Adjusted PBT(1) expectations(2) for the full year remain unchanged. The Board remains mindful of the potential earnings impact of continued inflation into FY23 and beyond. We have a long-term track record of growth, a proven, diversified strategy, and a quality range of brands. All of this is underpinned by a strong balance sheet. As a result, the Board remains confident that the Group is well positioned to deliver its long-term growth plans."
1 Excluding Exceptional items of GBP1.2m (H1 2021: GBP0.3m)
2 FY22 expectations refers to a Group compiled market consensus of adjusted PBT GBP25.2m
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 / Hattie Dreyfus Steve Pearce / Rachel Hayes Hudson Sandler Singer Capital Markets (NOMAD & Broker) 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 the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.
Executive Review
Revenue
The Board is pleased to report an encouraging half year performance with Group revenues of GBP80.2m, an increase of 19.1% compared to the prior year (H1 2021: GBP67.4m).
The Still and Carbonate product segments achieved revenue growth of 4.9% (to GBP37.3m) and 34.9% (to GBP42.9m) respectively, driven largely by a strong UK OoH recovery.
UK revenues increased by 29.3% to GBP62.6m (H1 2021: GBP48.4m).
Within the UK Packaged route to market, revenues increased by 5.1%.
The UK soft drinks industry is experiencing a period of significant and accelerating ingredient, packaging, and distribution inflation and overall market volumes are down 4.3%(1) . Our UK Packaged volumes were largely flat in the period versus last year, driven by the market out performance of the Vimto brand (in both value and volume terms) across both the Dilutes and Ready to Drink ("RTD") subcategories, as well as strong growth for both our Levi Roots and Feel Good brands.
Our UK OoH route to market continues to recover from the two-year pandemic, and experienced significant growth of 131.9% versus the prior period, which was impacted by lockdown restrictions. H1 2022 revenues are now ahead of those experienced in H1 2019, although 2019 revenues exclude the full roll out of the ICEE brand into cinemas (through Q4 2019 and Q1 2020). As previously advised, the Board commenced a strategic review of the Group's OoH route to market. The review is progressing and the Board expects to report on its findings at the end of this financial year.
International revenues fell by 7.2% to GBP17.6m (H1 2021: GBP19.0m), as various markets were impacted by logistics challenges, particularly in Q1, and the phasing of shipments between the first and second half of the year.
Middle East revenues in the period fell by 18.5% to GBP4.2m (H1 2021: GBP5.1m) primarily due to the phasing of shipments between the first and second half of the year. The underlying performance in the Middle East remains very encouraging with in-market volumes of cordial up 10% for the period from October 2021 to April 2022. African revenue growth was up 2.0% to GBP10.4m (H1 2021: GBP10.2m) for the period, recovering strongly in Q2 (+11%) from the challenges experienced in Q1 (-4%) when shipment timings were severely impacted towards the end of the quarter by national driver industrial action in Spain. Rest of World sales (largely Europe and the US) fell by 16.8% to GBP3.1m (H1 2021 GBP3.7m). Whilst the Group continued to see progress across Europe (+18.6%), its US sales remain severely constrained (-54.1%) by a shortage of shipping containers available for trans-Atlantic routes and this situation is expected to continue for the remainder of this year.
The impact of movements in foreign exchange rates on revenue year-on-year was immaterial, at approximately GBP0.2m favourable.
Gross Profit
Gross profit of GBP34.4m was GBP4.5m higher than H1 2021 (GBP29.9m) and 1.6 percentage points lower at 42.8%. The reduction in gross margin percentage was largely a result of increased lower margin carbonate revenues in H1 2022 versus H1 2021, as OoH opened up fully post the pandemic.
Of the GBP4.5m improvement, approximately GBP4.2m is due to the net volume effect of increased revenues versus the prior period. The remaining GBP0.3m is the year-on-year effect of the marketing investment in the Middle East.
The Group is experiencing significant ingredient and packaging inflation and, whilst ongoing mitigation actions have provided relief in the first half of the year, inflationary pressures continue to accelerate. The Group continues to work with its customers and suppliers across the whole of the supply chain to identify the optimal balance of mitigation actions and price recovery.
Distribution Expenses
Distribution expenses within the Group are those associated with the UK Packaged route to market, and for OoH, the distribution costs incurred from factory to depot. Final leg distribution costs within OoH are reported within Administrative Expenses.
1 Nielsen IQ RMS data for the Total Soft Drinks category for the YTD ending 18 June 2022 for the GB Total Coverage market
Distribution expenses increased by 9.6% to GBP4.7m (H1 2021: GBP4.2m) due to a combination of higher trading volumes, in particular OoH, and significant inflationary pressure experienced in H2 2021. The Group entered into a new 5-year distribution arrangement in H2 2021 that built significant additional capacity, given the Group's growth plans, and also provided a platform for future efficiency opportunities. Service levels have now stabilised following the significant supply chain disruption experienced in H2 2021 across the wider UK supply chain.
Administrative Expenses
Administrative Expenses, excluding exceptional items, totalled GBP18.5m (H1 2021: GBP16.7m), an increase of GBP1.8m or 10.9%.
Following the pandemic, the Group's investment in OoH support teams returned to more normalised levels, increasing by GBP0.9m versus the prior period. Given the growth opportunities in-situ, the Group has also increased investment in its International and UK Packaged commercial and operational capabilities by GBP0.5m.
The Group continued to further invest in marketing following the significant increase in spend through 2021, with costs up GBP0.2m versus the prior period (full year +GBP1.9m versus 2020, H1 2021 +GBP1.2m versus H1 2020), building successfully on its 'Find Your Different' campaign.
The Group reward system incorporates retention levers and these along with this year's accrued bonus charge increased costs by GBP0.6m versus H1 2021. Additionally the Group had a positive foreign exchange movement year-on-year of GBP0.5m (H1 2022: GBPnil net of forward currency contracts, H1 2021: GBP0.5m loss).
Exceptional Costs
The Group has incurred GBP1.2m of exceptional costs during the year (H1 2021: GBP0.3m).
In Q4 2020, the Group commenced a review of its UK operational supply chain. As a result of the review, a strategic decision was taken to move Dilutes production to a new contract manufacturer, which was successfully completed in the period. This decision was taken in order to provide additional manufacturing capacity, whilst taking advantage of higher speed lines and more efficient bottling processes. Significant costs were incurred during H1 in making this change, including additional storage capacity, new systems, restructuring costs and legal fees. Given the exceptional nature and scale of this change, the costs incurred have been treated as exceptional within these financial statements in order to provide a better understanding of the Group's underlying trading performance.
In previous annual reports, the Group reported a contingent liability in respect of historic contracts with some of its senior management, relating to incentive schemes which were designed to motivate, retain and engage those key employees. HMRC were of the view that the arrangements should have been taxed as employment income, which the Group and its advisors had previously disputed. During FY21, a tribunal was convened to consider the dispute of the Group's scheme as well as similar schemes operated by other companies. The tribunal found that the arrangements should have been taxed as employment income. As at 31 December 2021, the Group recognised a net liability of GBP2.6m in relation to this ruling, being a reasonable estimate of the final outcome, including the Group's additional tax liability, interest costs and amounts expected to be recovered. There has been no update or change to this key judgement as at the half year. During the period, there have been legal costs of GBP54k incurred in relation to this matter.
As signalled in the latest Annual Report, the Group commenced its full strategic review into the OoH route to market during the period. During H1, there have been costs of GBP48k incurred in relation to this review, with further costs expected in H2 2022. The review is progressing and the Board expects to report on its findings at the end of this financial year.
Operating Profit
Adjusted Operating Profit of GBP11.2m, pre-exceptional items, was up GBP2.2m, a 24.2% increase on the prior year (H1 2021: GBP9.0m). Operating profit of GBP10.0m (H1 2021: GBP8.8m) is after charging exceptional items during the period.
The Group has a number of forward currency contracts in place to mitigate the impact of fluctuations in the Euro and Dollar. The foreign exchange impact, net of forward currency contracts, during the current year is GBPnil (2021 H1: GBP0.5m loss).
Finance Costs
Net finance income of GBP0.1m (H1 2021 net finance cost: GBP0.1m) largely as a result of a strengthening of the Group's pension surplus during the year.
Profit before tax and tax rate
Adjusted profit before tax, pre-exceptional items, increased by 26.7% to GBP11.3m (H1 2021: GBP8.9m). The tax charge on adjusted profit before tax for the period of GBP2.2m (H1 2021: GBP1.7m) represents an effective tax rate of 19.5% (H1 2021: 19%). Reported profit before tax was GBP10.1m, an increase of 17.0% compared to the prior year (H1 2021: GBP8.6m).
Balance Sheet and Cash and Cash Equivalents
The continued strength of the Group's closing balance sheet reflects its diversified routes to market and asset light model.
Cash and cash equivalents at the end of the period remained strong at GBP49.2m (31 December 2021: GBP56.7m, H1 2021: GBP47.4m).
The Group completed the treasury share buyback programme in H1, spending GBP5.5m in order to facilitate future servicing of the Group's SAYE Option Scheme and/or Long-Term Incentive Plan .
As expected, following the full re-opening of OoH outlets this year, the Group has seen a re-investment into working capital. The Group's debtors and inventories are GBP8.0m higher than at the year end, offset by an increase of GBP2.1m in creditors as OoH volumes in particular increased. Capital expenditure in the period is GBP0.9m (H1 2021: GBP0.6m).
Inventory levels have also been impacted by both higher ingredient and packaging costs and the additional stock holding introduced as contingency for the transfer of Dilutes contract manufacturing, which was successfully completed in the first half of the year.
The Group's current Return on Capital Employed is 25.2%(1) (H1 2021: 14.6%).
Earnings per share
Total adjusted basic EPS increased to 24.80 pence (H1 2021: 19.52p) with basic EPS at 22.22 pence (H1 2021: 18.93p). On an adjusted basis, diluted EPS was 24.77 pence (H1 2021: 19.49p).
Dividend
In line with the Group's dividend policy, dividend cover is broadly 2x the adjusted earnings of the Group. As a result, the interim dividend for 2022 will be 12.4p per share, to be paid on 9 September 2022 with a record date of 5 August 2022.
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 2022, the Group recognised a surplus on its UK defined benefit scheme of GBP6.6m (31 December 2021: surplus GBP5.3m).
Outlook
Whilst the Group is not immune to the significant and accelerating inflationary pressures impacting the consumer and the soft drinks market, we have taken swift mitigating actions where possible and the Group's Adjusted PBT expectations for the full year remain unchanged. The Board remains mindful of the potential earnings impact of continued inflation into FY23 and beyond. We have a long-term track record of growth, a proven, diversified strategy, and a quality range of brands. All of this is underpinned by a strong balance sheet. As a result, the Board remains confident that the Group is well positioned to deliver its long-term growth plans.
Andrew Milne
Chief Executive Officer
David Rattigan
Chief Financial Officer
27 July 2022
1 Return on Capital Employed is the rolling 12 months adjusted operating profit as a percentage of the average period-end capital employed, excluding the effect of Goodwill impairment
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Half year Audited Half year to Year ended to 30 June 30 June 31 December 2022 2021 2021 GBP'000 GBP'000 GBP'000 Continuing operations Revenue 80,232 67,392 144,328 Cost of sales (45,880) (37,448) (79,153) ---------------------------------------- ------------ ----------- ------------- Gross profit 34,352 29,944 65,175 Distribution expenses (4,651) (4,244) (9,129) Administrative expenses (19,667) (16,945) (73,601) ---------------------------------------- ------------ ----------- ------------- Operating profit/(loss) 10,034 8,755 (17,555) Finance income 126 24 57 Finance expenses (63) (149) (158) ---------------------------------------- ------------ ----------- ------------- Profit/(loss) before taxation 10,097 8,630 (17,656) Taxation (1,969) (1,640) (4,512) ---------------------------------------- ------------ ----------- ------------- Profit/(loss) for the period 8,128 6,990 (22,168) ---------------------------------------- ------------ ----------- ------------- Earnings/(loss) per share (basic) 22.22p 18.93p (60.04p) Earnings/(loss) per share (diluted) 22.19p 18.91p (60.04p) Adjusted for exceptional items Operating profit/(loss) 10,034 8,755 (17,555) Exceptional items 1,173 267 39,477 ---------------------------------------- ------------ ----------- ------------- Adjusted operating profit 11,207 9,022 21,922 ---------------------------------------- ------------ ----------- ------------- Profit/(loss) before taxation 10,097 8,630 (17,656) Exceptional items 1,173 267 39,477 ---------------------------------------- ------------ ----------- ------------- Adjusted profit before taxation 11,270 8,897 21,821 ---------------------------------------- ------------ ----------- ------------- Adjusted earnings per share (basic) 24.80p 19.52p 46.15p Adjusted earnings per share (diluted) 24.77p 19.49p 46.09p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Half year Audited Half year to Year ended to 30 June 30 June 31 December 2022 2021 2021 GBP'000 GBP'000 GBP'000 Profit/(loss) for the financial period 8,128 6,990 (22,168) Items that will not be classified subsequently to profit or loss: Re-measurement of net defined benefit liability 910 3,176 4,083 Deferred taxation on pension obligations and employee benefits (228) (603) (962) Other comprehensive income for the period 682 2,573 3,121 Total comprehensive income/(expense) for the period 8,810 9,563 (19,047) ------------------------------------------- ------------ ----------- -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited 30 June 30 June 31 December 2022 2021 2021 ASSETS GBP'000 GBP'000 GBP'000 Non-current assets Property, plant and equipment 16,073 18,706 17,099 Goodwill - 36,244 - Intangibles 5,226 5,866 5,546 Pension surplus 6,621 3,925 5,276 -------------------------------- ---------- ---------- ------------- Total non-current assets 27,920 64,741 27,921 Current assets Inventories 14,751 6,563 9,706 Trade and other receivables 38,548 36,917 36,124 Corporation tax receivable 1,017 1,062 743 Cash and cash equivalents 49,167 47,427 56,674 -------------------------------- ---------- ---------- ------------- Total current assets 103,483 91,969 103,247 -------------------------------- ---------- ---------- ------------- Total assets 131,403 156,710 131,168 -------------------------------- ---------- ---------- ------------- LIABILITIES Current liabilities Trade and other payables 30,193 25,860 28,791 Provisions 4,242 - 4,242 Total current liabilities 34,435 25,860 33,033 Non-current liabilities Other payables 1,953 2,724 1,954 Deferred tax liabilities 3,307 2,024 3,155 ---------- ---------- ------------- Total non-current liabilities 5,260 4,748 5,109 -------------------------------- ---------- ---------- ------------- Total liabilities 39,695 30,608 38,142 -------------------------------- ---------- ---------- ------------- Net assets 91,708 126,102 93,026 -------------------------------- ---------- ---------- ------------- 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 943 306 676 Retained earnings 82,604 117,635 84,189 Total equity 91,708 126,102 93,026 -------------------------------- ---------- ---------- -------------
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Half year Unaudited Audited to Half year to Year ended 30 June 30 June 31 December 2022 2021 2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Cash flows from operating activities Profit/(loss) for the financial period 8,128 6,990 (22,168) Adjustments for: Depreciation and amortisation 2,318 2,464 4,969 Impairment losses on goodwill and intangible assets - - 36,244 Loss on sale of property, plant and equipment 61 8 63 Finance income (126) (24) (57) Finance expense 63 149 158 Tax expense recognised in the income statement 1,969 1,640 4,512 Increase in inventories (5,045) (642) (3,785) Increase in trade and other receivables (2,939) (7,774) (6,804) Increase in trade and other payables 2,110 4,457 7,429 Increase in provisions - - 4,242 Change in pension obligations (435) (402) (846) Fair value loss/(gain) on derivative financial instruments 515 - (178) (1,509) (124) 45,947 Cash generated from operating activities 6,619 6,866 23,779 Tax paid (2,319) (2,094) (3,878) ------------------------------------- -------- --------- -------- -------- ---------- ---------
Net cash generated from operating activities 4,300 4,772 19,901 Cash flows from investing activities Finance income 126 24 57 Proceeds from sale of property, plant and equipment - - 2 Acquisition of property, plant and equipment (913) (632) (1,239) Payment of contingent consideration (note 8) (71) (67) (67) Net cash used in investing activities (858) (675) (1,247) Cash flows from financing activities Payment of lease liabilities (554) (715) (1,189) Purchase of own shares (5,534) - (1,217) Dividends paid (4,861) (3,249) (6,868) ------------------------------------- -------- --------- -------- -------- ---------- --------- Net cash used in financing activities (10,949) (3,964) (9,274) Net (decrease)/increase in cash and cash equivalents (7,507) 133 9,380 Cash and cash equivalents at start of period 56,674 47,294 47,294 ------------------------------------- -------- --------- -------- -------- ---------- --------- Cash and cash equivalents at end of period 49,167 47,427 56,674 ------------------------------------- -------- --------- -------- -------- ---------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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 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 ----------------------------- ---------- --------- ------------ ---------- ---------- --------- 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 2022 3,697 3,255 1,209 676 84,189 93,026 Dividends - - - - (4,861) (4,861) Movement in ESOT - - - (2) - (2) Credit to equity for equity-settled share-based payments - - - 269 - 269 Purchase of own shares - - - - (5,534) (5,534) Transactions with owners - - - 267 (10,395) (10,128) ----------------------------- ---------- --------- ------------ ---------- ---------- --------- Profit for the period - - - - 8,128 8,128 Other comprehensive income - - - - 682 682 ----------------------------- ---------- --------- ------------ ---------- ---------- --------- Total comprehensive income - - - - 8,810 8,810 ----------------------------- ---------- --------- ------------ ---------- ---------- --------- At 30 June 2022 3,697 3,255 1,209 943 82,604 91,708 ----------------------------- ---------- --------- ------------ ---------- ---------- ---------
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 2021, 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 2022 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 27 July 2022.
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 any 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 potential for future lockdowns within 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 return in the second half of 2022 and into 2023.
During Q4 2021 and Q1 2022 the Group experienced a period of significant inflation against which a number of mitigation actions were introduced. These are largely evidenced in the H1 results announced. Our modelling has sensitised the impacts of Russia's invasion of Ukraine in February, in particular their impact on global supply chains and macroeconomic inflationary factors.
In addition to the further impacts 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 provide resilience against these factors and the other principal risks that the Group is exposed to. At the 30 June 2022 the Group had cash and cash equivalents of GBP49.2m 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. 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 GBP'000 GBP'000 GBP'000 Half year to 30 June 2022 Revenue 37,303 42,929 80,232 Gross Profit 18,679 15,673 34,352 Half year to 30 June 2021 Revenue 35,558 31,834 67,392 Gross Profit 18,572 11,372 29,944 Year ended 31 December 2021
Revenue 72,393 71,935 144,328 Gross Profit 37,980 27,195 65,175
A geographical split of revenue is provided below:
Half year Half year Year ended to to 31 December 30 June 30 June 2021 2022 2021 GBP'000 GBP'000 GBP'000 Geographical split of revenue Middle East 4,176 5,126 9,765 Africa 10,372 10,164 16,410 Rest of the World 3,059 3,675 6,523 ----------- ----------- -------------- Total exports 17,607 18,965 32,698 United Kingdom 62,625 48,427 111,630 ----------- ----------- -------------- Total revenue 80,232 67,392 144,328 ----------- ----------- -------------- 4. Exceptional items Half year Half year Year ended to to 31 December 30 June 30 June 2021 2022 2021 GBP'000 GBP'000 GBP'000 Review of UK packaged supply chain 1,071 267 620 Historic incentive scheme 54 - 2,613 Strategic review of Out of Home business 48 - - Impairment of goodwill and intangibles - - 36,244 1,173 267 39,477 ----------- ----------- -------------
In Q4 2020, the Group commenced a review of its UK operational supply chain. As a result of the review, a strategic decision was taken to move Dilutes production to a new contract manufacturer, which was successfully completed in the period. This decision was taken in order to provide additional manufacturing capacity, whilst taking advantage of higher speed lines and more efficient bottling processes. Significant costs were incurred during H1 in making this change, including additional storage capacity, new systems, restructuring costs and legal fees. Given the exceptional nature and scale of this change, the costs incurred have been treated as exceptional within these financial statements in order to provide a better understanding of the Group's underlying trading performance.
In previous annual reports, the Group reported a contingent liability in respect of historic contracts with some of its senior management, relating to incentive schemes which were designed to motivate, retain and engage those key employees. HMRC were of the view that the arrangements should have been taxed as employment income, which the Group and its advisors had previously disputed. During FY21, a tribunal was convened to consider the dispute of the Group's scheme as well as similar schemes operated by other companies. The tribunal found that the arrangements should have been taxed as employment income. As at 31 December 2021, the Group recognised a net liability of GBP2.6m in relation to this ruling, being a reasonable estimate of the final outcome, including the Group's additional tax liability, interest costs and amounts expected to be recovered. There has been no update or change to this key judgement as at the half year. During the period, there have been legal costs of GBP54k incurred in relation to this matter.
As signalled in the latest Annual Report, the Group commenced its full strategic review into the OoH route to market during the period. During H1, there have been costs of GBP48k incurred in relation to this review, with further costs expected in H2 2022. The review is progressing and the Board expects to report on its findings at the end of this financial year.
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.
5. 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:
Weighted average Earnings number of shares Earnings per share GBP'000 30 June 2022 Basic earnings per share 8,128 36,576,987 22.22p Dilutive effect of share options 48,451 Diluted earnings per share 8,128 36,625,438 22.19p
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 Group's operations. It can be reconciled from the basic earnings per share as follows:
Weighted average Earnings number of shares Earnings per share GBP'000 30 June 2022 Basic earnings per share 8,128 36,576,987 22.22p Exceptional items after taxation 944 Adjusted basic earnings per share 9,072 36,576,987 24.80p Diluted effect of share options 48,451 Adjusted diluted earnings per share 9,072 36,625,438 24.77p 6. Non-current Assets Property, Plant & Equipment Intangibles GBP'000 GBP'000 Cost At 1 January 2022 34,088 9,760 Additions 1,033 - Disposals (219) - At 30 June 2022 34,902 9,760 ------------- -------------- Depreciation and Amortisation At 1 January 2022 16,989 4,214 Charge for the period 1,998 320 On disposals (158) - At 30 June 2022 18,829 4,534 ------- ------ Net book value At 1 January 2022 17,099 5,546 At 30 June 2022 16,073 5,226 ------- ------ 7. 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 2022 by an independent qualified actuary.
A summary of the pension surplus position is provided below:
Pension surplus GBP'000 At 1 January 2022 5,276 Current service cost (26) Net interest income 50 Actuarial gains 910 Contributions by employer 411 At 30 June 2022 6,621 -------- 8. Contingent consideration
Within the Statement of Cash Flows there is a GBP0.1m (H1 2021: GBP0.1m) 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.
9. Provisions
In previous annual reports, the Group reported a contingent liability in respect of historic contracts with some of its senior management relating to incentive schemes which were designed to motivate, retain and engage those key employees. HMRC were of the view that the arrangements should have been taxed as employment income, which the Group and its advisors had previously disputed. During the previous year, a tribunal was convened to consider the dispute of the Group's scheme as well as similar schemes operated by other companies. The tribunal found that the arrangements should have been taxed as employment income.
Accordingly, as at 30 June 2022, the Group has recognised a provision of GBP4.2m (31 December 2021: GBP4.2m, 30 June 2021: nil) in relation to this ruling, being the Group's additional tax liability and interest costs.
Included within other receivables is a reimbursement asset in respect of these historic contracts.
There has been no update or change to this key judgement as at the half year.
10. Dividends
Dividend cover is broadly 2x adjusted earnings of the Group. As a result, the interim dividend for 2022 will be 12.4p per share to be paid on 9 September 2022 with a record date of 5 August 2022.
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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