Nichols PLC 2024 Interim Results

RNS Number : 5487X

Nichols PLC

24 July 2024

 

24 July 2024

(the "Company" or the "Group")

2024 INTERIM RESULTS

Strong first half profit performance and special dividend issued.
FY24 Adjusted PBT expected to be slightly ahead of expectations.

Nichols plc, the diversified soft drinks Group, is pleased to announce its unaudited Interim Results for the half year ended 30 June 2024 (the 'Period'), with trading during the Period continuing to progress strongly, reflecting the ongoing delivery of the Group's strategic priorities.

 

Key Financials

 

	Half year ended 30 June 2024	Half year ended 30 June 2023	Movement
Group Revenue	£84.0m	£85.5m	-1.8%
Adjusted Operating Profit1	£13.1m	£11.5m	+14.1%
Adjusted Profit Before Tax (PBT)1	£14.5m	£12.3m	+18.0%
Operating Profit	£10.4m	£10.3m	+0.5%
Profit Before Tax (PBT)	£11.8m	£11.2m	+5.8%
Adjusted Operating Profit Margin1	15.6%	13.4%	+220bps
Adjusted PBT Margin1	17.3%	14.4%	+290bps
Operating Profit Margin	12.4%	12.1%	+30bps
PBT Margin	14.1%	13.0%	+110bps
Adjusted Earnings per Share (basic)1	29.87p	25.70p	+16.2%
Earnings per Share (basic)	24.29p	23.31p	+4.2%
Cash and Cash Equivalents	£70.3m	£56.1m	+25.2%
Free cash flow2	£9.0m	£5.4m	+65.4%
Adjusted Return on capital employed3	27.1%	25.9%	+120bps
Interim Dividend per share	14.9p	12.6p	+18.3%
Special Dividend per share	54.8p	-	-

 

Andrew Milne, Chief Executive Officer of Nichols, commented:

"I am pleased to report further strategic progress in the first half, resulting in strong double digit increases in adjusted profit before tax and adjusted earnings per share. As a result of our progress, the Board's high levels of confidence in the outlook and the strength of our balance sheet, we are pleased to announce a special dividend of 54.8p per share - which equates to a total of £20m - alongside an 18% increase in the interim dividend to 14.9p per share. This reflects a long history of strong cash flow generation and the Board's commitment to delivering attractive shareholder returns.

 

Positive trading momentum in our UK Packaged business reflected further market share gains in squash and carbonates, driven by increased marketing investment, growth from innovation, and distribution gains. Our biggest ever UK promotional campaign was launched towards the end of the Period, and we are confident this will support the continued growth of the Vimto brand over the summer.

 

Whilst mindful of continued pressure on consumer spending, despite levels of inflation stabilising, our diversified business model and the enduring strength of the Vimto brand have enabled us to deliver a strong performance. As a result, we now expect full-year profitability to be slightly ahead of current market expectations and we remain confident that Nichols is well placed to deliver its strategic growth ambitions."

Strategic highlights

 

UK Packaged

·   Strong market share growth in the UK driven by both squash and carbonate categories

·   The Vimto brand achieved its highest ever UK annual retail sales value of £109m⁴, reflecting increased marketing investment and growth from innovation and distribution gains

 

International Packaged

·   Strong in-market execution across the Middle East during the key Ramadan trading period

·   Commenced phased can production in Senegal, enabling us to better serve this key market in West Africa by bringing production closer to the end consumer, with benefits expected to be delivered in H2

 

Out of Home (OoH)

·   Implementation of the OoH strategic review was largely concluded in the Period, delivering significant improvements in profitability

 

 

 Financial highlights

 

·    UK Packaged revenues +5.3% to £45.4m (H1 2023: £43.1m)

-    Underpinned by volume growth of 4.9%, reflecting product innovation, distribution gains and increased marketing investment

 

·    International Packaged revenues -6.9% to £20.0m (H1 2023: £21.5m)

-    As expected, due to the timing of shipments into the Middle East and reduced volumes in Africa, given the impact of one-off launch volumes last year

-    Strong performance forecast in H2

 

·    OoH revenues -11.3% to £18.6m (H1 2023: £21.0m)

-    Reflecting the planned reduction in activity having exited several unprofitable accounts, identified as part of the OoH Strategic Review.

 

·    Group revenue declined by -1.8% to £84.0m (H1 2023: £85.5m)

 

·    Gross margin increased by +2.9ppt to 44.0% (H1 2023: 41.1%)

-    Absolute gross margin increased by £1.8m reflecting UK volume growth and pricing actions taken in FY23 to mitigate significant inflationary pressures over the last 18 months.

 

·    Adjusted profit before tax growth of +18.0% to £14.5m and adjusted operating profit growth of +14.1% to £13.1m

-    Improved gross margin together with a reduction in administrative costs as a result of implementing the OoH strategic plan.

 

·    Exceptional costs of £2.7m 

-    £2.7m charge relating to investment in the Group's new ERP system, which is progressing well.

-    £0.2m charge relating to the implementation of the OoH review, that will conclude in H2.

-    £0.2m credit relating to the recovery of costs relating to Group's historical incentive scheme.

 

·    Strong cash and cash equivalents at £70.3m (H1 2023: £56.1m, 31 December 2023: £67.0m)

-    Increased net interest receipts of £1.4m (H1 2023: £0.8m)

 

·    Interim dividend increased to 14.9p (H1 2023: 12.6p)

 

·    Special dividend of 54.8p per share equating to an aggregate of £20m to be paid with the interim dividend

 

 

Outlook

 

The Company has begun trading in Q3 positively and in line with management expectations. Reflecting the progress made in H1 and underpinned by the Group's ongoing focus on driving margin improvement, the Board now expects to report full year adjusted profit before tax slightly ahead of current market expectations.⁵

 

 

Notes

¹  Excluding exceptional items

² Free cash flow is the net increase in cash and cash equivalents before acquisition funding and dividends

³  Adjusted return on capital employed is the rolling 12 months' adjusted operating profit divided by the average period-end capital employed

⁴ Nielsen IQ RMS data for the Squash, Flavoured Carbonates, RTD Stills, Flavoured Water, and Energy categories YTD to 15.06.24 for the GB Total Coverage market  

⁵ FY24 expectations refers to Group compiled market consensus for FY24 adjusted PBT of £28.8m at 23 July 2024

 

Contacts:

Nichols plc   Andrew Milne, Chief Executive Officer Richard Newman, Chief Financial Officer   Telephone: [phone] Singer Capital Markets (NOMAD & Broker)   Steve Pearce / Jen Boorer   Telephone: [phone]   Website: www.singercm.com Hudson Sandler (Financial PR)   Alex Brennan / Hattie Dreyfus / Harry Griffiths   Telephone: [phone]   Email: [e-mail]   Notes to Editors: Nichols plc is an international diversified soft drinks business with sales in over 60 countries. 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, Starslush, ICEE, Levi Roots and Sunkist. For more information about Nichols, visit: www.nicholsplc.co.uk   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 as Packaged revenues increased by 1.3% to £65.4m (H1 2023: £64.5m) while overall Group revenues declined by 1.8% to £84.0m (H1 2023: £85.5m), reflecting the expected rationalisation of the OoH business.

 

Encouragingly, UK Packaged revenues increased by 5.3% to £45.4m (H1 2023: £43.1m) underpinned by volume growth of 4.9% reflecting new product innovation, expanding distribution and increased marketing investment. Growth from innovation includes a strong performance from Vimto Energy, which launched in 2023, together with an expanded range of core Vimto products including flavour extensions and a new children's range of smaller format packs. Distribution gains have been achieved across a number of convenience format stores, for core products within the 'ready to drink' portfolio. The Group's biggest ever promotional campaign ('Love the Taste') was launched towards the end of the Period that will support growth of the Vimto brand over the summer months. 

 

International Packaged revenues declined by 6.9% to £20.0m (H1 2023: £21.5m). The significant growth seen within Africa in previous years reversed in the first half with revenues down 10.1% to £11.8m (H1 2023: £13.1m), due to the strong comparator as a result of significant launch volumes into Ivory Coast during the first half of 2023.  Production of canned products commenced in Senegal on a phased basis late in the Period, which will bring benefits in the second half of the year as the Group transfers increasing volumes to a local concentrate model rather than a finished product export model. As a result, revenues will reduce although margins will improve. 

 

Middle East revenues in the Period also declined by 29.3%, reflecting the timing of shipments related to Vimto's typically strong trading period of Ramadan which will see stronger volumes in Q4 as the date moves forward each year. The Group's Rest of World markets saw strong revenue growth of 37.1%, with the US and Europe continuing to perform well building on increased brand awareness and strong in-market execution.

 

OoH revenues declined by 11.3% to £18.6m (H1 2023: £21.0m), reflecting the planned reduction in activity having exited several unprofitable accounts and product offerings, identified as part of the OoH Strategic Review. As anticipated, the absolute profitability of the business has improved significantly as a consequence of reducing the cost base and focusing resources more efficiently within OoH.

  

The impact of movements in foreign exchange rates on revenue year-on-year was immaterial, at approximately -£0.2m adverse.

 

Gross Profit

 

Gross profit of £37.0m was £1.8m higher than H1 2023 (£35.2m) and 2.9 percentage points higher at 44.0%.

 

The cost of goods inflation experienced in 2022 and 2023 stabilised into the first half of the year, although underlying costs remain significantly higher than two years ago. The Group has been able to fully mitigate cumulative cost increases by working with its customers and suppliers across the whole of its supply chain, identifying the optimal balance of mitigating actions and price recovery. The impact of movements in foreign exchange rates on gross profit was -£0.1m adverse.

 

Distribution Expenses

 

Distribution expenses within the Group are those associated with the UK Packaged route to market, and for OoH are the distribution costs incurred from factory to depot. Final leg distribution costs within the OoH business are reported within administrative expenses.

 

Distribution expenses increased by 3.2% to £5.2m (H1 2023: £5.0m), largely reflecting increased volumes in the UK business. Inflationary pressures around increased fuel prices were reduced.

Administrative Expenses

 

Administration expenses, excluding exceptional items, totalled £18.7m (H1 2023: £18.7m). Additional costs incurred in the Period largely relate to payroll and staff related costs in response to cost-of-living pressures, alongside further investment in marketing spend to drive brand equity within the Packaged business. These additional expenses have been offset by a significant reduction in overhead costs related to the OoH business following implementation of the actions identified through the strategic review process.

  

Exceptional Costs

 

The Group incurred £2.7m of exceptional costs during the Period (H1 2023: £1.1m).

 

Business Change Programme and Systems Development

The Group has continued to build a new enterprise resource planning (ERP) system, focused on driving business transformation. The design phase of the project has concluded with the system architecture currently being built ahead of an extensive testing period during H2. The new system is expected to be operational in Q1 2025. Costs of £2.7m were incurred in the Period.

 

Out of Home Strategic Review and Restructuring

In 2022, the Group completed a strategic review into its OoH route to market, assessing customer and product mix as well as reviewing ways to enhance net margin and profitability going forward. The Group incurred £0.2m of costs in the Period, with most recommendations having been implemented.

 

Historic Incentive Scheme

During 2022, the Group settled with HMRC a £4.3m tax and interest charge relating to an historic incentive scheme and has now achieved a significant recovery of debts from current and previous employees who had indemnified the Company. Provisions relating to the recovery of these amounts have been reduced by £0.2m, with full cost recovery now expected by early 2025.

  

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.

 

Finance Income

 

Net finance income of £1.4m (H1 2023: £0.8m) was significantly up on the prior year, as the Group ensured the best return for its increasing deposits given higher interest rate rises over the Period.

 

Adjusted Operating Profit and Operating Profit

 

Adjusted operating profit, excluding exceptional items, increased by 14.1% to £13.1m reflecting volume growth in the UK, improving margins and tight controls of the overall cost base whilst maintaining investment in our brands.

 

Adjusted Profit Before Tax, Profit Before Tax and Tax Rate

 

Adjusted profit before tax, excluding exceptional items, increased by 18.0% to £14.5m (H1 2023: £12.3m). The tax charge on adjusted profit before tax for the Period of £3.6m (H1 2023: £2.9m) represents an effective tax rate of 24.8% (H1 2023: 23.8%). The increase in the effective rate is consistent with published rates. Profit before tax was £11.8m, an improvement of 5.8% compared to the prior year (H1 2023: £11.2m) reflecting the increased operating profits and interest income, partially offset by the increased exceptional costs largely relating to investment in the Group's new enterprise resource planning (ERP) system.

 

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 £70.3m (H1 2023: £56.1m, 31 December 2023: £67.0m).

 

The Group has seen its working capital marginally increase since the start of the year (+£0.1m), principally driven by debtors and strong Q2 sales. Capital expenditure in the Period was £0.1m (H1 2023: £0.1m) and was historically weighted towards our OoH business where a re-focus on capital allocation and spend has been actioned following the strategic review. The Group's current Return on Capital Employed is 27.1% (H1 2023: 25.9%).

 

Earnings per share

 

Adjusted basic EPS increased to 29.87 pence (H1 2023: 25.70p) with basic EPS at 24.29 pence (H1 2023: 23.31p). On an adjusted basis, diluted EPS was 29.86 pence (H1 2023: 25.68p).

 

Dividend and Capital Allocation

 

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 2024 will be 14.9p per share, to be paid on 6 September 2024 with a record date of 2 August 2024 and an ex-dividend date of 1 August 2024.

 

In the Group's preliminary results statement, the Board set out its approach to capital allocation and committed to identifying surplus cash reserves for distribution to shareholders. Having considered the investment needs and capital structure of the business, the Board has approved a special dividend of 54.8p per share equivalent to an aggregate distribution of £20m. This payment reflects a long history of strong cash flow generation by the Company and the Board's confidence in its future prospects. We will continue to keep our capital allocation policy under review ensuring we maintain sufficient resources to fund future growth opportunities, whilst balancing shareholder returns.  

 

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 2024, the Group recognised a surplus on its UK defined benefit scheme of £3.7m (31 December 2023: surplus £4.0m).

 

Outlook

 

The Board is pleased with the Group's trading performance and strategic progress in the first half of 2024. Consumer spending is still under pressure despite levels of inflation stabilising. However, we exit the first half with strong momentum and we remain confident that the Group, underpinned by its diversified business model and the enduring strength of the Vimto brand, is well placed to achieve its long-term strategic ambitions and deliver strong returns for our shareholders. 

 

The Company has begun trading in Q3 positively and in line with management expectations. Reflecting the progress made in H1 and underpinned by the Group's ongoing focus on driving margin improvement the Board now expects to report full year Adjusted Profit Before Tax¹ slightly ahead of current market expectations².

 

Andrew Milne

Chief Executive Officer

 

Richard Newman

Chief Financial Officer

 

24 July 2024

 

¹  Excluding exceptional items

²  FY24 expectations refers to Group compiled market consensus for FY24 adjusted PBT of £28.8m at 23 July 2024

 

 

 

CONSOLIDATED INCOME STATEMENT

		Unaudited Half year to 30 June 2024 £'000	Unaudited Half year to 30 June 2023 £'000	Audited Year ended 31 December 2023 £'000
Continuing operations
Revenue		83,976	85,546	170,741
Cost of sales		(47,021)	(50,356)	(98,565)
Gross profit		36,955	35,190	72,176
Distribution expenses		(5,171)	(5,009)	(9,567)
Administrative expenses		(21,402)	(19,846)	(40,323)
Operating profit		10,382	10,335	22,286
Finance income		1,458	866	2,095
Finance expenses		(37)	(48)	(123)
Profit before taxation		11,803	11,153	24,258
Taxation		(2,927)	(2,649)	(5,896)
Profit for the Period		8,876	8,504	18,362
Earnings per share (basic)		24.29p	23.31p	50.34p
Earnings per share (diluted)		24.28p	23.29p	50.32p
Adjusted for exceptional items
Operating profit		10,382	10,335	22,286
Exceptional items		2,713	1,144	2,907
Adjusted operating profit		13,095	11,479	25,193
Profit before taxation		11,803	11,153	24,258
Exceptional items		2,713	1,144	2,907
Adjusted profit before taxation		14,516	12,297	27,165
Adjusted earnings per share (basic)		29.87p	25.70p	56.41p
Adjusted earnings per share (diluted)		29.86p	25.68p	56.39p

           

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

		Unaudited Half year to 30 June 2024 £'000	Unaudited Half year to 30 June 2023 £'000	Audited Year ended 31 December 2023 £'000
Profit for the financial Period		8,876	8,504	18,362
Items that will not be classified subsequently to profit or loss:
Re-measurement of net defined benefit liability		(360)	69	(192)
Deferred taxation on pension obligations and employee benefits		90	(17)	48
Other comprehensive (expense)/income for the Period		(270)	52	(144)
Total comprehensive income for the Period		8,606	8,556	18,218

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

		Unaudited 30 June 2024	Unaudited 30 June 2023	Audited 31 December 2023
ASSETS		£'000	£'000	£'000
Non-current assets
Property, plant and equipment		8,773	10,247	9,457
Intangibles		215	297	256
Pension surplus		3,715	4,257	4,014
Total non-current assets		12,703	14,801	13,727
Current assets
Inventories		10,491	10,595	8,809
Trade and other receivables		42,205	42,001	41,393
Corporation tax receivable		-	986	-
Cash and cash equivalents		70,291	56,128	67,030
Total current assets		122,987	109,710	117,232
Total assets		135,690	124,511	130,959
LIABILITIES
Current liabilities
Trade and other payables		32,899	29,533	30,719
Corporation tax payable		74	-	318
Total current liabilities		32,973	29,533	31,037
Non-current liabilities Other payables		1,801	2,378	1,865
Deferred tax liabilities		626	687	715
Total non-current liabilities		2,427	3,065	2,580
Total liabilities		35,400	32,598	33,617
Net assets		100,290	91,913	97,342
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		2,151	1,481	1,845
Retained earnings		89,978	82,271	87,336
Total equity		100,290	91,913	97,342

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

	Unaudited Half year to 30 June 2024			Unaudited Half year to 30 June 2023		Audited Year ended 31 December 2023
	£'000	£'000		£'000	£'000	£'000	£'000
Cash flows from operating activities
Profit for the financial Period			8,876		8,504		18,362
Adjustments for:
Depreciation and amortisation	975			1,193		2,343
Loss on sale of property, plant and equipment	56			74		67
Finance income	(1,458)			(866)		(2,095)
Finance expense	37			48		123
Tax expense recognised in the income statement	2,927			2,649		5,896
(Increase)/decrease in inventories	(1,682)			(163)		1,623
Increase in trade and other receivables	(405)			(2,096)		(1,549)
Increase/(decrease) in trade and other payables	1,971			(928)		384
Change in pension obligations	(61)			(63)		(81)
Fair value gain on derivative financial instruments	(30)			(344)		(285)
			2,330		(496)		6,426
Cash generated from operating activities			11,206		8,008		24,788
Tax paid			(3,171)		(2,939)		(4,776)
Net cash generated from operating activities			8,035		5,069		20,012
Cash flows from investing activities
Finance income	1,458			866		2,095
Acquisition of property, plant and equipment	(146)			(138)		(479)
Proceeds from sale of property, plant and equipment	15			-		192
Net cash from investing activities			1,327		728		1,808
Cash flows from financing activities Payment of lease liabilities	(409)			(385)		(909)
Dividends paid	(5,692)			(5,580)		(10,177)
Net cash used in financing activities			(6,101)		(5,965)		(11,086)
Net increase/ (decrease) in cash and cash equivalents			3,261		(168)		10,734
Cash and cash equivalents at start of Period			67,030		56,296		56,296
Cash and cash equivalents at end of Period			70,291		56,128		67,030

 

 

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 2023	3,697	3,255	1,209	1,280	79,295	88,736
Dividends	-	-	-	-	(5,580)	(5,580)
Movement in ESOT	-	-	-	(2)	-	(2)
Credit to equity for equity-settled share-based payments	-	-	-	203	-	203
Transactions with owners	-	-	-	201	(5,580)	(5,379)
Profit for the Period	-	-	-	-	8,504	8,504
Other comprehensive income	-	-	-	-	52	52
Total comprehensive income	-	-	-	-	8,556	8,556
At 30 June 2023	3,697	3,255	1,209	1,481	82,271	91,913
	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 2024	3,697	3,255	1,209	1,845	87,336	97,342
Dividends	-	-	-	-	(5,692)	(5,692)
Movement in ESOT	-	-	-	4	-	4
Share option exercise	-	-	-	-	(272)	(272)
Credit to equity for equity-settled share-based payments	-	-	-	302	-	302
Transactions with owners	-	-	-	306	(5,964)	(5,658)
Profit for the Period	-	-	-	-	8,876	8,876
Other comprehensive expense	-	-	-	-	(270)	(270)
Total comprehensive income	-	-	-	-	8,606	8,606
At 30 June 2024	3,697	3,255	1,209	2,151	89,978	100,290

 

Treasury shares used for share option exercises are held within retained earnings.

  

 

 

 

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 2023, 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 2024 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 24 July 2024.

 

 

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 and its principal risks and uncertainties. The review performed considers severe but plausible downside scenarios that could reasonably arise within the Period.

 

Our modelling has sensitised the impacts of Russia's invasion of Ukraine and the conflict within Yemen, in particular their impact on global supply chains and macroeconomic inflationary factors. 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 30 June 2024 the Group had cash and cash equivalents of £70.3m 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, as the entity's chief operating decision maker, analyses the Group's internal reports to enable an assessment of performance and allocation of resources. The operating segments are based on these reports.

 

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment performance is evaluated based on adjusted operating profit (excluding exceptional items), finance income and exceptional items. This is the measure reported to the Board for the purpose of resource allocation and assessment of segment performance.

  

 

 

Half year to	Packaged
30 June 2024	UK	Middle East	Africa	Rest of World	Total Packaged	Out of Home	Total Segments	Central1	Total Group
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	45,386	3,466	11,754	4,752	65,358	18,618	83,976	-	83,976
Adjusted operating profit					18,779	2,964	21,743	(8,648)	13,095
Net finance income									1,421
Adjusted profit before tax									14,516
Exceptional items									(2,713)
Profit before tax									11,803

 

 

 

Half year to	Packaged
30 June 2023	UK	Middle East	Africa	Rest of World	Total Packaged	Out of Home	Total Segments	Central1	Total Group
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	43,097	4,905	13,081	3,466	64,549	20,997	85,546	-	85,546
Adjusted operating profit					17,988	1,352	19,340	(7,861)	11,479
Net finance income									818
Adjusted profit before tax									12,297
Exceptional items									(1,144)
Profit before tax									11,153

 

 

 

Year ended	Packaged
31 December 2023	UK	Middle East	Africa	Rest of World	Total Packaged	Out of Home	Total Segments	Central1	Total Group
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	83,914	12,963	22,184	8,122	127,183	43,558	170,741	-	170,741
Adjusted operating profit					36,317	5,063	41,380	(16,187)	25,193
Net finance income									1,972
Adjusted profit before tax									27,165
Exceptional items									(2,907)
Profit before tax									24,258

 

¹ Central includes the Group's central and corporate costs, which relate to salaries and head office overheads such as rent and rates, insurance and IT maintenance as well as the costs associated with the Board and Executive Leadership Team, Governance and Listed Company costs.

 

 

A geographical split of revenue is provided below:

 

		Half year to 30 June 2024	Half year to 30 June 2023	Year ended 31 December 2023
		£'000	£'000	£'000
Geographical split of revenue
Middle East		3,466	4,905	12,963
Africa		11,754	13,081	22,184
Rest of World		4,852	3,301	8,518
Total exports		20,072	21,287	43,665
United Kingdom		63,904	64,259	127,076
Total revenue		83,976	85,546	170,741

 

 

4.   Exceptional items

 

		Half year to 30 June 2024	Half year to 30 June 2023	Year ended 31 December 2023
		£'000	£'000	£'000
Business Change Programme and Systems Development		2,733	519	1,722
Out of Home Strategic Review and Restructuring		179	569	1,784
Historic incentive scheme		(199)	56	(599)
		2,713	1,144	2,907

 

The Group incurred £2.7m of exceptional costs during the Period (H1 2023: £1.1m).

 

Business Change Programme and Systems Development

The Group has continued to build a new enterprise resource planning (ERP) system, focused on driving business transformation. The design phase of the project has concluded with the system architecture currently being built ahead of an extensive testing period during H2. The new system is expected to be operational in Q1 2025. Costs of £2.7m were incurred in the Period.

 

Out of Home Strategic Review and Restructuring

In 2022 the Group completed a strategic review into its OoH route to market, assessing customer and product mix as well as reviewing ways to enhance net margin and profitability going forward. The Group incurred £0.2m of costs in the Period with most recommendations having been implemented.

 

Historic Incentive Scheme

During 2022, the Group settled with HMRC a £4.3m tax and interest charge relating to an historic incentive scheme and has now achieved a significant recovery of debts from current and previous employees who had indemnified the Company. Provisions relating to the recovery of these amounts have been reduced by £0.2m, with full cost recovery now expected by early 2025.

 

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. The weighted average number of ordinary shares is calculated by adjusting the shares in issue at the beginning of the Period by the number of shares bought back or issued during the Period multiplied by a time-weighting factor. 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 2024
Basic earnings per share		8,876	36,544,818	24.29p
Dilutive effect of share options			6,448
Diluted earnings per share		8,876	36,551,266	24.28p

 

 

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:

 

 

		Earnings	Weighted average number of shares	Earnings per share
		£'000
30 June 2024
Basic earnings per share		8,876	36,544,818	24.29p
Exceptional items after taxation		2,040
Adjusted basic earnings per share		10,916	36,544,818	29.87p
Diluted effect of share options			6,448
Adjusted diluted earnings per share		10,916	36,551,266	29.86p

 

  

6.   Non-current Assets

 

		Property, Plant & Equipment	Intangibles
		£'000	£'000
Cost
At 1 January 2024		31,674	9,998
Additions		321	-
Disposals		(2,966)	-
At 30 June 2024		29,029	9,998

 

 

Depreciation and Amortisation
At 1 January 2024	22,217	9,742
Charge for the Period	934	41
On disposals	(2,895)	-
At 30 June 2024	20,256	9,783

 

 

Net book value
At 1 January 2024	9,457	256
At 30 June 2024	8,773	215

 

 

 

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 2023 and updated at 30 June 2024 by an independent qualified actuary.

 

A summary of the pension surplus position is provided below:

 

 

Pension surplus	£'000
At 1 January 2024	4,014
Current service cost	(6)
Scheme administrative expenses	(34)
Net interest income	89
Actuarial losses	(360)
Contributions by employer	12
At 30 June 2024	3,715

 

 

 

8.   Dividends

 

Dividend cover is broadly 2x adjusted earnings of the Group. As a result, the interim dividend for 2024 will be 14.9p per share to be paid on 6 September 2024 with a record date of 2 August 2024.

 

In the Group's preliminary results statement the Board set out its approach to capital allocation and committed to identifying surplus cash reserves for distribution to shareholders. Having considered the investment needs and capital structure of the business, the Board has approved a special dividend of 54.8p per share equivalent to an aggregate distribution of £20m. This payment reflects a long history of strong cash flow generation by the Company and the Board's confidence in its future prospects. We will continue to keep our capital allocation policy under review ensuring we maintain sufficient resources to fund future growth opportunities, whilst balancing shareholder returns. 

 

 

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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