2018 INTERIM RESULTS

RNS Number : 0904V
Nichols PLC
19 July 2018
 

 

Contacts:

John Nichols, Non-Executive Chairman

Marnie Millard, Group Chief Executive Officer

Tim Croston, Group Chief Finance Officer

Andrew Milne, Group Commercial Director

 

Nichols plc

Telephone: 01925 222 222

Website: www.nicholsplc.co.uk

 

 

Alex Brennan/ Hattie O'Reilly

Richard Lindley

Hudson Sandler

N+1 Singer (Nominated Adviser)

Telephone: 020 7796 4133

Email: nichols@hudsonsandler.com

Telephone: 020 7496 3000

Website: www.n1singer.com

 

 

Nichols plc

2018 INTERIM RESULTS

 

Nichols plc ('Nichols' or the 'Group'), the soft drinks Group, announces its Interim Results for the half year ended 30 June 2018 (the 'period').

 

Nichols plc is an international soft drinks business with sales in over 85 countries, selling products in both the Still and Carbonate categories. The Group is home to the iconic Vimto brand which is popular in the UK and around the world, particularly in the Middle East and Africa. Other brands in its portfolio include Feel Good, Starslush, ICEE, Levi Roots and Sunkist. 

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

Financial Highlights:

 

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

Half Year ended

30 June 2018

Half Year ended

30 June 2017

% movement

 

£m

£m

 

 

 

 

 

Group Revenue

65.0

63.5

2.3%

Operating Profit

13.1

12.7

2.7%

Operating Profit margin

20.1%

20.0%

 

 

 

 

 

EBITDA*

14.0

13.2

6.2%

 

 

 

 

Profit Before Tax

13.1

12.7

2.7%

PBT margin

20.1%

20.0%

 

 

 

 

 

Earnings Per Share (basic)

28.81p

27.67p

4.1%

Interim dividend

11.3p

10.1p

11.9%

 

 

Chairman's Statement

 

Nichols plc has delivered a solid performance in the first half of 2018. The Group's revenue, profit before tax and earnings per share have all increased during the period.

 

Trading

 

Total Group revenue increased by 2.3% in the first six months of 2018, driven by a strong performance from the UK business.

 

UK sales totalled £53.8m in the period, an increase of 13.2% compared to the prior year. Within the UK business, the Vimto brand, which is 110 years old this year, continued to significantly outperform the market. Year to date sales of the Vimto brand are up 9.0% compared to the total UK market which increased by 3.7% (Nielsen YTD to 16 June 2018). Elsewhere in the UK, Out of Home revenue increased by 13.6%, with the growth coming from both dispense and frozen product sales. The UK growth was delivered in both the Still and Carbonate segments.

 

Total international sales were in line with our expectations at £11.2m, £4.8m lower than the same period in 2017. The majority of the reduction is a result of lower sales to the Middle East as anticipated in our 2017 Preliminary Results statement (1 March 2018). This is due to the ongoing conflict in Yemen and the timing of shipments to Saudi Arabia. Elsewhere in our international business, sales to Africa totalled £6.8m. Whilst this is 3.7% down at the half year point, the Board is confident that full year sales to this region will deliver year on year growth.

 

Dividend

 

Reflecting the Board's continued confidence in the outlook for the Group, we are pleased to announce an interim dividend of 11.3 pence per share, an increase of 11.9% compared to the prior year (2017: 10.1 pence). The interim dividend will be paid on 31 August 2018 to shareholders registered on 20 July 2018; the ex-dividend date is 19 July 2018. 


Summary and Outlook

The Board is pleased with the Group's trading performance in the first half of 2018.

 

Supported by the new Vimto marketing campaign launched in May, we expect to maintain the positive UK sales performance into the second half of the year. Whilst we maintain our original guidance that full year sales to the Middle East will be lower when compared to the prior year, the Board anticipate a stronger second half year in our international business.

 

As a result, the Board are confident that full year earnings will be in line with expectations.

 

John Nichols, Non-Executive Chairman, said:

 

 "Nichols plc has delivered a solid performance in the first half of 2018 with growth in revenue, profit before tax and earnings per share. The Board is pleased to announce an 11.9% increase in the dividend reflecting the performance as well as its confidence in the Group's outlook.

 

The performance during the first half is testament to the benefits of Nichols' diversified business model. The strong sales performance in the UK was driven by the strength of the Vimto brand, which continues to outperform the wider market, and we expect this momentum to continue following the launch of an exciting new marketing campaign in May.

 

We have been managing the widely reported market challenges in the Middle East and as a result, the Board is confident of delivering full year results in line with expectations."

 

 

 

John Nichols

Non-Executive Chairman

18 July 2018 

 

 

 

 

 

CONSOLIDATED INCOME STATEMENT

 

           

 

 

Unaudited

Unaudited

Audited

 

 

 

Half year

ended

Half year

ended

Full year ended

 

30-Jun-2018

30-Jun-2017

31-Dec-2017

 

 

 

 

 

 

 

 

£'000

£'000

£'000

 

 

 

 

 

 

Revenue

64,989

63,504

132,789

 

 

 

 

 

 

Operating profit

13,058

12,717

28,742

 

Finance income

75

74

134

 

Finance expense

(60)

(60)

(154)

 

 

 

 

 

 

Profit before taxation

13,073

12,731

28,722

 

 

 

 

 

 

Taxation

(2,436)

(2,534)

(5,548)

 

 

 

 

 

 

Profit for the financial period

10,637

10,197

23,174

 

 

 

 

 

 

Attributable to:

 

 

 

 

Owners of the Parent

10,617

10,197

23,174

 

Non-controlling interest

20

-

-

 

 

 

 

 

 

 

 

Earnings per share (basic)

 

28.81p

27.67p

62.88p

 

 

 

 

 

 

Earnings per share (diluted) - all activities

28.79p

27.65p

62.81p

 

 

 

 

 

 

Dividends paid per share

23.40p

20.30p

30.40p

 

 

 

 

 

 



 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

 

 

Half year

ended

30-Jun-2018

 

Half year

ended

30-Jun-2017

 

Full year

ended

31-Dec-2017

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Profit for the financial period

10,637

 

10,197

 

23,174

 

Items that will not be reclassified subsequently to profit or loss

 

Re-measurement of net defined benefit liability

-

 

-

 

1,140

 

 

 

 

 

 

Deferred taxation on pension obligations and employee benefits

-

 

-

 

(113)

 

 

 

 

 

 

Other comprehensive income for the period

-

 

-

 

1,027

 

 

 

 

 

 

 

Total comprehensive income for the period

10,637

 

10,197

 

24,201

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Owners of the Parent

10,617

 

10,197

 

24,201

Non-controlling interest

20

 

-

 

-

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

Unaudited

 

Unaudited

 

Audited

 

30-Jun-2018

 

30-Jun-2017

 

31-Dec-2017

 

 

 

 

 

 

 

£'000

 

£'000

 

£'000

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

14,391

 

9,924

 

12,059

Goodwill

33,726

 

29,415

 

30,666

Intangibles

7,767

 

6,006

 

7,993

Deferred tax assets

1,065

 

1,436

 

1,065

Total non-current assets

56,949

 

46,781

 

51,783

 

 

 

 

 

 

Current assets

 

 

 

 

 

Inventories

6,212

 

6,036

 

4,815

Trade and other receivables

34,120

 

36,957

 

34,740

Cash and cash equivalents

37,148

 

29,276

 

36,058

Total current assets

77,480

 

72,269

 

75,613

 

 

 

 

 

 

Total assets

134,429

 

119,050

 

127,396

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

26,296

 

20,624

 

21,031

Current tax liabilities

2,479

 

2,607

 

2,536

Total current liabilities

28,775

 

23,231

 

23,567

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Pension obligations

2,521

 

5,954

 

2,921

Deferred tax liabilities

1,602

 

1,101

 

1,586

Total non-current liabilities

4,123

 

7,055

 

4,507

 

 

 

 

 

 

Total liabilities

32,898

 

30,286

 

28,074

 

 

 

 

 

 

Net assets

101,531

 

88,764

 

99,322

 

 

 

 

 

 

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

157

 

(268)

 

134

Retained earnings

93,193

 

80,871

 

91,027

Non-controlling interest

20

 

-

 

-

Total equity

101,531

 

88,764

 

99,322

 

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

Unaudited

 

Half year ended

30-Jun-2018

Unaudited

 

Half year ended

30-Jun-2017

Audited

 

Full year ended

31-Dec-2017

 

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Profit for the financial period

 

10,637

 

10,197

 

23,174

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

Depreciation

708

 

362

 

1,018

 

Amortisation

226

 

78

 

157

 

Loss on sale of property, plant and equipment

32

 

15

 

40

 

Finance income

(75)

 

(74)

 

(134)

 

Finance expense

60

 

60

 

154

 

Tax expense recognised in the income statement

2,436

 

2,534

 

5,548

 

Change in inventories

(1,321)

 

536

 

1,878

 

Change in trade and other receivables

684

 

(5,448)

 

(4,675)

 

Change in trade and other payables

3,079

 

(859)

 

(1,810)

 

Change in pension obligations

(400)

 

(441)

 

(2,334)

 

 

 

5,429

 

(3,237)

 

(158)

 

 

 

 

 

 

 

Cash generated from operating activities

 

16,066

 

6,960

 

23,016

 

 

 

 

 

 

 

Tax paid

 

(2,555)

 

(2,314)

 

(5,274)

Net cash generated from operating activities

 

13,511

 

4,646

 

17,742

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Finance income

75

 

74

 

134

 

Proceeds from sale of property, plant and equipment

-

 

3

 

4

 

Acquisition of property, plant and equipment

(2,314)

 

(1,758)

 

(3,795)

 

Acquisition of subsidiary

(1,549)

 

(6,040)

 

(6,568)

 

Net cash used in investing activities

 

(3,788)

 

(7,721)

 

(10,225)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Funds from ESOT

-

 

84

 

-

 

Dividends paid

(8,633)

 

(7,487)

 

(11,213)

 

Net cash used in financing activities

 

(8,633)

 

(7,403)

 

(11,213)

 

 

 

 

 

 

 

Net increase/ (decrease) in cash and cash equivalents

 

1,090

 

(10,478)

 

(3,696)

Cash and cash equivalents at beginning of period

 

36,058

 

39,754

 

39,754

Cash and cash equivalents at end of period

 

37,148

 

29,276

 

36,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 2017, prepared under IFRS, 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.

 

            The interim financial information has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) and on the same basis and using the same accounting policies as used in the financial statements for the year ended 31 December 2017, aside from the fact that this is the first set of the Group's financial statements where IFRS 15 and IFRS 9 have been applied, the impact of which is detailed in section 2 below. 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.

 

2.         New Accounting Standards

 

IFRS 15, Revenue from Contracts with Customers

 

IFRS 15 supersedes IAS 18, Revenue and related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The standard establishes a new model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard is effective for accounting periods beginning or after 1 January 2018; the Group has applied the standard from this date without using the practical expedient for completed contracts retrospectively.

 

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

 

As a manufacturer and distributor, the Group earns its revenues from the sale of goods rather than services. The Group sells those goods to specific orders. The Group recognises revenue at a point in time, typically on despatch of the goods to customer's premises for UK sales or, for international sales, upon loading the goods onto the relevant carrier. The adoption of IFRS 15 has not affected the revenue recognition policy currently applied by the Group, with revenue recognised at a point in time, depending on when the specifics of a particular contract result in control of the goods being passed to the customer.

 

Although the majority of the Group's contracts with customers are not complex, with revenue being fixed for a specific quantity of goods, the Group has identified a number of contracts in which customers are given volume rebates and/ or other promotional rebates based on quantities purchased over a contractually agreed period of time.

 

Under the Group's previous policy under IAS 18, management made its best estimate of any rebates it had to give based on available information. Under IFRS 15, management have assumed that products sold by the balance sheet date attract a full rebate except to the extent that it was highly probable the full rebate had not been earned. Based on the timing of the agreements entered into with customers, the level of estimation in the accrual at each reporting date was insignificant, and as such, there has been no material impact on deductions to revenue under IFRS 15 as a result of rebate arrangements.

 

The Group does not incur material costs to obtain contracts with customers.

 

IFRS 9, Financial Instruments

 

IFRS 9, Financial Instruments replaces IAS 39, Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. The Group has adopted IFRS 9 from 1 January 2018 and in accordance with the transitional provisions in IFRS 9 (7.2.15) and (7.2.26), comparative figures have not been restated.

 

IFRS 9 largely retains the previous requirements in IAS 39 for the classification and measurement of financial liabilities and the accounting for the Group's financial liabilities remains largely the same as it was under IAS 39. Similar to the requirements of IAS 39, IFRS 9 requires contingent consideration liabilities to be treated as financial instruments measured at fair value, with the changes in fair value recognised in the statement of profit or loss.

 

However, IFRS 9 eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale, which has resulted in a change to the Group's accounting for impairment losses for financial assets by replacing IAS 39's incurred loss approach with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires the Group to record an allowance for ECL's for all loans and other debt financial assets not held at FVPL. The Group's financial assets that are subject to IFRS 9's new expected credit loss model comprise trade receivables for sales of inventory.

 

ECL's are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the asset's original effective interest rate. For contract assets and trade and other receivables, the Group has applied the standard's simplified approach and has calculated ECL's based on lifetime expected credit losses. The Group has established a provision matrix that is based on the Group's historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment. The Group has concluded that the expected loss allowance for trade receivables is not materially different from that previously recognised under IAS 39.

 

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was again immaterial.

 

IFRS 16, Leases

 

IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases.

 

As at the reporting date, the Group has non-cancellable operating lease commitments of £3.8m, the vast majority of which relate to property leases for operational sites. The Group has not yet determined to what extent these commitments will result in the recognition of an asset and a liability for future payments and how this will affect the Group's profit and classification of cash flows. Some of the commitments may be covered by the exception for short-term and low-value leases and some commitments may relate to arrangements that will not qualify as leases under IFRS 16.

IFRS 16 becomes effective for accounting periods beginning on or after 1 January 2019. The Group does not intend to adopt the standard before its effective date.

 

3.         Dividends

 

The interim dividend of 11.3 pence (2017: 10.1 pence) will be paid on 31 August 2018 to shareholders registered on 20 July 2018; the ex-dividend date is 19 July 2018.

 

4.         Earnings Per Share

 

Basic earnings per share are based on the weighted average number of shares in issue in the six months to 30 June 2018 of 36,857,624 (six months to 30 June 2017 of 36,853,794 and 12 months to 31 December 2017 of 36,857,660).

 

Interim Report

 

The interim report will be available on the Group's website (www.nicholsplc.co.uk) on or around 19 July 2018.

 

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.

 


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