2023 Preliminary Results

Nichols PLC
06 March 2024
 

6 March 2024                                                                                                                                                         

Nichols plc

2023 PRELIMINARY RESULTS

 

Strong performance underpinned by diversified business model and core Vimto brand

 

Nichols plc ('Nichols', the 'Company' or the 'Group'), the diversified soft drinks group, announces its Preliminary Results for the year ended 31 December 2023 (the 'Period').

  


Year ended

31 December 2023

Year ended

31 December 2022

 

Movement





Group Revenue

£170.7m

£164.9m

+3.5%





Adjusted Profit Before Tax (PBT)1

£27.2m

£25.0m

+8.7%

Profit Before Tax (PBT)

£24.3m

£13.8m

+75.3%





Adjusted PBT Margin1

15.9%

15.1%

+0.8ppts

PBT Margin

14.2%

8.4%

+5.8ppts





EBITDA2

£24.7m

£26.9m

(8.1%)





Adjusted earnings per share (basic)1

56.41p

55.38p

+1.9%

Earnings per share (basic)

50.34p

31.86p

+58.0%





Cash and cash equivalents

£67.0m

£56.3m

+19.0%





Free Cash Flow3 (FCF)

£20.9m

£14.6m

+43.1%





Adjusted Return on Capital Employed4

26.3%

27.2%

(0.9ppts)

Return on Capital Employed5

23.3%

14.2%

+9.1ppts





Proposed Final Dividend

15.6p

15.3p

+2.0%

Total Dividend

28.2p

27.7p

+1.8%


 

Financial Highlights

·      Revenue +3.5% at £170.7m (2022: £164.9m)

Overall Packaged business revenue increased by +6.1%

§ International Packaged revenue increased by +16.8% with double digit growth in all geographic segments

§ UK Packaged revenue increased by +1.3%

Out of Home ("OoH") business revenue decreased by -3.4% in line with revised strategy post restructuring

§ As anticipated following exit from unprofitable accounts

·      Gross Margin of 42.3% (2022: 43.1%)

UK Packaged gross margin maintained despite inflationary pressures

Market mix resulted in lower percentage margin

·      Adjusted Operating Profit increased by +£0.6m (+2.4%)

Investment made across the Group to prepare for further growth, including distribution channels within the International Packaged business, additional marketing and enhanced operational capabilities

Savings in overheads associated with restructured OoH business

·      Adjusted Operating Margin maintained at 14.8% (2022: 14.9%)

·      Adjusted Profit before Tax +8.7% to £27.2m

·      Exceptional items: Net charge of £2.9m (2022: £11.1m)

Costs associated with restructuring OoH and Business Change Programme and Systems Development

·      Strong FCF of £20.9m (2022: £14.6m) resulting in cash and cash equivalents of £67.0m (2022: £56.3m)

Assessment of forward cash and investment requirements

Identification of surplus cash in order to return to shareholders during 2024

·      Final dividend proposed at 15.6p (2022: 15.3p). Total dividend of 28.2p (2022: 27.7p).

 

Strategic and Operational Highlights

·      Strong growth across our Packaged business from continued investment in our brands, including product range extension and geographical expansion

Continued strong progress in international markets reflecting strong market penetration across existing and new territories in Africa and the Middle East

Celebrated 100th Ramadan season during 2023 with outstanding in-store displays that generated increased consumer engagement and purchases

·      Successful mitigation of the strong inflationary headwinds

·      OoH division realising benefits from the strategic review earlier than expected

Restructuring refocuses the business on profitability and reduces overall scale and complexity

·      Progress against ESG strategy ('Happier Future')

New responsible sourcing policy with supplier code of conduct

Roadmap for Scope 3 emissions established

 

Current Trading and Outlook

·      2024 trading has started well, with a performance in line with management expectations

·      The Company remains confident in its ability to deliver further strategic progress across its business in FY24

 

 

Andrew Milne, Chief Executive Officer of Nichols, commented:

"2023 was a year of strong progress and execution for Nichols, as the Packaged business delivered another year of growth underpinned by the Vimto brand, and benefits from the newly streamlined OoH business were delivered earlier than anticipated. The Group delivered a very strong performance in international markets driven by strong market penetration across existing and new territories in Africa and the Middle East. Innovation remained a critical growth driver and we have an exciting pipeline of new products planned for 2024.

Building on the progress achieved in 2023, I am confident about our prospects for 2024 and the well-defined strategy we have in place to drive further growth. Our diversified business model provides the foundation for continued success, reinforced by our well-established portfolio of owned and licensed brands, the close partnerships we have with our suppliers and customers and our long-term strategic focus. These strengths, coupled with a resilient soft drinks market and the dedication of our people, will enable us to continue to deliver value to shareholders."


 

References:

1 Excluding exceptional items

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

3 Free Cash Flow is the net increase in cash and cash equivalents before acquisition funding and dividends

4 Adjusted return on capital employed is the adjusted operating profit divided by the average period-end capital employed

5 Return on capital employed is the operating profit divided by the average period-end capital employed

 

 

 

Contacts

 

Nichols plc

Andrew Milne, Chief Executive Officer

David Taylor, Interim Chief Financial Officer

Richard Newman, Chief Financial Officer Designate

 

Telephone: 0192 522 2222

Singer Capital Markets (NOMAD & Broker)

Steve Pearce / Jen Boorer 

 

Telephone: 0207 496 3000

Website: www.singercm.com

Hudson Sandler (Financial PR)

Alex Brennan / Hattie Dreyfus / Harry Griffiths

 

 

Telephone: 0207 796 4133

Email: nichols@hudsonsandler.com

 

 

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.

 

 



 

Chair's Statement

 

Introduction

 

In what is my first set of full-year results as Non-Executive Chair of Nichols, I am pleased to report to shareholders on what has been a successful year for the Group. It is often tempting to focus on short-term achievements but I am satisfied that, in addition to delivering a strong performance against our targets during the year, and despite the challenges raised by an uncertain macroeconomic environment, we have made considerable progress in developing and implementing our long-term growth strategy. A substantial amount of work has been undertaken on a number of long-term projects and initiatives which are now beginning to deliver results and which we expect to continue to enhance our performance in the medium to long term.

 

During 2023, revenue increased by 3.5% to £170.7m (2022: £164.9m). Our core Packaged business performed well, with sales up 6.1%, and saw particularly strong growth from our International Packaged division where revenue increased by 16.8%. As anticipated, and in-line with our strategic plans, revenue in our OoH business reduced as we withdrew from unprofitable accounts, with sales down by 3.4%. Adjusted Operating Profit increased to £25.2m (2022: £24.6m) and Adjusted Profit before Taxation rose by 8.7% to £27.2m (2022: £25.0m). Operating Profit increased to £22.3m (2022: £13.5m) and Profit before Taxation increased to £24.3m (2022: £13.8m). Cash and cash equivalents increased to £67.0m (2022: £56.3m).

 

Nichols operates in a fast-moving industry with a constant need to be agile and adapt to changing market dynamics. Due to the strength of our brands and operations, the diversity of our business model and a focus on long-term opportunities, the Group is well positioned to navigate shifting market conditions. I am pleased to report that Nichols was able to respond quickly to a high level of input cost inflation early in 2023 and successfully managed other market challenges later in the year. Importantly, however, this was delivered whilst the business was increasing the levels of new product introduction, expanding distribution in export markets and implementing the strategic review of the OoH business. All these projects are important parts of our overall strategy and are intended to provide the basis for long-term progress within the Group. Further initiatives are planned for 2024 and beyond. Nichols is a Company that does not stand still and it is important that we prioritise sustainable growth to allow us to deliver against our ambitions.

 

 

People

 

I would like to give my thanks to all my colleagues at Nichols for their continued hard work and dedication. The Nichols team is rich in experience, knowledge and expertise; the commitment shown to both the Company and to each other is impressive and a key differentiator for us. All our stakeholders benefit significantly from the strength of our people and from their ability to drive sustained high levels of performance that position us well for the future.

 

 

The Board

 

The Board continued to evolve during the year. In addition to my appointment as Chair in February, we were pleased to welcome David Taylor to the Board as an Executive Director in his role as Interim Chief Financial Officer, ahead of the appointment of Richard Newman as our new Chief Financial Officer with effect from 21 March 2024. Post year end, in January 2024 we also welcomed Matt Nichols to the Board as a Non-Executive Director representing the Nichols family. I look forward to working with both Richard and Matt over the coming years.

 

Both James Nichols and David Rattigan stood down from the Board during the year, and David Taylor will step down in March. I would like to thank each of them for their service and commitment to the Group. I particularly wish to thank my predecessor, John Nichols, for his guidance during my first months with the Company. John has an enormous amount of experience within the business and his support has made my task of assuming the role of Chair much more straightforward than it might otherwise have been.

 

We further strengthened our succession planning process during the year and recognise that we must ensure that the composition of the Board remains effective and appropriate for our business.

 

 

Environment, Social and Governance

 

We are proud of the Group's commitment to the Nichols Happier Future strategy. The Happier Future pillars of "Everyone Matters", "Products We're Proud Of" and "Owning Our Climate Impact" underpin the development of our growth strategy as well as our day-to-day decision-making. During the course of the year we made significant progress towards achieving our objectives. Highlights for 2023 include extending our Diversity and Inclusion strategy within the business, continuing our Camp Vimto project with local school children and extending our Heathier Hydration programme to international markets.

 

 

Dividend and Capital Allocation

 

The Board is pleased to recommend an increased final dividend of 15.6p per share (2022: 15.3p) to give a proposed total dividend in respect of the year of 28.2p per share (2022: 27.7p). If approved, the final dividend will be payable to shareholders on the Register of Members at 22 March 2024. The ex-dividend date will be 21 March 2024. The Board is committed to operating a progressive and sustainable dividend policy, offering a good return to investors while meeting the needs of the business and its growth plans.

 

Nichols has a strong record of long-term cash generation and holds significant cash and deposit balances of £67.0m as at 31 December 2023. The Board intends to maintain the strength of its balance sheet while prioritising investment in growth opportunities, both organic and via acquisitions. The Board also recognises the importance of maintaining an efficient capital structure and, as a result, is assessing the future funding requirements of the Company's business plan and intends to identify surplus cash reserves for return to shareholders during 2024.

 

 

Outlook

 

The Group continues to derive considerable benefit from its diversified business model, with an established UK position complemented by the enhanced growth opportunities within our International business. Within our Packaged business, we have continued our strategy of investment in extending our product range and in the development of our international markets during the year, both of which are expected to continue to provide growth over the short and long term. The action taken to restructure our OoH division during 2023 is beginning to provide the anticipated benefits and the Company is confident that the business will contribute positively to overall Group performance during 2024.

The Group intends to accelerate the rate of investment in its longer-term development over the next 12 months in accordance with our established strategic plan. Whilst inflationary pressures now appear to be moderating in the UK, we remain aware of continued uncertainty affecting some of our markets but remain confident that necessary mitigating actions are in place.

The Group remains confident that it is well positioned to deliver its strategic plans and deliver sustainable shareholder returns, benefiting from the strength of its diversified business model, brands and financial position.

 

Liz McMeikan

Non-Executive Chair

6 March 2024

 



 

Chief Executive Officer's Statement

 

Overview

 

I am pleased to report our results for the year ended 31 December 2023. The team has again delivered a very strong set of results despite a challenging and volatile market environment. This performance has been achieved thanks to our people's commitment, versatility and resilience. I would like to thank all of them for continuing to embody the values of the Company and ensuring the business delivers value for all our stakeholders. I would also like to thank all our partners for their support in helping us achieve our goals and targets.

 

During the year we remained focused on mitigating significant inflationary costs through a range of cost management strategies and revenue growth management initiatives. We implemented price increases across all our portfolio of brands but worked closely with our customers to support them during these challenging times.

 

I am pleased that our strong portfolio of owned and licensed brands continued to perform well in the marketplace, achieved by a combination of strong marketing programmes and initiatives. Our long-term customer partnerships are critical to our success, and we continued to execute our joint business plans to maintain high service levels and strong in-market delivery of our promotions and innovation programmes throughout the year.

 

Ensuring our consumers can enjoy the taste of our brands on a daily basis is paramount to our success. We continued to invest in our marketing programmes in both the UK and across our international markets. Protecting the Group's long-term brand equity underpins our strategic goals and once again we have delivered some exceptional brand experiences in outlets for our consumers. Innovation is a crucial pillar of our long-term strategic plan and I am pleased we have delivered exciting new products both in the UK and Middle East.

 

We focused in 2023 on executing the outputs of the strategic review we conducted in our OoH business in 2022. The strategic review resulted in us having a more simplified business that is generating additional contribution to our overall business. I am delighted with how these plans have been executed during the year which has driven additional value.

 

Our Happier Future strategy continues to be a crucial element of our long-term strategy and we again made progress versus our commitments with a clear policy on responsible sourcing, including a supplier code of conduct, and a roadmap for our scope 3 emissions with short and medium-term objectives established. Since launching our Happier Future strategy and commitments in 2022, sustainability has become embedded in our business and is at the forefront of our decision making.

 

 

Strategy

 

As we emerged from the Covid pandemic we refreshed our strategy to ensure we continued to deliver strong growth and returns for all shareholders. We segmented our business into Packaged (UK and International) and OoH. Our overall target is to accelerate the performance in our Packaged business. This should deliver better returns for our shareholders whilst driving bottom line value from a simplified OoH division. Our Packaged business has grown revenue by +6.1% versus 2022, in line with our strategic intent, and OoH has reported an improved profit performance.

 

We have four clear strategic pillars that will remain our focus to drive long-term growth:

·      More from the Core

Focus on building a diversified and optimised product range across all of our core geographies

·      Thirst for New

Drive growth across our Packaged business through product portfolio innovation, channel growth, targeted acquisition and entering new selective international geographies

·      Fuel for Growth

Continually drive efficiencies within our operations to enable investment and support the long-term growth of our business

·      Happier Future

Deliver across our key pillars of People, Products and Planet by doing the right things, acting responsibly and meeting the long-term needs of the business

 

These growth pillars will be delivered through three key enablers of:

1.     A strong portfolio of brands

2.     A culture that allows people to thrive

3.     Working in close collaboration with all of our key partners

 

 

Market Performance

 

International Packaged

 

We delivered a very strong performance across our International markets, growing revenues by 16.8% versus 2022. Pleasingly, double digit revenue growth was delivered across all the key international markets that we operate in, driven by disciplined market execution, new product innovation, geographical expansion and working with new partners in key markets.

 

The Middle East has performed well, delivering revenue growth of 10.3%. Ramadan continues to be a critical sales driver in this market and we celebrated our 100th Ramadan season during 2023. The team delivered outstanding in-store displays that generated increased consumer engagement and purchases. This was supported by a strong integrated marketing campaign that has delivered excellent results, particularly across digital and social platforms.

 

We launched new product innovations across the Middle East, including the new Vimto Green Lemon Berry flavour, which continued to deliver strong growth and has proved popular with younger consumers. A new Vimto carbonated Zero product has been launched across the original Vimto portfolio, reflecting the changing tastes and preferences of local consumers. Both products are bringing incremental consumers into the brand and therefore boosting market penetration. Significant focus during the year has been placed on the new Zero-sugar cordial range to ensure the brand remains relevant and reflects the changing needs of our consumers to drive long-term growth.

 

In Africa we delivered revenue growth of 17.6% which builds on the 15.0% growth achieved in 2022. The business continues to grow across the continent from our strong base in West Africa. We re-opened our market in Gambia and enjoyed strong sales growth, reigniting the consumer appreciation for the Vimto brand. Product Innovation remains an important element of our growth strategy. During the year we launched our Watermelon range in our key market of Senegal via our local partner which has delivered strong consumer engagement. Across the Sudan region, we have capitalised on the strong consumer demand for Pomegranate flavours through launching a new cordial range.

 

Targeted marketing is critical to driving engagement across Africa, and we continued to invest in strong integrated campaigns focusing on the key events such as Valentine's Day, Tabaski, Ramadan and Back to School. These events deliver increased visibility and availability for our brand that drive strong consumer engagement and brand penetration.

 

New market expansion remains a key growth driver. During the year we have developed a new partnership with a local distributor in the Ivory Coast, allowing us to gain market share within this territory.

 

Across our Rest of World markets we delivered double digit revenue growth of 26.5%, building on the strong performance delivered in Europe in 2022. This success was achieved by driving additional distribution points for our core ranges across key retailers and wholesalers. Our partners focused heavily on implementing key marketing programmes, targeted at improving brand visibility and availability to deliver increased penetration and market share.

 

UK Packaged

 

2023 once again proved a year of sustained growth in our UK Packaged division against a backdrop of high inflationary pressures. As a result, we implemented price increases early in the year to help mitigate these rising costs and help protect our margins.

 

The Vimto brand achieved its highest ever brand value of £107m1, largely as a result of additional investment to expedite new product innovation, enhanced communications campaigns, new distribution points and driving improved availability.

 

We have maintained our position as the number two squash brand in the UK. We launched two new flavours of Orange & Pineapple and Mango & Passionfruit which helped increase on-shelf visibility for the brand and deliver incremental consumer penetration. We also focused on driving sales of squash during the colder winter months by rolling out our "Try me Hot" marketing campaign. During the second half of the year we invested further in promotions to increase value for our consumers which resulted in us achieving increased market share within the category.

 

At the start of 2023 we renovated our 500ml carbonated and still ranges. Launching transparent labels has enabled our on the go ranges to be more easily recycled. We also delivered our largest ever van sales distribution drive and ran a national campaign for 26 weeks. This focused on securing new distribution points across the key wholesale and convenience channel. This drive was supported with our Big Cash Giveaway on-pack promotion allowing our customers to win a share of up to £1 million in cash.

 

During the year we also launched our first ever Natural Vimto Energy product into the fast-growing energy subcategory. The product was launched in two varieties both in a 500ml can format, delivering the benefits of natural caffeine with added B vitamins. The product has secured strong listings across the retail market with very encouraging sales growth.

 

2023 saw the third year of our highly successful 'Find Your Different' marketing and advertising campaign. We delivered our largest ever multimedia campaign through TV, Video on Demand, Cinema, digital and a Spotify partnership. The campaign proved hugely successful reaching 88% of our target audience and was seen on average 12 times by our target consumers.

 

We continue to utilise digital communications as a key interface with consumers, and launched Vimto onto Tik Tok during the year, already securing over 88 thousand followers. Our 'Vimpto' campaign went viral in March across social media reaching 3 million in organic reach.

 

By investing into our e-commerce business, we have secured new listings with Amazon, Go Puff and Uber Eats delivering new reach and penetration via this fast-growing channel.

 

Within our brand licensing channel, we have extended our Myprotein Vimto range from its online platform into mainstream retail with a listing in Boots.

 

Across our licensed brands portfolio, we entered a new partnership in 2023 with SLUSH PUPPiE, launching a carbonated version of the well-loved brand in our grocery, wholesale and convenience channels. The launch proved extremely successful with a large trade and shopper support package bringing excitement to the carbonates category. Sales have been incredibly strong since the launch and more listings continue to be secured which will result in long-term growth.

 

Our Levi Roots portfolio was relaunched in its iconic green bottle in 2023. We introduced a new Price Mark Pack promotion to offer value for our consumers. On the back of this activity the brand delivered strong sales value and volume growth in Q4.

 

Out of Home

 

During 2023 we implemented the actions relating to the full strategic review of our OoH business. I am pleased that we have driven a very robust margin performance having also realised some of the benefits from the review earlier than anticipated. As expected, our sales revenue declined in the year as we exited unprofitable accounts in line with our strategy.

 

The OoH business is now operated as a distinct division within the Group, with a key focus on profitability.

 

The key changes implemented within the OoH business include:

 

·    Exited underperforming customer contracts, channels and regions which were considered sub scale and unprofitable

·      Implemented processes to simplify the business and a rationalisation of operating costs and central overheads

·      Improved financial reporting, including divisional and regional reporting focusing on net profit and return on capital employed

 

During the year we rebranded and relaunched our dispense V range of products as Premium Mixers by Vimto which has received positive feedback across the trade. We also launched a new limited flavour ICEE product to add excitement for our consumers across our cinema channel.

 

In line with our Happier Future commitments, we reformulated our still frozen slush range to ensure our consumers can enjoy great tasting products in line with our "Products we are Proud of" pillar.

 

 

Looking Ahead

 

Our business has again delivered a strong performance in a challenging and uncertain marketplace. The strength of our portfolio of owned and licensed brands, the resilience of our people, the close partnerships we have with our suppliers and customers and our long-term strategic focus have been at the core of the success we have achieved.

 

We have delivered a strong financial performance by having a very clear strategy across our different routes to market, and I am pleased that we have executed our initiatives in accordance with that plan. We are very focused on driving accelerated growth in our Packaged business and delivering bottom line value in our OoH division.

 

 

The diversity of our business has once again proved pivotal to our success. The momentum we have as we enter 2024 has been achieved by the strength of our core brands, our innovation pipeline, the opportunity for geographical expansion and the strong balance sheet we have for future investment in organic growth and targeted acquisitions.

 

I am confident that we will continue to deliver growth, ensuring we focus on the clear priorities we have in place. These plans, combined with a resilient soft drinks market and the passion, tenacity and dedication of our people will ensure we are able to offer strong returns for our shareholders. Trading in 2024 has started well and is in line with our expectations. While our markets are clearly subject to some general levels of uncertainty we remain confident in our ability to deliver an improved performance from each of our businesses and for the Group as a whole.

                                                                                                                                                                                                                                                                                                                                                   

Andrew Milne

Chief Executive Officer

6 March 2024

 

 

References:

1 Nielsen IQ RMS for Squash, Flavoured Carbonates, RTDs, and Flavoured Water categories for 12 months to 30.12.23 for the total coverage market



 

Interim Chief Financial Officer's Statement

 

Revenue

 

Group revenue increased by 3.5% to £170.7m (2022: £164.9m). This increase reflected further progress in our export sales and increased prices arising from our response to higher input costs, which has been partially offset by the fall in revenue following the restructuring of our OoH business. We raised prices to recover significantly higher material input costs early in the year where we were unable to mitigate these costs, with the expectation that we would lose some volume in the UK as a result of our decision to protect our gross margins. The price increase was designed to recover higher costs rather than to increase profitability and was consistent with our long-term strategic positioning. Overall revenue from the UK and International Packaged business rose by £7.3m (6.1%) to £127.2m with International accounting for the majority of the improvement. Revenue from our OoH business fell by £1.5m to £43.6m (-3.4%) as we withdrew from lower margin products and customer accounts.

 

 

Gross Profit

 

At the start of the year, we made a conscious decision as discussed above to prioritise the maintenance of our gross margins. Absolute gross profit was £72.2m (2022: £71.0m), with Group gross margin falling slightly to 42.3% from 43.1%. This reduction reflected a change in sales mix within our operating units and our decision to pass on cost inflation only.

 

We mitigated much of the cost increases experienced in the latter part of 2022 and early 2023 through more effective purchasing and working closely with our manufacturing partners to optimise productivity. Where appropriate we increased sales pricing and also de-listed lower margin products. Our gross margin fell slightly as a result of changes to our Group market mix.

 

 

Distribution Expenses

 

Distribution expenses totalled £9.6m (2022: £10.7m), a fall of 10.4% as overall volumes fell, in UK Packaged and in OoH, and fuel costs reduced in the second half of the year.

 

 

Administration Expenses

 

Administration expenses (excluding exceptional items) increased in the year by £1.7m to £37.4m. Planned investments in the future growth of our business were implemented during the year. The majority of this investment was made in additional people and resource in our International business, Procurement, Marketing and IT operations.

 

All these investments should improve our capacity to generate additional returns in the long-term. These were supported by a substantial reduction in overhead costs in OoH as we implemented the restructuring of that business. Within the figure of £37.4m additional costs were incurred in the reformulation of Slush products and in an increase in bad debt provisions within International reflecting a more uncertain business climate in the Yemen and other markets.

 

Including exceptional items, administrative expenses were £40.3m (2022: £46.9m).

 

 

Segmental Performance

 

Our revised segmental disclosure, identifying operating profit arising from our Packaged and OoH businesses alongside shared Central expenses, has been adopted to better reflect the strategic focus and forward plans of the Group. The Board's intention is to invest for future growth in our Packaged business, whilst allowing clearer focus on optimising performance in OoH.

 

In line with our strategic focus, the Group's Packaged business grew revenue during the year to £127.2m (2022: £119.9m, +6.1%) with gross profit improving proportionately. The majority of this improvement came from our International operations with good progress in the UK. Profit growth was strong with Adjusted Operating Profit increasing to £36.3m (2022: £34.3m) and this allowed further investment in the long-term development of the business. Overall profitability was impacted by a provision against the recoverability of customer debts in the Yemen and other export markets.

 

Within OoH the reported fall in revenue to £43.6m (2022: £45.1m) reflected a reduction in scale of the business as our restructuring progressed. This was carefully considered and recognised the cost to serve individual customers. Where the overhead associated with delivering a service was high relative to the additional contribution created, we withdrew. Revenue may have fallen but importantly the reduction in costs arising from the restructuring has allowed us to improve our profitability in this area. Adjusted Operating Profit increased to £5.1m (2022: £3.5m). The Board is pleased with the progress of OoH and the restructuring process has allowed much clearer reporting lines and an improved focus on profit optimisation within the operation. The benefits of the change are being secured earlier than we initially anticipated and we expect further progress in 2024, particularly given the negative effect on reported performance of product reformulation costs during 2023.

 

Central costs increased in the year to £16.2m (2022: £13.3m). The majority of this increase was in employment costs reflecting both cost of living increases and investment into creating additional capability within the Group. This additional capability is targeted against clear strategic growth plans and we expect it to support our forward performance.

 

 

Exceptional Items

 

The Group has incurred £2.9m of net Exceptional Costs during the year (2022: £11.1m).

 

Out of Home Strategic Review and Restructuring

In 2022 the Group completed a strategic review into its OoH business following a number of changes to the market it serves. This review included an assessment of customer and product profitability and the identification of opportunities to raise operating margins. As the changes arising from this review have been implemented during 2023 costs of £1.8m have been incurred to restructure the operations of the business. These additional restructuring costs are one-off in nature and will be treated as exceptional.

 

Business Change Programme and Systems Development

The Group commenced a project in 2022 to identify the potential benefits from replacing current operational and IT processes and systems, which are reaching the end of their planned life, with an integrated Enterprise Resource Planning (ERP) solution. During 2023 this project has progressed well and a number of future operational benefits have been identified. Costs of £1.7m (2022: £0.3m) have been incurred in completing the review, vendor selection and business design phases of the programme. Further costs will be incurred on the development of new systems and processes during 2024 and the project is expected to be completed in 2025. Due to the nature of these charges, the Group is treating the costs as exceptional.

 

Historic Incentive Scheme

During 2022 the Group finalised the treatment of a historic incentive scheme with HM Revenue and Customs and agreed to pay a sum in settlement of additional tax and interest liabilities. The Group also commenced the process of the recovery of debts from current and former employees who had indemnified the Company. A reserve was put in place to provide against the potential irrecoverability of some of these debts. Given the progress made in the collection of outstanding amounts this provision has been reduced during 2023 giving a net exceptional credit (after further legal fees) of £0.6m (2022: cost £0.1m).

 

 

Interest Income

 

Net finance income of £2.0m (2022: £0.4m) has been received during the year. The Group has benefitted significantly from increased interest rates during the year and also from higher average cash holdings.

 

 

Adjusted Profit Before Tax, Profit Before Tax and Tax Rate

 

Adjusted Profit Before Tax (excluding exceptional items) increased by 8.7% to £27.2m (2022: £25.0m) and Profit Before Tax (including exceptional items) increased by 75.3% to £24.3m (2022: £13.8m). The tax rate for the year has increased to 23.75% following the general increase in UK Corporation Tax to 25% effective from April 2023.

 

 

Adjusted Earnings per Share and Earnings Per Share

 

Adjusted Earnings per Share ('Adjusted EPS') increased by 1.9% from 55.38p to 56.41p. The difference between the rate of increase in Adjusted EPS (+1.9%) and Adjusted Profit Before tax (+8.7%) reflects the increase in UK Corporation Tax rates noted above. Earnings per Share were 50.34p (2022: 31.86p).

 

 

Cash and Cash Equivalents and Balance Sheet

 

The Group's cash generated from operating activities was once again strongly positive at £24.8m (2022: £20.5m). Working capital was well controlled with a fall in Inventory levels offsetting increased Trade and Other Receivables. The Group's cash contribution to our final salary pension scheme also fell as deficit reduction payments ceased. Our cash conversion performance improved substantially and was 102% (2022: 72%). Free cash flow after the payment of tax and capital expenditure was £20.9m (2022: £14.6m). After the payment of dividends of £10.2m (2022: £9.4m) and the purchase of shares into treasury of £nil (2022: £5.5m) net cash increased by £10.7m to £67.0m (2022: decrease of £0.4m to £56.3m).

 

Capital expenditure in the period was lower than in 2022 at £0.5m (2022: £1.2m) with the reduction largely a result of lower investment in OoH. Working capital was well controlled.

 

The Group retains substantial cash resources to fund investment in its forward strategic growth plans alongside its aim to improve shareholder returns. As detailed in the Chair's Statement, the Board is currently assessing the future funding requirements of the Company's business plan and intends to identify surplus cash reserves for return to shareholders during 2024.

 

The Group's Adjusted Return on Capital Employed remained strong at 26.3% (2022: 27.2%). Return on Capital Employed rose from 14.2% to 23.3%.

 

 

David Taylor

Interim Chief Financial Officer

6 March 2024



 

CONSOLIDATED INCOME STATEMENT

 

For the year ended 31 December 2023

 



 

 

2023

£'000

2022

£'000


 

 

 

 

Continuing operations

 

 

 

Revenue

 

 

170,741

164,926

Cost of sales

 

 

(98,565)

(93,905)

Gross profit

 

 

72,176

71,021

 

 

 

 


Distribution expenses

 

 

(9,567)

(10,677)

Administrative expenses

 

 

(40,323)

(46,888)

Operating profit

 

 

22,286

13,456

 

 

 

 


Finance income

 

 

2,095

514

Finance expense

 

 

(123)

(134)

Profit before taxation

 

 

24,258

13,836

 

 

 

 


Taxation

 

 

(5,896)

(2,201)

Profit for the year

 

 

18,362

11,635


 

 

 


Earnings per share (basic)

 

 

50.34p

31.86p

Earnings per share (diluted)

 

 

50.32p

31.82p

 

 




 

 




Adjusted for exceptional items

 




 

 




Operating profit

 

 

22,286

13,456

Exceptional items

 

 

2,907

11,146

Adjusted operating profit

 

 

25,193

24,602

 

 

 

 


Profit before taxation

 

 

24,258

13,836

Exceptional items

 

 

2,907

11,146

Adjusted profit before taxation

 

 

27,165

24,982

 

 

 

 


Adjusted earnings per share (basic)

 

 

56.41p

55.38p

Adjusted earnings per share (diluted)

 

 

56.39p

55.32p


 




 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the year ended 31 December 2023

 

 

 



 

2023

2022




 

£'000

£'000

Profit for the financial year



 

18,362

11,635




 

 


Items that will not be reclassified subsequently to profit or loss

 



 

 


Re-measurement of net defined benefit surplus



 

(192)

(2,071)

Deferred taxation on pension obligations and employee benefits



 

48

459




 

 


Other comprehensive expense for the year



 

(144)

(1,612)




 

 


Total comprehensive income for the year



 

18,218

10,023

 



 

 



 










 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

As at 31 December 2023



 

 

 



2023

2022

ASSETS


£'000

£'000

Non-current assets


 


Property, plant and equipment


9,457

10,958

Intangibles


256

88

Pension surplus


4,014

4,125



 


Total non-current assets


13,727

15,171

 


 


Current assets


 


Inventories


8,809

10,432

Trade and other receivables


41,393

39,561

Corporation tax recoverable


-

695

Cash and cash equivalents


67,030

56,296



 


Total current assets


117,232

106,984

 


 


Total assets


130,959

122,155

 


 


LIABILITIES


 


Current liabilities


 


Trade and other payables


30,719

30,711

Corporation tax payable


318

-



 


Total current liabilities


31,037

30,711

 


 


Non-current liabilities


 


Other payables


1,865

2,038

Deferred tax liabilities


715

670



 


Total non-current liabilities


2,580

2,708

Total liabilities

 

33,617

33,419

 


 


Net assets


97,342

88,736

 


 


 

EQUITY


 


Share capital


3,697

3,697

Share premium reserve


3,255

3,255

Capital redemption reserve


1,209

1,209

Other reserves


1,845

1,280

Retained earnings


87,336

79,295



 


Total equity


97,342

88,736







 

 


 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

For the year ended 31 December 2023


 

          2023

                   2022

      


 

£'000

£'000

£'000

£'000



 

 

 




Cash flows from operating activities

 

 

 





 

 

 




Profit for the financial year

 

 

18,362


11,635



 

 

 




Adjustments for:

 

 

 




Depreciation and amortisation

 

2,343

 

4,521



Impairment losses on intangible and fixed assets

 

-

 

8,714



Loss on sale of property, plant and equipment

 

67

 

186



Finance income

 

(2,095)

 

(514)



Finance expense

 

123

 

134



Tax expense recognised in the income statement

 

5,896

 

2,201



Decrease/(Increase) in inventories

 

1,623

 

(726)



Increase in trade and other receivables

 

(1,549)

 

(4,100)



Increase in trade and other payables

 

384

 

2,963



Decrease in provisions

 

-

 

(4,242)



Change in pension obligations

 

(81)

 

(920)



Fair value (gain)/loss on derivative financial instruments

 

(285)

 

662




 

 

6,426


8,879




 

Cash generated from operating activities

 

 

24,788


20,514

 


Tax paid

 

 

(4,776)


(4,178)


 

 

 

 




Net cash generated from operating activities

 

 

20,012


16,336



 

 

 

 




 

 

 

 



Cash flows from investing activities

 

 

 

 



Finance income

 

2,095

 

514



Proceeds from sale of property, plant and equipment

 

192

 

-



Acquisition of property, plant and equipment

 

(479)

 

(1,245)



Payment of contingent consideration

 

-

 

(71)



 

 

 

 




Net cash from/(used in) investing activities

 

 

1,808


(802)



 

 

 

 



Cash flows from financing activities

Payment of lease liabilities

 

 

(909)

 

 

(995)



Purchase of own shares

 

-

 

(5,534)



Dividends paid

 

(10,177)

 

(9,383)




 

 

 




Net cash used in financing activities

 

 

(11,086)


(15,912)



 

 

 




Net increase/(decrease) in cash and cash equivalents

 

 

10,734


(378)


Cash and cash equivalents at 1 January

 

 

56,296


56,674


 

 

 

 




Cash and cash equivalents at 31 December

 

 

67,030


56,296


 

 

 

 













 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

As at 31 December 2023

 

 

 

 

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 2022

 

3,697

3,255

1,209

676

84,189

93,026

Movement in ESOT


-

-

-

5

-

5

Credit to equity for equity-settled share-based payments

Purchase of own shares


-

 

-

-

 

-

-

 

-

599

 

-

-

 

(5,534)

599

 

(5,534)

Dividends


-

-

-

-

(9,383)

(9,383)

Transactions with owners

 

-

-

-

604

(14,917)

(14,313)

Profit for the year


-

-

-

-

11,635

11,635

Other comprehensive expense


-

-

-

-

(1,612)

(1,612)

Total comprehensive income

 

-

-

-

-

10,023

10,023

At 1 January 2023

 

3,697

3,255

1,209

1,280

79,295

88,736

Movement in ESOT


-

-

-

(2)

-

(2)

Credit to equity for equity-settled share-based payments


-

-

-

567

-

567

Dividends


-

-

-

-

(10,177)

(10,177)

Transactions with owners

 

-

-

-

565

(10,177)

(9,612)

Profit for the year


-

-

-

-

18,362

18,362

Other comprehensive expense


-

-

-

-

(144)

(144)

Total comprehensive income

 

-

-

-

-

18,218

18,218

At 31 December 2023

 

3,697

3,255

1,209

1,845

87,336

97,342



NOTES

               

1.    Basis of Preparation

 

The preliminary financial information does not constitute statutory accounts for the financial years ended 31 December 2023 and 31 December 2022, but has been derived from those accounts. The accounting policies remained unchanged from those set out in the 2022 Annual Report and Accounts.

 

Statutory accounts for 2022 have been delivered to the Registrar of Companies and those for the financial year ended 31 December 2023 will be delivered following the Group's Annual General Meeting. The auditors have reported on those accounts and their reports were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

 

2.    Going Concern

 

In assessing the appropriateness of adopting the going concern basis in preparing the Annual Report and Accounts, 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 31 December 2023 the Group had cash and cash equivalents of £67.0m 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 the Annual Report and Accounts) 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.

 

During the year, the Group changed its reportable segments to ensure the appropriate strategic focus across the business given the differing strategic challenges between its Packaged and OoH routes to market. The Group is now segmented into the operating segments Packaged, OoH and Central. This replaces the operating segments, Stills and Carbonates, used in the 2022 Annual Report and Accounts.

 

The new segmental reporting allows the Group to deliver on its strategic ambitions of accelerated growth across the Packaged business, both in the UK and Internationally, and maximise value within the OoH business, whilst providing oversight to manage central overheads from a total Group perspective.

 

This is the first time results have been presented in these segments within the Group's year end financial statements and thus the results reported for the previous financial year to 31 December 2022 have been re-presented for comparison purposes.

 

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.


 

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

 

 

 

Year ended

Packaged

 

 

 

 

31 December 2022

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

82,813

11,752

18,870

6,420

119,855

45,071

164,926

-

164,926





 

 

 

 

 

Adjusted operating profit





34,338

3,537

37,875

(13,273)

24,602

 





 

 

 

 

 

Net finance income









380

 









 

Adjusted profit before tax









24,982











Exceptional items









(11,146)

 







 

Profit before tax







13,836

 

 

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:

 

 



Year ended

31 December 2023

Year ended

31 December 2022

 

 

£'000

£'000

Geographical split of revenue

 


Middle East

12,963

11,752

Africa

22,184

18,870

Rest of the World

8,518

7,350

Total exports

43,665

37,972

United Kingdom

127,076

126,954

Total revenue

170,741

164,926

 

 

4.    Exceptional items

 

 

Year ended
31 December
2023

Year ended
31 December
2022

 

£'000

£'000




Out of Home Strategic Review and Restructuring

1,784

518

Business Change Programme and Systems Development

1,722

316

Historic incentive scheme

(599)

134

Impairment of intangible and fixed assets

-

8,714

Review of UK Packaged supply chain

-

1,464

 

2,907

11,146

 

 

The Group incurred £2.9m of exceptional costs during the year (2022: £11.1m).

 

 

Out of Home Strategic Review and Restructuring

In 2022 the Group completed a strategic review into its OoH business following a number of changes to the market it serves. This review included an assessment of customer and product profitability and the identification of opportunities to raise operating margins. As the changes arising from this review have been implemented during 2023 costs of £1.8m have been incurred to restructure the operations of the business. These additional restructuring costs are one-off in nature and will be treated as exceptional.

 

Business Change Programme and Systems Development

The Group commenced a project in 2022 to identify the potential benefits from replacing current operational and IT processes and systems, which are reaching the end of their planned life, with an integrated Enterprise Resource Planning (ERP) solution. During 2023 this project has progressed well and a number of operational benefits have been identified. Costs of £1.7m (2022: £0.3m) have been incurred in completing the review, vendor selection and business design phases of the programme. Further costs will be incurred on the development of new systems and processes during 2024 and the project is expected to be completed in 2025. Due to the nature of these charges, the Group is treating the costs as exceptional.

 

Historic Incentive Scheme

During 2022 the Group finalised the treatment of an historic incentive scheme with HM Revenue and Customs and agreed to pay a sum in settlement of additional tax and interest liabilities. The Group also commenced the process of the recovery of debts from current and former employees who had indemnified the Company. A reserve was put in place to provide against the potential irrecoverability of some of these debts. Given the progress made in the collection of outstanding amounts, this provision has been reduced during 2023 giving a net exceptional credit to profit of £0.6m, after further legal fees (2022: cost £0.1m).

 

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

£'000

Weighted average number of shares

Earnings

 per share

31 December 2023

 

 



Basic earnings per share


18,362

36,477,926

50.34p

Dilutive effect of share options



14,995

 

Diluted earnings per share


18,362

36,492,921

50.32p





 

 

Adjusted earnings per share (excluding exceptional items) has been presented in addition to the earnings per share as defined in IAS 33 Earnings per share, since, in the opinion of the Directors, this provides shareholders with a more meaningful representation of the earnings derived from the Groups' operations. It can be reconciled from the basic earnings per share as follows:

 

 



 

Earnings

£'000

Weighted average number of shares

Earnings

 per share

31 December 2023

 

 



Basic earnings per share


18,362

36,477,926

50.34p

Exceptional items after taxation


2,217


 

Adjusted basic earnings per share


20,579

36,477,926

56.41p

Diluted effect of share options



14,995

 

Adjusted diluted earnings per share


20,579

36,492,921

56.39p

 

 

 

6.    Property, plant and equipment and Intangibles

 



 

 

Property,

Plant &

Equipment

 

 

Intangibles

 

 

 

£'000

£'000

Cost

 




At 1 January 2023



35,311

9,760

Additions



1,269

-

Disposals



(4,668)

-

Transfers



(238)

238

At 31 December 2023

 

 

31,674

9,998

 

 

 

 

 

Depreciation and Amortisation

 

 

 

 

At 1 January 2023

 


24,353

9,672

Charge for the period

 

 

2,273

70

Disposals

 

 

(4,409)

-

At 31 December 2023

 

 

22,217

9,742

 

 

 

 

 

Net book value

 

 

 

 

At 31 December 2022

 


10,958

88

At 31 December 2023

 

 

9,457

256

 

 

 

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
31 December 2023 by an independent qualified actuary.

 

A summary of the pension surplus position is provided below:

 

Pension surplus

£'000

At 1 January 2023

4,125

Current service cost

(11)

Scheme administrative expenses

(124)

Net interest income

194

Actuarial losses

(192)

Contributions by employer

22

At 31 December 2023

4,014

 

 

8.    Provisions

 

During the second half of 2022, the Group settled with HMRC the tax and interest charges regarding the historic incentive scheme (£4.2m). Recovery of debts from current and previous management who had indemnified the Company commenced during 2023. Included within other receivables is a reimbursement asset in respect of the remaining amounts owed from these historic contracts.

 

 

9.    Dividends

 

The final dividend proposed is 15.6p, which will become ex-dividend on the 21 March 2024 and paid, subject to shareholder approval to all shareholders on the register on 22 March 2024, on 2 May 2024. 

 

 

Annual Report and Accounts

 

The Annual Report and Accounts will be mailed to shareholders and made available on our website during March 2024. Copies will be available after that date from: The Secretary, Nichols plc, Laurel House, Woodlands Park, Ashton Road, Newton-le-Willows, WA12 0HH.

 

 

Cautionary Statement

 

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

 

 

-Ends-

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 

Companies

Nichols (NICL)
UK 100

Latest directors dealings