NICHOLS PLC — Earnings Release 2013

Mar 13, 2014

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RNS Number : 1840C

Nichols PLC

13 March 2014

Date:	Embargoed until 0700 Thursday 13th March 2014
Contacts:	John Nichols, Non-Executive Chairman
Marnie Millard, Group Chief Executive Tim Croston, Group Finance Director
Nichols plc
Telephone:  01925 222222
Website:www.nicholsplc.co.uk
Alex Brennan	Richard Lindley
Hudson Sandler	N+1 Singer (Nominated Adviser)
Telephone:020 7796 4133	Telephone:  0113 388 4855/ 0207 496 3000
Email: nichols@hspr.com	Website: www.n1singer.com

Nichols plc

PRELIMINARY RESULTS

Nichols plc, the soft drinks Group, announces its Preliminary results for the year ended 31 December 2013.

Nichols plc is a highly focused soft drinks business.  Its brand portfolio includes Vimto, which is sold in over 65 countries and Levi Roots (soft drinks), Sunkist, Panda and Weight Watchers which are sold in the UK.  The Group has a leading market position in both the "Still" and "Carbonate" drinks categories.

Highlights:

·     Group sales up 2% to £109.9m (2012: £107.8m) with continued growth in the UK and internationally

·     Operating profit margin increased to 20% (2012: 19%)

·     Profit before tax (pre-exceptional items) up 10% to £22.5m (2012: £20.5m)

·     Earnings per share (pre-exceptional items) up 11% to 45.8p (2012: 41.4p)

·     Continuing strong cash generation with net cash at the year end up 39% to £34.3m (2012: £24.7m)

·     Proposed final dividend of 13.3p (2012: 11.7p), taking total dividend for the year up 13% to 19.62p        (2012: 17.32p)

Commenting John Nichols, Non-Executive Chairman, said:

"I am pleased to report another excellent year for Nichols. We have successfully delivered on our strategy to increase our profitability and, pre exceptional items, we have delivered double digit growth to both profit before tax and earnings per share. The business continues to be highly cash generative and we propose a final dividend of 13.3p, taking the total dividend for the year up 13% to 19.62p (2012: 17.32p), reflecting the Board's confidence in the outlook for the Group."

Chairman's Statement

I am pleased to report another excellent performance for Nichols plc. During 2013, the Group has successfully increased profit margin, delivered double digit profit growth (pre exceptional items) and maintained its strong cash generation.

Group sales totalled £109.9m, 2% ahead of the prior year.  During the second half of 2013 our sales performance started to gain momentum and showed a 4% increase over the same period in 2012. 

As previously reported, during 2013 we successfully delivered our strategy to improve profitability by focusing on value over volume. As a result our operating profit margin (pre exceptional items) increased to 20% (2012: 19%) and our profit before tax (pre exceptional items) increased by 10% to £22.5m (2012: £20.5m). Once again, the balance sheet remains strong with our year-end cash balance totalling £34.3m (2012: £24.7m).       

Results (Pre-exceptional items)

	Year ended 31 Dec 2013	Year ended 31 Dec 2012	% movement
	£m	£m
Group Revenue	109.9	107.8	+2%
Operating Profit	22.4	20.5	+9%
Operating Profit R.O.S.	20%	19%
Profit Before Tax	22.5	20.5	+10%
Net Cash	34.3	24.7	+39%
EPS (basic)	45.8p	41.4p	+11%

Trading

Our UK sales gained momentum in the second half of 2013, increasing by 5% year on year taking the full year total to £86.8m, 2% ahead of the prior year. During 2013 we have also successfully delivered our strategy to improve profitability with both revenue per case and margin showing good improvement compared to 2012.

We have successfully grown our market share of the Still category delivering an increase in sales of Vimto cordial of 11%. We continued with our planned reduction in promotional activity in the heavily discounted Carbonate sector where our sales declined by 6%.

Within our international business we saw continued growth in our African markets and coupled with a stronger second half year (versus 2012) in the Middle East, full year sales were £23.1m, which is 2% ahead of the prior year.       

Exceptional items

The Consolidated Income statement for 2013 includes the following one-off exceptional costs totalling £3.7m:

·    The implementation of a planned management restructuring, which was completed by the year end, incurring one-off costs of £1.7m.

·    A provision of £2.0m to cover the potential costs of a litigation claim from a licensee in Pakistan. The claim, which the company is defending, centres on the licensee's rights to manufacture and distribute Vimto cordial in Pakistan.

Dividend

Reflecting our strong balance sheet and the Board's continued confidence in the outlook, I am pleased to announce that we are recommending a final dividend of 13.3 pence per share (2012: 11.7 pence). This takes the total 2013 dividend to 19.62 pence (2012: 17.32 pence), a year on year increase of 13%.

Outlook

Although economic indicators suggest signs of optimism, there is evidence that consumer spending in the UK remains cautious and we expect the UK retail market to remain challenging in 2014. Despite this environment we are confident that the Group can maintain its strong performance into 2014. We will continue to invest in our brands and grow distribution in both our UK and international markets. January saw the launch of the "Vimto Squeezy" product which takes the brand into the new 'water enhancer' category and in April consumers will see the new Vimto TV campaign.

In summary, the Board is confident that the Group is well positioned to maintain its strong performance into 2014 and beyond.

John Nichols

Non-Executive Chairman

12 March 2014

Chief Executive's Report 2014

I am delighted to share my first report since taking the role of Chief Executive in May 2013.

Nichols plc is an international business with a portfolio of well established brands, selling to over 65 countries worldwide.  We have leading market positions in both the Still and Carbonate drinks categories and we continually look to bring new and innovative products to the soft drinks consumer, both in our home and overseas markets.

The UK Soft Drinks Market

The total value of the UK soft drinks market excluding the "on trade" channel, as measured by Nielsen grew by 4% to £7.5bn (52 weeks data to 4 Jan 2014).  The Carbonate sector remained very competitive during the year, with a heavy reliance by many brands on promotional mechanics to drive volume.   Despite the Group's strategy to decrease our promotional participation in the Carbonates category, we still outperformed the market with our core brand Vimto which successfully grew by 4.3%.

The trend of market growth in the convenience channel and online can be seen not only in our home market but also in our international markets.  Our promotional activity, packaging and product development continues to be targeted towards these trends.

Group Financial Performance

Despite ongoing economic challenges globally we are pleased to have grown sales by a modest 2%.  This was in line with our expectations given the lower promotional participation in the UK Carbonates sector.  Therefore, the improvement we have delivered to our gross margin has been particularly satisfying and has contributed to the strong profit delivery.

In summary in 2013 we achieved:

·     2%  total sales growth

·     10% profit before tax growth (pre exceptional items)

·     11% earnings per share growth (pre exceptional items)

·     13% full year dividend growth.

Cash conversion remained strong in 2013 and as a result we finished the year with £34.3m cash in the bank.

We continue to invest in our core brands in both the UK and international markets.  Vimto returned to UK television in 2013 with the final instalment of our highly successful "bounce 'n' boom" advertising campaign.  This was supported by a fully integrated digital marketing campaign.  Digital and social media platforms continue to be a highly compelling and effective way of engaging our consumers with our brands.

Trading Highlights

In 2013 the UK enjoyed a short spell of good weather not seen since 2006.  I am pleased to report our service levels were exemplary and, as a result, we benefited during that brief period with a sales uplift in excess of 20%.

We continue to invest in our portfolio of brands outside of Vimto, most notably our Levi Roots soft drinks range.  We successfully launched a new variant, coconut and lime, which really captured the consumers' imagination during the summer months. This new flavour was complemented by a new "Zero" range, in order to appeal to the health conscious consumer.

2013 also saw the addition of the Extreme Sports and Energy brand to our portfolio.  The energy sector remains the fastest growing category in soft drinks at 7% per annum.  We have sought to differentiate ourselves in this competitive category by launching the product in an eye catching black PET bottle that appeals to our target audience of 18 - 24 year old males who are interested in extreme sports events. 

Progress continues to be made in our Nichols Dispense business, with consolidation of our independent distributor base. This also involved the full integration of Festival Soft Drinks Limited, based on the south coast of England, into Nichols Dispense during 2013.

Internationally, we continued to develop and grow in Africa, with sales increasing by 21% in the year.  Our Middle Eastern business remains stable as Vimto benefits from the joint venture between our long standing partner Aujan Industries and Coca Cola.  At the end of the year we signed new contracts for Nepal and Myanmar, both of which are due to come on line during 2014.

We successfully implemented a new distribution model in the USA, whereby production is now undertaken by a local co-packer and sold to our nominated distributor.  This model not only ensures we achieve the most cost effective route to market but, more importantly, provides a strong base upon which to develop Vimto in the US market.

Corporate Responsibility

Corporate Responsibility issues within our sector have never been more prevalent, particularly around the issue of obesity.  Through our membership of the British Soft Drinks Association we have made a commitment to the Government's Public Health Responsibility Deal and we are actively participating in the Calorie Reduction Pledge.  Using 2011 as the base year, to date we have made the following progress:

·     Average calories per 100ml of Ready to Drink products sold is down by 18%

·     The proportion of our no added sugar sales has increased from 19% to 26%

·     Our total use of sugar has reduced by 20%

We will continue to provide our consumers with choice and transparency in their product selection and further development in this area will be evident in 2014. 

Community

We continue to provide support to charities in our local area, supported by our colleagues and business partners throughout the year.  In 2014 we will work with Warrington Youth Club.  Established in 1952, it has a growing membership of around 2,000 people.  Its ethos is inspiring young people to achieve their potential, with the guiding values of learning, choice, participation and diversity. 

Employees

Nichols plc is a business built upon a solid foundation of strong professional people.  We pride ourselves upon our excellent relationships with both our customers and our supplier partnerships. 

There have been a number of changes in the leadership team in 2013 which have ensured that a highly motivated and passionate group of people are working together to continue to grow and develop our overall business.  I would like to take this opportunity to thank them for their continued effort and commitment.

Marnie Millard

Group Chief Executive

12 March 2014

Consolidated income statement

Year ended 31 December 2013

	Before exceptional items	Exceptional items	Total	Total
	2013	2013	2013	2012
	£'000	£'000	£'000	£'000
Revenue	109,881	0	109,881	107,788
Cost of sales	(57,430)	0	(57,430)	(59,661)
Gross profit	52,451	0	52,451	48,127
Distribution expenses	(6,063)	0	(6,063)	(6,569)
Administrative expenses	(23,961)	(3,680)	(27,641)	(21,041)
Operating profit	22,427	(3,680)	18,747	20,517
Finance income	347	0	347	324
Finance expense	(264)	0	(264)	(331)
### Profit before taxation	22,510	(3,680)	18,830	20,510
Taxation	(5,645)	924	(4,721)	(5,252)
Profit for the financial year attributable to equity holders of the parent	16,865	(2,756)	14,109	15,258
Earnings per share (basic)			38.30p	41.43p
Earnings per share (diluted)			38.25p	41.38p

Consolidated statement of comprehensive income

Year ended 31 December 2013

			2013			2012
			£'000			£'000
Profit for the financial year			14,109			15,258
Other comprehensive income/(expense)
Defined benefit plan actuarial gain/(loss)			1,909			(773)
Deferred taxation on pension obligations and employee benefits			(308)			78
Other comprehensive income/(expense) for the year			1,601			(695)
Total comprehensive income for the year			15,710			14,563

Statement of financial position

Year ended 31 December 2013

		Group			Parent
		2013	2012		2013	2012
# ASSETS		£'000	£'000		£'000	£'000
Non-current assets
Property, plant and equipment		1,295	1,275		355	398
Goodwill		16,057	15,973		0	0
Investments		0	0		16,566	16,566
Deferred tax assets		1,321	2,148		1,321	2,082
# Total non-current assets		18,673	19,396		18,242	19,046
Current assets
Inventories		4,144	5,331		2,182	2,769
Trade and other receivables		22,721	23,741		20,565	20,446
Cash and cash equivalents		34,293	24,745		30,964	21,948
# Total current assets		61,158	53,817		53,711	45,163
# Total assets		79,831	73,213		71,953	64,209
# LIABILITIES
# Current liabilities
Trade and other payables		18,152	19,377		25,125	20,427
Current tax liabilities		1,675	2,191		803	1,368
Provisions		2,018	47		0	47
# Total current liabilities		21,845	21,615		25,928	21,842
Non-current liabilities
Pension obligations		4,047	6,556		4,047	6,556
Deferred tax liabilities		0	47		0	0
Total non-current liabilities		4,047	6,603		4,047	6,556
Total liabilities		25,892	28,218		29,975	28,398
# Net assets		53,939	44,995		41,978	35,811
# EQUITY
Share capital		3,697	3,697		3,697	3,697
Share premium reserve		3,255	3,255		3,255	3,255
Capital redemption reserve		1,209	1,209		1,209	1,209
Other reserves		(598)	(474)		177	301
Retained earnings		46,376	37,308		33,640	27,349
Total equity		53,939	44,995		41,978	35,811

Consolidated statement of cash flows

Year ended 31 December 2013                                            

	2013	2013	2012	2012
	£'000	£'000	£'000	£'000
# Profit for the financial year		14,109		15,258
Cash flows from operating activities
Adjustments for:
Depreciation	513		460
Loss on sale of property, plant and equipment	11		2
Finance income	(347)		(324)
Tax expense recognised in the income statement	4,721		5,252
Change in inventories	1,103		611
Change in trade and other receivables	1,050		(2,297)
Change in trade and other payables	(1,224)		(1,071)
Change in provisions	1,971		(92)
Change in pension obligations	(600)		(530)
		7,198		2,011
# Cash generated from operating activities		21,307		17,269
Tax paid		(4,765)		(4,545)
Net cash generated from operating activities		16,542		12,724
Cash flows from investing activities
Finance income	316		324
Proceeds from sale of property, plant and equipment	148		7
Acquisition of property, plant and equipment	(692)		(297)
Acquisition of subsidiary, net of cash acquired	0		(2,254)
Net cash used in investing activities		(228)		(2,220)
# Cash flows from financing activities
Acquisition of own shares	(127)		(4)
Dividends paid	(6,639)		(5,866)
# Net cash used in financing activities		(6,766)		(5,870)
# Net increase in cash and cash equivalents		9,548		4,634
Cash and cash equivalents at 1 January		24,745		20,111
Cash and cash equivalents at 31 December		34,293		24,745

Consolidated statement of changes in equity

Year ended 31 December 2013

	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 2012	3,697	3,255	1,209	(546)	28,687	36,302
Dividends	0	0	0	0	(5,866)	(5,866)
Movement in ESOT	0	0	0	72	(76)	(4)
Transactions with owners	0	0	0	72	(5,942)	(5,870)
Profit for the year	0	0	0	0	15,258	15,258
Other comprehensive expense	0	0	0	0	(695)	(695)
Total comprehensive income	0	0	0	0	14,563	14,563
At 1 January 2013	3,697	3,255	1,209	(474)	37,308	44,995
Dividends	0	0	0	0	(6,639)	(6,639)
Movement in ESOT	0	0	0	(124)	(3)	(127)
Transactions with owners	0	0	0	(124)	(6,642)	(6,766)
Profit for the year	0	0	0	0	14,109	14,109
Other comprehensive expense	0	0	0	0	1,601	1,601
Total comprehensive income	0	0	0	0	15,710	15,710
At 31 December 2013	3,697	3,255	1,209	(598)	46,376	53,939

Nichols plc

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

Basis of Preparation

The preliminary financial information does not constitute statutory accounts for the financial years ended 31 December 2013 and 31 December 2012, but has been derived from those accounts. The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the 2012 annual report, with the exception of the adoption of IAS 19 (revised).  They are also consistent with those in the full financial statements which have yet to be published. Under IAS 19 revised, interest cost and expected return on plan assets have been replaced with a finance cost component which is determined by applying the same discount rate used to measure the defined benefit obligation to the net defined benefit liability or asset. This is a presentational change only, and therefore has no impact on the Group consolidated results. Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for the financial year ended 31 December 2013 will be delivered following the Company's annual general meeting.  The auditors have reported on those accounts and their reports were unqualified and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

Earnings per Share

The calculation of basic earnings per share is based on earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.  Shares held in the Employee Share Ownership Trust and Employee Benefit Trust are treated as cancelled for the purposes of this calculation.

The calculation of diluted earnings per share is based on the basic earnings per share adjusted to allow for the assumed conversion of all dilutive options.

Basic earnings per share is 38.30 pence (2012: 41.43 pence).

Basic earnings per share (pre exceptional items) is 45.79 pence (2012: 41.43 pence).

Segmental Information

The Executive Committee 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 Executive Committee reviews the Group based on the operating segments identified below. Gross profit is the measure used to assess the performance of each operating segment.

	Revenue (sales to third parties)		Gross Profit
	2013 £'000	2012 £'000	2013 £'000	2012 £'000
Still	55,420	54,516	30,916	28,036
Carbonate	54,461	53,272	21,535	20,091
Total	109,881	107,788	52,451	48,127

There are no sales between the two operating segments, and all revenue is earned from external customers.

The operating segments gross profit is reconciled to profit before taxation as per the consolidated income statement.

The Group's assets are managed centrally by the Management Committee and consequently there is no reconciliation between the Group's assets per the statement of financial position and the segment assets.

	2013 £'000	2012 £'000
Capital Expenditure	692	297
Depreciation	513	460

Exceptional items

The Consolidated Income statement for 2013 includes the following one-off exceptional costs totalling £3.7m:

·     The implementation of a planned management restructuring, which was completed by the year end, incurring one-off costs of £1.7m.

·     A provision of £2.0m to cover the potential costs of a litigation claim from a licensee in Pakistan. The claim, which the company is defending, centres on the licensee's rights to manufacture and distribute Vimto cordial in Pakistan.

Annual Report

The annual report will be mailed to shareholders and made available on our website on or around 24 March 2014.  Copies will be available after that date from:  The Secretary, Nichols plc, Laurel House, Woodlands Park, Ashton Road, Newton le Willows, WA12 0HH.

Annual General Meeting

The annual general meeting will be held at the Registered Office, Laurel House, Woodlands Park, Ashton Road, Newton le Willows, WA12 0HH on 30 April 2014 at 11.00am.

Copies of the announcement can be found on the Investors Relations section of the company's website: www.nicholsplc.co.uk.

This information is provided by RNS

The company news service from the London Stock Exchange

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