NICHOLS PLC — Interim / Quarterly Report 2019

Jul 17, 2019

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RNS Number : 7355F

Nichols PLC

17 July 2019

Date:	Embargoed until 0700 Wednesday 17 July 2019
Contacts:	Marnie Millard, Group Chief Executive Officer Tim Croston, Group Chief Financial Officer Andrew Milne, Group Chief Operating Officer
Nichols plc
Telephone: 01925 222 222
Website: www.nicholsplc.co.uk
Alex Brennan/ Hattie Dreyfus
Hudson Sandler	Richard Lindley/ Rachel Hayes
Telephone: 020 7796 4133	N+1 Singer (Nominated Adviser and Broker)
Email: nichols@ hudsonsandler.com	Telephone: 0207 496 3000 Website: www.n1singer.com

Nichols plc

2019 INTERIM RESULT & BOARD CHANGES

Nichols plc ('Nichols' or the 'Group'), the soft drinks Group, announces its Interim results for the half year ended 30 June 2019 (the 'period').

Financial Highlights:

*EBITDA is the statutory profit before tax, interest, depreciation and amortisation	Half Year ended 30 June 2019	Half Year ended 30 June 2018	% movement
	£m	£m
Group Revenue	71.6	65.0	10.2%
Operating Profit	13.3	13.1	2.1%
Operating Profit margin	18.6%	20.1%
Profit Before Tax (PBT)	13.3	13.1	2.0%
PBT Margin	18.6%	20.1%
EBITDA*	15.3	14.0	9.7%
Earnings per share (basic)	29.63p	28.81p	2.8%
Interim dividend	12.4p	11.3p	9.7%

John Nichols, Non-Executive Chairman, said:

"Nichols plc has delivered another good trading performance in the first half of 2019, with growth across both the UK and international markets. As a result, revenue, profit before tax and earnings per share have all increased during the period, and we have increased the interim dividend by 9.7%."

Chairman's Statement

I am pleased to announce that the Group has delivered a good trading performance for the first six months of 2019. The Group's revenue, profit before tax and earnings per share have all increased during the period, and we have increased the interim dividend by 9.7%.

Trading

Total Group revenue in the period increased by 10.2% to £71.6m against the prior year (H1 2018: £65.0m). Across the Group, revenue from Still products has increased by 11.6% to £33.9m driven by Vimto dilute in the UK and Vimto concentrate sales to the Middle East. Sales of Carbonate products grew by 8.4% to £37.7m as a result of the Africa performance and Out of Home (OoH) growth.

Sales were strong in our international markets, albeit against softer prior year comparatives. International revenues totalled £14.5m in the period (H1 2018: £11.2m), with sales to the Middle East in line with expectations at £4.6m (H1 2018: £2.1m). Elsewhere in our international markets, sales to Africa grew by 12.6% to £7.6m, driven by strong execution in our core markets.

In the UK, revenue increased by 6.2% to £57.1m (H1 2018: £53.8m) as sales of Vimto grew by 4.0%, against very strong prior year comparatives (H1 2018: +9.0%). Year to date growth in the total soft drinks market was 4.1% (Nielsen to 15 June 2018) reducing from 5.7% in May (Nielsen to 18 May 2019) as the industry laps last year's record summer weather. Elsewhere in the UK business, OoH sales increased by 11.8% to £21.5m (H1 2018: £19.2m).

Profit

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) increased by 9.7% to £15.3m (H1 2018: £14.0m).

To support the trading growth, the Group has invested in its infrastructure during the period. In addition, administrative expenses include the retranslation cost of US Dollar and Euro currency balances reflecting adverse forex movements.

Profit Before Tax at the half year was £13.3m, 2.0% ahead of the prior period.  

Dividend

Reflecting the Board's ongoing confidence in the Group's financial position, we are pleased to recommend an interim dividend of 12.4 pence per share (H1 2018: 11.3 pence).

The interim dividend will be paid on 30 August 2019 to shareholders registered on 26 July 2019; the ex-dividend date is 25 July 2019.

The Board intends to deliver continued returns to shareholders through a progressive dividend policy, with increases aligned to growth in earnings per share with the alignment being fully implemented by 2021.

Board changes

After 14 years with the Group and 10 years as Group Chief Financial Officer, Tim Croston has informed the Board of his intention to step down from the Board by 30 June 2020. The notice that Tim has given the Board affords sufficient time to ensure a smooth transition to his successor, with the recruitment process commencing immediately.

Separately, we are delighted to announce that Andrew Milne who has served on the Board since January 2016 as Group Commercial Director has been promoted to the role of Group Chief Operating Officer with immediate effect.                                        

On behalf of the Board I would like to thank Tim for his significant contribution to the Group during the last 14 years and wish Andrew every success in his new role.

Summary and outlook

The Board is pleased with the Group's performance in the first six months of 2019 in both our UK and international markets.

While UK trading conditions are expected to remain challenging, as a result of the Group's diversified business model and sales momentum, the Board is confident that full year earnings will be delivered in line with its expectations.

John Nichols

Non-Executive Chairman

16 July 2019 

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

Notes to Editors:

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. 

CONSOLIDATED INCOME STATEMENT

		Unaudited	Unaudited	Audited
		Half year ended	Half year ended	Full year ended
30-Jun-2019	30-Jun-2018	31-Dec-2018
		£'000	£'000	£'000
Revenue		71,611	64,989	142,037
Operating Profit		13,337	13,058	31,638
Finance income		120	75	192
Finance expense		(118)	(60)	(77)
Profit Before Taxation		13,339	13,073	31,753
Taxation		(2,419)	(2,436)	(6,238)
Profit for the financial period		10,920	10,637	25,515
Earnings Per Share (basic)		29.63p	28.81p	69.23p
Earnings Per Share (diluted) - all activities		29.62p	28.79p	69.19p
Dividends paid per share		26.80p	23.40p	34.70p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Unaudited		Unaudited		Audited
	Half year ended 30-Jun-2019		Half year ended 30-Jun-2018		Full year ended 31-Dec-2018
	£'000		£'000		£'000
Profit for the financial period	10,920		10,637		25,515
## Items that will not be reclassified subsequently to profit or loss ## Re-measurement of net defined benefit liability	-		-		(412)
Deferred taxation on pension obligations and employee benefits	-		-		(44)
Other comprehensive income/ (expense) for the period	-		-		(456)
## Total comprehensive income for the period	10,920		10,637		25,059

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Unaudited		Unaudited		Audited
	30-Jun-2019		30-Jun-2018		31-Dec-2018
	£'000		£'000		£'000
ASSETS
Non-current assets
Property, plant and equipment	20,885		14,391		14,572
Goodwill	38,585		33,726		34,451
Intangibles	8,414		7,767		7,748
Deferred tax assets	835		1,065		835
## Total non-current assets	68,719		56,949		57,606
Current assets
Inventories	8,767		6,212		7,164
Trade and other receivables	42,440		34,120		38,153
Cash and cash equivalents	29,504		37,148		38,896
## Total current assets	80,711		77,480		84,213
Total assets	149,430		134,429		141,819
## LIABILITIES
## Current liabilities
Trade and other payables	26,437		26,296		22,339
Current tax liabilities	2,531		2,479		2,814
## Total current liabilities	28,968		28,775		25,153
## Non-current liabilities
Trade and other payables	3,093		-		-
Pension obligations	2,215		2,521		2,755
Deferred tax liabilities	2,013		1,602		1,801
## Total non-current liabilities	7,321		4,123		4,556
## Total liabilities	36,289		32,898		29,709
Net assets	113,141		101,531		112,110
## 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	666		157		666
Retained earnings	104,314		93,213		103,283
## Total equity	113,141		101,531		112,110

CONSOLIDATED STATEMENT OF CASH FLOWS

	Unaudited Half year ended 30-Jun-2019		Unaudited Half year ended 30-Jun-2018		Audited Full year ended 31-Dec-2018
	£'000	£'000	£'000	£'000	£'000	£'000
Profit for the financial period		10,920		10,637		25,515
Cash flows from operating activities
Adjustments for:
Depreciation and amortisation	2,009		934		2,179
Loss on sale of property, plant and equipment	2		32		127
Finance income	(120)		(75)		(192)
Finance expense	118		60		77
Tax expense recognised in the income statement	2,419		2,436		6,238
Change in inventories	(1,332)		(1,321)		(2,274)
Change in trade and other receivables	(2,812)		684		(3,347)
Change in trade and other payables	1,008		3,079		1,197
Change in pension obligations	(540)		(400)		(578)
		752		5,429		3,427
Cash generated from operating activities		11,672		16,066		28,942
Tax paid		(2,760)		(2,555)		(5,679)
Net cash generated from operating activities		8,912		13,511		23,263
Cash flows from investing activities
Finance income	120		75		192
Acquisition of property, plant and equipment	(3,288)		(2,314)		(3,857)
Acquisition of trade and assets	-		-		(143)
Acquisition of subsidiary	(4,718)		(1,549)		(3,814)
Net cash used in investing activities		(7,886)		(3,788)		(7,622)
Cash flows from financing activities
Payment of lease liabilities	(529)		-		-
Dividends paid	(9,889)		(8,633)		(12,803)
Net cash used in financing activities		(10,418)		(8,633)		(12,803)
Net (decrease)/ increase in cash and cash equivalents		(9,392)		1,090		2,838
Cash and cash equivalents at beginning of period		38,896		36,058		36,058
Cash and cash equivalents at end of period		29,504		37,148		38,896

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 2018, 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 2018, aside from the fact that this is the first set of the Group's financial statements where IFRS 16 has 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 16, Leases

IFRS 16, Leases has replaced IAS 17, Leases with effect from 1 January 2019. The adoption of IFRS 16 has resulted in the Group recognising right-of-use assets and lease liabilities on the consolidated statement of financial position for all contracts that are, or contain, a lease. The new standard removes the distinction between operating and finance leases, with all leases now being accounted for by recognising a right-of-use asset and a lease liability except for leases of low value assets and leases with a term of 12 months or less ("short term leases").

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used.

Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are depreciated on a straight-line basis over the remaining term of the lease.

The Group has identified non-cancellable operating lease commitments totalling £4.7m as at 1 January 2019, relating to property leases for operational sites and motor vehicles. The Group has applied the modified retrospective transition approach to its leases with effect from 1 January 2019, whereby the asset and liability values recognised are equal to one another, with no adjustment to opening reserves. The impact of adopting IFRS 16 on a modified retrospective basis was therefore to recognise a right-of-use asset and a lease liability of £4.1m at 1 January 2019.

The Group has presented right-of-use assets within property, plant and equipment, with the corresponding liabilities presented within trade and other payables split between current and non-current liabilities on the consolidated statement of financial position.

The Group has classified the principal portion of lease payments within financing activities and the interest portion within operating activities on the consolidated statement of cash flows. Lease payments for short-term leases and low-value assets not included in the measurement of the lease liability are classified as cash flows from operating activities.

The application of IFRS 16 has resulted in an increase in depreciation and finance costs offset by a decrease in rental costs, resulting in no material impact on Profit Before Tax. However, the application of IFRS 16 has increased reported EBITDA by the amount of its current operating lease cost, which for the 6 months ended 30 June 2019 was £0.5m.

3.         Dividends

The interim dividend of 12.4 pence (2018: 11.3 pence) will be paid on 30 August 2019 to shareholders registered on 26 July 2019; the ex-dividend date is 25 July 2019.

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 2019 of 36,857,600 (six months to 30 June 2018 of 36,857,624 and 12 months to 31 December 2018 of 36,857,758).

Interim Report

The interim report will be available on the Group's website (www.nicholsplc.co.uk) on or around 17 July 2019.

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.

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.

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