Last checked at 10 Mar 2011 07:00
Date: | Embargoed until 07.00am, Thursday 10 March 2011
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Contacts: | John Nichols, Non-Executive Chairman | |
Brendan Hynes, Group Chief Executive Tim Croston, Group Finance Director | ||
Nichols plc | ||
Telephone: 01925 222222 | ||
Website:www.nicholsplc.co.uk | ||
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Alistair Mackinnon-Musson | Mark Brady | |
Nathan Field | Brewin Dolphin Ltd | |
Hudson Sandler | (Nominated Adviser) | |
Telephone:020 7796 4133 | Telephone: 0845 213 4729 | |
Email: nichols@hspr.com | Website: www.corporatefinance.brewin.co.uk | |
Nichols plc
PRELIMINARY RESULTS & ACQUISITION
"2010 was another outstanding year"
Nichols plc, the soft drinks group, announces its Preliminary results for the year ended 31 December 2010.
Nichols plc is a highly focused soft drinks business. Its brand portfolio includes Vimto, which is sold in over 65 countries and Sunkist & Panda which are sold in the UK. The Group has a leading market position in both the "Stills" and "Carbonated" drinks categories and also in the soft drinks on dispense market, where its brands include Cabana, Ben Shaws & Dayla.
Highlights:
·; Group sales up +16% to £83.9m (2009: £72.4m)
·; Profit before tax (pre-exceptional) up +23% to 15.1m (2009: £12.2m)
·; EPS (pre-exceptional) up +29% to 30.23p (2009: 23.44p)
·; Proposed final dividend of 9.1p making the total dividend for the year 13.55p up +11.5% (2009: 12.15p)
·; Announced today: acquisition of remaining 50% of Dayla
·; Announced today: licence for Levi Roots (Reggae Reggae) brand for UK soft drinks
Commenting John Nichols, Non-Executive Chairman, said:
"2010 was another outstanding year, despite the difficult economic environment. We made excellent progress and were well ahead of 2009, which was also a record year for us and therefore a tough target to beat. In a challenging consumer market, once again we have delivered double digit growth in volume, revenue and profitability."
"We remain confident in producing further profitable growth in 2011 and beyond."
Chairman's Statement
I am delighted to report that 2010 was another outstanding year, despite the difficult economic environment and our very strong comparatives from the previous year. In a tough consumer market we have once again delivered double digit growth in volume, revenue and profitability.
Whilst the UK soft drinks market grew by +7% (AC Nielsen, year to 25 December 2010), our UK sales increased by +17%, buoyed by the launch of Cherry Vimto which delivered incremental sales of £3.7m.
Our international revenues increased by +24% to £15.4m, with significant growth coming from Africa (+56%) and the Middle East (+13%). Our overseas operations are a significant contributor to the Group, hedging against the uncertainties of the UK economy and diluting the impact of raw material inflation, currently affecting the food and drink industry in the UK.
Sales of soft drinks on dispense increased by +8%, largely as a result of the acquisition of the Ben Shaws dispense business in January 2010. Today, we are also announcing that we have invested in the future growth of our dispense business by acquiring the remaining 50% equity in Dayla Liquid Packing Ltd (Dayla).
We are also pleased to announce that we have agreed to license the Levi Roots (Reggae Reggae) brand exclusively in the UK soft drinks category and in April 2011 we will launch a range of branded Caribbean soft drinks aimed at the "world food cuisine" category - which is one of the fastest growing sectors in retail.
Results
Group revenue for the year to 31 December 2010 increased by +16% to £83.9m (2009: £72.4m). Profit before tax (pre exceptional items) was £15.1m (2009: £12.2m), growth of +23%. Earnings per share (pre-exceptional items) was 30.23 pence (2009: 23.44 pence) an increase of +29%.
The completion of the acquisition of the balance of Dayla has necessitated a minor restructure of our management and resource requirements, resulting in a small exceptional cost of £0.3m for 2010.
Net cash at 31 December 2010 was £15.0m (2009: £11.2m), with positive net cash flow of £3.8m during the year.
Dividend
Based on our excellent performance in 2010 and the Board's confidence in the ongoing strength of the Group, we are pleased to recommend a final dividend of 9.1 pence per share. This means a total dividend for the year of 13.55 pence (2009: 12.15 pence), an increase of +11.5%. If approved, the final dividend will be paid on 6 May 2011 to shareholders registered at 8 April 2011; the ex-dividend date is 6 April 2011.
People
We have great brands, we also have great people whose enthusiasm, ideas and hard work are fundamental to the success of our company. On behalf of the Board, I would like to thank all of our employees for their contribution to our excellent performance.
During the year, two of our long standing non-executive Board Directors, Jonathan Diggines and John Bee stepped down. I would therefore like to go on record and thank both Jonathan and John for their enormous contribution to the success of the Group over the many years they have been involved.
I am also pleased to welcome two exceptionally able replacements, John Longworth (appointed 30 November 2010) and Eric Healey (appointed 6 January 2011) both of whom are well placed to contribute to our continuing success.
For 2010, we again adopted Derian House Hospice as our chosen charity. The charity provides a fantastic service in supporting terminally ill children and their families.
Outlook
Following our exceptional performance in 2009, we again delivered strong growth in revenue, profit and cash generation in 2010. We have also significantly grown the brand value of Vimto and also our market share in the UK and overseas, whilst maintaining our margin in challenging market conditions.
Raw material cost inflation is a particular challenge facing the food and drink industry and whilst we are not immune to these pressures, our tight control of costs, along with our significant international business, helps to mitigate the adverse impact.
Although it hardly needs saying, the economic and consumer outlook in the UK remains uncertain in the near term. Despite the obvious challenges this will present, we have a robust business and expect to continue to outperform the market, delivering sales growth by ongoing investment in our core brands and by introducing new products.
We therefore remain confident in delivering further profitable growth in 2011 and beyond.
John Nichols
Non-Executive Chairman
10 March 2011
Chief Executive Statement
The Soft Drinks Market
In overall terms, during 2010 the UK soft drinks sector again proved to be resilient, with the total market growing by +7% in value terms and +3 % in volume terms (AC Nielsen data to 25 December 2010). The main growth categories were energy, sports and cola drinks, with carbonated fruit drinks also seeing +9% growth in the year. Nichols is mainly focused on the "still" and "carbonate" sectors.
The macro environment continues to provide challenges, with both consumer confidence and spending under severe pressure, due to the fiscal deficit measures. These trends, combined with another average summer, meant the soft drink market remained extremely competitive throughout last year.
The food and drink industry is also suffering from severe input cost inflation, with limited visibility on key commodity costs and availability. Despite all these challenging factors we continued to make excellent progress, which bodes well for the long term health of our business.
Our strategy, which is to grow our business both organically and through acquisition, whilst pursuing a balanced mix of volume and value growth, was again successful in 2010. This strategy, combined with increased year on year investment in our core brands, has enabled us to continue to grow our market share. It also resulted in a +16% growth in Group sales, whilst maintaining our operating margin. Sales growth in 2009 was also a very healthy +29%, which provided a very testing set of comparatives to beat in 2010.
In January 2010, we acquired the number four player in the soft drinks dispense market, Ben Shaws. This addition consolidated our position as the number three player in this sector.
Group Financial Performance
In 2010 we again delivered a very strong financial performance, above both our internal and external expectations. This has been achieved despite the economic and consumer uncertainties highlighted above, along with high raw material inflation.
In summary, in 2010 we delivered:
·; 16% sales growth
·; 23% profit growth
·; 30% Earnings per share growth (pre-exceptional)
·; 11.5% Dividend growth
Additionally, the Group's cash conversion was also ahead of expectations and we finished the year with £15m of cash in the bank, having completed the purchase of the Ben Shaws dispense business and invested more behind our core brands in 2010, than in 2009.
Our highly focused strategy has resulted in a further increase in our market share in the year across both the "still" and "carbonated" categories.
Trading Performance
The Group now sells in the UK and to over 65 countries internationally. We have a leading market position in both the 'stills' and 'carbonated' drinks categories, through our brand portfolio which includes Vimto, Sunkist, Panda, Cabana and Ben Shaws.
Sales in the UK increased by +15% to £69m (2009: £60m). This was achieved through increased distribution of Vimto in the UK, combined with new customer account wins in the independent sector. The successful launch of Cherry Vimto at the beginning of 2010 also contributed to our strong growth. Our sales of soft drinks on dispense increased by +8 % year on year, a good result given the downturn experienced in the licensed sector, in particular. This was largely achieved by the acquisition of the Ben Shaws dispense business in January 2010.
We again invested heavily in marketing in 2010, running our "seriously mixed up fruit" campaign for a second year. This award winning campaign has improved market penetration and brought over 1 million new consumers into the Vimto brand.
We have also re-designed the Vimto packaging and this will be launched in the first quarter of 2011. This initiative will update and modernise the brand image with a cleaner more natural look.
In 2008, we acquired a 50% share of Dayla Liquid Packing Ltd (Dayla), with an option to acquire the remaining 50% on agreed terms. On 9 March 2011 we exercised this option and have now completed the 100% acquisition of Dayla. This gives us access to the premium juice, bag in box market in Europe and broadens our product offering and market reach.
Internationally, 2010 was another successful year with sales increasing by +24% to £15.4m. This was driven by Vimto increasing its market share particularly in Africa, the Middle East and Northern Europe.
In Africa, we again increased the level of product that is locally manufactured and increased our marketing investment. These factors resulted in sales increasing by +56% in this region.
In the Middle East sales grew by +13% year on year with growth across both "still" and "carbonated" products.
In summary, growth from our core markets, combined with new product developments and opening new geographical markets in 2010, has enabled us to maintain our strong momentum.
Brand Licensing
The expansion of the Vimto brand franchise into new product categories continues with great success. Revenues from licensing the Vimto brand were again significantly up year on year, with nearly 40 million individual products consumed in 2010.
The Vimto brand is now available in a number of new licensed products including Vimto Fruit Numbers, Vimto Fruit Rope and Vimto Ice Lollies. These are complementary and contribute greatly to improving Vimto's overall brand awareness and penetration.
Corporate Responsibility
We take our responsibilities seriously and Nichols plc has a sustainable business strategy which includes our environmental and wider social responsibilities.
Sustainability and the Environment
We continue to actively work with the British Soft Drinks Association (BSDA), the Food and Drink Federation (FDF) and our key suppliers on environmental improvements, with four key areas targeted. These are:
·; Climate change
·; Waste and packaging
·; Water
·; Transport
We made good progress against these targets in 2010, including an ongoing review of the packaging and distribution requirements for all our products. This has resulted in reductions in packaging weights and distribution movements including:
·; Increased Dilute cases per pallet reducing pallet movements by 1,900 per annum, equivalent to 72 truck loads
·; Increased tetra cartons cases per pallet resulting in a reduction in pallet movements by 140 per annum, equivalent to 5 truck loads
·; Lightening of Dilute bottles reducing PET usage by over 145 tonnes or 17%
·; Dilute bottles now contain 25% recycled PET equivalent to 180 tonnes
·; Recycled on pack labels now used for all new labels
To underline our continued commitment we have now also signed up to the Courtauld Commitment (Phase 2) and look forward to working with the Waste Resources Action Programme (WRAP) to achieve their aims.
We are also members of Business in the Community (BITC), a charitable organisation committed to building a sustainable future for people and the planet. With the help of BITC, businesses are challenged to improve performance and benefit society in the areas of community, environment and workplace.
Employees
Our people are crucial to what we do and who we are. Our core values are built on our unique and special culture and cover key areas such as customer service, quality, professionalism, teamwork and mutual support. We have a strong emphasis on learning and development and aim to deliver consistently high results in everything we do. This has again been recognised externally, with Nichols plc being awarded an Outstanding Three Star status in the 2010 Best Companies Survey.
Community
We actively encourage our people to give something back and work with the wider community. In 2010 our charity team once again worked hard on behalf of our chosen charity, Derian House, holding a wide variety of events, including the annual Nichols plc Charity Golf Day, which involve our customers, suppliers and advisors.
Brendan Hynes
Chief Executive
10 March 2011
Nichols plc
NOTES TO THE PRELIMINARY ANNOUNCEMENT
Acquisition of Dayla Liquid Packing Ltd
Nichols plc announces the acquisition of the remaining 50% of the issued share capital of Dayla Liquid Packing Ltd (Dayla), for a consideration of £2.3m, based upon the previously agreed earnings valuation mechanism contained in the acquisition agreement dated December 2008. This completes the full acquisition of the company having purchased the initial 50% on 9 December 2008. This acquisition gives us access to the growing premium juice, bag in box market and broadens our product offering.
Ian Richard Jenkins and Christine Myrtle Jenkins are shareholders in and directors of Dayla. Accordingly the acquisition of the remaining 50% of Dayla from them is deemed to be a related party transaction for the purposes of the AIM Rules for Companies.
The Nichols plc Board, excluding Brendan Hynes who is also a Director of Dayla but not a shareholder, having consulted with Brewin Dolphin Ltd, the company's Nominated Adviser, believe that the terms of the acquisition of the remaining 50% of Dayla are fair and reasonable insofar as the Company's shareholders are concerned.
In Dayla's last audited accounts (for the 15 months to 31 December 2009) its sales were £13.0m and operating profits were £1.1m. Total assets less current liabilities were £1.5m, with £0.3m of long term liabilities including debt.
9 March 2011
Consolidated income statement
Year ended 31 December 2010
Before exceptional items
|
Exceptional items
|
Total
|
Before exceptional items
|
Exceptional items
|
Total
| |
2010 | 2010 | 2010 | 2009 | 2009 | 2009 | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue | 83,899 | 0 | 83,899 | 72,378 | 0 | 72,378 |
Cost of sales
| (42,153) | 0 | (42,153) | (36,198) | 0 | (36,198) |
Gross profit
| 41,746 | 0 | 41,746 | 36,180 | 0 | 36,180 |
Distribution expenses | (5,450) | 0 | (5,450) | (4,376) | 0 | (4,376) |
Administrative expenses | (21,179) | (293) | (21,472) | (19,303) | (293) | (19,596) |
Operating profit | 15,117 | (293) | 14,824 | 12,501 | (293) | 12,208 |
Finance income | 129 | 0 | 129 | 78 | 0 | 78 |
Finance expense | (163) | 0 | (163) | (360) | 0 | (360) |
Profit before taxation |
15,083 |
(293) |
14,790 |
12,219 |
(293) |
11,926 |
Taxation
| (4,042) | 76 | (3,966) | (3,651) | 79 | (3,572) |
Profit for the financial year attributable to equity holders of the parent | 11,041 | (217) | 10,824 | 8,568 | (214) | 8,354 |
Earnings per share (basic) | 29.63p | 22.86p | ||||
Earnings per share (diluted) | 29.59p | 22.57p | ||||
Dividends paid per share | 12.55p | 11.45p | ||||
All results relate to continuing operations | ||||||
Consolidated statement of comprehensive income
Year ended 31 December 2010
2010 | 2009 | |||||
£'000 | £'000 | |||||
Profit for the financial year | 10,824 | 8,354 | ||||
Other comprehensive income | ||||||
Defined benefit plan actuarial gain/(loss) | 74 | (1,565) | ||||
Deferred taxation on pension obligations and employee benefits | 28 | 396 | ||||
Other comprehensive income for the year | 102 | (1,169) | ||||
Total comprehensive income for the year | 10,926 | 7,185 |
Statement of financial position
Year ended 31 December 2010
Group | Parent | |||||
2010 | 2009 | 2010 | 2009 | |||
ASSETS | £'000 | £'000 | £'000 | £'000 | ||
Non-current assets | ||||||
Property, plant and equipment | 1,288 | 1,573 | 477 | 280 | ||
Goodwill | 11,914 | 9,891 | 0 | 0 | ||
Investments | 0 | 0 | 14,266 | 12,371 | ||
Deferred tax assets | 2,587 | 2,829 | 2,514 | 2,829 | ||
Total non-current assets | 15,789 | 14,293 | 17,257 | 15,480 | ||
Current assets | ||||||
Inventories | 3,418 | 2,694 | 1,754 | 1,414 | ||
Trade and other receivables | 16,272 | 14,730 | 11,858 | 10,976 | ||
Cash and cash equivalents | 14,967 | 11,215 | 13,182 | 9,830 | ||
Total current assets | 34,657 | 28,639 | 26,794 | 22,220 | ||
Total assets | 50,446 | 42,932 | 44,051 | 37,700 | ||
LIABILITIES | ||||||
Current liabilities | ||||||
Trade and other payables | 14,165 | 11,789 | 14,099 | 11,072 | ||
Current tax liabilities | 1,533 | 1,587 | 826 | 1,096 | ||
Provisions | 365 | 255 | 278 | 112 | ||
Total current liabilities | 16,063 | 13,631 | 15,203 | 12,280 | ||
Non-current liabilities | ||||||
Pension obligations | 4,135 | 4,744 | 4,135 | 4,744 | ||
Deferred tax liabilities | 72 | 99 | 0 | 0 | ||
Total non-current liabilities | 4,207 | 4,843 | 4,135 | 4,744 | ||
Total liabilities | 20,270 | 18,474 | 19,338 | 17,024 | ||
Net assets | 30,176 | 24,458 | 24,713 | 20,676 | ||
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 | (629) | (357) | 146 | 418 | ||
Retained earnings | 22,644 | 16,654 | 16,406 | 12,097 | ||
Total equity | 30,176 | 24,458 | 24,713 | 20,676 | ||
Consolidated statement of cash flows
Year ended 31 December 2010
2010 | 2010 | 2009 | 2009 |
| |
£'000 | £'000 | £'000 | £'000 | ||
Profit for the financial year | 10,824 | 8,354 | |||
Cash flows from operating activities | |||||
Adjustments for: | |||||
Depreciation | 542 | 619 | |||
Loss on sale of property, plant and equipment | 241 | 12 | |||
Equity-settled share based payment transactions | (627) | 334 | |||
Interest receivable | (129) | (78) | |||
Interest payable | 0 | 29 | |||
Tax expense recognised in the income statement | 3,966 | 3,572 | |||
Change in inventories | (724) | 64 | |||
Change in trade and other receivables | (886) | (1,144) | |||
Change in trade and other payables | 2,439 | 2,654 | |||
Change in provisions | 110 | 74 | |||
Change in pension obligations | (534) | (388) | |||
4,398 | 5,748 | ||||
| |||||
Cash generated from operating activities | 15,222 | 14,102 | |||
Tax paid | (3,777) | (3,076) | |||
Net cash generated from operating activities | 11,445 | 11,026 | |||
Cash flows from investing activities | |||||
Interest received | 139 | 45 | |||
Proceeds from sale of property, plant and equipment | 5 | 5 | |||
Acquisition of property, plant and equipment | (503) | (202) | |||
Acquisition of joint venture, net of cash acquired | 0 | 0 | |||
Additional consideration in respect of a prior acquisition | 0 | (1,370) | |||
Acquisition of business trade and assets | (2,733) | 0 | |||
Net cash used in investing activities | (3,092) | (1,522) | |||
Cash flows from financing activities | |||||
Interest paid | 0 | (6) | |||
Repurchase of own shares | 0 | (138) | |||
Dividends paid | (4,601) | (4,193) | |||
Net cash used in financing activities | (4,601) | (4,337) | |||
Net increase in cash and cash equivalents | 3,752 | 5,167 | |||
Cash and cash equivalents at 1 January | 11,215 | 6,048 | |||
Cash and cash equivalents at 31 December | 14,967 | 11,215 | |||
Consolidated statement of changes in equity
Year ended 31 December 2010
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 2009 | 3,697 | 3,255 | 1,209 | (574) | 13,679 | 21,266 |
Dividends | 0 | 0 | 0 | 0 | (4,193) | (4,193) |
Purchase of own shares | 0 | 0 | 0 | (138) | 0 | (138) |
Movement in ESOT | 0 | 0 | 0 | 21 | (17) | 4 |
IFRS 2 "Share based payment" charge | 0 | 0 | 0 | 334 | 0 | 334 |
Transactions with owners | 0 | 0 | 0 | 217 | (4,210) | (3,993) |
Profit for the year | 0 | 0 | 0 | 0 | 8,354 | 8,354 |
Other comprehensive income | 0 | 0 | 0 | 0 | (1,169) | (1,169) |
At 1 January 2010 | 3,697 | 3,255 | 1,209 | (357) | 16,654 | 24,458 |
Dividends | 0 | 0 | 0 | 0 | (4,601) | (4,601) |
Transfer of own shares | 0 | 0 | 0 | (473) | (353) | (826) |
Movement in ESOT | 0 | 0 | 0 | 2 | 18 | 20 |
IFRS 2 "Share based payment" charge | 0 | 0 | 0 | 199 | 0 | 199 |
Transactions with owners | 0 | 0 | 0 | (272) | (4,936) | (5,208) |
Profit for the year | 0 | 0 | 0 | 0 | 10,824 | 10,824 |
Other comprehensive income | 0 | 0 | 0 | 0 | 102 | 102 |
At 31 December 2010 | 3,697 | 3,255 | 1,209 | (629) | 22,644 | 30,176 |
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 2010 and 31 December 2009, but has been derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for the financial year ended 31 December 2010 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 29.63 pence (2009: 22.86 pence)
Basic earnings per share (pre exceptional items) is 30.23 pence (2009: 23.44 pence)
Annual Report
The annual report will be mailed to shareholders on or around 1 April 2011. 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 4 May 2010 at 11.00am.
Copies of the announcement can be found on the Investors Relations section of the company's website: www.nicholsplc.co.uk.