Final Results

RNS Number : 4170P

Nichols PLC

25 March 2009

 



Date:	Embargoed until 07.00am, Wednesday 25 March 2009
Contacts:	John Nichols, Non-Executive Chairman
	Brendan Hynes, Group Chief Executive
	Nichols plc
	Telephone: [phone]
	Website:www.nicholsplc.co.uk
	Alistair Mackinnon-Musson	Mark Brady
	Nathan Field	Brewin Dolphin
	Hudson Sandler	(NOMAD)
	Telephone:[phone]	Telephone: [phone]
	Email: [e-mail]	Website: www.corporatefinance.brewin.co.uk
Photographs:	Available on request from Hudson Sandler, as above

Nichols plc

PRELIMINARY RESULTS

Nichols plc, the soft drinks group, announces its preliminary results for the year ended 31 December 2008.

The group is a highly focused soft drinks and dispensed cold drinks business, comprising two operations: 

1.	Soft Drinks (sales and marketing of the Vimto brand throughout the world, where it is now available in over 65 countries and of the Panda & Sunkist brands in the UK).
2.	Dispense (namely the Cabana, Beacon, Cariel & Dayla cold soft drinks on draught 'dispense' businesses)

Highlights:

• Group profit before tax and exceptional items up 11.1%

• EPS (pre-exceptional items) up 15.4% to 20.03 pence

• Sales of the Vimto brand grew by 16.1% in the UK

• Total dividend for the year will be 11.15 pence, a 7.2% increase

• Positive cash of £6 million

Commenting John Nichols, Non-Executive Chairman, said:

'We are pleased to announce a strong set of results in Vimto's centenary year, particularly as this has been achieved against the backdrop of an economic downturn, a poor summer in the UK and increased promotional activity by our competitors.

'The results show we have a robust, focused, profitable and cash generative business, which is well placed to respond to the challenges presented by the current economic climate. We continue to invest for growth in our core Vimto brand in the UK and overseas and feel we are in the best possible shape to face the future.'

Chairman's Statement

It is pleasing to announce another year of strong results for 2008, our centenary year, particularly within the context of a deteriorating economy, increased promotional activity by our competitors and another year of poor summer weather.

Sales of the Vimto brand again grew strongly and were up by 16.1% in the UK, with end user international sales in the Middle East, Africa and the rest of the world also increasing year on year.

Our Dispense Operation improved operating profits by 18.1%, despite volumes being impacted by the economic downturn within the pubs and clubs sectors, however, the acquisition of 50% equity in Dayla Liquid Packing Limited in December 2008 further strengthens this division. Dayla provides the Group with direct access to the growing premium juice market, as well as a number of other exciting opportunities in the UK and overseas.

Results

For the year ended 31 December 2008, the Group's profit before tax and exceptional items increased by 11.1% to £10.0 million (2007: £9.0 million) on revenues up 1.6% to £56.2 million (2007: £55.3 million). Earnings per share (pre-exceptional items) increased 15.4% to 20.03 pence (2007: 17.36 pence).

Our financial statements for 2008 include exceptional items of £5.9 million, £5.7 million of which is attributable to non-cash write downs, principally goodwill impairment on the Panda brand. The remaining exceptional item of £0.2 million represents re-organisation costs within the Dispense Operation. 

At 31 December 2008 the Group's net cash position was £6.0 million (31 December 2007: £7.8 million), after having purchased 50% of Dayla for £2.9 million in cash.

Dividend

As a reflection of the confidence the Board has in the ongoing strength of the Group, it is pleased to recommend a final dividend of 7.40 pence per share (2007: 6.90 pence). This gives a total dividend for the year of 11.15 pence (2007: 10.40 pence) which is an increase of 7.2% on last year.

If approved, the final dividend will be paid on 21 May 2009 to shareholders registered on 24 April 2009.

People

I would like to take this opportunity, on behalf of the Board, to thank our employees for their individual and collective contributions to our Group's ongoing success.

In July 2008, I announced the appointment of Taylor Purkis as Group Finance Director, which completed the Executive team and positions us well to build upon our progress to date. 

Nichols has a privileged role to play in being of service to the wider community and, during 2008, we committed to various fund raising initiatives. The Derian House Hospice remains our favoured charity, as it is an outstanding organisation that exists to provide care and support to terminally ill children and their families. 

Outlook

Nichols continues to be a robust, focused, profitable and cash generative soft drinks business, which I believe is well placed to respond to the challenges presented by the current economic climate. 

2

We continue to invest for growth in our core Vimto brand both in the UK and overseas. This, together with the structural changes made in our Dispense Operation during 2008 and our investment in Dayla, puts us in the best possible shape to face the future.

Based on the combination of our clear strategy, our people and our brands we remain confident of continuing our progress in 2009. 

John Nichols

Non-Executive Chairman

25 March 2009

Chief Executives Review

The Soft Drinks Market

The summer of 2008 was again disappointingly cool, not dissimilar to the previous year. Nonetheless, the total soft drinks market, excluding the 'on' (pub and club) trade, grew by 1.0% in value terms but was 2% down in volume terms (AC Neilson data to 27 Dec 2008), with the main growth categories being energy, sports and juice drinks. The Dilutes category grew by 2% in value terms and the Fruit Carbonates category declined by 1%.

Against this backdrop, Vimto performed extremely well and once more grew its share ahead of the market in the following categories: Dilutes, Carbonates and Ready to Drink. Inevitably though, following the poor summer, volume driven promotions featured heavily in the final quarter but our mixed value/volume marketing strategy again clearly worked successfully - as not only did our market share increase, but our margins were also maintained despite rising commodity costs.

The general economic and consumer uncertainty experienced throughout 2008 also saw consumers move more towards better value offerings or extra fill promotions. We believe this trend is likely to continue into 2009.

Group Financial Performance

In a difficult market and a deteriorating economic environment, we are pleased to have made further strong progress in 2008; we have again delivered sales growth, margin growth, profit growth and double digit growth in earnings per share (pre-exceptional items). 

We have also improved our underlying cash generation, ending the year with £6.0 million of cash in the bank, having paid £2.9 million for 50% of Dayla, invested more year on year in our core brands and increased our market share in all territories. 

Soft Drinks Operation

The Group's Soft Drinks Operation consists of the sales and marketing of the Vimto brand throughout the world, where it is available in over 65 countries, along with sales of the Panda and Sunkist brands in the UK.

In 2008 the division's sales increased by 4.3% to £43.5 million (2007: £41.7 million) and operating profits increased by 15.7% to £9.6 million (2007: £8.3 million). This progress was mainly driven by increased distribution of Vimto in the UK, which led to the market share gains referred to above and further growth overseas, particularly in Africa, Turkey, USA and northern Europe.

Internationally, we saw further volume growth with annualised consumption of the Vimto brand reaching 370 million litres during the year, a growth of 8% on 2007. In the Group's core Middle Eastern market, a new TV advertising campaign in 2008 helped to drive increased end user sales; however, this was slightly offset by a reduction in shipments to the Yemen, driven by local manufacturing difficulties. In Africa we accelerated the expansion of locally manufactured product during 2008, resulting in sales increasing by 19%. Overall, the reduced shipments meant that international sales into the market for 2008 were broadly flat.

Revenues from Brand Licensing were significantly up in 2008 and the Vimto brand is now available in a number of licensed products including Vimto Chewy Sweets, Vimto Tongue Ticklers, Vimto Bon-Bon Bags, Vimto Lollipops and Vimto Ice Lollies. This range was extended last year into new confectionery products, improving Vimto's brand awareness and penetration. 

Despite making great progress with the Vimto brand in the UK, internationally and via Brand Licensing, we were less successful with Panda, which has suffered from the decline in the 'kids carbonate' market in the UK and also from a number of multiple retailers deciding to move away from single bottles and into multipacks. As a result of this and the requirements of international accounting standard IAS 36, we have decided to write down the carrying value of the Panda brand in these accounts. As mentioned in the Chairman's Statement, this is a non cash accounting adjustment and is shown as an exceptional item.

Although we will continue to produce and promote Panda, future Group marketing investment will concentrate more on our Vimto brand.

Dispense Operation

This division, which consists of our Cabana, Beacon, Cariel and Dayla businesses, is entirely focused on dispensing cold soft drinks on draught and used to be called the Dispense Systems Operation. In recognition of 2008 being Cabana's first full year operating under its new 'distributor business model' it has been decided to rename this division the Dispense Operation. The new business model is designed to reduce operating costs, whilst increasing brand share and penetration through a greater regional focus. I'm pleased to report these aims have been realised and we are now a strong number three in the draught soft drinks market, behind Coca Cola and Britvic (Pepsi) and have the scale to grow further.

Operating profits in the Dispense Operation increased by a very healthy 18% to £0.91 million (2007: £0.77 million) on reduced sales (because of the change in business model) of £12.7 million (2007: £13.6 million). It should also be noted the soft drinks on dispense market was particularly impacted by reduced consumption in the licensed 'on' trade being down by circa 9% year on year - with pub closures hitting record levels.

Anticipating the decline in the 'on' licensed sector, over recent years we have re-focused our Dispense Operation towards the Leisure, Foodservice, Hotels and Restaurants markets, as well as moving into new healthy product categories such as energy and juice drinks. This, combined with our move to the new business model, has enabled us to improve the performance of our dispense activities, despite the turbulence in the Pub and Club market.

Towards the end of 2008 we acquired a 50% share of Dayla Liquid Packing Ltd, with an option to acquire the remaining balance in three or four years time. This move provides access to the high growth premium juice dispense market, particularly in Europe, as well as securing the manufacturing and supply chain for our syrups - the core constituent ingredient of our dispensed products.

Corporate Responsibility 

Nichols plc has a sustainable business strategy which takes into account our environmental and wider social responsibilities.

Sustainability and the Environment

We are actively working with the British Soft Drinks Association (BSDA) and also our key external suppliers and have identified four key areas for improvement, being:

• Climate change

• Waste and packaging

• Water

• Transport

During 2008 we realised some tangible improvements including a rationalisation of our product range and packaging requirements in the Group's Soft Drinks Operation and also, in collaboration with our logistics partner and customers, we generated meaningful transportation efficiencies, whereby vehicles were loaded for both outbound and inbound journeys.

Employees

Over many years we have evolved a strong culture of mutual support, with an emphasis on excellence, learning and fun and our standards of health and safety remain exemplary.

In 2008 we were delighted to receive the Manchester Evening News Best Company Award, in the over £50 million turnover listed company category. In early 2009 we were also awarded First Class accreditation status in the 2009 Best Companies survey. These are external acknowledgments of excellence in our workplace and both awards are a credit to the whole team at Nichols PLC. 

Community

Our commitment to the community continued throughout 2008, with our charity team again working hard on behalf of Derian House - raising funds from a variety of events including the annual Nichols Charity Golf Day.  

Brendan Hynes

Chief Executive

25 March 2009

Consolidated income statement

Year ended 31 December 2008

	Before exceptional items	Exceptional items	Total	Before exceptional items	Exceptional items	Total
	2008	2008	2008	2007	2007	2007
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	56,221	0	56,221	55,276	0	55,276
Cost of sales	(27,520)	0	(27,520)	(27,321)	0	(27,321)
Gross profit	28,701	0	28,701	27,955	0	27,955
Distribution expenses	(3,892)	0	(3,892)	(3,795)	0	(3,795)
Administrative expenses	(15,005)	(5,940)	(20,945)	(15,418)	(978)	(16,396)
Operating profit	9,804	(5,940)	3,864	8,742	(978)	7,764
Finance income	288	0	288	291	0	291
Finance expense	(54)	0	(54)	(7)	0	(7)
Profit before taxation	10,038	(5,940)	4,098	9,026	(978)	8,048
Taxation	(2,732)	1,591	(1,141)	(2,672)	293	(2,379)
Profit for the financial year	7,306	(4,349)	2,957	6,354	(685)	5,669
Earnings per share (basic)			8.10p			15.49p
Earnings per share (diluted)			8.10p			15.47p
Dividends paid per share			10.65p			10.00p

Consolidated and parent company balance sheets

Year ended 31 December 2008

			Group			Parent
		2008	2007		2008	2007
ASSETS		£'000	£'000		£'000	£'000
Non-current assets
Property, plant and equipment		2,006	2,448		372	638
Goodwill		9,521	10,910		0	5,480
Investments		0	0		12,001	7,696
Deferred tax assets		2,705	1,197		2,697	1,187
Total non-current assets		14,232	14,555		15,070	15,001
Current assets
Inventories		2,758	2,509		1,287	1,546
Trade and other receivables		13,575	13,177		11,009	11,199
Cash and cash equivalents		6,048	7,814		4,458	6,777
Total current assets		22,381	23,500		16,754	19,522
Total assets		36,613	38,055		31,824	34,523
LIABILITIES
Current liabilities
Trade and other payables		10,137	8,828		8,526	7,941
Current tax liabilities		1,308	1,058		894	842
Provisions		181	681		0	117
Total current liabilities		11,626	10,567		9,420	8,900
Non-current liabilities
Pension obligations		3,567	3,635		3,567	3,635
Deferred tax liabilities		155	356		0	192
Total non-current liabilities		3,722	3,991		3,567	3,827
Total liabilities		15,348	14,558		12,987	12,727
Net assets		21,265	23,497		18,837	21,796
EQUITY
Share capital		3,697	3,697		3,697	3,697
Share premium		3,255	3,255		3,255	3,255
Capital redemption reserve		1,209	1,209		1,209	1,209
Other reserves		(574)	(492)		201	283
Retained earnings		13,678	15,828		10,475	13,352
Total equity		21,265	23,497		18,837	21,796

Consolidated statement of cash flows

Year ended 31 December 2008        

	2008	2008	2007	2007
	£'000	£'000	£'000	£'000
Profit for the financial year		2,957		5,669
Cash flows from operating activities
Adjustments for:
Depreciation	656		782
Loss on sale of property, plant and equipment	20		27
Impairment of goodwill and property, plant and equipment	5,615		0
Equity-settled share based payment transactions	543		192
Interest receivable	(288)		(291)
Interest payable	54		7
Tax expense recognised in the income statement	1,141		2,379
Change in inventories	342		(299)
Change in trade and other receivables	347		(570)
Change in trade and other payables	(1,032)		159
Change in provisions	(353)		(530)
Change in pension obligations	(588)		(347)
		6,457		1,509
Cash generated from operating activities		9,414		7,178
Tax paid		(2,595)		(1,800)
Net cash generated from operating activities		6,819		5,378
Cash flows from investing activities
Interest received	288		291
Proceeds from sale of property, plant and equipment	135		455
Acquisition of property, plant and equipment	(220)		(336)
Acquisition of subsidiary, net of cash acquired	0		(1,125)
Acquisition of subsidiary's net overdraft	0		(144)
Acquisition of joint venture, net of cash acquired	(2,908)		0
Acquisition of joint venture's net overdraft	(131)		0
Additional consideration in respect of a prior acquisition	(480)		(240)
Payment on settlement of pension obligation	(809)		0
Net cash used in investing activities		(4,125)		(1,099)
Cash flows from financing activities
Interest paid	(11)		(4)
Repurchase of own shares	(535)		(224)
Dividends paid	(3,914)		(3,697)
Net cash used in financing activities		(4,460)		(3,925)
Net increase in cash and cash equivalents		(1,766)		354
Cash and cash equivalents at 1 January		7,814		7,460
Cash and cash equivalents at 31 December		6,048		7,814

  Statement of recognised income and expense

Year ended 31 December 2008

GROUP		2008		2007
		£'000		£'000
Defined benefit plan actuarial (loss)/gain		(1,286)		2,522
Deferred taxation on pension obligations and employee benefits		132		(933)
Income and expense recognised directly in equity		(1,154)		1,589
Profit for the financial year		2,957		5,669
Total recognised income and expense for the year		1,803		7,258

Nichols plc

NOTES TO THE PRELIMINARY FINANCIAL INFORMATION

Basis of Preparation

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 will be delivered following the company's Annual General meeting. The Auditors have reported on these accounts; their reports were unqualified and did not contain statements under s.237 (2) or (3) of the Companies Act 1985.

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 8.10 pence (2007: 15.49 pence)

Basic earnings per share (pre exceptional items) is 20.03 pence (2007: 17.36 pence)

Dividends

The proposed final dividend of 7.40 pence per share (2007: 6.90 pence), if approved, will be paid on 21 May 2009 to shareholders registered on 24 April 2009. The ex dividend date is 22 April 2009. In addition, an interim dividend of 3.75 pence was paid on 3 September 2008.

Annual Report

The annual report will be mailed to shareholders on or around 16 April 2009. 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 20 May 2009 at 11.00 a.m.

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

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