Final Results

Nichols PLC 21 March 2001 Date: For immediate release, Wednesday 21st March 2001 Contacts: John Nichols, Chairman Gary Unsworth, Chief Executive Simon Nichols, Finance Director Nichols plc Telephone: 01925 222222 Website: www.nicholsplc.co.uk Alistair Mackinnon-Musson Philip Dennis Hudson Sandler Telephone: 020 7796 4133 Email: nichols@hspr.co.uk Nichols plc Preliminary Results Nichols plc announces its preliminary results for the year ended 31 December 2000. The group has three principal divisions: - Soft Drinks Operation (primarily involved in the manufacture and sale of soft drinks, including Vimto throughout the world) - Food Products and Beverage Systems (including Nichols Foods, the manufacturer and supplier to the vending, foodservice and retail markets and Balmoral, supplier of hot beverage systems and Cabana, soft drinks on draught) - Co-packing (which includes Stockpack, the group's contract packing operation) Key Points of 2000: - Group turnover increased by 12% to £90.4m (1999: £80.7m) - Operating profit increased by 4% to £8.5m (1999: £8.2m) - Earnings per share were 14.35p - Vimto rebranding and advertising - resulting in Vimto Cordial outperforming the market - Vimto launched first ever new flavour - Vimto Citrus - Cabana agreed supply agreement with Virgin Cola for dispense market - Balmoral achieved record sales success with its new product launches - Stockpack performed well with a number of new contract wins John Nichols, Chairman of Nichols plc, said: 'The Group has performed well in what has been a challenging and exciting year. Parts of the business have been restructured and we have implemented a number of new initiatives, to increase the efficiency and customer service of the Group, which are now beginning to show benefits.' Please find attached: Chairman's Statement Tables of figures Note to Editors CHAIRMAN'S STATEMENT Following the decision to change the name of the group from JN Nichols (Vimto) plc to Nichols plc, to better reflect the broader base of the business, the year 2000 proved to be one of contrasts for the group as a whole. There were many major achievements, a great deal of them arising from the immense programme of change that has been successfully implemented across all the group companies in the last two years and it is very pleasing to see these bear fruit. There were, however, some disappointments too. The desire to develop the group's capability and standing have been paramount, with focus being given to culture, synergy, people development and customer service. The programme of change is well underway, with the development of key activities that lead to business success and ultimately impact on financial performance. With the creation of a Support Centre at Laurel House, we have been able to focus on the development of a group-wide culture. The introduction of our Guiding Principles, which reflects the desired behaviour of all managers throughout the group, was one of the first steps in re-orientation towards establishing a culture of continuous improvement and customer service delivery. The culture of our business is dependent on us developing our greatest asset - people. The last year has seen a heavy investment in the training and development of all employees. The new Training Centre at Laurel House has been instrumental in creating the right learning environment and this will continue in the coming year with training focussing not only on the Technical abilities needed to do the job, but also on the development of all managers within the group. This will not only improve their skills and motivation, but will positively impact on individual, company and group performance. One of the group's core competencies rests in the area of manufacturing. With over 60 production lines across wet and dry beverages, confectionery and other food-related areas, the group is developing a wide range of capabilities covering both product and packaging formats. Continuous investment in the correct plant and equipment provides additional scope within our customer offering, together with efficiency improvements necessary for us to successfully compete in the markets in which we operate. Group turnover for the year to 31 December 2000 was up 12% to £90.4 million (1999: £80.7 million). Operating profits were nearly 4% ahead at £8.5 million (1999: £8.2 million). Profit before tax, excluding last year's exceptional item (which related to the disposal of the group's freehold property at Wythenshawe), was slightly behind the previous year at £7.6 million. Earnings per share were 14.35 pence (1999: 16.37 pence). There were no exceptional items this year. The directors have recommended a final dividend of 5.80 pence per share, bringing the total for the year to 8.80 pence per share (1999: 8.50 pence per share). This will be paid on 21 May 2001, to shareholders registered on 20 April 2001. Soft Drinks Operation The summer weather last year naturally adversely affected the whole of the soft drink industry and in particular the cordial sector, which was down, year on year, by around 3% overall, yet our own Vimto brand again outperformed the market and was up by 6%. International sales also performed well and were strongly ahead of last year. Overall our Soft Drinks Operation increased sales by 8% to £27.5m (1999: £ 25.4m) and operating profit was up by over 13%, which was a major achievement given the market conditions. The Vimto brand has responded exceptionally well to the year's marketing initiatives, especially the high exposure of Vimto Cordial in the southern part of the UK, through heavyweight advertising on both TV and bus sides. In all, more consumers are now buying more Vimto, more frequently, than ever before. The 2000 advertising initiative is to be repeated this year. To further strengthen its identity and impact and to broaden its appeal, the Vimto range was successfully re-branded and re-launched during last spring. This included a number of significant innovations including a change from supplying the cordial product in glass to plastic (PET) bottles and the successful UK launch of the first ever new flavour of the famous drink - Vimto Citrus. On the international side, overseas sales increased by 23% despite the continued strength of sterling, with sales of Vimto reaching a record 205 million litres, up 7% (1999: 192 million litres). Volumes are forecast to increase by a further 17% this year, to 240 million litres. In Africa, the Vimto brand continues to reach new markets with new franchise agreements being signed in Angola and South Africa, with product launches planned for 2001. Growth in the Middle East continues, with the expansion of the Vimto range to include Vimto powder and Vimto lollipops, which were launched in Saudi Arabia during the last quarter of 2000. The Asia Pacific region is developing well, with the first sale of Vimto concentrate to China and an agreement in place with a local manufacturer to produce and market the brand, with a launch planned during 2001. The group's current international strategy is to continue to expand the Vimto product range in existing markets, while at the same time launching into new target markets, such as India and Vietnam, alongside the continuation of the search to identify potential new markets for future development. Sunkist has proved to be a valuable addition to the portfolio since the license for it was acquired in 1999. Extending the number of product distribution points and increasing the rate of sale has contributed to a year on year volume growth of 25%. By widening its availability within both the vending and dispense channels, Sunkist is now a significant contributor not only to the group's Soft Drinks Operation but also to Nichols Foods and Cabana. Recently, there have been many new entrants into the energy drinks market, bringing greater competition in all areas. Despite this, Indigo has been successful in maintaining its presence and market share and this was further strengthened by the successful launch of a new variant, Indigo Extra, which is positioned directly at the 'stimulation mixer market'. Food Products & Beverage Systems Nichols Foods has strengthened its position as one of the UK's leading suppliers and manufacturers of food and beverage products despite continued competitor and margin pressures. On the international front, distributors in the Middle East have now been appointed to represent some of Nichols Foods' products, namely vending and in-cup dispense. The Company's strength lies in its comprehensive portfolio of own label and branded products across its vending, foodservice and retail divisions, as well as its dedicated customer focus and the provision of products and equipment that meet individual customer requirements. Within the vending market, Nichols Foods has positioned itself as the supplier of choice by providing a unique one-stop solution that is applicable to a comprehensive range of vending equipment, together with a specialist range of branded products for the vending market, such as Nescafe Gold Blend, PG Tea, Irn Bru and Kenco. In the foodservice market, Nichols Foods continues to report successful growth, despite wholesaler consolidation and market changes. Following extensive customer research, the Company has adopted a category management approach to its foodservice products. This led to the specific development and expansion of its Milfresh milk powder range to better meet customer requirements. Additionally, a testament to the company's heavy investment in plant and machinery as well as product research and development, is a new range of wet and dry single portion sachets and sticks, which were also introduced during the year. The company is now well placed to achieve major success in this developing market segment and gives Nichols Foods the opportunity to grow rapidly in the foodservice profit sector. In the retail market, Nichols Foods has seen extensive growth and success due to its strong relationships with both retailers and strategic supply partners alike, in the shape of the Federacion Nacional de Cafeteros de Colombia (FNC) and Mars Four Square. Our Beverage Systems Operation consists of Balmoral's hot beverages business and Cabana, our soft drinks on draught activity. At Cabana Soft Drinks the year 2000 was one of major change and disappointment. A strategic view was taken to align the operation more towards the leisure and catering markets, while maintaining its presence in the pub and club sector. This provides Cabana with a far more balanced customer portfolio overall. In addition, two external appointments to the Cabana board and the introduction of a new management team, together with the purchase of two independent, distributors provides greater depth of experience. The lack of a branded cola in Cabana's portfolio has always been a restriction to growth, however, having now completely restructured the business and secured a major agreement to supply Virgin Cola on draught on an exclusive basis from September this year, there are early and positive indications that the changes are working. Adding Virgin Cola to the already impressive list of dispense products now available from Cabana, which includes Vimto, Irn Bru and Sunkist, is a major step forward, being a huge boost to the planning for Cabana for 2001 and beyond. The introduction in October of Citrus Sun Orange Juice Drink is also having a big impact within the Cabana customer base who are now stocking this high juice product. Balmoral, a market leading supplier of hot beverage systems to the catering and leisure industry, continued to strengthen its position, with sales breaking through the £10 million level for the first time in its history, producing a strong growth in profits. The highly focused and sectorised sales teams continue to deliver results on both forecast machine sales targets and ingredients sales. New business has been achieved with many leading companies including KFC, Norwest Co-op and East Midlands Co-op. Success was also achieved at Eastbourne and North Middlesex hospitals, where the highly innovative and unique hospital trolley system - cafe on the spot - was successfully launched. The senior management team has been strengthened, in both the operations and finance departments, and a new IS/IT system has been developed and became operational in the early part of this year. Co-Packing The performance at Stockpack, the group's contract packing operation, took a major step forward and has been a remarkable success. The Board is delighted that Stockpack is now reaping the rewards of the hard work that has been put in to improve this business over the past two years. Stockpack returned to financial health, producing an operating profit of £384,000 against a loss of £292,000 in the previous year - an improvement of nearly £700,000, on sales up by 23% to £7.5 million (1999: £6.1 million). Stockpack had a good start to the year with the transfer of packaging equipment from Cadbury's facilities to Stockpack's site in Stockport, to support development work on their Heroes range of chocolates. With an investment of £450k, a complete packing line to support this product was installed, backed by the winning of a two-year contract. The future at Stockpack looks encouraging, as more of its blue chip customers seek to simplify their own factory operations and outsource their packaging solutions. Stockpack is well placed to exploit these opportunities and will continue to find greater levels of efficiency and control of costs to remain competitive in the marketplace. The Future I would like to take this opportunity of thanking all our employees for their hard work over the past year. It was certainly a very challenging one for all of us, but very satisfying that many of the initiatives that were begun over the past two or more years are now bearing fruit. The Board views the future with confidence. John Nichols Chairman 21 March 2001 CONSOLIDATED PROFIT & LOSS ACCOUNT Year Ended 31 December 2000 2000 1999 £'000 £'000 Turnover - continuing activities 90,416 80,720 Cost of sales 70,599 61,757 ---------- ---------- Gross profit 19,817 18,963 Net operating expenses 11,292 10,725 ---------- ---------- Operating profit - continuing activities 8,525 8,238 Exceptional item - 906 ---------- ---------- Profit on ordinary activities before interest 8,525 9,144 Net interest payable 966 396 ---------- ---------- Profit on ordinary activities before taxation 7,559 8,748 Tax on profit on ordinary activities 2,311 2,547 ---------- ---------- Profit for the financial year 5,248 6,201 Equity dividends 3,253 3,197 ---------- ---------- Retained profit for the year 1,995 3,004 ---------- ---------- Earnings per share (basic) 14.35p 16.37p Earnings per share (diluted) 14.34p 16.34p Dividends per share 8.80p 8.50p There were no recognised gains or losses in 2000 or 1999 other than the profit for the year. BALANCE SHEETS At 31 December 2000 Group Parent 2000 1999 2000 1999 £'000 £'000 £'000 £'000 ---------- ---------- ---------- ---------- Fixed assets Intangible assets 7,303 5,782 - - Tangible assets 35,078 32,320 18,454 18,376 Investments: shares in group - - 17,460 17,460 undertakings Investments: own 687 540 687 540 shares ---------- ---------- ---------- ---------- 43,068 38,642 36,601 36,376 ---------- ---------- ---------- ---------- Current assets Stocks 8,368 7,083 1,378 1,109 Debtors 19,290 15,975 12,255 12,313 Cash at bank and in 572 410 19 3 hand ---------- ---------- ---------- ---------- 28,230 23,468 13,652 13,425 Creditors: Amounts falling due within one year 21,348 26,743 6,967 19,838 ---------- ---------- ---------- ---------- Net current assets 6,882 (3,275) 6,685 (6,413) / (liabilities) Total assets less 49,950 35,367 43,286 29,963 current liabilities Creditors: Amounts falling due after one year 12,200 - 12,200 - ---------- ---------- ---------- ---------- 37,750 35,367 31,086 29,963 Provisions for 2,581 2,193 1,259 1,062 liabilities and charges ---------- ---------- ---------- ---------- 35,169 33,174 29,827 28,901 ---------- ---------- ---------- ---------- Share capital and reserves Called up share 3,697 3,697 3,697 3,697 capital Share premium 3,255 3,255 3,255 3,255 account Capital redemption 1,209 1,209 1,209 1,209 reserve Merger reserve - - 775 775 Profit and loss 27,008 25,013 20,891 19,965 account ---------- ---------- ---------- ---------- Equity 35,169 33,174 29,827 28,901 shareholders' funds ---------- ---------- ---------- ---------- CONSOLIDATED CASH FLOW STATEMENT Year Ended 31 December 2000 2000 1999 £'000 £'000 £'000 £'000 ---------- ---------- ---------- ---------- Cash inflow from 10,268 14,639 operating activities Returns on investments and servicing of finance Interest receivable 18 25 Interest payable (984) (416) Interest element of - (5) hire purchase contracts ---------- ---------- Net cash outflow from returns on investments and servicing of (966) (396) finance Taxation (1,995) (2,588) Capital expenditure and financial investment Purchase of (7,463) (9,165) tangible fixed assets Proceeds of sales 297 477 of tangible fixed assets Proceeds of sale of - 13 own shares ---------- ---------- Net cash outflow from capital expenditure and financial (7,166) (8,675) investment Acquisitions and disposals Acquisition of (2,130) (4,557) subsidiary undertakings Net cash / (borrowings) acquired with subsidiaries 109 (107) ---------- ---------- Net cash outflow from acquisitions and disposals (2,021) (4,664) Equity dividends (3,179) (3,123) paid ---------- ---------- Cash outflow before use of liquid resources and (5,059) (4,807) financing Management of liquid resources (Decrease) / (8,000) 8,000 increase in short term borrowings ---------- ---------- Net cash (outflow) / inflow from management of (8,000) 8,000 liquid resources Financing Increase in bank 12,200 - loans Capital element of (9) (43) hire purchase contracts Cancellation of own - (2,548) shares ---------- ---------- Net cash inflow / 12,191 (2,591) (outflow) from financing ---------- ---------- (Decrease) / (868) 602 increase in cash in the year ---------- ---------- NOTES TO THE FINANCIAL STATEMENTS Reconciliation Of Operating Profit To Net Cash Inflow From Operating Activities 2000 1999 £'000 £'000 ---------- ---------- Operating profit 8,525 8,238 Exceptional item - 906 Amortisation - intangible fixed assets 376 225 Depreciation - tangible fixed assets 4,588 4,043 (Profit) / loss on sale of tangible fixed (39) 410 assets Write down of investment in own shares 103 25 Loss on disposal of own shares - 10 (Increase) / decrease in stocks (1,225) 1,093 (Increase) / decrease in debtors (3,238) 667 Increase / (decrease) in creditors 1,178 (978) ---------- ---------- 10,268 14,639 ---------- ---------- Reconciliation Of Net Cash Flow To Movement In Net Debt 2000 1999 £'000 £'000 ---------- ---------- Decrease / (increase) in cash in the period 868 (602) Net cash (inflow) / outflow from management of liquid resources (8,000) 8,000 Cash outflow from reduction in hire purchase (9) (43) contracts Cash inflow from bank borrowings 12,200 - ---------- ---------- Movement in net debt in the period 5,059 7,355 Net debt at 1 January 2000 11,624 4,269 ---------- ---------- Net debt at 31 December 2000 16,683 11,624 ---------- ---------- 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. Annual Report The annual report will be mailed to shareholders on or about 30 March 2001. Copies will be available after that date from: The Secretary, Nichols plc, Laurel House, 3 Woodlands Park, Ashton Road, Newton-le-Willows, WA12 0HH Dividend The proposed final dividend, if approved, will be paid on 21 May 2001 to shareholders registered on 20 April 2001. Annual General Meeting The Annual General Meeting will be held at the registered office, Laurel House, 3 Woodlands Park, Ashton Road, Newton-le-Willows, WA12 0HH on Wednesday 16 May 2001 at 11am. Copies of the announcement can be found on the Investors Relations section of the company's website: www.nicholsplc.co.uk NOTE TO EDITORS The group has three principal divisions: Soft Drinks Operation Primarily involved in the manufacture, sales, marketing and licensing of the Vimto, Indigo and Sunkist brands, it now operates out of one site at Stone Cross, near Haydock. This operation supplies product to all major retail, wholesale and cash and carry outlets in the UK as well as exporting to over 60 countries worldwide. Food Products and Beverage Systems Food Products: Originally a major supplier of ingredients to the vending market, Nichols Foods following recent expansion has seen significant growth come from the foodservice sector. Further product and packaging initiatives will see development into the dynamic retail market. Beverage Systems: Cabana supplies over 6000 outlets in the licensed trade, leisure and catering markets, with soft drinks on draught, through a nationwide network and providing first class technical support, service is their hallmark of success. Balmoral has managed its expertise in the coffee supply business to develop first class hot beverage systems and now has considerable presence in leading catering and leisure outlets throughout the country. Co-Packing Stockpack: A leading contract packing operation whose co-packing and co-manufacturing facilities are used by many well known food and confectionery companies. They act as a one stop solution provider and offer total supply chain management. -ENDS-

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