2 August 2007 - Nichols plc, the soft drinks group, announces its Interim results for the six months to 30 June 2007.
The Group is a highly focused soft drinks and dispensed cold drinks business, comprising two operations:
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) and Dispense Systems (namely the Cabana & Beacon cold soft drinks on draught ‘dispense’ businesses)
Highlights:
Turnover up 6.1%
Profit on continuing activities before tax and exceptional items up 14.9%
Increased cash balances; Interim dividend up 6.1%
Core Vimto brand has continued its UK growth; International performance strong
Cariel integration is going well; four new distributors signed for Dispense Systems
Further progress is expected for the full year; Board confident of the future
Commenting John Nichols, Chairman, said:
“I am delighted to report that, for the fifth consecutive year, we have made positive progress during the first half. This has been achieved despite the soft drinks market generally being highly competitive and the extreme wet weather conditions experienced so far this summer”.
“Although we expect market volatility to continue throughout the second half, we still believe our core brands will continue to perform well in a difficult UK market, and that we will also see growth internationally for the full year. Combined with the improving performance of our Dispense Systems Operation, we anticipate showing further progress at the full year”.
Chairman’s Statement
I am delighted to report that, for the fifth consecutive year, we have made positive progress during the first half. We have achieved this despite the soft drinks market generally being highly competitive and the extreme wet weather conditions experienced so far this summer.
Results
The Interim results to June 2007 are the first set of trading results produced by Nichols PLC using the measurement basis of International Financial Reporting Standards (IFRS). An analysis of the impact of IFRS, together with reconciliation from UK GAAP to IFRS, was reported separately on 30 July 2007.
Turnover in the six months to 30 June 2007 at £27.8 million was 6.1% up on the first half of last year (2006: £26.2 million). This includes £0.5 million of sales relating to Cariel Soft Drinks acquired in April 2007. Profit on continuing activities before tax and exceptional items was up 14.9% at £2.77 million (2006: restated £2.41 million).
Earnings per share decreased by 4.6% to 5.43 pence (2006: restated 5.69 pence) mainly due to the higher effective tax rate in 2007.
The Group also had increased positive cash balances of £5.8 million at the end of June 2007 (2006: £2.4 million).
The acquisition of Cariel Soft Drinks, a cold soft drinks on draught business based in Dunblane Scotland, was in line with the aim to grow our core business. This acquisition, combined with the four new distributors signed in the first half of 2007, will help underpin the continued improvement in trading at our Dispense Systems Operation that is anticipated during the remainder of 2007 and beyond.
Soft Drinks Operation
After a better than expected start to the year, particularly in April, the months of May and June saw the general soft drinks market dominated by a combination of deep promotional activity and extreme wet weather, both of which have made trading extremely difficult in the first half of the year.
Despite these exceptionally challenging market conditions, I am pleased to report that our core Vimto brand has continued to grow, particularly in the ‘Carbonates’ and ‘Ready to Drink’ sectors, both of which have seen market share gains in the first half.
Internationally, the Vimto brand has also performed strongly, particularly in the Middle East, where sales were ahead in the first six months due to the timing of Ramadan. This uplift, however, is largely a timing issue, with forecast sales in the second half consequently being lower than normal, although in total, International sales for the year are expected to be ahead of those made in 2006.
In overall terms we still expect to see growth in the full year from our Soft Drinks Operation.
Dispense Systems Operation
The transformation of our Dispense Systems Operation to an ‘external distributor model’ is now complete. This means that in 17 of the 19 UK regions covered, provision of the actual dispense equipment and its subsequent maintenance are no longer the responsibility of the Group. Having effectively ‘out-sourced’ these aspects, long term agreements are now in place with the 17 external distributors, whereby Nichols supplies them with the consumable ‘syrups’ and ‘juices’ from which the dispense drink product is mixed at the point of sale.
In the first half of 2007 we successfully attracted four new distributors to the division and completed the acquisition of Cariel Soft Drinks, both of which increase geographical coverage and significantly strengthen our market position.
Our Dispense Systems Operation is now firmly positioned as the UK’s third major player in this sector and with its turnaround complete, we expect to see the financial benefits of our strategy coming through in the second half of 2007.
Dividend
This is our fifth consecutive year of improved Interim profits which, combined with our strong cash position and our confidence in the future, means the Board has approved a 6.1% increase in the Interim dividend to 3.50 pence per share (2006: 3.30 pence).
The Interim dividend will be paid on the 7 September 2007 to shareholders registered on the 10 August 2007. The ex-dividend date will be 8 August 2007.
Outlook
The extremely poor summer weather to date, combined with higher than normal promotional activity in the market, means that we expect the soft drinks market generally to remain fairly volatile throughout the second half of the year.
Despite these factors, however, we still believe our core brands will continue to perform well and that we will see further growth internationally. Combined with the improving performance of our Dispense Systems Operation, we anticipate showing further progress in sales for the full year at Group level.
On 19 March 2007, Nichols PLC announced it was in preliminary discussions regarding the possibility of an offer being made for the entire issued and to be issued share capital of the Group. These discussions continue, although there is no certainty that an offer will be made. Further announcements will be made as appropriate.