REG - Nichols PLC - 2022 Interim Results
27/07/2022 07:00
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RNS Number : 8298T Nichols PLC 27 July 2022
27 July 2022
Nichols Plc
2022 INTERIM RESULTS
Encouraging revenue and earnings growth as Out of Home recovers from the
pandemic
Nichols plc ('Nichols' or the 'Group'), the diversified soft drinks Group,
announces its unaudited Interim Results for the half year ended 30 June 2022
(the 'period').
Half year ended Half year ended
30 June 2022 30 June 2021 Movement
£m £m
Group Revenue 80.2 67.4 +19.1%
Adjusted Operating Profit1 11.2 9.0 +24.2%
Operating Profit 10.0 8.8 +14.6%
Adjusted Profit Before Tax (PBT)1 11.3 8.9 +26.7%
Profit Before Tax (PBT) 10.1 8.6 +17.0%
Adjusted PBT Margin1 14.0% 13.2% +0.8ppts
PBT Margin 12.6% 12.8% (0.2ppts)
EBITDA2 12.4 11.2 +10.6%
Adjusted Earnings per Share (basic)1 24.80p 19.52p +27.0%
Earnings per Share (basic) 22.22p 18.93p +17.4%
Cash and Cash Equivalents3 49.2 56.7 (13.2%)
Return on capital employed4 25.2% 14.6% +10.6%
Interim Dividend 12.4p 9.8p +26.5%
· Vimto Brand value in the UK +5.7%(5)
o Vimto continues to outperform the dilutes market, by +9.1%(5)
· UK revenues increased by 29.3% to £62.6m (H1 2021: £48.4m)
o UK Packaged route to market volume flat versus UK soft drinks down 4.3% as
consumer spending slows
o Out of Home (OoH) continues to recover from the pandemic, with revenues
+131.9%
• Strategic review of OoH progressing
· International revenues -7.2% to £17.6m (H1 2021: £19.0m), (Q2
+4%)
o Middle East phasing of shipments largely weighted to H2
• 'In-market' volume of cordial Oct to Apr, +10%, post completion of
marketing investment
o Continued progress in Africa, +2.0%
• Q2 +11%, Q1 -4% impacted by national driver industrial action in
Spain
o US shipments constrained through 2022 due to ongoing container shortages
· Gross margin 42.8% (H1 2021: 44.4%)
o Higher proportion of lower margin UK carbonate revenues as OoH recovers
· Exceptional charge of £1.2m largely relating to Operational Change
Programme
o Transfer of Dilutes contract manufacturing successfully completed
· Strong cash and cash equivalents at £49.2m (31 December 2021:
£56.7m)
o Completion of the Group's treasury share buyback programme (H1 2022 spend
£5.5m)
• Facilitates the Group's SAYE Option Scheme and/or Long-Term
Incentive Plan
o Renewed post pandemic working capital investment, net £5.9m outflow
· Interim dividend of 12.4p, +26.5% (H1 2021: 9.8p)
· 2022 Group expectations(6) remain unchanged
o Significant and accelerating inflationary pressures, particularly
ingredient and packaging costs
o Customer, supplier and operational mitigation actions underway
1 Excluding Exceptional items of £1.2m (H1 2021: £0.3m)
2 EBITDA is the statutory profit before tax, interest, depreciation, and
amortisation
3 The comparison is to 31 December 2021. All other comparatives compare to the
six months ending 30 June 2021 unless otherwise stated
4 Return on Capital Employed is the rolling 12 months adjusted operating
profit as a percentage of the average period-end capital employed, excluding
the effect of Goodwill impairment
5 Source: Nielsen IQ RMS data for the Total Soft Drinks category for the YTD
ending 18 June 2022 for the GB Total Coverage market
6 FY22 expectations refers to a Group compiled market consensus of adjusted
PBT £25.2m
John Nichols, Non-Executive Chairman, commented:
"I'm pleased to report an encouraging financial performance in the first half
of the year with 27% increases to both Adjusted PBT(1) and the half year
dividend. In the UK, the Vimto brand continues to outperform the broader
squash market, and the Group's Out of Home route to market experienced good
growth as the wider leisure sector continues to recover from the impact of the
pandemic. After some disruption to shipments affecting our International
business in Q1, I am pleased to report a recovery in Q2 which has so far
continued into the second half of the year.
Whilst the Group is not immune to the significant and accelerating
inflationary pressures impacting the consumer and the soft drinks market, we
have taken swift mitigating actions where possible and the Group's Adjusted
PBT(1) expectations(2) for the full year remain unchanged. The Board remains
mindful of the potential earnings impact of continued inflation into FY23 and
beyond. We have a long-term track record of growth, a proven, diversified
strategy, and a quality range of brands. All of this is underpinned by a
strong balance sheet. As a result, the Board remains confident that the Group
is well positioned to deliver its long-term growth plans."
1 Excluding Exceptional items of £1.2m (H1 2021: £0.3m)
2 FY22 expectations refers to a Group compiled market consensus of adjusted
PBT £25.2m
Contacts
Andrew Milne, Group Chief Executive Officer
David Rattigan, Group Chief Financial Officer
Nichols plc
Telephone: 0192 522 2222
Website: www.nicholsplc.co.uk (http://www.nicholsplc.co.uk)
Alex Brennan / Hattie Dreyfus Steve Pearce / Rachel Hayes
Hudson Sandler Singer Capital Markets (NOMAD & Broker)
Telephone: 0207 796 4133 Telephone: 0207 496 3000
Email: nichols@hudsonsandler.com (mailto:nichols@hudsonsandler.com) Website: www.singercm.com (http://www.singercm.com)
Notes to Editors:
Nichols plc is an international diversified soft drinks business with sales in
over 73 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 SLUSH PUPPiE, Feel Good, Starslush, ICEE, Levi
Roots and Sunkist.
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the company's obligations under Article 17 of
MAR.
Executive Review
Revenue
The Board is pleased to report an encouraging half year performance with Group
revenues of £80.2m, an increase of 19.1% compared to the prior year (H1 2021:
£67.4m).
The Still and Carbonate product segments achieved revenue growth of 4.9% (to
£37.3m) and 34.9% (to £42.9m) respectively, driven largely by a strong UK
OoH recovery.
UK revenues increased by 29.3% to £62.6m (H1 2021: £48.4m).
Within the UK Packaged route to market, revenues increased by 5.1%.
The UK soft drinks industry is experiencing a period of significant and
accelerating ingredient, packaging, and distribution inflation and overall
market volumes are down 4.3%(1). Our UK Packaged volumes were largely flat in
the period versus last year, driven by the market out performance of the Vimto
brand (in both value and volume terms) across both the Dilutes and Ready to
Drink ("RTD") subcategories, as well as strong growth for both our Levi Roots
and Feel Good brands.
Our UK OoH route to market continues to recover from the two-year pandemic,
and experienced significant growth of 131.9% versus the prior period, which
was impacted by lockdown restrictions. H1 2022 revenues are now ahead of those
experienced in H1 2019, although 2019 revenues exclude the full roll out of
the ICEE brand into cinemas (through Q4 2019 and Q1 2020). As previously
advised, the Board commenced a strategic review of the Group's OoH route to
market. The review is progressing and the Board expects to report on its
findings at the end of this financial year.
International revenues fell by 7.2% to £17.6m (H1 2021: £19.0m), as various
markets were impacted by logistics challenges, particularly in Q1, and the
phasing of shipments between the first and second half of the year.
Middle East revenues in the period fell by 18.5% to £4.2m (H1 2021: £5.1m)
primarily due to the phasing of shipments between the first and second half of
the year. The underlying performance in the Middle East remains very
encouraging with in-market volumes of cordial up 10% for the period from
October 2021 to April 2022. African revenue growth was up 2.0% to £10.4m (H1
2021: £10.2m) for the period, recovering strongly in Q2 (+11%) from the
challenges experienced in Q1 (-4%) when shipment timings were severely
impacted towards the end of the quarter by national driver industrial action
in Spain. Rest of World sales (largely Europe and the US) fell by 16.8% to
£3.1m (H1 2021 £3.7m). Whilst the Group continued to see progress across
Europe (+18.6%), its US sales remain severely constrained (-54.1%) by a
shortage of shipping containers available for trans-Atlantic routes and this
situation is expected to continue for the remainder of this year.
The impact of movements in foreign exchange rates on revenue year-on-year was
immaterial, at approximately £0.2m favourable.
Gross Profit
Gross profit of £34.4m was £4.5m higher than H1 2021 (£29.9m) and 1.6
percentage points lower at 42.8%. The reduction in gross margin percentage was
largely a result of increased lower margin carbonate revenues in H1 2022
versus H1 2021, as OoH opened up fully post the pandemic.
Of the £4.5m improvement, approximately £4.2m is due to the net volume
effect of increased revenues versus the prior period. The remaining £0.3m is
the year-on-year effect of the marketing investment in the Middle East.
The Group is experiencing significant ingredient and packaging inflation and,
whilst ongoing mitigation actions have provided relief in the first half of
the year, inflationary pressures continue to accelerate. The Group continues
to work with its customers and suppliers across the whole of the supply chain
to identify the optimal balance of mitigation actions and price recovery.
Distribution Expenses
Distribution expenses within the Group are those associated with the UK
Packaged route to market, and for OoH, the distribution costs incurred from
factory to depot. Final leg distribution costs within OoH are reported within
Administrative Expenses.
1 Nielsen IQ RMS data for the Total Soft Drinks category for the YTD ending 18
June 2022 for the GB Total Coverage market
Distribution expenses increased by 9.6% to £4.7m (H1 2021: £4.2m) due to
a combination of higher trading volumes, in particular OoH, and significant
inflationary pressure experienced in H2 2021. The Group entered into a new
5-year distribution arrangement in H2 2021 that built significant additional
capacity, given the Group's growth plans, and also provided a platform for
future efficiency opportunities. Service levels have now stabilised following
the significant supply chain disruption experienced in H2 2021 across the
wider UK supply chain.
Administrative Expenses
Administrative Expenses, excluding exceptional items, totalled £18.5m (H1
2021: £16.7m), an increase of £1.8m or 10.9%.
Following the pandemic, the Group's investment in OoH support teams returned
to more normalised levels, increasing by £0.9m versus the prior period. Given
the growth opportunities in-situ, the Group has also increased investment in
its International and UK Packaged commercial and operational capabilities by
£0.5m.
The Group continued to further invest in marketing following the significant
increase in spend through 2021, with costs up £0.2m versus the prior period
(full year +£1.9m versus 2020, H1 2021 +£1.2m versus H1 2020), building
successfully on its 'Find Your Different' campaign.
The Group reward system incorporates retention levers and these along with
this year's accrued bonus charge increased costs by £0.6m versus H1 2021.
Additionally the Group had a positive foreign exchange movement year-on-year
of £0.5m (H1 2022: £nil net of forward currency contracts, H1 2021: £0.5m
loss).
Exceptional Costs
The Group has incurred £1.2m of exceptional costs during the year (H1 2021:
£0.3m).
In Q4 2020, the Group commenced a review of its UK operational supply chain.
As a result of the review, a strategic decision was taken to move Dilutes
production to a new contract manufacturer, which was successfully completed in
the period. This decision was taken in order to provide additional
manufacturing capacity, whilst taking advantage of higher speed lines and more
efficient bottling processes. Significant costs were incurred during H1 in
making this change, including additional storage capacity, new systems,
restructuring costs and legal fees. Given the exceptional nature and scale of
this change, the costs incurred have been treated as exceptional within these
financial statements in order to provide a better understanding of the Group's
underlying trading performance.
In previous annual reports, the Group reported a contingent liability in
respect of historic contracts with some of its senior management, relating to
incentive schemes which were designed to motivate, retain and engage those key
employees. HMRC were of the view that the arrangements should have been taxed
as employment income, which the Group and its advisors had previously
disputed. During FY21, a tribunal was convened to consider the dispute of the
Group's scheme as well as similar schemes operated by other companies. The
tribunal found that the arrangements should have been taxed as employment
income. As at 31 December 2021, the Group recognised a net liability of £2.6m
in relation to this ruling, being a reasonable estimate of the final outcome,
including the Group's additional tax liability, interest costs and amounts
expected to be recovered. There has been no update or change to this key
judgement as at the half year. During the period, there have been legal costs
of £54k incurred in relation to this matter.
As signalled in the latest Annual Report, the Group commenced its full
strategic review into the OoH route to market during the period. During H1,
there have been costs of £48k incurred in relation to this review, with
further costs expected in H2 2022. The review is progressing and the Board
expects to report on its findings at the end of this financial year.
Operating Profit
Adjusted Operating Profit of £11.2m, pre-exceptional items, was up £2.2m, a
24.2% increase on the prior year (H1 2021: £9.0m). Operating profit of
£10.0m (H1 2021: £8.8m) is after charging exceptional items during the
period.
The Group has a number of forward currency contracts in place to mitigate the
impact of fluctuations in the Euro and Dollar. The foreign exchange impact,
net of forward currency contracts, during the current year is £nil (2021 H1:
£0.5m loss).
Finance Costs
Net finance income of £0.1m (H1 2021 net finance cost: £0.1m) largely as a
result of a strengthening of the Group's pension surplus during the year.
Profit before tax and tax rate
Adjusted profit before tax, pre-exceptional items, increased by 26.7% to
£11.3m (H1 2021: £8.9m). The tax charge on adjusted profit before tax for
the period of £2.2m (H1 2021: £1.7m) represents an effective tax rate of
19.5% (H1 2021: 19%). Reported profit before tax was £10.1m, an increase of
17.0% compared to the prior year (H1 2021: £8.6m).
Balance Sheet and Cash and Cash Equivalents
The continued strength of the Group's closing balance sheet reflects its
diversified routes to market and asset light model.
Cash and cash equivalents at the end of the period remained strong at £49.2m
(31 December 2021: £56.7m, H1 2021: £47.4m).
The Group completed the treasury share buyback programme in H1, spending
£5.5m in order to facilitate future servicing of the Group's SAYE Option
Scheme and/or Long-Term Incentive Plan.
As expected, following the full re-opening of OoH outlets this year, the Group
has seen a re-investment into working capital. The Group's debtors and
inventories are £8.0m higher than at the year end, offset by an increase of
£2.1m in creditors as OoH volumes in particular increased. Capital
expenditure in the period is £0.9m (H1 2021: £0.6m).
Inventory levels have also been impacted by both higher ingredient and
packaging costs and the additional stock holding introduced as contingency for
the transfer of Dilutes contract manufacturing, which was successfully
completed in the first half of the year.
The Group's current Return on Capital Employed is 25.2%(1) (H1 2021: 14.6%).
Earnings per share
Total adjusted basic EPS increased to 24.80 pence (H1 2021: 19.52p) with basic
EPS at 22.22 pence (H1 2021: 18.93p). On an adjusted basis, diluted EPS was
24.77 pence (H1 2021: 19.49p).
Dividend
In line with the Group's dividend policy, dividend cover is broadly 2x the
adjusted earnings of the Group. As a result, the interim dividend for 2022
will be 12.4p per share, to be paid on 9 September 2022 with a record date of
5 August 2022.
Pensions
The Group operates two employee benefit plans, a defined benefit plan that
provides benefits based on final salary, which is now closed to new members,
and a defined contribution group personal plan. At 30 June 2022, the Group
recognised a surplus on its UK defined benefit scheme of £6.6m (31 December
2021: surplus £5.3m).
Outlook
Whilst the Group is not immune to the significant and accelerating
inflationary pressures impacting the consumer and the soft drinks market, we
have taken swift mitigating actions where possible and the Group's Adjusted
PBT expectations for the full year remain unchanged. The Board remains mindful
of the potential earnings impact of continued inflation into FY23 and beyond.
We have a long-term track record of growth, a proven, diversified strategy,
and a quality range of brands. All of this is underpinned by a strong balance
sheet. As a result, the Board remains confident that the Group is well
positioned to deliver its long-term growth plans.
Andrew Milne
Chief Executive Officer
David Rattigan
Chief Financial Officer
27 July 2022
1 Return on Capital Employed is the rolling 12 months adjusted operating
profit as a percentage of the average period-end capital employed, excluding
the effect of Goodwill impairment
CONSOLIDATED INCOME STATEMENT
Unaudited Half year to 30 June Unaudited Audited
2022 Half year to Year ended
£'000 30 June 31 December 2021
2021 £'000
£'000
Continuing operations
Revenue 80,232 67,392 144,328
Cost of sales (45,880) (37,448) (79,153)
Gross profit 34,352 29,944 65,175
Distribution expenses (4,651) (4,244) (9,129)
Administrative expenses (19,667) (16,945) (73,601)
Operating profit/(loss) 10,034 8,755 (17,555)
Finance income 126 24 57
Finance expenses (63) (149) (158)
Profit/(loss) before taxation 10,097 8,630 (17,656)
Taxation (1,969) (1,640) (4,512)
Profit/(loss) for the period 8,128 6,990 (22,168)
Earnings/(loss) per share (basic) 22.22p 18.93p (60.04p)
Earnings/(loss) per share (diluted) 22.19p 18.91p (60.04p)
Adjusted for exceptional items
Operating profit/(loss) 10,034 8,755 (17,555)
Exceptional items 1,173 267 39,477
Adjusted operating profit 11,207 9,022 21,922
Profit/(loss) before taxation 10,097 8,630 (17,656)
Exceptional items 1,173 267 39,477
Adjusted profit before taxation 11,270 8,897 21,821
Adjusted earnings per share (basic) 24.80p 19.52p 46.15p
Adjusted earnings per share (diluted) 24.77p 19.49p 46.09p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Half year to 30 June Unaudited Audited
2022 Half year to Year ended 31 December
£'000 30 June 2021
2021 £'000
£'000
Profit/(loss) for the financial period 8,128 6,990 (22,168)
Items that will not be classified subsequently to profit or loss:
Re-measurement of net defined benefit liability 910 3,176 4,083
Deferred taxation on pension obligations and employee benefits (228) (603) (962)
Other comprehensive income for the period 682 2,573 3,121
Total comprehensive income/(expense) for the period 8,810 9,563 (19,047)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
ASSETS £'000 £'000 £'000
Non-current assets
Property, plant and equipment 16,073 18,706 17,099
Goodwill - 36,244 -
Intangibles 5,226 5,866 5,546
Pension surplus 6,621 3,925 5,276
Total non-current assets 27,920 64,741 27,921
Current assets
Inventories 14,751 6,563 9,706
Trade and other receivables 38,548 36,917 36,124
Corporation tax receivable 1,017 1,062 743
Cash and cash equivalents 49,167 47,427 56,674
Total current assets 103,483 91,969 103,247
Total assets 131,403 156,710 131,168
LIABILITIES
Current liabilities
Trade and other payables 30,193 25,860 28,791
Provisions 4,242 - 4,242
Total current liabilities 34,435 25,860 33,033
Non-current liabilities 1,953 2,724
Other payables 1,954
Deferred tax liabilities 3,307 2,024 3,155
Total non-current liabilities 5,260 4,748 5,109
Total liabilities 39,695 30,608 38,142
Net assets 91,708 126,102 93,026
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 943 306 676
Retained earnings 82,604 117,635 84,189
Total equity 91,708 126,102 93,026
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Half year to Half year to Year ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000 £'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) for the financial period 8,128 6,990 (22,168)
Adjustments for:
Depreciation and amortisation 2,318 2,464 4,969
Impairment losses on goodwill and intangible assets - -
36,244
Loss on sale of property, plant and equipment 61 8 63
Finance income (126) (24) (57)
Finance expense 63 149 158
Tax expense recognised in the income statement 1,969 1,640
4,512
Increase in inventories (5,045) (642) (3,785)
Increase in trade and other receivables (2,939) (7,774) (6,804)
Increase in trade and other payables 2,110 4,457 7,429
Increase in provisions - - 4,242
Change in pension obligations (435) (402) (846)
Fair value loss/(gain) on derivative financial instruments 515 -
(178)
(1,509) (124) 45,947
Cash generated from operating activities 6,619 6,866 23,779
(2,319) (2,094) (3,878)
Tax paid
4,300 4,772 19,901
Net cash generated from operating activities
Cash flows from investing activities
Finance income 126 24 57
Proceeds from sale of property, plant and equipment - -
2
Acquisition of property, plant and equipment (913) (632) (1,239)
Payment of contingent consideration (note 8) (71) (67) (67)
Net cash used in investing activities (858) (675) (1,247)
Cash flows from financing activities (554) (715)
Payment of lease liabilities (1,189)
Purchase of own shares (5,534) - (1,217)
Dividends paid (4,861) (3,249) (6,868)
Net cash used in financing activities (10,949) (3,964) (9,274)
Net (decrease)/increase in cash and cash equivalents (7,507) 133 9,380
Cash and cash equivalents at start of period 56,674 47,294 47,294
Cash and cash equivalents at end of period 49,167 47,427 56,674
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Called up share capital Share premium reserve Capital redemption reserve Other reserves Retained earnings Total
£'000 £'000 £'000 equity
£'000 £'000
£'000
At 1 January 2021 3,697 3,255 1,209 394 111,321 119,876
Dividends - - - - (3,249) (3,249)
Movement in ESOT - - - (2) - (2)
Debit to equity for equity-settled share-based payments
- - - (86) - (86)
Transactions with owners - - - (88) (3,249) (3,337)
Profit for the period - - - - 6,990 6,990
Other comprehensive income - - - - 2,573 2,573
Total comprehensive income - - - - 9,563 9,563
At 30 June 2021 3,697 3,255 1,209 306 117,635 126,102
Called up share capital Share premium reserve Capital redemption reserve Other reserves Retained earnings Total
£'000 £'000 £'000 equity
£'000 £'000
£'000
At 1 January 2022 3,697 3,255 1,209 676 84,189 93,026
Dividends - - - - (4,861) (4,861)
Movement in ESOT - - - (2) - (2)
Credit to equity for equity-settled share-based payments - - - 269 - 269
Purchase of own shares - - - - (5,534) (5,534)
Transactions with owners - - - 267 (10,395) (10,128)
Profit for the period - - - - 8,128 8,128
Other comprehensive income - - - - 682 682
Total comprehensive income - - - - 8,810 8,810
At 30 June 2022 3,697 3,255 1,209 943 82,604 91,708
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 2021,
prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 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.
These condensed consolidated interim financial statements for the half year
reporting period ended 30 June 2022 have been prepared in accordance with IAS
34 'Interim financial reporting' and also in accordance with the measurement
and recognition principles of UK adopted international accounting standards.
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.
The interim financial statements were authorised for issue by the Board of
Directors on 27 July 2022.
2. Going Concern
In assessing the appropriateness of adopting the going concern basis in
preparing the Interim Report and financial statements, the Directors have
considered the current financial position of the Group, its principal risks
and uncertainties and the potential impact of any further Covid-19
restrictions. The review performed considers severe but plausible downside
scenarios that could reasonably arise within the period.
The estimated impacts of Covid-19 restrictions are primarily based around our
Out of Home market and the potential for future lockdowns within the
hospitality industry. Our modelling has sensitised trading within this market
to reflect varying degrees of lockdowns with the most severe scenario assuming
that some restrictions will return in the second half of 2022 and into 2023.
During Q4 2021 and Q1 2022 the Group experienced a period of significant
inflation against which a number of mitigation actions were introduced. These
are largely evidenced in the H1 results announced. Our modelling has
sensitised the impacts of Russia's invasion of Ukraine in February, in
particular their impact on global supply chains and macroeconomic inflationary
factors.
In addition to the further impacts of Covid-19, alternative scenarios,
including the potential impact of key principal risks from a financial and
operational perspective, have been modelled with the resulting implications
considered. In all cases, the business model remained robust. The Group's
diversified business model and strong balance sheet provide resilience against
these factors and the other principal risks that the Group is exposed to. At
the 30 June 2022 the Group had cash and cash equivalents of £49.2m with no
external bank borrowings.
On the basis of these reviews, the Directors consider the Group has adequate
resources to continue in operational existence for the foreseeable future
(being at least one year following the date of approval of this Interim Report
and financial statements) and, accordingly, consider it appropriate to adopt
the going concern basis in preparing the financial statements.
3. Segmental Reporting
The Board considers the business from a product perspective and reviews the
Group's performance based on the reporting operating segments identified
below. There has been no change to the segments during the period. Based on
the nature of the products sold by the Group, the types of customers and
methods of distribution, management consider reporting operating segments at
the Still and Carbonate level to be reasonable, particularly in light of
market research and industry data made available by Nielsen. Gross profit is
the measure used to assess the performance of each operating segment.
Still Carbonate Group
£'000 £'000 £'000
Half year to 30 June 2022
Revenue 37,303 42,929 80,232
Gross Profit 18,679 15,673 34,352
Half year to 30 June 2021
Revenue 35,558 31,834 67,392
Gross Profit 18,572 11,372 29,944
Year ended 31 December 2021
Revenue 72,393 71,935 144,328
Gross Profit 37,980 27,195 65,175
A geographical split of revenue is provided below:
Half year to Half year to Year ended
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Geographical split of revenue
Middle East 4,176 5,126 9,765
Africa 10,372 10,164 16,410
Rest of the World 3,059 3,675 6,523
Total exports 17,607 18,965 32,698
United Kingdom 62,625 48,427 111,630
Total revenue 80,232 67,392 144,328
4. Exceptional items
Half year to Half year to Year ended
30 June 2022 30 June 31 December
2021 2021
£'000 £'000 £'000
Review of UK packaged supply chain 1,071 267 620
Historic incentive scheme 54 - 2,613
Strategic review of Out of Home business 48 - -
Impairment of goodwill and intangibles - - 36,244
1,173 267 39,477
In Q4 2020, the Group commenced a review of its UK operational supply chain.
As a result of the review, a strategic decision was taken to move Dilutes
production to a new contract manufacturer, which was successfully completed in
the period. This decision was taken in order to provide additional
manufacturing capacity, whilst taking advantage of higher speed lines and more
efficient bottling processes. Significant costs were incurred during H1 in
making this change, including additional storage capacity, new systems,
restructuring costs and legal fees. Given the exceptional nature and scale of
this change, the costs incurred have been treated as exceptional within these
financial statements in order to provide a better understanding of the Group's
underlying trading performance.
In previous annual reports, the Group reported a contingent liability in
respect of historic contracts with some of its senior management, relating to
incentive schemes which were designed to motivate, retain and engage those key
employees. HMRC were of the view that the arrangements should have been taxed
as employment income, which the Group and its advisors had previously
disputed. During FY21, a tribunal was convened to consider the dispute of the
Group's scheme as well as similar schemes operated by other companies. The
tribunal found that the arrangements should have been taxed as employment
income. As at 31 December 2021, the Group recognised a net liability of £2.6m
in relation to this ruling, being a reasonable estimate of the final outcome,
including the Group's additional tax liability, interest costs and amounts
expected to be recovered. There has been no update or change to this key
judgement as at the half year. During the period, there have been legal costs
of £54k incurred in relation to this matter.
As signalled in the latest Annual Report, the Group commenced its full
strategic review into the OoH route to market during the period. During H1,
there have been costs of £48k incurred in relation to this review, with
further costs expected in H2 2022. The review is progressing and the Board
expects to report on its findings at the end of this financial year.
Due to the one-off nature of these charges, the Board is treating these items
as exceptional costs and their impact has been removed in all adjusted
measures throughout this report.
5. Earnings Per Share
Basic earnings per share is calculated by dividing the profit after tax for
the period of the Group by the weighted average number of ordinary shares in
issue during the period. Diluted earnings per share is calculated by adjusting
the weighted average number of ordinary shares in issue assuming the
conversion of all potentially dilutive ordinary shares.
The earnings per share calculations for the period are set out in the table
below:
Weighted average number of shares
Earnings Earnings per share
£'000
30 June 2022
Basic earnings per share 8,128 36,576,987 22.22p
Dilutive effect of share options 48,451
Diluted earnings per share 8,128 36,625,438 22.19p
Adjusted earnings per share before exceptional items has been presented in
addition to the earnings per share as defined in IAS 33 Earnings per share,
since in the opinion of the Directors, this provides shareholders with a more
meaningful representation of the earnings derived from the Group's operations.
It can be reconciled from the basic earnings per share as follows:
Weighted average number of shares
Earnings Earnings per share
£'000
30 June 2022
Basic earnings per share 8,128 36,576,987 22.22p
Exceptional items after taxation 944
Adjusted basic earnings per share 9,072 36,576,987 24.80p
Diluted effect of share options 48,451
Adjusted diluted earnings per share 9,072 36,625,438 24.77p
6. Non-current Assets
Property, Plant & Equipment
Intangibles
£'000 £'000
Cost
At 1 January 2022 34,088 9,760
Additions 1,033 -
Disposals (219) -
At 30 June 2022 34,902 9,760
Depreciation and Amortisation
At 1 January 2022 16,989 4,214
Charge for the period 1,998 320
On disposals (158) -
At 30 June 2022 18,829 4,534
Net book value
At 1 January 2022 17,099 5,546
At 30 June 2022 16,073 5,226
7. Defined Benefit Pension Scheme
The Group operates a defined benefit plan in the UK. A full actuarial
valuation was carried out on 5 April 2020 and updated at 30 June 2022 by an
independent qualified actuary.
A summary of the pension surplus position is provided below:
Pension surplus £'000
At 1 January 2022 5,276
Current service cost (26)
Net interest income 50
Actuarial gains 910
Contributions by employer 411
At 30 June 2022 6,621
8. Contingent consideration
Within the Statement of Cash Flows there is a £0.1m (H1 2021: £0.1m) cash
outflow in the period in relation to the payment of contingent consideration.
These payments relate to contingent consideration paid for acquisitions made
in previous financial years.
9. Provisions
In previous annual reports, the Group reported a contingent liability in
respect of historic contracts with some of its senior management relating to
incentive schemes which were designed to motivate, retain and engage those key
employees. HMRC were of the view that the arrangements should have been taxed
as employment income, which the Group and its advisors had previously
disputed. During the previous year, a tribunal was convened to consider the
dispute of the Group's scheme as well as similar schemes operated by other
companies. The tribunal found that the arrangements should have been taxed as
employment income.
Accordingly, as at 30 June 2022, the Group has recognised a provision of
£4.2m (31 December 2021: £4.2m, 30 June 2021: nil) in relation to this
ruling, being the Group's additional tax liability and interest costs.
Included within other receivables is a reimbursement asset in respect of these
historic contracts.
There has been no update or change to this key judgement as at the half year.
10. Dividends
Dividend cover is broadly 2x adjusted earnings of the Group. As a result, the
interim dividend for 2022 will be 12.4p per share to be paid on 9 September
2022 with a record date of 5 August 2022.
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.
-Ends-
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