REG - Nichols PLC - 2023 Interim Results
26/07/2023 07:00
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RNS Number : 1678H Nichols PLC 26 July 2023
26 July 2023
Nichols plc
2023 INTERIM RESULTS
Encouraging trading performance and strategic progress
Nichols plc ('Nichols' or the 'Group'), the diversified soft drinks group,
announces its unaudited Interim Results for the half year ended 30 June 2023
(the 'period').
Half year ended Half year ended
30 June 2023 30 June 2022 Movement
£m £m
Group Revenue 85.5 80.2 +6.6%
Adjusted Profit Before Tax (PBT)1 12.3 11.3 +9.1%
Profit Before Tax (PBT) 11.2 10.1 +10.5%
Adjusted PBT Margin1 14.4% 14.0% +0.4ppts
PBT Margin 13.0% 12.6% +0.4ppts
Statutory EBITDA2 11.6 12.4 (6.5%)
Adjusted Earnings per Share (basic)1 25.70p 24.80p +3.6%
Earnings per Share (basic) 23.31p 22.22p +4.9%
Cash and Cash Equivalents 56.1 49.2 +14.2%
Free cash flow3 5.4 (2.6) + 310.2%
Adjusted Return on capital employed4 25.9% 25.2% +0.7ppts
Statutory Return on capital employed5 14.3% (14.3%) +28.6ppts
Interim Dividend 12.6p 12.4p +1.6%
Strategic and operational highlights
· Strong top line growth delivered across the business
o Focus on accelerating Packaged division in line with strategic plan
o Continued accelerated momentum in International Packaged geographies
· Significant progress on implementation of Out of Home (OoH) Strategic
Review
· Impacts of inflation actively managed
Financial highlights
· Group revenue increased by 6.6% to £85.5m (H1 2022: £80.2m)
o Packaged revenues +10.4% to £64.5m (H1 2022: £58.5m)
§ International Packaged revenues +24.6% to £21.5m (H1 2022: £17.2m)
- Middle East revenue +17.5%
- Continued momentum in Africa leading to +26.1% growth
- ROW markets +29.8%
§ UK Packaged revenues +4.5% to £43.1m (H1 2022: £41.3m)
- Ongoing focus on value over volume
o OoH revenues down 3.5% to £21.0m (H1 2022: £21.8m)
§ Reflects planned reduction in activity post OoH Strategic Review
· Gross margin % slightly lower at 41.1% (H1 2022: 42.8%)
o Absolute gross margin increased by £0.8m
o Cost of goods inflation recovered through price and mitigating actions
· Exceptional charge of £1.1m largely relating to the Group Systems
Review and OoH Strategic Review
· Strong cash and cash equivalents at £56.1m (H1 2022: £49.2m, 31
December 2022: £56.3m), increased interest receipts
· Increased interim dividend of 12.6p (H1 2022: 12.4p)
· Confidence in 2023 Group expectations(6) which remain unchanged
Andrew Milne, Chief Executive Officer, commented:
"We are pleased with our encouraging first half performance which again
reflects the strength of the Vimto brand. Particularly pleasing is the growth
in our core Packaged business, and the continued accelerated momentum across
our international markets with very strong performances in Africa, the Middle
East and the rest of the world.
The Group achieved significant strategic progress during the period,
particularly in relation to our Out of Home business where we are making
positive changes to simplify operations and focus on the areas of greatest
opportunity and profitability. We are on-track to deliver the material
benefits of these changes from FY 2024. Meanwhile, we remain focused on
accelerating growth in Packaged, both in the UK and internationally, in line
with our strategic plan.
We are mindful that consumer spend is still under pressure from continuing
high levels of inflation. However, the Group's track record, strong brands and
diversified business model, alongside the resilience of the wider soft drinks
market, support the Board's confidence in the Group's long-term growth
prospects, and that the Group's Adjusted PBT(1) for FY 2023 will be in line
with expectations(6)."
1 Excluding exceptional items
2 EBITDA is the statutory profit before tax, interest, depreciation, and
amortisation
3 Free Cash Flow is the net movement in cash and cash equivalents before
acquisition funding and dividends
4 Adjusted return on capital employed is the adjusted operating profit divided
by the average period-end capital employed
5 Statutory return on capital employed is the operating profit divided by the
average period-end capital employed
6 FY23 expectations refers to a Group compiled market consensus of adjusted
PBT £25.2m
Contacts
Nichols plc Telephone: 0192 522 2222
Andrew Milne, Group Chief Executive Officer
David Taylor, Interim Chief Financial Officer
Singer Capital Markets (NOMAD & Broker) Telephone: 0207 496 3000
Steve Pearce / Jen Boorer Website: www.singercm.com (http://www.singercm.com/)
Hudson Sandler (Financial PR) Telephone: 0207 796 4133
Alex Brennan / Charlotte Cobb / Harry Griffiths Email: nichols@hudsonsandler.com (mailto:nichols@hudsonsandler.com)
Notes to Editors:
Nichols plc is an international diversified soft drinks business with sales in
over 73 countries. 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,
Starslush, ICEE, Levi Roots and Sunkist.
For more information about Nichols, visit: www.nicholsplc.co.uk
(http://www.nicholsplc.co.uk/)
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 £85.5m, an increase of 6.6% compared to the prior year (H1 2022:
£80.2m).
The Group's Packaged route to market delivered a strong performance across all
regions with revenues increasing by 10.4% to £64.5m (H1 2022: £58.5m).
Within this, the Group's International Packaged business performed
particularly strongly, with revenues up 24.6% and all regions experiencing
double digit growth. The significant growth seen within Africa in previous
years has continued into 2023, with revenues up 26.1% to £13.1m (H1 2022:
£10.4m), delivered through a combination of new and existing geographies.
Middle East revenues in the period also improved, by 17.5%, with in-market
volumes performing well through Vimto's typically strong trading period of
Ramadan (+10%). The Group's rest of world markets saw revenue growth of 29.8%,
with the US and Europe continuing to perform well, building on increased brand
awareness and strong in-market execution.
Within the UK Packaged route to market, the Group saw revenues of £43.1m,
4.5% ahead of the prior year (H1 2022: £41.3m). The business remains focused
on its value over volume strategy in order to protect margins.
Following the initial implementation of the previously announced outputs of
the Group's Out of Home (OoH) Strategic Review, as expected, revenues within
this segment declined by 3.5% to £21.0m (H1 2022: £21.8m). The actions from
the review will continue to be implemented into the second half of the year,
with the benefits being realised from FY 2024.
The impact of movements in foreign exchange rates on revenue year-on-year was
immaterial, at approximately +£0.2m.
Gross Profit
Gross profit of £35.2m was £0.8m higher than H1 2022 (£34.4m) and 1.7
percentage points lower at 41.1%.
The cost of goods inflation experienced in 2022 continued into the first half
of the year, with underlying inflation at around 16%. The Group has been able
to fully mitigate this by working with its customers and suppliers across the
whole of its supply chain, identifying the optimal balance of mitigating
actions and price recovery. Excluding the impact of the input costs and the
price recovery, gross profit % was comparable with H1 2022.
The impact of movements in foreign exchange rates on gross profit was +£0.2m.
Distribution Expenses
Distribution expenses within the Group are those associated with the UK
Packaged route to market, and for OoH are the distribution costs incurred from
factory to depot. Final leg distribution costs within the OoH business are
reported within Administrative Expenses.
Distribution expenses increased by 7.7% to £5.0m (H1 2022: £4.7m),
reflecting inflationary pressures, particularly around increased fuel prices,
which were experienced in H2 2022 into H1 2023.
Administrative Expenses
Administration expenses excluding exceptional items totalled £18.7m (H1
2022: £18.5m), an increase of £0.2m or 1.1% year-on-year. Additional
costs incurred in the period largely relate to payroll and staff related costs
in response to cost-of-living pressures, alongside further investment in
marketing spend to drive brand equity within the Packaged business. These
additional expenses have been partially offset by savings across other cost
centres.
Segment Operating Profit
We have, for the first time, included an analysis of segment profitability
(see note 3) which identifies adjusted operating profit by business route to
market before central costs. Our Packaged business has performed well,
delivering an additional £1.5m of profit despite substantial inflation within
our supply chain which has led to a slight fall in segment operating margin to
27.9% (H1 2022: 28.1%). OoH has also performed in line with our strategic
expectations during a period of considerable change for the business,
operating margins were lower at 6.4% (H1 2022: 7.5%). Central costs have
increased by £1.0m on the prior year principally as a result of
cost-of-living increases to wages and salaries.
Exceptional Costs
The Group incurred £1.1m of exceptional costs during the period (H1 2022:
£1.2m).
Out of Home Strategic Review
In 2022 the Group completed a strategic review into its OoH route to market,
assessing customer and product mix as well as reviewing ways to enhance net
margin and profitability going forward. The Group incurred £0.6m of costs
in the period as these recommendations have begun to be implemented.
Additional costs will be incurred through the second half of 2023.
Historic incentive scheme
During 2022 the Group settled with HMRC the £4.3m tax and interest charges
relating to a historic incentive scheme and has commenced recovery of debts
from current and previous employees who had indemnified the Company. The Group
incurred legal costs in the period of £0.1m in relation to the case.
Group Systems Review
The Group has commenced a project to implement a new enterprise resource
planning (ERP) system, focused on driving business transformation and is
expected to be operational at the end of 2024. Costs of £0.5m were incurred
in the period.
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.
Finance Costs
Net finance income of £0.8m (H1 2022: £0.1m) was significantly up on the
prior year, as the Group ensured the best return for its deposits following
the Bank of England interest rate rises.
Profit before tax and tax rate
Adjusted profit before tax, pre-exceptional items, increased by 9.1% to
£12.3m (H1 2022: £11.3m). The tax charge on adjusted profit before tax for
the period of £2.9m (H1 2022: £2.2m) represents an effective tax rate of
23.8% (H1 2022: 19.5%). The increase in the effective rate is consistent with
published rates. Reported profit before tax was £11.2m, an increase of 10.5%
compared to the prior year (H1 2022: £10.1m).
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 £56.1m
(H1 2022: £49.2m, 31 December 2022: £56.3m).
The Group has seen its working capital marginally increase since the start of
the year (+£3.2m), principally driven by debtors and strong Q2 sales. Capital
expenditure in the period was £0.1m (H1 2022: £0.9m) and was historically
weighted towards our OoH business where a re-focus on capital allocation and
spend has been actioned following the strategic review.
The Group's current Return on Capital Employed is 25.9% (H1 2022: 25.2%).
Earnings per share
Total adjusted basic EPS increased to 25.70 pence (H1 2022: 24.80p) with basic
EPS at 23.31 pence (H1 2022: 22.22p). On an adjusted basis, diluted EPS was
25.68 pence (H1 2022: 24.77p).
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 2023
will be 12.6p per share, to be paid on 8 September 2023 with a record date of
4 August 2023 and an ex-dividend date of 3 August 2023.
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 2023, the Group
recognised a surplus on its UK defined benefit scheme of £4.3m (31 December
2022: surplus £4.1m).
Outlook
The Board is pleased with the Group's trading performance and strategic
progress in the first half of 2023. The progress in the UK and International
Packaged businesses during the first half will support the long-term
performance of the business.
We are mindful that consumer spend is still under pressure from continuing
high levels of inflation. However, the Group's track record, strong brands and
diversified business model, alongside the resilience of the wider soft drinks
market, support the Board's confidence in the Group's long-term growth
prospects, and that the Group's Adjusted PBT(1) for FY 2023 will be in line
with expectations(2).
Andrew Milne
Chief Executive Officer
David Taylor
Interim Chief Financial Officer
26 July 2023
1 Excluding exceptional items
2 FY23 expectations refers to a Group compiled market consensus of adjusted
PBT £25.2m
CONSOLIDATED INCOME STATEMENT
Unaudited Half year to 30 June Unaudited Audited
2023 Half year to Year ended
£'000 30 June 31 December 2022
2022 £'000
£'000
Continuing operations
Revenue 85,546 80,232 164,926
Cost of sales (50,356) (45,880) (93,905)
Gross profit 35,190 34,352 71,021
Distribution expenses (5,009) (4,651) (10,677)
Administrative expenses (19,846) (19,667) (46,888)
Operating profit 10,335 10,034 13,456
Finance income 866 126 514
Finance expenses (48) (63) (134)
Profit before taxation 11,153 10,097 13,836
Taxation (2,649) (1,969) (2,201)
Profit for the period 8,504 8,128 11,635
Earnings per share (basic) 23.31p 22.22p 31.86p
Earnings per share (diluted) 23.29p 22.19p 31.82p
Adjusted for exceptional items
Operating profit 10,335 10,034 13,456
Exceptional items 1,144 1,173 11,146
Adjusted operating profit 11,479 11,207 24,602
Profit before taxation 11,153 10,097 13,836
Exceptional items 1,144 1,173 11,146
Adjusted profit before taxation 12,297 11,270 24,982
Adjusted earnings per share (basic) 25.70p 24.80p 55.38p
Adjusted earnings per share (diluted) 25.68p 24.77p 55.32p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Half year to 30 June Unaudited Audited
2023 Half year to Year ended 31 December
£'000 30 June 2022
2022 £'000
£'000
Profit for the financial period 8,504 8,128 11,635
Items that will not be classified subsequently to profit or loss:
Re-measurement of net defined benefit liability 69 910 (2,071)
Deferred taxation on pension obligations and employee benefits (17) (228) 459
Other comprehensive income/(expense) for the period 52 682 (1,612)
Total comprehensive income for the period 8,556 8,810 10,023
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 June 30 June 31 December
2023 2022 2022
ASSETS £'000 £'000 £'000
Non-current assets
Property, plant and equipment 10,247 16,073 10,958
Intangibles 297 5,226 88
Pension surplus 4,257 6,621 4,125
Total non-current assets 14,801 27,920 15,171
Current assets
Inventories 10,595 14,751 10,432
Trade and other receivables 42,001 38,548 39,561
Corporation tax receivable 986 1,017 695
Cash and cash equivalents 56,128 49,167 56,296
Total current assets 109,710 103,483 106,984
Total assets 124,511 131,403 122,155
LIABILITIES
Current liabilities
Trade and other payables 29,533 30,193 30,711
Provisions - 4,242 -
Total current liabilities 29,533 34,435 30,711
Non-current liabilities 2,378 1,953
Other payables 2,038
Deferred tax liabilities 687 3,307 670
Total non-current liabilities 3,065 5,260 2,708
Total liabilities 32,598 39,695 33,419
Net assets 91,913 91,708 88,736
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 1,481 943 1,280
Retained earnings 82,271 82,604 79,295
Total equity 91,913 91,708 88,736
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000 £'000 £'000 £'000
Cash flows from operating activities
Profit for the financial period 8,504 8,128 11,635
Adjustments for:
Depreciation and amortisation 1,193 2,318 4,521
Impairment losses on intangible and fixed assets - -
8,714
Loss on sale of property, plant and equipment 74 61 186
Finance income (866) (126) (514)
Finance expense 48 63 134
Tax expense recognised in the income statement 2,649 1,969 2,201
Increase in inventories (163) (5,045) (726)
Increase in trade and other receivables (2,096) (2,939) (4,100)
(Decrease)/increase in trade and other payables (928) 2,110
2,963
Decrease in provisions - - (4,242)
Change in pension obligations (63) (435) (920)
Fair value (gain)/loss on derivative financial instruments (344) 515 662
(496) (1,509) 8,879
Cash generated from operating activities 8,008 6,619 20,514
(2,939) (2,319) (4,178)
Tax paid
5,069 4,300 16,336
Net cash generated from operating activities
Cash flows from investing activities
Finance income 866 126 514
Acquisition of property, plant and equipment (138) (913) (1,245)
Payment of contingent consideration (note 8) - (71) (71)
Net cash from/(used in) investing activities 728 (858) (802)
Cash flows from financing activities (385) (554) (995)
Payment of lease liabilities
Purchase of own shares - (5,534) (5,534)
Dividends paid (5,580) (4,861) (9,383)
Net cash used in financing activities (5,965) (10,949) (15,912)
Net decrease in cash and cash equivalents (168) (7,507) (378)
Cash and cash equivalents at start of period 56,296 56,674 56,674
Cash and cash equivalents at end of period 56,128 49,167 56,296
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 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
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 2023 3,697 3,255 1,209 1,280 79,295 88,736
Dividends - - - - (5,580) (5,580)
Movement in ESOT - - - (2) - (2)
Credit to equity for equity-settled share-based payments - - - 203 - 203
Transactions with owners - - - 201 (5,580) (5,379)
Profit for the period - - - - 8,504 8,504
Other comprehensive income - - - - 52 52
Total comprehensive income - - - - 8,556 8,556
At 30 June 2023 3,697 3,255 1,209 1,481 82,271 91,913
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 2022,
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 2023 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 26 July 2023.
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. The review performed considers severe but plausible
downside scenarios that could reasonably arise within the period.
Our modelling has sensitised the impacts of Russia's continued invasion of
Ukraine, in particular their impact on global supply chains and macroeconomic
inflationary factors. 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 2023 the Group
had cash and cash equivalents of £56.1m 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, as the entity's chief operating decision maker, analyses the
Group's internal reports to enable an assessment of performance and allocation
of resources. The operating segments are based on these reports.
During the year, the Group changed its reportable segments to ensure the
appropriate strategic focus across the business given the differing strategic
challenges between its Packaged and Out of Home routes to market. The Group is
now segmented into the operating segments Packaged, Out of Home and Central.
This replaces the operating segments, Stills and Carbonates used in previous
reporting periods.
The new segmental reporting allows the Group to deliver on its strategic
ambitions of accelerated growth across the Packaged business, both in the UK
and Internationally, and maximise value within the Out of Home business,
whilst providing oversight to manage central overheads from a total Group
perspective.
This is the first time results have been presented in these segments within
the Group's Interim financial statements and thus the results reported for the
previous half year to 30 June 2022 and financial year to 31 December 2022 have
also been re-presented for comparison purposes.
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Segment performance is evaluated based on adjusted
operating profit (excluding exceptional items), finance income and exceptional
items. This is the measure reported to the Board for the purpose of resource
allocation and assessment of segment performance.
Half year to Packaged
30 June 2023 UK Middle East Africa Rest of World Total Packaged Out of Home Total Segments Central(1) Total Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 43,097 4,905 13,081 3,466 64,549 20,997 85,546 - 85,546
Adjusted operating profit 17,988 1,352 19,340 (7,861) 11,479
Net finance income 818
Adjusted profit before tax 12,297
Exceptional items (1,144)
Profit before tax 11,153
Half year to Packaged
30 June 2022 UK Middle East Africa Rest of World Total Packaged Out of Home Total Segments Central(1) Total Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 41,258 4,176 10,372 2,670 58,476 21,756 80,232 - 80,232
Adjusted operating profit 16,453 1,621 18,074 (6,867) 11,207
Net finance income 63
Adjusted profit before tax 11,270
Exceptional items (1,173)
Profit before tax 10,097
Year ended Packaged
31 December 2022 UK Middle East Africa Rest of World Total Packaged Out of Home Total Segments Central(1) Total Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 82,813 11,752 18,870 6,420 119,855 45,071 164,926 - 164,926
Adjusted operating profit 34,338 3,537 37,875 (13,273) 24,602
Net finance income 380
Adjusted profit before tax 24,982
Exceptional items (11,146)
Profit before tax 13,836
(1) Central includes the Group's central and corporate costs, which relate to
salaries and head office overheads such as rent and rates, insurance and IT
maintenance as well as the costs associated with the Board and Executive
Leadership Team, Governance and Listed Company costs.
A geographical split of revenue is provided below:
Half year to Half year to Year ended
30 June 30 June 31 December
2023 2022 2022
£'000 £'000 £'000
Geographical split of revenue
Middle East 4,905 4,176 11,752
Africa 13,081 10,372 18,870
Rest of the World 3,301 3,059 7,350
Total exports 21,287 17,607 37,972
United Kingdom 64,259 62,625 126,954
Total revenue 85,546 80,232 164,926
4. Exceptional items
Half year to Half year to Year ended
30 June 2023 30 June 31 December
2022 2022
£'000 £'000 £'000
Out of Home Strategic Review 569 48 518
Historic incentive scheme 56 54 134
Group Systems Review 519 - 316
Review of UK packaged supply chain - 1,071 1,464
Impairment of intangibles and fixed assets - - 8,714
1,144 1,173 11,146
The Group incurred £1.1m of exceptional costs during the period (H1 2022:
£1.2m).
Out of Home Strategic Review
In 2022 the Group completed a strategic review into its OoH route to market,
assessing customer and product mix as well as reviewing ways to enhance net
margin and profitability going forward. The Group incurred £0.6m of costs
in the period as these recommendations have begun to be implemented.
Additional costs will be incurred through the second half of 2023.
Historic incentive scheme
During 2022 the Group settled with HMRC the £4.3m tax and interest charges
relating to a historic incentive scheme and has commenced recovery of debts
from current and previous employees who had indemnified the Company. The Group
incurred legal costs in the period of £0.1m in relation to the case.
Group Systems Review
The Group has commenced a project to implement a new enterprise resource
planning (ERP) system, focussed on driving business transformation and is
expected to be operational at the end of 2024. Costs of £0.5m were incurred
in the period.
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. The weighted average number of ordinary shares is
calculated by adjusting the shares in issue at the beginning of the period by
the number of shares bought back or issued during the period multiplied by a
time-weighting factor. 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 2023
Basic earnings per share 8,504 36,478,934 23.31p
Dilutive effect of share options 38,891
Diluted earnings per share 8,504 36,517,825 23.29p
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 2023
Basic earnings per share 8,504 36,478,934 23.31p
Exceptional items after taxation 872
Adjusted basic earnings per share 9,376 36,478,934 25.70p
Diluted effect of share options 38,891
Adjusted diluted earnings per share 9,376 36,517,825 25.68p
6. Non-current Assets
Property, Plant & Equipment
Intangibles
£'000 £'000
Cost
At 1 January 2023 35,311 9,760
Additions 765 -
Transfers (238) 238
Disposals (1,626) -
At 30 June 2023 34,212 9,998
Depreciation and Amortisation
At 1 January 2023 24,353 9,672
Charge for the period 1,164 29
On disposals (1,552) -
At 30 June 2023 23,965 9,701
Net book value
At 1 January 2023 10,958 88
At 30 June 2023 10,247 297
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 2023 by an independent qualified actuary.
A summary of the pension surplus position is provided below:
Pension surplus £'000
At 1 January 2023 4,125
Current service cost (44)
Net interest income 96
Actuarial gains 69
Contributions by employer 11
At 30 June 2023 4,257
8. Contingent Consideration
Within the Statement of Cash Flows there is a £0.1m cash outflow in the prior
period in relation to the payment of contingent consideration. This payment
relates to the final stage of contingent consideration paid for an acquisition
made in previous financial years.
9. Provisions
During the second half of FY22, the Group settled with HMRC the tax and
interest charges regarding the historic incentive scheme provided at 30 June
2022 (£4.2m). Recovery of debts from current and previous management who had
indemnified the Company has commenced during FY23. Included within other
receivables is a reimbursement asset in respect of these historic contracts.
10. Dividends
Dividend cover is broadly 2x adjusted earnings of the Group. As a result, the
interim dividend for 2023 will be 12.6p per share to be paid on 8 September
2023 with a record date of 4 August 2023.
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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