I N C H O L S P L C | I A N N U A L R E P O R T & F N A N C A L S T A T E M E N T S 2 0 1 1 I ANNUAL REPORT & FINANCIAL STATEMENTS 2011 Laurel House | Woodlands Park | Ashton Road | Newton-Le-Willows | Merseyside | WA12 0HH 01925 22 22 22 | www.nicholsplc.co.uk FINANCIAL CALENDAR PRELIMINARY RESULTS ANNOUNCED 8TH MARCH 2012 ANNUAL GENERAL MEETING 2ND MAY 2012 INTERIM RESULTS ANNOUNCED 26TH JULY 2012 I N C H O L S P L C | I A N N U A L R E P O R T & F N A N C A L S T A T E M E N T S 2 0 1 1 I NICHOLS PLC IS A HIGHLY FOCUSED SOFT DRINKS BUSINESS. ITS BRAND PORTFOLIO INCLUDES VIMTO, WHICH IS SOLD IN OVER 65 COUNTRIES AND LEVI Roots, weight watchers, SUNKIST & PANDA WHICH ARE SOLD IN THE UK. THE GROUP HAS A LEADING MARKET POSITION IN BOTH THE Still and carbonate DRINKS CATEGORIES AND ALSO IN THE SOFT DRINKS ON DISPENSE MARKET, WHERE ITS BRANDS INCLUDE CABANA & BEN SHAWS. CONTENTS CHAIRMAN’S STATEMENT 04 CHIEF EXECUTIVE’S REVIEW 06 FINANCIAL REVIEW 10 DIRECTORS & ADVISORS 13 DIRECTORS’ REPORT 14 AUDITOR’S REPORT 18 FINANCIAL STATEMENTS 19 NOTICE OF MEETING 48 FINANCIAL CALENDAR 51 3 CHAIRMAN’S STATEMENT “WE ARE PLEASED TO REPORT THAT ALL OUR BUSINESSES DELIVERED EXCELLENT GROWTH IN THE YEAR” We delivered another outstanding performance in 2011 with signifi cant growth in sales, profi tability and cash generation. Group sales increased by 18% to £98.9m driven by our strong portfolio of brands and our signifi cant international presence. This has been achieved despite the most challenging UK retail environment seen in a decade. The year also saw high levels of cost infl ation in the UK soft drinks industry affecting all our key raw materials. Whilst this had a negative impact on our UK gross margins, the effect on Group operating margin has been mitigated by a combination of ongoing productivity improvements in the UK and the strength of our international business. As a result, the Group’s operating profi t increased by 20% to £18.1m, maintaining the return on sales at 18%. JOHN NICHOLS NON-EXECUTIVE CHAIRMAN 4 RESULTS Group Revenue Operating Profit Operating Profit R.O.S. Profit Before Tax Net Cash Year ended 31 Dec 2011 £m Year ended 31 Dec 2010 £m % movement 98.9 18.1 18% 18.1 20.1 83.9 15.1 18% 15.1 15.0 EPS (basic) (pence) 36.3p 30.2p TRADING We are pleased to report that all our businesses delivered excellent growth in the year. The UK soft drinks market, like the general grocery market, suffered relatively low volume growth in 2011 as a consequence of the ongoing economic downturn affecting consumer spending. However, our UK soft drinks sales outperformed the market, increasing by 15%, more than twice the growth rate of the UK market at 7% (AC Nielsen 52 weeks data to 24 December 2011). Whilst Vimto remains our key brand, we are also continuing the strategy of broadening our portfolio and in April 2011 launched the Levi Roots range of Caribbean drinks, which added an incremental £2.5m sales in its first 9 months of trading. With the economic downturn continuing to affect the UK consumer, the importance and strength of our significant international business is evident. In 2011 our total international sales grew by 31% against the prior year. Sales to the Middle East were 24% higher on the back of strong in- country sales of the Vimto brand and our African sales were up a further 28% against tough comparatives (2010: 56% growth). The acquisition of the remaining 50% of Dayla Liquid Packing Ltd boosted our soft drinks on dispense sales which were 20% up on the prior year. This is a strong performance in a very challenging market. DIVIDEND Based on the 2011 performance and the Board’s confidence in the ongoing strength of the Group, we are pleased to recommend a final dividend of 10.30 pence per share. This takes the total 2011 dividend to 15.30 pence (2010: 13.55 pence), an increase of 13%. If approved, the final dividend will be paid on 4 May 2012 to shareholders registered on 30 March 2012, the ex-dividend date is 28 March 2012. OUTLOOK In summary, the UK trading environment in 2011 turned out to be +18% +20% +20% +34% +20% every bit as challenging as anticipated with consumer spending down and input costs up. However our strong brands, healthy balance sheet and thriving international business have enabled the Group to perform very strongly and deliver significant sales and profit growth. We would agree with the general consensus that 2012 will be just as challenging; the UK soft drinks market will see continued high level of promotions, further cost inflation and relatively low volume growth. Despite this backdrop, we again expect to outperform the market by continuing to invest in our brands, launching new products such as the recently announced Weight Watchers brand and delivering further growth in our international markets. Therefore we are confident that the Group is well placed to deliver profitable growth in 2012 and beyond. JOHN NICHOLS NON-EXECUTIVE CHAIRMAN 7 MARCH 2012 5 CHIEF EXECUTIVE’S REVIEW BRENDAN HYNES CHIEF EXECUTIVE CHIEF EXECUTIVE 6 THE SOFT DRINKS MARKET During 2011 the overall soft drinks market, excluding the “on trade”, grew by 7.0% in value terms and 2.0% in volume terms (AC Nielsen 52 weeks data to 24 Dec 2011). This represents a modest improvement on the previous year, the main growth categories being sports, energy and carbonated fruit drinks. The Nichols plc brand portfolio continues to be positioned predominantly in the still and carbonate sectors of the soft drinks market. The economic and consumer backdrop continues to be a challenge, particularly in the UK, which combined with signifi cant raw material cost infl ation and high levels of price promotion, meant that the market remained extremely competitive throughout the year. In this uncertain market, our strategy has remained consistent. We have succeeded in growing our share of the market both in the UK and in a number of our international markets. As a result Group sales increased by 18% year on year and 18% SALES GROWTH 20% PROFIT GROWTH 20% EARNINGS PER SHARE GROWTH 13% DIVIDEND GROWTH operating margins were maintained, despite the high level of raw material inflation. Cash conversion was also ahead of expectations and we finished the year with £20.1m of cash in the bank. In March 2011, we acquired the remaining 50% equity stake in Dayla Liquid Packing Ltd (Dayla), giving us full access to the premium juice category. Dayla has now been fully integrated into the still and carbonate segments of the Group. GROUP FINANCIAL PERFORMANCE 2011 saw another strong financial performance from the Group, which was again ahead of both internal and external expectations. This was achieved despite strong growth comparatives from the previous year, a difficult economic and consumer backdrop in the UK and significant raw material inflation. In summary, in 2011 we delivered: • 18% sales growth • 20% profit growth • 20% earnings per share growth • 13% dividend growth We have also had another record year for investment behind our core brands both in the UK and overseas. This has helped drive a further increase in our market share in the year across both the still and carbonate categories. TRADING HIGHLIGHTS The Group is now an international business, with an enviable stable of brands, selling to over 65 countries worldwide. We have leading market positions in both the still and carbonate drinks categories, and growth is being driven by a healthy mix of organic growth and new product development. In April 2011, we launched an innovative new range of Caribbean drinks under the Levi Roots (Levi) brand. The World Cuisine category is one of the fastest growing sectors of the soft drinks market and reflects the changing tastes of the modern consumer and the increasing growth in World Cuisine options. We are really pleased with how the Levi brand has been received in its first year by both the trade and the consumer and plan more unique flavours in 2012. Total UK sales increased by 14% to £77.8m (2010: £68.0m). This was achieved through a combination of increased market share for both Vimto and Sunkist in the UK, new product extensions such as the Vimto sports cap, as well as the launch of Levi Roots. We invested record levels in marketing in 2011, and again increased penetration bringing almost half a million new consumers into the Vimto brand. Following the full acquisition of Dayla in early 2011 we have now fully integrated this business into the Group. Dayla, which supplies premium juice to the UK and European hotels and restaurant market, has now been combined with our existing soft drinks on dispense products, to create a broader range and a stronger focus on the “out of home” market sector. 7 CHIEF EXECUTIVE’S REVIEW (CONTINUED) Internationally, 2011 was another very successful year with sales increasing by 31% to £21.1m. This has been driven by Vimto further increasing its market share particularly in the core markets of the Middle East, Africa and Northern Europe. In the Middle East sales grew by 24% year on year with growth across both still and carbonate products. In December 2011, our long standing partner in the Middle East, Aujan Industries, announced a joint venture with Coca Cola to distribute its brands, including Vimto within the region. The global strength of Coca Cola combined with the local market knowledge of Aujan Industries provides a strong platform for the continued success and the future growth and development of the Vimto brand in this region. We sell to 28 countries in Africa and in 2011 increased sales by 28% in this region, despite very strong sales comparatives from the previous year. During the year we also signed two new important distribution agreements in Africa, which bodes well for the long term growth prospects of this market. In summary, we have achieved further growth from our existing core markets, both in the UK and overseas, which combined with new product developments and innovative new brand launches, enabled the Group to once again deliver strong top and bottom line growth in 2011. 8 Our high standards in health and safety continued in 2011 and we are an active member of Valpak, ensuring our compliance with waste regulations, and minimising the direct impact our business activities have on the external environment. COMMUNITY Our commitment to the wider community continued in 2011 as we actively look for opportunities to give something back in return for the support we receive. In 2011 our charity team once again worked hard at raising funds on behalf of our chosen charity Derian House. CORPORATE RESPONSIBILITY Nichols plc prides itself on having a sustainable business strategy which takes into account our wider corporate, environmental and social responsibilities. SUSTAINABILITY AND THE ENVIRONMENT We continue to make good progress on each of the four key areas targeted. These are: • Climate change • Waste and packaging • Water • Transport We continue to work actively with the British Soft Drinks Association (BSDA), the Food and Drink Federation (FDF), the Waste & Resources Action Programme (WRAP) and our key suppliers on environmental improvements. We are also signatories to the Courtauld Commitment. Events included a 10k run, a fund raising golf day and a variety of other activities involving our customers, suppliers and advisors. EMPLOYEES Our core values emphasise the importance of customer service, quality, professionalism, teamwork and mutual support. We have a strong emphasis on learning and development and we see our people as a top priority for the business and critical to our continuing success. We aim to continue to deliver high results in everything we do and this has once again been recognised externally with Nichols plc winning the North West Institute of Directors Board of the Year and being shortlisted for the AIM Company of the Year in 2011. BRENDAN HYNES GROUP CHIEF EXECUTIVE 7 MARCH 2012 9 FINANCIAL REVIEW “One of the Group’s strengths is its signifi cant and mature international business” TIM CROSTON INCOME STATEMENT GROUP FINANCE DIRECTOR 10 ��������������������������������������������������� Group revenues totalled £98.9m in 2011, adding a further £15m (18%) on to the prior year. This growth is on the back of tough comparatives and continues the impressive trend that has seen Group revenues increase by 89% in the five years since 2006. 2011 £m 2010 £m Growth £m Still 50.6 41.4 Carbonate 48.3 42.5 9.2 5.8 Total 98.9 83.9 15.0 22% 14% 18% Analysis of revenues shows growth across both segments: still 22% and carbonate 14%. The still figures are boosted by the acquisition of the remaining 50% of the shares of Dayla Liquid Packing Ltd (March 2011). Like for like still sales show consistent growth with carbonate at 14%. Sales for our UK soft drinks business totalled £57.2m, an increase of 15%, more than double the UK soft drinks market growth of 7% (AC Nielsen 52 weeks data to 24 Dec 2011). The growth was driven by the performance of the Vimto brand and the incremental sales from our new product launch: the Levi Roots range of Caribbean drinks added a further £2.5m sales from launch. One of the Group’s strengths is its significant and mature international business. In 2011, with the UK retail environment under pressure from reduced consumer spend, the Group’s international sales have gone from strength to strength with our Middle East sales up 24% and enhanced distribution driving an impressive 28% increase in our Africa sales. In March 2011 we acquired the remaining 50% share equity of Dayla Liquid Packing Ltd (Dayla), strengthening our position in the growing premium juice market. The additional share of Dayla boosted our Dispense sales to £22.4m, an increase of 20% on the prior year, like for like sales were 5% up, a very creditable performance in a challenging market. PROFIT Group Operating Profit was £18.1m, 20% up on the prior year. As expected, the UK trading conditions were very challenging with margins under pressure from increased promotional activity and the impact of high input cost inflation. We mitigated the impact by a combination of supply chain efficiencies, overhead management and significant growth of our international business. Therefore we are pleased to report that our Group operating margins were maintained at 18%. The tax charge was £4.8m, an effective rate of 26% (2010: 27%). ���������������������������� ������������������ ����� ����� ����� ����� ���� ���� ���� ���� ���� ���� ���� ���������������������������� STATEMENT OF FINANCIAL POSITION The Group’s Statement of Financial Position (formerly the Balance Sheet) remains strong, debt free and has net cash at the year-end of £20.1m (2010: £15.0m), an increase of £5.1m. By exception, the key points of interest with regard to the Statement of Financial Position are: • Goodwill has increased by £1.7m due to the acquisition of the remaining 50% of the share equity of Dayla. • Inventories have increased by £2.4m, due to the incremental Dayla stocks and the pre-launch stock build for our Weight Watchers range launched in January 2012. • Trade and other receivables are up £4.8m as a result of the Dayla acquisition and growth in our existing businesses. EARNINGS PER SHARE • The Pensions liability has Earnings Per Share (EPS) increased 20% to 36.28 pence. The Group has now delivered a 135% increase in its EPS in the five years since 2006. increased by £2.2m to £6.3m as a result of an increase in the fund’s obligations per the year end actuarial valuation. 11 FINANCIAL REVIEW (CONTINUED) SHARE PRICE The closing share price for 2011 was 525 pence, an increase of 113% over the five years since 2006. The following graph charts the Group’s share price performance compared to the All AIM index. For ease of comparison both sets of data are shown as an index using 2006 as the base. ��������������������� ������������������� ��� � ��� � ��� � ���� ���� ���� ���� ���� ���� ����������� ������������� GOING CONCERN After making enquiries, the directors have formed a judgement, at the time of approving the financial statements, that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason the directors continue to adopt the going concern basis in preparing the financial statements. TIM CROSTON GROUP FINANCE DIRECTOR 7 MARCH 2012 INTERNAL CONTROL The Nichols Group complies with the principles of good corporate governance and has an established process of control and risk management. The Board is ultimately responsible for maintaining sound internal control systems to safeguard the investment of shareholders and the Company’s assets. The systems are reviewed by the Board and are designed to provide reasonable, but not absolute, assurance against material mis-statement or loss. AUDIT COMMITTEE The Audit Committee consists of E Healey, J Nichols and J Longworth. The terms of reference of the Committee include keeping under review the scope and results of the external audit. The Committee ensures the independence and objectivity of the external auditors, including the nature and extent of non-audit services supplied. Any further services with a value over £25,000 would require Nichols plc Board approval. RISKS AND UNCERTAINTIES The UK soft drinks business continues to be largely dependent on third party suppliers for all products. To manage this risk we have appropriate and adequate audit procedures and resource at our disposal to ensure that the division sells product of the highest quality. Following the acquisition of the remaining 50% of the shares of Dayla Liquid Packing Ltd (March 2011), the Dispense business has direct influence over product supply. A large proportion of our international business is with the Middle East and Africa. Any political instability in these key regions could lead to volatility in our trading patterns. Issues in the Middle East at the time of writing are not affecting our core international markets. In common with many businesses we are now also highly dependent on the availability of IT systems to carry out many trading activities. We have robust business continuity plans and stress test procedures in place to minimise all risks and exposures that the Group faces. SHAREHOLDERS DIVIDEND The Board is recommending a final dividend of 10.3 pence per ordinary share (2010: 9.1 pence) payable to shareholders on the register at 30 March 2012. The final dividend together with the interim dividend of 5.0 pence, gives a total dividend of 15.3 pence per share for the year which represents a 13% increase on the prior year (2010: 13.55 pence). �������������� ������������������ �� � ���� ���� ���� ���� ���� ���� 12 DIRECTORS & ADVISORS JOHN NICHOLS BRENDAN HYNES TIM CROSTON ERIC HEALEY JOHN LONGWORTH NON-EXECUTIVE CHAIRMAN CHIEF EXECUTIVE GROUP FINANCE DIRECTOR & COMPANY SECRETARY NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR AUDITORS Grant Thornton UK LLP, 4 Hardman Square, Spinningfields, Manchester, M3 3EB BANKERS The Royal Bank of Scotland plc, 1 Spinningfields Square, Manchester, M3 3AP SOLICITORS DLA Piper, 101 Barbirolli Square, Manchester, M2 3DL STOCKBROKERS & NOMINATED ADVISOR N+1 Brewin LLP, 7 Drumsheugh Gardens, Edinburgh, EH3 7QH FINANCIAL ADVISORS N M Rothschild & Sons Limited, 82 King Street, Manchester, M2 4WQ REGISTRARS Capita Registrars Limited, Northern House, Woodsome Park, Fenay Bridge, Huddersfield, HD8 0GA REGISTERED OFFICE Laurel House, Woodlands Park, Ashton Road, Newton-le-Willows, WA12 0HH REGISTERED NUMBER 238303 13 NICHOLS PLC DIRECTORS’ REPORT The directors present their report and the audited financial statements for the year ended 31 December 2011. PrinciPal activities and business review The Company and its principal operating subsidiaries are engaged in the supply of soft drinks to the retail, wholesale, catering, licensed and leisure industries. A review of the Group’s trading during the year and its prospects are contained in the Chairman’s Statement on pages 4 and 5, the Chief Executive’s Review on pages 6 to 9 and the Financial Review on pages 10 to 12. reconciliation of profit for the financial year to retained earnings movement 2011 2010 Profit for the financial year £’000 £’000 £’000 13,326 £’000 10,824 Interim dividend 5.00p (2010: 4.45p) per share paid 9 September 2011 Final dividend 9.10p (2009: 8.10p) per share paid 6 May 2011 Transfer of own shares Other comprehensive (expense)/ income and movement on ESOT (1,842) (3,353) 0 (2,088) (1,638) (2,963) (353) 120 Retained earnings movement non-executive directors (7,283) 6,043 (4,834) 5,990 J longworth (53) Mr Longworth is currently a Non-Executive Director of the Cooperative Group and is also a Competition Commission panel member. He is Chairman of a business he founded in 2010, SVA Limited. Previous roles have included being a Main Board Director of Asda and a Director of Tesco Stores. He was appointed to the Board of Nichols plc in November 2010. e healey (63) Mr Healey, a Chartered Accountant, is a member of the Audit Committee of the University of Salford and an adviser to a number of enterprises. He is a former senior partner of an international accounting firm. He was appointed to the Board in January 2011. P J nichols (62) Mr Nichols has been a director of the Company since 1976. He was appointed Managing Director in 1986 and Chairman in 1999. In November 2007, Mr Nichols moved to Non-Executive Chairman. All of the above are members of the audit and remuneration committees of the Board. 14 executive directors b M hynes (51) Mr Hynes joined the Company as Group Finance Director in 2002 and was appointed Chief Executive Officer in November 2007. He has previously been Group Finance Director at William Baird plc and KPS plc. t J croston (48) Mr Croston initially joined the Company as Group Financial Controller in 2005 and moved to Finance and Operations Director for the Soft Drinks Division in 2007. He was appointed Group Finance Director on 1 January 2010. Financial risk ManageMent obJectives and Policies Business risks and uncertainties are included within the Financial Review on page 12 and financial risks are set out in note 22 to the financial statements. creditor PayMent Policy The Group’s policy is to agree terms of payment at the start of business with all suppliers, to abide by these terms and to pay in accordance with its contractual and other legal obligations. At 31 December 2011 there were 41 (2010: 39) creditor days outstanding. eMPloyees The Group’s policy is to recruit and promote on the basis of aptitude and ability without discrimination of any kind. Applications for employment by disabled people are always fully considered bearing in mind the qualification and abilities of the applicants. In the event of employees becoming disabled every effort is made to ensure their continued employment. The management of the individual operating companies consult with employees and keep them informed on matters of current interest and concern to the business. charitable and Political donations Charitable donations during the year amounted to £13,000 (2010: £28,000). There were no political donations in either 2011 or 2010. share oPtions The Company operates a Save As You Earn share option scheme. In conjunction with this it makes donations to an Employee Share Ownership Trust to enable shares to be bought in the market to satisfy the demand from option holders. share caPital The resolutions concerning the ability of the Board to purchase the Company’s own shares and to allot shares are again being proposed at the Annual General Meeting. In exercising its authority in respect of the purchase and cancellation of the Company’s shares the Board takes as its major criterion the effect of such purchases on future expected earnings per share. No purchase is made if the effect is likely to be deterioration in future expected earnings per share growth. During the year the Company did not purchase any of its own shares. The board believes that being permitted to allot shares within the limits set out in the resolution without the delay and expense of a general meeting gives the ability to take advantage of circumstances that may arise during the year. auditors In accordance with Section 489 of the Companies Act 2006 a resolution will be proposed at the Annual General Meeting that Grant Thornton UK LLP be re-appointed auditors. 15 DIRECTORS’ REPORT (CONTINUED) directors’ resPonsibilities stateMent The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law Section 393, Companies Act 2006, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as each of the directors is aware: • there is no relevant audit information of which the Company’s auditor is unaware; and • the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. directors’ indeMnity The Group has agreed to indemnify its directors against third party claims which may be brought against them and has in place an officers’ insurance policy. directors’ reMuneration Salary and fees £’000 75 227 116 22 22 0 0 462 Benefits in kind £’000 42 1 10 0 0 0 0 53 Bonuses £’000 0 60 31 0 0 0 0 91 Growth Securites Ownership Plan £’000 0 45 25 0 0 0 0 70 Pension contributions £’000 0 25 8 0 0 0 0 33 Total 2011 £’000 117 358 190 22 22 0 0 709 Total 2010 £’000 112 333 157 2 0 22 20 646 P J Nichols B M Hynes T J Croston J Longworth E Healey J D Bee J B Diggines Total 16 Bonuses which are not guaranteed are payable to the executive directors and certain senior executives based on achievement of pre-determined performance targets. For 2011 the annual cash bonus arrangement calculated by reference to earnings growth based on continuing operations but before exceptional items was reviewed. The Remuneration Committee considered it appropriate to issue awards under an incentive plan (the Growth Securities Ownership Plan (GSOP)) related to growth in operating profit from continuing operations before exceptional items, tax and finance costs as this would reduce the potential overall cost of the incentive. Growth in 2011 earnings from continuing operations but before exceptional items of 27% was required in order to achieve the maximum bonus. Under the GSOP measurement a target growth in operating profit from continuing operations before exceptional items, tax and finance costs of 19% was required to achieve any bonus. The actual growth rate achieved was 20%. As a result of this, an apportionment of the maximum bonus will be made to executive directors and certain senior executives. Please refer to page 16 for amounts payable to executive directors. Please refer to Note 20 to the financial statements for details of share options relating to directors. P J Nichols is a member of the final salary pension scheme; B M Hynes and T J Croston have a personal pension plan. The Company contributions to the respective schemes are shown in the above table. By order of the Board t J croston Secretary Laurel House Ashton Road Newton le Willows WA12 0HH 7 March 2012 17 Independent auditor’s report to the members of Nichols plc We have audited the financial statements of Nichols plc for the year ended 31 December 2011 which comprise, the consolidated income statement, the consolidated statement of comprehensive income, the Group and parent company statement of financial position, the consolidated statement of cash flows, the parent company statement of cash flows, the Group and parent company statements of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. resPective resPonsibilities oF directors and auditor As explained more fully in the Directors’ Responsibilities Statement set out on page 16, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. scoPe oF the audit oF the Financial stateMents A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/ apb/scope/private.cfm. oPinion on Financial stateMents In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 31 December 2011 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. oPinion on other Matter Prescribed by the coMPanies act 2006 In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to rePort by excePtion We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. kevin engel Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Manchester 7 March 2012 18 FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT YEAR ENDED 31 DECEMbER 2011 Revenue Cost of sales gross profit Distribution expenses Administrative expenses operating profit Finance income Finance expense Profit before taxation Taxation Before exceptional items 2010 £’000 Exceptional items 2010 £’000 total 2011 £’000 Notes 3 98,912 83,899 (52,683) 46,229 (42,153) 41,746 (5,862) 5 (22,218) (5,450) (21,179) 0 0 0 0 (293) Total 2010 £’000 83,899 (42,153) 41,746 (5,450) (21,472) 18,149 15,117 (293) 14,824 6 6 72 (116) 129 (163) 0 0 129 (163) 18,105 15,083 (293) 14,790 8 (4,779) (4,042) 76 (3,966) Profit for the financial year attributable to equity holders of the parent 13,326 11,041 (217) 10,824 Earnings per share (basic) Earnings per share (diluted) Dividends paid per share 10 10 9 36.28p 36.25p 14.10p 29.63p 29.59p 12.55p The accompanying accounting policies and notes form an integral part of these financial statements. All results relate to continuing operations. CONSOLIDATED STATEMENT OF COMPREHENSIvE INCOME YEAR ENDED 31 DECEMbER 2011 Profit for the financial year other comprehensive (expense)/ income Defined benefit plan actuarial (loss)/ gain (see note 27) Deferred taxation on pension obligations and employee benefits (see note 14) other comprehensive (expense)/ income for the year total comprehensive income for the year 20 2011 £’000 13,326 2010 £’000 10,824 (2,926) 842 74 28 (2,084) 102 11,242 10,926 STATEMENT OF FINANCIAL POSITION YEAR ENDED 31 DECEMbER 2011 assets non-current assets Property, plant and equipment Goodwill Investments Deferred tax assets total non-current assets current assets Inventories Trade and other receivables Cash and cash equivalents total current assets total assets liabilities current liabilities Trade and other payables Current tax liabilities Provisions total current liabilities non-current liabilities Pension obligations Deferred tax liabilities total non-current liabilities total liabilities net assets equity Share capital Share premium Capital redemption reserve Other reserves Retained earnings total equity group Parent Notes 2011 £’000 2010 £’000 2011 £’000 2010 £’000 11 12 13 14 15 16 21 17 17 18 27 14 19 1,374 13,658 0 2,579 17,611 5,790 21,118 20,111 47,019 1,288 11,914 0 2,587 15,789 3,418 16,272 14,967 34,657 461 0 16,566 2,512 19,539 4,056 16,510 17,871 38,437 477 0 14,266 2,514 17,257 1,754 11,858 13,182 26,794 64,630 50,446 57,976 44,051 20,073 1,752 139 14,165 1,533 365 21,154 1,138 99 14,099 826 278 21,964 16,063 22,391 15,203 6,313 51 6,364 4,135 72 4,207 6,313 0 6,313 4,135 0 4,135 28,328 20,270 28,704 19,338 36,302 30,176 29,272 24,713 3,697 3,255 1,209 (546) 28,687 36,302 3,697 3,255 1,209 (629) 22,644 30,176 3,697 3,255 1,209 229 20,882 29,272 3,697 3,255 1,209 146 16,406 24,713 The financial statements on pages 19 to 47 were approved by the Board of Directors on 7 March 2012 and were signed on its behalf by: P J nichols Chairman The accompanying accounting policies and notes form an integral part of these financial statements. Registered number 238303 21 CONSOLIDATED STATEMENT OF CASH FLOwS YEAR ENDED 31 DECEMbER 2011 Profit for the financial year cash flows from operating activities Adjustments for: Depreciation Loss on sale of property, plant and equipment Equity-settled share-based payment transactions Finance income Tax expense recognised in the income statement Change in inventories Change in trade and other receivables Change in trade and other payables Change in provisions Change in pension obligations cash generated from operating activities Tax paid net cash generated from operating activities cash flows from investing activities Finance income Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment Acquisition of subsidiary, net of cash acquired Acquisition of subsidiary’s net overdraft Acquisition of business trade and assets net cash used in investing activities cash flows from financing activities Disposal of own shares Dividends paid net cash used in financing activities net increase in cash and cash equivalents Cash and cash equivalents at 1 January cash and cash equivalents at 31 december Notes 2011 £’000 2011 £’000 13,326 2010 £’000 2010 £’000 10,824 6 467 26 0 (72) 4,779 (1,674) (4,069) 4,794 (226) (748) 72 1 (302) (2,300) (24) 0 3,277 16,603 (3,794) 12,809 542 241 (627) (129) 3,966 (724) (886) 2,439 110 (534) 139 5 (503) 0 0 (2,733) 4,398 15,222 (3,777) 11,445 (2,553) (3,092) 83 9 (5,195) 0 (4,601) (5,112) 5,144 14,967 20,111 (4,601) 3,752 11,215 14,967 21 The accompanying accounting policies and notes form an integral part of these financial statements. 22 PARENT COMPANY STATEMENT OF CASH FLOwS YEAR ENDED 31 DECEMbER 2011 Profit for the financial year cash flows from operating activities Adjustments for: Depreciation Equity-settled share-based payment transactions Finance income Tax expense recognised in the income statement Change in inventories Change in trade and other receivables Change in trade and other payables Change in provisions Change in pension obligations cash generated from operating activities Tax paid net cash generated from operating activities cash flows from investing activities Finance income Acquisition of property, plant and equipment Acquisition of subsidiary, net of cash acquired Acquisition of business trade and assets net cash used in investing activities cash flows from financing activities Disposal of own shares Dividends paid net cash used in financing activities net increase in cash and cash equivalents Cash and cash equivalents at 1 January cash and cash equivalents at 31 december Notes 2011 £’000 2011 £’000 11,759 2010 £’000 2010 £’000 9,143 170 0 (72) 4,225 (2,302) (4,652) 7,050 (179) (748) 72 (154) (2,300) 0 3,492 15,251 (3,068) 12,183 165 (627) (125) 3,298 (341) (11) 3,004 166 (534) 135 (362) 0 (2,733) 4,995 14,138 (3,225) 10,913 (2,382) (2,960) 83 9 (5,195) 0 (4,601) (5,112) 4,689 13,182 17,871 (4,601) 3,352 9,830 13,182 21 The accompanying accounting policies and notes form an integral part of these financial statements. 23 STATEMENT OF CHANgES IN EqUITY YEAR ENDED 31 DECEMbER 2011 Called up share capital £’000 Share premium reserve £’000 Capital redemption reserve £’000 3,697 3,255 1,209 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Other reserves £’000 (357) 0 (473) 2 199 (272) 0 0 3,697 3,255 1,209 (629) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 83 83 0 0 3,697 3,255 1,209 (546) Retained earnings £’000 16,654 (4,601) (353) 18 0 (4,936) 10,824 102 22,644 (5,195) (4) (5,199) 13,326 (2,084) 28,687 Total equity £’000 24,458 (4,601) (826) 20 199 (5,208) 10,824 102 30,176 (5,195) 79 (5,116) 13,326 (2,084) 36,302 Called up share capital £’000 Share premium reserve £’000 Capital redemption reserve £’000 3,697 3,255 1,209 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3,697 3,255 1,209 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Other reserves £’000 418 0 (473) 2 199 Retained earnings £’000 12,097 (4,601) (353) 18 0 Total equity £’000 20,676 (4,601) (826) 20 199 (272) (4,936) (5,208) 0 0 146 0 83 83 0 0 9,143 102 16,406 (5,195) (4) (5,199) 11,759 (2,084) 20,882 9,143 102 24,713 (5,195) 79 (5,116) 11,759 (2,084) 29,272 3,697 3,255 1,209 229 group at 1 January 2010 Dividends Transfer of own shares Movement in ESOT IFRS 2 “Share-based payment” charge transactions with owners Profit for the year Other comprehensive income at 1 January 2011 Dividends Movement in ESOT transactions with owners Profit for the year Other comprehensive expense at 31 december 2011 Parent at 1 January 2010 Dividends Purchase of own shares Movement in ESOT IFRS 2 “Share-based payment” charge transactions with owners Profit for the year Other comprehensive income at 1 January 2011 Dividends Movement in ESOT transactions with owners Profit for the year Other comprehensive expense at 31 december 2011 24 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 1. RepoRting entity Nichols plc (the “Company”) is a company domiciled in the United Kingdom. The address of the Company’s registered office is Laurel House, Woodlands Park, Ashton Road, Newton-le-Willows, WA12 0HH. The consolidated financial statements of the Company as at and for the year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is primarily engaged in the supply of soft drinks to the retail, wholesale, catering, licensed and leisure industries. The Company’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive’s Review on pages 6 to 9. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Finance Review on pages 10 to 12. In addition, notes 22 and 24 to the financial statements include the Company’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Company has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 2. Accounting policies basis of preparation The consolidated and parent company financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. The financial statements were approved by the Board of Directors on 7 March 2012. The financial statements have been prepared on the historical cost basis. The accounting policies have been applied consistently by the Group. An income statement is not provided for the parent company as permitted by Section 408 of the Companies Act 2006. The profit dealt with in the financial statements of Nichols plc was £11,759,000 (2010: £9,143,000). Functional and presentation currency These consolidated financial statements are presented in sterling, which is also the functional currency of the parent and subsidiary companies. use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. impairment of goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The “value in use” calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value (see note 12). The carrying amount of goodwill at the balance sheet date was £13.7 million (2010: £11.9 million). share options The assumptions on the expected life of share options, volatility of shares, risk free yield to maturity and expected dividend yield on shares are used in the IFRS fair value calculation of the Group’s share options outstanding at the balance sheet date (see note 20). defined benefit obligations For the Group’s defined benefit plan, the main assumptions used by the actuary are the rate of future salary increases, the rate of increase in pensions in payment, the discount rate and the expected rate of inflation (see note 27). useful lives of property, plant and equipment As described within the property, plant and equipment paragraph below, the Group reviews the estimated useful lives of property, plant and equipment at least annually. Estimates and underlying assumptions are reviewed by management on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 25 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 basis of consolidation The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 December 2011. Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Entities whose economic activities are jointly controlled by the Group and other ventures independent of the Group are accounted for using the proportionate consolidation method. Intra-Group balances and any unrealised gains and losses arising from intra-Group transactions are eliminated in preparing the consolidated financial statements. All Group companies have coterminous year ends. Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with Group accounting policies. Goodwill is stated after separating out identifiable assets. Goodwill represents the excess of acquisition costs over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition. The Group has elected not to apply IFRS 3 “Business combinations” retrospectively to business combinations established prior to 1 January 2006. Accordingly, the classification of the combination (acquisition, reverse acquisition or merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at the date of transition if they would be recognised under IFRS and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax and non-controlling interest are adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions. revenue recognition Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts, volume discounts and excluding VAT. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, the amount of revenue can be measured reliably, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably and there is no continuing management involvement with the goods. Transfer of risks and rewards vary depending on the individual term of the contract of sale. For sales in the UK, transfer occurs when the product is despatched to the customer. However, for some international shipments, transfer occurs either upon loading the goods onto the relevant carrier or when the goods have arrived in the overseas port. The point of transfer for international shipments is dictated by the terms of each sale. segmental reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components and for which discrete financial information is available. An operating segment’s operating results are reviewed regularly by the management committee (as chief operating decision maker) to make decisions about resources to be allocated to the segment and assess its performance. Segment results that are reported to the management committee include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment reporting for the Group is made to the gross profit level for the operating segments but no segment reporting is made for further expenditure or for the assets and liabilities of the Group. The assets and liabilities of the Group are reported as Group totals and no reporting of these balances is recorded at a segment level. As a result all of the Group’s assets and liabilities are unallocated items and no reconciliation of segment assets to the Group’s total assets is prepared. Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies of Group entities at exchange rates at the date of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the consolidated income statement in the period in which they arise. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and options (see below for details of the Group’s accounting policies in respect of such derivative financial instuments). exceptional items Exceptional items are material items which individually, or if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence in order to assist in understanding the Group’s financial performance (see note 5). taxation Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in other comprehensive income. current tax Current tax is the expected tax payable on the taxable income for the year, using rates which are enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. 26 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 deferred tax Deferred tax is recognised using the balance sheet liability method, with no discounting, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, provided they are enacted or substantively enacted at the reporting date. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. goodwill Goodwill arises on the acquisition of subsidiaries, associates and joint ventures. Goodwill representing the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable assets acquired, is capitalised and reviewed annually for impairment. Goodwill is measured at cost less accumulated impairment losses. As part of its transition to IFRS, the Group elected to restate only those business combinations that occurred on or after 1 January 2006. In respect of acquisitions prior to 1 January 2006, the net book value of goodwill at the date of transition is the deemed cost of goodwill to the Group under IFRS. For acquisitions on or after 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative, it is recognised immediately in the Group income statement. Goodwill written off to reserves prior to the date of transition to IFRS remains in reserves. There is no re-instatement of goodwill previously amortised on the transition to IFRS. Goodwill previously written off to reserves is not written back to the income statement on subsequent disposal. other reserves Other reserves incorporate purchase of own shares, movements in the Group’s ESOT and the IFRS 2 “Share-based payment” charge for the year. impairment The carrying values of the Group’s non-current assets are reviewed at each reporting date to determine whether there is any indication of impairment. Goodwill is reviewed for impairment annually. All property, plant and equipment is tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indication of impairment exists then the asset’s recoverable amount is estimated. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash- generating units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating unit level. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using the cost of capital that reflects the current market assessments of the time value of money and the risks specific to the asset. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. Impairment losses are recognised in the income statement. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of replacing part of an item of plant, property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred. Depreciation is calculated on a straight line basis to write down the cost less estimated residual value on property, plant and equipment over their estimated useful lives. The estimated useful lives for the current and comparative periods are as follows: Property, plant and equipment 3-10 years Material residual value estimates and useful economic lives are updated at least annually. inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. 27 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 Financial assets The Group’s financial assets comprise primarily cash, bank deposits and trade receivables that arise from its business operations. For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise deposits with banks and bank and cash balances. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provisions for impairment. A provision for impairment of trade receivables is established when there is evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Financial liabilities The Group’s financial liabilities comprise trade and other payables. Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instruments. Trade payables are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method. derivative financial instruments The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risk, including foreign exchange forward contracts, interest rate swaps and foreign currency options. Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The Group designates certain derivatives as either hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations. leased assets Operating leases and the payments are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. employee benefits defined contribution plan Obligations for contributions to the Group’s defined contribution pension plan are recognised as an expense in the income statement when they are due. defined benefit plan The Group’s net obligation in respect of its defined benefit pension plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value, and any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the net total of any unrecognised past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. Actuarial gains and losses are recognised in other comprehensive income. Interest expenses related to pension obligations are included in “finance costs” in the Group income statement. All other post employment benefits are included in administrative expenses in the Group income statement. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in the income statement on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the income statement. share-based payment transactions The Group’s equity-settled share-based payments comprise the grant of options under the Group’s share option schemes. In accordance with IFRS 2 “Share-based payment”, the Group has recognised an expense to the income statement representing the fair value of outstanding equity-settled share-based payment awards to employees which have not vested as at 1 January 2011 for the year ending 31 December 2011. Those fair values were charged to the income statement over the relevant vesting period adjusted to reflect actual and expected vesting levels. The Group has calculated the fair market value of the nil cost options as being based on the market value of a company’s share at the date of grant adjusted to reflect the fact that an employee is not entitled to receive dividends over the relevant holding period. The total amount to be expensed over the vesting period is determined with reference to the fair value of options granted, excluding the impact of any non market vesting conditions. Non market vesting conditions are included in the assumptions about the number of options expected to vest. At each balance sheet date the Group revises its estimate of the number of options expected to vest. It recognises the impact of revisions to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The proceeds received, net of any directly attributable transactions costs, are credited to share capital and share premium when the options are exercised. 28 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 Provisions and contingent liabilities A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for. Finance income and expenses Finance income comprises interest income on funds invested. Interest income is recognised as it accrues, using the effective interest method. Dividend income is recognised on the date that the Group’s right to receive payment is established. Finance expenses comprise interest expense on borrowings and are recognised in the income statement. earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. employee share ownership trust The assets and liabilities of the Employee Share Ownership Trust (“ESOT”) have been included in the consolidated financial statements. The costs of purchasing own shares held by the ESOT are shown as a deduction against equity. Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the consolidated income statement. investments in subsidiaries Investments in subsidiaries are shown in the parent company balance sheet at cost less any provision for impairment. standards and interpretations in issue not yet adopted New standards and interpretations currently in issue but not effective for accounting periods commencing on 1 January 2011 are: • IFRS 9 Financial Instruments (effective 1 January 2015) • IFRS 10 Consolidated Financial Statements (effective 1 January 2013) • IFRS 11 Joint Arrangements (effective 1 January 2013) • IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013) • IFRS 13 Fair Value Measurement (effective 1 January 2013) • IAS 19 Employee Benefits (Revised June 2011) (effective 1 January 2013) • IAS 27 (Revised), Separate Financial Statements (effective 1 January 2013) • IAS 28 (Revised), Investments in Associates and Joint Ventures (effective 1 January 2013) • Disclosures - Transfers of Financial Assets - Amendments to IFRS 7 (effective 1 July 2011) • Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12 Income Taxes (effective 1 January 2012) • Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 (effective 1 July 2012) • Disclosures - Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7 (effective 1 January 2013) • Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014) • Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015) • IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective 1 January 2013) 29 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 3. segmentAl infoRmAtion a. key operating segment The Executive Committee analyses the Group’s internal reports to enable an assessment of performance and allocation of resources, the operating segments are based on these reports. The Executive Committee reviews the Group on the operating segments identified below. Gross profit is the measure used to assess the performance of each operating segment. Still Carbonate Total revenue (sales to third parties) gross Profit 2011 £’000 50,563 48,349 98,912 2010 £’000 41,405 42,494 83,899 2011 £’000 24,566 21,663 46,229 2010 £’000 23,234 18,512 41,746 There are no sales between the two operating segments, and all revenue is earned from external customers. The operating segments gross profit is reconciled to profit before taxation as per the consolidated income statement. The Group’s assets are managed centrally by the Management Committee and consequently there is no reconciliation between the Group’s assets per the statement of financial position and the segment assets. Capital Expenditure Depreciation b. reporting by geographic segment revenue by geographic destination Middle East Africa Rest of the World Total exports United Kingdom 2011 £’000 302 467 2011 £’000 11,489 5,379 4,224 21,092 77,820 98,912 2010 £’000 503 542 2011 % 11.6 5.4 4.3 21.3 78.7 100.0 2010 £’000 9,255 4,213 2,614 16,082 67,817 83,899 2010 % 11.0 5.0 3.1 19.1 80.9 100.0 Revenue from continuing operations arose principally from the provision of goods. The Group’s business segments operate in the Middle East, Africa, the Rest of the World, China and the United Kingdom. The Group’s Head Office operations are located in the United Kingdom. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers and not on the legal entity in which the transaction occurred. No individual customer accounts for 10% or more of the Group’s revenue in either 2011 or 2010. total assets The assets of the Group at 31 December 2011 and 31 December 2010 are entirely located within the United Kingdom. capital expenditure The capital expenditure of the Group for the years ended 31 December 2011 and 31 December 2010 was entirely made within the United Kingdom. depreciation The Group’s depreciation charges for the years ended 31 December 2011 and 31 December 2010 are against fixed assets all retained within the United Kingdom. 30 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 4. opeRAting pRofit Operating profit is stated after charging/(crediting): Inventory amounts charged to cost of sales Auditors’ remuneration - audit of the Company’s annual accounts Fees payable to the auditors for other services: Audit of the Company’s subsidiaries Other services relating to employee incentive scheme Depreciation of property, plant and equipment Operating lease rentals payments Equity-settled share-based payments Payment under Growth Securities Ownership Plan Gain on foreign exchange differences Loss on sale of property, plant and equipment 5. exceptionAl items Dispense Operation restructuring costs Total The cash impact in 2011 of the exceptional items is nil (2010: £15,000). 6. finAnce income And expense Finance income comprises: Bank interest receivable Finance expense comprises: Expected return on defined benefit pension scheme assets Interest on defined benefit pension scheme obligations Finance expense 2011 £’000 2010 £’000 52,683 42,153 38 19 110 467 420 0 770 (15) 26 37 18 0 542 420 199 0 (63) 241 2011 £’000 0 0 2010 £’000 293 293 2011 £’000 2010 £’000 72 129 (1,059) 1,175 116 (979) 1,142 163 31 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 7. diRectoRs And employees a. average number of persons employed during the year, including directors: Total b. group employment costs were as follows: Wages and salaries Social security costs Pension costs - defined contribution scheme Pension costs - defined benefit scheme (see note 27) Equity settled share-based payments Awards under Growth Securities Ownership Plan The employment costs for the parent company amounted to £5,675,000 (2010: £5,440,000). Directors’ remuneration for the year Pension costs Payment under Growth Securities Ownership Plan 2011 number 169 2010 Number 112 2011 £’000 6,789 620 215 119 0 770 2010 £’000 6,252 606 201 110 199 0 8,513 7,368 2011 £’000 606 33 70 709 2010 £’000 616 30 0 646 The highest paid director has received £333,000 (2010: £310,000) excluding pension contributions. Benefits are accruing to 2 directors (2010: 2 directors) under a defined contribution scheme. Equity-settled share-based payments in respect of directors, not included in the above figures, amounted to nil (2010: £102,000). Awards under Growth Securities Ownership Plan in respect of directors, not included in the above figures, amounted to £465,000 (2010: nil). Further information regarding directors’ remuneration and the Growth Securities Ownership Plan is provided in the directors’ report on pages 16 & 17. c. key management personnel are deemed to be the executive directors of the company and members of the executive committee. The compensation payable to key management in the year is detailed below: Wages and salaries Pension costs - defined contribution scheme Pension costs - defined benefit scheme Equity-settled share-based payments Awards under Growth Securities Ownership Plan 2011 £’000 1,171 58 27 0 765 2,021 2010 £’000 1,154 53 22 181 0 1,410 32 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 8. tAxAtion a. analysis of expense recognised in the consolidated income statement Current taxation: UK corporation tax on income for the year Adjustments in respect of prior years Total current tax charge for the year Deferred tax: Origination and reversal of temporary differences Adjustments in respect of prior years Total deferred tax charge for the year 2011 £’000 4,130 (146) 3,984 805 (10) 795 2010 £’000 3,747 (24) 3,723 277 (34) 243 Total tax expense in the consolidated income statement 4,779 3,966 The tax expense is wholly in respect of UK taxation. b. tax reconciliation Profit before taxation Profit before taxation multiplied by the standard rate of corporation tax in the United Kingdom of 26.5% (2010: 28%) Effect of: Non-deductible expenses Permanent element of share scheme deduction Impact on deferred tax of use of hybrid tax rate Other timing differences Adjustments to the tax charge in respect of prior years Depreciation for the year greater than capital allowances Group relief not paid for Net income not taxable / additional expenses allowable for tax purposes Total tax expense in the consolidated income statement 2011 £’000 18,105 4,796 38 (113) 144 3 (159) 39 32 (1) 2010 £’000 14,790 4,143 32 (157) 91 (164) (58) 79 0 0 4,779 3,966 The effective rate of tax for the year of 26.4% (2010: 26.8%) is lower than the standard rate of corporation tax in the United Kingdom (26.5%). The differences are explained above. c. the effective rate of tax on profit before exceptional items is 26.4% (2010: 26.8%). d. tax on items charged to equity In addition to the amount credited to the consolidated income statement, £842,000 (2010: £28,000) has been credited directly to equity, being the movement on deferred taxation relating to retirement benefit obligations and employee benefits. 9. equity dividends Interim dividend 5.00p (2010: 4.45p) paid 9 September 2011 Final dividend for 2010 9.10p (2009: 8.10p) paid 6 May 2011 2011 £’000 1,842 3,353 5,195 2010 £’000 1,638 2,963 4,601 The interim dividend for the prior year of £1,638,000 was paid on 8 September 2010. In accordance with IAS 10 “Events after the reporting date”, the 2011 final proposed dividend of £3,801,000 (10.3p per share) has not been accrued as it had not been approved by the year end. 33 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 10. eARnings peR shARe Earnings per share (basic) Earnings per share (diluted) Earnings per share (basic) - before exceptional items Earnings per share (diluted) - before exceptional items 2011 36.28p 36.25p 36.28p 36.25p 2010 29.63p 29.59p 30.22p 30.18p earnings per share - after exceptional items Basic earnings per share Dilutive effect of share options Diluted earnings per share 2011 weighted average number of shares earnings £’000 earnings per share Earnings £’000 2010 Weighted average number of shares Earnings per share 13,326 36,728,932 36.28p 10,824 36,531,394 29.63p 32,013 51,971 13,326 36,760,945 36.25p 10,824 36,583,365 29.59p 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; earnings per share - before exceptional items Basic earnings per share Exceptional items Taxation in respect of exceptional items 2011 weighted average number of shares earnings £’000 earnings per share Earnings £’000 2010 Weighted average number of shares Earnings per share 13,326 36,728,932 36.28p 10,824 36,531,394 29.63p 0 0 293 (76) Basic earnings per share before exceptional items 13,326 36,728,932 36.28p 11,041 36,531,394 30.22p Dilutive effect of share options 32,013 51,971 Diluted earnings per share before exceptional items 13,326 36,760,945 36.25p 11,041 36,583,365 30.18p 34 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 11. pRopeRty, plAnt And equipment group cost at 1 January 2010 Additions Disposals at 1 January 2011 Acquisitions through business combinations Additions Disposals at 31 december 2011 depreciation at 1 January 2010 Charge for the year On disposals at 1 January 2011 Charge for the year On disposals at 31 december 2011 net book value at 31 december 2011 Net book value at 31 December 2010 Parent cost at 1 January 2010 Additions at 1 January 2011 Additions at 31 december 2011 depreciation at 1 January 2010 Charge for the year at 1 January 2011 Charge for the year at 31 december 2011 net book value at 31 december 2011 Net book value at 31 December 2010 Property, plant and equipment £’000 5,415 503 (803) 5,115 323 302 (173) 5,567 3,842 542 (557) 3,827 467 (101) 4,193 1,374 1,288 Property, plant and equipment £’000 1,656 362 2,018 154 2,172 1,376 165 1,541 170 1,711 461 477 35 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 12. goodwill group cost at 1 January 2010 Additions Adjustment to a prior acquisition at 1 January 2011 Additions at 31 december 2011 Parent cost at 1 January 2010 at 31 december 2010 and 31 december 2011 £’000 9,891 1,895 128 11,914 1,744 13,658 £’000 0 0 Goodwill relates to the historic still and carbonate dispense business which is considered by management to be one cash-generating unit. This cash generating unit is reported across both our still and carbonate segments. Goodwill is tested at least annually for impairment and whenever there are indications that goodwill might be impaired. The recoverable amount of a cash-generating unit is based on its value in use. Value in use is the present value of the projected cash flows of the cash-generating unit. The key assumptions regarding the value in use calculations were forecast growth in revenues and the discount rate applied. Budgeted revenue growth is estimated based on actual performance over the past two years and expected market changes. The discount rate of 9% is a pre-tax rate and reflects the risks specific to the relevant cash-generating unit. Dispense Operation cash flow projections are based on the most recent financial budgets approved by management. Management have applied an annual growth rate of 5% in projecting the cash flows for a period of five years. Further periods have not been included in the impairment test. Management have considered the allocation of the proceeds to other intangibles and are satisfied that is it correctly allocated to goodwill. Goodwill additions for 2011 consist of the acquisition of the remaining 50% of the issued share capital of Dayla Liquid Packing Limited. The total goodwill is entirely attributable to the Dispense Operation. If the discount rate were to increase by 10% the discounted cashflows would still exceed the carrying amount, likewise if the free cashflows were to reduce by 10% the discounted cashflows would still exceed the carrying amount. 13. investments: shARes in gRoup undeRtAkings Parent cost and net book amount At 1 January 2010 Additions at 1 January 2011 Additions at 31 december 2011 £’000 12,371 1,895 14,266 2,300 16,566 All non current investments relate to Group undertakings. Listed below are the subsidiaries and the ownership of their ordinary share capital by the Group. Beacon Holdings Limited Beacon Drinks Limited * Ben Shaws Dispense Drinks Limited Cabana (Holdings) Limited Cabana Soft Drinks Limited ** Cariel Soft Drinks Limited Dayla Liquid Packing Limited MiniUrban Limited *** % 100 100 100 100 100 100 100 100 The Company directly owns Cabana (Holdings) Limited, Beacon Holdings Limited, Cariel Soft Drinks Limited, Ben Shaws Dispense Drinks Limited and Dayla Liquid Packing Limited. *Beacon Drinks Limited is directly owned by Beacon Holdings Limited. **Cabana Soft Drinks Limited is directly owned by Cabana (Holdings) Limited. ***MiniUrban Limited is directly owned by Dayla Liquid Packing Limited. All Group undertakings are consolidated. The above companies and the parent company were all incorporated and operate in the United Kingdom. Particulars of non-trading companies are filed with the annual return. All companies in the Group are engaged in the supply of soft drinks and other beverages. 36 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 14. defeRRed tAx Assets And liAbilities movement in tempoRARy diffeRences duRing the yeAR Recognised in equity £’000 0 0 842 0 842 group Property, plant and equipment Goodwill Employee benefits Provisions Net balance at 1 January 2011 £’000 83 1,170 1,179 83 2,515 Recognised in income £’000 (17) (729) (77) (6) (829) group Property, plant and equipment Goodwill Employee benefits Provisions Parent Property, plant and equipment Goodwill Employee benefits Provisions Parent Property, plant and equipment Goodwill Employee benefits Provisions Net balance at 1 January 2010 £’000 22 1,277 1,428 3 2,730 Net balance at 1 January 2011 £’000 82 1,170 1,179 83 2,514 Net balance at 1 January 2010 £’000 121 1,277 1,428 3 2,829 Recognised in income £’000 61 (107) (277) 80 (243) Recognised in income £’000 (32) (729) (77) (6) (844) Recognised in income £’000 (39) (107) (277) 80 (343) Recognised in equity £’000 0 0 28 0 28 Recognised in equity £’000 0 0 842 0 842 Recognised in equity £’000 0 0 28 0 28 Deferred tax acquired £’000 0 0 0 0 0 Deferred tax acquired £’000 0 0 0 0 0 Deferred tax acquired £’000 0 0 0 0 0 Deferred tax acquired £’000 0 0 0 0 0 net balance at 31 december 2011 £’000 66 441 1,944 77 2,528 Net balance at 31 December 2010 £’000 83 1,170 1,179 83 2,515 net balance at 31 december 2011 £’000 50 441 1,944 77 2,512 Net balance at 31 December 2010 £’000 82 1,170 1,179 83 2,514 recognised deferred tax assets and liabilities deferred tax assets and liabilities are attributable to the following: group Property, plant and equipment Goodwill Employee benefits Provisions Parent Property, plant and equipment Goodwill Employee benefits Provisions Assets Liabilities net Current year £’000 117 441 1,944 77 2,579 Prior year £’000 155 1,170 1,179 83 2,587 Current year £’000 (51) 0 0 0 (51) Prior year £’000 (72) 0 0 0 (72) current year £’000 66 441 1,944 77 2,528 Prior year £’000 83 1,170 1,179 83 2,515 Assets Liabilities net Current year £’000 50 441 1,944 77 2,512 Prior year £’000 82 1,170 1,179 83 2,514 Current year £’000 0 0 0 0 0 Prior year £’000 0 0 0 0 0 current year £’000 50 441 1,944 77 2,512 Prior year £’000 82 1,170 1,179 83 2,514 37 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 15. inventoRies Finished goods group 2011 £’000 5,790 2010 £’000 3,418 Parent 2011 £’000 4,056 2010 £’000 1,754 In 2011 the Group write-down of inventories to net realisable value amounted to £198,000 (2010: £106,000). 16. tRAde And otheR ReceivAbles Trade receivables Amounts owed by Group undertakings Other receivables Prepayments and accrued income group Parent 2011 £’000 19,895 0 703 520 21,118 2010 £’000 14,691 0 1,297 284 16,272 2011 £’000 15,143 546 430 391 2010 £’000 10,736 114 783 225 16,510 11,858 Other receivables include an amount of £39,000 (2010: £175,000) due in more than one year. All other amounts above are short-term debt. The difference between the carrying value and fair value of all receivables is not considered to be material. All trade and other receivables have been reviewed for indicators of impairment and a provision of £1,679,000 (2010: £1,647,000) has been recorded accordingly in parent and Group. In addition, some of the unimpaired trade receivables are past due at the reporting date. The age of receivables past due but not impaired is as follows: group Up to 30 days overdue Over 30 days and up to 60 days overdue Over 60 days and up to 90 days overdue Over 90 days overdue Parent Up to 30 days overdue Over 30 days and up to 60 days overdue Over 60 days and up to 90 days overdue Over 90 days overdue group Bad debt provision group Bad debt provision Parent Bad debt provision Parent Bad debt provision 38 2011 £’000 2,607 579 (579) 0 2,607 2011 £’000 1,695 328 (505) 0 1,518 2010 £’000 2,343 231 41 0 2,615 2010 £’000 1,508 78 127 0 1,713 Utilised £’000 (56) at 31 december 2011 £’000 1,679 Utilised £’000 (115) At 31 December 2010 £’000 1,647 Utilised £’000 (2) at 31 december 2011 £’000 1,577 Utilised £’000 (28) At 31 December 2010 £’000 1,553 At 1 January 2011 £’000 Charge in the year £’000 1,647 88 At 1 January 2010 £’000 Charge in the year £’000 919 843 At 1 January 2011 £’000 Charge in the year £’000 1,553 26 At 1 January 2010 £’000 Charge in the year £’000 846 735 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 17. tRAde And otheR pAyAbles And cuRRent tAx liAbilities Trade payables Amounts owed to Group undertakings Other taxes and social security Accruals and deferred income Current tax liabilities group Parent 2011 £’000 5,968 0 1,037 13,068 20,073 1,752 21,825 2010 £’000 3,463 0 979 9,723 14,165 1,533 15,698 2011 £’000 4,430 3,906 506 12,312 21,154 1,138 22,292 2010 £’000 2,526 1,924 608 9,041 14,099 826 14,925 All amounts shown above are short-term. The carrying values are considered to be a reasonable approximation of fair value. At 31 December 2011, liabilities have contractual maturities which are summarised below: group Trade payables Other short term financial liabilities Parent Trade payables Other short term financial liabilities 18. pRovisions group Exceptional cost provision Parent Exceptional cost provision 2011 2010 within 6 months £’000 5,968 13,068 19,036 within 6 to 12 months £’000 0 0 0 Within 6 months £’000 3,463 9,723 13,186 2011 2010 within 6 months £’000 4,430 12,312 16,742 within 6 to 12 months £’000 0 3,906 3,906 Within 6 months £’000 2,526 9,041 11,567 Within 6 to 12 months £’000 0 0 0 Within 6 to 12 months £’000 0 1,924 1,924 At 1 January 2011 £’000 Charge in the year £’000 365 0 At 1 January 2011 £’000 Charge in the year £’000 278 0 Utilised £’000 (226) Utilised £’000 (179) at 31 december 2011 £’000 139 at 31 december 2011 £’000 99 39 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 19. shARe cApitAl Authorised 52,000,000 (2010: 52,000,000) 10p ordinary shares Allotted, issued and fully paid 36,968,772 (2010: 36,968,772) 10p ordinary shares 2011 £’000 5,200 3,697 2010 £’000 5,200 3,697 The share capital of Nichols plc consists only of ordinary 10p shares. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at shareholders’ meetings. There were no movements in the Group’s authorised and allotted, issued and fully paid share capital for the financial years ending 31 December 2011 and 31 December 2010. 20. shARe options The Group operates a Save As You Earn (SAYE) scheme for all other employees. The estimated fair values of options which fall under the IFRS 2 “Share-based payment” accounting charge and inputs used in the Binomial model to calculate those fair values, are as follows: save as you earn scheme date of grant 26 September 2005 3 October 2006 1 September 2008 1 September 2008 1 June 2010 1 June 2010 1 June 2011 1 June 2011 number granted share price on grant date exercise price Fair values on grant date vesting period expected dividend yield 28,991 60,376 30,796 11,398 46,776 9,008 27,177 8,970 £2.05 £2.51 £2.45 £2.45 £3.54 £3.54 £5.58 £5.58 £1.63 £1.92 £1.77 £1.77 £2.83 £2.83 £3.85 £3.85 £0.40 5.00 years £0.46 5.00 years £0.66 3.00 years £0.65 5.00 years £0.70 3.00 years £0.69 5.00 years £1.73 3.00 years £1.73 5.00 years 3.50% 3.50% 4.35% 4.35% 4.35% 4.35% 4.00% 4.00% lapse rate 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% risk free rate volatility 3.91% 4.38% 4.36% 4.37% 1.41% 2.30% 1.29% 1.90% 22.65% 21.13% 20.31% 20.31% 25.70% 25.70% 32.94% 32.94% expected volatility The volatility of the Company’s share price on each date of grant was calculated as the average of annualised standard deviations of daily continuously compounded returns on the Company’s stock, calculated over five years back from the date of the grant, where applicable. risk-free rate The risk-free rate is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the life of the option. expected life The expected life of a SAYE option is equal to the vesting period plus a six month exercise period. 40 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 20. shARe options (continued) date of grant: 26 September 2005 3 October 2006 1 September 2008 1 June 2010 1 June 2011 At 1 January 2011 2,432 46,732 28,893 52,578 0 130,635 Granted Exercised Lapsed at 31 december 2011 Exercise price per share 0 0 0 0 36,147 36,147 (2,432) (46,438) (24,750) 0 0 (73,620) 0 (294) (99) 0 0 (393) 0 0 4,044 52,578 36,147 92,769 163p 192p 177p* 283p 385p Options are exercisable at the end of a three or five year savings contract commencing on the date of grant and for a period of six months thereafter. The share price during 2011 varied between 416p and 583p and the weighted average price for the year was 519p. At 31 December 2011, options over 92,769 shares were outstanding under Employee Share Option Plans (2010: 130,635). *Indicates share options exercisable at 31 December 2011. Outstanding on 1 January Granted Exercised Lapsed Outstanding on 31 December 21. cAsh And cAsh equivAlents group Cash at bank and in hand Parent Cash at bank and in hand 2011 2010 weighted average exercise price in pence 224.77 385.00 186.00 188.22 318.12 number 130,635 36,147 (73,620) (393) 92,769 Weighted average exercise price in pence 137.82 195.45 2.58 189.18 224.77 Number 529,626 80,784 (452,327) (27,448) 130,635 At 1 January 2011 £’000 14,967 At 1 January 2011 £’000 13,182 Cash flow £’000 5,144 at 31 december 2011 £’000 20,111 Cash flow £’000 4,689 at 31 december 2011 £’000 17,871 41 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 22. finAnciAl instRuments Exposure to interest rate, credit and currency risks arises in the normal course of the Group’s business. treasury management The Group’s treasury activities are targeted to provide suitable, flexible funding arrangements to satisfy the Group’s requirements. Interest rate and liquidity risk are managed at a Group level. Foreign currency risk is managed, in consultation with Group management, in subsidiaries which are responsible for the majority of purchases. The Group’s policy for investing any surplus cash balances is to place such amounts on deposit. liquidity risk The Group seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs. The acquisition of companies and the continuing investment in non-current assets will be achieved by a mix of operating cash and short term borrowing facilities. Short term flexibility is achieved by bank overdraft. interest rate risk The Group finances its activities through a mixture of retained profits and borrowings. All borrowings are in sterling at floating rates of interest, based upon the prevailing base rate or LIBOR. The Group has reviewed the impact of sensitivity on interest rate fluctuations and has concluded that there would be no impact on the income statement following the effects of such variances. credit risk The Group has no significant concentrations of credit risk. The Group has implemented stringent policies that ensure that credit evaluations are performed on all potential customers before sales commence. Credit risk is managed by limiting the aggregate exposure to any one individual counterparty, taking into account its credit rating. Such counterparty exposures are regularly reviewed and adjusted as necessary. Accordingly, the possibility of material loss arising in the event of non-performance by counterparties is considered to be unlikely. Cash at bank is held only with major UK banks with high quality external credit ratings or government support. Foreign currency risk The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the functional currency of the Group. The currencies giving rise to this risk are primarily US Dollars (USD) and Euros (€). The Group uses forward exchange contracts to hedge its foreign currency risk. Forward purchase contracts in US Dollars are made to cover at least the full year of projected purchases. The forward foreign currency purchase contracts, which are a mixture of firm contracts and conditional options, mature in line with expected purchases throughout 2011. The directors have reviewed the fair value of the forward contracts outstanding at the balance sheet date, and have concluded that the fair value is not material to the financial statements. Accordingly a financial asset or liability has not been recognised in these financial statements. Foreign currency assets US Dollar Euro Chinese Yuan Foreign currency sensitivity 2011 £’000 2,199 918 1 3,118 2010 £’000 1,970 418 32 2,420 Some of the Group’s transactions are carried out in US Dollars, Euros and Chinese Yuan. As a result, management have undertaken sensitivity analysis to consider the financial impact if Sterling had both strengthened and weakened against the US Dollar, the Euro and the Chinese Yuan . If Sterling had strengthened against the US Dollar, Euro and Chinese Yuan by 5% (2010: 5%), then this would have had the following impact: Net result for the year usd (104) euro (44) cny 0 total (148) USD (93) 2011 £’000 2010 £’000 Euro (20) CNY (1) Total (114) If Sterling had weakened against the US Dollar, Euro and Chinese Yuan by 5% (2010: 5%), then this would have had the following impact: Net result for the year usd 116 euro 48 cny 1 total 165 USD 104 2011 £’000 2010 £’000 Euro 22 CNY 2 Total 128 Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk. 42 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 23. summARy of finAnciAl Assets And liAbilities by cAtegoRy The IAS 39 categories of financial assets included in the balance sheet and the headings in which they are included are as follows: current assets Trade receivables and other receivables Cash and cash equivalents Total loans and receivables group Parent 2011 £’000 20,599 20,111 40,710 2010 £’000 15,988 14,967 30,955 2011 £’000 16,119 17,871 33,990 2010 £’000 11,633 13,182 24,815 The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are included are as follows: current liabilities Other financial liabilities at amortised cost Trade and other payables group Parent 2011 £’000 5,968 2010 £’000 3,463 2011 £’000 4,430 2010 £’000 2,526 24. cApitAl mAnAgement policies And pRoceduRes The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. This strategy remains unchanged from 2010. At 31 December 2011 the Group had no debt, and therefore the capital structure consists of equity only. The directors regularly monitor the level of net assets of the Company in accordance with Section 656 of the Companies Act 2006 (Serious Loss of Capital). 25. opeRAting leAses Non-cancellable operating lease rentals are payable as follows: Within one year Between two and five years More than five years group Parent 2011 £’000 468 563 95 1,126 2010 £’000 2011 £’000 2010 £’000 342 403 158 903 272 322 0 594 231 173 0 404 The Group leases its headquarters, Laurel House and the site operated by Dayla Liquid Packing Limited, under a non-cancellable operating lease agreement and also leases dispensing and certain other plant and equipment under non-cancellable operating lease agreements which have varying terms, escalation clauses and renewal rights. 26. RelAted pARty tRAnsActions Parent company The parent company entered into the following transactions with subsidiaries during the year: Sale of goods and services (including recharge of costs) All balances with the related parties are on an arm’s length basis. Transaction value Year ended 31 December Balance outstanding as at 31 December 2011 £’000 2,978 2010 £’000 2,523 2011 £’000 3,360 2010 £’000 1,810 43 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 27. employee benefits The Group operates two employee benefit plans, a defined benefit plan which provides benefits based on final salary which is now closed to new members and a defined contribution Group personal plan. The Group personal plan consists of individual contracts with contributions from both the employer and employee. The charge for the year for the Group personal plan was £215,000 (2010: £201,000). The Company operates a defined benefit plan in the UK. A full actuarial valuation was carried out on 5 April 2008 and updated at 31 December 2011 by an independent qualified actuary. The Company paid an additional £0.9 million into the plan in the year (2010: £0.7 million) and will continue to monitor the deficit. The principal actuarial assumptions used by the actuary at the reporting date (expressed as weighted averages) were as follows: Future salary increases Rate of increase in (post 1997) pensions in payment (a) Discount rate at 31 December Expected rate of inflation Overall expected return on plan assets 31 december 2011 31 December 2010 31 December 2009 3.05% 3.40% 4.70% 3.05% 4.40% 4.45% 3.40% 5.40% 3.40% 5.90% 4.50% 3.50% 5.70% 3.50% 6.20% The expected return on plan assets is based on the the long term rates of return on the market values of equities, fixed interest assets, corporate bonds and cash and other assets at 31 December. Other material actuarial assumptions were the rate of salary increases and mortality assumptions. In terms of future salary increases, the actuary is recommending an assumption of approximately 1% in excess of inflation based on historic differences between price inflation and salary inflation. Assumptions regarding future mortality experience are set based on the advice of actuaries and in accordance with published statistics. Life expectancies have been estimated as 92 years for men (2010: 92 years) and 92 years for women (2010: 92 years). (a) Increases on pre-6 April 1997 pensions are fixed at 3% per annum. Post-6 April 1997 increases are in line with price inflation, subject to a minimum of 3% and a maximum of 5%. Over the year the Company contributed to the plan at the rate of 18.6% of salaries. The charge to the consolidated income statement was £119,000 (2010: £110,000). The Company will continue to contribute at this rate pending the results of the next actuarial valuation. The plan is now closed to new entrants. This means that the average age of the membership can be expected to rise which in turn means that the future service cost (as a percentage of scheme members’ pensionable salaries) can be expected to rise. The assets of the Group’s defined benefit plan and the expected rates of return on these assets are summarised as follows: long term rate of return expected at 31 december 2011 31 December 2010 31 December 2009 31 December 2008 31 December 2007 5.60% 2.60% 4.50% 0.50% 6.90% 3.90% 5.20% 0.50% 7.20% 4.20% 5.40% 0.50% 6.60% 3.60% 6.50% 1.50% 7.50% 4.50% 5.80% 5.50% Market value of assets at 31 december 2011 £’000 31 December 2010 £’000 31 December 2009 £’000 31 December 2008 £’000 31 December 2007 £’000 11,207 12,511 11,004 993 2,570 3,053 1,938 1,983 1,463 1,772 1,800 963 8,826 1,610 1,502 602 12,009 2,094 2,042 425 17,823 17,895 15,539 12,540 16,570 Equity securities Gilts Government bonds Cash and other Equity securities Gilts Government bonds Cash and other 44 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 27. employee benefits (continued) The following amounts were measured in accordance with IAS 19 “Employee benefits”. the amounts recognised in the statement of financial position are determined as follows: Fair value of plan assets Present value of defined benefit obligations Recognised liability for defined benefit obligations 31 december 2011 £’000 31 December 2010 £’000 31 December 2009 £’000 31 December 2008 £’000 31 December 2007 £’000 17,823 17,895 15,539 (24,136) (22,030) (20,283) (6,313) (4,135) (4,744) 12,540 (16,107) (3,567) 16,570 (20,205) (3,635) the expense is recognised in the following line items in the consolidated income statement: operating profit Current service costs total operating charge Finance expense Expected return on plan assets Interest on obligation total finance expense total charge to the consolidated income statement group consolidated statement of comprehensive income Actual return less expected return on plan assets Experience gains and losses arising on plan liabilities Changes in the assumptions underlying the present value of the plan liabilities actuarial movement in defined benefit plan recognised in statement of comprehensive income 2011 £’000 (119) (119) 1,059 (1,175) (116) (235) (1,460) 96 (1,562) (2,926) 2010 £’000 (110) (110) 979 (1,142) (163) (273) 1,033 (72) (887) 74 the movement during the year in the liability for defined benefit obligations was as follows: Liability for defined benefit obligations at 1 January Current service costs Contributions paid into the plan Gain on settlement of obligations Other finance costs Actuarial (loss)/gain recognised in statement of comprehensive income liability for defined benefit obligations at 31 december 2011 £’000 (4,135) (119) 983 0 (116) (2,926) (6,313) the movement during the year in the present value of the plan assets was as follows: 2010 £’000 (4,744) (110) 808 0 (163) 74 (4,135) 2010 £’000 15,539 979 1,033 344 0 2011 £’000 17,895 1,059 (1,460) 329 0 Opening fair value of plan assets Expected return on plan assets Actuarial (loss)/gain Contributions by the Group Assets distributed on settlement of obligations closing fair value of plan assets 2009 £’000 (56) (56) 737 (1,068) (331) (387) 1,901 120 (3,586) (1,565) 2009 £’000 (3,567) (56) 775 0 (331) (1,565) (4,744) 2009 £’000 12,540 737 1,901 361 0 2008 £’000 (84) (84) 1,102 (1,145) (43) (127) (4,782) 1,113 2,383 (1,286) 2008 £’000 (3,635) (84) 672 809 (43) (1,286) (3,567) 2008 £’000 16,570 1,102 (4,782) 417 (767) 2007 £’000 (161) (161) 1,085 (1,088) (3) (164) (634) (22) 3,178 2,522 2007 £’000 (6,504) (161) 511 0 (3) 2,522 (3,635) 2007 £’000 15,928 1,085 (634) 191 0 17,823 17,895 15,539 12,540 16,570 45 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMbER 2011 27. employee benefits (continued) the movement during the year in the present value of defined benefit obligations was as follows: Opening defined benefit obligations Current service costs Contributions by participants Other finance costs Actuarial loss/(gain) Liabilities discharged on settlement closing defined benefit obligations difference between expected and actual return on plan assets Amount Percentage of plan assets experience gains and losses on plan liabilities Amount Percentage of present value of plan liabilities gains and losses on changes in assumptions Amount Percentage of present value of plan liabilities total actuarial gains and losses Amount Percentage of present value of plan liabilities 2011 £’000 2010 £’000 22,030 20,283 119 (654) 1,175 1,466 0 110 (464) 1,142 959 0 2009 £’000 16,107 56 (414) 1,068 3,466 0 24,136 22,030 20,283 2011 £’000 (1,460) (8.2%) 96 0.4% (1,562) (6.5%) (2,926) (12.1%) 2010 £’000 1,033 5.8% (72) (0.3%) (887) (4.0%) 74 0.3% 2009 £’000 1,901 12.2% 120 0.6% (3,586) (17.7%) (1,565) (7.7%) 2008 £’000 20,205 84 (255) 1,145 (3,496) (1,576) 16,107 2008 £’000 (4,782) (38.1%) 1,113 6.9% 2,383 14.8% (1,286) (8.0%) 2007 £’000 22,432 161 (320) 1,088 (3,156) 0 20,205 2007 £’000 (634) (3.8%) (22) (0.1%) 3,178 15.7% 2,522 12.5% 46 UNAUDITED FIvE YEAR SUMMARY yeARs ended 31 decembeR Revenue Operating profit before exceptional items, IAS 19 and long term incentive scheme Exceptional items IAS 19 operating profit charges Long term incentive scheme charges Operating profit after exceptional items Profit on disposal of business Net interest (payable)/receivable Profit before tax Tax Profit after tax Dividends paid Retained profit/(loss) Earnings per share - (basic) Earnings per share - (diluted) Earnings per share - (basic) before exceptional items Earnings per share - (diluted) before exceptional items Dividends paid per share 2011 £’000 98,912 19,038 0 (119) (770) 2010 £’000 83,899 15,426 (293) (110) (199) IFRS 2009 £’000 72,378 12,891 (293) (56) (334) 18,149 14,824 12,208 0 (44) 18,105 (4,779) 13,326 (5,195) 8,131 36.28p 36.25p 36.28p 36.25p 14.10p 0 (34) 14,790 (3,966) 10,824 (4,601) 6,223 29.63p 29.59p 30.22p 30.18p 12.55p 0 (282) 11,926 (3,572) 8,354 (4,193) 4,161 22.86p 22.57p 23.44p 23.15p 11.45p 2008 £’000 56,221 10,431 (5,940) (84) (543) 3,864 0 234 4,098 (1,141) 2,957 (3,914) (957) 8.10p 8.10p 20.03p 20.01p 10.65p 2007 £’000 55,276 9,098 (978) (164) (192) 7,764 0 284 8,048 (2,379) 5,669 (3,697) 1,972 15.49p 15.47p 17.36p 17.34p 10.00p 47 NOTICE OF ANNUAL gENERAL MEETINg Notice is hereby given that the twentieth Annual General Meeting of Nichols plc (“Company”) will be held at its registered office at Laurel House, Woodlands Park, Ashton Road, Newton le Willows, WA12 0HH on Wednesday 2 May 2012 at 11.00 a.m to consider and, if thought fit, to pass the following resolutions as ordinary resolutions: 1. 2. 3. 4. 5. 6. 7. To receive the Company’s annual accounts and directors’ and auditor’s reports for the year ended 31 December 2011. To declare a final dividend for the year ended 31 December 2011 of 10.30 pence per ordinary share of 10 pence in the capital of the Company to be paid on 4 May 2012 to shareholders whose names appear on the register of members at the close of business on 30 March 2012. To re-elect B M Hynes, who retires by rotation, as a director of the Company. To re-elect T J Croston, who retires by rotation, as a director of the Company. To reappoint Grant Thornton UK LLP as auditors of the Company. To authorise the directors to determine the remuneration of the auditors. That, pursuant to section 551 of the Companies Act 2006 (“Act”), the directors be and are generally and unconditionally authorised to exercise all powers of the Company to allot shares in the Company or to grant rights to subscribe for or to convert any security into shares in the Company up to an aggregate nominal amount of £184,843, provided that (unless previously revoked, varied or renewed) this authority shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on 2 August 2013 (whichever is the earlier), save that the Company may make an offer or agreement before this authority expires which would or might require shares to be allotted or rights to subscribe for or to convert any security into shares to be granted after this authority expires and the directors may allot shares or grant such rights pursuant to any such offer or agreement as if this authority had not expired. This authority is in substitution for all existing authorities under section 551 of the Act (which, to the extent unused at the date of this resolution, are revoked with immediate effect). to consider and, if thought fit, to pass the following resolutions as special resolutions: 8. That, subject to the passing of resolution 7 and pursuant to sections 570 and 573 of the Companies Act 2006 (“Act”), the directors be and are generally empowered to allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority granted by resolution 7 and to sell ordinary shares held by the Company as treasury shares for cash, as if section 561(1) of the Act did not apply to any such allotment or sale, provided that this power shall be limited to the allotment of equity securities or sale of treasury shares: 8.1 in connection with an offer of equity securities (whether by way of a rights issue, open offer or otherwise): 8.1.1 to holders of ordinary shares in the capital of the Company in proportion (as nearly as practicable) to the respective numbers of ordinary shares held by them; and 8.1.2 to holders of other equity securities in the capital of the Company, as required by the rights of those securities or, subject to such rights, as the directors otherwise consider necessary, but subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates or any legal or practical problems under the laws of any territory or the requirements of any regulatory body or stock exchange; and 8.2 otherwise than pursuant to paragraph 8.1 of this resolution, up to an aggregate nominal amount of £184,843, and (unless previously revoked, varied or renewed) this power shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on 2 August 2013 (whichever is the earlier), save that the Company may make an offer or agreement before this power expires which would or might require equity securities to be allotted or treasury shares to be sold for cash after this power expires and the directors may allot equity securities or sell treasury shares for cash pursuant to any such offer or agreement as if this power had not expired. This power is in substitution for all existing powers under section 570 and 593 of the Act (which, to the extent unused at the date of this resolution, are revoked with immediate effect). 48 gENERAL NOTES 9. That, pursuant to section 701 of the Companies Act 2006 (“Act”), the Company be and is generally and unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of 10p each in the capital of the Company (“Shares”), provided that: 9.1 9.2 9.3 the maximum aggregate number of Shares which may be purchased is 3,696,877; the minimum price (excluding expenses) which may be paid for a Share is 10p; the maximum price (excluding expenses) which may be paid for a Share is an amount equal to 105 per cent of the average of the middle market quotations for a Share as derived from the Daily Official List of the London Stock Exchange plc for the five business days immediately preceding the day on which the purchase is made, and (unless previously revoked, varied or renewed) this authority shall expire at the conclusion of the next annual general meeting of the Company after the passing of this resolution or on 2 August 2013 (whichever is the earlier), save that the Company may enter into a contract to purchase Shares before this authority expires under which such purchase will or may be completed or executed wholly or partly after this authority expires and may make a purchase of Shares pursuant to any such contract as if this authority had not expired. By order of the Board t J croston Company Secretary 2 April 2012 Registered office Laurel House Woodlands Park Ashton Road Newton le Willows WA12 0HH Registered in England and Wales No. 238303 general notes 1. 2. 3. 4. 5. Copies of the executive directors’ service agreements and non-executive directors letters of appointment will be available for inspection at the registered office of the Company during normal business hours (excluding weekends and public holidays) from the date of this notice until the conclusion of the Annual General Meeting. The right to vote at the meeting is determined by reference to the register of members. Only those shareholders registered in the register of members of the Company as at 6.00 p.m. on Monday, 30 April 2012 (or, if the meeting is adjourned, 6.00 p.m. on the date which is two working days before the date of the adjourned meeting) shall be entitled to attend and vote at the meeting in respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be disregarded in determining the rights of any person to attend or vote (and the number of votes they may cast) at the meeting. A member is entitled to appoint another person as his or her proxy to exercise all or any of his rights to attend, speak and vote at the meeting. A proxy need not be a member of the Company. A member may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him or her. To appoint more than one proxy, you will need to complete a separate proxy form in relation to each appointment. Additional proxy forms may be obtained from the Company’s registrar at shareholder.services@capitaregistrars.com or on 0871 664 0300 (calls cost 10p per minute plus network extras. Lines are open 8:30am – 5:30pm, Monday - Friday) or you may photocopy the proxy form already in your possession. You will need to state clearly on each proxy form the number of shares in relation to which the proxy is appointed. A failure to specify the number of shares each proxy appointment relates to or specifying a number which when taken together with the number of shares set out in the other proxy appointments is in excess of those held by the member, may result in the proxy appointment being invalid. The appointment of a proxy will not preclude a member from attending and voting in person at the meeting if he or she so wishes. A form of proxy is enclosed. To be valid, it must be completed, signed and sent to the offices of the Company’s registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU so as to arrive no later than 11.00 a.m. on Monday 30 April 2012 (or, in the event that the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). 49 gENERAL NOTES & DIRECTIONS TO THE ANNUAL gENERAL MEETINg 6. 7. CREST members who wish to appoint a proxy or proxies for the meeting (or any adjournment of it) through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the Company’s Registrar, Capita Registrars (CREST ID RA10) no later than 11.00 a.m. on Monday 30 April 2012 (or, if the meeting is adjourned, no later than 48 hours before the time of any adjourned meeting). For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which Capita Registrars is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his or her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat a CREST Proxy Instruction as invalid in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. Leave the M6 at Junction 23 and take the A49 south towards Newton. Woodlands Park is on the left in approximately 0.3 miles. On entering the estate, Laurel House is accessed from the fourth exit of the roundabout. 50 FINANCIAL CALENDAR PRELIMINARY RESULTS ANNOUNCED 8TH MARCH 2012 ANNUAL GENERAL MEETING 2ND MAY 2012 INTERIM RESULTS ANNOUNCED 26TH JULY 2012 I N C H O L S P L C | I A N N U A L R E P O R T & F N A N C A L S T A T E M E N T S 2 0 1 1 I NICHOLS PLC IS A HIGHLY FOCUSED SOFT DRINKS BUSINESS. ITS BRAND PORTFOLIO INCLUDES VIMTO, WHICH IS SOLD IN OVER 65 COUNTRIES AND LEVI Roots, weight watchers, SUNKIST & PANDA WHICH ARE SOLD IN THE UK. THE GROUP HAS A LEADING MARKET POSITION IN BOTH THE Still and carbonate DRINKS CATEGORIES AND ALSO IN THE SOFT DRINKS ON DISPENSE MARKET, WHERE ITS BRANDS INCLUDE CABANA & BEN SHAWS. I N C H O L S P L C | I A N N U A L R E P O R T & F N A N C A L S T A T E M E N T S 2 0 1 1 I ANNUAL REPORT & FINANCIAL STATEMENTS 2011 Laurel House | Woodlands Park | Ashton Road | Newton-Le-Willows | Merseyside | WA12 0HH 01925 22 22 22 | www.nicholsplc.co.uk