Nichols PLC Annual Report 2016

FY2016 Annual Report · Nichols PLC

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Making the

world smile
by being
refreshingly
different

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Nichols plc is an international soft drinks business
with sales in over 85 countries, selling products in
both the Still and Carbonate categories.

The Group is home to the iconic Vimto brand which is popular in the UK and
around the world, particularly in the Middle East and Africa. Other brands in
its portfolio include Feel Good, Starslush, Levi Roots and Sunkist.

01 |

Strategic
Report.

Chairman’s Statement

Chief Executive Officer’s Report

Group Commercial Director’s Report

Chief Financial Officer’s Report

02 |

Directors.

03 |

Directors’
Report.

04 |

Corporate
Governance
Report.

05 |

Auditor’s
Report.

06 |

Financial
Statements.

07 |

Notice of
Meeting.

08 |

Financial
Calendar.

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Group Revenue

Operating Profit

Operating Profit R.O.S

2015

£109.3m

2015

£27.8m

2015

25.5%

2016

£117.3m

2016

£30.3m

2016

25.8%

+7.4%

+9.0%

Profit Before Tax*

Net Cash

EPS (basic)*

2015

£28.0m

2015

£35.4m

2015

60.33p

2016

£30.4m

2016

£39.8m

2016

66.18p

+8.6%

+12.2%

+9.7%

*Pre-exceptional items. Exceptional items are explained in note 5 of the financial statements.

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ohn

ichols

Non-Executive Chairman

The Board is very pleased with the strong
performance in 2016 and is confident that
the Group is well placed to continue the
trend into 2017.

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I am delighted to report that 2016 was another
very good year for Nichols plc. The Group’s revenues
increased by 7.4%, operating profit grew by 9.0%
and adjusted basic earnings per share was 9.7%
ahead of the prior year.

UK market sales
totalled
£90.7m

International sales
increased
8.8%

Vimto brand
grew by
4.7%

Profit before tax
increased by
8.6%

Trading

The Group’s total revenue was £117.3m, 7.4% up
on the prior year (2015: £109.3m). This growth
came from both our UK and international markets,
which emphasises the strength of our diversified
business model. As a result of the revenue growth,
operating profit increased to £30.3m, 9.0% ahead
of 2015 (£27.8m).

Total sales in the UK were £90.7m, 7.0% up
on the prior year (2015: £84.8m) which is
particularly pleasing given the challenging trading
environment. The growth was driven by a strong
performance from the Vimto brand and the
successful integration of The Noisy Drinks Co.
Limited (Noisy) following the full acquisition of the
frozen drinks company in January 2016.

Sales from the Vimto brand grew 4.7% in the year,

significantly outperforming the UK soft drinks
market where sales growth was 1.0% (Nielsen
year to date 31 December 2016). The addition of
frozen drinks has enhanced our Out of Home offer
to the customer, which also includes dispense
and packaged soft drinks across both the Still and
Carbonate market. As a result, we believe Vimto
Out of Home offers a unique proposition to this
segment of the soft drinks market.

International sales for 2016 totalled £26.6m,
representing an 8.8% increase on the prior year
(2015: £24.4m) and a 2.7% increase on a constant
exchange rate basis. This excellent result was
driven by sales to our African markets where
revenues grew by 32.5% to £10.5m (up 19.7% on
a constant exchange rate basis). In the Middle East,
in-market Vimto sales showed healthy growth and
whilst sales of concentrate were slightly down on

the prior year, this was simply a result of the timing
of shipments ahead of Ramadan in 2017.

Exceptional Gain

As described in the Chief Financial Officer’s
Report, the exceptional gain in 2016 related to the
step-acquisition of Noisy, which was accounted
for as an investment in associate prior to the
remaining 51% of shares being acquired in January
2016.

Dividend

Following another strong performance and
reflecting the Board’s continued confidence in
the outlook for the Group, the Board is pleased
to recommend a final dividend of 20.3 pence
per share (2015: 17.6 pence). If accepted by our
shareholders, the total dividend for 2016 will

be 29.3 pence (2015: 25.6 pence), an increase of
14.5% on the prior year.

Subject to shareholder approval, the final dividend
will be paid on 5 May 2017 to shareholders
registered on 7 April 2017; the ex-dividend date is
6 April 2017.

Board Changes

Following six years of service as a Non-Executive
Director, John Longworth has indicated that he will
be stepping down from the Board at the AGM on
26 April 2017. The Board would like to thank John
for his service and wish him a happy and successful
future. The process to replace John is underway
and a further announcement will be made in due
course.

Outlook

In 2017, we will maintain focus on our stated
growth strategy. This includes developing our core
brands and markets whilst investing in innovation
and seeking further acquisition opportunities.
In summary, the Board is very pleased with the
strong performance in 2016 and is confident that
the Group is well placed to continue this trend into
2017.

John Nichols
Non-Executive Chairman
1 March 2017

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Available in over 85 countries worldwide, Vimto
always brings a smile to the face of our
consumers whilst having a refreshingly different
approach to each of its local markets.

Chief Executive Officer

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I am very pleased with the excellent performance that
Nichols plc delivered in 2016 reﬂ ecting strong progress made
across the business despite the global soft drinks environment
remaining challenging. Group revenues increased 7.4% and
profi t before tax (pre-exceptional gain) increased 8.6%.

This performance was driven by new product
development, contributi ons from acquired
businesses and geographical growth. The Group
conti nues to maintain its fi rm focus of ensuring we
deliver our strategy of driving value over volume
in all areas of the business. There is no doubt
that the heritage of the Vimto brand conti nues to
resonate with our consumers across the globe. We
strive hard to ensure Vimto is as relevant today
as it was back in 1908 when the brand was born.
Available in over 85 countries worldwide, Vimto
always brings a smile to the face of our consumers
whilst having a refreshingly diff erent approach to
each of its local markets.

With the additi on of the Feel Good brand, we
are conti nuing to develop our portf olio to meet
the ever-changing needs of our consumers.
We integrated Noisy during 2016 following the
acquisiti on of the remaining 51% shareholding in
January 2016, representi ng a further successful
example of our diversifi cati on strategy.

In March 2016, the UK Chancellor announced the
Government’s plan to introduce a soft drinks levy
due to be eff ecti ve from April 2018. As a business
with a diversifi ed product portf olio and market

presence, I believe the Group is well positi oned to
both comply with and miti gate the eff ect of the
levy.

The UK Soft Drinks Market

(As measured by Nielsen year to date 31
December 2016)

In 2016, volumes in the UK soft drinks market
increased by a modest 1.5%. The total value of the
soft drinks market grew by a marginal 1.0%
year-on-year to a total value of £7.6 billion.

Within the soft drinks market, sectors that
experienced growth were Fruit Juice, Water and
Mixers. However, Cola, Dilutables and Fruit Drinks
all declined.

Despite this backdrop, the Vimto brand value
increased to £72.5m delivering growth of 4.7%.
Whilst the category remains highly competi ti ve
and promoti onally driven, we have maintained our
stance of focussing on value over volume. Vimto
Dilutes outperformed the market by 3 percentage
points and was the only top three squash brand to
achieve growth. Our ready to drink range delivered
a year-on-year increase of 25.6%, making Vimto
the fastest growing brand in this sector.

The UK On-Trade

(As measured by CGA, Total Licensed, year to date
to 26 November 2016)

The UK on-trade soft drinks sector also saw modest
volume increase of 0.8%. However, sales value was
up by a healthy 3.7%. Both packaged soft drinks
and draught contributed to the value performance
with consumers seeking branded and premium
soft drinks. Other categories such as craft beers,
wines and spirits also experienced growth primarily
from premium off erings. Soft drinks are becoming
more infl uenti al in the sales mix as consumers
are enjoying premium spirits with quality branded
mixers.

Operati onal Review

Vimto UK

We achieved an overall sales increase of the Vimto
brand of 4.7%, with all ranges performing positi vely.
However, we remain focussed on growing our sti ll
range of products and we are pleased to report that
Sti ll sales during 2016 increased by 5.4%. The best
performer within the range was the 500ml, which
saw strong sales growth of 28.1%. We conti nued
to see good progress from Vimto Mini’s, introduced
in 2014, which gathered strong sales momentum
in 2016 as a result of distributi on gains, prominent
facings in front of store chillers and the second year
of our distributi on drive in the Midlands. Vimto
carbonates also returned to growth with sales up
3.3%.

To support the growth of our sti ll ready to drink
products, we created a new above the line
marketi ng campaign in 2016. A new Remixed
orange toad joined our original purple Vimtoad
in new creati ve content primarily targeti ng the
teenage market. A new advert was aired via video
on demand which achieved 13 million views

and featured in an extensive cinema programme
that was seen by nearly 8 million people. With
our target audience in mind, digital media also
formed a large part of the marketi ng campaign.
This included a highly successful partnership with
Snapchat where “Vimto” lenses were available
for a day. The consumer response far surpassed
what we expected and the results Snapchat have
seen previously, demonstrati ng the tremendous
engagement we achieve when we communicate
with teenagers through Vimto. The acti vity
achieved 8 million plays, 950 thousand shares and a
total of 10.5 million views.

The adverti sing campaign also supported the
launch of Vimto Remix early in 2016 when we
introduced two new variants to the Vimto range.
With exciti ng new juices and fl avours, they both
have an

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Vimto Out of Home
delivered strong
revenue growth of
17.0%

Vimto social media activity
in the Middle East over a
two-day period saw
104m impressions

added dash of our secret Vimto taste and I am
delighted to report Remix has delivered an
incremental £3.4m to the Vimto brand value since
launch. This represents one of our most successful
pieces of new product development since the
launch of the original Vimto brand over 100 years
ago.

We also brought to market new pack formats
to meet the needs of both our customers and
consumers, for example, a bespoke 3 litre squash
bott le was designed for one of our discounter
customers.

In Manchester and Birmingham, Selfridges invited
us to install an off -shelf fi xture full of Vimto
products. The “Vimto Fun Factory” includes all of
our packaged soft drinks products, off ers Vimto
Slush and a collecti on of our most successful
confecti onery products. Both parti es have been
extremely pleased with its performance and it truly

represents the spirit and the love our consumers
have for Vimto.

In July 2015, we acquired the Feel Good brand.
Feel Good is a range of completely natural soft
drinks with absolutely no added sugar. We have
already spread some “Feel Goodness” as both
carbonated and sti ll juice drinks were relaunched
in September 2016. Feel Good has delicious new
recipes and the packaging has been redesigned
to present a more modern image supporti ng the
unique positi oning of the product range.

In UK grocery, we introduced a 4 x 275ml take
home pack and we have secured new listi ngs
for 2017 including Feel Good Kid’s juice drink
in a prominent high street café chain. Our
marketi ng acti viti es included a strong consumer
communicati on plan and in-store sampling to
support the relaunch in the second half of 2016.

Vimto Internati onal

Our internati onal business again performed
strongly in 2016 as we saw our long-term
internati onal investment strategy deliver results.
A star performer for 2016 was the African region
with sales growth of 32.5% (19.7% on a constant
exchange rate basis). Pleasingly, we saw good
growth from our core markets including Senegal
and Guinea, as well as new territories that
came on stream contributi ng to strong Vimto
concentrate sales. We are parti cularly pleased
with the brand’s launch in Sudan and the work of
our partner in that territory who executed some
tremendous in-market acti vati on.

Our partner in the Middle East, Aujan Coca-
Cola Beverages Company, delivered another
successful 360-degree marketi ng campaign, which
included TV and outdoor adverti sing, in-store
acti vati on and digital content during Ramadan.

We saw magnifi cent in-store executi on with Vimto
concentrate bott les creati ng a replica model of
the Burj Khalifa, towering to an unbelievable eight
metres tall and Vimto brand take overs of the
Supermarket’s Ramadan aisles. As a result, Vimto
brand cordial sales in its largest market of Saudi
Arabia were up 3.0% versus a cordial market,
which saw a decline of 2.5% (as measured by
Nielsen MAT July 2016). Social media is becoming
increasingly important in the Middle East and 2016
saw Vimto enter into a new era of communicati on
with younger people. The output of this acti vity
saw some extraordinary results with 104 million
impressions over a two-day period and 4.1 million
views. Bloomingdales’ fl agship store in Dubai
repeated the successful 2015 personalised Vimto
cordial bott le promoti on. This year however, every
personalised bott le was stylised with Swarovski
crystals. The promoti on saw a huge amount of
acti vity on social media with one of UAE’s most

famous female singers, Ahlam Al Shamsi, who
has four million followers, promoti ng her very
own named Vimto cordial bott le. Whilst we are
synonymous with Ramadan, it is key that the brand
remains relevant to the younger generati on and
becomes an everyday drink of choice. Therefore,
it was parti cularly pleasing to see the growth we
achieved in the Sti ll category with our 250ml bott le
and cartons.

Part of the strategy for Noisy included overseas
growth. Both Heide Park, a theme park in Germany
and Gardaland, an amusement park in Italy have
a long-standing relati onship with Noisy. With
Nichols plc’s internati onal experti se we will look to
conti nue to expand this area of our internati onal
acti viti es.

Vimto Out of Home

It has been an exciti ng year for Vimto Out of Home,
which delivered strong revenue growth of 17.0%.
We acquired the fi nal shareholding in Noisy in
January 2016 and secured new business wins in
various major outlets including Morrisons café,
in Compass Group and Greene King. In 2016, we
installed 35.0% more machines than we did in the
previous year, demonstrati ng our growth.

A new marketi ng initi ati ve was launched by Vimto
Out of Home to support its unique propositi on
of off ering both equipment and products to its
customers. This included a new website, trade
communicati on programme and in-fi eld marketi ng
sales material. We are able to showcase our range
of equipment from dispensed soft drinks to frozen
soft drinks and from Coca-Cola to milkshakes,
which are relevant to customers ranging from
independent landlords to buyers of large leisure
groups.

WE ARE TEAM

Corporate Responsibility

2016 has proved to be another challenging year
for the soft drinks industry, notably including
the UK Government’s decision to announce the
introduction of the Soft Drinks Industry Levy
that will come into force in April 2018. Whilst
consultation is ongoing, the following information
has been published: drinks containing less than 5
grams of sugar per 100ml will be exempt from the
levy, juice and juice drinks with no added sugar
will also be levy free and drinks that contain a milk
content over 75% will be exempt.

We have taken the issues of childhood obesity and
sugar reduction seriously for many years. All of the
Group’s recent new product development has
been wholly focussed on no added sugar basis, all

11%

Of our shoppers are
buying more NAS

Our squash range is
already levy free

advertising has featured our no added sugar (NAS)
ranges and we have constantly reduced the levels
of sugar in all of our products. As a result, we have
made significant progress in 2016:

• 11% of our shoppers are buying more NAS

than a year ago

• Remix, which has no added sugar, has added

an incremental £3.4m to the Vimto brand value

• Vimto NAS brand sales value were up 19%.

•

In 2016, NAS represented a total of 41% of
our Vimto sales, compared to 33% in 2015.

• Our squash range is already levy free

Our Community

Our People

Star Award Winners 2016

We continued our work with Warrington Youth
Club as our chosen charity. Warrington Youth Club
believes in “inspiring young people to achieve” and
supports young people’s development by offering
opportunities to increase and develop skills, self-
awareness and confidence. This in turn enables
them to make positive and healthy life choices
through a range of programmes.

Not to be outdone by our male colleagues’
achievement in 2014, a group of eleven women
from Vimto volunteered to climb Kilimanjaro in
March 2016. Following a six-month intensive
training programme that required huge dedication
in terms of time and support from our families, all
eleven of us successfully climbed 5,895 metres
to reach the summit. As a result, we were able,
through the people and companies who kindly
sponsored us, to buy three new and much needed
mini buses for the Youth Club.

We have welcomed a large number of new
colleagues in 2016 and we are very happy to have
all the staff from Noisy join the Vimto family.
Our operations now stretch from Stirling to
Southampton with stop offs at our factory in Ross-
on-Wye and our newly acquired site in Thurrock. It
has been a hugely challenging year but as always,
our people have responded to the changes with
huge “Vim and Vigour”.

I would like to express my appreciation for all the
efforts our teams continue to show.

Every day, the teams demonstrate our company
values as they continue to DELIVER WOW and
MAKE A DIFFERENCE by FINDING A BETTER
WAY.

We have a group of people who are PASSIONATE
ABOUT WHAT THEY DO and ARE PROUD TO BE
PART OF OUR FAMILY.

However, most importantly THEY CREATE FUN.

Thank you all!

Newcomer of the Year
Alex Comerford

Local Hero
Neil MacDonald

Innovator of the Year
Becky Unwin

Local Hero
Sam Taylor

Mentor of the Year
Nick Gamble

Local Hero
Kieron Frampton

Unsung Hero
Kerry Liptrot

Local Hero
Gavin Eastwood

Local Hero
Tony Phillips

Team of the Year
All employees from
2016

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Our Vision

We continue to develop our rolling five-year strategy. Our activities for both our home and overseas markets centre on four core pillars:

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More from the Core

Thirst for New

Healthier Future

Wherever, Whenever

Outlook

New product development and
acquisition across the Group remains
core to the growth of the Group.

We still have headroom for growth
in our Vimto brand in both our UK
and overseas markets. Our relentless
focus on 500ml and no added sugar
new product development will
continue as will international product
development to ensure Vimto is fit for
all its local markets.

The relaunch of Feel Good in
the UK and further new product
development will see it firmly lead
the category as a natural healthier
alternative soft drink. We will
continue to focus all our marketing
activities on Vimto no added sugar.
Through product development, we
will ensure Vimto is able to meet the
challenge of the sugar levy due in
2018.

With our diversified portfolio and
our flexible out-sourced global
production model, it ensures we
are able to meet the needs of our
consumers. We want to make sure
our products are available wherever
and whenever our customers want
them. We are keen to continue
to develop and expand our large
presence in the Middle East and
seek new partners in the African
region. The recently opened Indian
market will be a long-term growth
project and we seek to make progress
in Malaysia and Indonesia in the
medium-term. In the UK, we will build
on our successful Midlands campaign
and we will aim to grow distribution
in the South of England.

our geographical reach and our track record of
successful and profitable brand growth puts us in a
strong position to deliver future success.

Marnie Millard
Chief Executive Officer

1 March 2017

I am very pleased with the performance by the
Group during 2016. Whilst we do anticipate some
cost and foreign exchange pressures in 2017, we
believe we remain well placed to mitigate the
impact through careful cost control and price
recovery strategies.

We continue to invest in all parts of our
organisation, which includes both our brands and
our people. Making sure that our brand portfolio
is fit for the future is critical to ensuring the long-
term success of the business. The ongoing and
planned diversification of the Group means that
we are able to take decisions that will deliver long-
term sustainable success. There is no doubt that
challenges will remain in the soft drinks market
and current economic uncertainty is here

to stay in the short-term. However, I believe our
diversification across different routes to market,

VIMTO
BRAND
GREW BY
4.7%

9,373
FEEL GOOD
FACEBOOK
LIKES

374,074
VIMTO
FACEBOOK
LIKES

Making the

world smile
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refreshingly
different

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ndrew
ilne

Group Commercial Director

The strong international growth
momentum we delivered in 2015 continued
into 2016, particularly across our
African business.

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The diversification of the business across our
three commercial routes to market (UK packaged,
International and Out of Home) has again been a
key strategic focus for us in 2016.

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This diversification gives us a strong platform to
grow our business on a number of fronts. Following
on from the Chief Executive Officer’s Report I am
going to provide some greater insight into a number
of projects we successfully completed in 2016.

2016 has seen the launch of our new no added
sugar Vimto Remix range across a number of our
key pack formats. After conducting extensive
research in the marketplace, our consumers told us
they were looking for Vimto to introduce new and
exciting flavours whilst still retaining our ‘Mixed
up Fruit’ principles. With 6 out of 10 purchases
across squash being outside of the red and black
variants, we developed two new distinct flavours,
which were Mango, Strawberry and Pineapple and
Raspberry, Orange and Passionfruit. These flavours
were launched with a wide range of our UK
grocery, wholesale and impulse customers in March
2016. New creative was commissioned to support
the launch of Remix whilst remaining true

to the core Vimto range. Working with Aardman,
an animation studio, a new advert was developed
which showcased the mix of fruits in both Remix
Mango, Strawberry & Pineapple and Vimto Original.
The creative was aired on cinema, video on
demand, Snapchat, mobile advertising and social
media and then further rolled out onto point of sale
for the van sales drive.

I am pleased to report that the launch has brought
new consumers and importantly incremental sales

to the Vimto brand. We remain committed and
excited about the continued potential for the brand
in 2017 and beyond.

The strong international growth momentum we
delivered in 2015 continued into 2016, particularly
across our African business. Vimto is now present
in 38 countries in a range of pack formats across
the African continent. Throughout 2016, the sales
growth in our core markets has been particularly
pleasing. This has been achieved by investing in

strong marketing campaigns that have driven the
visibility of the brand and by putting feet on the
street to maximise availability and distribution.
Also in the year, we launched a TV campaign across
a number of the African markets that has allowed
us to bring new consumers into the brand.

The brand was also successfully launched in
a number of new African markets in 2016. A
particular highlight has been our drive into the
Sudan region, which has shown some good early
sales momentum. By working in conjunction with
our local partner, the brand visibility and availability
was strong from day one, which gives us a solid
platform to deliver more growth in 2017.

and bring new consumers into the brand. We will
extend these launches into more African countries
in 2017 to continue to drive growth.

Our acquisition of Noisy has been at the core of
our success in our Out of Home business in 2016.
Enabling us to approach our current and new
customers with a portfolio of still products to sell
across our dispense, packaged and frozen ranges
has seen us gain valuable listings and deliver strong
growth. New customer wins with our frozen range
such as the Morrisons customer cafés will deliver
all year round business growth to complement our
more traditional seasonal business across holiday
parks and attractions.

We have also seen some new product launches into
the African market in 2016 with our Vimto Malt
range glass bottles and the launch of Vimto Ginger.
These new formats work well with our core Vimto
flavour across both the still and carbonate ranges

To support our Out of Home route to market we
have invested by recruiting new people across both
our field sales and national account teams. This will
drive incremental growth across our independent,
regional and national customers by offering our

unique portfolio of products to this broader
audience.

2017 will see us continue our strategy of driving
commercial growth across our three distinct income
streams to ensure our business remains diversified
to fuel our long-term growth aspirations.

Andrew Milne
Group Commercial Director

1 March 2017

33 MILLION
BOTTLES
SOLD
DURING
RAMADAN.

400 MILLION
LITRES OF
VIMTO SOLD
ACROSS
AFRICA.

VIMTO ALWAYS
BRINGS A SMILE
TO THE FACE OF
OUR CONSUMERS
WHILST HAVING
A REFRESHINGLY
DIFFERENT
APPROACH TO
EACH OF ITS LOCAL
MARKETS.

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roston

Chief Financial Officer

One of the aims of our growth strategy is to
leverage the benefits of our diverse business model.
Our 2016 performance again demonstrates the
importance of this strategy as we have delivered
growth from across the Group.

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In 2016 Nichols delivered another strong set of
results as the Group continued its trend of delivering
sustained profit growth whilst also increasing its
sales in both the UK and export markets.

Income Statement

Group sales totalled £117.3m, an increase of £8.0m
(7.4%) compared to the prior year (2015: £109.3m).

The majority of the sales growth came from the Still
segment which was driven by the Vimto brand and
the incremental sales of frozen beverages following
the acquisition of Noisy. The Carbonate segment
included positive growth from our sales to Africa.

Still

UK Sales

2015

54.8m

2016

59.5m

+8.6%

Carbonate

2015

54.5m

2016

57.8m

+6.1%

Total

2015

109.3m

2016

117.3m

+7.4%

I am pleased to report strong growth in the UK,
where sales increased by 7.0% to £90.7m, an
additional £5.9m compared to the prior year (2015:
£84.8m). This result was particularly pleasing given
that we had targeted top line growth following a
flat performance in 2015.

Within the UK, one of the key drivers of this
growth was Vimto, with sales into the grocery
market increasing by 4.7%. This is another strong
performance for the brand and significantly
outperforms the total market which increased by
1.0% in the same period (Nielsen year to date 31
December 2016). The Vimto increase in sales came
from the Still category, which increased by 5.4%
and Carbonate, which was up 3.3% compared to
2015. Elsewhere in the portfolio, sales from the
Levi Roots brand declined due to its performance in
the UK grocery market.

The other pleasing factor behind our UK
performance is the incremental sales from the
acquisition of Noisy. Post the full acquisition which
was completed 8 January 2016, the net

UK sales
grew by
7.0%

African market sales
increased by an underlying
19.7%

Total gross profit
increased by
11.6%

year-on-year sales benefit to the Group was £5.8m.
Noisy is a good strategic fit with our Out of Home
business and adds frozen beverages to our portfolio
of products for this sector which also includes
dispense and packaged soft drinks.

International Sales

International sales totalled £26.6m (2015: £24.4m),
delivering growth of £2.2m (8.8%) compared to last
year and 2.7% on a constant exchange rate basis.
The majority (c83%) of our international sales are in
our two key regions: Africa and the Middle East.

Sales to our African markets grew by an underlying
19.7% and buoyed by the stronger Euro, reported
sales increased by 32.5%. This performance came
from both core and new markets. Importantly, from
a value point of view, the trend shows an increasing
proportion of concentrate sales with in-country
producers rather than sales of finished goods via
in-country distributors.

Whilst our sales of concentrate to the Middle East
were 7.0% down on the prior year, it is important to
note that in-country sales of Vimto showed healthy

growth during 2016. Therefore, as explained in
previous years, the timing of shipments around our
year end is driven by the supply chain requirements
ahead of the following year’s Ramadan period.
Ramadan 2017 commences 27 May and we
anticipate several shipments of concentrate early in
Q1 2017.

Elsewhere, sales in our remaining international
markets totalled £4.6m (2015: £4.2m), an increase
of 10.8% compared to the prior year.

Gross Profit

Gross profit totalled £59.1m for the year, an
increase of 11.6% compared to the prior year.
In addition to the trading growth, our continued
focus on value over volume has contributed to
the increase in gross margin, which was 50.4%
compared to 48.5% in the prior year.

Distribution Expenses

The majority of our distribution expenses relate to
warehousing and haulage in our UK business. The
total cost in 2016 of £6.3m (2015: £5.5m) equates
to 5.3% of sales up from 5.0% in 2015 as a result of

a differing sales mix due to the growth in our Out
of Home business and the acquisition of Noisy.

Administrative Expenses

The total cost of overheads in 2016 was £22.5m,
which was £2.8m higher than the prior year.
The increase year-on-year is largely due to the
inclusion of the administration costs associated
with the addition of Noisy (the acquired business).
Administrative costs include depreciation and
amortisation, salaries and bonuses, administrative
costs, marketing costs, as well as other overheads.

Operating Profit

As a result of the strong trading performance,
operating profit increased by 9.0% to £30.3m
(2015: £27.8m). Consequently, the operating profit
margin has increased to 25.8% (2015: 25.5%).

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Exceptional Gain

Taxation

Key Performance Indicators

Having initially taken a 49% stake in Noisy in March 2015, the Group acquired
the remaining shares on 8 January 2016. Under International Financial
Reporting Standards, the latter transaction triggers a deemed disposal of the
initial 49% of the shares in Noisy and a subsequent acquisition of 100% of
the shares. As a consequence, a gain on disposal amounting to £1.1m arose
due to the increase in value of the 49% between March 2015 and January
2016. This gain is disclosed as an exceptional credit and is the only exceptional
item arising in the year.

The pre-exceptional effective tax rate is 19.8%, marginally lower than the prior
year (2015: 20.7%) reflecting the reduction in the standard rate of Corporation
Tax. The exceptional gain is not subject to tax.

As reported in more detail above, the following key performance indicators are used by management to monitor the Group’s income statement:

Profit Before Tax and Exceptional Items

Earnings Per Share

Profit before tax and exceptional items (PBT) increased by 8.6% to £30.4m
(2015: £28.0m). The Group maintained its impressive record of PBT growth
having delivered a 68% increase in the last five years with a Compound Annual
Growth Rate (CAGR) of 11%.

Basic earnings per share before exceptional items increased by 9.7% to 66.18
pence (2015: 60.33 pence). The Group’s EPS has increased by 84% over the
last five years with a CAGR of 13%.

Revenue Growth
+7.4%

Gross Margin
50.4%

Operating Profit Margin
25.8%

The increase in the current year’s revenue as a
percentage of the prior year’s total.

Revenue less product cost as a percentage of
revenue, reviewed specifically at individual product
(Still and Carbonate) level.

Group profit before financing income or charges as
a percentage of revenue, which is considered for
the Group as a whole rather than at product level.

Profit before tax and exceptional items (£m)

Basic EPS before exceptional items (pence per share)

80.00

60.00

40.00

20.00

0.00

2011

2012

2013

2014

2015

2016

2011

2012

2013

2014

2015

2016

Statement of Financial Position

Cash

The year end cash balance was £39.8m, an increase
of £4.4m compared to the prior year. The Group
remains very cash generative as demonstrated by
delivering cash from operating activities in excess
of profit for the financial year. In line with our
growth strategy, cash reserves have been invested
during the year in the acquisition of Noisy (£3.7m
during 2016) and further enhancements of £0.9m
to our operating facility at Ross-on-Wye, which
supplies our growing Out of Home business.

By exception, other points of note with regard to
the statement of financial position are:

• Property, plant and equipment increased by

£2.6m. This includes the £0.9m expenditure at
our Ross-on-Wye operating facility on plant and

machinery referred to above and £1.2m
acquired as part of the Noisy acquisition.

• Goodwill increased by £4.0m, recognised

on acquisition of Noisy.

•

Intangibles increase due to the customer
lists and brands associated with the
acquisition of Noisy.

Inventories at the year end have increased by
£2.8m in comparison to 2015, this was
planned to reduce the impact of higher
cost of goods in 2017.

• Movement in both trade and other

receivables/ payables are subject to the timing
of transactions around the reporting date.

• Pension liability increased to £6.4m (2015:

£3.9m) based on the movement in the actuarial
assumptions employed; in particular, the
discount rate employed has reduced to 2.55%

based on yields on high quality corporate
bonds. The Group has a recovery plan in place
to fund the deficit. The actuarial assumptions
and reconciliations of assets and liabilities in the
scheme are disclosed in note 26. The
movement in other comprehensive income

relating to the pension scheme is also described
in note 26.

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Risks and Uncertainties

Management consider the following issues to be the principal risks potentially affecting the business:

Risk

Mitigation

Management consider there would be a risk to the
Company’s growth ambitions if the business was reliant on
any one market or product category.

One of the key aims of our strategy is to invest and focus across our
business activities to leverage the diversity of the Group. We are
pleased that the strategy has successfully delivered growth in the UK,
both in our grocery and Out of Home markets in addition to our key
international regions.

In common with many businesses, we are highly
dependent on the availability of IT systems. The threat of
cyber-attack is an ever present and indeed, ever growing
risk in today’s global business environment.

Nichols operates a number of preventative systems and controls to
reduce the risk. In addition, we have a robust disaster recovery plan
including the use of third party professional providers to host our
systems and data.

During 2016, the Government announced the
introduction of the Soft Drinks Industry Levy commencing
April 2018. The levy will be an additional cost to suppliers
of soft drinks into the UK market dependent on the level
of added sugar in their products.

Prior to the announcement, Nichols was well placed to mitigate the
impact of the levy with a significant proportion of its product range
already below the levy hurdles. Through reformulation, the Company
is confident that the majority of its products will be levy exempt by
April 2018. In addition, as the levy only applies to the UK, all of our
extensive international sales are out of scope.

Unavailability of the Vimto compound. As the Vimto brand
accounts for the majority of the Group’s revenue, it is vital
that we have surety of supply of the compound.

Working in partnership with our suppliers, we have established
production capability with dual suppliers at more than one location to
ensure continuity of supply.

Loss of a major customer account.

We are dedicated to maintaining long-term relationships with all of our
customers but the Group’s diverse income stream across markets and
regions means we are not overly reliant on any one customer.

In addition to the above principal risks and mitigating controls, the risk register identifies several less critical risks that we believe are adequately managed and
considered by the management team.

Shareholders

Dividend

The Board is recommending a final dividend of 20.3 pence per ordinary share
(2015: 17.6 pence) payable to shareholders on the register at 7 April 2017.
The final dividend together with the interim dividend of 9.0 pence, gives a
total dividend of 29.3 pence per share for the year, which represents a 14.5%
increase on the prior year (2015: 25.6 pence).

The Board has maintained a consistent dividend policy over the last five years
during which time the growth has totalled 92% with a CAGR of 14%.

Share Price

The Nichols plc share price closed the year at 1,630 pence (2015: 1,430
pence), an increase of 14% during the year. 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 2011 as the base.

Total dividend (pence per share)

Nichols plc v All AIM (indexed from 2011)

2011

2012

2013

2014

2015

2016

3.5

2.5

1.5

0.5

2011

2012

2013

2014

2015

2016

Nichols PLC

All AIM index

Going Concern

Strategic Report

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.

The Strategic Report on pages 4 to 37 was approved by the Board of Directors
on 1 March 2017 and signed on its behalf by:

Tim Croston
Chief Financial Officer

1 March 2017

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John Nichols

Non-Executive Chairman

Marnie Millard

Chief Executive Officer

Tim Croston

Chief Financial Officer

Andrew Milne

Group Commercial Director

John Gittins

Independent Non-Executive Director

John Longworth

Independent Non-Executive Director

John is the grandson of the founder of the
Company and inventor of Vimto, John Noel Nichols.
John joined Nichols plc in 1971 and was appointed
as director in 1975. In 1986 John became the
Group Managing Director, subsequently he became
Executive Chairman of the Group and in 2007 he
moved to Non-Executive Chairman.

John has three grown up children, two of whom
also work for the Company. John spends his spare
time sailing, playing golf and walking his dog on the
beach in Wales.

Marnie joined Nichols in October 2012 as
Managing Director of Vimto Soft Drinks. In May
2013 she was appointed Chief Executive Officer.
Marnie has vast experience in the soft drinks
industry having occupied senior roles with Macaw
Soft Drinks and Refresco Limited. In April 2015,
Marnie was appointed Regional Vice-Chairman
of CBI Northwest and she is on the Board of
Management and Executive Council of the British
Soft Drinks Association.

Marnie is married, has two children and is also
a proud grandmother to her grandson Freddie.
Marnie enjoys attending concerts and relaxes by
walking on the moors near her home.

Tim joined the Group as Group Financial Controller
in 2005. He became Finance and Operations
Director of Vimto Soft Drinks in 2007 and was
appointed to the plc Board as Chief Financial
Officer in January 2010.

In December 2015, Tim was appointed, in a Non-
Executive capacity, to the Audit Committee of
Riverside Housing Association, a leading provider
of UK social housing. Previously, Tim held financial
controller positions at Polyone Inc. and at Smith
and Nephew plc. Tim has two teenage children with
his wife Sue. Tim is an avid and lifelong Manchester
City fan and likes to attend both home and away
matches with his family.

Andrew joined Nichols as the Commercial Director
for Vimto Soft Drinks in July 2013. He was
appointed to the plc Board on 1 January 2016.
Andrew has extensive experience in the soft
drinks industry having previously worked as Sales
Director for the Northern region at Coca-Cola
Enterprises and prior to that, as Trading Director at
GlaxoSmithKline.

Andrew has two young children with his wife
Debbie. Andrew is a keen Manchester United fan
and spends what spare time he has either watching
or playing sport.

John is a graduate of the London School of
Economics and a chartered accountant. He
was appointed to the Board of Nichols as an
independent Non-Executive Director in July 2015
and is a member of both the Audit Committee
(which he chairs) and the Remuneration Committee.

John is currently Audit Committee Chair of AIM
listed Park Group plc and has over 20 years
experience of CFO roles in companies such as
Begbies Traynor Group plc, Spring Group plc
and Vertex Data Science Limited. John was also
previously an independent Non-Executive Director
and the Audit Committee chair of Electricity North
West Limited for six years.

John has extensive experience at director level in
various organisations, including Asda, Tesco Stores
Limited and as Director General of the British
Chambers of Commerce and panel member of the
Competition Commission.

In addition, John is Chairman of SVA Limited, a
business he founded in 2010. John was appointed
to the Board of Nichols in November 2010 and is
also a member of both the Audit and Remuneration
Committees.

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Our strategy for growth includes developing our core
brands and markets whilst investing in innovation
and seeking further acquisition opportunities.

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 BDO LLP be
re-appointed auditors.

The directors present their report and the audited
financial statements for the year ended 31
December 2016.

Non-Executive Directors

P J Nichols

J Gittins

J Longworth

All of the above are members of the Audit and
Remuneration Committees of the Board.

Executive Directors

M J Millard

T J Croston

A Milne (Appointed 1 January 2016)

Financial Risk Management Objectives and
Policies

Business risks and uncertainties are included within
the Chief Financial Officer’s Report on pages 30 to
37 and financial risks are set out in note 21 to the
financial statements.

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.

Political Donations

There were no political donations in either 2016 or
2015.

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

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Directors’ remuneration payable in year ended 31 December 2016

Summary of directors’ interests in the Company

Salary
and fees

Benefits
in kind

Bonuses payable in
respect of 2016

Pension
contributions

Total
2016

Total
2015

£’000

P J Nichols

M J Millard

T J Croston

A Milne

J Longworth

J Gittins

E Healey

Total

101

266

196

182

799

151

110

102

456

350

308

102

387

306

360

1,271

837

(Number of Shares)

Opening shareholding

2016
movement

Closing
shareholding

P J Nichols

M J Millard

T J Croston

A Milne

J Longworth

J Gittins

2,000,000

17,607

140

9,307

(1,607)

1,280

9,307

16,000

140

1,280

Each of the directors who are directors at the
time when this directors’ report is approved have
confirmed that:

• 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 as directors in order to
make themselves aware of any relevant audit
information and to establish that the auditors

are aware of that information.

Directors’ Responsibilities Statement

The directors are responsible for preparing the
strategic report and 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 elected to
prepare the financial statements in accordance

with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. Under
Company law, 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.

The directors are also required to prepare financial
statements in accordance with the rules of the
London Stock Exchange for companies trading
securities on the Alternative Investment Market. 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 they have been prepared in
accordance with IFRSs as adopted by the
European Union;

• 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 requirements of 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.

The directors are responsible for ensuring the
annual report and the financial statements are
made available on a website. Financial statements
are published on the Company’s website in
accordance with legislation in the United Kingdom
governing the preparation and dissemination

of financial statements, which may vary from
legislation in other jurisdictions.

The maintenance and integrity of the Company’s
website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing
integrity of the financial statements contained
therein.

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

Bonuses which are not guaranteed are accruing
to the executive directors and certain senior
executives based on pre-determined performance
targets. The Remuneration Committee have
considered it appropriate to issue awards under an
incentive plan relating to growth in operating profit
before exceptional items.

Total bonuses paid to the three executive directors
during the year were £237,420. An additional
bonus of £245,854 was paid to M J Millard during
the year under a long-term incentive plan. Both
were accrued for at 31 December 2015.

The current incentive plan runs from 1 January
2014 to 31 December 2016 and the remuneration
level at grant was linked to a theoretical number
of shares equivalent in value to no more than
twelve months salary for each year of the incentive
scheme.

In respect of the scheme, the third year’s
performance criteria has been met and as a result,
the Group has provided for a bonus in 2016 of
£614,000 for the three executive directors at 31
December 2016, which will be payable subsequent
to the year ended 31 December 2016. The total
amount accrued for the three executive directors
across the three year’s of the incentive plan is
£1,843,000.

scheme and M J Millard, T J Croston and A Milne
have a personal pension plan. The Company
contributions to the respective schemes are shown
in the above table.

A summary of directors’ interests in the Company
are shown in the table above.

All figures above relate to shares owned outright.

By order of the Board

Tim Croston
Secretary

1 March 2017

Laurel House, Woodlands Park,
Ashton Road, Newton-le-Willows, WA12 0HH.

P J Nichols is a member of the final salary pension

Registered in England and Wales No. 238303.

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Introducti on

As an AIM listed business, the Group is not
required to comply with the UK Corporate
Governance Code (“the Code”). The Group does
not fully comply with the Code, but recognises
the importance of eff ecti ve corporate governance
procedures relevant to its size and nature of
operati ons, as described below.

The Board

The Board comprises a Non-Executi ve Chairman,
three Executi ve Directors and two Non-Executi ve
Directors. Their names and biographical details are
set out on pages 38 and 39. The Board considers
the two Non-Executi ve Directors, John Gitti ns and
John Longworth, to be independent. The posts of
Chairman and Chief Executi ve are held by diff erent
individuals. The Chairman is responsible for the
Board and the Chief Executi ve for the operati ng
performance of the Group.

The Board is scheduled to meet four ti mes each
year, with additi onal meeti ngs called if required.

The Board’s main responsibiliti es are to agree
Group strategy, approve annual budgets, review
management performance, fi nancial results, board
appointments and dividend policy. Comprehensive
briefi ng papers are distributed to all directors
prior to each scheduled Board meeti ng. Directors
are able, if necessary, to take independent
professional advice, at the Group’s expense, in the
furtherance of their duti es.

The Board has delegated specifi c responsibiliti es
to Audit and Remunerati on Committ ees (see
below). Due to the infrequency of senior
appointments, the Board does not maintain a
Nominati ons Committ ee, but will form one as
appropriate, if required. The appointment of
new Non-Executi ve Directors to the Board is
considered by the whole Board.

All directors are subject to electi on by
shareholders at the fi rst annual general meeti ng
aft er their appointment. Thereaft er, directors are
then subject to reti rement by rotati on at intervals
of no more than three years.

Remunerati on Committ ee

The Remunerati on Committ ee consists of all three
Non-Executi ve Directors and is chaired by John
Nichols.

The remunerati on committ ee met on one occasion
during the year. Its remit is to set remunerati on
packages for Executi ve Directors, approve any
Group share, share opti on or cash based incenti ve
scheme and grant, award, allocate shares, share
opti ons or payments under such schemes. In
additi on, the remunerati on committ ee periodically
reviews the Group’s remunerati on policy in
relati on to its peer group and industry norms.

The Executi ve Directors determine the
remunerati on of the Non-Executi ve Directors.

Details of directors’ remunerati on are set out in
the directors’ report on page 42.

Audit Committ ee

The Audit Committ ee consists of all three Non-
Executi ve Directors and is chaired by John Gitti ns,

an independent Non-Executi ve Director.

The Audit Committ ee met three ti mes during the
year.

The Audit Committ ee’s terms of reference are
available on the Group’s website. Its principal
responsibiliti es include monitoring the integrity
of fi nancial reporti ng, internal controls and the
external audit process.

During the year the Audit Committ ee discharged
its responsibiliti es by:

• approving the external auditor’s plan for
the audit of the Group’s annual fi nancial
statements, including key areas of audit
focus, key risks, confi rmati on of auditor
independence and terms of engagement;

• reviewing the Group’s draft fi nancial

statements and interim results statements
and reviewing the external auditor’s detailed
reports thereon, including dispositi on of key

audit issues and risks;

• meeti ng the external auditor twice, without
management, to discuss matt ers relati ng to
its remit and any issues arising from its work;

• considering the results of targeted reviews
by the fi nance team and other professional
advisors and the ti mely follow up of control

recommendati ons;

• reviewing the Group’s risk management
process, key risk register and risk miti gati ons.

Internal Control

The Board has overall responsibility for
maintaining sound internal control systems to
safeguard the investment of shareholders and
the Group’s assets. The systems are reviewed by
the Board and, when asked, the Audit Committ ee
and are designed to provide reasonable, but not
absolute, assurance against material misstatement
or loss.

The key features of the internal control systems
are:

• a Group organisati onal structure with clear

lines of responsibility;

• comprehensive business planning
procedures, including annual preparati on
of detailed budgets for the year ahead and
projecti ons for future years;

• approving the audit fee and reviewing the
Group’s policy for non-audit work. The
current policy is to not engage the auditor’s

• comprehensive monthly fi nancial reporti ng

system, highlighti ng variances to budget and
regularly updated forecasts;

for any non-audit work;

• considering the fi ndings of the Financial
Reporti ng Council’s Audit Quality Review of the
external auditor’s work for the 2015 fi nancial
year and monitoring of recommendati ons;

• reviewing the arrangements by which the
Group’s staff may, in confi dence, raise
concerns and issues and the process by
which these are proporti onately and

independently investi gated;

• targeted, risk lead, functi onal reviews by

the fi nance functi on and other professional

advisors.

In respect of the Audit Quaity Review fi ndings
on the external auditor’s 2015 audit work, the
Board and Audit Committ ee are sati sfi ed with the
quality of the audit work based on the fi ndings
which did not give rise to any signifi cant matt ers
and have ensured that the limited modifi cati on
to the approach arising from the review has been
enacted.

Att endance at Board and Committ ee Meeti ngs

The following tables set out the number of
scheduled meeti ngs of the Board and its
Committ ees during the year and individual
att endance by Board members:

Board Meeti ngs

Directors:

John Nichols

Marnie Millard

Tim Croston

Andrew Milne

John Longworth

John Gitti ns

Meeti ngs att ended

Remunerati on Committ ee

Directors:

John Nichols

John Longworth

John Gitti ns

Audit Committ ee

Directors:

John Nichols

John Longworth

John Gitti ns

Meeti ngs att ended

t
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’

Independent Auditor’s report to the members of
Nichols plc

We have audited the fi nancial statements of
Nichols plc for the year ended 31 December
2016 which comprise the consolidated income
statement, the consolidated statement of
comprehensive income, the Group and parent
Company statement of fi nancial positi on, the
consolidated and parent Company statement
of cash fl ows, the Group and parent Company
statement of changes in equity and the related
notes. The fi nancial reporti ng framework that has
been applied in their preparati on is applicable law
and Internati onal Financial Reporti ng Standards
(IFRSs) as adopted by the European Union and, as
regards the parent Company fi nancial statements,
as applied in accordance with the provisions of the
Companies Act 2006.

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 matt ers we are
required to state to them in an auditor’s report

and for no other purpose. To the fullest extent
permitt ed 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.

Respecti ve Responsibiliti es of Directors and
Auditors

As explained more fully in the statement of
directors’ responsibiliti es, the directors are
responsible for the preparati on of the fi nancial
statements and for being sati sfi ed that they give a
true and fair view. Our responsibility is to audit and
express an opinion on the fi nancial statements in
accordance with applicable law and Internati onal
Standards on Auditi ng (UK and Ireland). Those
standards require us to comply with the Financial
Reporti ng Council’s (FRC’s) Ethical Standards for
Auditors.

Scope of the Audit of the Financial Statements

A descripti on of the scope of an audit of fi nancial
statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.

Opinion on Financial Statements

In our opinion:

• the fi nancial statements give a true and fair
view of the state of the Group’s and the
parent Company’s aff airs as at 31 December
2016 and of the Group’s profi t for the year

then ended;

• the Group fi nancial statements have been
properly prepared in accordance with IFRSs
as adopted by the European Union;

• the parent Company fi nancial 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 fi nancial statements have been
prepared in accordance with the

requirements of the Companies Act 2006.

Opinion on other matt ers prescribed by the
Companies Act 2006

for our audit have not been received
from branches not visited by us; or

In our opinion, based on the work undertaken in
the course of the audit:

• the parent Company fi nancial statements
are not in agreement with the accounti ng

• the informati on given in the strategic report
and directors’ report for the fi nancial year for
which the fi nancial statements are prepared is
consistent with the fi nancial statements; and

• the strategic report and directors’ report
have been prepared in accordance with
applicable legal requirements.

Matt ers on which we are required to report by
excepti on

In the light of the knowledge and understanding
of the Group and the parent Company and its
environment obtained in the course of the audit,
we have not identi fi ed material misstatements in
the strategic report or the directors’ report.

records and returns; or

• certain disclosures of directors’ remunerati on

specifi ed by law are not made; or

• we have not received all the informati on
and explanati ons we require for our audit.

Julien Rye
(Senior Statutory Auditor)

We have nothing to report in respect of the
following matt ers where the Companies Act 2006
requires us to report to you if, in our opinion:

For and on behalf of BDO LLP,
statutory auditor, Manchester, United Kingdom.
1 March 2017

• adequate accounti ng records have not been kept
by the parent Company, or returns adequate

BDO LLP is a limited liability partnership registered in England and Wales (with
registered number OC305127).

Auditors
BDO LLP, 3 Hardman Street,
Spinningfi elds, Manchester,
M3 3EB.

Bankers
The Royal Bank of Scotland PLC, 1 Spinningfi elds
Square, Manchester, M3 3AP.

Solicitors
DLA Piper, 101 Barbirolli Square, Manchester, M2
3DL.

Stockbrokers & Nominated
Advisor
N+1 Singer Advisory LLP, West One Wellington
Street, Leeds,
LS1 1BA.

Financial Advisors
N M Rothschild & Sons Limited, 82 Kings Street,
Manchester,
M2 4WQ.

Registrars
Capita Registrars Limited, Northern House,
Woodsome Park, Fenay Bridge, Huddersfi eld,
HD8 0GA.

Registered Oﬃ ce
Laurel House, Woodlands Park, Ashton Road,
Newton-le-Willows,
WA12 0HH.

Registered Number
238303.

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CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2016

STATEMENT OF FINANCIAL POSITION
YEAR ENDED 31 DECEMBER 2016

Revenue

Cost of sales

Gross profit

Distribution expenses

Administrative expenses

Operating profit

Finance income

Finance expense

Share of post-tax profits of equity accounted associate

Profit before taxation

Taxation

Profit for the financial year attributable to equity holders of the parent

Earnings per share (basic)

Earnings per share (diluted)

Before
exceptional
items
£’000

Exceptional
items
£’000

117,349

(58,234)

59,115

(6,271)

(22,519)

30,325

214

(134)

30,405

(6,015)

24,390

1,087

Notes

2016
£’000

2015
£’000

117,349

109,279

(58,234)

(56,296)

59,115

52,983

(6,271)

(5,483)

(22,519)

(19,666)

30,325

27,834

1,301

(134)

213

(201)

190

31,492

28,036

(6,015)

(5,803)

25,477

22,233

69.13p

60.33p

69.07p

60.25p

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2016

Profit for the financial year

Items that will not be reclassified subsequently to profit or loss

Remeasurement of net defined benefit liability (see note 26)

Deferred taxation on pension obligations and employee benefits (see note 14)

Other comprehensive (expense)/ income for the year

Total comprehensive income for the year

2016
£’000

25,477

(3,472)

601

(2,871)

22,606

2015
£’000

22,233

1,632

(274)

1,358

23,591

Assets

Non-current assets

Property, plant and equipment

Goodwill

Investments

Investment in equity accounted associate

Intangibles

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

Total current liabilities

Non-current liabilities

Pension obligations and employee benefits

Deferred tax liabilities

Total non-current liabilities

Total liabilities

Net assets

Equity

Share capital

Share premium reserve

Capital redemption reserve

Other reserves

Retained earnings

Total equity

Group

2016
£’000

Notes

8,715

23,061

6,084

1,436

39,296

6,717

31,508

39,754

77,979

117,275

21,456

2,355

23,811

6,395

1,101

7,496

31,307

85,968

3,697

3,255

1,209

(358)

78,165

85,968

2015
£’000

6,061

19,108

2,970

1,316

1,098

Parent

2016
£’000

3,970

2,504

2015
£’000

3,928

2,504

16,566

1,316

1,436

1,316

1,098

30,553

25,792

25,412

3,945

27,860

35,438

67,243

97,796

18,127

2,679

20,806

3,893

3,979

24,785

73,011

3,697

3,255

1,209

(547)

65,397

73,011

3,914

25,020

25,768

54,702

80,494

21,008

357

21,365

6,395

27,760

52,734

3,697

3,255

1,209

417

44,156

52,734

2,430

20,765

22,907

46,102

71,514

16,981

1,160

18,141

3,893

22,034

49,480

3,697

3,255

1,209

228

41,091

49,480

PJ Nichols
Chairman
Registered number 238303.

The parent Company reported a profit for the year ended 31 December 2016 of £15,774,000 (2015: £15,974,000).

The financial statements on pages 48 to 77 were approved by the Board of Directors on 1 March 2017 and were signed on its behalf by:

CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2016

PARENT COMPANY STATEMENT OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2016

Cash flows from operating activities

Profit for the financial year

Adjustments for:

Depreciation and amortisation

(Profit)/ loss on sale of property, plant and equipment

Finance income - non-exceptional

Finance expense

Finance income - exceptional gain

Tax expense recognised in the income statement

Change in inventories

Change in trade and other receivables

Change in trade and other payables

Change in pension obligations and employee benefits

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

Acquisition of business trade and assets

Acquisition of associate investment

Net cash used in investing activities

Cash flows from financing activities

Share options exercised

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

2016
£’000

25,477

2015
£’000

22,233

1,111

(6)

(214)

134

(1,087)

6,015

(2,382)

(3,036)

1,229

(970)

214

(2,442)

(3,715)

(107)

(9,806)

502

(213)

201

5,803

767

(4,335)

(1,560)

(665)

213

(1,767)

(157)

(3,820)

(2,970)

516

22,749

(4,639)

18,110

794

26,271

(6,116)

20,155

(5,926)

(8,497)

(69)

(8,589)

(8,658)

955

34,483

35,438

(9,913)

4,316

35,438

39,754

Cash flows from operating activities

Profit for the financial year

Adjustments for:

Depreciation

Loss on sale of property, plant and equipment

Finance income

Finance expense

Tax expense recognised in the income statement

Change in inventories

Change in trade and other receivables

Change in trade and other payables

Change in pension obligations and employee benefits

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 business trade and assets

Hive-up of dormant subsidiaries

Net cash used in investing activities

Cash flows from financing activities

Share options exercised

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

2016
£’000

15,774

2015
£’000

15,974

281

(214)

126

4,037

(1,484)

(4,255)

4,165

(970)

214

(323)

(107)

(9,806)

271

(213)

201

4,266

205

355

(430)

(665)

213

(441)

(3,820)

390

3,992

19,966

(3,868)

16,098

1,686

17,460

(4,577)

12,883

(109)

(3,658)

(68)

(8,589)

(8,657)

3,783

19,124

22,907

(9,913)

2,861

22,907

25,768

STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2016

Group

At 1 January 2015

Dividends

Movement in ESOT

Transactions with owners

Profit for the year

Other comprehensive income

Total comprehensive income

At 1 January 2016

Dividends

Movement in ESOT

Transactions with owners

Profit for the year

Other comprehensive expense

Total comprehensive income

At 31 December 2016

Parent

At 1 January 2015

Dividends

Movement in ESOT

Transactions with owners

Profit for the year

Other comprehensive income

Total comprehensive income

At 1 January 2016

Dividends

Movement in ESOT

Transactions with owners

Profit for the year

Other comprehensive expense

Total comprehensive income

At 31 December 2016

Called up share
capital
£’000

Share premium
reserve
£’000

Capital redemption
reserve
£’000

Other
reserves
£’000

Retained
earnings
£’000

Total
equity
£’000

3,697

3,255

1,209

(560)

50,477

58,078

(8,589)

(82)

(69)

(8,671)

(8,658)

22,233

1,358

23,591

3,697

3,255

1,209

(547)

65,397

73,011

189

(9,806)

(32)

157

(9,838)

(9,649)

25,477

(2,871)

22,606

3,697

3,255

1,209

(358)

78,165

85,968

Called up share
capital
£’000

Share premium
reserve
£’000

Capital redemption
reserve
£’000

Other
reserves
£’000

Retained
earnings
£’000

Total
equity
£’000

3,697

3,255

1,209

215

32,036

40,412

3,697

3,255

1,209

228

189

(8,589)

(81)

(68)

(8,670)

(8,657)

16,367

1,358

17,725

41,091

49,480

(9,806)

(32)

157

(9,838)

(9,649)

15,774

(2,871)

12,903

3,697

3,255

1,209

417

44,156

52,734

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

1. Reporting entity

Nichols plc (the “Company”) is a company incorporated
and domiciled in the United Kingdom, listed on
the Alternative Investment Market. 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 2016 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.

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 and the Companies Act 2006 as
applicable to companies reporting under IFRS.

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.

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 reporting date, that have a significant risk of
causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year.

Carrying value of brand support accruals

The Group incurs significant costs in the support and
development of the Group’s brands. The majority of
costs incurred on the arrangements (and therefore
deduction to revenue) have been settled at 31
December 2016, however certain judgement is
required in determining the level of closing accrual
required at a year end for promotions and brand
support campaigns that either span two financial years
or where the costs have not been fully settled by the
year end date. This includes sales related discounts
which are included within revenue as disclosed in the

revenue recognition policy below. Based on the timing
of the agreements entered into with customers in the
year, the level of estimation in the year end accrual is
insignificant.

In particular, promotion campaigns with customers
take place over short time frames, with volume and
sales forecasts during the campaign benchmarked
against prior experience and reviewed with the
customer in advance of the promotion. During the
promotion the systems and processes within the
business allow the directors to monitor the level of the
estimate against actual spend during the promotion,
such that any judgement taken at the year end is
not significant across the promotional timeframe. In
respect of brand support campaigns, management has
well established joint business arrangements in place
with customers, and again the systems and processes
allow management to have full visibility of activity
levels on these plans, allowing estimates to be made
with a strong degree of certainty at the year end. There
has not been any evidence of eventual settlements of
liabilities in respect of the above being significantly
different to that being accrued.

Intangible assets with indefinite lives

In the opinion of the directors, the industry in which
the Group operates is stable and there are relatively
high barriers to entry. The brands acquired are well
established in their respective sales channels and both
have an important role to play in all of the Group’s
routes to market. The brands are also well positioned
to mitigate against the impact of recent sugar levy
announcements.

The directors have therefore made a judgement
that certain intangible assets relating to brands have
indefinite lives. It is expected that these brands will
be held and supported for an indefinite period of time
and are expected to generate economic benefits.
The Group is committed to supporting its brands and
invests in significant consumer marketing promotional
spend.

Impairment of goodwill and intangible assets with
indefinite lives

Determining whether goodwill and intangible
assets with indefinite lives are impaired requires an
estimation of the value in use of the cash-generating
units to which the assets have 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 11).

The carrying amount of goodwill at the reporting date

was £23.1 million (2015: £19.1 million).

Customer list intangible assets have finite lives
assigned. Such assets are tested for impairment if an
impairment indicator exists. No risks are noted at 31
December 2016.

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 26).

Basis of consolidation and goodwill

The Group financial statements consolidate those of
the Company and all of its subsidiary undertakings
drawn up to 31 December 2016. Subsidiaries are
entities controlled by the Group. Control exists if all
three of the following elements are present: power
over the investee, exposure to variable returns from
the investee, and the ability of the investor to use
its power to affect those variable returns. Control is
reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements
of control. The financial statements of subsidiaries are
included in the consolidated financial statements from
the date that control commences until the date that
control ceases.

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
acquisition method. The acquisition 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 statement
of financial position 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 the fair value
of the consideration transferred over the fair value of
the Group’s share of the identifiable net assets of the
acquired subsidiary at the date of acquisition.

In the year, the Group has acquired the remaining 51%
share of Noisy, which was previously accounted for
as an investment in associate. In calculating goodwill,

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

the fair value of consideration has been calculated
using the cash consideration plus the directors’ best
estimate of deferred consideration at the acquisition
date plus the fair value of the 49% interest already
owned. To calculate goodwill, this calculation has been
compared to the net assets at the date of acquisition
of the remaining 51% of shares of Noisy, including an
assessment of the fair value of intangible assets. The
exceptional gain recognised relates to the excess of the
fair value of the 49% interest over its book value.

Revenue recognition

Revenue from the sale of goods is calculated on the
basis of the invoiced price, less any agreed discounts or
rebates and excluding VAT and after the deduction of
certain promotional and brand support costs invoiced
by customers.

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. With
regards to discounts, rebates, promotional costs and
brand support costs, these costs are calculated to
reflect the expected amount of customer claims in
respect of these items. The statement of financial
position includes accruals for claims yet to be received
for discounts, rebates and promotional costs.

Transfer of risks and rewards and cessation of
continuing mangement involvement varies 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 Board (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 Board 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.

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 in other comprehensive income/ (expense),
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.

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.

Brands

Brands acquired in a business combination are
recognised at fair value at the acquisition date. Brands
acquired separately through a business combination
are assessed at the date of acquisition as to whether
they have an indefinite life. The assessment includes
whether the brand name will continue to trade and
the expected lifetime of the brand. All brands acquired
to date have been assessed as having an indefinite
life as they are expected to continue to contribute
to the long-term future of the Group. The brands are
reviewed annually for impairment, being carried at cost
less accumulated impairment charges. The fair value of
a brand at the date of acquisition is based on the Relief
from Royalties method, which is a valuation model
based on discounted cash flows.

Customer lists

Customer lists acquired in a business combination are
recognised at fair value at the acquisition date. They
are amortised over the useful economic life identified
at the date of acquisition with amortisation charges
included within administrative expenses.

Reserves

Share capital represents the nominal value of equity
shares.

Share premium represents the excess over nominal
value of the fair value of the consideration received for
equity shares.

Capital redemption reserve represents the reserve
created upon redemption of shares.

Other reserves incorporate purchase of own shares
and movements in the Group’s ESOT.

Retained earnings represents retained earnings.

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.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

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 cash-generating
unit. 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 property, plant
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

Land and buildings

50 years

Material residual value estimates and useful economic
lives are updated at least annually.

Land is not depreciated.

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.

Financial assets

The Group’s financial assets comprise primarily cash,
bank deposits and trade receivables that arise from its
business operations. Financial assets are a contractual
right to receive cash or another financial asset from
another entity or to exchange financial assets or
financial liabilities with another entity under conditions
that are potentially favourable to the entity.

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, such as significant financial
difficulties on the part of the counterparty or default or
significant delay in payment.

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.

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.

Post-employment benefit plans

The Group provides post-employment benefits
through various defined contribution and defined
benefit plans.

Employee benefit - Incentive Plan

An accrual is recognised in respect of an incentive
plan that will see amounts payable to employees and
directors subsequent to the year ended 31 December
2016 if group targets continue to be met. The
quantum of the accrual is based on target growth in
operating profit before exceptional items linked to a
theoretical number of shares and a theoretical share
price-earnings ratio. The quantum of the accrual is re-
assessed at each year end based on the performance
of the group against the target set.

Defined Contribution Plan

The Group pays fixed contributions into independent
entities in relation to plans and insurances for
individual employees. The Group has no legal
or constructive obligations to pay contributions
in addition to its fixed contributions, which are
recognised as an expense in the period that relevant
employee services are received.

Defined Benefit Plan

Under the Group’s defined benefit plan, the amount
of pension benefit that an employee will receive on
retirement is defined by reference to the employee’s
length of service and final salary. The legal obligation
for any benefits remains with the Group, even if plan
assets for funding the defined benefit plan have been
set aside. Plan assets may include assets specifically
designated to a long-term benefit fund as well as
qualifying insurance policies.

The liability recognised in the statement of financial
position for defined benefit plans is the present
value of the defined benefit obligation (DBO) at the
reporting date less the fair value of plan assets.

Management estimates the DBO annually with the
assistance of independent actuaries. This is based
on the standard rates of inflation, salary growth
and mortality. Discount factors are determined
close to each year end by reference to high quality
corporate bonds that are denominated in the
currency in which the benefits will be paid and that
have terms to maturity approximating to the terms
of the related pension liability. Service cost on the
net defined benefit liability is included in employee
benefits expense. Net interest expense on the net
defined benefit liability is included in finance costs.
Remeasurement of the DBO, comprising actuarial gains
and losses and the return on scheme assets (excluding
interest), are recognised in the statement of other
comprehensive income in the year in which they arise.

payable to a customer given the existence of brand
support accruals. Similarly the directors are reviewing
the impact of IFRS 16, which will become effective for
the 31 December 2019 year end. At the current year
end the total minimum lease payments on operating
leased assets is £3,165,221 which is considered
materially similar to the asset and liability that would
be recognised if IFRS 16 were effective at the current
time.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

Share-based payment transactions

Employee Share Ownership Trust

The Group’s equity-settled share-based payments
comprise the grant of options under the Group’s share
option schemes.

The assets and liabilities of the Employee Share
Ownership Trust (ESOT) have been included in the
consolidated financial statements.

The Group recognises 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 2016
for the year ending 31 December 2016.

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.

Those fair values are charged to the income statement
over the relevant vesting period adjusted to reflect
actual and expected vesting levels. The Group
calculates the fair market value of the 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 reporting
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 managed by the ESOT, therefore there is no
impact on share capital and share premium when the
options are exercised.

Investments in subsidiaries

Investments in subsidiaries are shown in the parent
Company statement of financial position at cost less
any provision for impairment.

Investments in associates

Associates are entities over which the Group has
significant influence but does not control, generally
accompanied by a share of between 20% and 50%
of the voting rights. Investments in associates are
accounted for using the equity method.

Standards and interpretations in issue not yet
adopted

At the date of authorisation of these financial
statements, the following Standards and
Interpretations which have not been applied in these
financial statements were in issue but not yet effective
(and in some cases had not yet been adopted by the
EU):

IFRS 9, Financial instruments

IFRS 15, Revenue from contracts with customers

Provisions and contingent liabilities

IFRS 16, Leases

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 potential costs of a legal claim is
recognised when Management have considered the
merits of the claim and taken appropriate legal advice
as to the outcome of the litigation.

Finance income

Finance income comprises interest income on funds
invested. Interest income is recognised as it accrues,
using the effective interest method.

Disclosure Initiative: Amendments to IAS 7

Clarifications to IFRS 15 revenue from contracts with
customers

Classification and Measurement of Share-based
Payment Transactions (Amendments to IFRS 2)

Annual Improvements to IFRSs (2014-2016 Cycle)

The directors are currently considering the
potential impact of adoption of these standards and
interpretations in future periods on the consolidated
financial statements of the Group.

In respect of the above, the directors are specifically
reviewing the requirements of IFRS 15, which will
become effective for the 31 December 2018 year
end. In particular, an assessment is ongoing around
specific elements within the standard’s guidance
relating to variable consideration and consideration

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

3. Segmental information

a. Key operating segments

The Board 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 Board considers the business from a product perspective and reviews the
Group on the operating segments identified below. There has been no change

to the segments during the year. Based on the nature of the products sold by
the Group, the types of customers and methods of distribution, management
consider reporting operating segments at the Still and Carbonate level to be
reasonable. Gross profit is the measure used to assess the performance of each
operating segment as identified as a KPI in the Chief Financial Officer’s Report.

Still

Carbonate

Total

Revenue

Gross Profit

2016
£’000

59,523

57,826

2015
£’000

54,791

54,488

117,349

109,279

2016
£’000

34,702

24,413

59,115

2015
£’000

30,452

22,531

52,983

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 overheads are managed centrally by the Board and consequently there is no reconciliation to profit before tax at a segmental level.

The Group’s assets are managed centrally by the Board 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 area

Revenue by geographic destination

Middle East

Africa

Rest of the World

Total exports

United Kingdom

2016
£’000

2,442

954

2016
£’000

11,497

10,496

4,606

26,599

90,750

117,349

2015
£’000

1,767

502

2016
%

9.9

8.9

3.9

22.7

77.3

100.0

2015
£’000

12,365

7,922

4,182

24,469

84,810

109,279

2015
%

11.3

7.2

3.9

22.4

77.6

100.0

Revenue from continuing operations arose principally from the provision of goods.

Total assets

The Group’s business segments operate in the Middle East, Africa, the Rest of the
World and the United Kingdom. The Group’s Head Office operations are located in
the United Kingdom.

In presenting information on the basis of geographical areas, area 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
2016 or 2015.

The assets of the Group at 31 December 2016 and 31 December 2015 are entirely
located within the United Kingdom.

Capital expenditure

The capital expenditure of the Group for the years ended 31 December 2016 and 31
December 2015 was entirely made within the United Kingdom.

Depreciation

The Group’s depreciation charges for the years ended 31 December 2016 and 31
December 2015 are against property, plant and equipment all retained within the
United Kingdom.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

4. Operating profit

Operating profit is stated after charging/ (crediting):

Inventory amounts charged to cost of sales

BDO LLP remuneration:

Audit services of the company’s annual accounts

Non-audit services; corporate finance services

Depreciation of property, plant and equipment

Operating lease rentals payments

Awards under Incentive Plan

(Gain)/ loss on foreign exchange differences

(Profit)/ loss on sale of property, plant and equipment

Amortisation of intangible assets

5. Finance income and expense

Finance income comprises:

Bank interest receivable

Exceptional item - gain on step-acquisition of The Noisy Drinks Co. Limited

Finance income

Finance expense comprises:

Net interest income on defined benefit pension scheme assets

Interest on defined benefit pension scheme obligations

Bank interest payable

Finance expense

2016
£’000

2015
£’000

58,234

56,296

954

548

1,268

(464)

(6)

157

2016
£’000

214

1,087

1,301

(845)

971

134

502

536

1,017

316

2015
£’000

213

(820)

1,021

201

Notes

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

6. Directors and employees

a. Average number of persons employed during the year, including directors:

2016
Number

2015
Number

Group

Parent Company

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 26)

Accrued under Incentive Plan

c. Parent Company employment costs were as follows:

Wages and salaries

Social security costs

Pension costs - defined contribution scheme

Pension costs - defined benefit scheme (see note 26)

Accrued under Incentive Plan

205

154

2016
£’000

8,823

923

319

1,268

11,362

2016
£’000

8,109

906

304

1,268

10,616

178

116

2015
£’000

7,677

736

304

1,017

9,771

2015
£’000

7,051

614

258

1,017

8,977

Group and parent Company key management personnel compensation

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the
directors of the Company listed on page 41.

Wages and salaries

Pension costs

Accrued under Incentive Plan

2016
£’000

1,212

614

1,885

2015
£’000

806

724

1,561

The highest paid director has received £393,000 (2015: £386,000) excluding pension contributions.

Benefits are accruing to 4 directors (2015: 3 directors) under a defined contribution scheme, the highest paid director has received contributions of £17,000 in the year.

Further information regarding directors’ remuneration and the Incentive Plan is provided in the directors’ report on pages 40 to 43.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

7. 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

2016
£’000

5,738

5,755

267

(7)

260

2015
£’000

5,425

5,458

429

(84)

345

Total tax expense in the consolidated income statement

6,015

5,803

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 20.00% (2015: 20.25%)

Effect of:

Non-deductible expenses

Other tax adjustments, reliefs and transfers

Other timing differences

Adjustments to the tax charge in respect of prior years

Income not taxable for tax purposes

Depreciation for the year lower than capital allowances

Opening share scheme deferred tax

Impact on deferred tax due to rate change

Total tax expense in the consolidated income statement

2016
£’000

2015
£’000

31,492

28,036

6,298

5,677

(330)

(36)

(7)

(90)

103

6,015

134

(74)

(50)

(38)

5,803

The effective rate of tax for the year of 19.1% (2015: 20.7%) is lower than the standard rate of Corporation Tax in the United Kingdom (20.00%). The differences are
explained above.

c. The effective rate of tax on profit is 19.1% (2015: 20.7%).

d. Tax on items recognised in other comprehensive expense

In addition to the amount charged to the consolidated income statement, a credit of £601,000 (2015: charge of £274,000) has been recognised in other comprehensive
(expense)/ income, being the movement on deferred taxation relating to retirement benefit obligations and employee benefits.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

8. Equity dividends

Interim dividend 9.00p (2015: 8.00p) paid 26 August 2016

Final dividend for 2015 17.60p (2014: 15.30p) paid 3 May 2016

2016
£’000

3,318

6,488

9,806

2015
£’000

2,949

5,640

8,589

The interim dividend for the prior year of £2,949,000 was paid on 28 August 2015.

The 2016 final proposed dividend of £7,505,000 (20.30p per share) has not been accrued as it had not been approved by the year end.

9. 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

Earnings per share - before exceptional items

Basic earnings per share

Dilutive effect of share options

Diluted earnings per share

2016

69.13p

69.07p

66.18p

66.12p

2015

60.33p

60.25p

60.33p

60.25p

Earnings
£’000

25,477

2016
Weighted
average number
of shares

Earnings
per share

36,853,888

69.13p

33,197

Earnings
£’000

22,232

2015
Weighted
average number
of shares

Earnings
per share

36,849,638

60.33p

52,981

25,477

36,887,085

69.07p

22,232

36,902,619

60.25p

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:

Basic earnings per share

Exceptional items

Basic earnings per share before exceptional items

2016
Weighted
average number
of shares

Earnings
per share

36,853,888

69.13p

2015
Weighted
average number
of shares

Earnings
per share

36,849,638

60.33p

Earnings
£’000

22,232

36,853,888

66.18p

22,232

36,849,638

60.33p

Earnings
£’000

25,477

(1,087)

24,390

Dilutive effect of share options

33,197

52,981

Diluted earnings per share before exceptional items

24,390

36,887,085

66.12p

22,232

36,902,619

60.25p

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

10. Property, plant and equipment

Group

Cost

At 1 January 2015

Additions

Disposals

At 1 January 2016

Additions

On acquisition of subsidiary

Disposals

Land and
buildings
£’000

3,444

Property,
plant and
equipment
£’000

5,807

1,767

(82)

7,492

2,442

1,177

(110)

Parent

Cost

Land and
buildings
£’000

Property,
plant and
equipment
£’000

At 1 January 2015

3,444

2,666

Additions

Disposals

441

(2)

Total
£’000

6,110

441

(2)

Total
£’000

9,251

1,767

(82)

10,936

At 1 January 2016

3,444

3,105

6,549

2,442

1,177

(110)

Additions

Disposals

323

At 31 December 2016

3,444

3,428

6,872

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

11. Goodwill

Group

Cost

At 1 January 2015

Acquisitions

At 1 January 2016

Acquisition (see note 19)

At 31 December 2016

Parent

Cost

At 1 January 2015

Acquisitions

At 1 January 2016

Acquisitions

At 31 December 2016

£’000

16,447

2,661

19,108

3,953

23,061

£’000

2,504

The Group goodwill acquisition for 2016 relates to the acquisition of the remaining 51% of the issued share capital of The Noisy Drinks Co. Limited, completed on 8 January
2016. The total goodwill is entirely attributable to the Out of Home business. Details of the fair value of identifiable assets acquired, purchase consideration and goodwill are
shown in note 19.

At 31 December 2016

3,444

11,001

14,445

All goodwill relates to the Out of Home business which is considered by management to be two cash-generating
units (CGU’s) sitting below each of the Still and Carbonate operating segments:

Depreciation

At 1 January 2015

Charge for the year

On disposals

At 1 January 2016

Charge for the year

On disposals

At 31 December 2016

Land and
buildings
£’000

Property,
plant and
equipment
£’000

Total
£’000

4,434

502

(61)

Depreciation

At 1 January 2015

Charge for the year

On disposals

4,394

433

(61)

4,766

4,875

At 1 January 2016

885

(99)

954

(99)

Charge for the year

On disposals

5,552

5,730

At 31 December 2016

109

178

Land and
buildings
£’000

Property,
plant and
equipment
£’000

109

178

2,512

2,621

212

281

2,724

2,902

Total
£’000

2,351

271

(1)

Still

Out of Home

Carbonate

Out of Home

2,311

202

(1)

2016
£’000

2015
£’000

14,409

10,456

8,652

23,061

8,652

19,108

Net book value at
31 December 2016

Net book value at
31 December 2015

3,266

5,449

8,715

3,335

2,726

6,061

Net book value at
31 December 2016

Net book value at
31 December 2015

3,266

704

3,970

3,335

592

3,928

Brand names with indefinite lives were recognised as part of the fair value exercise on the acquisition of Noisy (2016) and the trade and assets of Feel Good Drinks (2015).
Both have been allocated to the CGU’s above for impairment testing.

Impairment review

Goodwill and intangible assets with indefinite lives are tested at least annually for
impairment and whenever there are indications that the assets 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 headroom on the assessment is significant. If the discount rate were to increase
by 10% (i.e. to 20.35%) the discounted cash flows would still exceed the carrying
amount, likewise if the free cash flows were to reduce by 10% the discounted cash
flows would still exceed the carrying amount.

The following are the key assumptions on which the directors have based their cash
flow projections to undertake impairment testing:

The discount rate of 10.35% is a pre-tax rate and reflects the risks specific to the
relevant cash-generating unit. Out of Home business cash flow projections are based
on the most recent financial budgets approved by management. Management have
applied an annual growth rate in projecting the cash flows for a period of five years
in line with these budgets. Further periods have been included in the impairment
test based on growth into perpetuity of 2% per annum. Management consider the
annual growth projections for 5 years and into perpetuity to be reasonable in light of
company growth in the current year and economic growth rates.

Management have considered the allocation of the excess of the fair value of the
consideration transferred over the fair value of the Group’s share of the identifiable
assets acquired to other intangibles and are satisfied that is it correctly allocated to
goodwill.

• Volume growth rates - reflect senior management expectations of volume
growth based on growth achieved to date, current strategy and expected

market trends.

• Brand contribution - being revenue less marginal costs that the directors

consider to be directly attributable to the sale of the given brand. Key to brand
contribution is pricing, discounts and the cost base.

• Raw material price, distribution costs and overhead inflation - the basis used to

determine the value assigned to inflation is the forecast CPI.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

12. Investments: shares in Group undertakings

Parent

Cost and net book amount

At 1 January 2015, 1 January 2016 and at 31 December 2016

£’000

16,566

All non-current investments relate to Group undertakings. Listed below are the trading subsidiaries and the ownership of their ordinary share capital by the Group:

Beacon Drinks Limited *

Ben Shaws Dispense Drinks Limited

Cabana Soft Drinks Limited **

Dayla Liquid Packing Limited

Dispense Solutions Limited *****

Festival Drinks Limited ***

Vimto (Out of Home) Limited

Nichols Dispense (S.W.) Limited ****

The Noisy Drinks Co. Limited ******

100

The Company directly owns Ben Shaws Dispense Drinks Limited, Dayla Liquid
Packing Limited and Vimto (Out of Home) Limited.

*Beacon Drinks Limited is directly owned by Vimto (Out of Home) Limited.

**Cabana Soft Drinks Limited is directly owned by Vimto (Out of Home) Limited.

*** Festival Drinks Limited is directly owned by Vimto (Out of Home) Limited.

**** Nichols Dispense (S.W.) Limited is directly owned by Vimto (Out of Home)
Limited.

***** Dispense Solutions (Wales) Limited is directly owned by Nichols Dispense
(S.W.) Limited.

****** The Noisy Drinks Co. Limited is directly owned by Vimto (Out of Home)
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
confirmation statement.

All companies in the Group are engaged in the supply of soft drinks and other
beverages.

The registered address of each of the above is Laurel House, Woodlands Park,
Ashton Road, Newton-le-Willows, WA12 0HH.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

13. Intangibles

Group

At 1 January 2015

Acquisitions

At 1 January 2016

Acquisitions (see note 19)

At 31 December 2016

Amortisation

At 1 January 2015 and 1 January 2016

Charge in the year

At 31 December 2016

Carrying value at 31 December 2016

Carrying value at 31 December 2015

Parent

At 1 January 2015

Acquisitions

At 1 January 2016 and 31 December 2016

Brand name
£’000

Customer list
£’000

Total
£’000

1,316

4,925

6,241

157

2,352

157

2,195

6,084

1,316

2,573

3,889

1,316

Brand name
£’000

1,316

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

14. Deferred tax assets and liabilities

Movement in temporary differences during the year

Group

Property, plant and equipment

Goodwill and intangibles

Employee benefits

Provisions

Group

Property, plant and equipment

Goodwill and intangibles

Employee benefits

Provisions

Parent

Property, plant and equipment

Goodwill and intangibles

Employee benefits

Provisions

Parent

Property, plant and equipment

Goodwill and intangibles

Employee benefits

Provisions

Net balance at 1
January 2016
£’000

Arising on
business combination
£’000

Recognised
in income
£’000

Recognised in other
comprehensive expense
£’000

Net balance at 31
December 2016
£’000

(41)

247

770

1,012

(886)

(158)

(31)

(202)

(1)

(392)

601

(199)

(670)

1,169

335

Net balance at 1
January 2015
£’000

Arising on
business combination
£’000

Recognised
in income
£’000

Recognised in other
comprehensive income
£’000

Net balance at 31
December 2015
£’000

(37)

294

1,277

1,629

(4)

(47)

(233)

(59)

(343)

(274)

(41)

247

770

1,012

Net balance at 1
January 2016
£’000

Arising on
business combination
£’000

Recognised
in income
£’000

Recognised in other
comprehensive expense
£’000

Net balance at 31
December 2016
£’000

247

770

1,098

(29)

(31)

(202)

(1)

(263)

601

216

1,169

1,436

Net balance at 1
January 2015
£’000

Arising on
business combination
£’000

Recognised
in income
£’000

Recognised in other
comprehensive income
£’000

Net balance at 31
December 2015
£’000

294

1,277

1,699

(47)

(233)

(58)

(327)

(274)

247

770

1,098

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Group

Assets

Liabilities

Net

Property, plant and equipment

Goodwill and intangibles

Employee benefits

Provisions

Current year
£’000

Prior year
£’000

Current year
£’000

Prior year
£’000

Current year
£’000

Prior year
£’000

216

1,169

1,436

247

770

(215)

(886)

(86)

1,098

(1,101)

(86)

(199)

(670)

1,169

335

(41)

247

770

1,012

Parent

Assets

Liabilities

Net

Property, plant and equipment

Goodwill and intangibles

Employee benefits

Provisions

15. Inventories

Finished goods

Raw materials

Total inventories

Current year
£’000

Prior year
£’000

Current year
£’000

Prior year
£’000

Current year
£’000

Prior year
£’000

216

1,169

1,436

247

770

1,098

216

1,169

1,436

247

770

1,098

Group

Parent

2016
£’000

5,452

1,265

6,717

2015
£’000

3,378

567

3,945

2016
£’000

3,914

2015
£’000

2,430

In 2016 the Group write-down of inventories to net realisable value amounted to £389,000 (2015: £173,000).

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

16. Trade and other receivables

Trade receivables

Amounts owed by Group undertakings

Other receivables

Prepayments and accrued income

Group

Parent

2016
£’000

28,808

1,515

1,185

2015
£’000

24,640

2,710

510

2016
£’000

21,018

3,031

367

604

2015
£’000

19,097

362

849

457

31,508

27,860

25,020

20,765

All 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 £1,805,000 (2015: £736,000) has been recorded accordingly.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

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

2016
£’000

5,254

1,239

14,963

21,456

2,355

23,811

2015
£’000

5,364

802

11,961

18,127

2,679

20,806

2016
£’000

4,298

2,721

726

13,263

21,008

357

21,365

2015
£’000

4,244

1,740

270

10,727

16,981

1,160

18,141

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:

All amounts shown above are short-term. The carrying values are considered to be a reasonable approximation of fair value.

At 31 December 2016, liabilities have contractual maturities which are summarised below:

Group

Up to 30 days overdue

Over 30 days and up to 60 days overdue

Over 60 days and up to 90 days overdue

2016
£’000

4,139

781

948

2015
£’000

2,105

171

5,868

2,366

Parent

Up to 30 days overdue

Over 30 days and up to 60 days overdue

Over 60 days and up to 90 days overdue

2016
£’000

2,972

311

2015
£’000

1,122

146

3,309

1,354

Group

Bad debt provision

Group

Bad debt provision

Parent

Bad debt provision

Parent

Bad debt provision

At 1 January
2016
£’000

Charge in the year
£’000

737

1,374

At 1 January
2015
£’000

Charge in the year
£’000

424

327

At 1 January
2016
£’000

Charge in the year
£’000

736

1,371

Utilised
£’000

(306)

Utilised
£’000

(14)

Utilised
£’000

(306)

At 31 December
2016
£’000

1,805

At 31 December
2015
£’000

737

At 31 December
2016
£’000

1,801

At 1 January
2015
£’000

Charge in the year
£’000

Utilised
£’000

At 31 December
2015
£’000

415

325

(4)

736

2016

2015

Within 6 months
£’000

Within 6 to 12 months
£’000

Within 6 months
£’000

Within 6 to 12 months
£’000

5,254

14,963

20,217

5,364

11,962

17,326

2016

2015

Within 6 months
£’000

Within 6 to 12 months
£’000

Within 6 months
£’000

Within 6 to 12 months
£’000

4,298

13,263

17,561

2,721

4,244

10,727

14,971

1,740

Group

Trade payables

Other short-term financial liabilities

Parent

Trade payables

Other short-term financial liabilities

18. Share capital

Allotted, issued and fully paid 36,968,772 (2015: 36,968,772) 10p ordinary shares

2016
£’000

3,697

2015
£’000

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 2016 and
31 December 2015.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

19. Acquisitions

2015 Acquisition

On 23 July 2015, the Group acquired the trade and assets of Feel Good Drinks Limited, an established range of premium juice drinks containing no added sugar and 100%
natural ingredients. The acquisition is a key part of the Group’s growth strategy and we plan to further develop the brand across our established UK and international
markets, supported by increased marketing resource and investment.

Details of the fair value of identifiable assets acquired, purchase consideration and goodwill are as follows:

Inventories

Brand

Total assets acquired

Fair value
£’000

384

1,316

1,700

Fair value of consideration paid

Cash

Contingent cash consideration (paid 2 February 2016)

Total consideration

Goodwill (see note 11)

Fair value
£’000

3,884

320

4,204

2,504

The goodwill recognised on the acquisition relates to expected synergies from combining operations of Feel Good and Nichols plc. Feel Good has an important part to play
in all of the Group’s routes to market and the brand is a core element of the Group’s future growth strategy. There is no further contingent consideration on the acquisition
other than as disclosed above.

2016 Acquisition

On 8 January 2016, the Group acquired the remaining 51% of the issued share capital of The Noisy Drinks Co. Limited, the UK’s leading frozen drinks business, supplying
the Starslush brand to a number of prestigious customers in both the UK and mainland Europe. In addition to enhancing the Group’s product portfolio, the acquisition also
strengthens the Group’s supply chain capabilities as the business has an established UK network facilitating direct access to customers on a national basis.

Details of the fair value of identifiable assets acquired, purchase consideration and goodwill are as follows:

Property, plant and equipment

Inventory

Trade and other receivables

Cash

Trade and other payables

Tax liabilities

Brand

Customer list

Deferred tax on acquired intangibles

Total assets acquired

Fair value of consideration paid

Cash paid

Contingent cash consideration (see below)

Fair value of previously held interest

Total consideration

Goodwill (see note 11)

Book value
£’000

Adjustment
£’000

1,177

390

519

600

(2,267)

(131)

288

(133)

2,573

2,352

(886)

3,906

Fair value
£’000

1,177

257

519

600

(2,267)

(131)

2,573

2,352

(886)

4,194

Fair value
£’000

3,165

1,000

3,982

8,147

3,953

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

The goodwill recognised above includes certain intangible assets that cannot be
separately identified and measured due to their nature. This includes control over
the acquired business, the skills and experience of the assembled workforce, the
scale and the future growth opportunities that is provides to the Group’s operations.
The goodwill recognised is not deductible for tax purposes.

Since the acquisition, The Noisy Drinks Co. Limited has contributed £5.8m to
revenue. It is not possible to determine the net profit impact as the business has
been subsumed into the trade of the Out of Home CGU. If the acquisition had
occurred on 1 January rather than 8 January 2016 the revenue contribution would
be unchanged.

Acquisition costs of £30,032 arose as a result of the transaction. These have been
recognised within administrative expenses.

The contingent cash consideration payable was originally payable in February 2018
based on profitability targets established with the vendor. During 2016, a deed of
variation was signed and the contingent consideration settled for a reduced amount
of £550,000. The difference between the £1.0m and £550,000 paid has been taken
as a credit within administrative expenses.

In line with the requirements of IFRS 3 Business Combinations, the acquisition of the
remaining 51% of the issued shared capital of The Noisy Drinks Co. Limited has been
accounted for as a step-acquisition. As a result, the original 49% holding has been
treated as though disposed and subsequently re-acquired as part of the acquisition
of the full 100% of the issued share capital. This has given rise to a deemed profit on
disposal of the previously held interest of £1,087,000, presented as an exceptional
item in the income statement (see note 5). In the prior year, the previously held
49% interest was equity accounted for as an investment in associate.

Investment in associate

Carrying value as at 1 January 2016

Reclassification

Carrying value as at 8 January 2016

Fair value of 49% investment at 8 January 2016

Exceptional credit recognised

20. Cash and cash equivalents

Group

At 1 January
2016
£’000

Cash at bank and in hand

35,438

21. Financial instruments

£’000

2,970

(75)

2,895

3,982

1,087

Cash
flow
£’000

4,316

At 31 December
2016
£’000

Parent

At 1 January
2016
£’000

39,754

Cash at bank and in hand

22,907

Cash
flow
£’000

2,861

At 31 December
2016
£’000

25,768

Exposure to treasury management, liquidity, credit and currency risks arise in the normal course of the Group’s business.

Treasury management

limiting the aggregate exposure to any one individual

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.

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.

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
where required, short-term borrowing facilities.

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

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 ($) and Euros (€).
During 2016, the Group entered into foreign currency transactions that over the
course of the year resulted in the Group having a ‘natural currency hedge’. This
then meant the Group did not need to enter into forward contracts to minimise
the impact of movements in foreign currency rates on the spot market.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

21. Financial instruments (continued)

Foreign currency assets:

US Dollar

Euro

Swiss Franc

Foreign currency sensitivity

2016
£’000

2,769

2,541

304

5,614

2015
£’000

2,136

2,862

304

5,302

Some of the Group’s transactions are carried out in US Dollars and Euros. As a result, management have undertaken sensitivity analysis to consider the financial impact if
Sterling had both strengthened and weakened against the US Dollar and the Euro.

If Sterling had strengthened against the US Dollar and Euro by 5% (2015: 5%), then this would have had the following impact:

Net result for the year

USD
£’000

(72)

2016
Euro
£’000

(114)

Total
£’000

(186)

USD
£’000

(102)

2015
Euro
£’000

(136)

If Sterling had weakened against the US Dollar and Euro by 5% (2015: 5%), then this would have had the following impact:

Net result for the year

USD
£’000

212

2016
Euro
£’000

141

Total
£’000

353

USD
£’000

112

2015
Euro
£’000

151

Total
£’000

(238)

Total
£’000

263

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.

22. Summary of financial assets and liabilities by category

The IAS 39 categories of financial assets included in the statement of financial position and the headings in which they are included are as follows:

Current assets

Group

Parent

Loans and other receivables

Trade receivables and other receivables

Cash and cash equivalents

Total financial assets

2016
£’000

30,323

39,754

70,077

2015
£’000

27,350

35,438

62,788

2016
£’000

24,416

25,768

50,184

2015
£’000

20,308

22,907

43,215

The IAS 39 categories of financial liability included in the statement of financial position and the headings in which they are included are as follows:

Current liabilities

Group

Parent

Other financial liabilities at amortised cost

Trade and other payables

Total financial liabilities

2016
£’000

5,254

2015
£’000

5,364

2016
£’000

7,019

2015
£’000

5,984

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

23. 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 2015.

At 31 December 2016 the Group had no debt and therefore the capital structure consists of equity only.

24. Operating leases

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Within one year

Between two and five years

More than five years

Group

Parent

2016
£’000

963

1,804

398

3,165

2015
£’000

658

1,041

313

2,012

2016
£’000

553

762

1,315

2015
£’000

382

423

805

The Group leases its operating depots under non-cancellable operating lease agreements and certain other plant and equipment under non-cancellable
operating lease agreements which have varying terms, escalation clauses and renewal rights.

25. 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)

Transaction value
Year ended 31 December

Balance outstanding
as at 31 December

2016
£’000

1,254

2015
£’000

1,539

2016
£’000

240

2015
£’000

(1,578)

All sales noted above with the related parties are conducted in line with similar transactions with external parties.

Details of key management personnel compensation have been disclosed in note 6, no other transactions were entered into with key management personnel in the year.

Two family members of the Non-Executive Chairman are employed in management roles within the business. The total remuneration paid in the year was £119,500 (2015:
£110,000). An accrued amount of £33,000 (2015: £30,000) will be paid in the subsequent financial year.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

26. Pension obligations and 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 £319,000 (2015: £293,000).

The Company operates a defined benefit plan in the UK. A full actuarial valuation
was carried out on 5 April 2014 and updated at 31 December 2016 by an
independent qualified actuary.

The assets of the defined benefit plan are managed by a pension fund that is legally
separated from the Group. Governance of the plan is the responsibility of appointed
trustees, acting on professional advice.

The plan is exposed to a number of risks, including changes to long term UK
interest rates and inflation expectations, movements in global investment markets,
changes in UK life expectancy rates and regulatory risk from changes in UK pension
legislation.

Interest rate risk

The present value of the defined benefit liability is calculated using a discount rate

determined by reference to market yields of high quality corporate bonds. The
estimated term of the bonds is consistent with the estimated term of the defined
benefit obligation and it is denominated in sterling. A decrease in market yield on
high quality corporate bonds will increase the Group’s defined benefit liability,
although it is expected that this would be offset partially by an increase in the fair
value of certain of the plan assets.

Investment risk

The plan assets at 31 December 2016 are predominantly equity and debt
instruments.

Longevity risk

The Group is required to provide benefits for life for the members of the defined
benefit liability. Increases in the life expectancy of the members, where the pension
payments are linked to CPI, will increase the defined benefit liability.

Inflation risk

A significant proportion of the defined benefit liability is linked to inflation. An
increase in the inflation rate will increase the Group’s liability. A portion of the plan
assets are inflation-linked debt securities which will mitigate some of the effects of
inflation.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

Plan assets

The reconciliation of the balance of the assets held for the Group’s defined benefit plan is presented below:

Fair value of plan assets at start of accounting period

Interest income

Return on plan assets (excluding amounts included in net interest)

Contributions paid by the employer

Actual contributions paid by plan participants

Benefits paid

Fair value of plan assets at end of accounting period

31 December 2016
£’000

31 December 2015
£’000

23,700

845

2,377

1,126

(4,069)

23,985

23,780

820

(189)

903

(1,620)

23,700

The actual return on plan assets was £3,223,000 (2015: £631,000). Plan assets do not comprise any of the Group’s own financial instruments or any assets used by Group
companies. Plan assets can be broken down into the following category of investments:

A reconciliation of the pension obligation and plan assets to the amounts presented in the statement of financial position for 2016 and 2015 is shown below.

The major categories of plan assets, measured at fair value are:

Present value of funded obligations

Fair value of plan assets

Deficit in the plan

Related deferred tax asset

Net liability recognised

Defined benefit obligation

The details of the Group’s defined benefit obligation are as follows:

Opening defined benefit obligation

Current service cost (Company only)

Interest cost

Actual contributions paid by plan participants

Experience adjustment

Actuarial losses/ (gains) from changes in financial assumptions

Actuarial gains from changes in demographic assumptions

Benefits paid - including insurance premiums

Closing defined benefit obligation

31 December 2016
£’000

31 December 2015
£’000

(30,380)

23,985

(6,395)

1,098

(5,297)

(27,593)

23,700

(3,893)

710

(3,183)

31 December 2016
£’000

31 December 2015
£’000

27,593

971

(335)

6,185

(4,069)

30,380

29,970

1,021

(1,506)

(315)

(1,620)

27,593

Equities

Gilts

Bonds

Other, including cash

Total fair value of assets

31 December 2016
£’000

31 December 2015
£’000

16,970

1,582

2,393

3,040

23,985

15,991

1,605

3,278

2,826

23,700

Assets included which do not have a quoted market value:

31 December 2016
£’000

31 December 2015
£’000

Equities

Gilts

Other, including cash

Total

The significant actuarial assumptions used for the valuations
are as follows:

31 December 2016
£’000

31 December 2015
£’000

Future salary increases

Rate of increase in (post 1997) pensions in payment (a)

Discount rate at 31 December

Expected rate of inflation - RPI

Overall expected return on plan assets

3.25%

3.30%

2.55%

3.25%

2.55%

3.15%

3.25%

3.80%

3.15%

3.80%

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

26. Pension obligations and employee benefits (continued)

The expected return on plan assets is based on 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.

(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%.

Other material actuarial assumptions were the rate of salary increases and mortality
assumptions. In terms of future salary increases, the actuary is assuming salaries will
increase in line with the RPI inflation assumption.

Assumptions regarding future mortality experience are set based on the advice of
actuaries and in accordance with published statistics. For members not yet retired,
life expectancies have been estimated as 90 years for men (2015: 89 years) and 92
years for women (2015: 92 years). For current pensioners, life expectancies have
been estimated as 87 years for men (2015: 87 years) and 90 years for women (2015:
90 years).

Over the year, the Company contributed to the plan at the rate of 18.6% of salaries.
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.

Defined benefit plan expenses

Amounts recognised in profit or loss are:

Current service cost (Company)

Net interest cost (on net defined benefit liability)

Total amount recognised in the consolidated income statement

31 December 2016
£’000

31 December 2015
£’000

126

155

201

238

The current service cost is included in employee benefits expense and the net interest expense is included in finance costs.
Amounts recognised in other comprehensive income relating to the Group’s defined benefit plan are as follows:

Remeasurements recognised in other comprehensive income:

Actuarial gains/ (losses) on the assets

Experience adjustment

Actuarial (losses)/ gains from changes in financial assumptions

Changes in demographic assumptions

Total (loss)/ gain recognised in other
comprehensive income

31 December 2016
£’000

31 December 2015
£’000

2,378

335

(6,185)

(3,472)

(189)

1,506

315

1,632

Other defined benefit plan information

Employees of the Group are required to contribute a fixed 6% of their
pensionable salary.

The remaining contribution is partly funded by the Group’s subsidiaries. The
funding requirements are based on the pension funds actuarial measurement
framework as set out in the funding policies.

The weighted average duration of the defined benefit obligation at 31 December
2016 is 18 years (2015: 18 years).

The significant actuarial assumptions for the determination of the defined benefit
obligation are the discount rate, the inflation assumption and life expectancy.

The calculation of the net defined benefit liability is sensitive to these
assumptions.

Based on historical data, the Group expects contributions of £900,000 to be paid
in 2017.

The table below summarises the sensitivity of the obligation to changes to these
assumptions:

Increase in discount rate by 0.5%

Increase in price inflation adjustment by 0.5%

1 year increase in life expectancy

31 December 2016

31 December 2015

-8.00%

4.00%

3.00%

-8.00%

4.00%

3.00%

The method and assumptions used in this analysis are similar to those used in the previous year.

NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016

27. Audit exemption statement

Under section 479A of the Companies Act 2006 the Group is claiming exemption
from audit for the subsidiary companies listed below. The parent undertaking,
Nichols plc, registered number 238303, guarantees all outstanding liabilities
to which the subsidiary company is subject at the end of the financial year

(being the year ended 31 December 2016 for each company listed below). The
guarantee is enforceable against the parent undertaking by any person to whom
the subsidiary company is liable in respect of those liabilities.

Beacon Drinks Limited

Ben Shaws Dispense Drinks Limited

Cabana Soft Drinks Limited

Dayla Liquid Packing Limited

Festival Drinks Limited

Vimto (Out of Home) Limited

Nichols Dispense (S.W.) Limited

Dispense Solutions (Wales) Limited

The Noisy Drinks Co. Limited

Company Number

1732905

231218

938594

603111

1256006

8795779

8766560

8671127

5905631

28. Contingent liability

The Company had previously entered into contracts with some of its senior
management relating to incentive schemes which were designed to motivate,
retain and engage those key employees. HMRC have written to the Company
with their initial view that the arrangements should have been taxed as
employment income which the Company and its advisors dispute. If HMRC
pursues its current position and is successful in its argument then the
Company may have to pay up to £3.2m in income tax and national insurance.
The employees who are party to the contracts have formally indemnified the
Company in relation to income tax and employees’ national insurance and an
amount of up to £2.4m can be requested from them. The directors have obtained

external advice and on the basis of this do not believe that the company has
a liability for any additional tax or national insurance. In common with such
disputes with HMRC it may take some time to settle and the directors are unable
to assess how long this will take and the timing of any potential settlement if
required. As at the date of this report, there has been no significant progress in
the case to note since this time last year.

UNAUDITED FIVE YEAR SUMMARY
YEARS ENDED 31 DECEMBER

Revenue

Operating profit before exceptional items, IAS 19 and Long Term Incentive Scheme
Charges

Exceptional items

IAS 19 operating profit charges

Incentive Plan operating profit charges

Operating profit after exceptional items, IAS 19 and Long Term Incentive Scheme
Charges

Net finance income/ (expense)

Share of post-tax profits of equity accounted associate

Profit before taxation

Taxation

Profit after taxation

Dividends paid

Retained earnings

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

Restated

2016
£’000

117,349

31,622

2015
£’000

2014
£’000

2013
£’000

2012
£’000

109,279

109,205

105,529

103,642

28,888

26,464

25,194

21,741

(29)

(1,268)

30,325

1,167

31,492

(6,015)

25,477

(9,806)

15,671

69.13p

69.07p

66.18p

66.12p

26.60p

(37)

(1,017)

27,834

190

28,036

(5,803)

22,233

(8,589)

13,644

60.33p

60.25p

60.33p

60.25p

23.30p

(7,768)

(103)

(764)

17,829

17,922

(3,776)

14,146

(7,518)

6,628

38.39p

38.34p

55.03p

54.96p

20.40p

(3,680)

(96)

(2,671)

18,747

18,830

(4,721)

14,109

(6,639)

7,470

38.30p

38.25p

45.79p

45.72p

18.02p

(107)

(1,117)

20,517

(7)

20,510

(5,252)

15,258

(5,866)

9,392

41.43p

41.38p

41.43p

41.38p

15.92p

NOTICE OF ANNUAL
GENERAL MEETING

Notice is hereby given that the twenty fifth Annual General Meeting of Nichols plc
(“Company”) will be held at Nichols plc, Laurel House, Woodlands Park, Ashton Road,
Newton-le-Williows, Merseyside, WA12 0HH on Wednesday, 26 April 2017 at
11:00 a.m. for the following purposes:

To consider and, if thought fit, to pass the following resolutions as ordinary
resolutions:

To receive the Company’s annual accounts, strategic report and directors’ and
auditors’ reports for the year ended 31 December 2016.

To declare a final dividend for the year ended 31 December 2016 of 20.30
pence per ordinary share of 10 pence in the capital of the Company to
be paid on 5 May 2017 to shareholders whose names appear on the register
of members at the close of business on 7 April 2017.

To re-elect P J Nichols, who retires by rotation, as a director of the Company.

To re-elect M J Millard, who retires by rotation, as a director of the Company.

To reappoint BDO 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 £1,228,135.90, 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 27 July 2018 (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:

That, subject to the passing of resolution 8 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 8 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):

8.1.2 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,

8.2

9.1

9.2

9.3

otherwise than pursuant to paragraph 7 of this resolution, up to an aggregate
nominal amount of £184,244, 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 27 July 2018 (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 573 of the Act (which, to the extent unused at the
date of this resolution, are revoked with immediate effect).

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:

the maximum aggregate number of Shares which may be purchased is
3,684,882:

the minimum price (excluding expenses) which may be paid for a Share is 10p;
and

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 27
July 2018 (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

Tim Croston
Secretary

1 March 2017

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

Registered Office, Laurel House, Woodlands Park, Ashton Road, Newton-le-Willows,
WA12 0HH.

Registered in England and Wales No. 238303.

GENERAL NOTES

1. To receive the Company’s annual accounts, strategic report and directors’ and

auditors’ reports for the year ended 31 December 2016.

2. Biographical details of all those directors who are offering themselves for

re-election at the meeting are set out on pages 38-39 of the
enclosed annual report and accounts.

3. 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 close of business on Monday, 24 April 2017 (or, if the
meeting is adjourned, close of business 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.

4. 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 +44 (0) 371 664
0300 (calls are charged at the standard geographic rate and will vary by provider.
Calls outside the United Kingdom will be charged at the applicable international
rate. Lines are open 9:00 a.m. – 5:30 p.m., 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. A proxy may
only be appointed in accordance with the procedures set out in notes 5 to 8
below and the notes to the form of proxy.

5. 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.

6. 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 asset services, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive no later than
11:00 a.m. on Monday, 24 April 2017 (or, in the event that the meeting is
adjourned, no later than 48 hours (excluding any part of the day that is not a
working day) before the time of any adjourned meeting).

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, 24 April 2017 (or, if the meeting is adjourned, no later than
48 hours (excluding any part of the day that is not a working day) 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.

9. 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.

10. A shareholder which is a corporation may authorise one or more persons
to act as its representative(s) at the meeting. Each such representative

may exercise (on behalf of the corporation) the same powers as the

corporation could exercise if it were an individual shareholder, provided
that (where there is more than one representative and the vote is
otherwise than on a show of hands) they do not do so in relation to the
same shares.

11. As at 16 March 2017 (being the last practicable date before the publication
of this notice), the Company’s issued share capital consists of 36,968,772
ordinary shares of 10 pence each, carrying one vote each. As the Company
holds 85,039 ordinary shares in treasury, in respect of which it cannot
exercise any votes, the total voting rights in the Company as at 16 March 2017
are 37,053,811.

12. You may not use any electronic address provided either in this notice of general
meeting or any related documents (including the form of proxy) to communicate

with the Company for any purposes other than those expressly stated.

GENERAL NOTES & DIRECTIONS TO THE
ANNUAL GENERAL MEETING

Directions to the Annual General Meeting

Car:

Leave the M6 at Junction 23 and take the A49 north 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.

Pubic Transport

Train:

Newton-le-Willows railway station is located 1.3 miles away
from Woodlands Park on Southworth Road, WA12 9SF.

Bus:

The nearest bus service to Woodlands Park is located on
Cobden Street, 0.8 miles from Woodlands Park, operating the
number 22 service into Newton-le-Willows.

NOTES

FINANCIAL CALENDAR

Preliminary Results Announced

2 March 2017

Annual General Meeting

26 April 2017

Interim Results Announced

20 July 2017

Laurel House, Woodlands Park, Ashton Road, Newton-le-Willows, Merseyside, WA12 0HH
01925 22 22 22 www.nicholsplc.co.uk