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Vimto on dispense
Hello
,
WE’VE BEEN M AK I NG
THE WORLD
Smile
refreshingly different
BY BEIN G
SINCE 1 9 08
Feel Good Drinks Skinny dip, 2017
3
C O N T E N T S
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, ICEE, Levi Roots and Sunkist.
01
S T R A T E G I C
R E P O R T
CHAIRMAN’S
STATEMENT
CHIEF EXECUTIVE
OFFICER’S REPORT
GENDER PAY GAP REPORT
GROUP COMMERCIAL
DIRECTOR’S REPORT
CHIEF FINANCIAL
OFFICER’S REPORT
02
D I R E C T O R S
THE BOARD
DIRECTORS’
REPORT
03
C O R P O R A T E
G O V E R N A N C E R E P O R T
04
A U D I T O R ’ S R E P O R T
05
F I N A N C I A L
S T A T E M E N T S
06
N O T I C E O F
M E E T I N G
07
F I N A N C I A L
C A L E N D A R
THREE CHEEKY BOYS ENJOYING A
BOTTLE OF VIMTO IN MACCLESFIELD, 1960 .
4
5
S T R A T E G I C R E P O R T
P E R F O R M A N C E
GROUP REVENUE
OPERATING PROFIT*
OPERATING PROFIT
2016
£117.3m
2017
£132.8m
+13.2%
2016
£30.3m
2017
£30.5m
+0.7%
2016
£30.3m
2017
£28.7m
-5.3%
PROFIT BEFORE TAX*
EPS (BASIC)*
NET CASH
2016
£30.4m
2016
66.18p
2017
£30.5m
2017
67.76p
+0.4%
+2.4%
2016
£39.8m
2017
£36.1m
-9.3%
6
7
*Pre-exceptional items. Exceptional items are explained in note 4 of the financial statements.
S T R A T E G I C R E P O R T
N O N - E X E C U T I V E C H A I R M A N
John
N I C H O L S
WE ARE WELL PREPARED
FOR THE INTRODUCTION OF
THE SUGAR LEVY WITH 100% OF
THE VIMTO AND FEEL GOOD
BRANDS PORTFOLIO ALREADY
EXEMPT FROM THE LEVY.
8
C H A I R M A N ’ S S T A T E M E N T
09
9
S T R A T E G I C R E P O R T \ C H A I R M A N ’ S S T A T E M E N T
S T R A T E G I C R E P O R T \ C H A I R M A N ’ S S T A T E M E N T
The Group has delivered a strong revenue performance throughout
2017, with both the UK and international businesses contributing
to a double-digit increase compared to the prior year.
Despite industry wide cost input increases and the challenges in Yemen
as reported in our Trading Update on 19 December 2017, profit pre-exceptional
items has been maintained at the same level as the prior year and the Board has
recommended a 15.3% increase in the final dividend.
Trading
T
otal Group revenue for 2017 has
increased by 13.2% to £132.8m
(12.2% on a constant exchange
rate basis). This has been
delivered across the Group in both our UK
and International businesses highlighting
the advantages of our diversified business
model.
UK sales totalled £100.8m, an increase
of 11.0%, which is a strong performance
given ongoing challenges in the UK
market. Once again, the Vimto brand has
significantly outperformed the market
with sales in 2017 up by 9.0% compared
to the overall UK soft drinks market
which was up by 2.2% in the same period
(Nielsen year to 30 December 2017).
Elsewhere in the UK, our Out of Home
business increased its sales by 21.5%
compared to the prior year. This was
delivered from both our dispensed soft
drinks and frozen beverages product
ranges and demonstrates the benefits
of recent acquisitions in this part of our
business.
Sales to our international customers
grew by 20.4% to £32.0m (2016: £26.6m).
Revenues to Africa were £12.7m, an
increase of 21.2% compared to 2016.
Despite the reported challenges in Yemen,
revenues to the Middle East region were
up 13.4%, although this was in the context
of softer comparatives in the prior year
(2016: -7.0%).
Whilst the Group remains highly profitable
with Group Profit Before Tax and
exceptional items delivering a 23% return
on sales (2016: 26%), the margin has
been impacted by increased input costs
affecting the wider industry. In addition
to the margin dilution and as reported
in our Trading Update on 19 December
2017, the escalation in hostilities in
Yemen prevented the planned shipments
of Vimto concentrate in December. As
a result, Group Profit Before Tax and
exceptional items of £30.5m was broadly
in line with the prior year (2016: £30.4m).
Exceptional Items
The Group incurred a number of costs
during 2017 which by their nature were
non-recurring and have been reported
as exceptional items. These costs fell
into three categories: merger and
acquisition expenses, restructuring costs
and costs incurred in preparation for the
introduction of the Soft Drinks Industry
Levy. The total cost of these exceptional
items was £1.8m.
UK MARKET SALES
TOTALLED
£100.8m
VIMTO BRAND
GREW BY
9.0%
INTERNATIONAL SALES
INCREASED
20.4%
10
Dividend
Outlook
As a reflection of the Board’s confidence in
the Group’s financial position and future
growth prospects, we are pleased to
recommend a final dividend of 23.4 pence
per share (2016: 20.3 pence).
If accepted by our shareholders, the
total dividend for 2017 will be 33.5 pence
(2016: 29.3 pence), an increase of 14.3%
on the prior year. Subject to shareholder
approval, the final dividend will be paid on
4 May 2018 to shareholders registered on
23 March 2018; the ex-dividend date is 22
March 2018.
In 2018, we expect to maintain the positive
sales trend in the UK with the Vimto brand
being supported by a new marketing
campaign launching in the spring. In
addition, we are well prepared for the
introduction of the sugar levy with 100% of
the Vimto and Feel Good brands portfolio
already exempt from
the levy.
In our international business, we are
confident of continued sales growth in
Africa, however the current conflict in the
Yemen coupled with a slowdown in the
Saudi economy, suggests that sales to the
Middle East region will soften in 2018.
In summary, the Group remains highly
profitable and our diversified business
model and strong balance sheet, along
with the resilience of the Vimto brand will
continue to support the expected sales
growth in 2018.
John Nichols
Non-Executive Chairman
28 February 2018
11
S T R A T E G I C R E P O R T
C H I E F E X E C U T I V E O F F I C E R
Marnie
M I L L A R D
WE ARE PROUD OF THE
HERITAGE OF OUR BRAND
AND PROUD OF ALL THE
PARTNERS WE WORK WITH
ACROSS THE GLOBE.
12
C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T
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BRAND
IS NOW
WORTH
AN INCREASE OF 5% FROM 2016*
The UK Soft Drinks Market
The UK On-Trade
* (As measured by Nielsen year to date 30
December 2017)
In 2017, volumes in the UK soft drinks
market were flat at 0.2%. Value sales
were slightly higher but still only showing
modest growth of 2.2%, with the overall
market totalling £7.8 billion.
Within the soft drinks market, value growth
was seen across mixers, colas, plain and
flavoured waters and fruit carbonates.
Energy drinks, dilutables, fruit drinks and
sports drinks were all sectors in decline.
Vimto has added an impressive £3.5m to
its brand value (Nielsen data) in twelve
months and is now worth £76m, an
increase of 5%. This metric is important to
us as the UK soft drinks market remains
highly competitive and promotionally
driven, but we continue with our focus of
adding value to the brand through our
focus on driving “value over volume” and to
the sector as a whole.
The category remains highly competitive
and promotionally driven but we continue
with our focus of adding value to the
sector. Our product innovation, under
the sub brand Remix has added £6.3m to
the retail sales brand value in less than 3
years. In both the dilutable and ready to
drink categories, Vimto has significantly
outperformed the market. Vimto dilutes
grew by 9.0% versus a market decline
of 3.6%, whilst Vimto ready to drink
has outperformed the market by 7.2
percentage points.
(As measured by CGA, Total
Licensed, Total Soft Drinks,
last 12 months to 4 November
2017)
The UK on-trade soft drinks
sector saw a dip in consumption
as volume has decreased by 1.6%
and value sales also decreased by 1.3%, as
consumers remain cautious with spending.
All categories, including beers, wines &
spirits, are experiencing a challenging
time, potentially related to the drop in
frequency in total eating out as consumers
tighten their belts during these uncertain
economic times. Category performance
has also been affected by the number
of licensed outlets in the UK declining
1%. This is across Free Trade and Leased
& Tenanted as the market remains a
challenging place.
Operational Review
Vimto UK
Vimto achieved an impressive sales
increase of 9.0% during 2017, with both
original and Remix contributing to that
market leading performance. Driven
through all market channels and across
all pack formats, dilute and ready to drink
achieved double digit growth at 10% and
11% respectively.
It is more important than ever for brands
to remain relevant and top of mind for
consumers. The UK market is fiercely
competitive, with unprecedented changes
taking place in the retail space. Our
customers
are continually
looking for winning
brands and are taking tough
decisions to ensure they are fit for
the future. Therefore, with this backdrop
it is particularly pleasing to see Vimto
succeeding in these difficult times.
Pink Remix 500ml ready to drink was
launched in 2017 and delivered a 13%
increase in sales on our Remix brand in the
Cash & Carry sector. Our launch of drink
now water in the form of Vim2o helped to
improve our Convenience business by 12%
and we achieved 4,000 new distribution
points for our Vimto 500ml range within
the M25 as part of our Go South extended
trial.
Our marketing campaign for 2017
continued to feature our very own
successful Vimtoad alongside the Remixed
toad. However, I am sad to report this
is the last you will see of the Vimtoad
as he prepares for retirement. We have
appointed a new creative agency and have
developed new brand positioning which
will be launched in spring 2018.
I am pleased to report Group sales grew
by 13.2% despite the global soft drinks market remaining
challenging. The strength of the Vimto brand, our
geographical reach and continued focus on driving
“value over volume” delivered an excellent sales
performance across the Group.
A
ll of our routes
to market have
performed
well and it’s
particularly rewarding to see
the diversified business model
contributing so positively to the
overall growth of our business.
We are proud of the heritage of our
brand and proud of all the partners we
work with across the globe. Some overseas
core markets have proved challenging during
2017, but the resilience of the brand and the
love our consumers have for Vimto, ensures we
continue to perform strongly in these geographies.
The acquisition of one of our distributors, DJ Drink
Solutions Limited, was made in 2017 to further strengthen
our Out of Home presence in the North of England.
The Soft Drinks Industry Levy will be introduced into
the UK in April 2018 and I am delighted to report we are
already 100% levy free across the Vimto and Feel Good
brands portfolio.
All Vimto reformulation work was completed and
introduced into the market during the second half of 2017.
Our no added sugar Vimto sales grew by 20% in 2017 and
I am extremely pleased with the position of our product
portfolio ahead of the implementation of the levy.
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S T R A T E G I C R E P O R T \ C H I E F E X E C U T I V E O F F I C E R ’ S R E P O R T
F
eel Good was relaunched in 2017
with new packaging design, new
and improved flavours as well as
launching Feel Good Infusions
which allowed the brand to enter the
water category.
The launch was announced with 100
women taking part in a Skinny Dip to
celebrate the strapline “100% natural and
100% Feel Good”. The subsequent digital
advert reached 2.4 million of our target
“Health Conscious Urbanites”, the outdoor
advertising seen by 2.5 million people and
the radio campaign attracted 2.5 million
listeners. As a result of this good work, I
am pleased to report Feel Good now has a
brand value of £3.2m.
NOW HAS A
BRAND
VALUE OF
*AS MEASURED BY NIELSEN YEAR TO DATE 30 DECEMBER 2017. **MADE WITH ALL NATURAL INGREDIENTS.
16
17
Vimto International
International revenue, despite some
extraordinary trading challenges was up
20.4%.
into 2017 and was
joined by Vimto
Watermelon.
Africa delivered an outstanding
performance with growth of 21.2% (14.1%
on a constant exchange rate basis), with
three new countries coming on stream
in 2017: Mauritania, Benin and Uganda.
Core markets in this geographical region
continued to perform well with in-market
sales up by 21%.
We launched a new 250ml Vimto can,
which was initially sold into Guinea in
order to celebrate, with Vimto, at large
family gatherings. Pleasingly, this has not
detracted sales from the original 330ml
can, but created a new drinking occasion
for Vimto.
Following our hugely successful launch
into Sudan in 2016,
we introduced Vimto
ready to drink in a
carton, which has
already resulted in
2.3m units being
consumed in market.
The rollout of Vimto
Ginger and Vimto Malt
continued
The relationship
with our partner
Aujan Coca-Cola
Beverages Company
in the Middle East
is over 90 years
old and again in
2017 they delivered a truly impressive
360-degree marketing campaign, which
included new creative content for
Ramadan delivered across all forms of
media. Their TV campaign reached 96%
of their target audience, in store displays
were as magnificent as previous years,
with the star of the show being a 6 metre
tall replica of Big Ben and their digital
content achieved collectively over 220
million impressions.
Despite the challenging macro-economic
environment in the region, which saw the
introduction of a “bubble tax” at the end
of 2017, our sales to the Middle East were
up 13.4%. The tax has been applied to
carbonated soft drinks and energy drinks
at a level of 50% and 100% respectively.
Our first new flavour development, Vimto
strawberry, was launched into the region
and our Vimto 250ml still ready to drink
targeted at children was the star
performer of the portfolio.
2017 saw the launch of Vimto
slush into the region in
the United Arab Emirates and the
Kingdom of Saudi Arabia. So far, the
results have been encouraging and we
look forward to installing additional
machines during 2018.
Our long standing partner in Yemen has
experienced many operational challenges
during 2017 due to the hostilities in
his country and this situation remains
unchanged. Unfortunately, this did impact
our Group profit, as we were unable to
ship concentrate as we had planned in
December.
AFRICA HAD
AN OUTSTANDING
PERFORMANCE
WITH GROWTH OF
21.2%
Vimto Out of Home
Vimto Out of Home delivered a second
year of good organic sales growth of
11.0%. Including the DJ Drink Solutions
Limited (DJ) acquisition, who were our
largest distributor based in the North of
England, overall sales were up 21.5%.
I am very pleased with the
performance of our Distributor
network in this sales channel
and would like to thank
them for their
continued hard work and support. Our
overall market share of cola dispense
grew in 2017, with sales of no added
sugar cola accelerating as we start to see
consumer tastes change in the on-trade.
The Starslush brand performed well in
2017 with increased sales of 7%, driven
by some great new business wins such as
Tayto Park in Ireland and Flamingo Land
in Yorkshire. In addition we introduced
our first ever new flavour under the
Starslush brand for Halloween, a blood
orange variant, which delivered good
incremental volume.
In line with all our UK packaged
products, all our frozen
beverage brands will be
sugar levy ready by April
and we have made
absolutely sure they
have kept their original
great taste.
In 2017, we embarked on a new long-
term relationship with the great American
ICEE brand which is famous for its frozen
carbonated beverage.
ICEE in the USA already works in
partnership with many of the great brands
we have in our Out of Home product
range. We look forward to developing
that partnership over the coming years,
as frozen carbonated beverages are
particularly strong in the cinema chains in
both the UK and Europe.
18
19
Corporate Responsibility
The Soft Drinks Industry Levy will be introduced in April 2018. Before this legislation was introduced, we had been working for many
years on the following:
REDUCING
SUGAR IN
OUR PRODUCT
PORTFOLIO
ALL NEW PRODUCT
DEVELOPMENT FOR
THE LAST 5 YEARS
HAS FOCUSED ON
NO ADDED SUGAR
ALL OF OUR
ADVERTISING HAS
FEATURED OUR
NO ADDED SUGAR
RANGES
As a result:
•
•
100% OF OUR OWN BRANDS ARE
EXEMPT FROM THE SOFT DRINKS
INDUSTRY LEVY
WE HAVE REMOVED 2,000
TONNES OF SUGAR SINCE 2011
•
•
WE HAVE REDUCED 9.5 BILLION
CALORIES FROM OUR PRODUCTS
BY 2020 WE WILL HAVE TAKEN
MORE THAN 20% OF CALORIES
OUT OF OUR DRINKS
20
21
Our Community
We continued to support Warrington
Youth Club in 2017. 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. In support of this work,
Nichols plc ran a “dragons den” workshop
as part of the national NCS programme
and over six weeks, twenty young people
took part in this initiative. They were given
a real business issue for which they had
to find a solution and then pitch their
proposal to a panel of Vimto dragons. The
successful all-girl winning team were then
taken to the House of Lords for the day
accompanied by Baroness Helen Newlove.
Thanks also goes to all our partners,
suppliers and friends who joined us at
our annual golf day and attended our
Moonlight gala dinner where we raised
over £30,000 for the Youth Club.
Our People
Our values have been truly embedded into our day to day lives here at Nichols. This year our annual STAR awards were reinvigorated and
are now a real reflection of how our colleagues feel about each other.
AWARDED TO:
ASH BULLOCK
AWARDED TO:
STEVE DAVEY
ABOUT
WHAT
AWARDED TO:
LEE GIBSON
AWARDED TO:
PAUL
JOHNSON
EXTRA
AWARDED TO:
ADAM JONES
STAR AWARDS
WERE MADE TO:
TEAM ROSS,
HAZEL JOBBINS &
DARREN JACKSON
AWARDED TO:
PAUL
SCREGG
I would like to take this opportunity to thank
each and every member of our work family.
It has been a challenging year with many
changes taking place within the business.
Many individuals have taken on additional
tasks to their day job and they have tackled
that with the “vim and vigour” I see day in
and day out in the organisation. A very big
thank you to you all!
We conducted our second employee engagement
survey at the beginning of 2017. 88% of our
colleagues responded to our survey and we
achieved an engagement score of 95% which was
very pleasing. 99% of our respondents are proud
to work at Vimto, with 93% feeling they have an
opportunity to work and grow with us.
OUR
VISION
We continue to develop our rolling
long-term strategy built upon our four
key pillars:
MORE
FROM THE
CORE
THIRST
FOR
NEW
HEALTHIER
FUTURE
WHEREVER
WHENEVER
We will build upon the success we
have achieved for Vimto in 2017. We
remain focussed on value driving
activity and look forward to the new
exciting creative campaign to be
released in 2018. There is significant
headroom for growth for both Vimto
and Feel Good both in the UK and
overseas.
Our entry into the water category
with Vim2o and Feel Good Infusions
are indicative of our determination
to have natural healthier soft drinks
within our product portfolio. We will
continue to work on our product
formulations in order to ensure we
meet the changing tastes of our
consumers, which include taking into
account their desire for less sugar
both home and abroad.
diversified model has and will continue to
serve us well and we remain committed to
acquisition of the right brand and or the
right business.
Marnie Millard
Chief Executive Officer
28 February 2018
As we have proven with Remix,
product innovation is key to
attracting new consumers into
our brands. It remains a key part
of our growth strategy along with
appropriate acquisitions.
With our diversified portfolio and
our flexible outsourced global
production model, we are able to
meet the ever changing needs of our
consumers. Geographic expansion
for both the UK and international
remains a high priority for the
business.
Outlook
Vimto will be a magnificent 110 years old
in 2018 and its brand performance in
2017 is as strong as ever. We are facing
unprecedented change in our market
environment, not just in the UK but
internationally. Consumers’ tastes, beliefs
and habits are all contributing to different
choices being made and we believe with
continued investment in our brands and
our people, we are well placed to meet
these challenging times. Our
22
23
THE
GENDER PAY GAP
REPORT 2017
A
S OF 5 APRIL 2017, EMPLOYERS WITH MORE THAN 250 EMPLOYEES ARE REQUIRED TO REPORT
ON THEIR GENDER PAY GAP. NICHOLS PLC HAD FEWER THAN 250 EMPLOYEES ON THIS DATE,
HOWEVER, IN THE SPIRIT OF TRANSPARENCY HAVE DECIDED TO PUBLISH ITS RESULTS. THE
LEGISLATION REQUIRES 6 CALCULATIONS TO BE PUBLISHED:
PROPORTION OF
MALES & FEMALES
IN EACH
PAY QUARTILE
THE MEAN & MEDIAN
DIFFERENCES BETWEEN
MALE & FEMALE PAY
A N D B O N U S G A P S
PROPORTION OF MALES
& FEMALES RECEIVING A
BONUS PAYMENT
% EMPLOYEES
SPLIT BY GENDER
68%
32%
PROPORTION
OF MALES
& FEMALES
WITHIN SENIOR
MANAGEMENT
TEAM &
MANAGERS
WITHIN THE
GROUP.
50
40
30
20
10
0
MALE
FEMALE
SMT
Managers
Our Out of Home technical, distribution and
manufacturing functions traditionally have
attracted a higher % of male employees,
however, we are delighted to see females in our
regional sales operatives’ roles.
We are delighted that our senior management team has a 6:5 male:female
ratio and our CEO is female. The split of male/ female managers across the
Group is indicative of the distribution and technical aspect of our Out of
Home route to market. However, diversity is reflected in this area with 1 of
our 3 regional sales managers being female.
S T R A T E G I C R E P O R T
PROPORTION
OF MALES
& FEMALES
RECEIVING
A BONUS
PAYMENT
DID NOT
RECEIVE
12%
RECEIVED
88%
MALE
FEMALE
DID NOT
RECEIVE
8%
RECEIVED
92%
The potential to earn a
bonus was not available
to all employees in 2016.
From 2017, every employee
has the potential to earn
a bonus, which is linked to
Group performance and
personal objectives.
PROPORTION OF
MALES & FEMALES
IN EACH
PAY QUARTILE
BOTTOM
31% 69%
SECOND
38% 62%
THIRD
40% 60%
TOP
22% 78%
The review of the pay per quartile, based on hourly pay, is a reflection of the workforce as previously mentioned in this
report. By way of explanation of what could be stated as the disproportionate median bonus figure, this is reflective of
the higher proportion of female employees in the 3rd quartile and the % of females on the senior management team
who were paid bonuses in 2016, versus the higher number of male employees across the Group in predominately blue
collar roles, who were not entitled to bonus payments in 2016. This has been addressed in 2017.
FEMALE
MALE
HOURLY PAY:
MEAN 5%
MEDIAN 2%
BONUS:
MEAN 7%
MEDIAN -137%
24
G E N D E R P A Y G A P R E P O R T
25
S T R A T E G I C R E P O R T
G R O U P C O M M E R C I A L D I R E C T O R
Andrew
M I L N E
THE VIMTO BRAND HAS
SEEN VALUE GROWTH OF 5%
DURING THE YEAR WHICH IS A
RATE THAT IS MORE THAN DOUBLE
THE SOFT DRINKS MARKET
VALUE GROWTH.
26
G R O U P C O M M E R C I A L D I R E C T O R ’ S R E P O R T
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S T R A T E G I C R E P O R T \ G R O U P C O M M E R C I A L D I R E C T O R ’ S R E P O R T
F
ollowing on from the Chief
Executive Officer’s report, I am
going to provide some greater
insight into a number of key
I am excited and encouraged about the
platform we have built for future growth
and incremental sales across these new
products.
strategic initiatives that have been at the
core of driving our business performance
in 2017.
The Vimto brand has seen value growth of
5% during the year which is a rate that is
more than double the soft drinks market
value growth and has seen us increase our
market share. I am particularly pleased
with our performance across squash and
our ready to drink ranges. In both
subcategories we are the fastest growing
brand with an outperformance in squash
of 12.8 percentage points and in ready to
drink 7.2 percentage points.
The performance of our Vimto Remix
no added sugar ranges have been
fundamental in driving the growth.
Building on the strong platform we built
when we launched the product in 2016,
we have added further pack formats
across both the Mango, Strawberry and
Pineapple and Raspberry, Orange and
Passionfruit flavours.
We have gained new listings of
these additional packs whilst gaining
incremental availability and visibility of
the products we launched in 2016 that
has allowed us to deliver nationwide
distribution.
This was supported throughout the
summer with a successful marketing
campaign, focused heavily on cinema and
video on demand that ensured our key
teenage audience viewed our advertising
20 million times.
The successful launch of the Vimto Remix
no added sugar sub-brand has brought
new consumers into Vimto and has played
a key role in driving penetration of the
brand which grew by 4.5% during 2017.
OUR
audience
V I E W E D O U R
advertising
MILLION
20
TIMES
During 2017, we have continued to ensure
our diversified business model delivers
strong growth throughout each of our
commercial routes to market. Our African
business once again has played a pivotal
role by delivering sales growth of 14.1%
(on a constant exchange rate basis). This
is against a backdrop of double digit
growth in 2016. The key to our success
across the African continent has been on
a number of fronts.
Firstly we have again driven accelerated
growth across our core markets by
executing strong local marketing
campaigns supported by our first pan
African TV advertising that was aired
across 20 countries. By working in
partnership with local distributors and
bottlers we have seen new and successful
launches across Mauritania, Benin and
Uganda which will provide us with a
strong platform for growth in future years.
Secondly, new product launches have
been a feature of our campaign. By
understanding the local needs of our
consumers within the markets in which
we operate, we have launched a new
Vimto Watermelon range in the second
half of 2017. This will add to our growing
portfolio now including Vimto Malt
and Vimto Ginger products and will
continue to drive incremental revenue
in 2018.
Finally, we have introduced a range of
new pack formats to ensure Vimto is
available for our consumers to enjoy
across a spectrum of drinking occasions.
Within our Guinea market, we introduced
a new 250ml can which has been
consumed during weddings and has not
addition of the frozen ICEE
brand. ICEE is the world's
largest carbonated
frozen brand and was
invented in America over
50 years ago. The ICEE
brand will complement
our uncarbonated
Starslush brand, and
allow us to go to market
with a total solution across
the frozen drinks category. We
were pleased to be able to sign a long-
term partnership with the ICEE company
that gives us distribution rights across
Western Europe.
Acquisition has also been at the core
of our strategy in Out of Home in 2017.
Earlier in the year we acquired the DJ Drink
Solutions Limited (DJ) business, one of our
existing distributors. DJ operates across the
North West, North East and North Wales
geographies offering both cold drinks
and coffee to a range of Out of Home
customers. By purchasing the business we
will be able to realise the full margin by
delivering straight to the end customer,
whilst driving efficiencies into our current
infrastructure.
Finally, it was a proud moment to be able
to open our first Vimto shop in one of the
country’s most iconic visitor attractions –
Blackpool Pleasure Beach. Operating in the
middle of our key North West heartland,
visitors are now able to purchase the full
range of our Vimto products from a frozen
Vimto drink to our iconic Vimto bon bons in
one easy to shop location.
2018 will see us continue our strategy
of driving sales growth across our three
distinct routes to market, and we will
support this strategy with the launch of
a brand new and exciting advertising
campaign that will go live across the key
summer trading period.
Andrew Milne
Group Commercial Director
28 February 2018
cannibalised our
current 330ml
pack format. We
have also launched a still Vimto in a prism
tetra format that has been particularly
popular with younger consumers within
the Sudan. All of these strategies across a
range of countries on the African continent
puts us in a strong position to continue to
drive growth across this market in future
years.
We have again been able to
strengthen the portfolio of brands
we are able to offer our range
of customers across our Out
of Home business by the
28
29
30
31
S T R A T E G I C R E P O R T
C H I E F F I N A N C I A L O F F I C E R
Tim
C R O S T O N
REFLECTING ON 2017, THE
GROUP HAS DELIVERED A SOLID
PERFORMANCE, WITH DOUBLE
DIGIT REVENUE GROWTH
ACHIEVED IN BOTH OUR UK AND
INTERNATIONAL BUSINESSES.
32
C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
33
33
S T R A T E G I C R E P O R T \ C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
S T R A T E G I C R E P O R T \ C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
R
eflecting on 2017, the Group has
delivered a solid performance.
Double digit revenue growth
was achieved in both our UK
and international businesses, in addition,
the Group remains very profitable and is
underpinned by a strong balance sheet.
This is despite the headwinds of
challenges in the UK trading environment
and an escalation of hostilities in one of
our Middle Eastern territories.
Income Statement
Revenue (£m)
140
120
100
80
65
40
20
0
2012
2013
2014
2015
2016
2017
Group revenue increased by 13.2% to £132.8m (2016: £117.3m).
Business Segments Review
Still
Carbonate
Total
2016
£59.5m
2016
£57.8m
2017
£64.1m
2017
£68.7m
+7.7%
+18.9%
2016
£117.3m
2017
£132.8m
+13.2%
Whilst both business segments
contributed to the sales growth, the
majority of the increase came from
Carbonates. This excellent performance
was driven by growth in Africa, where the
vast majority of sales are Carbonate and
the increase in Out of Home sales in the
UK.
UK Sales
UK revenues increased by 11.0% to
£100.8m which represents 76% of Group
income.
This was a very strong performance within
a challenging trading environment. The UK
market dynamics are evolving at a rapid
pace, although overall growth is minimal,
the rising trend for convenience shopping
and the increasing influence of the
discounters means that suppliers need to
be agile and responsive to change.
Against that backdrop, I am delighted
to report that Vimto brand sales grew
UK SALES
GREW BY
11.0%
AFRICAN MARKET SALES
INCREASED BY
21.2%
VIMTO SALES
GREW BY
9.0%
by 9.0% in the year which compares to
an overall market growth of 2.2% growth
(Nielsen MAT to 30 December 2017).
Once again, the Vimto brand has gained
market share, the growth was driven by
sales within the Still segment across the
Multiples and Discounters.
Elsewhere in our UK business, sales within
our Out of Home business totalled £38.9m,
a 21.5% increase on the prior year. Growth
on a like for like basis excluding the
acquisition of DJ Drink Solutions Limited
(DJ) (acquired 2 June 2017) was 11.3%.
International Sales
Sales in our international business grew by
20.4% (15.9% on a constant exchange rate
basis) to £32.0m.
It is pleasing to report that revenue from
the USA and central Europe increased by
37% compared to the prior year, growing
our international footprint beyond the
core markets of Africa and the Middle East.
These regions now represent c20% of our
international revenues.
The strong momentum in Africa was
maintained in 2017 with sales up 21.2%
on the prior year (14.1% on a constant
exchange rate basis). This result is all the
more impressive as the 2016 comparatives
delivered 19.7% year on year growth. The
2017 increase came from both core and
new markets in the region.
In our pre-Christmas Trading Update
(19 December 2017) we reported that
an escalation of hostilities in Yemen
had prevented the shipments of Vimto
concentrate planned for December 2017.
At the time of writing, the situation in
Yemen remains unchanged, therefore we
are uncertain as to the timing at which we
will be able to resume shipments to our
Yemeni customer. Despite this unfortunate
situation, which is clearly something that
management cannot control, sales to the
Middle East region in 2017 increased by
13.4% (12.1% on a constant exchange rate
basis). However, this performance should
be considered in combination with the
2016 reported sales to the Middle East
which were 7.0% down on the prior year.
As previously explained, reported Middle
East sales are sensitive to timing around
the Group’s year end as the shipment date
is driven by the supply chain requirements
ahead of the following year’s Ramadan
period.
Gross Profit
Gross Profit for the year was £60.6m, 2.6%
above the prior year (2016: £59.1m).
The Group remains highly profitable with
a Gross Margin of 45.6% (2016: 50.4%).
As expected and consistent with many
UK businesses, weaker sterling post the
Brexit vote had an adverse effect on our
input costs in 2017, which has diluted our
margins during the year.
Distribution Expenses
The majority of our distribution expenses
relate to our UK business. The total cost
in 2017 of £5.9m represents a 5.3% saving
compared to the prior year (2016: £6.3m)
and equates to 4.5% of sales (2016: 5.3%).
The savings have been achieved from a
number of cost efficiency projects.
Administrative Expenses
Pre-exceptional overheads in 2017
totalled £24.1m which is an increase of
£1.6m compared to the prior year. Of this
increase, the majority is the incremental
overheads associated with DJ, which was
acquired during the year.
Operating Profit
As indicated in the Group’s pre-Christmas
Trading Update, pre-exceptional Operating
Profit of £30.5m is marginally ahead of the
prior year.
EBITDA
Given the acquisitive nature of the Group,
the directors have started to utilise EBITDA
as a key performance indicator. EBITDA
is defined as profit before interest, tax,
depreciation and amortisation and is
similarly marginally ahead of the prior year
at £31.7m (2016: £31.4m).
34
35
S T R A T E G I C R E P O R T \ C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
S T R A T E G I C R E P O R T \ C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
Profit Before Tax and Exceptional Items
Key Performance Indicators
Profit before tax and exceptional items (£m)
As reported in more detail above, the following Key Performance Indicators are used by management to monitor the Group’s Income
Statement:
35
30
25
20
15
10
5
0
2012
2013
2014
2015
2016
2017
Profit Before Tax (PBT) and exceptional items totalled £30.5m and
is in line with the prior year. It should be noted that the Group
remains highly profitable with a 23% return on sales (2016: 26%).
The decline in PBT margin is principally as a result of increased
input costs noted above. Nevertheless, the Group has delivered
compound annual PBT growth of 8% over the last five years.
Exceptional Items
Exceptional costs during 2017 totalled £1.8m and were made up
of:
• Merger & acquisition costs (£0.3m)
• Restructuring costs (£1.3m)
• Preparations for the introduction of the Soft Drinks Industry
Levy (£0.2m)
EPS before exceptional items (pence per share)
Earnings Per Share
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2012
2013
2014
2015
2016
2017
Earnings Per Share increased by 2.4% (2016: 9.7%) to 67.76 (2016:
66.18) pence. The Group’s EPS has increased by 64% (2016: 84%)
over the last five years with a Compound Annual Growth Rate
(CAGR) of 10% (2016: 13%).
36
GROSS MARGIN
REVENUE GROWTH
45.6%
(2016: 50.4%)
+13.2%
(2016: +7.4%)
OPERATING PROFIT
MARGIN
(PRE-EXCEPTIONAL ITEMS)
23.0%
(2016: 25.8%)
EBITDA
£31.7m
(2016: £31.4m)
Revenue less product cost
as a percentage of revenue,
reviewed specifically at
individual product (Still and
Carbonate) level.
The increase in the current
year’s revenue as a percentage
of the prior year’s total.
Group profit (pre-exceptional
items) before financing income
or charges as a percentage of
revenue, which is considered
for the Group as a whole rather
than at product level.
EBITDA is defined as
profit before interest, tax,
depreciation and amortisation.
Statement of Financial Position
Cash
The Group continues to be very cash
generative in relation to its operating
activities and had a year end cash balance
of £36.1m (2016: £39.8m).
Management aim to leverage the strong
cash position to reinvest in the long-term
growth strategy for the Group. During
2017, £6.6m of cash reserves was used to
acquire DJ to enhance our growing Out of
Home business. DJ was the largest of our
Out of Home distributors, covering the
North West, North East and North Wales
regions. This acquisition consolidates the
Group’s route to market in the regions
and is consistent with our successful
business model already operating in other
UK regions.
A further £1.2m was invested in our
Ross-on-Wye manufacturing facility.
This expenditure completes a long-
term project that has seen a significant
expansion of the factory as well as
investment in state of the art robotic and
automated machinery capable of much
greater volume and efficiency than the
Out of Home division has previously been
capable of. During the year, a special
pension contribution of £1.9m was made,
which allowed the pension scheme to
acquire the adjoining property to that
occupied by Nichols plc in Newton-
le-Willows. This property purchase
safeguards our plans for future growth
and expansion.
By exception, other points of note with
regard to the statement of financial
position are:
• Property, Plant and Equipment
increased by £3.3m. Significant
movement within this asset category
is c£2.0m of additions to our Out of
Home equipment and a further £1.2m
expenditure at our Ross-on-Wye
plant referred to above.
• Goodwill increased by £7.6m during the
year which was mainly the goodwill on
acquisition of DJ.
• The £1.9m increase in intangibles
relates to the deemed value of
customer lists acquired as part of the
investment in DJ.
• The value of inventories is £1.9m less
than the prior year end. This is due to
the unwinding of the planned stock
build at the 2016 year end to help
mitigate input cost increases that
were anticipated for 2017.
• Trade receivables were £3.3m higher
than the 2016 year end, this was caused
by the timing of international sales in
2017 falling into the period close to the
reporting date.
37
S T R A T E G I C R E P O R T \ C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
S T R A T E G I C R E P O R T \ C H I E F F I N A N C I A L O F F I C E R ’ S R E P O R T
• The year end pension liability of
£2.9m has reduced significantly from the
prior year (2016: £6.4m). This is due to
improved performance of investments
in 2017 and recovery plan contributions
made from the Group. During the year,
a special pension contribution of £1.9m
was made, which allowed the pension
scheme to acquire the adjoining
property to that occupied by Nichols plc
in Newton-le-Willows. This property
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
purchase safeguards our plans for
future growth and expansion. The
actuarial assumptions and
described in note 26.
Risks and Uncertainties
The Group maintains a risk register which is reviewed and managed by the senior management team on a regular basis. The register
is also reviewed by the Group Audit Committee at each meeting. Management consider the following issues to be the principal risks
potentially affecting the business:
Shareholders
Dividend
The Board is recommending a final dividend of 23.4 pence per
ordinary share (2016: 20.3 pence) to be paid 4 May 2018. The
final dividend together with the interim dividend of 10.1 pence,
gives a total dividend of 33.5 pence per share for the year which
represents a 14.3% increase on the prior year (2016: 29.3 pence).
The Board has maintained a consistent dividend policy over the
last five years during which time the growth has totalled 93% with
a CAGR of 14%.
Share Price
The Nichols plc share price closed the year at 1,542 (2016: 1,630)
pence, a decrease of 5% during the year. The share price remains
strong and represents c22 P/E ratio. Although the year end price
was down on the prior year, the timing was just 12 days following
our Trading Update informing of the Yemini situation and
reflective of a period of volatility in the equity markets.
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 2012 as the base.
Risk
Mitigation
Total dividend (pence per share)
Nichols plc v All AIM (indexed from 2012)
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.
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.
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.
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.
Nichols plc 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.
We are pleased to report that 100% of the Group’s
UK products are exempt from the levy ahead of its
introduction on 6 April 2018. The only products sold
by the Group in the UK that will attract the levy are
original recipe Coca-Cola and Pepsi Cola sold under
license. 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.
37
32
27
22
17
12
7
2012
2013
2014
2015
2016
2017
Strategic Report
The Strategic Report on pages 6 to 39 was approved by the board
of directors on 28 February 2018 and signed on its behalf by:
2.5
2
1.5
1
0.5
0
2012
2013
2014
2015
2016
2017
Nichols PLC
All AIM index
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.
38
Tim Croston
Chief Financial Officer
28 February 2018
39
S T R A T E G I C R E P O R T
S T R A T E G I C R E P O R T
John
N I C H O L S
Marnie
M I L L A R D
Tim
C R O S T O N
Andrew
M I L N E
John
G I T T I N S
Helen
K E A Y S
John
N I C H O L S
Marnie
M I L L A R D
Tim
C R O S T O N
N O N - E X E C U T I V E C H A I R M A N
C H I E F E X E C U T I V E O F F I C E R
C H I E F F I N A N C I A L O F F I C E R
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 Freddie and
Matilda. 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
M I L N E
John
G I T T I N S
Helen
K E A Y S
G R O U P C O M M E R C I A L D I R E C T O R
I N D E P E N D E N T N O N - E X E C U T I V E D I R E C T O R
I N D E P E N D E N T N O N - E X E C U T I V E D I R E C T O R
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.
Helen joined Nichols in September 2017.
After a career in Consumer Marketing at
organisations such as GE Capital, Sears and
Vodafone, Helen has developed significant
experience working as a Non-Executive
Director.
She is currently SID at Dominos Pizza Group
plc and the Chair of Remcom at Communisis
plc. She has previously held NED roles at
Majestic Wines plc, Skin Clinics and Chrysalis
plc.
Helen is married with 2 teenage children who
keep her busy watching their sports matches.
In her spare time she likes to play tennis.
Helen is also a Life Trustee of the Shakespeare
Birthplace Trust.
40
T H E B O A R D
T H E B O A R D
41
D I R E C T O R S ' R E P O R T
OUR STRATEGY FOR GROWTH INCLUDES
DEVELOPING OUR CORE BRANDS AND MARKETS
WHILST INVESTING IN INNOVATION AND SEEKING
FURTHER ACQUISITION OPPORTUNITIES.
The directors present their report and the
audited financial statements for the year
ended 31 December 2017.
Non-Executive Directors
P J Nichols
J Gittins
J Longworth (Resigned 26 April 2017)
H Keays (Appointed 1 September 2017)
All of the above are members of the Audit
and Remuneration Committees of the
Board.
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
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.
There were no political donations in either
2017 or 2016.
Auditors
Executive Directors
Share Options
M J Millard
T J Croston
A Milne
Financial Risk Management Objectives
and Policies
Business risks and uncertainties are
included within the Chief Financial Officer’s
Report on pages 32 to 39 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
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
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.
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.
42
43
D I R E C T O R S ' R E P O R T
D I R E C T O R S ' R E P O R T
Directors’ remuneration payable in year ended 31 December 2017
Summary of directors’ interests in the Company
Salary
and fees
Benefits
in kind
Bonuses payable in
respect of 2017
Pension
contributions
Total
2017
Total
2016
£’000
£’000
£’000
£’000
£’000
£’000
P J Nichols
M J Millard
T J Croston
A Milne
J Gittins
J Longworth
H Keays
Total
101
322
213
201
32
7
11
887
1
22
17
15
0
0
0
55
0
62
44
41
0
0
0
0
14
12
13
0
0
0
102
420
286
270
32
7
11
102
456
350
308
32
23
0
147
39
1,128
1,271
Directors’ Responsibilities Statement
The directors are responsible for preparing
the annual 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 Group
and Company 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 of the Group
and Company and of the profit or loss of
the 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 AIM.
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, subject to
any material departures disclosed and
explained in the financial statements;
• prepare the financial statements
on the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping
adequate accounting records that
are sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that the financial
statements comply with the 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.
Website publication
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.
(Number of Shares)
Opening shareholding
2017
movement
Closing shareholding
P J Nichols
M J Millard
T J Croston
A Milne
J Gittins
J Longworth
H Keays
2,000,000
9,307
16,000
0
1,280
140
0
0
1,135
1,135
908
0
(140)
0
2,000,000
10,442
17,135
908
1,280
0
0
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 a
Long-Term Incentive Plan (LTIP) relating
to growth in operating profit before
exceptional items. The LTIP will be equity
settled and is being accounted for through
other reserves.
Total bonuses paid to the three Executive
Directors during the year were £360,250.
All bonuses were accrued for at 31
December 2016.
The current LTIP runs from 1 January
2017 to 31 December 2019 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.
All figures above relate to shares owned
outright.
By order of the board
Tim Croston
Secretary
28 February 2018
Laurel House, Woodlands Park,
Ashton Road, Newton-le-Willows, WA12 0HH.
Registered in England and Wales No. 238303.
In respect of the scheme, the first year’s
performance criteria have not been met
and as a result, the Group has provided
for a potential bonus in 2017 of £236,002
through other reserves for the three
Executive Directors at 31 December 2017,
which will be equity settled subsequent to
the year ended 31 December 2019 if Group
targets over the period are met.
Growth in 2017 operating profit of 0.7%
was achieved. As a result of targets not
being met, an estimate of the potential
bonus payable is currently being accrued
and apportioned to Executive Directors
and certain senior executives.
P J Nichols is a member of the final
salary pension 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.
44
45
C O R P O R A T E G O V E R N A N C E R E P O R T
C O R P O R A T E G O V E R N A N C E R E P O R T
• reviewing the Group’s risk management
process, key risk register and risk
mitigations.
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 Committee 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 organisational structure with
clear lines of responsibility;
• comprehensive business planning
procedures, including annual
preparation of detailed budgets for
the year ahead and projections
for future years;
• a comprehensive monthly financial
reporting system, highlighting
variances to budget and regularly
updated forecasts;
• targeted, risk lead, internal reviews
by the finance function and other
professional advisors.
Attendance at Board and Committee
Meetings
The following tables set out the number of
scheduled meetings of the Board and its
Committees during the year and individual
attendance by Board members:
Board Meetings
Directors:
John Nichols
Marnie Millard
Tim Croston
Andrew Milne
John Longworth
John Gittins
Helen Keays
Meetings attended
5
5
5
5
2
5
2
Remuneration Committee
Directors:
John Nichols
John Gittins
John Longworth
Helen Keays
Audit Committee
Directors:
John Nichols
John Gittins
John Longworth
Helen Keays
Meetings attended
2
2
1
1
Meetings attended
3
3
1
1
The Audit Committee met three times
during the year.
The Audit Committee’s terms of reference
are available on the Group’s website.
Its principal responsibilities include
monitoring the integrity of financial
reporting, internal controls and the
external audit process.
During the year the Audit Committee
discharged its responsibilities by:
• approving the external auditor’s plan
for the audit of the Group’s annual
financial statements, including key audit
matters, key risks, confirmation of
auditor independence and terms of
engagement, including audit fees;
• reviewing the Group’s draft financial
statements and interim results
statements and reviewing the external
auditor’s detailed reports thereon,
including disposition of key audit
matters and risks;
• meeting the external auditor twice,
without management, to discuss
matters relating to its remit and
any issues arising from its work;
• reviewing the performance of the
external auditor, which is considered to
be effective;
• reviewing the arrangements by which
the Group’s activities are in compliance
with the Bribery Act 2010;
• approving the plan of targeted internal
reviews conducted by the finance
team and other professional advisors,
monitoring the results of these reviews
and the timely follow up of control
recommendations. The Group does not
have a formal internal audit function
but these reviews are considered
appropriate given the size and nature
of the Group’s operations and the work
performed by the external auditor;
Introduction
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 effective corporate governance
procedures relevant to its size and nature
of operations, as described below.
The Board
The Board comprises a Non-Executive
Chairman, three Executive Directors and
two Non-Executive Directors. Their names
and biographical details are set out on
pages 40 and 41. The Board considers the
two Non-Executive Directors, John Gittins
and Helen Keays, to be independent. The
posts of Chairman and Chief Executive
are held by different individuals. The
Chairman is responsible for the Board
and the Chief Executive for the operating
performance of the Group.
The Board is scheduled to meet four times
each year, with additional meetings called
if required.
The Board’s main responsibilities are
to agree Group strategy, approve
annual budgets, review management
performance, financial results, Board
appointments and dividend policy.
Comprehensive briefing papers are
distributed to all directors prior to each
scheduled Board meeting. Directors are
able, if necessary, to take independent
professional advice, at the Group’s
expense, in the furtherance of their duties.
The Board has delegated specific
responsibilities to Audit and
Remuneration committees (see below).
Due to the infrequency of senior
appointments, the Board does not
maintain a Nominations Committee, but
will form one as appropriate, if required.
The appointment of new Non-Executive
Directors to the Board is considered by
the whole Board.
All directors are subject to election by
shareholders at the first Annual General
Meeting after their appointment.
Thereafter, directors are then subject to
retirement by rotation at intervals of no
more than three years.
Remuneration Committee
The Remuneration Committee consists of
all three Non-Executive Directors and is
chaired by Helen Keays.
The Remuneration Committee met on a
number of occasions during the year. Its
remit is to set remuneration packages
for Executive Directors, approve any
Group share, share option or cash
based incentive scheme and grant,
award, allocate shares, share options
or payments under such schemes. In
addition, the Remuneration Committee
periodically reviews the Group’s
remuneration policy in relation to its peer
group and industry norms.
The Executive Directors determine the
remuneration of the Non-Executive
Directors.
Details of directors’ remuneration are set
out in the Directors’ Report on page 44.
Audit Committee
The Audit Committee consists of all three
Non-Executive Directors and is chaired
by John Gittins, an Independent Non-
Executive Director.
46
47
A U D I T O R ’ S R E P O R T
Independent Auditor’s report to the
members of Nichols plc
Opinion
We have audited the financial statements
of Nichols plc (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) for the
year ended 31 December 2017 which
comprise the consolidated income
statement, the consolidated statement of
comprehensive income, the Group and
Parent Company statement of financial
position, the consolidated and Parent
Company statement of cash flows, the
Group and Parent Company statement of
changes in equity and notes to the financial
statements, including a summary of
significant accounting policies.
The financial reporting framework that
has been applied in the preparation of
the financial statements is applicable law
and International Financial Reporting
Standards (IFRSs) as adopted by the
European Union and, as regards the Parent
Company financial statements, as applied
in accordance with the provisions of the
Companies Act 2006.
In our opinion:
• the financial statements give a true and
fair view of the state of the Group’s and
of the Parent Company’s affairs as at 31
December 2017 and of the Group’s profit
for the year then ended;
• the Group financial statements have
been properly prepared in accordance
with IFRSs as adopted by the European
Union;
• the Parent Company financial
statements have been properly
prepared in accordance with IFRSs as
adopted by the European Union and
as applied in accordance with the
provisions of the Companies Act
2006; and
• the financial statements have been
prepared in accordance with the
requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards
are further described in the Auditor’s
responsibilities for the audit of the financial
statements section of our report. We are
independent of the Group and the Parent
Company in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have
fulfilled our other ethical responsibilities in
accordance with these requirements. We
believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Use of our report
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the Company’s
members those matters we are required
to state to them in an auditor’s report and
for no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than
the Company and the Company’s members
as a body for our audit work, for this
report, or for the opinions we have formed.
Conclusions relating to going concern
We have nothing to report in respect of the
following matters in relation to which the
ISAs (UK) require us to report to you where:
• the directors’ use of the going concern
basis of accounting in the preparation
of the financial statements is not
appropriate; or
• the directors have not disclosed in the
financial statements any identified
material uncertainties that may cast
significant doubt about the Group’s or
the Parent Company’s ability to continue
to adopt the going concern basis of
accounting for a period of at least twelve
months from the date when the financial
statements are authorised for issue.
Key audit matters
Key audit matters are those matters
that, in our professional judgment, were
of most significance in our audit of the
financial statements of the current period
and include the most significant assessed
risks of material misstatement (whether or
not due to fraud) we identified, including
those which had the greatest effect on:
the overall audit strategy, the allocation of
resources in the audit; and directing the
efforts of the engagement team. These
matters were addressed in the context of
our audit of the financial statements as a
whole, and in forming our opinion thereon,
and we do not provide a separate opinion
on these matters.
48
49
A U D I T O R ’ S R E P O R T
A U D I T O R ’ S R E P O R T
Brand Support Accruals
How We Addressed the Key Audit Matter in the Audit
As disclosed in note 2 (accounting policies) the Group incurs
significant costs in the support and development of the Group’s
brands. The classification of these costs within the income
statement is dependent upon the type of arrangement with the
customer. As the majority of these costs are recognised as a
deduction to revenue we consider there to be a significant risk
concerning the appropriate application of IAS 18, particularly
in respect of the Group’s measurement of the fair value of
consideration in revenue transactions as well as the Group’s
accounting for arrangements where cash consideration is given by
the Group to the customer.
Further, whilst the majority of costs incurred on these
arrangements have been settled at 31 December 2017, certain
management 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.
In accordance with the auditing standards and in view of the
judgements involved above, as well as management being in a
position to be able to override controls, we have presumed a risk
of fraud within this area.
We undertook the following audit procedures in relation to brand
support arrangements:
•
Reviewed the design and implementation of controls
over the calculation and application of brand support
arrangements. We tested the operating effectiveness of
controls that were identified;
•
•
•
•
Performed detailed testing over a sample of brand support
arrangements charged to revenue and to costs in the year,
through verification to agreement and recalculation of
the amounts recognised as a cost and the value of liability
accrued;
Ensured that the accounting policy for brand support
arrangements has been appropriately applied and that
the classification of charges in the income statement is
appropriate;
Performed detailed cut-off testing to ensure that brand
support arrangements are recorded in the correct period;
and
Reviewed the year end liability for completeness and
accuracy, including ensuring the ageing of the liabilities is
appropriate.
Pension Scheme Assumptions
How We Addressed the Key Audit Matter in the Audit
We consider there to be a significant risk concerning the
appropriateness of the actuarial assumptions applied in
calculating the Group’s defined benefit pension scheme liability of
£2.9m (2016: £6.4m) as shown in note 26.
The valuation of the Group’s pension scheme liability involves
significant judgement in the choice of discount rate used and in
the key sources of estimation uncertainty, in particular in relation
to the inflation assumptions and mortality rates, as described in
the Group’s accounting policies.
We have assessed the appropriateness of the assumptions
underpinning the valuation of the scheme liabilities.
Specifically we challenged the discount rate, inflation and
mortality assumptions applied in the calculation by using
our auditor engaged pension specialists to benchmark the
assumptions applied against comparable third party data and
assessed the appropriateness of the assumptions in the context
of the Group’s own position.
Acquisition Accounting
How We Addressed the Key Audit Matter in the Audit
As described in note 2 (accounting policies) and note 19, on 2
June 2017 the Group acquired the entire share capital of D J Drink
Solutions Limited.
We focused on this area because the accounting treatment for the
provisional opening balance sheet is inherently judgemental and
requires the directors to exercise many judgements, including in
respect of the fair values of intangible assets and the calculation
of associated goodwill.
We reviewed the sale and purchase agreement entered into on 2
June 2017 and considered management’s accounting treatment.
We tested the fair values ascribed to intangible assets by
understanding the assumptions adopted in the valuation model,
which critically include the forecast attrition rate in relation to
existing customers, the expected longevity of the customer
relationships, and the sales and margin forecasts.
We engaged and evaluated the work of our specialists who
assessed the appropriateness of those underlying assumptions.
Our application of materiality
We consider materiality to be the
magnitude by which misstatements,
individually or in the aggregate, could
reasonably be expected to influence the
economic decisions of the users of the
financial statements. We use materiality
both in planning the scope of our audit
work and in evaluating the results of
our work. Based on our professional
judgement, we determined materiality
for the financial statements as a whole as
follows:
Group materiality
Basis for materiality
Rationale for the benchmark adopted
£1.40 million (2016: £1.30 million)
3 year average basis utilising 5% of profit before tax, after
adjusting for exceptional items.
Pre-tax profit after adjusting for exceptional items is determined
to be a stable basis of assessing business performance and is
considered to be the most significant determinant of performance
used by shareholders.
In considering individual account balances
and classes of transactions we apply a
lower level of materiality (performance
materiality) in order reduce to an
appropriately low level the probability
that the aggregate of uncorrected and
undetected misstatements exceeds
materiality. Performance materiality was
set at £1.05million (2016: £0.98million),
representing 75% of materiality.
We agreed with the Audit Committee
that we would report to the Committee
all individual audit differences identified
during the course of our audit in excess of
£28,000 (2016: £26,000). We also agreed to
report differences below these thresholds
that, in our view, warranted reporting on
qualitative grounds.
There were no misstatements identified
during the course of our audit that were
individually, or in aggregate, considered
to be material in terms of their absolute
monetary value or on qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining
an understanding of the Group and
its environment, including Group-wide
controls, and assessing the risks of material
misstatement at the Group level.
The Group manages its operations from
two principal locations in the UK and has
common financial systems, processes
and controls covering all significant
components. The audit of all significant
components was performed by the same
audit team.
99% (2016: 99%) of net assets. Our audit
work on each component was executed
at levels of materiality applicable to each
individual entity which was lower than
Group materiality. Component materiality
ranged from £0.8m to £0.9m (2016: £0.8m
to £0.9m).
In assessing the risk of material
misstatement to the Group financial
statements, and to ensure we had
adequate quantitative coverage of
significant accounts in the financial
statements, of the three reporting
components of the Group, we determined
that two components represented the
principal business units within the Group.
For these two components, we performed
an audit of the complete financial
information. For the remaining component,
we performed audit procedures on specific
accounts within that component that
we considered had the potential for the
greatest impact on the significant accounts
in the financial statements, either because
of the size of these accounts or their risk
profile.
As a consequence of the audit scope
determined, we achieved coverage of
approximately 96% (2016: 97%) of revenue,
97% (2016: 98%) of profit before tax and
Other information
The directors are responsible for the
other information. The other information
comprises the information included in the
strategic report other than the financial
statements and our auditor’s report
thereon. Our opinion on the financial
statements does not cover the other
information and, except to the extent
otherwise explicitly stated in our report,
we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read
the other information and, in doing so,
consider whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the audit or otherwise appears to be
materially misstated. If we identify such
material inconsistencies or apparent
material misstatements, we are required
to determine whether there is a material
50
51
misstatement in the financial statements
or a material misstatement of the other
information. If, based on the work we
have performed, we conclude that there
is a material misstatement of this other
information, we are required to report
that fact. We have nothing to report in this
regard.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion, based on the work
undertaken in the course of the audit:
• the information given in the strategic
report and the directors’ report for
the financial year for which the financial
statements are prepared is consistent
with the financial statements; and
• the strategic report and the directors’
report have been prepared in
accordance with applicable legal
requirements.
Matters on which we are required to
report by exception
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
identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not
been kept by the Parent Company, or
returns adequate for our audit have not
been received from branches not visited
by us; or
• the Parent Company financial
statements are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’
remuneration specified by law are not
A U D I T O R ’ S R E P O R T
O U R A D V I S O R S
made; or
basis of these financial statements.
Auditors
Stockbrokers & Nominated Advisor
Registered Office
A further description of our responsibilities
for the audit of the financial statements
is located on the Financial Reporting
Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
Julien Rye
(Senior Statutory Auditor)
For and on behalf of BDO LLP,
Statutory Auditor, Manchester, UK
28 February 2018
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
BDO LLP,
3 Hardman Street,
Spinningfields,
Manchester,
M3 3EB.
N+1 Singer Advisory LLP,
West One Wellington Street,
Leeds,
LS1 1BA.
Laurel House,
Woodlands Park,
Ashton Road,
Newton-le-Willows,
WA12 0HH.
Bankers
Financial Advisors
Registered Number
The Royal Bank of Scotland PLC,
1 Spinningfields Square,
Manchester,
M3 3AP.
N M Rothschild & Sons Limited,
82 Kings Street,
Manchester,
M2 4WQ.
238303.
Solicitors
Registrars
DLA Piper,
101 Barbirolli Square,
Manchester,
M2 3DL.
Link Asset Services,
34 Beckenham Road,
Beckenham,
Kent,
BR3 4TU.
• we have not received all the information
and explanations we require for our
audit.
Responsibilities of directors
As explained more fully in the directors’
responsibilities statement set out on page
44, the directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a true
and fair view, and for such internal control
as the directors determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error.
In preparing the financial statements, the
directors are responsible for assessing the
Group’s and the Parent Company’s ability
to continue as a going concern, disclosing,
as applicable, matters related to going
concern and using the going concern basis
of accounting unless the directors either
intend to liquidate the Group or the Parent
Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
52
53
C O N S O L I D A T E D I N C O M E S T A T E M E N T - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
S T A T E M E N T O F F I N A N C I A L P O S I T I O N - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Before
exceptional
items
£’000
Exceptional
items
£’000
Before
exceptional
items
£’000
Exceptional
items
£’000
2017
£’000
Notes
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Operating profit
Finance income
Finance expense
Profit before taxation
Taxation
Profit for the financial year attributable to equity holders
of the parent
Earnings per share (basic)
Earnings per share (diluted)
3
132,789
(72,166)
60,623
(5,938)
0
0
0
0
132,789
117,349
(72,166)
(58,234)
60,623
(5,938)
59,115
(6,271)
(24,142)
(1,801)
(25,943)
(22,519)
30,543
(1,801)
28,742
30,325
134
(154)
30,523
(5,548)
24,975
0
0
134
(154)
(1,801)
28,722
0
(5,548)
(1,801)
23,174
214
(134)
30,405
(6,015)
24,390
62.88p
62.81p
4
5
5
7
9
9
2016
£’000
117,349
(58,234)
59,115
(6,271)
(22,519)
30,325
1,301
(134)
0
0
0
0
0
0
1,087
0
1,087
31,492
0
(6,015)
1,087
25,477
69.13p
69.07p
C O N S O L I D A T E D S T A T E M E N T O F C O M P R E H E N S I V E I N C O M E - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
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 income/ (expense) for the year
Total comprehensive income for the year
2017
£’000
23,174
1,140
(113)
1,027
24,201
2016
£’000
25,477
(3,472)
601
(2,871)
22,606
Assets
Non-current assets
Property, plant and equipment
Goodwill
Investments
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
10
11
12
13
14
15
16
20
17
17
26
14
18
Group
2017
£’000
Notes
2016
£’000
8,715
23,061
0
6,084
1,436
Parent
2017
£’000
4,145
2,504
2016
£’000
3,970
2,504
16,566
16,566
1,316
1,065
1,316
1,436
12,059
30,666
0
7,993
1,065
51,783
39,296
25,596
25,792
4,815
34,740
36,058
75,613
6,717
31,508
39,754
77,979
127,396
117,275
21,031
2,536
23,567
2,921
1,586
4,507
28,074
99,322
3,697
3,255
1,209
134
91,027
99,322
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
2,342
31,742
15,422
49,506
75,102
14,955
232
15,187
2,921
0
2,921
18,108
56,994
3,697
3,255
1,209
909
47,924
56,994
3,914
25,020
25,768
54,702
80,494
21,008
357
21,365
6,395
0
6,395
27,760
52,734
3,697
3,255
1,209
417
44,156
52,734
The Parent Company reported a profit for the year ended 31 December 2017 of £14,080,000 (2016: £15,774,000).
The financial statements on pages 54 to 85 were approved by the Board of Directors on 28 February 2018 and were signed on its behalf by:
54
P J Nichols
Chairman
Registered number 238303.
55
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
P A R E N T C O M P A N Y S T A T E M E N T O F C A S H F L O W S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Cash flows from operating activities
Profit for the financial year
Adjustments for:
Depreciation and amortisation
Loss/ (profit) 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
Net cash used in investing activities
Cash flows from financing activities
Share options exercised
Dividends paid
Net cash used in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
20
Notes
2017
£’000
2017
£’000
23,174
2016
£’000
2016
£’000
25,477
5
5
5
1,175
40
(134)
154
0
5,548
1,878
(4,675)
(1,810)
(2,334)
134
4
(3,795)
(6,568)
(158)
23,016
(5,274)
17,742
1,111
(6)
(214)
134
(1,087)
6,015
(2,382)
(3,036)
1,229
(970)
214
17
(2,442)
(3,715)
794
26,271
(6,116)
20,155
(10,225)
(5,926)
0
8
(11,213)
(107)
(9,806)
(11,213)
(3,696)
39,754
36,058
(9,913)
4,316
35,438
39,754
Cash flows from operating activities
Profit for the financial year
Adjustments for:
Depreciation
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
Net cash used in investing activities
Cash flows from financing activities
Share options exercised
Dividends paid
Net cash used in financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
20
Notes
2017
£’000
2017
£’000
14,080
2016
£’000
2016
£’000
15,774
347
(134)
154
3,407
1,571
(6,721)
(5,840)
(2,334)
281
(214)
126
4,037
(1,484)
(4,255)
4,165
(970)
(9,550)
4,530
(3,275)
1,255
1,686
17,460
(4,577)
12,883
134
(522)
214
(323)
(388)
(109)
0
8
(11,213)
(107)
(9,806)
(11,213)
(10,346)
25,768
15,422
(9,913)
2,861
22,907
25,768
56
57
S T A T E M E N T O F C H A N G E S I N E Q U I T Y - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
Group
At 1 January 2016
Dividends
Movement in ESOT
Transactions with owners
Profit for the year
Other comprehensive expense
Total comprehensive income
At 1 January 2017
Dividends
Movement in ESOT
Credit to equity for equity-settled share based
payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
At 31 December 2017
Parent
At 1 January 2016
Dividends
Movement in ESOT
Transactions with owners
Profit for the year
Other comprehensive expense
Total comprehensive income
At 1 January 2017
Dividends
Movement in ESOT
Credit to equity for equity-settled share based
payments
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
At 31 December 2017
58
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
(547)
65,397
73,011
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
189
189
0
0
0
(9,806)
(9,806)
(32)
157
(9,838)
(9,649)
25,477
25,477
(2,871)
(2,871)
22,606
22,606
3,697
3,255
1,209
(358)
78,165
85,968
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
192
300
(11,213)
(11,213)
(126)
0
66
300
492
(11,339)
(10,847)
0
0
0
23,174
23,174
1,027
1,027
24,201
24,201
3,697
3,255
1,209
134
91,027
99,322
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
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3,697
3,255
1,209
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
228
0
189
189
0
0
0
417
0
192
300
41,091
49,480
(9,806)
(9,806)
(32)
157
(9,838)
(9,649)
15,774
15,774
(2,871)
(2,871)
12,903
12,903
44,156
52,734
(11,213)
(11,213)
(126)
0
66
300
492
(11,339)
(10,847)
0
0
0
14,080
14,080
1,027
1,027
15,107
15,107
3,697
3,255
1,209
909
47,924
56,994
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 2017 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 2017, 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 £30.7 million (2016: £23.1 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 2017.
Defined benefit obligations
For the Group’s defined benefit plan, the main
assumptions used by the actuary are mortality
rates, the discount rate and the expected rate of
inflation (see note 26).
Business combinations
IFRS 3 'Business Combinations’ requires that the
consideration for an acquisition is recorded at
fair value. Where contingent consideration is
part of the acquisition cost then the directors
estimate the fair value of the amount payable.
Contingent consideration is revalued at each
reporting period according to the latest
forecasts of the acquired business based on the
terms of the earn-out arrangement.
Where deferred consideration is part of an
acquisition cost then it is recorded and held
on the balance sheet at amortised cost. Assets
and liabilities must also be recognised at fair
value on acquisition. The identification and
measurement of contingent liabilities and
intangible assets are key areas of judgement.
For intangible assets appropriate valuation
methods are used, including royalty rates and
the income approach to recognise the fair value
of the assets acquired.
59
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
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 2017.
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.
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 management 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. In line with market
research and data made available by Nielsen,
which documents industry performance in
respect of Stills and Carbonates, management
identify both Stills and Carbonates as operating
segments where 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.
Exceptional items
The Group has adopted an accounting policy
that seeks to highlight significant exceptional
items of income and expense within Group
results for the year. Exceptional items are those
considered to be of such significance, by either
nature or scale, that separate disclosure is
required in the financial statements in order to
provide a better understanding of the Group’s
trading performance (see note 4).
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/ (expense).
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, movements in the Group’s ESOT and
equity settled share-based payments in respect
of Long-Term Incentive Plans.
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 and intangible assets with
indefinite lives are reviewed for impairment
annually. All property, plant and equipment
is tested for impairment whenever events or
changes in circumstances indicate that the
carrying amount may not be recoverable. If any
such indication of impairment exists then the
asset’s recoverable amount is estimated.
For the purposes of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash flows
(cash-generating units). As a result, some assets
are tested individually for impairment and some
are tested at a cash-generating unit level.
An impairment loss is recognised if the carrying
amount of an asset or its cash-generating
unit exceeds its recoverable amount. The
recoverable amount is the higher of fair value,
reflecting market conditions less costs to sell
and value in use. In assessing value in use, the
estimated future cash flows are discounted to
their present value using the cost of capital that
reflects the current market assessments of the
time value of money and the risks specific to
the 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:
Plant, machinery, fixtures
and fittings
3-10 years
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.
60
61
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
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.
Contingent consideration
Contingent consideration represents the
Group’s best estimate of the fair value of
amounts payable based on the likelihood of
future events occuring.
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.
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.
Share-based payment transactions
The Group operates two equity settled share-
based payment schemes; a Save As You Earn
scheme open to all employees and a Long-Term
Incentive Plan for certain directors and senior
executives. Both schemes comprise the grant
of options under the Group’s share option
schemes.
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 2017 for the year ending 31
December 2017.
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.
No further disclosures have been provided due
to the immateriality of the schemes above.
Provisions and contingent liabilities
A provision is recognised if, as a result of a
past event, the Group has a present legal or
constructive obligation that can be estimated
reliably and it is probable that an outflow of
economic benefits will be required to settle
the obligation. Provisions are determined by
discounting the expected future cash flows
at a pre-tax rate that reflects current market
assessments of the time value of money and the
risks specific to the liability.
A provision for 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.
Employee Share Ownership Trust
The assets and liabilities of the Employee Share
Ownership Trust (ESOT) have been included in
the consolidated financial statements.
The costs of purchasing own shares held by the
ESOT are shown as a deduction against equity.
Neither the purchase nor sale of own shares
leads to a gain or loss being recognised in the
consolidated income statement.
Investments in subsidiaries
Investments in subsidiaries are shown in the
Parent Company statement of financial position
at cost less any provision for impairment.
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
IFRS 16, Leases
Clarifications to IFRS 15, Revenue from contracts
with customers
Classification and Measurement of Share-based
Payment Transactions (Amendments to IFRS 2)
deductions to revenue under IFRS 15 as a result
of rebate arrangements.
It is expected that IFRS 16 will materially affect
the consolidated financial statements. As
at the reporting date, the Group has non-
cancellable operating lease commitments of
£3.8m (see note 24), the vast majority of which
relate to property leases for operational sites.
Management have commenced an analysis of
these leases to assess the expected impact of
IFRS 16.
If IFRS 16 was implemented in the year to 31
December 2017, its effect would be to increase
the net book value of property, plant and
equipment, with a corresponding finance lease
liability resulting in an immaterial net impact
on the income statement for the year. A full
assessment of the impact on the Group is to
be concluded during 2018, in advance of the
standard becoming effective from 1 January
2019.
Given that the trade payables and receivables
and cash are the only material financial
instruments, the Group is not expecting the
classification aspects of IFRS 9 to have a material
effect. Notwithstanding the high value of trade
receivables, the application of the expected
credit loss impairment model is not expected to
have a material effect on the Group due to the
fact that the Group’s customers are primarily
major supermarkets and bad debts within this
population are rare historically and no change
to this position is expected.
The Group is still in the process of developing
its expected credit loss systems and
methodologies. The Group is not expecting to
restate comparatives when applying IFRS 9 for
the first time for the period ended 31 December
2018.
Annual Improvements to IFRSs (2015-2017
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.
The International Accounting Standards Board
has issued IFRS 15, Revenue from contracts
with customers, which is effective for periods
beginning on or after 1 January 2018. The Group
has decided not to early adopt this standard.
As a manufacturer and distributor, the Group
earns its revenues from the sale of goods rather
than services. The Group sells those goods to
specific orders. The Group recognises revenue
at a point in time, typically on despatch of the
goods to customers’ premises for UK sales or,
for International sales, upon loading the goods
onto the relevant carrier.
The Group has concluded that adoption of IFRS
15 will not impact the revenue recognition policy
currently applied, with revenue recognised at a
point in time, depending on when the specifics
of a particular contract result in control of the
goods being passed to the customer.
Although the majority of the Group’s contracts
with customers are not complex, with revenue
being fixed for a specific quantity of goods, the
Group has identified a number of contracts
in which customers are given volume rebates
and/ or other promotional rebates based on
quantities purchased over a contractually
agreed period of time. Under the Group’s
current policy, management makes its best
estimate of any rebates it will have to give based
on available information.
Under IFRS 15, management will assume
products sold by the balance sheet date will
attract a full rebate except to the extent that
it is highly probable the full rebate will not be
earned. As disclosed in the ‘uses of estimates
and judgements’ section of note 2, based on
the timing of the agreements entered into with
customers, the level of estimation in the year
end accrual is insignificant, and as such there
is not expected to be a significant impact on
62
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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, particularly in
light of market research and industry data made available by Nielsen. Gross
profit is the measure used to assess the performance of each operating
segment.
Still
Carbonate
Total
Revenue
Gross Profit
2017
£’000
64,139
68,650
2016
£’000
59,523
57,826
132,789
117,349
2017
£’000
35,168
25,455
60,623
2016
£’000
34,702
24,413
59,115
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
2017
£’000
3,940
1,018
2017
£’000
13,035
12,724
6,275
32,034
100,755
132,789
2016
£’000
2,442
954
2017
%
9.8
9.6
4.7
24.1
75.9
100.0
2016
£’000
11,497
10,496
4,606
26,599
90,750
117,349
2016
%
9.9
8.9
3.9
22.7
77.3
100.0
Revenue from continuing operations arose principally from the provision of
goods.
The Group’s business segments operate in the Middle East, Africa, the Rest of
the World 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 2017 or 2016.
Total assets
The assets of the Group at 31 December 2017 and 31 December 2016 are
entirely located within the United Kingdom.
Capital expenditure
The capital expenditure of the Group for the years ended 31 December 2017
and 31 December 2016 was entirely made within the United Kingdom.
Depreciation
The Group’s depreciation charges for the years ended 31 December 2017 and
31 December 2016 are against property, plant and equipment all retained
within the United Kingdom.
64
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
Depreciation of property, plant and equipment
Operating lease rentals payments
Awards under Incentive Plan
Loss/ (gain) on foreign exchange differences
Loss/ (profit) on sale of property, plant and equipment
Amortisation of intangible assets
2017
£’000
2016
£’000
72,166
58,234
57
1,018
713
300
405
40
157
56
954
548
1,268
(464)
(6)
157
The Group incurred a number of costs during 2017 which by their nature were non-recurring and have been reported as exceptional items within administrative
expenses. These costs fall into three categories: merger and acquisition expenses (£0.3m), restructuring costs (£1.3m), which represent redundancies of £0.6m, all
of which have been communicated to those employees impacted prior to the year-end date, as well as costs incurred in respect of the exit from an operating site
in the Out of Home division – principally related to onerous lease costs of £0.6m and other costs of £0.1m. Further costs have been incurred in preparation for the
introduction of the Soft Drinks Industry Levy (£0.2m).
5. Finance income and expense
Finance income comprises:
Bank interest receivable
Exceptional gain
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
Notes
26
26
2017
£’000
134
0
134
(600)
754
0
154
2016
£’000
214
1,087
1,301
(845)
971
8
134
See note 19 for details of the prior year exceptional credit recognised, which reflected a gain on the step-acquisition of The Noisy Drinks Co. Limited.
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6. Directors and employees
7. Taxation
a. Average number of persons employed during the year, including directors:
2017
Number
2016
Number
a. Analysis of expense recognised in the consolidated income statement
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
242
197
2017
£’000
9,495
1,183
410
41
300
11,429
2017
£’000
8,930
1,124
410
41
300
10,805
205
154
2016
£’000
8,823
923
319
29
1,268
11,362
2016
£’000
8,109
906
304
29
1,268
10,616
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 43.
Wages and salaries
Pension costs
Accrued under Incentive Plan
2017
£’000
1,089
39
236
1,364
2016
£’000
1,212
59
614
1,885
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
2017
£’000
5,257
(29)
5,228
297
23
320
2016
£’000
5,738
17
5,755
267
(7)
260
Total tax expense in the consolidated income statement
5,548
6,015
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 19.25% (2016: 20.00%)
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
Impact on deferred tax due to rate change
Total tax expense in the consolidated income statement
2017
£’000
2016
£’000
28,722
31,492
5,529
6,298
161
(111)
31
(62)
0
57
(57)
5,548
63
(330)
(36)
(7)
(90)
14
103
6,015
The highest paid director has received £406,000 (2016: £393,000) excluding pension contributions.
Benefits are accruing to 3 directors (2016: 4 directors) under a defined contribution scheme, the highest paid director has received contributions of £14,000 in the
year.
Further information regarding directors’ remuneration and the Incentive Plan is provided in the directors’ report on pages 42 to 45.
The effective rate of tax for the year of 19.3% (2016: 19.1%) is higher than the standard rate of Corporation Tax in the United Kingdom (19.25%). The differences
are explained above.
c. The effective rate of tax on profit is 19.3% (2016: 19.1%).
d. Tax on items recognised in other comprehensive income/ (expense)
In addition to the amount charged to the consolidated income statement, a charge of £113,000 (2016: credit of £601,000) has been recognised in other
comprehensive income/ (expense), being the movement on deferred taxation relating to retirement benefit obligations and employee benefits.
66
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8. Equity dividends
Interim dividend 10.1p (2016: 9.0p) paid 25 August 2017
Final dividend for 2016 20.3p (2015: 17.6p) paid 5 May 2017
2017
£’000
3,726
7,487
11,213
2016
£’000
3,318
6,488
9,806
The interim dividend for the prior year of £3,318,000 was paid on 26 August 2016.
The 2017 final proposed dividend of £8,651,000 (23.4p 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
2017
62.88p
62.81p
67.76p
67.69p
2016
69.13p
69.07p
66.18p
66.12p
Basic earnings per share
Dilutive effect of share options
Diluted earnings per share
2017
Weighted
average number
of shares
Earnings
£’000
Earnings
per share
Earnings
£’000
2016
Weighted
average number
of shares
Earnings
per share
23,174
36,857,660
62.88p
25,477
36,853,888
69.13p
36,997
33,197
23,174
36,894,657
62.81p
25,477
36,887,085
69.07p
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 Groups’ 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
Dilutive effect of share options
Earnings
£’000
23,174
1,801
24,975
2017
Weighted
average number
of shares
Earnings
per share
36,857,660
62.88p
36,857,660
67.76p
36,997
Earnings
£’000
25,477
(1,087)
24,390
2016
Weighted
average number
of shares
Earnings
per share
36,853,888
69.13p
36,853,888
66.18p
33,197
Diluted earnings per share before exceptional items
24,975
36,894,657
67.69p
24,390
36,887,085
66.12p
10. Property, plant and equipment
Group
Cost
At 1 January 2016
Additions
On acquisition of subsidiary
Disposals
Plant,
machinery
fixtures
and fittings
£’000
7,492
2,442
1,177
(110)
Land and
buildings
£’000
3,444
0
0
0
Total
£’000
10,936
2,442
1,177
(110)
At 1 January 2017
3,444
11,001
14,445
Additions
On acquisition of subsidiary
Disposals
0
0
0
3,940
780
(401)
3,940
780
(401)
At 31 December 2017
3,444
15,320
18,764
Plant,
machinery
fixtures
and fittings
£’000
Land and
buildings
£’000
109
69
0
178
69
0
0
4,766
885
(99)
5,552
949
(357)
314
Total
£’000
4,875
954
(99)
5,730
1,018
(357)
314
Depreciation
At 1 January 2016
Charge for the year
On disposals
At 1 January 2017
Charge for the year
On disposals
Impairment of assets on prior
acquisition (note 11)
At 31 December 2017
247
6,458
6,705
Parent
Cost
Plant,
machinery
fixtures
and fittings
£’000
Land and
buildings
£’000
At 1 January 2016
3,444
3,105
Additions
Disposals
0
0
323
0
Total
£’000
6,549
323
0
At 1 January 2017
3,444
3,428
6,872
Additions
Disposals
0
0
522
0
522
0
At 31 December 2017
3,444
3,950
7,394
Depreciation
At 1 January 2016
Charge for the year
On disposals
At 1 January 2017
Charge for the year
On disposals
At 31 December 2017
Plant,
machinery
fixtures
and fittings
£’000
Land and
buildings
£’000
Total
£’000
2,621
281
0
2,512
212
0
2,724
2,902
278
0
347
0
3,002
3,249
109
69
0
178
69
0
247
Net book value at
31 December 2017
Net book value at
31 December 2016
3,197
8,862
12,059
3,266
5,449
8,715
Net book value at
31 December 2017
Net book value at
31 December 2016
3,197
948
4,145
3,266
704
3,970
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11. Goodwill
Group
Cost
At 1 January 2016
Acquisitions
At 1 January 2017
Re-statement of goodwill on prior acquisition
Acquisition (see note 19)
At 31 December 2017
£’000
19,108
3,953
23,061
387
7,218
30,666
Parent
Cost
At 1 January 2016
Acquisitions
At 1 January 2017 and 31 December 2017
£’000
2,504
0
2,504
The Group’s goodwill acquisition for 2017 relates to the acquisition of 100% of the issued share capital of DJ Drink Solutions Limited (DJ), completed on 2 June
2017. 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. The re-statement of goodwill on prior acquisition represents property, plant and equipment of £314k, which has been impaired to
£nil and HP lease liabilities restated by £73k, in respect of The Noisy Drinks Co. Limited (Noisy) acquisition in 2016. This adjustment was identified in the hindsight
period post acquisition on 8 January 2016.
All goodwill relates to the Out of Home business which is considered by management to be two independent Out of Home cash-generating units (CGU’s) sitting
below each of the Still and Carbonate operating segments. The goodwill has been allocated to these CGU’s and not to the named subsidiaries.
Still
Out of Home
Carbonate
Out of Home
2017
£’000
2016
£’000
14,602
14,409
8,846
23,448
8,652
23,061
The £7.2m goodwill recognised in the year in respect of the acquisition of 100%
of the issued share capital of DJ remains unallocated to a cash-generating unit
(CGU) at 31 December 2017. Management are able to review the performance
of the acquisition at the operating segment level (Still and Carbonate) however
will formalise the allocation to a specific CGU , which is lower than an operating
segment in line with IAS 36, in the forthcoming financial year.
Brand names with indefinite lives were recognised as part of the fair value
exercise on the acquisition of Noisy in 2016 (£2.6m) and the trade and assets of
Feel Good Drinks in 2015 (£1.3m). Both have been allocated to the Still Out of
Home CGU above for impairment testing. In respect of the Parent Company’s
goodwill, the entire goodwill is allocated to the Still Out of Home CGU in both
2016 and 2017.
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.
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 CGU is based on its value in use. Value
in use is the present value of the projected cash flows of the CGU. The key
assumptions regarding the value in use calculations were forecast growth in
revenues and the discount rate applied. Budgeted revenue growth is estimated
based on actual performance over the past two years and expected market
changes.
The discount rate of 15% is a pre-tax rate and reflects the risks specific to
the relevant CGU. 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.
70
12. Investments: shares in Group undertakings
Parent
Cost and net book amount
£’000
At 1 January 2016, 1 January 2017 and at 31 December 2017
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 ******
DJ Drink Solutions Limited *******
%
100
100
100
100
100
100
100
100
100
100
“The Company directly owns Ben Shaws Dispense Drinks Limited, Dayla Liquid
Packing Limited and Vimto (Out of Home) Limited.
******* DJ Drink Solutions Limited is directly owned by Vimto (Out of Home)
Limited.
*Beacon Drinks Limited is directly owned by Vimto (Out of Home) Limited.
All Group undertakings are consolidated.
**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.
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.
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13. Intangibles
Group
Cost
At 1 January 2016
Acquisitions
At 1 January 2017
Acquisitions (see note 19)
At 31 December 2017
Amortisation
At 1 January 2016
Charge in the year
At 1 January 2017
Charge in the year
At 31 December 2017
Brand
name
£’000
1,316
2,573
3,889
0
3,889
Customer
list
£’000
0
2,352
2,352
2,066
4,418
0
0
0
0
0
0
157
157
157
314
Total
£’000
1,316
4,925
6,241
2,066
8,307
0
157
157
157
314
Carrying value at 31 December 2017
Carrying value at 31 December 2016
3,889
3,889
4,104
2,195
7,993
6,084
Parent
At 1 January 2016, 1 January 2017 and 31 December 2017
1,316
Brand name
£’000
72
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 2017
£’000
Arising on
business
combination
£’000
Recognised
in income
£’000
Recognised in other
comprehensive
income
£’000
Net balance at
31 December 2017
£’000
(199)
(670)
1,169
35
335
0
(360)
0
0
(360)
(230)
39
(200)
8
(383)
0
0
(113)
0
(113)
(429)
(991)
856
43
(521)
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
36
1,012
0
(886)
0
0
(886)
(158)
(31)
(202)
(1)
(392)
0
0
601
0
601
(199)
(670)
1,169
35
335
Net balance at
1 January 2017
£’000
Arising on
business
combination
£’000
Recognised
in income
£’000
Recognised in other
comprehensive
income
£’000
Net balance at
31 December 2017
£’000
16
216
1,169
35
1,436
0
0
0
0
0
(49)
(17)
(200)
8
(258)
0
0
(113)
0
(113)
(33)
199
856
43
1,065
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
45
247
770
36
1,098
0
0
0
0
0
(29)
(31)
(202)
(1)
(263)
0
0
601
0
601
16
216
1,169
35
1,436
73
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14. Deferred tax assets and liabilities (continued)
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group
Property, plant and equipment
Goodwill and intangibles
Employee benefits
Provisions
Assets
Liabilities
Net
Current
year
£’000
0
166
856
43
1,065
Prior
year
£’000
16
216
1,169
35
1,436
Current
year
£’000
(429)
(1,157)
0
0
Prior
year
£’000
(215)
(886)
0
0
(1,586)
(1,101)
Current
year
£’000
(429)
(991)
856
43
(521)
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
0
199
856
43
1,098
Prior
year
£’000
16
216
1,169
35
1,436
Current
year
£’000
(33)
0
0
0
(33)
Group
Parent
2017
£’000
3,990
825
4,815
2016
£’000
5,452
1,265
6,717
2017
£’000
2,342
0
2,342
Prior
year
£’000
Current
year
£’000
(33)
199
856
43
1,065
0
0
0
0
0
2016
£’000
3,914
0
3,914
In 2017, the Group write-down of inventories to net realisable value amounted to £176,000 (2016: £389,000).
Prior
year
£’000
(199)
(670)
1,169
35
335
Prior
year
£’000
16
216
1,169
35
1,436
16. Trade and other receivables
Trade receivables
Amounts owed by Group undertakings
Other receivables
Prepayments and accrued income
Group
Parent
2017
£’000
31,293
0
1,460
1,987
2016
£’000
28,808
0
1,515
1,185
2017
£’000
24,087
6,967
11
677
2016
£’000
21,018
3,031
367
604
34,740
31,508
31,742
25,020
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 £2,102,000 (2016: £1,805,000) has been recorded
accordingly.
In addition, some of the unimpaired trade receivables are past due at the reporting date. The age of receivables past due but not impaired is as follows:
Group
Up to 30 days overdue
Over 30 days and up to 60 days overdue
Over 60 days and up to 90 days overdue
2017
£’000
4,921
623
336
2016
£’000
4,139
781
948
5,880
5,868
Parent
Up to 30 days overdue
Over 30 days and up to 60 days overdue
Over 60 days and up to 90 days overdue
2017
£’000
3,380
389
116
2016
£’000
2,972
311
26
3,885
3,309
Group
Bad debt provision
Group
Bad debt provision
Parent
Bad debt provision
Parent
Bad debt provision
At 1 January
2017
£’000
1,805
At 1 January
2016
£’000
737
At 1 January
2017
£’000
1,801
At 1 January
2016
£’000
736
Charge in
the year
£’000
367
Charge in
the year
£’000
1,374
Charge in
the year
£’000
334
Charge in
the year
£’000
1,371
Utilised
£’000
(70)
Utilised
£’000
(306)
Utilised
£’000
(65)
Utilised
£’000
(306)
At 31 December
2017
£’000
2,102
At 31 December
2016
£’000
1,805
At 31 December
2017
£’000
2,070
At 31 December
2016
£’000
1,801
74
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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
2017
£’000
6,827
0
1,119
13,085
21,031
2,536
23,567
2016
£’000
5,254
0
1,239
14,963
21,456
2,355
23,811
2017
£’000
4,491
852
544
9,068
14,955
232
15,187
2016
£’000
4,298
2,721
726
13,263
21,008
357
21,365
All amounts shown above are short-term. The carrying values are considered to be a reasonable approximation of fair value.
At 31 December 2017, liabilities have contractual maturities which are summarised below:
2017
2016
Within 6 months
£’000
Within 6 to 12 months
£’000
Within 6 months
£’000
Within 6 to 12 months
£’000
6,827
13,085
19,912
0
0
0
5,254
14,963
20,217
0
0
0
2017
2016
Within 6 months
£’000
Within 6 to 12 months
£’000
Within 6 months
£’000
Within 6 to 12 months
£’000
4,491
9,068
13,559
0
852
852
4,298
13,263
17,561
0
2,721
2,721
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 (2016: 36,968,772) 10p ordinary shares
2017
£’000
3,697
2016
£’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 2017 and 31
December 2016.
19. Acquisitions
2017 Acquisition
On 2 June 2017, the Group acquired 100% of the issued share capital of DJ Drink Solutions Limited (DJ), the largest of our Out of Home dispensed soft drinks
distributors covering the North West, North East and North Wales regions. This acquisition consolidates the Group’s route to market in the two regions and is
consistent with our successful business model already operating in other regions in the UK.
Details of the fair value of identifiable assets acquired, purchase consideration and goodwill are as follows:
Book value
£’000
Adjustment
£’000
Fair value
£’000
Property, plant and equipment
Inventory
Trade and other receivables
Cash
Trade and other payables
Tax liabilities
Customer list
Deferred tax on acquired intangibles
Total assets acquired
Fair value of consideration
Cash paid
Contingent cash consideration (see below)
Total fair value of consideration
Goodwill arising on acquisition (note 11)
780
121
734
187
(1,585)
(226)
11
0
2,066
(360)
1,706
780
121
734
187
(1,585)
(226)
2,066
(360)
1,717
Fair value
£’000
6,568
2,367
8,935
7,218
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 opportunities for growth within the territory in which DJ operated, the skills and experience of the assembled workforce, and the wider
scale and future growth opportunities that it provides to the Group‘s operations. The goodwill recognised is not deductible for tax purposes.
Acquisition costs of £145,807 arose as a result of the transaction. These have been recognised as exceptional items within administrative expenses.
The contingent cash consideration is payable in June 2018 based on profitability targets established with the vendor. The amount payable is linked to growth in
gross profit in the 12 month period following acquisition, with a maximum amount payable of £3.2m.
Since the acquisition, DJ has contributed £4.5m to revenue and £0.9m to net profit for the Group.
76
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19. Acquisitions (continued)
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:
20. Cash and cash equivalents
Group
At 1 January
2017
£’000
Cash
flow
£’000
At 31 December
2017
£’000
Parent
At 1 January
2017
£’000
Cash
flow
£’000
At 31 December
2017
£’000
Cash at bank and in hand
39,754
(3,696)
36,058
Cash at bank and in hand
25,768
(10,346)
15,422
Book value
£’000
Adjustment
£’000
Fair value
£’000
21. Financial instruments
Exposure to treasury management, liquidity, credit and currency risks arise in the normal course of the Group’s business.
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
Cash paid
Contingent cash consideration (see below)
Fair value of previously held interest
Total fair value of consideration
Goodwill arising on acquisition (note 11)
1,177
390
519
600
(2,267)
(131)
288
(133)
2,573
2,352
(886)
3,906
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
Acquisition costs of £30,032 arose as a result of the transaction, 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 £1,000,000 and £550,000 paid was
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
was accounted for as a step-acquisition. As a result, the original 49% holding was treated as though disposed and subsequently re-acquired as part of the
acquisition of the full 100% of the issued share capital. This gave 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 2015, the previously held 49% interest was equity accounted for as an investment in associate.
Treasury management
The Group’s treasury activities are targeted to provide suitable, flexible funding arrangements to satisfy the Group’s requirements. Interest rate and
liquidity risk are managed at a Group level. Foreign currency risk is managed, in consultation with Group management, in subsidiaries which are
responsible for the majority of purchases. The Group’s policy for investing any surplus cash balances is to place such amounts on deposit.
Liquidity risk
The Group seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs. The acquisition of companies and the
continuing investment in non-current assets will be achieved by a mix of operating cash and 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 limiting the aggregate exposure to any one individual counterparty, taking
into account its credit rating. Such counterparty exposures are regularly reviewed and adjusted as necessary.
Accordingly, the possibility of material loss arising in the event of non-performance by counterparties is considered to be unlikely. Cash at bank is held only
with major UK banks with high quality external credit ratings or government support.
Foreign currency risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the functional currency of the Group.
The currencies giving rise to this risk are primarily US Dollars and Euros. During 2017, the Group entered into foreign currency transactions that over the
course of the year resulted in the Group having a natural 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.
Foreign currency assets:
US Dollar
Euro
Swiss Franc
2017
£’000
3,686
3,864
61
7,611
2016
£’000
2,769
2,541
304
5,614
78
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21. Financial instruments (continued)
Foreign currency sensitivity
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.
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 2016.
At 31 December 2017, the Group had no debt and therefore the capital structure consists of equity only.
If Sterling had strengthened against the US Dollar and Euro by 5% (2016: 5%), then this would have had the following impact:
24. Operating leases
Net result for the year
US Dollar
£’000
(175)
2017
Euro
£’000
(184)
Total
£’000
(359)
US Dollar
£’000
(72)
2016
Euro
£’000
(114)
Total
£’000
(186)
If Sterling had weakened against the US Dollar and Euro by 5% (2016: 5%), then this would have had the following impact:
Net result for the year
US Dollar
£’000
195
2017
Euro
£’000
204
Total
£’000
399
US Dollar
£’000
212
2016
Euro
£’000
141
Total
£’000
353
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
Loans and other receivables
Trade receivables and other receivables
Cash and cash equivalents
Total financial assets
Group
Parent
2017
£’000
32,753
36,058
68,811
2016
£’000
30,323
39,754
70,077
2017
£’000
31,065
15,422
46,487
2016
£’000
24,416
25,768
50,184
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
Other financial liabilities at amortised cost
Trade and other payables
Total financial liabilities
Group
Parent
2017
£’000
6,827
6,827
2016
£’000
5,254
5,254
2017
£’000
5,343
5,343
2016
£’000
7,019
7,019
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
2017
£’000
1,023
2,042
705
3,770
2016
£’000
963
1,804
398
3,165
2017
£’000
534
743
0
2016
£’000
553
762
0
1,277
1,315
The Group leases its operating depots under non-cancellable operating lease agreements and certain other plant and equipment under non-
cancellable operating lease agreements.
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
2017
£’000
842
2016
£’000
1,254
2017
£’000
6,115
2016
£’000
240
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
£157,000 (2016: £119,500). An accrued amount of £20,000 (2016: £33,000) will be paid in the subsequent financial year.
80
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26. Pension obligations and employee benefits
Plan assets
The reconciliation of the balance of the assets held for the Group’s defined benefit plan is presented below:
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 £410,000
(2016: £319,000).
The Company operates a defined benefit plan in the UK. A full actuarial
valuation was carried out on 5 April 2017 and updated at 31 December 2017 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 2017 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.
A reconciliation of the pension obligation and plan assets to the amounts presented in the statement of financial position for 2017 and 2016 is shown below.
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 from changes in financial assumptions
Actuarial gains from changes in demographic assumptions
Benefits paid - including insurance premiums
Closing defined benefit obligation
82
31 December 2017
£’000
31 December 2016
£’000
(30,167)
27,246
(2,921)
654
(2,267)
(30,380)
23,985
(6,395)
1,098
(5,297)
31 December 2017
£’000
31 December 2016
£’000
30,380
41
754
6
362
646
(409)
(1,613)
30,167
27,593
29
971
6
(335)
6,185
0
(4,069)
30,380
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 2017
£’000
31 December 2016
£’000
23,985
600
1,714
2,554
6
(1,613)
27,246
23,700
845
2,377
1,126
6
(4,069)
23,985
The actual return on plan assets was £2,314,000 (2016: £3,222,000). 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.
The major categories of plan assets, measured at fair value
are:
31 December 2017
£’000
31 December 2016
£’000
Equities
Gilts
Bonds
Other, including cash
Total fair value of assets
19,006
1,616
2,429
2,327
25,378
16,970
1,582
2,393
3,040
23,985
Assets included which do not have a quoted market value:
31 December 2017
£’000
31 December 2016
£’000
Property
Gilts
Other, including cash
Total
1,868
0
0
1,868
0
0
0
0
The property was acquired following a special contribution made by Nichols plc on 21 December 2017. As such, the price paid is considered to be market value.
The significant actuarial assumptions used for the valuations
are as follows:
31 December 2017
£’000
31 December 2016
£’000
Future salary increases
Rate of increase in (post 1997) pensions in payment (a)
Discount rate at 31 December
Expected rate of inflation - RPI
3.20%
3.30%
2.40%
3.20%
3.25%
3.30%
2.55%
3.25%
83
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
N O T E S T O T H E F I N A N C I A L S T A T E M E N T S - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
26. Pension obligations and employee benefits (continued)
27. Audit exemption statement
Other 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.
(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%.
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 89 years for men (2016: 90
years) and 90 years for women (2016: 92 years). For current pensioners life
expectancies have been estimated as 87 years for men (2016: 87 years) and 89
years for women (2016: 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 2017
£’000
31 December 2016
£’000
41
154
195
29
126
155
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:
31 December 2017
£’000
31 December 2016
£’000
Actuarial gains on the assets
Experience adjustment
Actuarial losses from changes in financial assumptions
Changes in demographic assumptions
Other movements
Total gain/ (loss) recognised in other comprehensive income
1,714
(362)
(646)
409
25
1,140
2,378
335
(6,185)
0
0
(3,472)
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 2017 for each
company unless otherwise stated). 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 (year ended 30 September 2018)
The Noisy Drinks Co. Limited
DJ Drink Solutions Limited (year ended 31 May 2018)
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.
Company Number
1732905
231218
938594
603111
1256006
8795779
8766560
8671127
5905631
5787898
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.
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
2017 is 18 years (2016: 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 2018.
The table below summarises the sensitivity of the obligation to changes to these
assumptions:
31 December 2017
£'000
31 December 2017
%
31 December 2016
£'000
31 December 2016
%
Increase in discount rate by 0.5%
Increase in price inflation adjustment by 0.5%
1 year increase in life expectancy
204
58
88
-7.00
2.00
3.00
512
256
192
-8.00
4.00
3.00
29. Post balance sheet events
On 15 February 2018, the Group acquired 75% of the issued share capital of The Noisy Drink Company North West Limited (NNW) for £1.5m. NNW is one of our
Out of Home frozen soft drinks distributors covering the North West region and is an entirely separate company with separate ownership to The Noisy Drinks Co.
Limited previously acquired by the Group. This acquisition further consolidates our route to market in the region and is consistent with our successful business
model already operating in other regions in the UK.
Details of the book value of identifiable assets acquired are as follows:
Property, plant and equipment
Inventories
Receivables
Cash
Payables
Total
£’000
713
56
192
20
(981)
0
The method and assumptions used in this analysis are similar to those used in the previous year.
At the date of authorisation of these financial statements, a detailed assessment of the fair value of the identifiable net assets has not been completed.
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U N A U D I T E D F I V E Y E A R S U M M A R Y - Y E A R E N D E D 3 1 D E C E M B E R 2 0 1 7
N O T I C E O F A N N U A L G E N E R A L M E E T I N G
Revenue
Operating profit before exceptional items, IAS 19 and Long-Term Incentive
Scheme Charges
Exceptional items
IAS 19 operating profit charges
Long-Term Incentive Scheme operating profit charges
Operating profit after exceptional items, IAS 19 and Long-Term Incentive Scheme
charges
Net finance (expense)/ income
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
2017
£’000
132,789
30,884
(1,801)
(41)
(300)
28,742
(20)
0
28,722
(5,548)
23,174
(11,213)
11,961
62.88p
62.81p
67.76p
67.69p
30.40p
Restated
2016
£’000
2015
£’000
2014
£’000
2013
£’000
117,349
109,279
109,205
105,529
31,622
28,888
26,464
25,194
0
(29)
(1,268)
30,325
1,167
0
31,492
(6,015)
25,477
(9,806)
15,671
69.13p
69.07p
66.18p
66.12p
26.60p
0
(37)
(1,017)
27,834
12
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
93
0
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
83
0
18,830
(4,721)
14,109
(6,639)
7,470
38.30p
38.25p
45.79p
45.72p
18.02p
86
Notice is hereby given that the twenty sixth Annual General Meeting of Nichols
plc (“Company”) will be held at Nichols plc, Laurel House, Woodlands Park,
Ashton Road, Newton-le-Willows, Merseyside, WA12 0HH on Wednesday, 25
April 2018 at 11:00 a.m. for the following purposes:
To consider and, if thought fit, to pass the following resolutions as ordinary
resolutions:
directors otherwise consider necessary, but subject to such exclusions
or other arrangements as the directors may deem necessary or
expedient in relation to treasury shares, fractional entitlements, record
dates or any legal or practical problems under the laws of any territory
or the requirements of any regulatory body or stock exchange; and
9.2
otherwise than pursuant to paragraph 9.1 of this resolution, up to an
aggregate nominal amount of £184,244,
1.
2.
3.
4.
5.
6.
7.
8.
To receive the Company’s annual accounts, strategic report and
directors’ and auditors’ reports for the year ended 31 December 2017.
To declare a final dividend for the year ended 31 December 2017 of 23.4
pence per ordinary share of £0.10 in the capital of the Company, to be
paid on 4 May 2018 to shareholders whose names appear on the
register of members at the close of business on 6 April 2018.
To re-elect A Milne, who retires by rotation, as a director of the
Company.
To re-elect T Croston, who retires by rotation, as a director of the
Company.
To reappoint H Keays, who has been appointed by the Board since the
last Annual General Meeting, 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 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 (representing one third of the existing issued
ordinary share capital of the Company), 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 25 July 2019 (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:
9.
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:
9.1
in connection with an offer of equity securities (whether by way of a
rights issue, open offer or otherwise):
9.1.1 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
9.1.2 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
10.
10.1
10.2
10.3
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 25 July 2019
(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 sections 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 25 July 2019 (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
28 February 2018
Registered Office, Laurel House, Woodlands Park, Ashton Road,
Newton-le-Willows, WA12 0HH.
Registered in England and Wales No. 238303.
87
G E N E R A L N O T E S
G E N E R A L N O T E S
1. To receive the Company’s annual accounts, strategic report and directors’
8.
and auditor's reports for the year ended 31 December 2017.
2. Biographical details of all those directors who are offering themselves for
re-election at the meeting are set out on pages 40 to 41 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, 23 April
2018 (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.enquiries@linkgroup.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, Link Asset Services, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive no later
than 11:00 a.m. on Monday, 23 April 2018 (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, Link Registrars (CREST ID
RA10) no later than 11:00 a.m. on Monday, 23 April 2018 (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 time stamp applied to the message by the CREST Applications Host)
from which Link 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 2018 (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
2018 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.
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.
88
89
N O T E S
MA KING THE WORLD
SMILE BY BEI NG
REFRESHINGLY DIFFERENT.
DESIGNED WITH
love BY VIMTO CREATIVE.
Laurel House, Woodlands Park, Ashton Road, Newton-le-Willows, Merseyside, WA12 0HH
01925 22 22 22 www.nicholsplc.co.uk
F I N A N C I A L C A L E N D A R
Preliminary Results Announced
Annual General Meeting
Interim Results Announced
1 March 2018
25 April 2018
19 July 2018
90
91
92