Nichols Plc - 9 Months Trading Update
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(the "Company" or "Group')
Continued outperformance of the Vimto brand offset by anticipated declines in Out of Home as a result of Covid-19
Nichols plc, the diversified soft drinks Group, provides the following trading update for the 9 months to 30 September 2020 ("the period").
As anticipated in the Group's Interim Results in July, the ongoing Covid-19 pandemic has continued to impact the soft drinks industry. Strong further growth achieved by the Vimto brand in the UK and a good performance in the Group's International business have been offset by significant declines in the UK Out of Home ("OoH") route to market. As a result, total Group revenue in the period decreased by 16.5% to £91.7m against the prior year.
The Vimto brand has continued to outperform the wider UK soft drinks market, achieving growth of 5.8%*1 in value terms in the year to date ("YTD"), versus 1.9% value growth across the wider UK soft drinks market. Across the Group's International markets, the strong momentum reported in the Group's Interim Results has continued, particularly in Africa, where revenues increased by 10.5% YTD against the prior year.
As previously anticipated, trading since the half year has remained very challenging in the Group's OoH route to market. Q3 revenues in OoH were 45.2% lower than those seen in the same period of 2019, as many of the Group's customers' outlets remained closed or operated with significantly reduced footfall as a result of ongoing social distancing restrictions.
The Group has placed a strong focus on controlling overhead and operational costs whilst ensuring the business is able to 'Build Back Better' post the pandemic. Management has focused on reducing discretionary spend and realigning marketing investment to FY 2021. Consequently, the Group has carried out a review of its operational structures, and following the integration of prior year acquisitions in the OoH route to market, has announced to its employees on 18 November proposals subject to consultation that, if implemented fully, would make a number of roles redundant by Q1 2021.
Whilst recognising that significant uncertainty remains regarding Q4 trading as a result of ongoing social restrictions in the UK, the Board currently expects Adjusted Profit Before Tax ("PBT")2 for FY20 to be between £11m and £13m.
Cash generation has continued to be very positive through 2020 and despite the financial challenges posed by the ongoing pandemic cash and cash equivalents at the end of the period were £45.4m (30 September 2019: £37.2m).
Given the ongoing uncertainty regarding the future progression of the pandemic, the Board is not able to provide financial guidance for the year ended 31 December 2021 at this stage.
Whilst recognising the current and near-term impact of the pandemic on the soft drinks market, the Board continues to believe that Nichols, underpinned by the strength of the Vimto brand and the Group's diversified business model, remains well placed to deliver its long-term strategic ambitions. The Group intends to provide its next trading update on 12 January 2021.
John Nichols, Non-Executive Chairman, said:
"The Board remains pleased with the Group's resilient performance in the period despite the significant impact of the Covid-19 pandemic on the Out of Home sector. We are particularly encouraged by the strong performance of the Vimto brand in the UK where we continue to make market share gains.
As part of our ongoing focus on ensuring the Group has the right structures in place to deliver its long-term strategy, the Group has taken the difficult decision to propose, subject to consultation, that a number of roles are removed from our structure. These difficult decisions have not been taken lightly and I thank all Nichols colleagues for their continued hard work and commitment.
Whilst recognising the current and near-term impact of the pandemic on the soft drinks market, the Board continues to believe that Nichols, underpinned by the strength of the Vimto brand and the Group's diversified business model, remains well placed to deliver its long-term strategic ambitions."