Nichols Plc - Trading Update
Group sales in 2019 are expected to be c.4.0% ahead of the prior year. We are pleased with this performance given the slowdown in the UK soft drinks market and the challenging broader consumer environment.
Across the Group, sales in both the UK and International businesses are ahead of 2018. In the UK, the Vimto brand continues to deliver growth against strong prior year comparatives and increase market share. Within our international markets, Ramadan 2019 has been one of the brand's most successful campaigns across the Middle East region.
We currently anticipate full year Profit Before Tax to be in line with market expectations.
Guidance for the year ending 31 December 2020
The Saudi Arabian and UAE tax authorities have recently implemented an excise tax of 50%, to be levied on the retail price of non-carbonated sweetened drinks.
This tax will be applied to all non-carbonated drinks containing either natural or artificial sweeteners, including sales of Vimto products. Therefore, unlike the UK soft drinks levy, product reformulation is not an option. Whilst it is difficult to estimate the future effect on sales volumes of the Vimto brand in these regions, at this point in time, we have to assume the increased retail price will have a negative impact from 2020. In order to mitigate the impact, we are currently developing plans in collaboration with our long term in-market partner which will require increased investment in the Vimto brand to maintain its strong market position.
The actual impact on sales in the Middle East will not be known until after the Ramadan trading period, which accounts for approximately 80% of annual in-country revenues, and we will update the market accordingly in our 2020 Interim Results Announcement in July. Whilst there is a broad range of possible outcomes, we believe the impact of the tax could be material to the Group and may result in Profit Before Tax for FY20 being materially below current expectations.
The company's annual sales of concentrate to the Saudi and UAE markets is c.£7.0m and the Middle East as a whole, remains a key strategic market for the Vimto brand. In addition, the Group remains highly profitable and cash generative, allowing continued investment in our future growth plans.
Nichols plc will issue a further trading update on Thursday 9 January 2020.