|
|
Half Year ended 30 June 2020 |
Half Year ended 30 June 2019 |
Movement |
|
|
£m |
£m |
|
|
|
|
|
|
|
Group Revenue |
59.2 |
71.6 |
(17.3%) |
|
|
|
|
|
|
Adjusted Operating Profit *1 |
6.8 |
13.3 |
(48.9%) |
|
Operating Profit |
3.0 |
13.3 |
(77.4%) |
|
|
|
|
|
|
Adjusted Profit Before Tax (PBT) *1 |
6.8 |
13.3 |
(48.9%) |
|
Profit Before Tax (PBT) |
2.9 |
13.3 |
(78.2%) |
|
|
|
|
|
|
Adjusted PBT Margin *1 |
11.5% |
18.6% |
(7.1bps) |
|
PBT Margin |
4.9% |
18.6% |
(13.7bps) |
|
|
|
|
|
|
EBITDA *2 |
9.3 |
15.3 |
(39.2%) |
|
|
|
|
|
|
Adjusted earnings per share (basic) |
14.94p |
29.63p |
(49.6%) |
|
Earnings per share (basic) |
4.59p |
29.63p |
(84.5%) |
|
|
|
|
|
|
Net Cash *3 |
46.8 |
40.9 *3 |
+14.4% |
|
Interim dividend |
28.0p |
12.4p |
+125.8% |
Headlines
· Vimto Brand Value in the UK +6.6% versus soft drink market of +1.3% *4
· Vimto Brand 'in-market' Middle East sales remain resilient through Ramadan despite Sweetened Beverage Tax (SBT) and Covid-19 restrictions
· Vimto in Africa delivers strong revenue growth +8.7% versus H1 2019
· Out of Home (OoH) effectively closed in Q2 with fixed costs weighing heavily on overall financial performance
· Strong cash performance in the period, Free Cash Flow *5 +£6.7m, Cash Conversion *6 at 121%
· Exceptional non-cash Impairment of Feel Good Goodwill and Intangible Assets of £3.8m
· Dividend re-instated
· Continued uncertainty for H2 outlook, guidance remains withdrawn
· Andrew Milne (current COO) will succeed Marnie Millard OBE as CEO from 1 January 2021
*1 Excluding Exceptional items of impairment charges of £3.8m (2019: £nil).
*2 EBITDA is the statutory profit before tax, interest, depreciation and amortisation.
*3 Net Cash excludes IFRS 16 liabilities. The comparison is to 31 December 2019. All other comparatives compare to the six months ending 30 June 2019 unless otherwise stated.
*4 Nielsen Total Coverage Year to Date 13.6.2020.
*5 Free Cash Flow is the net increase in cash and cash equivalents adjusting acquisition funding and dividends.
*6 Cash Conversion is the Free Cash Flow/ Adjusted Profit After Tax
John Nichols, Non-Executive Chairman, said:
“Our first and most important objective through this unprecedented period has been the protection and wellbeing of our employees and customers. Throughout these most difficult of times, our colleagues have once again demonstrated their values and commitment and I would like to wholeheartedly thank everyone for their current and future efforts.
In light of the ongoing impact to the financial results of the Group due to the global pandemic, the Board remains pleased with the Group's performance. Although the immediate future remains uncertain, we are confident in Nichols' ability to emerge from this period well-placed to continue to deliver the Group's long-term strategic plan.
On behalf of the Board I would like to thank Marnie for her significant contribution to the Group over the last seven years and wish Andrew every success in leading the business during the next phase of its development. Marnie will now commence her handover to ensure a smooth transition.”
Chairman's Statement
The strength of the Vimto brand, robust balance sheet and diversified business model has ensured a resilient cash performance in the period despite the unprecedented trading conditions across our markets. We have seen the Vimto brand significantly outperform the market in the UK, deliver good growth in Africa and perform robustly in the Middle East despite the challenges of the SBT and Covid-19 restrictions. Cash balances have grown strongly to £46.8m (FY 2019: £40.9m) as management took prudent steps to conserve cash throughout Q2 in response to Covid-19.
Trading
Ahead of the worldwide introduction of restrictions on the movement of people and requirements for social distancing measures, the Group's revenue progression was strong with Q1 reporting a 6.2% increase versus Q1 in the prior year. Q2 revenues, however, experienced a 35.2% decrease compared to the prior year Q2.
Total Group revenue for the period decreased by 17.3% to £59.2m against the prior period (H1 2019: £71.6m). The Group has been impacted by the effects of Covid-19 in both the carbonates and still product categories, driven by OoH performance, coupled with the introduction of the SBT in the Middle East. Revenue from carbonated products is down 28.8% to £26.8m (H1 2019: £37.7m) and sales of still products decreased by 4.6% to £32.4m (H1 2019: £33.9m).
In the UK, revenue decreased by 19.7% versus last year to £45.9m (H1 2019: £57.1m). However, within this, the Vimto brand's value increased by 6.6% year to date against a soft drinks market performance of +1.3% (Nielsen to 13.06.2020), driving further market share gains.
Sales across our International markets were £13.3m, a decrease of 8.1% versus the prior year (H1 2019: £14.5m), which is as a result of the impact of funding support agreed with our partner in the Middle East following the introduction of the SBT. Despite Covid-19 restrictions in the Middle East, the Vimto brand was resilient throughout Ramadan and 'in-market' sales were broadly flat with the prior year, which, combined with the African sales growth of 8.7% to £8.3m (H1 2019: £7.6m), demonstrates the strength of the Vimto brand internationally.
Impact of Covid-19
The spread of Covid-19 across the UK and the subsequent lockdown and social distancing measures implemented by the Government have had a significant impact on the Group. The OoH route to market was effectively closed from 23 March and a large proportion of the team were furloughed. Other employees have worked very effectively from home and high levels of service have continued to be provided to all of our customers. The majority of furloughed employees have now returned to work.
The revenue impact from the OoH closure has been seen across both the Stills and Carbonates segments but has had a larger impact on Carbonates which are down 28.8% to £26.8m (H1 2019: £37.7m) versus the prior year. The Stills segment is down 4.6% to £32.4m (H1 2019: £33.9m).
Further detail concerning the financial impact of Covid-19 on the Group's Interim Results is provided in Note 3 to the financial statements later in this notice.
Profit
The Group has placed strong focus on controlling overhead costs whilst respecting the principle of ensuring the business is able to 'Build Back Better' post the pandemic. Management focused on reducing discretionary spend and realigning marketing investment to H2 2020 and FY 2021 activities. Overheads were 8.0% lower than H1 2019.
Following a strategic review of the Group's 'Feel Good' Brand and it's recognition as a separate Cash Generating Unit ('CGU'), the Group has incurred an impairment to Goodwill and Intangible Assets of its 'Feel Good' Brand of £3.8m. Due to the nature of this charge the Board are treating this non-cash item as an exceptional cost and its impact is removed in all the adjusted measures included in this report. We remain committed to the 'Feel Good' Brand which has recently been relaunched in the UK.
Adjusted Profit Before Tax of £6.8m decreased by 48.9% versus the prior period (H1 2019: £13.3m).
Profit Before Tax of £2.9m decreased by 78.2% compared to the prior period (H1 2019: £13.3m).
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) decreased by 39.2% to £9.3m (H1 2019: £15.3m).
Cash
Cash and cash equivalents at the end of the period were £46.8m (H1 2019: £29.5m) from £40.9m at the 2019 Year End. The Group focused on cash management throughout H1 2020 with particular emphasis on protecting cash flow over the critical spring and summer trading periods, given the uncertainty surrounding Covid-19 restrictions.
The Group took mitigating actions to conserve cash including the withdrawal of the final dividend from 2019 (conserving £10.4m of cash), focus on working capital management, particularly outstanding year end balances and the restriction of non-essential capital expenditure. The result of this was Free Cash Flow of £6.7m and a cash conversion of 121%.
The Group concluded a prior year insurance claim during the period which provided £2.0m of cash (no 2020 income statement impact).
Dividend
The Board made the decision to withdraw the final dividend (28.0p) for 2019 in March 2020 due to the uncertainties concerning the financial impact of Covid-19.
In the context of dividend policy and payment, it is our intention to consider the two financial years 2019 and 2020 as a single review period given the overlap of the two years in terms of dividend payments. We paid an interim dividend of 12.4p in August 2019.
As a result of the Adjusted Profit After Tax in H1 2020 and our strong cash performance we are now able, with confidence, to reinstate the value of the final proposed dividend from 2019 of 28.0p as the interim dividend for 2020. This will be paid on 4 September 2020 with a record date of 31 July 2020.
Any final dividend proposal (February 2021) will be in line with our dividend policy and be based on the two years financial performance adjusted for payments already made.
Board Changes and Relationship Agreement
After seven years with the Group as CEO, Marnie Millard has informed the Board of her intention to leave the Group. Marnie will stand down as CEO and resign from the Board on 31 December 2020.
The Board is delighted to announce that Andrew Milne will be appointed as CEO of the Group with effect from 1 January 2021. Andrew is currently a Board Director and holds the position of Chief Operating Officer. He has been with the Group for seven years having joined in July 2013 as Commercial Director for Vimto Soft Drinks. Andrew has extensive experience in the soft drinks industry having also been Sales Director for the Northern region of Coca Cola Enterprises before joining the Group. Prior to that Andrew worked at GlaxoSmithKline as a Trading Director.
On behalf of the Board I would like to thank Marnie for her significant contribution to the Group in the last seven years and wish Andrew every success in leading the business during the next phase of its development.
As separately announced the Board has entered into a Relationship Agreement with the Nichols Family. The purpose of the Relationship Agreement is to formalise Board representation for the Nichols Family whilst also ensuring that the Group is capable of carrying on, at all times, its business independently. Therefore, the Board is pleased to announce the appointment of James Nichols to the Board as a Non-Executive Director with immediate effect. John Nichols remains as Non- Executive Chairman of the Group.
Outlook
Uncertainty remains concerning the outlook for H2, particularly in terms of the degree to which the OoH sector will recover and the development of the pandemic in Africa. As a result, the Board is still not in a position to provide financial guidance for the rest of 2020 and beyond.
Despite the short-term impact to the financial performance of the Group as a result of the global pandemic, we remain confident in Nichols' ability to emerge from this period well-placed to continue to deliver the Group's long-term strategic plans.
John Nichols
Non-Executive Chairman, 21 July 2020.