Good afternoon, ladies and gentlemen, and welcome to the
Nichols
Plc
Full-Year
Results
Investor
Presentation.
Throughout
this
recorded
presentation,
investors
will
be
in
listen-only
mode.
Questions
are
encouraged
and
can
be
submitted
at
any
time
via
the
Q&A
tab
just
situated
on
the
right-hand
corner
of your
screen.
Please
simply
type
in
your
questions
at
any
time
and
press
send.
The
company
may
not
be
in
a
position
to
answer
every
question
they
received
during
the
meeting
itself.
However,
the
company
will
review
all
questions
submitted
today
and
publish responses
where it's
appropriate
to
do
so.
These
will
be
available
via
Investor Meet
Company
dashboard,
and
we
will
notify
you
by
e-mail
when
these
are
ready
for
your
review.
Before
we begin,
I
would
like
to
submit
the
following
poll,
and
if
you'd
give
that
your
kind
attention,
I'm
sure
the
company
would be
most
grateful.
And
I
now like
to
hand
you
over
to
Andrew
Milne,
CEO;
and
David
Rattigan,
CFO.
Good
afternoon
to
you both.
A
Andrew Paul Milne
Good
afternoon, everybody.
A
warm
welcome
to
our
2021
results
presentation
and thank
you
for taking
the
time
to
dial
in
this
afternoon.
Okay.
In
terms
of
the
flow
today
– I'll
just move
the
slider.
Yes.
Three
parts
of the
presentation,
so,
I
will
kick
off
giving
you
an
overview
of
our
strategic
and
operational
performance
in
2021.
I
will
then
hand
over to
David, who
will
talk you
through
our financial
numbers for
the
year
and
also
give
you
a financial
outlook.
And
I
will
come
back
in
and
just
clarify
our
strategy
going
forward
and
sum
up.
And
then after
about
40
minutes, we
will
open
up the
floor
to
questions.
Okay.
So,
if
I
can kick
off
today
and
by
first just
giving
you
a
top
line
executive summary
of
the
key
takeaways.
So,
firstly,
we're
really
pleased
with
the
growth
we've
seen
again
in 2021
on
Vimto
both
in
the
UK
and across
all
of
our
key
international
markets.
A
particular standout
for us
would
be
the
accelerated
growth
that
we've
seen
in
Africa
where
we
delivered
17%
sales
revenue
growth
versus
the
prior
year.
Again,
in
one
of
our
major
markets,
the
Middle
East,
back
in
December
2019,
there
was
a
Sweetened Beverage
Tax
that
was
introduced
that
put
50%
on
the
retail
price
of
all
of
our
products.
We
decided
to invest
with
our
long-term
partner,
the
Aujan
Coca-Cola
Bottling
Company,
in
that
region,
to
help
mitigate
the
impact of
that cost.
And
I'm
really
pleased to
say,
as
we've
exited
2021, we're
really pleased
with
how
we protected
our
market share
in
country
during
that
period.
Throughout
2021,
we've
invested
heavily
again
in
our
Vimto
brand,
both
at
home
and abroad,
in
a
series
of integrated
marketing
campaigns
to
drive
the
equity of
our brand
in
the
long
term.
We've
also
made
strong
progress
on
our
Happier
Future ESG
strategy
and
outlined
a
number
of
commitments
that
we're
delivering
against
on
that
program.
We've
also
in 2021
started
investing
in
what
we're
calling
our
operational
change
program,
and
that's
to
make
sure
that
we've
got
the right
infrastructure
and
the
right
foundations
in
our
business
to
support
the
growth
we
want
to
deliver over
the
next
few
years
to
ensure
great
service
levels
and
availability
of our
products.
We
know over
the
last
two
years
our
Out
of
Home
business
has
been
seriously
impacted
by
the
coronavirus
pandemic
through
our
closures,
restrictions
due
to
social
distancing
and
outlets
and
our
footfall
reduction
in
that
period.
As
a
result
of
that,
we
have
seen
70%
growth
2021 versus
2020. But
versus
where
we
were
in
2019,
we
are
30%
behind
that
progress.
So,
result
of that,
we've
put an impairment
review in
place.
We've impaired
all the
goodwill
on
our
balance
sheet.
And
most
importantly
now,
we've
commenced
the strategic
review
of
that
sector
to
ensure
we
grow
back
stronger
and
more
profitably
in
the future.
Again,
in
2021, we've
maintained
a
very
strong
cash
position
to
similar
levels
that
we've
seen
pre
the
pandemic.
And
the
well-publicized
inflationary
cost
that
hit
in
the
whole
of
the
industry
at
the
moment,
we've
put plans
in
place
through
cost
reduction
programs
or
appropriate
pricing
strategies
with
a
range
of
our
customers
to
help
mitigate
those
costs.
Okay. So,
those
are
the
key
headlines
I'd
ask
you to
take
away
today.
What
I'm now
going
to do
is
just
give
you
a
bit
of
an update
on
what's happening
in
the
UK
packaged
market
using
the
Nielsen
data
which
measures ePOS
brand value
sales
at
retail.
So,
the
key takeaways
from
this
slide
would
be
once
again
in
2021,
the
soft
drinks markets has
proved
incredibly
resilient,
driving
value
growth
at
8.5%.
We've
seen
shoppers
buying
soft
drinks
more
often
at
higher
prices,
and
you
see
that
play
out
and
the volume
is
up
2.3%
but
value,
as
I
say,
at
8.5%.
So,
that
metric
playing
out.
In
terms
of
some
of
the subcategories
within
soft
drinks, some
of
the
real
winners
have been
the
energy
category
which
has
grown
at 15.9%
through
lots
of
innovation
and
flavor
expansion.
In
coffee,
we're
a
nation
of
tea
drinkers
in
the
home,
but
definitely
a
nation
of
coffee
drinkers
out
of
the
home.
And
that
cold
ready-to-drink
coffee
category
has
shown
great
progression,
delivering
over
32%
growth
during
2021.
The
subcategories
that have
not
performed
as
well
has
been
squash,
and
that
is
due
to
lapping
a
really
strong
2020 as
lots
of
us
stayed at
home
and
consumed
more
squash.
But
over
the
two
years,
squash category
has
grown
7.5%,
so
proved
resilient. Also
mixes
during
2020, lots
of
us
consumed
more
gin
and
tonic
in home,
and
during
2021, we've
seen people
return
to
the
hospitality
sector
so
that
growth
not
coming
back.
Okay, if
we
compare
from Nielsen's perspective
how
we
have
performed,
firstly, I'm
really
pleased
to
say that
across the
three
subcategories
we
play
in,
that
being
squash,
fizzy-flavored
carbonates
or
our
ready-to-drink
still
juice
drinks,
we've
delivered
value
growth
across
the
piece.
We've
also for
the
first time
in
our
history
have
delivered
over £100
million
worth
of
brand
value,
and
we've
done
that
drive in
value
at
6.3%
versus
volume
of
0.1%
and
made
that,
while
making
sure
we've
not
given
our margin
away.
Over the
last
five
years,
we've
driven
growth
through
bringing
new
households
into
the
brand,
and
you
can
see that
nearly
900,000 new
households
and
really
importantly, 300,000
of
those
households have
been
in
the
South,
which
is
where we
have a
targeted
approach
to
grow the
brand.
Across
the
portfolio
of
the
squash
brands
and
the
main
players,
we
are
now
the
number
two
squash
brand
behind
Robinsons
and
during
2021,
we've
been the
fastest-growing
squash
brand
as
well.
If
we
dive a
bit
deeper into
our
UK
packaged
performance
and
across the
UK
packaged
arena,
we
have
about 40% of
our
sales
in
grocery,
30%
in
discounters
and
30%
in
wholesale
cash
and
carry,
which
means
our
risk
is
quite
well-spread
within
the
UK
market.
Definitely
at
the
corner of
our
growth
this
year
has
been
the
new
branding
we've
rolled
out.
We
fortified
our
squash ranges,
so
they
now
have vitamin
C
and
vitamin
D
and
on
the back
of
consumer
research.
And
a
few
years
ago,
we
only
had
our
original purple
flavor
and
no
added
sugar
and
we've
extended
that
portfolio
now
to
offer
seven
different
variants.
And
as
you
can see
in
the
second
picture
there,
that
has really
driven
the
visibility
and
availability
of our brands
in
the
marketplace.
During
2020, our
independent
convenience
stores
often
gave
extra
space
to
toilet
rolls
and
pasta and,
therefore,
we
lost
distribution.
And
we've
had
a
concerted
van sales push
during
2021
to
make
sure
we
win
that
distribution
back.
And
I'm pleased
to
report,
we've
won
over
13,000 points
of
new
distribution
both
in
independent retailers,
but
also
win
some big, major
forecourt retailers.
We've
also
focused on
driving
weighted purchase
during
2021,
and
we've
awaited
our
multipack cans
to
an
eight-pack
in ASDA.
And
also
for
the first
time,
we've
taken
our
flavored
portfolio
in
squash
into
our
two-liter
variants
in ASDA and
we
fully
expect
to see
that
rolling
out
further across subsequent
years.
And
finally, through
our
category
work,
we've
identified
an
opportunity
in
what
we
call the
power-up
category,
which
is
heavily focused
on
protein
drinks
and
protein
shakes.
Some
of
the
insight
there has
been
that
people
enjoy
those
products
but
find
the taste
quite
bland.
So,
we
partnered
with
the
Myprotein
brand,
which
is
owned
by
The
Hut
Group, and
through
their
direct-to-consumer
website
have
done
a brand
licensing partnership
where
we've done
limited
edition
flavorings
on some
of
their
protein
drinks
with
Vimto,
which have
proved
extremely
popular,
and
I'm
pleased
to
say
some
of
those
will
return
in
2022
[indiscernible]
(00:10:13).
We've
also
underpinned
our campaign
in
the
UK
with
a
brand
new
fully
through-the-line
marketing
campaign
called
Find
Your
Different. It's
been
on
TV,
video-on-demand
right
through
to
in store,
and
we've
increased
both
awareness,
consideration
and
advocacy
with
our
core
consumer
target
of
[indiscernible]
(00:10:40).
And
what
I'd
like to do
now
is
just
share
with
you
one
of
the
adverts
that
aired
live
on
TV
in
May
this
year.
[Video Presentation]
(00:10:52-00:11:15)
Okay.
Thank
you.
So,
as we
look
further afield
and
out to
the
Middle
East, which
is
one
of
our
key
markets, what
again
we
have
seen
in
2021 through
the
investment
we've made
as
well
around
the
Sweetened
Beverage Tax
is outstanding
execution
in
marketplace,
and
whereas
traditionally the
execution we've
seen
in
Saudi
Arabia, which
is
our
major market,
the
picture
you
see
there
is
in Kuwait.
So,
that
execution reaching
out
to
some
of those
broader
markets.
We've
also,
for
the
first time,
made a move
into
a
No Added
Sugar
cordial
product and
also,
our
tetra
packs have
been
in
No
Added
Sugar.
And
as
we
move into
2022, we're
going
to
be
launching
our
Vimto ZERO
cordial and
also, Vimto
Zero
carbonate
packs. And
again,
we've
seen
a
very
strong
and
integrated
marketing
campaign around
Sweet
Togetherness, which
is
celebrating families
coming
together at
that
key
Ramadan period.
In
Africa,
where
we've seen
accelerated
growth, that has
been
on
the
back
of
a
fully
integrated
marketing
campaign
across Valentine's
Day,
Ramadan, Tabaski
and
back-to-school.
We've
rolled
out
our new
branding across
our African
markets.
And
again,
we'll launch
new flavors
such
as watermelon
into
new
pack formats
so
that's
our
2-liter carbonate
pack
that has
been
proven
very successful
at
launch
in
Algeria
midway
through the year.
[indiscernible]
(00:12:53)
I
mentioned we've
had challenges
there
over
the
last
two
years
on our
product portfolio.
We've
made
good
progress
in 2021,
but
due
to
where
we
were
versus
our
projections
as
we come
out
of 2021,
we
have
impaired
all
the
goodwill
from
our
balance
sheet and
now we
commence
the
strategic review
to
ensure
by
looking
on
how
we
go-to-market,
our
product
portfolio and
the financial
thresholds
we
have
in
place
in
this
route-to-market.
We
will
build
this
business
back
stronger
and
more
profitably going
forward.
And
then
finally,
before
I
pass
back to
David, we
have our
Feel
Good
brand,
which
is
a
brand
we've
launched
this
year
into
a space
that
we
can't stretch
Vimto.
So,
this
is
an
all-natural product,
fruit,
sparkling
water
drink,
very
low
calorie
with
a
very
strong
purpose
ESG
proposition
to
back
it
up.
We've
launched it into
foodservice and
out
of
home via
listings
with
Brakes
and
Bidfood
who
are
the
route
to
market
into
that
sector.
And
in
Q4,
we
listed
the
brand
in
the premium
retailer,
Sainsbury's,
and
our focus
as
we
go
into
2022
will
be
driving
distribution
and
driving
awareness
of
the
brand
to
grow
it
over
the
long
term.
Okay.
I'm
now going
to
hand
over
to
David,
who
will
give
you
an
overview
of
the
numbers and
then
a
financial
outlook
as
well,
and
then I
will
come
back
and
summarize.
Thank
you.
D
David Thomas Rattigan
Thank
you,
Andrew.
In
terms of
revenue
performance,
we've
seen
revenues
grow
by
21.6%
to
£144.3
million
with
strong
performance
across
all
three
of
our
routes
to
market.
This
takes us
broadly back
to
the
2019
pre-pandemic
levels
of
£147
million.
We're
delighted to
report
UK
packaged
growth
of
8.5%
with
strong
brand
performance
from
both
our
Vimto
and
Levi
Roots
brands.
For
Vimto,
we
saw continued
progress
in
each
of
its
subcategories
with
growth
in
Squash,
Carbs
and
Stills.
Vimto
brand
value
is
now
13.2%
larger
than
in
2019.
In
the
UK,
we
see
multiples
and
discounters
grow
again
by
7%
and
seen
convenience
delivered
wholesale
and
cash and carry
recover
back
to
2019
levels
following
the
significant
impact
caused
by
outlet
closures
in
2020.
2021
saw a
softer
version
of
2020's coronavirus
restrictions
and the
out of
home route
to
market
recovered
accordingly,
growing
77.4%
versus
2020.
It
was
quarter
four
though
before
we
saw
anything
like
a
return
to
2019
rates
of
sale
in out of home and overall
out
of
home
closed
the
year
31.4%
down
versus
2019.
Our
international
business
reported
underlying
revenue
growth
of
9.8%
once
adjustments
are
made
for
the
year-on-year
impact
of
our
investments
in
the
Middle
East
to
mitigate
the
impact
of
the
Sweetened
Beverage
Tax
which
is
now
complete, and
we
are
delighted
to
report
revenue
growth
of
17.1%
in
Africa
and
14.2%
across
our
European
and
US,
rest
of
world
markets.
Moving
on
to
adjusted
PBT.
The
group
delivered
87.9%
growth
with
adjusted
PBT
now
at
£21.8
million,
which
was
at
the
top
end
of
previous
guidance
and
market
expectations.
Our
gross profit
grew
£15.6
million
versus
2020, and
by
3.4
percentage
points
to
45.2%,
broadly
back
to
the
gross
margin
seen
in
2017 and
2018 of
45.7%.
Of
that
£15.6
million,
£9.4
million
is
a
direct
consequence
of
the
volume
growth
seen
year-on-year.
The
balancing
£6.2
million,
a
combination
of mix
and
margin
management
gains
versus
2020. £2.7
million
of
this
being
the
only
line
that
the
group's
investments
to
mitigate
the impact
of
the
introduction
of
the Sweetened
Beverage
Tax,
as
mentioned,
now
complete.
In
the
year,
our
customer mix
was
richer
from
a
gross
margin
perspective
as
in-house
and
national
out of
home
customers
returned,
and
margin
– that
benefited
from
a
more
consistent
coronavirus
road
map
from
the
UK
government
which,
combined
with restructuring
in
Q4 2020,
meant
that
we
have
less
downtime
in
our
factory
and
planning
for
the
coronavirus
became
more
manageable.
Distribution
costs
increased
£1.1
million
due
to
both
volume
and
price.
The
UK
driver
shortages
and
fuel
cost
increases
impacting
as
might
be
expected.
The
group
continues
to
invest
in
capacity
to
support
the
significant
growth
we
are
experiencing.
And
during
the
year,
we
signed
a
new
five-year
distribution
contract,
which
is
already
providing
significant
benefit
to
the
group.
The
group
continued
to
increase
its
marketing
investments
behind
the
Vimto
brand,
with
costs
increasing
£1.9
million
as
a
result
of
our
successful
delivery
of
the
Find
Your
Different
campaign.
The
campaign has
supported
significant
distribution
gains
during
the
year.
From
an
overhead perspective,
costs
were
£0.9
million
adverse to 2020
and
as
reported
at
the half
year
and
in
2020,
the
group
had
a
£1.3
million
deferred
consideration
credit
relating
to
the Noisy
Drinks
Company
and
AML
acquisitions,
which
created
in
2021
an
adverse comparison.
Moving
on
to exceptionals.
We've
seen
significant
exceptional charges
this
year
of
£39.5
million
as
the
group
updates
its
balance
sheet
following
the
impact
of
the
coronavirus
on
its
out-of-home
route-to-markets,
and
also
accounts
for
the
previous
contingent
liability
associated
with
historic
incentive
schemes
where
the
tax
treatments
have been
previously
challenged
by
the
HMRC.
More
positively,
and
perhaps
most
importantly,
the
group charged
a
further
£0.6
million
of
costs
to
underpin
capacity
and
capability
development
in
its
UK
packaged
supply
chain,
which
continues to
experience
significant
growth.
The vast
majority
of
this
year's
exceptional
charge relates
to
a
goodwill
impairment
in
out
of
home
of
£36.2
million
and
is
entirely
non-cash.
The
impairment follows
a
review
that
highlights
that
future
growth
prospects
for
this
route
to
market
are
expected
to be
slower
than
previously
thought
and
net
margins
lower
than
anticipated.
Significant
opportunity
exists
in
our
out-of-home
route
to
market,
but
it
will
require
a
more
transformational
approach
than
anticipated
and
this
strategic
review
has
now
commenced.
In
terms of
cash,
as
we
have referenced
in
previous
presentations,
we
recognized
early
in
the
pandemic
the
unique
circumstances
we
were
facing
and
challenged
ourselves to
ensure
we
exited
the
pandemic
with
at
least
the
same
financial
strength
we
entered
it
and
a
clear
view of
the
strategic
choices
we
needed
to
make.
Cash
and
cash equivalents
closed
the
period
at
£56.7
million,
up
from
£47.3
million
last
year.
Cash
conversion
remained
very
strong at
103%
and
held
the
cash
gains
from 2020
where
working
capital
unwound
as
businesses
went
into
hibernation
through
the
various
lockdowns.
Working
capital
was
largely neutral
in
the
year
despite
a
significant
stock
build
in
readiness
for
operational
changes
in
H1 2022
as
part
of
our
UK
packaged
supply
chain
project.
Higher
financial
return
thresholds
in
out
of home
limited
CapEx
spend.
And
all
in
all,
we
were
delighted
to
deliver
another
strong
free
cash
flow
performance
of
£17.5
million
which,
despite
the
pandemic,
was
broadly
in
line
with
historical averages.
Moving
on
to
dividend,
in
2020, the
board
applies
a
dividend
policy
of
broadly
2
times
cover,
in
line
with
historical
averages.
Final
adjusted
basic
EPS
is
£0.4615
for
the
year
and,
therefore,
we
proposed
a
final
dividend of
£0.133
per
share,
meaning
a
full
year dividend
per
share
of
£0.231.
The
final
dividend
will
be
paid
on
the
5th
of
May,
subject
to shareholder
approval.
I'm
delighted
to
say
that
the
company's AGM
this
year
will
be
a
physical
one
again
and
will
take
place
on
the
27th
of
April
in
Newton-le-Willows.
Okay.
As
mentioned
earlier,
the
group's revenue
performance
of £144.3
million
was
broadly
back
to
pre-pandemic
FY 2019
levels
of
$147
million.
It has
been
a
challenging
couple
of
years
for
us
all. 2020
was
uniquely
impactful
and
2021
has
seen
significant
recovery.
As we
now
hopefully
exit
the
pandemic,
we
thought
it
would
be
useful
to
contrast
2021's
performance
with
2019,
as
this will
hopefully
give
a
better
sense
of
where
the
group
is
now
and
help
you
understand
our
direction
of travel
for
the
future.
The
soft drinks
market
has
grown
11%
since 2019,
powered
by
segments
like
cola,
energy,
mixers
and
ready-to-drink
coffee,
areas
where
Vimto
does
not
currently
trade.
Over
the
same
period,
our
UK
packaged
revenues
for
Nichols
have grown
12%
and
Vimto's brand
value
has
grown
13.2%.
We've
seen
significant distribution
gains
and
very
encouraging
improvements
across
all
brand
awareness
metrics
in
the
UK.
Internationally,
despite
some
reporting
turbulence
associated
with
the
Sweetened
Beverage
Tax,
revenues
of
progress,
11%.
We've
seen
significant
progress
in
Africa
with
growth
of
26%.
And
the
Middle
East,
while not
seeing
underlying
volume
growth
has remained
stable
despite
the
introduction
of
a
50%
Sweetened
Beverage
Tax.
Where
our
Middle East
and
Africa
consumers
go,
they
want
to
drink
Vimto.
And
whilst
not the mainstream
US
and
European
markets,
we
are
delighted
with
Vimto's
progress
there.
In terms
of
out
of home,
the
pandemic has
provided
an
opportunity
to
take
stock
and
consider
the
route-to-market
from
an
overall
returns
perspective.
The
heavier
asset
and
overhead
associated
with
this
route-to-market
have
weighed
heavily
on
the
group
over
the
last
two
years.
And
whilst
we
recognize
that,
as
the
specter
of
COVID
recedes
and
revenues
return,
overall
returns
will
remain
challenged
without
a
more
transformational
approach.
Moving
on
to
adjusted PBT
versus 2019.
So,
whilst
revenues
have
largely
returned
to
2019 levels,
profits
have
not.
Adjusted
PBT is
£10.6
million.
Whilst
volume still
accounts
for
£1.3
million
of
difference,
gross
margin
in 2019
at
47.6%
was
a
couple
of
percentage
points
ahead
of
both
2017
and
2018
levels.
Gross
margin
in
2021
is
largely
back
to
what
we
might
expect
for
the
group. Distribution
costs for
the
group
are
largely
UK-based,
and
volume
and
inflation
have
played
a
part
in
the
higher
cost
scene. The
group has
continued
to
increase
its
investments
in
future
brand
of
growth
and
marketing
and management
costs
associated
with Vimto
campaigns
and
Feel
Good
have
increased.
The
group's
pre-pandemic
investments
in
out-of-home
assets
have
meant
a
largely
fixed
cost,
including
higher
depreciation
charge,
have
remained
in
situ
without
the
support
in
contribution.
Revenues,
as
previously
noted,
remain
31%
lower
than
in
2019.
The
group
also
benefited
in
2019 from
a
£1.1
million
credit
associated
with
deferred consideration
associated
with its AML
acquisition.
We exit
the pandemic
with
a different
shape
to
our
business.
Financially,
we
have
both
significant
opportunities
for
branded
growth
and
an
out-of-home
route-to-market
readying
for
transformational
change.
So,
what
does all
that
mean
for
return
on
capital
employed?
Excluding
the
cash
on
the
balance
sheet,
the
business
delivered a healthy 37%
return
from
its
capital
employed
in
2021.
With
significant
firepower
now
in
cash
reserves
of
£56.7
million,
how
that
capital
is
allocated
is
a
critical
consideration
for the
group
going
forward.
Over
the
last
nine
years,
in
addition
to
the
£27.6
million
of
acquisition
spend,
the
group
invested
£26.4
million
in
property,
plant
and
equipment, largely,
as
we
built
the
out-of-home
route-to-market.
Out-of-home
growth
projections,
as
noted,
are
now
expected
to
be
lower
than
previously
estimated.
And
its
overall
financial
proposition
will
undergo
a
transformational
change
over
the
coming
years.
From
2022,
ROCE
will
become
one
of our
key
performance
indicators
as
we
believe
efficient
and
effective
capital
allocation
presents
a
significant
opportunity
for
the
group
given
our
strong
balances
and
highly
resilient
free
cash
flow.
Whilst
out-of-home
investments
will
need
to
meet
higher financial
return
thresholds,
we
see
both
significant
organic
growth
opportunities
for
Vimto
and
new
packaged
soft
drinks
opportunities
in
adjacent
categories.
So,
in
terms of
takeout
then.
2019
revenues
have
largely
returned.
But
without
the
full
recovery
of
adjusted PBT,
we
end the
pandemic
with
a
different shape
and
focus
for
our
business.
Vimto
is
the
real
long-term
winner.
It
has
shown
itself
to
be
both
flexible
and
resilient.
We
see
significant
headroom
for
organic
growth
in
both
the
UK
and
internationally.
Vimto
will
be
supported
to
realize
its potential,
whether
that
be
through
investing
with
our
partners, for
capacity
and
process
improvements
or
marketing
to
ensure
we
reach
new
consumers
and
drive
further
distribution
gains.
The Vimto
range
will
continue
to
be
renovated,
and
innovation
remains
key
to
our
future
success.
We
see
significant
long-term
soft
drink
market
growth
in
adjacent
categories
in
areas
where
Vimto
does
not
trade
and
perhaps cannot
easily
stretch
to.
We
continue
to
invest
in
the
Feel Good brand
and
continue
to
assess
acquisition
opportunities
in
adjacent
soft
drinks categories
or
for
brands that
complement
Vimto
in
existing
categories
in
both
the
UK
and
internationally.
We
will
only
progress,
though,
if
the
business
case
makes
sense
over
the
long-term
from
a
ROCE
perspective.
Our
strong
balance
sheet
will,
for
the
right
opportunities,
mean
we can
invest
for the
future
and
play
the
long
game.
However,
we
do have
some
near-term
headwinds
to
navigate.
We've discussed
the
strategic
review
in
out-of-home
and
the
need
for
us
to
deliver
a
transformational
financial
proposition.
We
need
to
manage
and
mitigate
the
impact
of
inflation
of
13.6%
for
2022
versus
2021.
We
will
do this
in
a
number
of
ways,
including
through
operational
efficiency
gains
and
through
customer
price
increases.
In
2023,
the
deposit
return
scheme
commences
in
Scotland,
and
while
this is
a positive
step
in
the ESG
agenda,
it
initially
brings
operational
complexity
and
significant
cost.
So,
finally,
before
handing
back
to
Andrew,
I
would
like
to
provide
some
financial
guidance
in
terms
of
outlook
for
FY 2022
and
FY
2023. Firstly,
I
would
like
to
confirm
that
the
group's
adjusted
PBT
expectations
for
FY
2022 remain
unchanged.
The
group has
a firm
focus
on
its
strategic
agenda,
and
we
will
continue
to
execute
it
at
pace
through
2022,
whilst
navigating
the
short
to
near-term
headwinds
highlighted.
In
terms
of
that
FY
2023,
when
all
things
are
considered,
we
are
pleased
to
be
able
to
guide
to
high-single
digits
adjusted
PBT
growth,
continuing
the
momentum
seen
in
both
2021
and
2022. Thank
you.
A
Andrew Paul Milne
Thank
you,
David.
Okay.
I'm just
going
to
now
have
a
bit of
a deep
dive
into
our
ESG
strategy.
And
then,
just
sum
up
before
we
open
the
floor
to questions.
So,
from an
ESG
perspective
then,
we
are currently
focused
in
three
key
areas.
So,
the first
pillar
of
our
strategy
is
around
everyone
matters.
And
this
starts with
our
own
people,
both
in
their
well-being, but
also
in
their
difference,
and
it
also
focuses
on
how
we
support
young
people
in
the
local
communities
where
we
operate
who
haven't perhaps
not had
for
whatever
reason
the
chance
to
fulfill
their
potential.
The
second
pillar is
absolutely
about
having
products
we're
proud
of,
and
that's
threefold.
It's
about
the
liquid,
it's
about the
packaging,
and
it's
about
how
we
responsibly
source.
And
last but
not
least,
it's
about
owning
our
own
climate
impact,
both
in
terms
of
the
emissions
that
we're directly
responsible
for
in
our
Scope
1
and
2
and
how
we
decarbonize
our
supply
chains
in
Scope
3
and
then
very
much with
the
water
we
use
as
a
soft
drinks company,
how
do we
do
that responsibly.
And
we have
a lot
of
commitments
out
there that
we're
tied
to
and
commitments
that
we
believe
as
a
management
team
we'll
be
able
to
deliver
against,
and
we make
them short
term enough
that
we
will
still
be
here
to
do
that.
I'd
just like
to pull
out
some of
the commitments
that
I've
highlighted
in
bold.
So,
[ph]
where now
(00:32:40) everyone
matters,
we're
absolutely
pledging
by
2025
that
we
will
help
improve
the
future
for
over
100
young
people
in
our
communities
and
we're
going
to
launch our
Vimto
Camps
this
year
that
will
focus
on developing
those
people.
And
wouldn't it
be
wonderful
if
some
of
those
people
could actually
end
up
working with
us
here
at
Nichols?
In
October
2022, there
is
legislation
coming
into
the
market,
which
is
called
the
HFSS
Compliance,
which
is
high
fat,
sugar,
salt
legislation.
And
if
you're
not
in
line
with
that
legislation,
you
will
no longer
be
able
to
display
your
products
at
[ph]
sale
points
(00:33:24) or on gondola end
during
promotions.
And
I'm really pleased to say that all of our recipes now are compliant in that they are below the 4.1 grams per 100 mil of liquids and they will be rolling out in the first half of 2022 to ensure we're compliant by October.
I'm really
pleased
to
say
that
all
of
our
PET
packaging
is
recyclable,
but
we're
making
a
firm
commitment
that
by 2025
by
supporting
the
rollout
of
the
deposit
return
scheme
in
the
UK that
will
then
give
us
a
closed
loop
system
that
can
operate
in
the
UK,
and
we
will
have
100%
recycled
PET
in
our
products
sourced
from either
the
UK
or
Europe, if
it's
not
all
available
in
the
UK
by
2025.
And
on
our
owning
our
climate
impact,
in
terms
of
Scope
1
and Scope
2,
we're
fully
committed
that
by
2025, we
will
have reduced
our
direct
emissions
by
25%
and
that
by
2030
it
will
be
reduced
by
80%.
So, hopefully,
some
clear commitments
there
that
we're
going
to
deliver
against
in the
next
few
years.
So,
hopefully,
you
will
take
from
our
presentation today
we
have
five
very
clear
strategic
imperatives
that
we're
going
to
focus
on
over
the
next
few
years.
The
first will
be
we'll
be ruthlessly
focused
on
our
asset-light
package
business
both
in
the
UK, but
also
further
afield
and
particularly
in
Africa
where
we're seeing
that
accelerated
growth.
We're
investing
in
our
infrastructure to
make
sure
that
we
can
deliver
that
growth
with
our
supply
chain
partners
and
deliver
great
service levels
to
our
customers.
Our
strategic review
and
our development will
ensure
we
build
that
better
and
more
profitably
for
the
long
term.
ESG
is
at
the
heart
of
what
we
do
and
we have
clear
commitments.
And
from
an
M&A
perspective,
with
that
strength
we
have
on
the balance
sheet,
we
will
target
branded
acquisitions
predominantly
in
the
UK,
but also
maybe
internationally,
but
only
where
the business
case
stacks up
and
we
can
add
real
value.
So,
in summary,
I'm
pleased
to
say
that
we
have
strong,
diverse
business,
both
in
the
UK
and
abroad
that
is
being
powered
and
fueled
by
the
momentum
we've
got
on
our
Vimto
brand.
We
remain
highly
profitable,
cash
generative
with
a
very strong
balance
sheet
and
a
clear
strategic
focus. Importantly,
we
are in
line
with
our
expectations
for 2022,
so
no
change
there,
and
we're
very
confident
of
delivering
profitable
growth
through
the
long-term
strategic
plan
we
now
have
in
place
to
deliver
in
the
future.
Okay. Thank
you
for
listening
today.
And
we
will
now
open
up
to
be able to take questions.
Operator
Andrew,
David,
that's
great.
Thank
you
very
much
for
your
presentation
this
afternoon.
[Operator Instructions]
I
just
want
the team
to take
a
few
moments
to
review
those
questions
submitted
already.
I
would
like
to
remind
you
that
a
recording
of
this
presentation,
along
with a
copy
of the
slides
and
the
published
Q&A,
can
be
accessed
via
Investor
dashboard.
Andrew,
David,
I'm
just
going
pop
your
camera
back
up.
And
as
you
can
see,
we've
received
a
number
of
questions
throughout
today's
event
and
thank
you
to
all
investors
for
submitting
those.
If
I
could
please
ask
you
to
read
out
those
questions
and
give
responses
where
it's
appropriate
to do
so
and
I'll
pick
up
from
you
at the
end.
Thank
you.
A
Andrew Paul Milne
Great.
Thank
you.
So,
the
first
couple
of
questions,
I'll
summarize
those
by
– we're
being asked, do
we
see
our
growth
firstly coming
from
M&A
or
organic
growth. And
I
think
we
definitely
see
our
growth
coming
organically.
The
momentum
we
have
on
the
Vimto
brand
in
the
UK and,
particularly,
in
our
Squash portfolio,
the
Squash
category
has
grown
by
7.5%
in
the
last
two
years.
We've
grown
Squash
by
30%.
So,
the
momentum
there
is
very
strong
and
we
expect that
to
continue and across
the
broader
portfolio.
I
we
look further
afield,
our
African
growth
has
been
very
strong
and
our
Middle
East
growth
has been
very
resilient
and
we
now
see
with
broader
innovation
in
the
Middle East, broader
portfolio,
that
growth
continuing
as
well.
M&A
is
very
important
to
us.
We
have
the
firepower
on
the
balance
sheet
and
we
very
much
hope
it
will
come
from
M&A.
But
it
will
only
come
from
M&A
if
we
can find
the
right
brands
that
we
can
add
value
to
and
that
drive
our
ROCE
measure.
There's
another question here
saying
about,
are
we
overly
reliant
on
the
Middle
East.
And
hopefully,
what
you've
seen
from
the
presentation today,
I
think what
we've
done
in
the Middle
East
over
the
last
two
or
three
years
where
we've
had
significant
challenges
of
the Sweetened
Beverage
Tax,
that brought the
retail
price up
by
potentially
50%
and
also
the
introduction
of
taxes
to
that
region
for
the
first time,
like
we've
seen
VAT come
in.
The
brand
itself has
proved
very
resilient,
but
broadly,
in-market
sales
are
flat.
So,
you
can see
that
our
growth
has
come
from
other
areas
and
a
great
example
would
be
Africa.
So,
I
would
actually say
at
the moment,
we
are
less
reliant
on the
Middle East
than
we
have ever
been
because
of the
growth
we
see
elsewhere.
We
have
a
question
here
about
inflation
and
supply
chain.
So,
I'll perhaps,
hand
over
to
David
as
I
read
this
out. The
question
is,
have
you
experienced
any
supply
chain
issues
and
how
have you
mitigated
these?
So
perhaps,
David
you
can
answer that.
D
David Thomas Rattigan
Yeah,
sure.
So,
if
you look
at
our
overall
financials
for
2021,
the
largest
single
inflationary
pressure
was
around
the
driver
shortage
and
the
various
rate
changes
that
needed
to
take
place
to
manage
those
very
difficult
supply
chain
issues
that
all
of
the
UK
faced
in
the
summer,
particularly
on
the
early
autumn.
Interestingly, we
at
that
time,
we're
entering
into
negotiations
for
a
longer
term
contract
with
logistics
providers,
and
we
were
able
to
secure
– we
did
have
to
pay
a
bit
more,
but
we
did secure
a
great
opportunity,
build capacity
and
has allowed
us
to come
out
through
that
period
with
service levels
now
largely
what
they
were
before
that
issue
hits us.
So,
some
of
the
supply
chain
issues
that
everybody
has seen
through
the
summer,
autumn,
we
would
say, it
now
starts to
ease,
particularly
around some
of
the
driver
shortages.
There
is still
a
challenge
in
the
market,
but
we've
been
able
to
come
through
that.
Clearly, there
have
been,
coming
into
2022, a
whole
series
of
inflationary
pressures
that
have
come
to the
business,
and
we've
got
ways
that
we
plan
to
mitigate
that,
as
we
referenced
in
the
presentation.
But
that
inflation
has
come
really
right
across
the
board.
It's
something
that
we've
not
seen
in
probably
a
generation,
really
that
kind
of
a
13.6%.
If
you
look
at
packaging,
whether
it
be
plastics,
whether
it
be
aluminum,
whether
it
be
card,
all
of
these
things have
been
in
short
supply
and
pricing
has been
quite
challenging.
Obviously,
we talked
about
distribution
cost
and
labor
shortages,
generally
have
put
pressure
in
the
system
also.
And
ingredients
in
the
summer
of
last
year,
there
were
a
number
of
crop
failures
which put
an
awful
lot
of
pressure
in
the
system.
So,
that
13.6%
of
inflation
was
unique
and
we
see
hitting
us
in
2022
versus
2021.
But
it's
one
of
the
great
strengths
of
this
brand
at
a
time
when
we
are
seeing
that
kind
of
challenging
inflation
on
a
number of
our
peers
and
other
companies in
the
UK
are experiencing
that,
in
fact,
globally.
The
strength
of
our
brand,
the
choices
that
we
have
and
the
options
that
we
have
in
terms of
changing
supply
and
moving
things
forward.
So,
it
mitigates
a
number
of
those
areas.
And
given
the growth
and
the
strength
of
the
brand
in
the
right
way,
in
the
appropriate
way,
passing
that
through
to
customers
is
something
that
we
are
trying
very
hard
to manage
and
that's
something
that
we
are
playing
through.
So,
yes,
it
is
a
very
challenging
inflationary
environment,
but
we
believe
the
company is
well-placed
to
manage
that
over
this
immediate
future.
A
Andrew Paul Milne
Okay. Thanks,
David.
There's another
question
here
that
I
will
take.
So,
the
first bit
is, can
you
add
color
on
your
prospects
in
the
US?
And
then,
the
second
question from
the
same
person
is,
are
the energy
and
mixer
markets
too
crowded
for
Nichols
to launch
it?
So,
if I
talk
about the
US,
I
think
as
a
reminder,
our
US
business
is
very
heavily
focused
in
the
ethnic
market
trade
of
where
our
Middle
Eastern
or
African
consumers travel
and
want
to
purchase those
products.
So,
we
have
seen
good
growth
in
that
market
over
the
last
few
years,
although
it
would be
transparent
to
say the US
contribution
to
our
overall
business
is
still
below
5%.
What
we
are
seeing though
is
our
partner over
there
at
the
moment
has
had
an
injection
of
cash
from
private
equity
and
that's going
to give
it some
real
firepower
to
go
after
acquisitions there
that
I think
could
open
some
routes
to
market for
us.
So,
we
still
expect
growth
in
the
ethnic
channels,
but
I
don't think
that
will
be
transformational
for
the
group,
and
I
don't see
our
brand
moving
into
the
very,
very
competitive
main
market
there
in
carbonates
because
there
isn't
a
squash
market
that
exists in
the
main
market
in
America.
In
terms of
mixers and
energy,
a
great
question,
it's
interesting.
It's
interesting,
in
energy,
94%
of
the
value
in
that
market
comes
from
three
players,
which
is
Monster,
Red
Bull
and
Lucozade.
So,
although
there's
lots
of
players
in
that
category
outside
of
those
big
three,
it's
very
tough
to
win,
and
I
don't
see
energy
as
a
big
category
growth
for
us.
You
may
enter
it
in
some
ways,
but
I
don't see
it
as
a
big
focus.
And
also
mixers
as
well,
I
mean, we
know
the
[indiscernible]
(00:44:33) over
the
years,
but
there's
a
lot of
players
now that
have
gone
into
that
market.
So,
we
kind
of
see that
as
very
crowded.
I
see other
white
spaces
as
a much
better
opportunity
for
us
to
go
in
and
try
and
win.
Okay.
The
next
question
is
let
me
read
the
question.
D
David Thomas Rattigan
Yeah,
so...
A
Andrew Paul Milne
Do
you want
to
read
that
out
and
then
you...
[indiscernible]
(00:44:54)
D
David Thomas Rattigan
...
[ph]
it's
okay,
I
can
cover
on
here (00:44:56).
So,
the
question
is
with
regards to
the
share
buyback
program
that
you,
no
doubt, had
all
seen
in recent
RNSs
over
recent
months.
The
share buyback
is
a
very
tactical process.
I
want
to be
clear.
It's
not
a
strategic
item
in
terms
of
trying
to
change
the
capital
structure of
the
business
or
anything
of
that
nature.
We
have
a
[indiscernible]
(00:45:23) scheme
and
other
employee
share
option
schemes
for
the
group
going
forward,
and
that
is an
area
that
we've
needed
to top
up
the
shares
that
we
own
in
order
to
satisfy
those
options
for
the
future.
And
that
share
buyback
is
entirely
for
that
purpose.
So,
it
should
be viewed
in
that
light.
It's
in
order
to
provide
those
longer-term
share
ownership
options
for
employees
of
the
group.
There
are
no
further
plans to
change
the
capital
structure
of the
group
in
terms
of
numbers
of shares
at
this
stage.
A
Andrew Paul Milne
Okay.
Thanks, David.
I
think
that looks, Jake,
that the...
Operator
Yeah.
David,
Andrew,
thank
you
for
addressing
all
of
those
questions
that
have come
through
from
investors
this
afternoon.
Of
course,
ladies
and
gentlemen,
the
company
will
have the
opportunity
to
review
all
questions
submitted
today,
and
we'll
publish
those
responses
on
the
Investor
Meet
Company
platform
when
they're
ready
for
your
review.
Perhaps
before
redirecting
investors
to
provide
you with
their
feedback,
which
I
know
is
particularly
important
to
the
company,
David,
Andrew,
if
I
could
please
ask you
for
a few
closing
comments
to
wrap
up
with.
Thank
you.
A
Andrew Paul Milne
No
problem. So once
again, just
to
say
a
big
thank
you
for
dialing
in
today.
Hopefully,
you've
found
the
presentation
interesting and
insightful.
If
you're
already
an
investor,
we
hope
you
remain
an
investor.
If
you're
not
an
investor,
we
hope
we've convinced
you
today
to
invest
in
the
business
as
well.
So,
thank
you
for your
time.
Operator
Andrew,
David,
thank
you
for
taking
the
time
to
update
investors
this
afternoon.
Could
I please
ask
investors
not
to
close
this
session
as
you'll
now
be
automatically
redirected
for
the
opportunity
to
provide
your
feedback
in
order
that the
management
team
could
better
understand
your
views
and
expectations.
This
will
only take
a
few
moments
to complete
and I'm
sure
it
would be
greatly
valued
by
the
company.
On
behalf of
the
management
team
of
Nichols
Plc,
we
would
like
to
thank
you
for
attending
today's
presentation.
That
now
concludes
today's
session
and good
afternoon
to
you
all.
Good afternoon, ladies and gentlemen, and welcome to the Nichols Plc Full-Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab just situated on the right-hand corner of your screen. Please simply type in your questions at any time and press send.
The company may not be in a position to answer every question they received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via Investor Meet Company dashboard, and we will notify you by e-mail when these are ready for your review.
Before we begin, I would like to submit the following poll, and if you'd give that your kind attention, I'm sure the company would be most grateful. And I now like to hand you over to Andrew Milne, CEO; and David Rattigan, CFO. Good afternoon to you both.
Good afternoon, everybody. A warm welcome to our 2021 results presentation and thank you for taking the time to dial in this afternoon. Okay. In terms of the flow today – I'll just move the slider. Yes. Three parts of the presentation, so, I will kick off giving you an overview of our strategic and operational performance in 2021. I will then hand over to David, who will talk you through our financial numbers for the year and also give you a financial outlook. And I will come back in and just clarify our strategy going forward and sum up. And then after about 40 minutes, we will open up the floor to questions.
Okay. So, if I can kick off today and by first just giving you a top line executive summary of the key takeaways. So, firstly, we're really pleased with the growth we've seen again in 2021 on Vimto both in the UK and across all of our key international markets. A particular standout for us would be the accelerated growth that we've seen in Africa where we delivered 17% sales revenue growth versus the prior year.
Again, in one of our major markets, the Middle East, back in December 2019, there was a Sweetened Beverage Tax that was introduced that put 50% on the retail price of all of our products. We decided to invest with our long-term partner, the Aujan Coca-Cola Bottling Company, in that region, to help mitigate the impact of that cost. And I'm really pleased to say, as we've exited 2021, we're really pleased with how we protected our market share in country during that period.
Throughout 2021, we've invested heavily again in our Vimto brand, both at home and abroad, in a series of integrated marketing campaigns to drive the equity of our brand in the long term. We've also made strong progress on our Happier Future ESG strategy and outlined a number of commitments that we're delivering against on that program.
We've also in 2021 started investing in what we're calling our operational change program, and that's to make sure that we've got the right infrastructure and the right foundations in our business to support the growth we want to deliver over the next few years to ensure great service levels and availability of our products.
We know over the last two years our Out of Home business has been seriously impacted by the coronavirus pandemic through our closures, restrictions due to social distancing and outlets and our footfall reduction in that period. As a result of that, we have seen 70% growth 2021 versus 2020. But versus where we were in 2019, we are 30% behind that progress.
So, result of that, we've put an impairment review in place. We've impaired all the goodwill on our balance sheet. And most importantly now, we've commenced the strategic review of that sector to ensure we grow back stronger and more profitably in the future.
Again, in 2021, we've maintained a very strong cash position to similar levels that we've seen pre the pandemic. And the well-publicized inflationary cost that hit in the whole of the industry at the moment, we've put plans in place through cost reduction programs or appropriate pricing strategies with a range of our customers to help mitigate those costs.
Okay. So, those are the key headlines I'd ask you to take away today. What I'm now going to do is just give you a bit of an update on what's happening in the UK packaged market using the Nielsen data which measures ePOS brand value sales at retail.
So, the key takeaways from this slide would be once again in 2021, the soft drinks markets has proved incredibly resilient, driving value growth at 8.5%. We've seen shoppers buying soft drinks more often at higher prices, and you see that play out and the volume is up 2.3% but value, as I say, at 8.5%. So, that metric playing out.
In terms of some of the subcategories within soft drinks, some of the real winners have been the energy category which has grown at 15.9% through lots of innovation and flavor expansion. In coffee, we're a nation of tea drinkers in the home, but definitely a nation of coffee drinkers out of the home. And that cold ready-to-drink coffee category has shown great progression, delivering over 32% growth during 2021.
The subcategories that have not performed as well has been squash, and that is due to lapping a really strong 2020 as lots of us stayed at home and consumed more squash. But over the two years, squash category has grown 7.5%, so proved resilient. Also mixes during 2020, lots of us consumed more gin and tonic in home, and during 2021, we've seen people return to the hospitality sector so that growth not coming back.
Okay, if we compare from Nielsen's perspective how we have performed, firstly, I'm really pleased to say that across the three subcategories we play in, that being squash, fizzy-flavored carbonates or our ready-to-drink still juice drinks, we've delivered value growth across the piece.
We've also for the first time in our history have delivered over £100 million worth of brand value, and we've done that drive in value at 6.3% versus volume of 0.1% and made that, while making sure we've not given our margin away.
Over the last five years, we've driven growth through bringing new households into the brand, and you can see that nearly 900,000 new households and really importantly, 300,000 of those households have been in the South, which is where we have a targeted approach to grow the brand.
Across the portfolio of the squash brands and the main players, we are now the number two squash brand behind Robinsons and during 2021, we've been the fastest-growing squash brand as well.
If we dive a bit deeper into our UK packaged performance and across the UK packaged arena, we have about 40% of our sales in grocery, 30% in discounters and 30% in wholesale cash and carry, which means our risk is quite well-spread within the UK market.
Definitely at the corner of our growth this year has been the new branding we've rolled out. We fortified our squash ranges, so they now have vitamin C and vitamin D and on the back of consumer research. And a few years ago, we only had our original purple flavor and no added sugar and we've extended that portfolio now to offer seven different variants. And as you can see in the second picture there, that has really driven the visibility and availability of our brands in the marketplace.
During 2020, our independent convenience stores often gave extra space to toilet rolls and pasta and, therefore, we lost distribution. And we've had a concerted van sales push during 2021 to make sure we win that distribution back. And I'm pleased to report, we've won over 13,000 points of new distribution both in independent retailers, but also win some big, major forecourt retailers.
We've also focused on driving weighted purchase during 2021, and we've awaited our multipack cans to an eight-pack in ASDA. And also for the first time, we've taken our flavored portfolio in squash into our two-liter variants in ASDA and we fully expect to see that rolling out further across subsequent years.
And finally, through our category work, we've identified an opportunity in what we call the power-up category, which is heavily focused on protein drinks and protein shakes. Some of the insight there has been that people enjoy those products but find the taste quite bland. So, we partnered with the Myprotein brand, which is owned by The Hut Group, and through their direct-to-consumer website have done a brand licensing partnership where we've done limited edition flavorings on some of their protein drinks with Vimto, which have proved extremely popular, and I'm pleased to say some of those will return in 2022 [indiscernible] (00:10:13).
We've also underpinned our campaign in the UK with a brand new fully through-the-line marketing campaign called Find Your Different. It's been on TV, video-on-demand right through to in store, and we've increased both awareness, consideration and advocacy with our core consumer target of [indiscernible] (00:10:40). And what I'd like to do now is just share with you one of the adverts that aired live on TV in May this year.
[Video Presentation] (00:10:52-00:11:15)
Okay. Thank you. So, as we look further afield and out to the Middle East, which is one of our key markets, what again we have seen in 2021 through the investment we've made as well around the Sweetened Beverage Tax is outstanding execution in marketplace, and whereas traditionally the execution we've seen in Saudi Arabia, which is our major market, the picture you see there is in Kuwait. So, that execution reaching out to some of those broader markets.
We've also, for the first time, made a move into a No Added Sugar cordial product and also, our tetra packs have been in No Added Sugar. And as we move into 2022, we're going to be launching our Vimto ZERO cordial and also, Vimto Zero carbonate packs. And again, we've seen a very strong and integrated marketing campaign around Sweet Togetherness, which is celebrating families coming together at that key Ramadan period.
In Africa, where we've seen accelerated growth, that has been on the back of a fully integrated marketing campaign across Valentine's Day, Ramadan, Tabaski and back-to-school. We've rolled out our new branding across our African markets. And again, we'll launch new flavors such as watermelon into new pack formats so that's our 2-liter carbonate pack that has been proven very successful at launch in Algeria midway through the year. [indiscernible]
(00:12:53) I mentioned we've had challenges there over the last two years on our product portfolio. We've made good progress in 2021, but due to where we were versus our projections as we come out of 2021, we have impaired all the goodwill from our balance sheet and now we commence the strategic review to ensure by looking on how we go-to-market, our product portfolio and the financial thresholds we have in place in this route-to-market. We will build this business back stronger and more profitably going forward.
And then finally, before I pass back to David, we have our Feel Good brand, which is a brand we've launched this year into a space that we can't stretch Vimto. So, this is an all-natural product, fruit, sparkling water drink, very low calorie with a very strong purpose ESG proposition to back it up. We've launched it into foodservice and out of home via listings with Brakes and Bidfood who are the route to market into that sector. And in Q4, we listed the brand in the premium retailer, Sainsbury's, and our focus as we go into 2022 will be driving distribution and driving awareness of the brand to grow it over the long term.
Okay. I'm now going to hand over to David, who will give you an overview of the numbers and then a financial outlook as well, and then I will come back and summarize. Thank you.
Thank you, Andrew. In terms of revenue performance, we've seen revenues grow by 21.6% to £144.3 million with strong performance across all three of our routes to market. This takes us broadly back to the 2019 pre-pandemic levels of £147 million. We're delighted to report UK packaged growth of 8.5% with strong brand performance from both our Vimto and Levi Roots brands.
For Vimto, we saw continued progress in each of its subcategories with growth in Squash, Carbs and Stills. Vimto brand value is now 13.2% larger than in 2019. In the UK, we see multiples and discounters grow again by 7% and seen convenience delivered wholesale and cash and carry recover back to 2019 levels following the significant impact caused by outlet closures in 2020.
2021 saw a softer version of 2020's coronavirus restrictions and the out of home route to market recovered accordingly, growing 77.4% versus 2020. It was quarter four though before we saw anything like a return to 2019 rates of sale in out of home and overall out of home closed the year 31.4% down versus 2019.
Our international business reported underlying revenue growth of 9.8% once adjustments are made for the year-on-year impact of our investments in the Middle East to mitigate the impact of the Sweetened Beverage Tax which is now complete, and we are delighted to report revenue growth of 17.1% in Africa and 14.2% across our European and US, rest of world markets.
Moving on to adjusted PBT. The group delivered 87.9% growth with adjusted PBT now at £21.8 million, which was at the top end of previous guidance and market expectations. Our gross profit grew £15.6 million versus 2020, and by 3.4 percentage points to 45.2%, broadly back to the gross margin seen in 2017 and 2018 of 45.7%.
Of that £15.6 million, £9.4 million is a direct consequence of the volume growth seen year-on-year. The balancing £6.2 million, a combination of mix and margin management gains versus 2020. £2.7 million of this being the only line that the group's investments to mitigate the impact of the introduction of the Sweetened Beverage Tax, as mentioned, now complete.
In the year, our customer mix was richer from a gross margin perspective as in-house and national out of home customers returned, and margin – that benefited from a more consistent coronavirus road map from the UK government which, combined with restructuring in Q4 2020, meant that we have less downtime in our factory and planning for the coronavirus became more manageable.
Distribution costs increased £1.1 million due to both volume and price. The UK driver shortages and fuel cost increases impacting as might be expected. The group continues to invest in capacity to support the significant growth we are experiencing. And during the year, we signed a new five-year distribution contract, which is already providing significant benefit to the group.
The group continued to increase its marketing investments behind the Vimto brand, with costs increasing £1.9 million as a result of our successful delivery of the Find Your Different campaign. The campaign has supported significant distribution gains during the year.
From an overhead perspective, costs were £0.9 million adverse to 2020 and as reported at the half year and in 2020, the group had a £1.3 million deferred consideration credit relating to the Noisy Drinks Company and AML acquisitions, which created in 2021 an adverse comparison.
Moving on to exceptionals. We've seen significant exceptional charges this year of £39.5 million as the group updates its balance sheet following the impact of the coronavirus on its out-of-home route-to-markets, and also accounts for the previous contingent liability associated with historic incentive schemes where the tax treatments have been previously challenged by the HMRC.
More positively, and perhaps most importantly, the group charged a further £0.6 million of costs to underpin capacity and capability development in its UK packaged supply chain, which continues to experience significant growth.
The vast majority of this year's exceptional charge relates to a goodwill impairment in out of home of £36.2 million and is entirely non-cash. The impairment follows a review that highlights that future growth prospects for this route to market are expected to be slower than previously thought and net margins lower than anticipated.
Significant opportunity exists in our out-of-home route to market, but it will require a more transformational approach than anticipated and this strategic review has now commenced.
In terms of cash, as we have referenced in previous presentations, we recognized early in the pandemic the unique circumstances we were facing and challenged ourselves to ensure we exited the pandemic with at least the same financial strength we entered it and a clear view of the strategic choices we needed to make.
Cash and cash equivalents closed the period at £56.7 million, up from £47.3 million last year. Cash conversion remained very strong at 103% and held the cash gains from 2020 where working capital unwound as businesses went into hibernation through the various lockdowns. Working capital was largely neutral in the year despite a significant stock build in readiness for operational changes in H1 2022 as part of our UK packaged supply chain project.
Higher financial return thresholds in out of home limited CapEx spend. And all in all, we were delighted to deliver another strong free cash flow performance of £17.5 million which, despite the pandemic, was broadly in line with historical averages.
Moving on to dividend, in 2020, the board applies a dividend policy of broadly 2 times cover, in line with historical averages. Final adjusted basic EPS is £0.4615 for the year and, therefore, we proposed a final dividend of £0.133 per share, meaning a full year dividend per share of £0.231.
The final dividend will be paid on the 5th of May, subject to shareholder approval. I'm delighted to say that the company's AGM this year will be a physical one again and will take place on the 27th of April in Newton-le-Willows.
Okay. As mentioned earlier, the group's revenue performance of £144.3 million was broadly back to pre-pandemic FY 2019 levels of $147 million. It has been a challenging couple of years for us all. 2020 was uniquely impactful and 2021 has seen significant recovery. As we now hopefully exit the pandemic, we thought it would be useful to contrast 2021's performance with 2019, as this will hopefully give a better sense of where the group is now and help you understand our direction of travel for the future.
The soft drinks market has grown 11% since 2019, powered by segments like cola, energy, mixers and ready-to-drink coffee, areas where Vimto does not currently trade. Over the same period, our UK packaged revenues for Nichols have grown 12% and Vimto's brand value has grown 13.2%. We've seen significant distribution gains and very encouraging improvements across all brand awareness metrics in the UK.
Internationally, despite some reporting turbulence associated with the Sweetened Beverage Tax, revenues of progress, 11%. We've seen significant progress in Africa with growth of 26%. And the Middle East, while not seeing underlying volume growth has remained stable despite the introduction of a 50% Sweetened Beverage Tax.
Where our Middle East and Africa consumers go, they want to drink Vimto. And whilst not the mainstream US and European markets, we are delighted with Vimto's progress there.
In terms of out of home, the pandemic has provided an opportunity to take stock and consider the route-to-market from an overall returns perspective. The heavier asset and overhead associated with this route-to-market have weighed heavily on the group over the last two years. And whilst we recognize that, as the specter of COVID recedes and revenues return, overall returns will remain challenged without a more transformational approach.
Moving on to adjusted PBT versus 2019. So, whilst revenues have largely returned to 2019 levels, profits have not. Adjusted PBT is £10.6 million. Whilst volume still accounts for £1.3 million of difference, gross margin in 2019 at 47.6% was a couple of percentage points ahead of both 2017 and 2018 levels.
Gross margin in 2021 is largely back to what we might expect for the group. Distribution costs for the group are largely UK-based, and volume and inflation have played a part in the higher cost scene. The group has continued to increase its investments in future brand of growth and marketing and management costs associated with Vimto campaigns and Feel Good have increased.
The group's pre-pandemic investments in out-of-home assets have meant a largely fixed cost, including higher depreciation charge, have remained in situ without the support in contribution. Revenues, as previously noted, remain 31% lower than in 2019. The group also benefited in 2019 from a £1.1 million credit associated with deferred consideration associated with its AML acquisition.
We exit the pandemic with a different shape to our business. Financially, we have both significant opportunities for branded growth and an out-of-home route-to-market readying for transformational change.
So, what does all that mean for return on capital employed? Excluding the cash on the balance sheet, the business delivered a healthy 37% return from its capital employed in 2021. With significant firepower now in cash reserves of £56.7 million, how that capital is allocated is a critical consideration for the group going forward.
Over the last nine years, in addition to the £27.6 million of acquisition spend, the group invested £26.4 million in property, plant and equipment, largely, as we built the out-of-home route-to-market. Out-of-home growth projections, as noted, are now expected to be lower than previously estimated. And its overall financial proposition will undergo a transformational change over the coming years.
From 2022, ROCE will become one of our key performance indicators as we believe efficient and effective capital allocation presents a significant opportunity for the group given our strong balances and highly resilient free cash flow. Whilst out-of-home investments will need to meet higher financial return thresholds, we see both significant organic growth opportunities for Vimto and new packaged soft drinks opportunities in adjacent categories.
So, in terms of takeout then. 2019 revenues have largely returned. But without the full recovery of adjusted PBT, we end the pandemic with a different shape and focus for our business. Vimto is the real long-term winner. It has shown itself to be both flexible and resilient. We see significant headroom for organic growth in both the UK and internationally.
Vimto will be supported to realize its potential, whether that be through investing with our partners, for capacity and process improvements or marketing to ensure we reach new consumers and drive further distribution gains. The Vimto range will continue to be renovated, and innovation remains key to our future success.
We see significant long-term soft drink market growth in adjacent categories in areas where Vimto does not trade and perhaps cannot easily stretch to. We continue to invest in the Feel Good brand and continue to assess acquisition opportunities in adjacent soft drinks categories or for brands that complement Vimto in existing categories in both the UK and internationally. We will only progress, though, if the business case makes sense over the long-term from a ROCE perspective.
Our strong balance sheet will, for the right opportunities, mean we can invest for the future and play the long game. However, we do have some near-term headwinds to navigate. We've discussed the strategic review in out-of-home and the need for us to deliver a transformational financial proposition. We need to manage and mitigate the impact of inflation of 13.6% for 2022 versus 2021.
We will do this in a number of ways, including through operational efficiency gains and through customer price increases. In 2023, the deposit return scheme commences in Scotland, and while this is a positive step in the ESG agenda, it initially brings operational complexity and significant cost.
So, finally, before handing back to Andrew, I would like to provide some financial guidance in terms of outlook for FY 2022 and FY 2023. Firstly, I would like to confirm that the group's adjusted PBT expectations for FY 2022 remain unchanged. The group has a firm focus on its strategic agenda, and we will continue to execute it at pace through 2022, whilst navigating the short to near-term headwinds highlighted.
In terms of that FY 2023, when all things are considered, we are pleased to be able to guide to high-single digits adjusted PBT growth, continuing the momentum seen in both 2021 and 2022. Thank you.
Thank you, David. Okay. I'm just going to now have a bit of a deep dive into our ESG strategy. And then, just sum up before we open the floor to questions. So, from an ESG perspective then, we are currently focused in three key areas. So, the first pillar of our strategy is around everyone matters. And this starts with our own people, both in their well-being, but also in their difference, and it also focuses on how we support young people in the local communities where we operate who haven't perhaps not had for whatever reason the chance to fulfill their potential.
The second pillar is absolutely about having products we're proud of, and that's threefold. It's about the liquid, it's about the packaging, and it's about how we responsibly source. And last but not least, it's about owning our own climate impact, both in terms of the emissions that we're directly responsible for in our Scope 1 and 2 and how we decarbonize our supply chains in Scope 3 and then very much with the water we use as a soft drinks company, how do we do that responsibly.
And we have a lot of commitments out there that we're tied to and commitments that we believe as a management team we'll be able to deliver against, and we make them short term enough that we will still be here to do that.
I'd just like to pull out some of the commitments that I've highlighted in bold. So, [ph] where now (00:32:40) everyone matters, we're absolutely pledging by 2025 that we will help improve the future for over 100 young people in our communities and we're going to launch our Vimto Camps this year that will focus on developing those people. And wouldn't it be wonderful if some of those people could actually end up working with us here at Nichols?
In October 2022, there is legislation coming into the market, which is called the HFSS Compliance, which is high fat, sugar, salt legislation. And if you're not in line with that legislation, you will no longer be able to display your products at [ph] sale points (00:33:24) or on gondola end during promotions. And I'm really pleased to say that all of our recipes now are compliant in that they are below the 4.1 grams per 100 mil of liquids and they will be rolling out in the first half of 2022 to ensure we're compliant by October.
I'm really pleased to say that all of our PET packaging is recyclable, but we're making a firm commitment that by 2025 by supporting the rollout of the deposit return scheme in the UK that will then give us a closed loop system that can operate in the UK, and we will have 100% recycled PET in our products sourced from either the UK or Europe, if it's not all available in the UK by 2025.
And on our owning our climate impact, in terms of Scope 1 and Scope 2, we're fully committed that by 2025, we will have reduced our direct emissions by 25% and that by 2030 it will be reduced by 80%. So, hopefully, some clear commitments there that we're going to deliver against in the next few years.
So, hopefully, you will take from our presentation today we have five very clear strategic imperatives that we're going to focus on over the next few years. The first will be we'll be ruthlessly focused on our asset-light package business both in the UK, but also further afield and particularly in Africa where we're seeing that accelerated growth.
We're investing in our infrastructure to make sure that we can deliver that growth with our supply chain partners and deliver great service levels to our customers. Our strategic review and our development will ensure we build that better and more profitably for the long term.
ESG is at the heart of what we do and we have clear commitments. And from an M&A perspective, with that strength we have on the balance sheet, we will target branded acquisitions predominantly in the UK, but also maybe internationally, but only where the business case stacks up and we can add real value.
So, in summary, I'm pleased to say that we have strong, diverse business, both in the UK and abroad that is being powered and fueled by the momentum we've got on our Vimto brand. We remain highly profitable, cash generative with a very strong balance sheet and a clear strategic focus. Importantly, we are in line with our expectations for 2022, so no change there, and we're very confident of delivering profitable growth through the long-term strategic plan we now have in place to deliver in the future.
Okay. Thank you for listening today. And we will now open up to be able to take questions.
Andrew, David, that's great. Thank you very much for your presentation this afternoon. [Operator Instructions] I just want the team to take a few moments to review those questions submitted already. I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via Investor dashboard.
Andrew, David, I'm just going pop your camera back up. And as you can see, we've received a number of questions throughout today's event and thank you to all investors for submitting those. If I could please ask you to read out those questions and give responses where it's appropriate to do so and I'll pick up from you at the end. Thank you.
Great. Thank you. So, the first couple of questions, I'll summarize those by – we're being asked, do we see our growth firstly coming from M&A or organic growth. And I think we definitely see our growth coming organically. The momentum we have on the Vimto brand in the UK and, particularly, in our Squash portfolio, the Squash category has grown by 7.5% in the last two years. We've grown Squash by 30%. So, the momentum there is very strong and we expect that to continue and across the broader portfolio.
I we look further afield, our African growth has been very strong and our Middle East growth has been very resilient and we now see with broader innovation in the Middle East, broader portfolio, that growth continuing as well.
M&A is very important to us. We have the firepower on the balance sheet and we very much hope it will come from M&A. But it will only come from M&A if we can find the right brands that we can add value to and that drive our ROCE measure.
There's another question here saying about, are we overly reliant on the Middle East. And hopefully, what you've seen from the presentation today, I think what we've done in the Middle East over the last two or three years where we've had significant challenges of the Sweetened Beverage Tax, that brought the retail price up by potentially 50% and also the introduction of taxes to that region for the first time, like we've seen VAT come in. The brand itself has proved very resilient, but broadly, in-market sales are flat. So, you can see that our growth has come from other areas and a great example would be Africa. So, I would actually say at the moment, we are less reliant on the Middle East than we have ever been because of the growth we see elsewhere.
We have a question here about inflation and supply chain. So, I'll perhaps, hand over to David as I read this out. The question is, have you experienced any supply chain issues and how have you mitigated these? So perhaps, David you can answer that.
Yeah, sure. So, if you look at our overall financials for 2021, the largest single inflationary pressure was around the driver shortage and the various rate changes that needed to take place to manage those very difficult supply chain issues that all of the UK faced in the summer, particularly on the early autumn.
Interestingly, we at that time, we're entering into negotiations for a longer term contract with logistics providers, and we were able to secure – we did have to pay a bit more, but we did secure a great opportunity, build capacity and has allowed us to come out through that period with service levels now largely what they were before that issue hits us.
So, some of the supply chain issues that everybody has seen through the summer, autumn, we would say, it now starts to ease, particularly around some of the driver shortages. There is still a challenge in the market, but we've been able to come through that.
Clearly, there have been, coming into 2022, a whole series of inflationary pressures that have come to the business, and we've got ways that we plan to mitigate that, as we referenced in the presentation. But that inflation has come really right across the board. It's something that we've not seen in probably a generation, really that kind of a 13.6%.
If you look at packaging, whether it be plastics, whether it be aluminum, whether it be card, all of these things have been in short supply and pricing has been quite challenging.
Obviously, we talked about distribution cost and labor shortages, generally have put pressure in the system also. And ingredients in the summer of last year, there were a number of crop failures which put an awful lot of pressure in the system. So, that 13.6% of inflation was unique and we see hitting us in 2022 versus 2021.
But it's one of the great strengths of this brand at a time when we are seeing that kind of challenging inflation on a number of our peers and other companies in the UK are experiencing that, in fact, globally. The strength of our brand, the choices that we have and the options that we have in terms of changing supply and moving things forward. So, it mitigates a number of those areas.
And given the growth and the strength of the brand in the right way, in the appropriate way, passing that through to customers is something that we are trying very hard to manage and that's something that we are playing through.
So, yes, it is a very challenging inflationary environment, but we believe the company is well-placed to manage that over this immediate future.
Okay. Thanks, David. There's another question here that I will take. So, the first bit is, can you add color on your prospects in the US? And then, the second question from the same person is, are the energy and mixer markets too crowded for Nichols to launch it?
So, if I talk about the US, I think as a reminder, our US business is very heavily focused in the ethnic market trade of where our Middle Eastern or African consumers travel and want to purchase those products. So, we have seen good growth in that market over the last few years, although it would be transparent to say the US contribution to our overall business is still below 5%.
What we are seeing though is our partner over there at the moment has had an injection of cash from private equity and that's going to give it some real firepower to go after acquisitions there that I think could open some routes to market for us.
So, we still expect growth in the ethnic channels, but I don't think that will be transformational for the group, and I don't see our brand moving into the very, very competitive main market there in carbonates because there isn't a squash market that exists in the main market in America.
In terms of mixers and energy, a great question, it's interesting. It's interesting, in energy, 94% of the value in that market comes from three players, which is Monster, Red Bull and Lucozade. So, although there's lots of players in that category outside of those big three, it's very tough to win, and I don't see energy as a big category growth for us. You may enter it in some ways, but I don't see it as a big focus. And also mixers as well, I mean, we know the [indiscernible] (00:44:33) over the years, but there's a lot of players now that have gone into that market. So, we kind of see that as very crowded. I see other white spaces as a much better opportunity for us to go in and try and win.
Okay. The next question is let me read the question.
Yeah, so...
Do you want to read that out and then you... [indiscernible]
(00:44:54)
... [ph] it's okay, I can cover on here (00:44:56). So, the question is with regards to the share buyback program that you, no doubt, had all seen in recent RNSs over recent months. The share buyback is a very tactical process. I want to be clear. It's not a strategic item in terms of trying to change the capital structure of the business or anything of that nature.
We have a [indiscernible] (00:45:23) scheme and other employee share option schemes for the group going forward, and that is an area that we've needed to top up the shares that we own in order to satisfy those options for the future. And that share buyback is entirely for that purpose. So, it should be viewed in that light. It's in order to provide those longer-term share ownership options for employees of the group. There are no further plans to change the capital structure of the group in terms of numbers of shares at this stage.
Okay. Thanks, David. I think that looks, Jake, that the...
Yeah. David, Andrew, thank you for addressing all of those questions that have come through from investors this afternoon. Of course, ladies and gentlemen, the company will have the opportunity to review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform when they're ready for your review. Perhaps before redirecting investors to provide you with their feedback, which I know is particularly important to the company, David, Andrew, if I could please ask you for a few closing comments to wrap up with. Thank you.
No problem. So once again, just to say a big thank you for dialing in today. Hopefully, you've found the presentation interesting and insightful. If you're already an investor, we hope you remain an investor. If you're not an investor, we hope we've convinced you today to invest in the business as well. So, thank you for your time.
Andrew, David, thank you for taking the time to update investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team could better understand your views and expectations. This will only take a few moments to complete and I'm sure it would be greatly valued by the company.
On behalf of the management team of Nichols Plc, we would like to thank you for attending today's presentation. That now concludes today's session and good afternoon to you all.