Vimto maker Nichols has experienced a dramatic slump in sales and profits as it faced the “unequalled challenges” presented by the Covid pandemic.
Following a strong start to 2020, with first quarter sales up 6.2%, the group was hit hard by the first national lockdown in March as the out-of-home market for its still and fizzy portfolio of drinks disappeared overnight. Revenues across the next three quarters sank 26.1% compared to the prior year to finish 26.1% lower overall for 2020 at £118.7m.
In the UK, Nichols revenues declined 22% to £91.6m over the year, driven by a 61.4% reduction in the out-of-home sector.
However, the business flagged the strength of the Vimto brand, with value up 6.7% against a total soft drinks market performance of 2.5% as it made further market share gains as shoppers stocked up in supermarkets.
Sales across international markets fell 8.3% to £27m in 2020, but despite Covid restrictions in the Middle East and the introduction of a sugar tax, Vimto proved to be “resilient” throughout Ramadan. Vimto sales also climbed 7.4% to £14m in Africa and by 17.3% to £5.7m in the rest of the world to offset some of the overall declines.
Profitability at the group collapsed as a result of the challenging conditions, with EBITDA for the year more than halving to £16.5m, compared witth £37m in 2019.
Exceptional costs of £5.1m, including writing down the value of the Feel Good brand, as well as making redundancies, including slimming down the executive board, dragged down profits further. Pre-tax profits for 2020 were 79.8% lower than the previous year at £6.5m.
Non-executive chairman John Nichols said: ”The Covid-19 pandemic presented us with unequalled challenges in 2020 and our first and most important objective through this unprecedented period has been the protection and wellbeing of our employees and customers. Throughout these difficult times, our colleagues have consistently demonstrated their values and commitment to our business, and I would like to wholeheartedly thank everyone for their efforts.”
He added that the strength of the Vimto brand, the group’s robust balance sheet and the diversified business model had ensured a resilient financial performance in the period despite the challenging trading conditions across markets.
”We have achieved significant outperformance from the Vimto brand in the UK, solid growth in Africa and a good performance in the Middle East despite the impact of the recently introduced sweetened beverage tax and Covid-19 restrictions,” Nichols said.
”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, the group’s diversified business model and the skill and commitment of our colleagues, remains well placed to deliver its long-term strategic ambitions.”
However, the group was unable to make any forecasts for its performance in 2021 given the continued near-term uncertainty.
Investors were soothed by the positive notes sounded in the results to send shares 1.4% higher this morning to 1,125p.
Fierce competition for shoppers is keeping a lid on food price inflation, according to the latest BRC-Nielsen shop price index for February.
Food prices rose 0.2% last month, which is the lowest inflation rate for the category since January 2017.
Fresh food prices fell for the third consecutive month in February, with prices decreasing by 0.8%, the same rate as in January. Ambient food inflation slowed to 1.6% in February, down from 1.7% in January.
Mike Watkins, head of retailer and business insight at Nielsen, said: “With the national lockdown continuing, prices across fashion and clothing retailers continue to fall ahead of the anticipated re-opening of stores in April.
“However, for grocery retailers, despite basket spends growing by over 25% and volume sales up 4% since the start of the year, more shoppers are looking to stretch their budget and price-led competition is keeping a lid on increases in food prices.”
Shop prices more generally fell in February by 2.4%, below January’s decrease of 2.2%. This is the lowest deflation rate since May 2020.
Non-Food prices fell by 3.9%, compared with a decline of 3.6% in January, which is the fastest rate of decline since May 2020.
BRC chief executive Helen Dickinson added: “With the third lockdown constricting consumer spending across all income brackets, many retailers have been vigorously discounting products in an attempt to encourage additional spending. Meanwhile, despite Brexit-related costs, food inflation remained steady thanks to fierce competition between grocers to maintain their market share amidst declining incomes for some UK households.”
She warned consumers could, however, face higher prices in the future as a result of rising global food prices, shipping costs and Brexit red tape.
“Many retailers are already under great financial strain due to ongoing forced closures and restrictions, and some will not be in a position to continue to absorb all of these added costs. It is vital government uses the Budget today to ease cost pressures on retailers by extending targeted business rates relief for the worst-hit businesses, extending the moratorium on aggressive debt enforcement and lifting the EU state aid limits on lockdown grants. Otherwise, retailers will struggle to continue to provide the competitive prices their customers are used to.”
A boom in online shopping and strong demand from the fmcg industry has helped packaging firm DS Smith in the past four months.
The group said in a trading update covering the period since 1 November that it was seeing strong box volume but input costs had also increased.
CEO Miles Roberts added DS Smith had delivered “a robust performance” during the period against a challenging macro-economic environment.
“We are seeing excellent demand from fmcg and e-commerce customers for our sustainable packaging products and solutions and we continue to invest for growth in these areas,” he said.
“Covid-19 is accelerating a number of the structural growth drivers and with our leading position in recycling and fibre-based packaging we are well positioned to capitalise and drive further market share gains.
”While the economic environment remains uncertain due to Covid-19, we are experiencing good momentum across the business in both Europe and North America. We are confident in delivering results in line with our expectations for the year and showing further good progress and momentum as we move into the next financial year.”
Smiths News has reported ”a robust” operational and financial performance for the 26-week period to 27 February 2021, with profit and cash generation in line with market expectations.
The group said in a trading update that the flexibility and resilience of the company’s business model in its core newspaper and magazine wholesaling operations helped to ensure it traded to plan throughout the period. A full service was maintained over the second lockdown in England in November and the current UK wide restrictions to date, with markets not experiencing the large reductions and fluctuations that occurred during the first months of the pandemic.
The company expects adjusted EBITDA to be £20.5m for H1 2021 and bank net debt to be £71m at 27 February 2021.
Given the stable performance of the business in H1 2021, the board added it continued to expect that full-year financial performance would be in line with market expectations.
CEO Jonathan Bunting said: ”Our performance in the period says much for the resilience of our markets, the strength and flexibility of our business model, and the dedication of our colleagues
”I’m grateful for the unwavering support of all our stakeholders throughout these challenging months, including our supply chain partners. Working together to mitigate the impacts of the pandemic and associated lockdowns, we have delivered a strong performance that is founded on supporting the long term sustainability of our markets and supply chain. I very much look forward to providing a further update on our financial performance and wider progress in our interim results in May 2021.
The FTSE 100 rallied further this morning on a wave of fresh optimism ahead of today’s Budget from Rishi Sunak, with London’s blue-chip index up 1.2% to 6,693.92pts.
Early risers in fmcg include Devro, up another 3.8% to 201.4p, McColl’s, which continues to surge another 3.3% to 37.6p, Science in Sport, up 3.1% to 46.9p, and Compass Group, up 2.8% to 1,568p.
Virgin Wines started its second day of trading down 0.9% to 225.9p, as investors took some profit after yesterday’s strong opening.
Other fallers including HelloFresh, down 1.4% to €61.90, packaging group DS Smith, down 0.6% to 400.7p, and Finsbury Food Group, down 0.5% to 80.1p.
Yesterday in the City
The FTSE 100 made further gains yesterday as markets emerged from the bond price volatility of last week, with London’s index up another 0.4% to 6,613.75pts.
Hotel Chocolat registered a sweet 2.2% rise to 380p yesterday after shrugging off Covid disruption to its stores and posting 11% growth in the first half as online orders soared.
Virgin Wines celebrated a successful first day of trading after its listing at 197p, with shares flying up more than 15% to close at 228p.
HelloFresh shares sank by 6.7% to €62.40 despite revenues more than doubling in 2020 as it delivered more than 600 million meals to customers around the world.
Investors raced to buy McColl’s Retail Group stock yesterday following Monday’s news of a stronger relationship with Morrisons. The share price jumped another 34.6% to 36.9p.
Other risers yesterday included Devro, up 6.3% to 118.6p, Kerry Group, up 5.3% to €108, and Glanbia, up 4.1% to €11.20.
Fallers included SSP Group, Associated British Foods and Bakkavor, down 3.7% to 347.2p, 1.3% to 2,367p and 1.3% to 87p respectively.