Nichols (LSE:NICL) — Investor Presentation

0:01 Good morning, 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. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And now I'd like to hand you over to CEO, Andrew Milne. Good morning, sir. Thanks very much, Jake, and a a very good morning and warm welcome to everybody on the call. And thank you for taking the time to dial in this morning to to listen to the presentation.

0:54 In terms of the flow of our presentation today, so we'll do it in three parts. So I will kick off and give you a strategic and operational update on the activities from 2022. I will then hand over to David, our CFO, who will take you through all of the numbers from 2022 and also then give you a financial outlook. Then I will come back and give you a forward focus with a clear view on what our strategic focus will be as we go forward. Okay. What I'll just kick off with firstly, though, is just the executive highlights that would be good for you to take away from today's presentation. So first and foremost, we're really pleased to be able to report that our full year adjusted PBT is in line with market expectations and and growth at circa 14%.

1:41 Our top line growth has been very pleasing at just over 14% growth again, but really encouraging is we continue to see accelerated growth across our international geography In the big two regions we operate in, both in The Middle East and Africa, we have delivered double digit growth in 2022. We continue to invest in our Vimto brand, both in The UK and further afield, particularly in Africa and The Middle East to drive the long term, brand equity. Like most of the industry, in 2022, we have faced significant inflationary headwinds, but we are really pleased that through a a range of cost mitigation initiatives and price realization, we have, mitigated all of those headwinds.

2:33 We signposted that last year, but we have fully completed our strategic review of our out of home business. And and in the forward looking section of today's presentation, I will outline the conclusions we have come to, but also the actions we are now gonna be put in place going forward.

2:52 Two years ago, we kicked off a significant operational change program that was designed to make sure we have both the capability and the capacity in place to be able to fulfill our long term ambitions. And, again, we have made strong progress here in GEAR. Also, at the start of last year, we published our first ESG report with a number of commitments. And, again, we've made strong progress here. We recently announced that we have appointed a new nonexecutive chair to our board. So Liz will join us as chair from the day of our AGM, which is the April 26, and she brings both a wealth of experience and diversity to the board. And subject to shareholder approval, I'm pleased to announce that our full year dividend will be 27.7p, which is a 20% increase year on year.

3:43 Okay. So what I plan to do now is just give you a market update on what's been happening in soft drinks throughout 2022. And as a reminder, this is the Nielsen data, which is the benchmark for the soft drinks industry, and it takes data from EPOLS sales and grocery, sample data in convenience and impulse, but doesn't include the on trade and discounts. So if you see any discrepancies in these numbers and David's numbers, it will be because, obviously, as David is reporting our internal sales figures. Okay. So what's been happening in the market? Well, the key headlines to take away would be it's been another very resilient year for soft drinks, and you can see in that top box that value growth has been 9.2% across the market. Equally, what you can see is that volume is down 2.1%, so you can clearly see across the market prices being realized.

4:37 There are a number of soft drinks subcategories and some ones from a broader perspective that have done well. So energy, which is 15% of the market, continues to perform strongly, value and volume through penetration. Plain water has done particularly well, although was lapping softer comparative figures as in q one twenty twenty one, we were locked down so people were consuming more tap water at home and not buying drinks out and about, hence the softer comps. And in the cola category, which does account for 25% of all soft drinks in The UK, there is 7% value growth driven by price as volume is down 3%. Couple of points on subcategories that haven't performed quite as well. So mixers is down over 10% of value, but, again, that is the converse of what is happening to plain water as in q one twenty twenty one when we were locked down, people were consuming more mixers at home, have now returned to the on trade, which is then not read in the '22 data.

5:40 And squash, which is about flat, similarly, people did consume more squash in home when we were locked down. So we're pleased as we play in that category, the squash is broadly and is bigger than the squash subcategory of both 2018 and 2019. If we compare our own performance via Nielsen, what you can see, and as a reminder, we play in squash, ready to drink stills, and ready to drink carbonates. You can see a range of those products on the table. Really pleasingly, we have taken market share in the squash category and the ready to to drink still juice category. In squash particularly, we are now firmly consolidated as the number two brand and have been the fastest growing brand in the squash category of the major brands.

6:31 In carbonates, we took a disproportionate amount of our COGS inflation, with our value over volume strategy, we have actively here made sure we are protecting our gross margins for the long term, and therefore, it took a a number of revenue management activities such as less promotional activity and, we made We are progress in '22 across all of our squash range, which coupled with our branding we launched in 2021 has proved very popular. And then with the range of successful flavor innovation we have rolled out throughout the year, and you can see the rainbow effect of that on the table, We do have real good stand out now from a visibility and availability point of view in store.

7:25 At store level, we have continued to invest on feet in the street and and consumer promotions. You can see the big cash giveaway promotion there we ran earlier this year, very pertinent in the cost of living crisis. And we've supplemented that with, again, a strong above the line and below marketing campaign involving TV, video, and digital. We also conducted our largest ever van sales drive across the whole country to drive distribution of our key small packs. Further afield, in The Middle East, one of our key regions, 2022 was our ninety ninth, campaign in The Middle East with Ramadan and Vimto being, very strongly linked, and we saw excellent in store, market execution and in market sales of over 10% during the key eight week trading period of Ramadan.

8:20 We've continued to launch innovation in the region. We launched a Vimto Zero Cordial for the first time, which proved very popular with consumers. And at the back end of the year, we took our carbonates range into a new citrus based green flavor that tied in with the launch of Saudi Arabia's participation in the World Cup. You can see there a picture of the Burj in Dubai. And on the first night of Ramadan, we took over the whole Burj Khalifa and through LED lighting lit up purple and then beamed some of our key marketing messages up and down the verge of Khalifa, proved very popular and large crowds did gather. And we ran our sweet togetherness campaign through digital and social platforms throughout the whole of Ramadan.

9:06 Again, we're really pleased with our performance in Africa during the year and plus 15% growth in revenue versus tough comps of plus 17 from the year before. We launched our carbonates cam range into three new markets, namely Angola, Chad, and Central African Republic, and then continue to invest in strong promotions across Valentine's, Tabasaki, Ramadan, back to school, coupled with the continued rollout of our new branding and feet on the street execution in store pulling out of the key wholesalers.

9:41 Last year in out of home, we were conducting our strategic review, which I will cover later, but we also worked hard to ensure that the first full year the trade opened, we supported customers. I think it's fair to say as we hit the key trading periods of Easter into the summer, footfall was definitely slower to return to key trading outlets like holiday parks and theme parks. And in outlet as well, we also saw customer spending levels reduced to our forecasts and also eighteen and nineteen levels. In our post mix branded range, where we have a strong branded portfolio already, we supplemented that with a new exclusive partnership with The UK's number one ginger beer, Old Jamaica, to keep driving that branded presence.

10:28 And we tied up in our cinema channel where we sell ICEE, our carbonated slush, and did a number of movie tie ups. And at the back end of the year, launched a brand new trade website that no not only improves our customer communications, but also drives efficiencies as our trade customers can now order products from us online. We have in place our operational change program and some highlights of the momentum we have here. We have switched all of our production now from Princes, who we were with a number of years, into Refresco, which has resulted in new high speed lines going into Refresco, which has certainly helped us mitigate inflationary pressures throughout the year.

11:15 We have completed logistic tenders with partners both in The UK and abroad to make sure we have the right cost to serve model, but also service levels at an appropriate level. And during what's been very tough times due to inflationary pressures, we have invested in new capability and numbers of people into our purchasing team to help us through those challenges, but also ensure in the long term we buy at the best possible levels.

11:46 We launched our happier future commitments earlier this year across three pillars. A couple of highlights. So in our everyone matters pillar, we have launched our first Camp Vimto program, which is very targeted at raising the aspirations and creating opportunities for young peoples in the communities we serve, and we've established our first female leaders network group. Within products we're proud of, we have spent a lot of our time this year getting ready for sorry, in '22, getting ready for the launch of the DRS scheme in Scotland, which is due to go live on August 16. And we feel we're in the best place we can possibly be to make that launch as successful as it can be. We've also continued to make sure our products are compliant with all HFS legislation, so we have no restrictions on promotions, and all our innovation is launched in a no added sugar product format.

12:39 And then our owning our climate impact pillar, all our UK locations now are on a 100% renewable energy sources, and we've spent time working with the green element company, to collect our scope three data, which has is challenging in a in a outsourced model that we have due to our manufacturing all being through contract packers. But we have that data now that gives us the platform to build a plan, for the future. Finally, for myself, just to reiterate, so Liz has joined us currently as a net and is spending her time getting to know the business. She brings a wealth of experience in her executive career. She spent time at retailers such as Tesco and FMCG suppliers like Colgate, Parm, Olive.

13:28 In her nonexecutive career, she has spent time at companies like McBride, so a big FMCG PLC player, but also people like Weatherspoons who are a family business. So Liz will take over from John Nichols, our current nonexecutive chair, on the April 26, but we're also pleased to report that John, who is the founder of the is the grandson of the founder of our business, will take the second family seat on our board, which also has James, his son, who works in our business in the second seat. So we retain John's wealth of knowledge into the business. Okay. I will now hand over to David before I come back and do the strategic outlook, who will now take you through the numbers. Thank you. Thanks, Andrew, and, thanks for joining everybody.

14:16 So first of all, revenue. Revenues remain strong again this year, increasing by 14.3% to $164,900,000 from $144,300,000 last year. And you may recall that last year's revenue number was very similar to the 2019 pre pandemic revenue level of $1.47. So that means that the group has grown 12.1%, pre pandemic to post pandemic. And it was pleasing to note in the year that revenues progressed across all of our reported segments and geographies as well as within each of our three routes to market. Overall, our group carbonate sales progressed by 20.4% or 14,700,000 and still products by 8.2 or 5,900,000.

15:09 UK revenues progressed 13.7% to $127,000,000. And within The UK, our package revenues moved forward 2.9% driven by market outperformance from the Vimto brand in both dilutes and the ready to drinks subcategories. For our UK out of home business, a return to a more normalized post pandemic trading period meant revenues progressed 42.8%. Although for half two in isolation, the growth was a more customary 5%. Dispense revenues in particular bounced back this year, up 48% versus 2021 as pubs notably in the second half year experienced the return to a more normalized operating environment.

15:59 2022 presented a challenging operating environment for our UK trading teams. The contrasting pressures bestowed by significant and accelerating inflationary pressures across almost all of our input costs with increasing cost of living challenges for our cost consumers meant the price recovery needed to be delivered appropriately and in partnership with our customers via a range of revenue management activities, including reduced promotional activity and temporary SKU rationalization in certain channels. Whilst this approach dampened volumes, particularly for our flavored carbs within The UK packaged route to market, it ensured we were able to balance revenue growth with long term margin protection and was a demonstration of our long held value over volume strategy in action.

16:53 We're delighted with the group's international performance again. Despite significant supply chain disruption in quarter two of the year, the group delivered 16.1% revenue growth, and it now represents almost a quarter of the group's overall revenue. Our international routes to markets, NUCLIUS, is The Middle East and Africa. And in both markets via strong and long held partnerships, we're seeing solid and significant progress. Versus 2019, the year before the introduction of the 50% sweetened beverage tax in The Middle East, revenue there has held strong, growing 1.6%. In this the first year without any additional marketing support.

17:39 Successful navigation of this most critical change for consumers in the region has been a critical focus for the group over the last four years, and we are very pleased with the outcome. In Africa, the group has grown 45% since 2019 and presents for the group given the strength of the brand, particularly in West Africa, a significant growth opportunity for the future. Okay. Adjusted PBT. From an adjusted profit before tax perspective, the group progressed 14.5% or 3,200,000 to 25,000,000, maintaining the group's adjusted profit before tax margin of 15.1%.

18:24 Gross margin progressed 5,800,000 in the year, largely as a result of the additional volumes seen in out of home and the packaged international business, which more than offset the dampened volume seen in our UK packaged route to market. The group benefited naught 800,000 in comparisons with last year, with 2021 being the final year of marketing investments in support of the actions to mitigate the impact of the sweetened beverage tax in The Middle East. The group experienced significant and accelerating inflationary pressure in the year with underlying cost of goods inflation approaching 14%. Mitigation plans included exceptional change across our supply chains, including the migration of dilutes contract manufacturing to faster, more efficient lines, as well as important contract renegotiations to best manage import inflationary pressure through the year.

19:23 The net effect of the group's balanced revenue management activities and cost of goods inflation mitigation actions was to fully protect the group's gross margin. Excluding the inherent dilutive effect of price recovery, the group maintained its gross margin percentage in line with 2021. Distribution costs increased 1,600,000 through a combination of increased volumes across the group largely in out of home and ongoing inflationary pressures. The group entered into a new five year distribution contract at the end of twenty twenty one that was implemented through 2022, and this offers to the group both significant additional capacity as well as improved opportunities for efficiency gains going forward.

20:10 Administration expenses excluding exceptional items increased 1,600,000, largely as a result of net payroll and staff related costs. This was broadly in line with cost of living increases seen in the year. The group's strong cash balances and pension surplus provided additional income year on year of naught 500,000. Moving on to exceptional costs in the year. The group incurred again significant exceptional costs this year of 11,100,000 as it completed a number of reviews into its strategic footprint. Notably, the group completed its review of its out of home route to market. Whilst the review found significant opportunities for net margin progression, which Andrew will take you through later in the presentation, it also showed the challenging times ahead for The UK on trade.

21:03 Research by UHY hacker Young found an 83% rise in pubs and bars filing for insolvency last year. We saw in q four a significant slowdown in out of home for the group. And when combined with a significant increase in the group's cost of capital from circa 8% to circa 13, it is perhaps no surprise that we've we've we see a further charge against our assets of 8,700,000. This on top of last year's 36,200,000 out of home goodwill impairment. Critical to the success of the out of home business going forward is the recognition of the differing strategic challenges and opportunities for out of home versus our packaged routes to market.

21:50 And this will be reflected by a new divisional structure for out of home with segmental reporting at a group level from 2023. Our first objective will be to ensure net margins for out of home are positive whilst allowing for the correct development of its own strategic agenda distinct from our package routes to market. As signposted in 2021, the group completed the transfer of its dilutes filling in the year, including 1,500,000 of costs on top of the 900,000 incurred in the previous periods. The project is now complete. With regards to the historic incentive tax scheme charged to exceptional costs in 2021, it is worth noting that we settled this year with HMRC and paid 4,300,000 in cash and have now started, that process of completing that that particular item from the from from the books.

22:49 Finally, for exceptional costs, the group commenced a group systems review that will over 2023 and '24 implements a new ERP for our package business and ensure the right system platform is in place to ensure effective delivery for our out of home business going forward. Okay. I thought it would be useful at this point to share the 2022 results segmentally as we would show them in 2023 going forward. So let's just have a look at that to understand the different strategic opportunities from a financial perspective. Firstly, on the left hand side of the chart, you will see that out of home is currently losing money.

23:36 This will be corrected through f y twenty three through the implementation of the strategic review actions that Andrew will take us through shortly. Out of home is both overhead and asset heavy, and you can see that of the 50,000,000 of fixed assets we had in 2019, we now have impaired 45,000,000. And about half of the rest will be disposed of in 2023

24:01 as the strategic review actions are implemented. I think that's quite important for us financially to appreciate that the impairments that we've seen in the last two years, by pure maths are now largely behind us. They're in the rearview mirror, and that process is now kinda dealt with. Going forward, strategic planning for our out of home business will be on ensuring that value realization across that p and l and balance sheet going forward. If we look at the packaged routes to market, so the right hand side, in in in the checkered lines, you can see that this business or this business is inherently asset light. It's internationally diversified and is a very healthy mix of concentrate sales and packaged goods.

24:53 It has significant growth opportunities, which will be delivered through growing distribution of Vimto across The UK beyond its northern heart heartland and across The Middle East while taking advantage of the increasingly powerful position of the Vimto brand in the fast growing African markets. Returns from our package business because of its mix are healthy And even when grouped with corporate costs, that combined elements of our business delivers return on sales of 21.5% and return on capital employed, including cash of 35% together with an ongoing very strong free cash flow.

25:36 Our package business specifically is highly profitable with excellent net margins as described and returns on capital employed. And it is for those reasons that the group's future capital deployment will focus on The UK and international package developments. That will be through a combination of brand and distribution support for Vimto, building on the significant growth already experienced over many years. And where mergers and acquisitions occur, it will be in this space. The board is highly confident with the group's investment case and believes we are very well positioned to deliver our long term growth plans. Okay. Moving on to net assets and capital employed.

26:25 The group is highly cash generative with a very strong balance sheet. The group's EBITDA at sixteen point three percent and 26,900,000 increased significantly in the year. Free cash flow was 14,600,000, but would improve to 18,900,000 if we excluded the one off exceptional h r HMRC payments mentioned earlier. The group's adjusted return on capital employed improved to 27.2%. And as noted in previous presentations, this along with free cash flow are now key performance indicators for the group. Cash is now at 56,300,000. Fixed assets are now at 11,000,000, highlighting both the opportunity and criticality of effective capital allocation.

27:16 A strong cash balance at these moments is another key security measure in terms of the stock. Finally, for net assets, the group continued to work with its pension fund trustees to secure the pension surplus and further derisk scheme assets in the year. The scheme closed the year with a surplus of 4,100,000, having had a deficit of a similar value in March 2020.

27:43 The scheme is now funded to 122%, and the group with its trustees has commenced the review into potential buyout over the next couple of years, which will obviously remove the pension scheme then from the balance sheet. Moving on to our dividend proposal and the group's AGM. Dividend policy remains broadly at two times cover with an adjusted EPS of 55.38p, and this makes for a full year dividend of 27.7p. Taking account of the interim dividend already paid, we propose a final dividend of 15.3p. The ex dividend date will be the March 23, and payment will be made on the May 4 subject to shareholder approval.

28:29 The group's AGM will again be here at Laurel House. It's our HQ in Newton LaWillows on the April 26.

28:38 Okay. And finally for me, some comments regarding financial outlook. FY '23 group adjusted PBT expectations remain unchanged, and we remain very comfortable with the consensus for both f y twenty three and '24. That statement comes with some context as we ended the year. We see our international business ahead of expectations and out of home slightly behind. But the figures that are in the consensus, 2324, we are very comfortable with.

29:16 From an inflation point of view, significant inflation and cost of, living expenses that we've seen this year are expected to continue, over 2023. But perhaps critically, the difference between f y twenty three and '22 is that whereas in 2020, two, inflation was accelerating and peaked in the second half year, we expect that to be the reverse this year. And what that means is that many of the actions that are necessary to mitigate inflation this year are already in play. That said, we do recognize these are uncertain times, and there is some potential for upside.

30:04 It's possible that The UK economy has that much bonded soft landing and dodges recession. And some of the cost of living challenges that we are currently seeing are not as severe or don't last for as long. And that will be very helpful for branded businesses and volumes and release some of the challenges that we experienced in the last twelve months. That said, I think there is also some risk of inflation remaining stubborn into 2024.

30:32 And as a result of that, our actions remain firmly fixed on what we can control. And in that regard, we are extremely confident of delivery and the group's prospects for success.

30:47 Thank you, David. And okay. I will now spend a few minutes just outlining our strategy as we move forward. I'm going to kick off with the conclusions from our out of home strategic review, but then provide us with the platform for the actions we're gonna put in place throughout the remainder of 2023. So I think it's fair to say that the really important first one is that, you know, the impact of the pandemic and subsequent cost of living crisis resulted in us carrying out the strategic review across our out of own business. What we've learned is that the national geographic footprint leads to inefficiencies and therefore an unprofitable cost to serve model.

31:34 Out of home is capital intensive versus the asset light package business.

31:42 The business itself is distinct in out of home. It has higher operational gearing and therefore a lower net margin compared to our package business. And it has very different strategic challenges versus the package business, and therefore, a different management approach is required to deliver the long term shareholder returns. So with those as our foundations, what are we what are we actually going to do in the following year? So the first really important point to say is that we are going to create a much more simplified business model. Firstly, we are going to exit from all the frozen slush accounts, which are national accounts with the exception of cinema, which I'll explain in a minute.

32:30 So that means we will be taking our products and machinery out of the big national accounts in, theme parks, holiday parks, etcetera. And the reason for that is we don't have densities of outlets evenly spread geographically, which just makes the cost to serve model to go to all those national accounts not viable for us. The reason for staying in cinema is in that channel, we have our ICEE, which is our fizzy carbonated slush product. The machines that are used to serve that product are very different. They can only go in very high footfall locations because of the cost of them, which we need to return against. But as a result of that, they certainly need a lot less servicing, and we don't deliver to individual cinema outlets like we do in the rest of our national accounts because that those deliveries are consolidated through a wholesale partner.

33:29 Therefore, that business in cinema remains viable for us. Our coffee business is through a partnership with and is predominantly in a business to business context served through machines in outlets like big workplace venues. Due to the pandemic and then the lower return to working locations that we've seen due to homeworking now, that business again becomes unviable for us, puts complexity into our model, and we want to simplify it and purely focus on soft drinks. In our central region, which essentially spans from The Midlands across to East Anglia, we only operate our in house business there in frozen as we have a distributor to operate our post mix business and no coffee business, so we will exit that business with our in house teams.

34:21 As a result of the the above actions, we are going to close a number of our depots, so we will reduce our depots infrastructure from 16 to nine. We will also rationalize our roles internally, and currently, our people in this part of the business are going through a consultation process. Going forward, we will have a very disciplined capital allocation policy. Importantly, we will understand where we will allocate capital and, more importantly, where we won't. We will operate the business in three distinct regional profit centers, namely the Scotland, the North, and the South, Each of those profit centers being headed up by a general manager who will have clear KPIs, on net profit and ROCE, and we've invested in our financial reporting to allow us to report that very clearly in those regions.

35:17 As we mentioned, we will put these actions into place during 2023 with the benefits being then realized and baked into our 2024 outlook, and we will operate out of home as a distinct division within the company with the segmental reporting that David has given you an example of today. So, hopefully, you can see both our conclusions and our output, but definitely our strategic focus going forward as a business. So as we've mentioned, our focus will be very much in our packaged area and a number of things to pull out. So that first box there highlights our drive to focus on accelerated growth within our packaged area, driving profitable revenue.

36:05 And some examples of how that will look going forward will be we have a very healthy pipeline of innovation that spans both GB, Africa, and The Middle East, and we're excited with the innovation we have for the future. In Africa, we have two new partnerships on board this year, both in The Ivory Coast, which is a key market in West Africa, and Sierra Leone that we believe will drive more growth into that business this year. As ever, we see real headroom for the core brands we have in our current markets, and we have a number of commercial initiatives in place to continue to drive that headroom growth. And in terms of the equity of our brand for the long term, once again, we will have strong integrated marketing campaigns above the line, example, things like TV, but below the line at store level where appropriate across the relevant markets.

37:06 In the second box, m and a is very important for us, but we'll be solely focused on our package business. And we would only bring m and a in if we felt we could enter into new categories that we could add value to in the long term and that fully complement Vimto. We will continue to implement initiatives that drive operational efficiencies to ensure our cost to serve model is appropriate in the package range. And we will also, as David mentioned, drive business transformation through the implementation of a new ERP system over 2023 and 2024. So to clarify, our out of home strategy's focus will be very simplified with the new business model. It will operate standalone, and it will be absolutely focused on driving value at the bottom line.

37:58 So to sum up today, the soft drinks category has again proved very resilient over a number of years, and we are positive that this will continue as we go forward, providing us with opportunities. The strength of our diverse business in The UK and abroad has again been pivotal to our success in 2022. We are highly profitable and cash generative to give us firepower for the future. Hopefully, you can see now our capital allocation strategy is very clear in terms of where we will invest and where we won't invest. And the results of everything you've seen today, we're very confident in delivering our long term strategic objectives and continued profitable growth. Thank you. Andrew, David, that's great. And if I may just jump back in there, thank you very much indeed for your presentation this morning.

38:46 And gentlemen, please do continue to submit your questions just by using the Q and A tab situated on the top right hand corner of your screen. But just while the team take a few moments to review those questions that were 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 and a can be accessed via your investor dashboard. David, Andrew, we did receive a number of pre submitted questions ahead of today's event. And as you can see there in the q and a tab, we've also received a number of questions throughout your presentation this morning as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And, Andrew, David, perhaps if I may just hand back to you to address those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Thank you. So if I if I perhaps read the questions out and just pause to let people take them in, and then either myself or, as appropriate, David David will answer the question. So the first question perhaps to kick off with is, how can you compete with Robinson's and Ribena, and what is the difference in market share with your competitors?

39:54 Okay. So perhaps to start with the market share. So, the subcategory of squash, the number one player in there is Robinson's, and they have about 37% market share. We are the number two player, and we have market share of approximately 13%. Rybena are number three with 7% market share. And then there are some smaller players or quite a significant private label share in squash of about 30%. And those market shares are based on the Nielsen read, which is the data we have and can access in terms of what that is telling us. So I think in terms of how we compete, probably, you know, one of the big strategic moves we made a number of years ago was to branch outside of just being in our original Vinto and no added sugar portfolio into a range of flavors that you can see on the table.

40:54 That allows us to improve our visibility and our availability and brings new consumers in without cannibalizing our current range. And then as hopefully we've outlined going forward, we will continue to invest in a number of marketing initiatives and commercial initiatives to drive both distribution, availability, rate of sale, and also geographical expansion coupled with, our above the line marketing, which is about driving the long term health and brand equity, with consumers to drive penetration. Okay. So if I move to the next question, perhaps, if, David, you want to take this, if I if you're happy with that and I read this out. So with a strong brand and high levels of cash, do you see a risk in being taken over?

41:43 So I think the the the the the key answer is that we we are a very strong business and the growth opportunities that we have, for Vimto in terms of its positioning and the way in which soft drinks generally has, performed over many years. We are a very attractive, business with with with with with, as I say, tremendous growth opportunities. I think our business, that that mix of concentrate of international diversification, really strong positions in markets that actually there's great distribution gains ahead of us if we execute well, mean that our focus is entirely on that execution, on doing a really great job at delivering shareholder value given the opportunities that we have. I think we've identified today, the different parts of our business in terms of out of home and what we will, focus on here. It's a great business. It has a particular need and focus at the moment, very different though to our package business. Only about 1% of the sales in outer home are Vinto.

42:44 So it's a very different kind of play that we have there, but we believe we can add real value there as well, but internationally and Vinto across The UK. So it's not something that preoccupies us at all. Our job is to deliver real growth, for shareholders, and that's what we're focusing on. And I think given the opportunities we have, we are very confident that we can achieve that. Thanks, David. And there are a couple of questions here around are we looking at m and a activity? And I'll just reiterate, hopefully, have answered those through the presentation. So but just to clarify, our m and a activity, due to our healthy cash balance, if we do m and a activity, we'll be focused in our packaged area and not in our out of home area.

43:30 And as mentioned in the presentation, the m and a would be in subcategories that we felt we could add value to and complemented Vimto. But, equally, our investment will be around driving Vimto and the opportunities that we've highlighted. And there's a question here around Africa and our business model and and how it works. So what we'll share there is that we have a business model in Africa where we have cans that we import into Africa, and they are produced in Europe with a key partner of ours. And And then we also do have local bottling with some partners across Africa as well where we produce locally, and they complement our CAM products. And we have products in both a PT format and a glass format in that African region.

44:24 Okay. There is one then question here about our employee composition, so I will just read out the, question for everybody. So, what do your employees do? Where are they based? How will numbers change over the next decade, compared to 300 now compared to only a 100 in 2010 or as much as 789 in 2000. So there are some numbers in there. I'm not I'm not sure they're quite a 100% accurate, but I suppose to answer the question as best as I can. You know, our our employees at the moment are all based in The UK. Our head office is in Laurel House in Newton, La Willows.

45:13 And here, we have based all of our key sales functions, marketing functions, finance functions, people functions, customer service, legal. So the bulk of our functions are based here at Laurel House. In our out of home business, which is spread geographically, We do have depots around the country. We have one factory in Ross On Wye, and some of our staff that are based out of these depots are in a factory, and we do have a range of our employees who are home based. And that has accelerated, as you would imagine, as we've come out of COVID, and more people do work from home now as they have the capability to do that through the investment in IT systems we've made for our people. It might just be worth saying, actually, that that sort of that history that's being described there is actually quite important to understanding our business. You know, historically, Vinso was, as you might imagine, both mixed and and and bottled in in factories, that that that we owned and therefore had, the staffing that was associated with that. One the great strengths we've had within our business on the package side over this last year has been actually being able to decide where we operate at the moment and where we play because we've been able to come out or go in because our factories are outsourced.

46:34 And that big shift of of of of of emphasis from insourcing factories to outsourcing them happened round about the times that are being described. And the NICLLS business was probably at the leading edge of that particular change in FMCG, and it's a real kind of core strength for this business today. It creates a lot of variability and flexibility, means we can adapt to the challenges that are there. Clearly, our out of home business is more people heavy, and that's where a number of the people are now. But but that fundamental shift over the time period that's described, it's very, very important to understand our investment case and the and the opportunities going forward because, you know, in these very changing times, it's nice to be able to adapt the way we have been and can, and it gives us lots of options for future growth. So I think it's a key, point of understanding, actually. Thanks, David.

47:27 There's a a few broad questions here that are asking about do we have any plans to expand our growth perhaps out of the geographies we currently operate in? So I think it's it's fair to say that, you know, we still believe in the countries we are. So the Continent Of Africa, very strong in West Africa, The Middle East, and The UK. We have absolute headroom in all of those regions, and we plan to drive our investment into to realize that growth. We are always looking for new countries. They tend to always be a longer term play, but it's about us finding the balance between our focus and our investment into where we see that core growth coming from balanced with the longer term, and we review those and then decide to go into those countries.

48:16 And couple of questions here, perhaps for you for yourself, David. Despite revenue and EBIT growth over the last five years, free cash flow has been static. What what why is that? Well, free cash flow, has improved, this year, particularly if you take out well, if you take out the HMRC one off payments. And the levels of free cash flow, as you say, are broadly speaking, in line with some of the the the the averages over the the pre pandemic period. This is a an extremely cash generative business. You may notice in the statistics, our cash conversion last year was on a 100%. And if it hadn't have been for the single payment this year to HMRC, it would have been similar this year. And that basically is a measure that's saying all of our profit were converting into cash within the year. That's a really strong metric from a cash flow point of view.

49:10 Clearly, though, our revenues have been, changing. There's two elements to that. One is the package growth. We we we we threw two two numbers at you earlier that are very pertinent here. One is the 12 and a half percent growth from 2019 to 2022. That is nothing to do with out of home opening up or closing down through the pandemic. That is a pre pandemic number to a post pandemic number. And a lot of that growth has come from in fact, all of that growth has come from the packaged area because, actually, the out of home area has had a a troubled time through the pandemic. So that packaged area where we want to see profitable growth going forward, is is is growing very strongly, and we're very, pleased about that.

49:59 If you go back over a number of years, we made a number of acquisitions in out of home, which certainly moved that top line up disproportionately. And that's why there's that disconnect between the two because as you can see from the numbers today, the out of home area, while giving quite a bit of revenue, is not actually given the profits in the numbers and therefore not necessarily the additional free cash flow that you might expect. That's the reason for the strategic review. That's the reason for the different focus. The packaged area is where we see real growth. It's demonstrated in these numbers. It's demonstrated over a whole series of, years. Our free cash flow is progressing very positively in those areas. In out of home, we've clearly got a different strategic agenda, a different strategic focus. I hope that covers it.

50:48 Yeah. And perhaps a very specific question here, probably for yourself, David, someone asking what interest rate is paid on the cash. Certainly more than a year ago. I think, you know, certainly for a number of years interest on on on on any of the cash balances that corporates would have would would have been next to zero, and that's clearly not a great use of of of of of shareholder funds. And certainly, as this year has come through with the interest rate changes, we know a lot of that is causing the cost of, living crisis and challenges out there for consumers. It is moving forward. So our intents is not to hold that clearly for investments. It's to invest in the business, not for the interest. But we are now seeing, you know, rates up to two, three, 4%.

51:39 But, clearly, our intent is not to hold that for the interest return. It is to invest that into the business and to be able to drive that profitable growth going forward. Thanks, David. Okay, Jake. I think that brings the questions to a close. Andrew, absolutely. And David as well, thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this morning. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. Just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish those responses on the Investor Meet company platform. Andrew, just before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

52:27 Yeah. Thanks, Jake. So, yeah, finally, just to say, firstly, thank you very much again for dialing in this morning, and thank you for taking the time to give the questions, which are always really helpful. And probably leave you with two or three clear messages. Firstly, in summary, for 2022, we are really pleased to have been able to report double digit growth on our top sales line, double digit growth on our bottom adjusted PBT line, and double digit growth year on year in our dividend payments subject to shareholder approval. And going forward, really importantly now, hopefully, it is very clear from today what our strategy will be, where our focus will be, which will be to drive and maximize value at the bottom line in our out of home business with a very different approach going forward, but to drive that accelerated growth in our package business and a very clear clear allocation policy on capital as we move forward.

53:26 Okay. Thank you very much, and look forward to speaking to you in the near future. Andrew, that's great. And David as well, thank you once again for updating investors this morning. 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 can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll 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. So good morning to you all.