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&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 can review all questions submitted today, and we'll publish our responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, as usual, we would just like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful. I would now like to hand you over to the Executive Management Team from Nichols plc. Andrew, good morning, sir.
Good morning. Welcome, everybody, to our full-year 2024 presentation. Thank you very much for taking the time to dial in this morning to listen to the presentation. We will split the presentation into three to four parts, and it will probably take about 30 to 35 minutes. I will kick off just with a look back on 2024 in terms of our strategic and operational highlights. I will then hand over to David, our Finance Director, who will take you through all of the numbers. I will then come back on and just give you a flavor for what's to come in 2025 and beyond, and then we're happy to take questions.
Okay, so probably the key highlights to take away from today's presentation were, first and foremost, we are really pleased to be able to have delivered strong packaged revenue growth in our higher margin business, which is in line with the strategy that we outlined at our Capital Markets Day at the back end of 2024, and we grew that packaged business by 4.4% in the year. A big focus for us in 2024 was on our U.K. packaged division, where we wanted to drive both value and volume after a number of years of protecting our margins and taking some volume losses. I am really pleased, again, that we grew value and volume. Value grew by 6.3%, and that was ahead of the market, which grew at 3.8%. Really pleasing was on our gross margin percentages. We improved that by over three percentage points across the business.
In all three of our divisions, U.K. packaged, international packaged, and out of home, we moved forward our percentage gross margins. On top of all of that performance, we significantly invested in our marketing, both in terms of the U.K. packaged division and the international packaged division, to drive in-year promotions and innovation, but also to drive long-term brand equity. After all of that, we managed to deliver adjusted PBT growth of 15.6% year- on- year. On top of our ordinary dividend policy, which is 2x cover and was clearly progressive because we made more profit in the year, we also delivered GBP 20 million back to shareholders in a one-off special dividend in the year. Thank you. Turning to a reminder of our strategy.
At a headline level, to remind you that our absolute focus is to accelerate growth in our higher margin packaged business in the U.K. and internationally, and it is to drive bottom-line value from a simplified out-of-home business. We have four key strategic drivers, More from the Core , which is all about delivering growth organically across the brands and in the channels and geographies we currently operate in. The second pillar is called Thirst for New, and for us, this is about innovation. It is about appropriate geographical expansion, and it is about acquisition, very focused on our U.K. packaged division, where we believe we can bring a brand in to complement Vimto, that we can then add value to in the long-t erm.
Fuel for Growth is all about how we are driving efficiencies across our business by utilizing and leveraging our asset-light model and reinvesting those efficiencies back into our packaged business , predominantly into marketing to grow the business. Happier Future is our set of commitments we've made from an ESG perspective across people, product, and planet. All of those are underpinned by three key foundations of, one, we're a branded business and very proud of the strong brands we have across all three of our divisions. Our asset-light model means the partnerships we have with customers and suppliers are very important to us, none more so than an example where in the Middle East, we partner with the Aujan Coca-Cola Bottling Company, and we've just celebrated in 2024 our 101st Ramadan campaign.
We are very proud of the culture we have in the business and the high engagement scores we have that provide a culture where we believe our people can thrive in. Okay, what I'll do now is just give you a little bit of context to what's happening in the U.K. packaged soft drinks market. This is Nielsen data to the end of December 2024. As a reminder, this is kind of the industry benchmark, but takes EPOS sales from the grocers and sample data from Unitas wholesale channel. Sometimes you will see just some small discrepancies between what's reported here and our internal sales data, which is obviously what we're selling into the customers, whereas this data is about retail sales out of customers.
I think the first key important headline is, again, the soft drinks market proved very resilient in the U.K. If you look in the top left-hand box, you will see there that the value grew 3.8% in the year to GBP 13.5 billion. Really importantly and encouragingly, after a few years of volumes going backwards, you can see in the box below that volume grew by 1.4%. The difference between those two shows probably inflation running at about 2.4% in the year. There are about 15 or 16 subcategories in soft drinks. The top three pull out categories that have performed very well in the year. You can see water doing particularly well there. The insight there is we believe that is on the back of quite a lot of negative press around tap water.
Energy, which is now the second largest subcategory after cola at GBP 2.2 billion. That is strong value and volume growth. Fruit juice is performing well at a value, less on volume. That is where, due to bad crops, the prices of juices have gone up, and that is then being pushed through onto consumers. The categories that have not fared as well on the bottom three level is the sports category, which is down 20% as it lacks the incredible success of Prime in earlier years. Mixers and lemonade as categories have seen declines now for a number of years post-COVID and continuing to trade down. Across the three largest subcategories we operate in, overall, we are pleased to report that across squash, flavored carbs, and RTD still juices, all of our brands are in value and volume growth.
On squash, where we are the number two brand, so second to Robinsons in the category, good, strong, solid growth there, and we've outperformed the market by 2.8 percentage points. On carbonates, although we're in growth relative to the market on value, we are behind. There's just a footnote there from our internal sales. Our carbonate business has actually grown 9% year on year. That's just really highlighting sometimes the discrepancies we have on the data. In ready-to-drink still juice products, you see that our value has grown 5% relative to the market at 3%. That's on the back of some strong progression on our 500 ml range and also the introduction of our new kids' mini packs. If we look then to what's been happening in the U.K. in our More from the Core strategic pillar.
Firstly, we've launched a newly categorized strategy during the year called Fresh Thinking for Drinking. This is where we've gone and done a lot of consumer research and identified over the next five years what will be the big trends that are going to be important in terms of growing your business. We've talked to our customers around those, and they've welcomed that insight. Really, anything we do from an innovation or acquisition point of view will play to those growing trends because that's where we believe the growth will come in soft drinks over the next five years. Examples there could be exciting new flavors, different pack formats, how do you exploit parts of the day when soft drinks are consumed less than other parts of the day, etc., etc.
From a brand investment point of view, we launched our biggest ever campaign in the year in the U.K., Love the Taste or Your Money Back . That ran across 30 million of our packs. I'm really pleased to say we had a tiny amount of products returned to us. Hopefully that says that people do love our taste of our products, and that helped to build brand penetration across the U.K. We flowed that investment through to store, where we invested heavily in our packaging and point of sale at store level, which encourages disruption and consumer pickup of our brands. On the back of that, all of what I've talked about, I was really pleased that we landed some really important big distribution wins this year across numerous of our customers, both in the north and the south, on our core packs.
Okay, if we now just focus on our Thirst for New in the U.K. Firstly, we really accelerated the performance of our Vimto brand in the year. We had four big innovation focuses. The new blood orange squash we launched, the continuation year two of our launch of energy in the 500 ml can, a new sub-brand called Discovery on Vimto in carbs, and then the minis that I referenced. On our license range, Levi , SLUSH PUPPiE , we took Levi into a can format. We also took it into a 500 ml energy can format and launched new flavors on SLUSH PUPPiE . We saw good growth, particularly on Levi, which grew year- on- year 40%. We are very targeted from an M&A perspective.
As I mentioned, it's about U.K. packaged, and it's about areas and brands that Vimto can't play in and that we believe then we could buy and add value to over the medium to long term. From an international point of view, again, I'm really pleased with our performance in the Middle East. You can see there an outstanding display in one of our stores. As a result of that focus, the marketing and execution, we delivered over 10% growth in the region, which was really pleasing year on year. In Africa, a big strategic move for us was to move the production of our red cans from Spain closer to the point of consumption. In partnership with a company called Millennium, we've built a factory in Senegal. We have now moved and are phasing the move of some of our cans into market.
This has benefits of it stops the distributors who distribute our products in market having their cash and working capital tied up by paying those duties, which means they can purchase more product from us and drive the product and drive market share. Because we're not importing the cans from Spain all the way into Senegal and then across the country, our ability to get product to market quicker has improved, and there's less risk from a supply chain fragility. Clearly, there are sustainability benefits of us not shipping finished products all the way around the world. To support that move, we've opened our first office in Senegal, where we've got people now on the ground driving key marketing activity to drive customer pull-through and pickup of our brand.
From the Thirst for New internationally, we had good, strong growth from new brands in the region. We launched new flavors such as the lemon berry. You can see on the picture there. We fortified our products with the addition of vitamins to build on growing trends in that region. That was about driving penetration into the brands outside of the key Ramadan period. We launched into Sierra Leone, which is in West Africa. It is a country about 8 million-10 million in population. We launched with one of our key partners there, and the launch was heavily focused on driving our PET range to 300 mil. You can see in the picture there. We had a strong marketing campaign on the ground to launch that.
Finally, after two to three years of work and identification of the right partners, we've launched into a new geography outside of Africa, Middle East, and Malaysia. That's a large country, 40 million population, and a well-established squash category there already, which is important so that consumers understand squash and cordial. Purple fruits are well understood, and some of our competitors operate in this area. Again, important that consumers buy into that. We launched at the back end of 2024 our one-liter proposition. It's got 25% juice, which is akin to local trends. Our product in the U.K. is about 10% juice. We launched exclusively with 99 Speedm art, who are a convenience chain situated nationally in Malaysia in about 2,500 stores. We had a strong marketing campaign, lots of sampling, and in-store POS to cause disruption. We're pleased.
We then rolled out to up to about 3,000 stores by the year end as we went to some of the different supermarket chains. The fuel for growth. Two things to talk about here. Firstly, the restructure we did in out of home and the strategic review means we have a much simpler model now for that business, less senior management time spent in that area, run very well by an experienced management team. They have done a superb job in delivering profit growth year on year of 35% versus the previous year. The key focus for us there has been absolutely about the profitability by outlet, only putting capital where we believe we can do proven returns, and then reinvesting those savings back into our packaged business in the U.K. and internationally.
After two and a half years of work, I'm pleased to report that last week we went live with our new SAP system in the business. We were able to dispatch stock last week. We were able to produce in our own factory. That went really well in terms of the launch. Clearly, with all these launches, you then are in hypercamp for six to eight weeks. We're working our way very carefully through that with lots of support. Really pleased that we've gone live and the system is working. Okay. Finally, from myself before I hand to David, from a Happier Future point of view, good progress. I've got all three pillars. A couple of points to pull out.
One would be we achieved an investor-accredited sustainability rating through Integrum, and we have got an A rating for the work we are doing in this area. We are really pleased that that external accreditation gave us confidence in the approach we are taking. We have now moved all of the recycled PET in our bottles to 51% and being sourced from good sustainable sources. As I mentioned earlier, from a climate impact, we were really pleased with that move of production to Senegal. We are not shipping finished products all the way around the world. Okay. I will now hand you over to David, who will talk through the numbers, and then I will come back and look forward to 2025 and beyond. Thank you.
Thank you, Andrew. Okay. Obviously, a really good year of progress in terms of the financial metrics and very much in line with the ambitions that we talked about at our Capital Market Day later on last year. I'll just pick out a few of the headlines. Revenue up 1.2%. I think on a like-for-like basis, that's actually close to about 5.2% because the move to the concentrate model in West Africa led to a lower revenue figure, but much the same profitability. We had obviously reduced our turnover in accordance with our planning out of home. About 5.2% like-for-like. Importantly, profit up 15.6%. I think a little bit higher than we expected until later on last year. Good performance there. Adjusted PBT margin 18.2%. We have a medium-term target there to hit about 20% bottom line and made good progress on that this year.
Earnings per share up 13.5% to GBP 0.64. Cash and cash equivalents are slightly lower figure than last year, but the GBP 53.7 million was after the GBP 20 million special dividend that was paid in September 2024. Also, quite a heavy investment in the new ERP system of about GBP 7.6 million a year. We'll go through that in a bit more detail later. Adjusted return on capital employed, strong at 31%. I think good progress there. I think that reflects both increased profitability and also a more efficient balance sheet. Obviously, we don't earn as much return off the cash we hold on the balance sheet as we do from the operating business, but a good increase there.
Proposed final dividend GBP 0.171, up 9.6%, giving it a total ordinary dividend for the year of GBP 0.32 before the special dividend of GBP 0.548. Good shareholder return there. Thank you, Andrew.
Looking at a bit more detail, revenue movements. Overall group revenue up 1.2%. As I say earlier, like-for-like, about 5.2% up. Where that's come from really is good, strong growth in the U.K. package area, where we've increased sales by 6.3%. That's mostly an increase in volume rather than any significant price impact. International, obviously a little bit more complex. Headline number up by 0.8%. Like-for-like, though, we think it's close to 8.2% because of the move to the West African concentrate model. Middle East, + 9.6%. Very good sales there. Probably a little bit more than we expected in the finish of the year in the pre-Ramadan sales. Good performance there in both Saudi Arabia and with a bit of extra product going into the Yemen. Africa, like-for-like, + 8.3%. Good performance there.
Obviously, as Andrew's mentioned, we have opened our first overseas marketing office. Rest of the world up 5.8%. Good performance in the smaller markets around the world. Overall, packaged business, like-for-like, up 7%. Out of home, down 8.2%, which is very much as expected. We did go through a fairly major restructuring of the out-of-home business during 2022 and 2023, and we expected to reduce the scale of it. The good news, as we'll see on the slide over, is while the revenue is down, our profitability has substantially improved in that business. Thank you, Andrew. Looking at segmental profitability. Good performance by all our businesses. Again, in line with the overall group strategy and for the individual plans we have in place for each business. Looking first at the packaged business, operating margin up 2% to 30.6% operating margin.
A really good performance across package as a whole. I think that's coming really from strong gross margin growth in both the U.K. and international from overall volumes increasing. Some mixed effects in there as well. The international business is now a bigger proportion of package as a whole. That tends to be more profitable for us. Within international, it was higher margin markets that performed perhaps a little bit better. Some positive mixed effects. Another big effect in there, though, was some benefits from reduced costs of goods sold. Some wins there in terms of material procurement and in terms of reduced co-packer fees from the recentring processes we've been going through. Really quite a good performance, which we hope to push forward. Overall, profit in the division up GBP 4.3 million.
I think it's important to say, though, that that's after an increase in marketing spend of GBP 1.9 million in the packaged business. We very much wanted to increase spend to support the brands, and that's had both a positive in-year effect and we think a continuing effect into the future. Moving on to the out-of-home business, very much a transformational performance for the business, if you like, that we, as I said earlier, we have restructured that business with the aim of focusing it more on core profitability and profitable accounts and profitable product areas.
We are very pleased to say that the performance this year really supports the hopes that we had from that restructuring through a mixture really of increased management focus, taking cost down, particularly at overhead level, and some price benefits as well, where we have been able to, we have managed to increase profitability in the out-of-home business by GBP 1.7 million. That is 35% up on last year. Obviously, from the group's overall strategy, that GBP 1.7 million profit increase is really what has allowed us to reinvest in the packaged business where we see the main future growth opportunities. Really good performance from out-of-home. Central costs are a little bit higher. Essentially, what that is underpinning is our forward investment plans. The big areas of increase have been in, for example, procurement and supply chain, where we have both extended and improved our teams in that area.
I think you can see the start of the benefits coming through there from cost of goods sold, one or two other areas of increase in terms of IT, in terms of our research and development. Very much a planned increase in cost and one which we expect to be an investment in improving future performance. Overall, I guess operating profit up from 14.8%- 16.7% margin, good performance, a little bit more interest return. Obviously, we had quite a lot of cash across last year, and interest rates were quite good. We obviously see that as being reducing a little bit this year with lower interest rates, but really pleased to get back over the GBP 30 million profit mark to GBP 31.4 million for the year. Same numbers, probably in a slightly different format.
I think what we wanted to do was just to illustrate how important the gross margin gain has been for delivering increased profitability, that we've delivered GBP 6.7 million more of gross margin, a little bit of a decline in out-of-home, but very strong progress both in the U.K. and in international, where the combined increase was around about GBP 7 million. Margin as a whole up by 3.5 percentage points and 9.4% in absolute terms. That is really something that we're really very pleased with because it does allow us to both maintain investment in the business and deliver a profit increase. Really good performance. As you can see, the other areas, some increase in costs. I've talked about the admin expenses, but very much an investment in forward marketing as well. Good progress on profitability overall.
Looking at exceptional items, we have chosen to, well, we have to treat the investment in the new ERP system as a revenue cost. So cost of that GBP 7.6 million across the year. That really covers both the development of the systems in terms of redesigning business processes, in terms of configuring the SAP system to those processes and the Nichols model, and the start of the implementation phase. Quite a lot of cost in the year. As Andrew said earlier, that system went live last week. With good progress, we expect really the cost to continue through to early into the second quarter, but we would expect costs overall in that area for 2025 to be much more similar to the 2023 number than the 2024 number.
Quite a big investment for us, but we do see a lot of forward benefits on that with an overall payback of around about five years. That will be coming from very much closer integration with our supply chain. Our systems now will talk directly to both material suppliers and to our co-packers. Very strong integration there. Also much clearer integration with our customer systems as well. Just to illustrate one of the potential benefits where we perhaps overorder a product and then have to clear out as the stock becomes a little bit older and close to its sell-by date, obviously, we get less money for that. If we can manage residual sales better, we think we can get quite a nice margin increase off things like that.
Very much an important project to prepare the business for the next 5 to 10 years. Net cash. Obviously, as a company, we like holding cash on the balance sheet. We think it's good in terms of allowing us to invest going forward as a safety margin. Started the year with GBP 67 million. Good EBITDA, up 11.7%. Then spend on the new IT system, GBP 7.4 million. Obviously, really pleased to be able to return a total of GBP 31.2 million to shareholders this year. I think most of the other areas are pretty small in comparison. Working capital well controlled. Overall, cash has remained pretty strong at GBP 53.7 million. We would obviously expect to build that cash during 2025 again. Very much a business model that generates cash both for investment and for return to shareholders. Finally, for me, just a confirmation.
We've talked about our capital allocation policy before. Our first plan is always to reinvest in the business for profitable growth. I think we've certainly done that this year, and we certainly plan to keep doing that going forward. We expect to continue to pay a progressive ordinary dividend. We have some plans for M&A, which Andrew will pick up on later. Nothing particularly imminent, but obviously, we would need cash for the right opportunity, but paying the right price. Ultimately, we will then return any further surplus funds to shareholders as special dividends. This year's dividend, we've maintained our two-times dividend cover. Our earnings of GBP 0.64, which has given us GBP 0.32 total dividends. The final dividend of GBP 0.171 will, if approved, be paid on 1st of May. Just a reminder, we paid a special of GBP 0.548 in September. Thank you.
Thanks, David. I will just now pick up and spend a few minutes just focusing on 2025 and beyond, and then we'll open up to questions. I think if we start in our U.K. business first, what I'm really pleased about is we will continue with our focus on innovation. We are really pleased to announce that we're going to be launching a new sub-brand on our squash portfolio called Vimto Wonderfuel. The proposition comes in three flavors, and it is targeted at children and the breakfast occasion because our insights have shown us through our category strategy work that the day part when least consumers are drinking soft drinks is between that breakfast and lunch part of the day. People tend to consume fruit juice, but will often dilute fruit juice down with water.
We're working with our big customers to look at how do we make this proposition of Wonderfuel fulfill that day part where less drinks are consumed. The product has 30% juice in it, so it's higher with juice and is fortified with a large bundle of vitamins. We've also signed a partnership with Applied Nutrition, who are working with us to take Vimto into the beyond-the-bottle space. We're really pleased to announce that we'll be launching energy gels, where you can see on the picture there, and also Vimto hydration tablets, where you will take the tablet, put it into the water to flavor the water. Both of these products, in conjunction with Applied Nutrition, will be listed in Holland & Barrett and Superdrug over the next few weeks and months. We'll continue our focus on driving energy into the ever-growing energy category.
The focus for us this year is we will launch our energy onto a priced marked pack that allows our wholesale convenience customers who only shop price marked packs to list the brand and drive more penetration. We will heavily invest into our marketing campaigns. We will see the return of Love the Taste or Your Money Back , but we will go on more than 30 million packs this year, and the campaign will run for an extra four weeks, taking it from 12 weeks we saw in 2024 to 16 weeks in 2025. Internationally, we will continue to drive organic growth both at Ramadan and all year round with the launch of the new packs we have got, and we will go back on TV in the region for the first time in six years.
We have more innovation coming to capture that all-year-round opportunity with share packs and carbonates. Also within the Middle East, we have awarded the territory of the Yemen region to the Aujan Coca-Cola Bottling Company, who will hopefully then capitalize and grow that region and distribution further. In Malaysia, building on the launch we had at the back end of Q4, we are really pleased to announce that we will update our advertising this year, and we are actually going on TV Q1 into Q2. In Africa then, to complement what we have done in Senegal, in conjunction with the same partner, Millennium, we will open a second factory, or they will open a second factory in the Ivory Coast, and they will then produce our product there as well. What you will see from this next slide is just hopefully an explanation.
The scale of our business in Africa is about 60 million liters, with half of that in red cap and half of that in purple product across PET and glass. You'll see on the left there that we have 11 key markets in West Africa where we sell the red cap. Our strategic expansion will see Senegal service six of those countries: Gambia, Guinea-Bissau, Mali, Mauritania, and Senegal. When Millennium opens the second factory in Ivory Coast, probably December 2025, January 2026, we will then phase the production for Burkina Faso, Liberia, Sierra Leone, Niger, and Ivory Coast into that factory as well. Our goal here is to increase our market share, which is currently broadly about 8%-12%, so a 50% increase over the period of phasing that production through to 2027 and 2028.
The enablers for that will be the local production and concentrate model, which will enhance the margins and drive product availability at a market share, the marketing programs to drive pull-through, the mitigation of less risk in our supply chain, and clearly the benefits from a sustainability point of view. We will continue our focus in the year with our Happier Future commitments. I will not go through all of these, but probably just to point you to the middle box where the deposit return scheme, DRS, is now being passed by government and will launch in the U.K. in October 2027. The current legislation states that it will put GBP 0.20 on the product of anything in a plastic container or an aluminium can.
Consumers will pay the 20p when they purchase the product, and then will return the vessel to a returnable vending machine and receive that 20p back. Ultimately, that should then allow us to be able to sustain 100% recycled PET in all of our products from the U.K. We will be preparing for that over the next couple of years. Just to finish, these are the targets we have put up at the Capital Markets Day, clearly with an actual FY 2024 in. As a reminder, we wanted over the medium term, which we are calling five years, to increase our revenue in 2023 from GBP 170 million up to GBP 225 million. We wanted to increase our margin from 15.9% up to 20%, and we wanted to increase our profit from GBP 27.2 million up to GBP 45 million. You can see there is good growth.
At the bottom line, our projection for 2024 was GBP 30 million. That up to GBP 45 million gave us a 50% growth. We have come in and I think made really good strong progress. We have delivered PBT of GBP 31.4 million, so ahead of where we wanted to have been. The margin has grown up to 18.2% with us then targeting to get to 20% over the next few years. We are pleased with the results and pleased with the progress versus those ambitions. To finish, to remind you, on the top of that strong financial performance, we operate in a very resilient soft drinks category, both in the U.K. and abroad. Hopefully, our strategy is clear. It is accelerate growth in the high-margin packaged business.
is from a simplified out-of-home business focus on the bottom line and continue to find efficiencies in the business to reinvest back to fuel that growth. A good example there will be, as we have talked about, we have launched the ERP SAP system, and we have invested about GBP 10 million into that, and we will look to pay that back over five years starting in 2026. With all of that together, we are confident in delivering those medium-term financial ambitions and creating further shareholder value. Okay, that concludes the presentation. Happy now to go through the questions.
Perfect. Andrew, David, if I may just jump back in there, and thank you very much indeed for your presentation this morning. I will just bring back up your camera there for the Q&A.
Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that is situated on the right-hand corner of your screen. While the team take a few moments to review those questions that were submitted already, I would just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboard. Andrew, David, as you can see there, we have received a number of questions throughout your presentation this morning. Thank you to all of those on the call for taking the time to submit their questions. At this point, if I may, I will just hand back to you to read out those questions and give your responses where it is appropriate to do so.
If I pick up from you at the end, that'd be great. Thank you.
Yeah, thank you. I'll take the first few questions. The first one is asking us under our owning our climate impact, are we looking at introducing the tethered caps on our one and two-liter cordial plastic bottles? There is legislation here in parts of the EU. That's not legislation yet in the U.K., but we are talking to all of our co-packers in terms of doing the right thing about tethering the caps. That's something we're just reviewing, but also wanting to make sure that it's done in a way that means that people can still use the bottles quite easily. Yeah, something we're discussing and reviewing at the moment. I've been asked here just to give a bit of an update on the competitive environment in the U.K.
Have I seen any changes following the Britvic-Carlsberg deal and what's happening with brands that are launched into Aldi and Lidl or coffee? Yeah, I mean, yeah, the market in the U.K., as we know, is very competitive. I suppose what's positive, as we saw in 2024, soft drinks proved very resilient again and grew. January and February, I think across the whole of the U.K., has been tough, but I think food and drink tends to fare pretty well compared to GM. Perhaps where people are reducing spend out of the home, they'll then perhaps increase spend in grocery and treat themselves in the home. I think what we have is a good balance in our business where we have a business in home, we have a business out of home, and we have our international business that helps us just spread our risk.
We've probably not seen any big changes at the moment from the Britvic-Carlsberg deal. We obviously sell Pepsi under license with Britvic, and our relationship continues to be strong there, and we continue to sell their products. Yeah, I think in Aldi and Lidl, they have both launched a brand that looks very similar to Vimto in the last 12 months. In some ways, we take that as a compliment because they are seeing the value of our brand and people wanting it. Generally, though, we find that people can't replicate the unique taste of Vimto. That's one of our absolute USPs from a strategic point of view. Therefore, our loyal consumers who want the taste of Vimto don't tend to switch out. Can you provide more color on the increased category competition in the Middle East referenced in the R&S?
Yeah, I think what we are seeing again in the Middle East are more people trying to launch me-too Vimto copy brands, particularly in our cordial pack formats to capitalize on Ramadan. Whereas we are absolutely never complacent and we take every competitor seriously, again, the challenge I just mentioned over there is trying to replicate the unique Vimto taste is difficult. Vimto has been now synonymous with Ramadan for 101 years, and we're in the middle of our 102nd campaign in 2025. Ramadan's live now started on the 28th of February. It's pretty much a staple in people's home during those important Iftar meal occasions that occur every evening during Ramadan. How has the launch in Malaysia gone relative to expectations? Yeah, we're pleased.
As I mentioned, we launched that exclusively with 99 Speedm art, a good strong what we would call below the line, so sampling POS type activity for launch to get people tasting the product and to get it to stand out on shelf. We've now widened our distribution to some of the more major supermarkets and really are stepping up the heavyweight marketing campaign. Pleased with the start, but excited for the year ahead. Do licensing deals such as Myprotein have the potential to make a material profit contribution? One assumes they are high margin in nature. Yeah, I think our licensing business is very important to us. It allows us to go into areas with the brand that we're not experts in.
It also allows us to increase our visibility and availability of the Vimto brand, which then has a strong halo effect onto the soft drinks business. Yeah, it plays an important role for us, and we're really pleased with the partnerships we have there, Myprotein being with The Hut Group. The Middle East remains a key market, particularly during Ramadan. How are you working to reduce seasonality and drive year-round demand? Yeah, I think hopefully what we've shown in the presentation is we have launched a lot of new packs and formats over the last few years. We now have four flavors across Tetras, four flavors across smaller ready-to-drink kids' packs, and we have a number two brand in Saudi.
We have four flavors now across carbonates in cans and glass bottle, and we are looking to launch some more share packs, so bigger PT packs in the region. All of that brings in additional consumers and increases our penetration outside of that key Ramadan period. Really good strong progress there, I would say. Next question, how much, maybe one for you, David, how much of the gross margin improvement was driven by the shift in the Africa model versus volume leverage in the U.K. beverage business?
I think the, I suppose the main effect of the shift to the concentrate model in West Africa is on the percentage margin. We do not earn a much higher absolute margin. The plan really behind it is that it does give cost benefit to our distribution partners in West Africa.
We now have an expectation with them that they will use that cost benefit that comes from lower duties that they have to pay to invest in growing the distribution of the brand and in marketing that they carry out. We are obviously working very closely with them on that. Yeah, we are probably looking at something less than 1% of the gross margin in the international overall coming from that. It is a relatively small effect, but obviously important in terms of making our business easier to run there. Not major, I think in terms of the overall, but in terms of the market, quite a substantial shift in the margin once we have shifted all of that supply to the concentrate model.
Thanks, David. Do you plan to increase development and marketing of non-alcoholic drinks to meet the growing demand in U.K. bars and restaurants?
I think here we will work with our category strategy, fresh thinking for drinking. We look at where we think the biggest opportunities will be. I think what's really important in any business is you then prioritize. You think where will you get the biggest growth? I'm a big believer of investing well behind the big initiatives as opposed to trying to do everything and maybe not having the firepower to succeed. I think that'll be one for us to think about. I also think as well within bars and restaurants, space is always a premium behind the bar. Again, you have to think about how much space can I get relative to some of the very big competitors there?
Will I get the growth and margin in that part of the business relative to us maybe trying to go faster in Africa? We will always be open-minded, but I think it will be a matter of choice and return on investment and prioritization for us. Okay, hi. Hi, how will you set sustainability commitments for the overseas sales as those expand, e.g., recycle content in ex-U.K. bottles, supply chain emissions? Okay, yeah. Trying to set the right commitments for our overseas business is more challenging than in the U.K. Obviously, we work in a lot of countries with a lot of different partners. A lot of these have come into what we would call Scope 3. I think we have done a lot of work on Scope 1 and Scope 2 .
We are at the moment building what our Scope 3 emissions will be and how that plays out internationally. I think we are making some good progress there. The one we've highlighted today around the move in Senegal and then the further move to Ivory Coast really helps us in delivering against some of those commitments. Perhaps one for you, David here. What is the expected increase in costs as a result of the Autumn Budget in the U.K., and are there plans in place to try and mitigate those?
I think the, I guess the main increase in costs is obviously in the National Insurance rises, where I think we've estimated it will cost us around about GBP 400,000 in the full year.
The effect is probably a bit smaller than you might expect because we have relatively few people who are paid at the bottom end of the pay scale, if you like, that we have a few people in the out-of-home business in terms of the manufacturing units, in terms of some of the distribution roles that we have. It is perhaps not having as much impact as it might have in other companies. In terms of our overall cost base, I think what it comes into is that we will mitigate that where we can through probably putting a little bit more price through. We are thinking about how we deal with price impacts. I think the indirect effect on some of our supply chain, where we obviously buy a lot of fruit, is that impacted.
We obviously have kind of manufacturers who manufacture most of our U.K. product for us. I think those have been priced into negotiations for the prices we're paying this year. So we've got guaranteed prices on those. I think we'll see one or two effects coming through. I think overall, it just probably means that we've probably got to put a bit of upward price pressure in than we would otherwise have liked to. We haven't had significant pushback from the customer base on that as yet.
Okay, thanks, David. There's a couple of questions here from a couple of people. I'll take these. Asking around, there's been a little bit of a negative press recently and then some more this morning about the effect of slushy products on children as a result of it containing glycerol. Probably just to explain this to everybody.
Firstly, we sell slush within our out-of-home business. In our overall business, it probably now accounts for about 3% or 4% of our sales. When the sugar levy came back in 2018, all manufacturers of slush reformulated and took sugar out and replaced it with glycerol. What sugar does in slush is it allows the product to freeze. Glycerol was an alternative to sugar, so it's a sweetener that has the same effect. What it means is then your products are much lower in sugar and calories and far below the sugar levy, which was what was designed from the government to do to drive into no added sugar or lower sugar products. About two or three years ago, there was some negative press around glycerol, and it had an impact on some children.
Basically, by consuming large amounts of the slush product and then being very, very active afterwards, led to some dehydration and some young children then collapsing and having to go to hospital. We reacted very quickly to this. In our Starslush brand, which is the brand that is targeted at younger children and sold in places like trampoline parks and play barns, when children are therefore being very active afterwards, we removed our product from the marketplace. We reformulated it. We put sugar back into the product and took away the glycerol. We did debate that taking the glycerol out and replacing with sugar does put calories back into the product. What we felt was slushies are bought as a treat and tend to be bought on average by consumers once, twice, three times a year. We felt very comfortable with that.
We do have a little slush product, ICEE, which is available in cinemas. You can't self-serve in cinemas, so the outlet has to serve it. We have signs on the machines saying not to be consumed by young children. We regularly audit those cinema chains. We work very closely with the cinema chains to monitor that. Essentially, when someone is consuming a slush product in a cinema, they are intending not to run around because clearly they're sitting down and watching the film. We take these concerns very seriously. I'm just reiterating, we acted very quickly, and we reformulated all of our Star slush brand to take the glycerol out and put sugar back in to minimize any risk here. Okay. There's a question here asking for an overview of the SAP system.
I'd like to think we maybe did do that in the presentation, but probably just to reiterate a few points. We went live last week. It's the SAP S/4HANA we've put in, which is a licensed system. We've had a transformational project running in the business for two and a half years to get ready. We've put all our best people on this project. We've worked with external consultants on the project to help us. We went live last week, and the system is working, which is great news. We are now in hypercare for a number of weeks with our consultants staying in the business for a period to help us. As and when we feel we're completely ready to come out of hypercare, we will do. As I say, really pleased with where we are.
We are looking then to, as a five-year payback on that GBP 10 million starting in 2026. Okay, perhaps one here for you, David. You have a surplus on the legacy pension scheme. What are the plans for the legacy pension scheme, e.g., buyout or continuation?
I think the overall plan is for a buyout, and the trustees have been taking on advice on that probably for about 12 to 18 months. There is at present one remaining member who will be retiring shortly. Basically, all the members will become either pension or deferred members. It's much easier then to wind up. I think it's a project that's underway. It's proceeding quite slowly and carefully. There's obviously a lot of legal work to do around it. Yes, the intention is to buy out the scheme and then wind out the rest of it.
Okay, thanks, David. Do you see a big drop-off in sales of Vimto in the Middle East outside of Ramadan? What I would say is the key period of trading for us is Ramadan. The four weeks on the build-up when people are buying the product for the 30 days, and then people come back during Ramadan to buy the product. I would probably say about now 70% of our business is in that 8 to 10 week window. As we mentioned earlier, we are launching lots of new products, flavors, pack formats, and really importantly, zero ranges in the region on the back of health trends there and fortification of our products, added vitamins to drive that all-round consumption. We never take our eye off Ramadan because it is such an important trading period for us.
I think perhaps the last question here, how can we lobby the government regarding halving of the IHT tax relief on AIM-listed stocks? I think what I'd say here is we talk to Singers, who are our Nomads that we have to have when we're listed on the AIM stock market, and that they really talk to governments on our behalf and represent us in this space. I think just in addition to that, we're wholly supportive of the QCA, the Quoted Companies Alliance on this. Obviously, they have been lobbying quite hard on behalf of AIM companies. I think that answers all the questions that have been submitted.
Absolutely. Andrew, David, if I may just jump back in there, thank you very much indeed for being so generous of your time there and addressing all of those questions that came in this morning.
Andrew, perhaps before really just looking to redirect those on the call to provide you with 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 just to wrap up with, that would be great.
Yeah, thank you. First and foremost, I'd just like to reiterate, we are very pleased with the financial results we've delivered across all of the metrics that David highlighted on his first slide. We went out and did our Capital Markets Day, the first time we've done that in the back end of last year, and set some ambitious targets. We believed the results we've delivered this year means we are absolutely in line to be able to deliver on those over the next five years and continue to drive value for all of our shareholders.
I would just like to finish to say thank you for dialing in today and listening. We really do value you as our retail investors and the time you take to listen to the presentation and for the questions that you submit as well that allows us to make this a two-way conversation. Thank you very much and look forward to updating you at the next roadshow. Thank you.
That's great. Andrew, David, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations? This will only take a few moments to complete, but I am sure it will be greatly valued by the company.
On behalf of the management team with Nichols, we would like to thank you for attending today's presentation. That now concludes today's session. Good morning to you all.