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Nichols should benefit from weekend treats

Consumers may be watching what they spend on their weekly shop but management is banking on leisure spending remaining popular
July 21, 2016

Pressure on prices between the at-war supermarkets is weighing on various consumer-facing stocks but drinks group Nichols (NICL) isn't hurting all that badly. Sales of packaged drinks account for slightly more than half of group sales - and two-fifths of this is to the grocers - but the other half is split between its 'out of home' division, which includes hotels and restaurants, and its international business. While people tend to be more frugal with their weekly shop, management says it is benefiting from the "weekend millionaire" - those willing to treat themselves after the working week.

IC TIP: Hold at 1445p

Its recent acquisition of Noisy Drinks could help it even further. Finance director Tim Croston said pre-acquisition, Noisy had some national accounts with the likes of Alton Towers owner Merlin Entertainments (MERL), and it had recently signed an agreement with Hungry Horse, owned by pub company Greene King (GNK), to put slushy makers in 230 outlets. Prior to the Noisy deal, Nichols targeted small scale independent shop owners. An accounting quirk also meant Nichols' management had to effectively dispose of the half of Noisy it already owned to buy the whole business, which led to a £1.1m exceptional gain. Excluding this, operating profits still rose 11 per cent.

Analysts at N+1 Singer expect pre-tax profits of £30.3m for the year to December 2016, leading to EPS of 65.7p compared to £28m and 60.3p in FY2015.

NICHOLS (NICL)
ORD PRICE:1,445pMARKET VALUE:£535m
TOUCH:1,442-1,476p12-MONTH HIGH:1,495pLOW: 1,095p
DIVIDEND YIELD:1.8%PE RATIO:22
NET ASSET VALUE:207p*NET CASH:£32.8m

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201554.710.923.78.0
201656.513.028.19.0
% change+3+19+19+13

Ex-div: 28 Jul

Payment: 26 Aug

*Includes intangible assets of £28.8m, or 78p a share