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How Nichols used star power to sell Vimto in the Midlands

The focus on marketing ahead of and during a music festival in Birmingham added fizz to the Vimto maker
March 2, 2016

In a tough drinks market environment, sometimes you need a helping hand. And Vimto maker Nichols (NICL) did just that by riding on the popularity of top-selling recording artist Ed Sheeran. The Aim-traded company took its Vimto brand to the Fusion Festival in Birmingham where the singer was playing, prior to which it had ramped up marketing in the local area.

IC TIP: Hold at 1320p

This meant sales of the drink grew nine times faster in the Midlands than nationally and the habit seems to have stuck, with one in four households there now drinking the brand. This will be music to the ears of management considering the value of the UK soft drinks market - excluding pubs and bars - fell 0.6 per cent in the year to 2 January 2016.

It seems this - as well as a 3.9 per cent rise in international sales - helped the group avoid a drop in revenue. But in spite of the almost non-existent rise in turnover, adjusted operating profit jumped nearly 9 per cent to £28m. Management said this rise was in part because of its decision to limit its "deep promotional activity", meaning margins also registered healthy growth.

Analysts at broker N+1 Singer expect adjusted pre-tax profit of £30.3m in the 2016 financial year, leading to EPS of 65.7p compared with £28m and 60.3p in 2015.

 

NICHOLS (NICL)
ORD PRICE:1,320pMARKET VALUE:£488m
TOUCH:1,303-1,350p12-MONTH HIGH:1,495pLOW: 1,046p
DIVIDEND YIELD:1.9%PE RATIO:22
NET ASSET VALUE:197p*NET CASH:£35m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20119918.136.315.3
201210820.541.417.3
201310618.838.319.6
201410917.938.422.4
201510928.060.325.6
% change+0+56+57+14

Ex-div: 31 Mar

Payment: 3 May

*Includes intangible assets of £19m, or 52p a share