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Nichols defies industry gloom

The softs drink group enjoyed a solid 2016, boosted by rising sales of higher margin beverages
March 6, 2017

Supermarket price wars and the impending sugar tax don't present an ideal environment for Vimto maker Nichols (NICL). Fortunately, the soft drinks company appears to have a decent handle on the situation, thanks to shrewd acquisitions, international growth and rising sales of higher-margin beverages.

IC TIP: Hold at 1737p

At 7 per cent, Nichols' UK revenue growth easily surpassed the 1 per cent posted by the rest of the market. Leading the way was the resilient Vimto brand and new contributions from Noisy, acquired last January. The latter's frozen slush and shake drinks provided a welcome boost to Nichols' increasingly important out-of-home division. Together with 14 per cent revenue growth from non-fizzy Vimto, this helped to trigger a 9 per cent rise in group operating profit to £30.3m.

The bottom line was also boosted by surging demand for high-margin concentrate drinks in Africa. But business in the Middle East underwhelmed, due to the timing of shipments ahead of the annual Ramadan fasting period. Management anticipates cost and currency pressures in 2017, but is confident that these challenges can be mitigated by cost control and price recovery.

N+1 Singer expects adjusted pre-tax profit of £32.3m in 2017, leading to EPS of 71p (up from £30.4m and 66.1p in 2016).

NICHOLS (NICL)
ORD PRICE:1,737pMARKET VALUE:£641m
TOUCH:1,719-1,739p12-MONTH HIGH:1,765pLOW: 1,165p
DIVIDEND YIELD:1.7%PE RATIO:25
NET ASSET VALUE:233p*NET CASH:£40m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201210820.541.417.3
201310618.838.319.6
201410917.938.422.4
201510928.060.325.6
201611731.569.129.3
% change+7+12+15+14

Ex-div: 6 Apr

Payment: 5 May

*Includes intangible assets of £29m, or 79p a share