Nichols interim profit and sales rise as Vimto outperforms the market

In the half year to 30 June, pre-tax profit was up 2.7% to £13.1m on revenue of £65m, up 2.3% on the same period a year ago. Earnings per share rose to 28.81p from 27.67p and the group declared an interim dividend of 11.3p, up 11.9% on the same period last year.

Sales in the UK jumped 12.3% to £53.8m, with the Vimto brand continuing to "significantly" outperform the market. Sales of Vimto were up 9% year-to-date compared to a 3.7% increase in the total UK soft drinks market.

In addition, the Out of Home business grew strongly, with revenue up 13.6% thanks to dispense and frozen product sales.

Total international sales, however, were down £4.8m on the same period a year ago at £11.2m, but in line with Nichols' expectations, due to expected lower sales in the Middle Yeast. This is due to the ongoing conflict in Yemen and the timing of shipments to Saudi Arabia.

Nichols said it expects to maintain the positive UK sales performance in the second half thanks to its new Vimto marketing campaign. Full-year earnings are forecast to be in line with expectations overall and the company said it sees a stronger second-half in its international business.

Non-executive chairman John Nichols said: "Nichols has delivered a solid performance in the first half of 2018 with growth in revenue, profit before tax and earnings per share. The board is pleased to announce an 11.9% increase in the dividend reflecting the performance as well as its confidence in the group's outlook.

"The performance during the first half is testament to the benefits of Nichols' diversified business model. The strong sales performance in the UK was driven by the strength of the Vimto brand, which continues to outperform the wider market, and we expect this momentum to continue following the launch of an exciting new marketing campaign in May.

"We have been managing the widely reported market challenges in the Middle East and as a result, the board is confident of delivering full year results in line with expectations."

Shore Capital analyst Phil Carroll upgraded its stance on Nichols to 'hold' from 'sell' and said the results were "solid".

"Overall, whilst the International division performance is subdued this has been more than offset by strong UK performance where the balance of the division seems to be improving with a strong performance from Out of Home alongside the continued momentum in the Vimto brand.

"We leave our full year forecasts unchanged at this stage. We are looking for FY2018F profit before tax of £31.6m, growth of 3.6% year-on-year, which equates to earnings per share of 69.4p, growth of 2.5%. This puts the shares on a valuation of 21.6x price-to-earnings and an EV/EBITDA ratio of 15.5x with a dividend yield of 2.5%. We believe the company is demonstrating its resilience and following a de-rating we now upgrade our sell recommendation to hold."

At 1040 BST, the shares were down 0.9% to 1,473.63p.