Nichols (NICL) yesterday reported its H123 results to 30 June. Revenue was +6.6%, with International the strongest performer at +24.6% (Middle East +17.5%, Africa +26.1%, RoW +29.8%). UK packaged growth was more modest at +4.5% (despite mid-teens price increases) as protecting profits took priority over maintaining volumes. Out of Home revenue fell by 3.5% as NICL withdrew from unprofitable segments and customers as it targets a 10-12% operating margin from this division (vs. 9% in H123, excluding reformulation costs). Gross margin was down 170bps and operating margin down 60bps as NICL passed on COGS inflation in absolute terms rather than attempting to maintain percentage margins, given the competitive nature of the category. Adjusted PBT grew by £1.0m (or 9%), helped by interest income rising by £0.7m due to higher rates on its substantial (£56m) cash balance. EPS growth was lower at 3.6% as the tax rate increased from 19.5% to 23.8% due to the higher corporation tax rate. DPS was up 1.6% as cover was maintained at 2x. NICL’s expectations for FY23 remain unchanged, with the company citing consensus PBT of £25.2m. NICL expects its input costs to be broadly flat in H2 versus H1 and, having successfully passed on cost inflation thus far, is not looking for further price increases. Indeed, it has recently increased its promotional activity, having dialled this back during the period of very high cost-inflation, and has seen a positive volume reaction. NICL plans to switch to a new ERP system in late 2024, from what sounds like a very old existing system, which should deliver significant efficiency benefits. NICL remains on the lookout for acquisition opportunities, targeting relatively early-stage UK brands to complement its existing portfolio. We have upgraded our FY23E/FY24E PBT forecasts by 5%/3% respectively.