In line 2019 outcome highlights another year of solid progress and delivery
Nichols has issued a scheduled year-end trading update. In a tough soft drinks market it has once again delivered against market expectations, highlighting the strength of the diversified model. Briefly, growth was in evidence across all three division, with the core Vimto brand holding market share despite a very strong UK comp and International having a good year. This translated into c4% sales growth and 3% at the PBT level. So another year of solid delivery, further reinforcing management’s excellent track record. The outlook for 2020 remains unchanged from the reduced guidance given last month owing to the Middle East excise duty related headwind. We are prudent with our numbers and following the 2020 reset, the company is expected to return to growth in 2021. Overall, we remain positive, attracted by the cash generative nature of Nichols’s asset light business model and significant UK and International growth potential from market share gains. On a 12m view we expect the company to continue outperforming operationally and investors to focus on its superior fundamentals.
09 Jan 20
LIBERUM: Nichols PLC - Improved top-line thanks primarily to the Middle East
Nichols offered a bit more granularity this morning on the drivers of its top-line growth. The top-line growth came out to 3.6%, which is arguably at the low end of the c.4% guidance from 23 December 2019.
09 Jan 20
FY19 in line but Middle East excise duty headwind
Nichols’s trading update signals an in-line FY19 outcome driven by UK market share gains and good international progress. The main news today is the recent 50% excise tax on non-carbonated drinks in Saudi Arabia/UAE. This is a headwind going into FY20 which at this juncture is extremely difficult to quantify given c.80% of in-country sales of Vimto in the Middle East are made during the one month of Ramadan. Our analysis shows a potential c.£2.5-£4m PBT hit. Given the uncertainty we prudently factor in £4m and some UK caution, resulting in a 15% FY20 PBT downgrade (the range is 10- 15% given the unknown impact of the levy). The shares trade on a FY20 P/E of 26x and 17x EV/EBITDA vs a peer group average of 23x/17x. Whilst the short-term Middle East uncertainty is unhelpful, on a 12m view we expect the company to continue outperforming operationally and investors to focus on its superior fundamentals.
23 Dec 19
Positive CFO appointment news
Nichols has this morning confirmed the appointment of a replacement FD - David Rattigan, currently interim CFO of McBride, following 5 years as Group Financial controller. We feel this is a good solid appointment as David brings relevant FMCG and restructuring experience from both a branded and private label perspective, having also held senior management roles at United Biscuits and Sodexo. He will officially start on the 24th February 2020 with a smooth handover period over the following months given the current CFO, Tim Croston, is scheduled to step down from the Board by 30 June 2020. Overall, we view today’s CFO news as positive on various fronts and helps remove an area of uncertainty.
21 Oct 19
LIBERUM: Soft Drinks: 6 Initiations - Slaking the thirst for growth
The €160bn European non-alcoholic ready-to-drink (NARTD) soft drinks market is set to add an incremental €19bn by 2023. The industry is very dynamic and innovative and is driven by a variety of factors including: low- and no-calorie drinks, premiumisation, healthy hydration, channel shifts and rising per capita consumption.
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19 Sep 19
Top line momentum at Nichols appears robust, albeit with investment (for now at least) curtailing bottom line upgrades. We continue to view Nichols as a high-quality business, well positioned to take market share in the UK, with the addition of a long term emerging market structural growth stream. We also note the group’s balance sheet flexibility and an acquisition track record building in Out Of Home (OOH). However, with the stock revisiting valuation multiple highs and some uncertainties surrounding the Middle East (possible Saudi levy on drinks with added sugar/ Yemen conflict), we remain at HOLD. We continue to have a preference for Fevertree and C&C amongst our Beverages coverage
16 Aug 19
Strong interims reinforce the group’s attractions
Nichols has navigated a tricky H1 to report a pleasing set of interims with a strong 8.1% LFL showing and good international progress being the stand out features. Looking forward, whilst the UK market is expected to remain challenging, Nichols is geographically well diversified (>45% EBIT) and has good momentum in its Out of Home business to support future growth. We make no changes to current year forecasts and tweak outer year PBT by a modest -2% to primarily reflect a higher depreciation charge. We remain positive on growth, international diversification, M&A optionality and progressive DPS considerations and see fair value towards 1785p.
17 Jul 19
Good start to FY19
Nichols has issued a reassuring AGM trading update covering Q1-19. The UK has sustained the positive momentum of recent years and International has got off to a strong start, albeit vs soft comps. Whilst the UK consumer / grocery sector backdrop remains uncertain, we feel Nichols is well placed to build on the good start to the year as it enters the busier trading periods. We make no forecast changes at this juncture. Nichols is one of our key N+1S 2019 stock picks and to date the recommendation has served us well with the share price up 29% YTD. The stock trades on a FY19 P/E of 24.6x and 17.4x EV/EBITDA. Whilst in the near-term the valuation looks fair, we remain positive on a 2-3 year view on quality growth, DPS and balance sheet considerations. For reference our DCF valuation is c.2000p
01 May 19
Small Cap Feast
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Distribution Finance Capital Holdings plc — specialist lender which builds relationships with manufacturers and then provides working capital solutions up and down their supply chains to drive their growth is looking to join AIM. No raise, secondary offering of £19.8m at 90p, expected market cap of £95.98m. Expected 09 May 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019 NEX Exchange Arbuthnot Banking Group plc, primarily involved in banking and financial services including commercial banking, private banking, wealth planning and investment management, is looking to joining the NEX Exchange Growth Market. Expected 17 May 2019
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01 May 19
Solid FY18 finals and 3% PBT upgrade for FY20
Nichols’s FY18 finals demonstrate another excellent period of sales growth and the virtues of being geographically diversified. The UK had a stellar year while International matched lower guidance. Profitability came in line with expectations and there is good news on the dividend front, a bolt-on deal and contract win. We make no change to our FY19 PBT but upgrade FY20 by 3%. We view Nichols as a core holding and see fair value at c1700p.
27 Feb 19
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
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14 Jan 19
Strong H2 caps off another positive year and a forecast beat
Nichols’s YE trading update signals a beat against market expectations, market share gains and the virtues of geographical diversification. It has enjoyed a strong H2, led by the UK, resulting in overall sales growth of 7% vs our 5%. UK had an excellent year, significantly outperforming market growth and reflecting another period of successful strategic execution. International progress as expected was mixed with Yemen and Saudi shipment timing issues a drag. This was well flagged at the interims and thus not a surprise. What is reassuring is evidence of Africa returning to strong growth in H2. Overall, top-line strength influences us to upgrade our FY18 PBT by 2% but prudence dictates no change to outer year numbers at this stage. The shares trade on a FY19 P/E of 19.8x and 13.9x EV/EBITDA – a 6%/12% discount to close peers. We see fair value towards 1580p and see today’s positive update as supportive of our bull stance. Fundamentally, Nichols offers a combination of defensive UK growth, international diversification, M&A optionality and a progressive DPS. We expect the shares to re-rate in 2019 as the virtues of geographical diversification and good top-line momentum are better discounted.
09 Jan 19
Solid interims with a 3% PBT beat
Nichols interims have come in ahead of expectations and, as a sign of ongoing confidence, the DPS has been lifted by 11.9%. We are impressed by double digit UK sales growth, with an excellent 9% LFL from the core Vimto brand. International sales were broadly in line with guidance. Whilst we make no forecast changes, the risk remains on the upside. We see intrinsic value towards 1950p on DCF criteria and stay positive on BS strength/optionality, a progressive DPS and growth prospects.
19 Jul 18
Be Heard (BHRD LN) H1 shows strong revenue growth, but profit shortfall | dotdigital Group (DOTD LN) Another year of strong growth & cash generation | EKF Diagnostics (EKF LN) Manufacturing agreement with Oragenics Inc | Goals Soccer Centres (GOAL LN) Profit warning | LiDCO Group (LID LN) UK distribution deal with Maicuff Technology | Nichols (NICL LN) Solid interims with a 3% PBT beat | Speedy Hire (SDY LN) In line Q1 update, with ROCE continuing to move forwards |
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19 Jul 18
Key takeaways from the Consumer reporting season
With a busy reporting season behind us we use this note to take stock. Stepping back we pull out the key themes which emerged across the sub-sectors we actively follow in the consumer space. On balance there was more cause for optimism. This is supportive of our top-down view that there is scope for a better H2 for consumer related stocks as cost headwinds ease and pressure on disposable income moderates. We also take a close look at 7 stocks we actively research and which reported over March and April. For each we use charts to depict the key takeaways from an investment case perspective.
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30 Apr 18
Finals highlight another year of excellent top-line execution
Nichols FY17 results highlight another year of excellent top-line progress, with doubledigit growth in the UK and International. This is impressive given various challenges in the year. Profitability is in line with expectations but there is a better than anticipated uplift in the DPS – a good signal. Whilst there is no change to the Yemen situation, outlook commentary around the UK and Africa is positive. We keep our forecasts largely unchanged and see intrinsic value towards 1950p on DCF criteria. We remain positive on BS, a progressive DPS and ongoing growth prospects.
01 Mar 18
accesso Technology (ACSO LN) First healthcare partnership | Clinigen Group (CLIN LN) Downgrades irritating, mask more important progress | IDOX (IDOX LN) First steps to rebuilding confidence | IndigoVision Group (IND LN) Period of stabilisation targeted | Maistro (MAIS LN) Much improved H2’17 performance | Nichols (NICL LN) Finals highlight another year of excellent top-line execution | Redde (REDD LN) Growth from new relationship, 3-8% EPS upgrades
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01 Mar 18
N+1 Singer - Nichols - 2017 – A positive year tempered by recent Yemen developments
Nichols’s 2017 trading update highlights a year of strong revenue growth in the UK and Africa. The resulting market share gains reflect positively on the management. Recent political developments in Yemen, which are totally outside of management’s control, however, have had an adverse affect on Middle East sales. Consequently the company is guiding to a flat 2017 PBT outcome and given regional uncertainty going into next year, modest profit growth in 2018. As a result we lower our 3 year PBT forecasts by 6%-12%. Whilst it is disappointing to be downgrading, we strongly feel this should not overshadow Nichols’s fundamental attractions around geographical diversity, a progressive DPS policy and a strong balance sheet.
19 Dec 17
N+1 Singer - Morning Song 19-12-2017
Curtis Banks Group (CBP LN) IT platform selected, positive development – reiterate our BUY | dotdigital Group (DOTD LN) Positive AGM statement | ECO Animal Health Group (EAH LN) Marketing authorisation for Aivlosin® in the Philippines | Microsaic Systems (MSYS LN) Appointment of Non-Executive Chairman | Nichols (NICL LN) 2017 – A positive year tempered by recent Yemen developments | River and Mercantile Group (RIV LN) Research costs to be absorbed under MiFID2, not a material impact | Springfield Properties (SPR LN) Strong progress in H1, in line with expectations
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19 Dec 17
Small Cap Breakfast
Erris Resources PLC—a mineral exploration and development company currently focused on two geographic areas. Offer TBC, expected 21 December 2017 CIP Merchant Capital—Closed ended investment Company. Sector focus oil & gas, healthcare, pharma, and real estate. Raising £55m. Due 21 Dec Panthera Resources— The Company was established to act as a holding company for Indo Gold Limited, an unlisted Australian registered company. The Company aims to explore and develop gold assets in India and West Africa. No raise. Expected 21 Dec Sumo Group—one of the UK's largest independent developers of AAA-rated video games providing both turnkey and codevelopment solutions, including initial concept and pre-production. Raising £38.45m and vendor sale of £39,7m. Mkt cap £145m. Bushveld Minerals—RTO of Bushveld Vametco and therefore 78.8% of Strategic Minerals Corporation, the intermediate holding company that owns a 75 per cent. interest in the Vametco Vanadium Mine. Eqtec—Company with access to a proprietary advanced gasification technology used in industrial size power plants to convert waste into synthetic gas to generate electricity. Raising £1.6m. Mkt Cap £8.7m. Due 21 Dec. Volex VLX.L—The global provider of cable assemblies is proposing to move from the main market to AIM on 19 January. £71m market cap. FYMar18E rev £241.5m and £7.19m PBT OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m.
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19 Dec 17
N+1 Singer - Nichols - Strong interims and an accretive deal
Nichols continues to justify its premium rating, posting a strong set of interims with LFL sales growth of 12% and EPS of 7%. The core Vimto brand has continued to comfortably outperform the UK soft drinks market and International momentum remains impressive. Today’s interims are also accompanied by a small bolt-on deal of a distributor which triggers FY18 and FY19 EPS upgrades of 3%/4% respectively. The shares trade on a premium FY18 P/E of 25x which we feel is deserved given the internationally diversified nature of income and excellent track record of positive forecast momentum. Given favourable ongoing growth prospects and optionality afforded by a growing net-cash position, we feel Nichols should be a core mid-cap holding. We stay positive and argue for ST fair value towards 2100p – 27.5x FY18 EPS.
20 Jul 17
Strong H1 Performance All Round
Nichols (NICL LN, BUY, T/P 2300p) released interim 2017 results broadly in line with both our own and market expectations as group revenue and EPS advanced by 12.4% and 7.4% respectively. Interim dividend is due to increase by 12.2%. Whilst market conditions are envisaged to “remain challenging” the company expects its full year earnings to be in line with expectations.
20 Jul 17
Trading Update due Tuesday
Carr’s Group (CARR LN, BUY, T/P 185p) should release a trading statement on Tuesday 18th July 2017. We expect the engineering business to be more “as usual” than earlier in the year when contract delays prompted a downgrade to forecast. Agriculture should be more positive. In our view a number of longer term growth attractions remain in place, notably for international feedblocks. Our 185p price target is equivalent to a 19.8x calendar 2017 P/E. BUY.
Nichols Carr's Group
17 Jul 17
Shares should feel good too
Nichols (NICL LN, BUY, T/P 2300p) is due to release interim 2017 results on 20th July. Yet while too early to benefit from any unusually dry summer weather, which may be in prospect, the results will include the impact of the company’s Middle East performance during Ramadan, which this year ran from 26th May to 24th June. We estimate that around one third of the company’s profits are generated in the Middle East.
12 Jun 17
N+1 Singer - Nichols - Positive AGM tenor supportive of premium rating
A very pleasing AGM update from Nichols this morning. By all accounts it’s had a strong start to FY17, with UK metrics in Q1 illustrating further outperformance vs the soft-drinks sector and international showing strong trading momentum. Admittedly, Q1 is the quietest quarter but it’s reassuring to see the company get off to a good start. The update flags various headwinds in 2017, but these have been well trailed and if anything recent sterling strength is a positive from an input cost perspective. Given reference to trading being in line with management expectations and the fact that the all important summer and Q4 trading season is still ahead, we make no forecast changes at this juncture. The share price has rallied 12% since the 2nd March finals and is up 14% YTD. This leaves the stock trading on a FY17/FY18 P/E of 27x/25x and 19x/18x EV/EBITDA respectively. The tenor of toady’s AGM reinforces the attractions of the stock and whilst the rating looks full in the short-term, we see scope for further share price upside on a 12m view.
26 Apr 17
Feeling good about growth prospects
In our view Nichols (NICL LN, BUY, T/P 2300p) remains well positioned to grow. Its core Vimto business’s strong performances in both the UK and Middle East enjoy significant intra-regional geographic growth opportunities as well as generating enough free cash flow to fund NPD and selective M&A. Moreover, we argue that the company’s very virtuous outsourcing business model merits a premium valuation. We raise our price target from 1760p to 2300p. BUY.
13 Apr 17
The apparent UK budget realisation that next year’s sugar tax may yield less government revenue than originally envisaged is pretty much in line with expectations. Moreover, it vindicates a recent statement made by AG Barr (BAG LN, HOLD, T/P 600p) and similarly comments made Nichols (NICL LN, BUY, T/P1760p) in the aftermath of preliminary results.
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09 Mar 17
N+1 Singer - Nichols - Strength & tenor of FY16 results supportive of premium rating
FY16 results make positive reading reflecting the strength of a diversified model. Management has once again successfully executed strategic and growth initiatives to deliver strong sales and double-digit EPS growth. The 14.5% DPS uplift is a positive signal about prospects. In FY17 NICL will face higher cost pressures but has mitigating levers and good trading momentum to create further value. We keep our FY17/18 PBT forecasts unchanged but lift EPS by 1.4%/2.5% and see fair value at 1800p.
02 Mar 17
Vigourous all-round performance - EPS beats
Nichols’ (NICL LN, BUY, T/P1760p) preliminary 2017 results included beats at both pre-tax and EPS level. The company reported £30.4m of pre-tax profits – similar both to our own £29.8m estimate and consensus. But adjusted diluted EPS at 66.1p (+9.7%) was comfortably ahead of the 63.8p that we envisaged as well as being above the 65.5p consensus (source: Bloomberg). The company’s tax rate dropped from 20.7% to 19.8%.
02 Mar 17
Salient play in a healthy industry
PepsiCo’s (PEP US, N/R) full year figures reconfirmed growth expectations for the US FMCG giant in 2017. PepsiCo – which generates one third of its revenue from North American beverages – looks for 3% organic sales growth in 2017. Our own view about UK soft drinks remains positive. Flexibility around sugar, ongoing innovation, potential price support from a sugar tax and further M&A are all consistent with the industry maintaining sales growth and delivering positive share price performances.
16 Feb 17
2016 profit and earnings in line
Nichols (NICL LN, BUY, T/P 1760p) released a trading update today in advance of full year results due on 2 nd March 2017. The company announced that revenue increased by 7.3% to £117.3m, which compared with £118m Bloomberg consensus. Full year profit and earnings are expected to be both ahead of the prior year and in line with expectations
10 Jan 17
Small Cap Breakfast
Sareum Holdings * (SAR.L) | ABCAM (ABC.L) | Wey Education (WEY.L) | H&T Group (HAT.L) | Everyman Media Group (EMAN.L) | Impax Asset Management (IPX.L) | Nichols (NICL.L) | Focusrite (TUNE.L) | Majestic Wines (WINE.L) | Science in Sport (SIS.L)
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10 Jan 17
Trading statements due Tuesday 10th January
Nichols’ (NICL LN, BUY, T/P 1760p) 2017 trading statement should reflect a relatively flat UK soft drinks market while international continues to grow. UK market data suggest negative carbonates volumes with positive, albeit small, pricing. Stills continue to outperform carbonates in terms of overall revenue.
Nichols Carr's Group
06 Jan 17
Vimto and beyond
Nichols benefits from a strong core brand in Vimto, which is capable of both domestic and international growth. This core should be supplemented by Vimto Out of Home as well as further M&A. We initiate coverage of Nichols - one of the four major UK listed soft drinks manufacturers - with a BUY recommendation and a 1760p price target.
15 Nov 16
Reassuring AGM update with trading cited as in line
An in line AGM trading update from Nichols this morning which is good news. We should, however, stress that this covers the quietest quarter of the year with all the anticipated growth for FY16 dependent on good momentum coming from last years bolt-on deals, a reasonable summer and further international progress. Owing to the diversified nature of the portfolio and a significant international business, the risk around the proposed UK sugar levy is expected to be minimal we feel. To this end, we note the shares have re-rated by 1 P/E point to 20x FY16 since the March finals. We make no forecast changes at this early stage of the year and see ST fair value at 1430p.
27 Apr 16
Diversified model offers ongoing growth opportunities
Nichols has navigated a challenging FY15 to deliver double-digit EPS growth, strong margin progress and a 14% DPS uplift. We expect its diversified model, ongoing NPD and focus on value over volume to help support solid growth in FY16. Acquiring the remaining 51% of Noisy results in 1-2% EPS upgrades. We see ST fair value at 1400p.
02 Mar 16
Painting the world purple
Nichols has made good progress in diversifying UK sales so as to become less reliant on the UK grocery sector. At the same time the focus on value over volume and seeking to augment market share in the Midlands has strengthened the investment case. We estimate sugar tax risk to EPS a modest 3%. These features coupled with an attractive international growth angle should continue to support solid growth going forward and underpin the premium rating. A burgeoning net-cash pile offers additional growth optionality. We stay positive.
26 Feb 16
FY15 update reinforces key strengths and supports modest upgrades
Nichols’s FY15 trading update builds further confidence that international diversification and a focus on value over volume can continue to deliver good sustainable earnings growth. The International segment made further y-o-y progress, especially over H2. The UK outperformed in a challenging market environment as well as driving solid growth in the higher value product categories. Net, better sales mix drives useful c.1% EPS upgrades over our 3 year forecast period, implying that our FY15 EPS is now 6% higher than 12m ago. Looking forward into FY16, we now estimate a solid 8.5% EPS growth, driven by the recent bolt-on acquisitions, NPD initiatives earmarked for Vimto and ongoing international progress. In a stagnant soft-drinks market this growth is highly commendable. The shares on a premium FY16 P/E of 22x adequately reflect the groups ongoing attractions.
08 Jan 16
Strong H1 EPS growth and an accretive acquisition
Nichols has navigated a tricky first half to once again deliver double-digit EPS and DPS growth. There is also further positive corporate news with an earnings and strategically accretive acquisition of the Feel Good brand (premium adult drinks). We push through 3 year EPS upgrades of 2.5%-5.5% and advocate fair value at 1420p.
23 Jul 15