Nicola Mallard, Investec analyst, said: “It has not been the kindest of climates for soft drink operators. But Nichols continued to deliver good growth, reporting a 15% uplift in interim PBT[profit before tax] to £8.3M.
“The growth was delivered by both the UK business (although the group admitted this was proving more challenging) and the group’s international franchise base, and sets the group up for a solid performance in the financial year 2012.”
Levi Roots range
The UK performance was underpinned by “solid” performance from Vimto, which reported growth of about 3.5%, and the benefits of new listings for Weight Watchers drinks and its Levi Roots range.
Launched early in the year, the Weight Watchers range generated sales of £1.1M, which Mallard said was “a reasonable start”.
The latest results also included the a full six-month contribution from the Levi Roots range, which is now generating annualised revenues of about £3M for the group.
But Mallard predicted slower progress in the second half of the year. She said earnings per share should still show close to double-digit growth.
Increased promotion
“Setting aside the weather for now, the economic climate is unlikely to change, so the incidences of downtrading to the cheaper products and increased promotion will remain,” said Mallard. “The poor nature of the first half will also hang over the industry, with the trade likely to be sitting on higher stocks.”
Potential risks to Nichols business included: a poorer than expected volume performance and start up problems with its new bottling arrangements in Africa and the Middle East.
Investec’s share recommendation remains 'Hold'.
At the end of July, Nichols reported a 14% increase in overseas sales for the half year to June 30, with revenue up by 10% and profits up by 14%.
