Shares in Nichols (NICL:AIM) fizzed up 8% to £12.15 on Friday after the soft drinks group served up a profit guidance upgrade following a ‘strong’ year-to-date performance, with the iconic Vimto brand delivering plate-pleasing performances across all of its markets.
Adjusted pre-tax profit for 2021 is now expected to be in the £21 million-to-£22 million range, comfortably ahead of the £19.1 million called for by consensus, after sales bubbled up by a forecast-beating 17% to £107 million in the nine months to September.
THIRST FOR VIMTO
Popular in the UK and around the world, especially in the Middle East and Africa, Vimto has ‘continued to deliver a strong performance across all of its markets’, insisted Newton-le-willows-headquartered Nichols.
In the UK, Vimto’s brand value has increased by 4.5% year-to-date, according to research firm Nielsen. And in Africa, the Middle East, Europe and the US, the soft drink made with a secret recipe continued to see progress year-on-year, with international revenues up 36% versus the prior year.
Despite the ongoing challenges posed by Covid, cash and cash equivalents at the end of the period amounted to a bumper £55.6 million.
COST PRESSURES WEIGH
While Nichols expects its sales momentum to continue into 2022, the company warned the outlook for 2022 is ‘adversely impacted’ by a cocktail of inflationary pressures including logistics, labour and materials.
Accordingly, Nichols prudently left its profit expectations for 2022 unchanged, with consensus looking for £25.2 million.
Following the positive update, Numis is sticking with its ‘hold’ rating and £13.50 price target, noting that Nichols’ ‘near-term multiples are above typical levels’.
Nevertheless, the broker believes it is ‘worth looking through to a recovered earnings number in full year 2023 reflecting the strength and position of its Vimto brand in the UK and international markets, net cash position and good management team.’
