'Bloody good' results for acquisition-hungry Nichols

By Anne Bruce

- Last updated on GMT

Related tags Uk soft drinks Soft drink United kingdom

In March Nichols inked a licensing deal with Levi Roots (pictured), whose Reggae Reggae brand is worth a cool £40-50m.
In March Nichols inked a licensing deal with Levi Roots (pictured), whose Reggae Reggae brand is worth a cool £40-50m.
Soft drink firm Nichols is still on the acquisitions trail after revealing what one analyst hailed as "bloody good" interim results for the half year to June 30.

The company – whose brands include Vimto, Sunkist, Panda and Levi Roots – reported sales up 14.4% to £50.5m and pre-tax profits up 20.4% to £7.2m.

Volume sales in Nichols’ UK soft drinks business were up 11% on last year, delivering a 13% value increase to £28.3m, against a UK soft drinks market which grew by only 1% in volume terms and 6% in value (AC Nielsen 26 weeks to July 9 2011).

Brendan Hynes, group ceo told FoodManufacture.co.uk that the company was actively seeking an acquisition, but “nothing had cleared the hurdles yet.”​ He said: “By the end of the year we should have millions ​[around £18m] in the bank, and it’s not earning much money there.”

Hynes said Nichols was interested in brands active in growth sectors, and not at the commodity end.

A brand such as Vimto spanning the three categories that Nichols operates in – concentrates, carbonates and stills – would be ideal, he said.

Levi Roots success

Hynes said the company was pleased with the licensing deal to launch a Reggae Reggae range of branded Caribbean soft drinks with entrepreneur Levi Roots, three months in.

In a year or so, if the drinks continued to perform in the UK, he said that Nicols would look at rolling-out the concept to overseas markets.

Phil Carroll of Shore Capital said of the interim statement: “These are bloody good results, especially against the backdrop of more subdued recent updates from Britvic and AG Barr.”

Carroll said that Nichols “very flexible model”​, with production outsourced, an “extremely savvy management team”​ and overseas sales were the cornerstones of its success.

“With outsourcing they are not having to ‘feed the beast’ at the factory as it were,”​ he added.

International sales account for 20% of its business, but in terms of volume would be equal to the UK business as a whole, Carroll said.

Strong management team

He also expressed his “very high opinion”​ of the management team, whose ability was apparent in the April Levi Roots’ soft drink launch.

Carroll said: “Take the recent Levi Roots deal, there is a very nice risk reward ratio there, there was very little capital outlay, and it gets them onto the world foods aisle. Compare that to the £60m Barr’s acquisition of Rubicon, which was obviously a lot more expensive​.”

Nichols non-executive chairman John Nichols said: “Our strong performance was achieved against the well-documented economic challenges affecting the consumer, compounded by almost unprecedented raw material cost inflation in the food and drinks sector.”

Despite predicting continued economic uncertainty and cost inflation into 2012, Nichols said the firm expected full-year profits significantly ahead of last year.

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