In a note issued today (July 25) following the company’s publication of its half-year financial statement covering the six months to June 30, Sahil Shan, analyst at N+1 Singer, said: “Given the growing cash pile, management continue to explore corporate deals. In short, the Nichols growth story has on-going mileage we feel …
Shan headed his summary of performance by stating: “Looking forward, management is strategically on the front foot to drive forward the UK business and to continue to strengthen the international platform.”
Non-executive chairman John Nichols said: “In recent years our UK gross margins have been under pressure from a combination of increased promotional activity and raw material cost inflation.
‘Plan has been successful’
“In 2013 we planned to address this by reducing our promotional participation in the heavily discounted carbonate category and growing our market share in the still category. At the half year this plan has been successful, delivering increased gross margin and cash profit …”
Nichols predicted UK consumer spending would remain cautious for the remainder of 2013 and the soft drinks market would be characterised by low volume growth and significant promotional activity.
Nichols also declared plans to introduce new products and enter new international markets, at the same time as continuing to invest in core brands.
The company’s latest launch was Extreme Sports and Energy, a brand licensed from the Extreme Sports Company targeted at 18–24 year-old sports enthusiasts. The product first hit the market hit in June via cash and carry and wholesale customers, aimed at the impulse sector.
Growth in African markets
International sales were 2% ahead of the 2012 half-year for Nichols, driven by further growth in African markets.
Nichols reported flat group sales for the half year, compared to the same period last year. Group revenue fell slightly, from £55.4M to £55.2M. Pre-tax profit rose by 9%, from £8.3M to £9M, a result Shan described as “robust”.
“We will continue with our strategy of introducing further new products and entering new international markets whilst importantly continuing to invest in our existing core brands,” said Nichols.
In addition to Panda fizzy pop, Nichols’ brand portfolio includes Weight Watchers, Levi Roots, Vimto and Sunkist.