Vimto and Panda Pops drink maker Nichols (LSE: NICL) inevitably stirs nostalgia in adults of a certain age. It brings all sorts of memories bubbling up in my case and I am glad to see the legend lives on, with the company publishing rising sales and profits today.
Soft drinks, hard profits
The £702m soft drinks maker’s interim results for the half year ended 30 June 2017 showed revenues up 12.4% to £63.5m over the six months to 30 June, with pre-tax profit rising 6.8% to £12.7m. Domestic revenue rose 6.7% to £47.5m with flagship brand Vimto – yay! – posting a sales increase of 10% within the UK.
Nichols sells still and carbonate beverages in more than 85 countries, with the iconic Vimto brand particularly popular in the Middle East and Africa, while other brands in its portfolio include Feel Good, Starslush, Levi Roots and Sunkist (more nostalgia there). International revenue totalled £16m, up 33.5% on last year’s £12m, with 30.9% growth in Africa and 19.8% in the Middle East.
Vim and vigour
Non-executive chairman John Nichols hailed another strong performance in the first half of the year. “Our sales momentum, which continues to outperform the UK market, coupled with successful management of input costs has delivered solid profit growth.” He also warned that market conditions will remain challenging during the second half, although the firm’s clear strategy, strong brands and diversified business model should deliver full-year results in line with expectations.
Nichols has a market cap of £695m and its share price has soared 30% in the last 12 months, 175% over five years. It is flat after today’s results, which contained no surprises either way, but this all points to a steady, growing business. Perhaps the biggest concern is that the weaker pound has pushed up input costs, but is Brexit so bad that people cannot afford fizzy drinks in this country?
That said, five years of double-digit earnings per share (EPS) growth are set to shrink to 7% in 2017, and 5% thereafter. This is a worry, with the stock trading at a toppy forecast valuation of 26.4 times earnings. Forecast revenue growth is relatively slow, with 2016’s £117.35m expected to hit £123.44m this year then £127.6m in 2017. Nichols may not be quite so fizzy in future.
Clothing retailer Brown (N) Group (LSE: BWNG) is also getting into its stride with its share price up 63% over the past 12 months. The FTSE 250-listed firm has spiked since June’s Q1 results showed group revenue up 5.6% thanks to brands Simply Be, where sales rose 20.5%, and JD Williams, up 12.7%.
Product revenue rose 10.2%, driven by a strong performance from womenswear. It has also put in a doughty online performance, where revenues grew 16%. Chief executive Angela Spindler, who is focusing on driving financial returns across the business, is shuttering five lossmaking stores due to weak footfall.
This £850m company needs some tough love, given that EPS have fallen for five successive years, with a sixth pencilled in for 2018, another drop of 5%. There is hope on that front with a forecast 5% EPS rise in 2019, when the yield should hit 4.7%. Its current valuation of 12.9 times earnings adds to the feelgood factor.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes