City Snapshot: Vimto maker Nichols returns to sales and profits growth as Covid restrictions end

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Revenues and profits have returned to strong growth at soft drinks supplier Nichols thanks to the easing of lockdown restrictions and continued demand for the Vimto brand.

Nichols suffered a dramatic fall in its top and bottom lines during the Covid crisis in 2020 as the closure of the hospitality industry and less consumption of drinks out of home put pressure on the group.

However, this morning, Nichols revealed a 13.8% jump in revenues to £67.4m in the six months to 30 June, with a particularly strong recovery in the strong quarter as non-essential retailers and pubs, cafes and restaurants reopened.

UK sales rose 5.5% to £48.4m, driven by a strong performance of the Vimto brand in supermarkets, with the business facing tough comparatives from a year ago when shoppers were stockpiling groceries. Nichols said Vimto outpeformed the market in the dilutes category.

The out-of-home division was broadly flat year-on-year thanks to growth of 843.7% in the second quarter as society reopened.

Sales overseas jumped 42.3% to £19m, with double-digit growth in all markets as Vimto volumes performed “resiliently” through Ramadan despite the ongoing pandemic and restrictions in the Middle East. Revenues in Africa improved 23% to £10.2m and the rest of the world (largely Europe and the US) grew by 49% to £3.7m.

EBITDA bounced back 20.4% to £11.2m as a result of the improved performance, with adjusted operating profits up 33% to £9m and adjusted pre-tax profits up 32% to £8.9m.

Non-executive chairman John Nichols said: “Our first and most important objective through the Covid-19 pandemic has been the continued safety and wellbeing of our employees and customers. Throughout these challenging times, our colleagues have consistently demonstrated their commitment to our business and our customers, and I would again like to wholeheartedly thank everyone for their support.

“The continued strong performance of the Vimto brand, the group’s robust balance sheet and our diversified business model has ensured a resilient financial performance in the period with growth across each of our reporting segments.

“The UK government’s planned roadmap out of lockdown continues and although at a more cautious pace than originally planned, the group’s positive start to the year means that we remain confident that it will achieve the board’s expectations for the year. Longer term, the Board is currently assessing the impact of inflationary pressures affecting logistics, labour, plastics and costs associated with increasing environmental legislation.”

Nichols share price remained unchanged at 1,440p as markets opened.

Morning update

Bakkavor has seen strong sales momentum as lockdown restrictions ended thanks to shoppers returning to more frequent visits to supermarkets and c-stores and eating on the go more.

In a trading update for the 13 weeks to 26 June, the prepared food manufacturer reported group revenues up 13% compared to a year ago and 16.1% higher on a like-for-like basis. Bakkavor also said the figures were 0.7% and 1.8% igher, respectively, than pre-pandemic levels.

First quarter sales in the UK continued to be hampered by restrictions, but shopping habits started to normalise after March as the sales of ready meals, pizza and desserts got back to 2019 levels.

Salads delivered a strong year-on-year performance driven by recovery in food-to-go. However, this remained behind 2019 levels as a result of the continuation of government guidance to work from home, as well as mixed weather in the quarter.

UK like-for-like sales increased 12% in the quarter compared to 2020, and were down only 1.4% compared to 2019.

In the US, Bakkavor reported continued strong sales momentum through a combination of restrictions easing and growth with customers in both traditional grocery retail and online channels. Like-for-like sales increased 48.7% in the quarter compared to 2020, when the business was most impacted by the pandemic, and 50.3% ahead of 2019.

In China, there continued to be significant like-for-like sales growth in the quarter of 40.8%, as volumes return and the business builds back to pre-Covid levels, leaving sales down 5.5% compared to 2019.

CEO Agust Gudmundsson said: “We are pleased to see improving trends across all of our businesses as lockdown measures have eased, with group sales for the quarter ahead of 2019.

“We are also encouraged by the return to pre-pandemic levels of shopping visit frequency, a key driver for our fresh prepared food offering. Looking ahead, industry wide cost pressures and labour challenges are expected to persist and we will continue to work hard across the group to attract, recruit and retain talent, and with our customers, to mitigate the impact. Overall trading remains in line with management expectations.”

Shares in the group remained flat this morning at 135.8p.

The FTSE 100 continued its recovery this morning, climbing 1.4% to 6,977.69pts.

Food and drink stocks also started today on the front foot, bouncing back from Monday’s sell-off, with Compass Group up 4.9%, WH Smith up 3.8%, Associated British Foods up 3.7%, Marks & Spencer up 3.5% and SSP Group up 3.3%.

Yesterday in the City

The FTSE 100 made a slight recovery yesterday after Monday’s rout, with the index finishing back up 0.5% to 6,881.13pts.

Morrisons fell 0.3% to 261.1p as prospects of a bidding war diminished after global asset management firm Apollo confirmed it would not be making its own offer but rather hoped to joined the Fortress consortium. Shares are now closer to the 254p offer price after reaching highs of 267.5p earlier this month.

Fevertree Drinks suffered heavy falls after it reported a significant hit to its margins caused by the global logistics problems caused by a shortage of HGV drivers. The stock plunged 7.2% to 2,273p.

Conversely, Irn-Bru maker AG Barr fizzed 3.2% higher to 544p as it upgraded its full-year expectations on the back of relaxed Covid restrictions.

Virgin Wines bounced back from heavy losses on Monday to rise 5.6% to 208.5p after it reported a positive end to its financial year and continued demand from subscribers.

Other risers yesterday included Vimto owner Nichols, climbing 3.8% to 1,440p ahead of this morning’s results.

Parsely Box slid another 7.7% to 131p on top on a dramatic 16% fall on Monday as investors continued to remain unconvinced of the DTC business’ long term potential. The stock is now 35% lower than the 200p IPO price from March.

Other heavy fallers included Just Eat Takeaway and McBride, down 4.8% to 5,743p and 4.5% to 85p respectively.