Shares in Nichols (LON:NICL) rose after the Vimto-owner announced the £64 million acquisition of functional drinks brand VITHIT.
The earnings-enhancing deal boosts Nichols’ position in the fast-growing health and wellness drinks segment. In addition, and to quote broker Singer Capital Markets, ‘a single brand story just became two’.
A bit about VITHIT
VITHIT was founded by Gary Lavin in Dublin in 2001. Over the past 25 years, the company has built leading positions in functional drinks. The company’s low-calorie, low-sugar beverages are fortified with vitamins and functional ingredients.
Today, VITHIT ranks as the number one brand in Ireland. In addition, it is the UK’s leading vitamin drinks brand ahead of nearest rival Get More Vits. Besides the UK and Ireland, VITHIT is sold in 13 further international markets, with Australia being the biggest.
For FY25, VITHIT generated adjusted pre-tax profits of €4.1 million on revenue of €26.5 million. The brand has grown its sales by more than 90% since FY21.
Perfect fit for Nichols
Nichols’ CEO Andrew Milne said: ‘We are delighted to announce the acquisition of VITHIT – an outstanding brand with a differentiated product operating in a rapidly growing soft drinks category.’
He continued: ‘With its established market position, alignment with our asset-light operating model, proven profitability and significant headroom for growth, VITHIT perfectly fits the acquisition profile we have been looking for’. Furthermore, VITHIT is ‘fully aligned with our long-term growth strategy’ insisted Milne.
Sahill Shan of Singer Capital Markets explained that Nichols had signposted M&A at its November 2024 Capital Markets Day.
‘Less than two years on, it’s delivered’, said Shan. ‘VITHIT is asset-light, profitable, health-focused, and Nichols has the distribution to drive it. It gets the group to its £225 million medium-term revenue target a year early, and gives UK packaged growth real impetus alongside already strong international momentum.’
We like the look of the VITHIT acquisition. The deal is consistent with Nichols’ strategic plan to selectively invest in differentiated drinks brands that strengthen its UK packaged business and provide exposure to attractive growth categories.
Crucially, Bichols didn’t acquire VITHIT for its potential alone. It is already an established category leader with sufficient scale to move the needle from day one. As a result, Sharesify sees scope for long-term growth as Nichols helps with wider distribution and overseas expansion.
Nichols funded the acquisition through the cash on its balance sheet. And its strong cash generation means these bumper cash reserves will rebuild over time.
The AIM-listed company recently delivered robust H1 results. These revealed an acceleration in revenue growth, another excellent performance from Vimto in Africa and a 35% uplift in the dividend.
Read the press release here: https://www.nicholsplc.co.uk/investors/
Disclaimer: The author James Crux has a personal interest in Nichols.
