I never came across TCFF on TMF - looks like I missed out. But the Boring Investment Green Room sounds like a great idea and, prompted by the trading update it issued today, I'd like to highlight one of the companies in my portfolio as possibly of interest.NICHOLS PLChttp://www.nicholsplc.co.uk
AIM listed manufacturer and distributor of soft drinks, whose primary brands are Vimto, Sunkist and Levi Roots.
Figures from six months to June 2016 (ROCE and valuation multiples from trailing twelve months per Stockopedia data):
Market Cap: £587m (EV of £554m due to net cash position)
Gearing: N/A - c£33m net cash
Operating margin: 27%
Sales growth, last six months: 3.3%
EPS growth, last six months: 8.97%
So....not cheap, certainly, but a very high quality business looking at measures such as return on capital, operating margin, gross margin, cash conversion and the like.
Earnings and dividends per share have increased at a near 15% per annum rate over the last five years.
In terms of more qualitative factors, the business operates in what I consider to be a good sector, selling a product that is a "small ticket consumer non-durable", i.e. doesn't cost much and gets used (drunk) quickly, with traditionally high brand loyalty. Peers such as A.G. Barr (owner of Irn-Bru) and Britvic demonstrate similar margins and returns on capital (Britvic actually realising lower margins, reflecting the fact that its brands have lower pricing power IMO).
Also, importantly (from a "boringness" perspective) Nichols is still part family owned - the chairman, John Nichols, being a descendent of the founder - and I very much like this presence of the owner's eye in the boardroom.
The business released a trading statement today, covering the full year to 31 December 2016: https://otp.tools.investis.com/clients/ ... sid=834138
Overall a very positive update IMV, with the key bit being:
Group revenue for the year has increased by 7.3% totalling £117.3m (2015: £109.3m). The growth has come from both the UK and International business activities.
In the UK, sales have increased by 6.9% against the prior year to £90.7m (2015: £84.8m). This increase has been driven by sales of the Vimto brand, which were 5% ahead of the prior year, and the incremental revenues from the successful acquisition of The Noisy Drinks Co. Ltd. This performance is significantly ahead of the UK soft drinks market which grew by 0.8% in the year to 3 December 2016
A 7.3% sales increase is very good, and 5% growth of Vimto in the UK (when the overall soft drink market is more or less stagnant) is very very impressive.
Share price is down a bit today, probably because good expectations were baked into the, admittedly high, share price. They've basically hit expectations, but no more.
I hold, and it's not a company I'm adding to at today's valuation, but it is one that I would start to think about adding to on a pull back to say 20x earnings, on the basis of continued low growth in its UK business combined with the possibility of further success in exporting its brands round the world (Vimto already being popular in the Middle East, believe it or not!).