Today, I’m reviewing the three biggest detractors in my current portfolio. Do I still believe in them?

Pack your bags

The performance of online holiday firm On the Beach (LSE: OTB) has been disappointing. There was me thinking that the end of the pandemic might see an explosion in ‘revenge spending’ as people emerge from their homes.

To some extent, this is what happened. But then came high inflation and a cost-of-living crisis. These succeeded in pushing the shares down and leaving my position underwater.

To be fair, On the Beach is trading well. The company recently reported half-year revenue of £80.8m. That’s an 11% increase year on year. It also forecast a record summer thanks to a bursting order book.

Surely this makes the stock– at less than 10 times forecast earnings — an absolute steal? It seems the market is unconvinced.

Since the next update (due September) covers that vitally important summer season, I’m staying put. I’m also crossing my fingers that there aren’t any more geopolitical wobbles or inflation spikes in the interim. These could do a lot of damage.

On the Beach is definitely ‘on the naughty step’.

Great company, bad investment?

Another loser has been Vimto owner Nichols (LSE: NICL). Again, a lot of this seems to be down to inflationary pressures.

This is particularly frustrating as this bears all the hallmarks of a ‘quality’ company.

First, it sells low ticket soft drinks that people buy out of habit. This makes earnings fairly predictable.

Second, its got solid fundamentals. It consistently makes great margins on what it sells and, outside of a pandemic, stellar returns on the money it puts to work.

There’s also virtually no debt on its books. Put another way, Nichols should easily survive another period of economic upheaval.

The problem is that these things look priced in (17 times forward earnings). I’m also not seeing anything that will put a rocket under sales in the near future.

I always intend to hold stocks for the long term but Nichol’s time could be up.

Blue sky bet

A third stinker is AIM-listed penny stock Seeing Machines (LSE: SEE). It runs high-tech tracking software that monitors drivers’ levels of fatigue. The goal is to reduce accidents on the roads.

Sounds good, right?

Sadly, it’s been anything but a smooth ride for investors so far. This is despite fairly frequent news on partnerships with major manufacturers.

Now, this was always going to be a risky buy. Growth stocks like this often need regular injections of cash to keep the lights on, regardless of how good its products are.

At least my holding is modest. As always, maintaining a diversified portfolio can help to minimise some of the financial pain that comes with less successful stock picks.

Perhaps the first cut to interest rates may finally spark life in more volatile, small-cap UK shares. Or perhaps confirmation that the company is now at breakeven (expected in 2025) will get things motoring.

I’m loath to cut my position. But a deadline has been set.

The post These UK shares are stinking out my ISA. Time to sell? appeared first on The Motley Fool UK.

Diageo

What it does: Diageo is one of the world’s leading suppliers of alcoholic drinks, with top brands in the gin, vodka, whisky and stout markets.

By Cliff D’Arcy. As I write, currently trading at 2,819.5p, Diageo (LSE:DGE) shares have dived 23.3% in the last year. Also, they are 12.5% lower over five years.

This has lowered the group’s market value to £62.6bn. However, these figures exclude cash dividends, which Diageo has grown consistently over decades.

Currently, Diageo’s trailing cash yield is 2.9% a year – below the FTSE 100’s 4% yearly dividend yield. But 2024’s interim dividend was 4% above 2023’s, plus analysts expect this growth to continue, as it has done for many years.

Few companies are immune to financial downturns, stock-market crashes and recessions. But history has shown me that financially strong FTSE 100 firms with powerful, established brands (such as Diageo) do better than most.

Finally, I view Diageo stock as undervalued today. Therefore, my wife and I will keep tight hold of our shares for their dividends and potential capital gains!

Cliff D’Arcy has an economic interest in Diageo shares.

National Grid

What it does: National Grid owns and operates the electricity transmission network in England and Wales.

By Charlie Carman. National Grid (LSE:NG.) is a defensive stock worth considering for tricky times.

Electricity demand is fairly constant throughout the economic cycle and, as a regulated monopoly, the utility giant doesn’t face competition risks like most companies. That’s an attractive quality in a recession.

National Grid also has a marvellous dividend history. Distributions haven’t been cut since 1996 and the group’s progressive policy targets annual payout growth in line with CPIH inflation.

One cause for concern is the balance sheet. Net debt now stands at £43.9bn. This could spell trouble for the dividend, especially since cover is low at 1.2 times earnings.

However, National Grid has a high degree of regulatory protection. Accordingly, I don’t see its liabilities as an existential threat, even if the dividend comes under pressure.

Still, payouts weren’t cut in 2008 or during the pandemic, so I’m optimistic the company could take the next crisis in its stride.

Charlie Carman does not own shares in National Grid. 

Nichols

What it does: Family-owned Nichols makes Vimto and a range of other soft drinks. This £350m business is listed on London’s AIM market.

By Roland Head. Branded soft drinks are usually regular repeat purchases. Nichols (LSE: NICL) delivered reliable results for many years prior to the pandemic, with operating profit rising from £17.8m in 2014 to £32.4m in 2019.

Sales slumped when Covid-19 lockdowns caused out-of-home sales to collapse. However, changes made to the business since then look smart to me. I think Nichols is building back stronger.

Long term, there’s a risk that Vimto could fall out of fashion. But there doesn’t seem to be any sign of this yet. Nichols’ first-quarter results showed rising sales volumes in the UK and highlighted growth opportunities in the Middle East – an important market for the firm.

A record net cash position of £73m provides further reassurance for me.

Nichols’ share price remains well below its historic highs. The shares do not look too expensive to me. I see this as a stock to tuck away for the future.

Roland Head does not own shares in Nichols.

The post 3 resilient British stocks for weathering economic storms appeared first on The Motley Fool UK.

Notwithstanding this, there are a few UK shares I wouldn’t want to sell unless I really, really had to (or a seriously better alternative came along).

Hated FTSE 100 stock

On a possibly controversial first note, I’d be very reluctant to jettison Scottish Mortgage Investment Trust (LSE: SMT). Yes, you read that right.

Despite enduring an awful time of late, it would be brave to suggest that the fund has already seen its best days.

To think this way is to go against the idea that economies will never return to form and industries can never be disrupted by new entrants that tear up the map. It’s the latter that the fund seeks to own.

Naturally, it could still take time to see a reversal in SMT’s fortunes. Inflation remains stubbornly high, pushing central banks to keep raising interest rates. That’s never good news for daring growth stocks that feed on economic optimism and, admittedly, some degree of hype.

That’s why it’s important to look at performance over the long term (at least five years, preferably longer). On this timeline, the trust has been a clear winner with its early backing of eventual mega-caps like Tesla paying off handsomely.

I’m keeping the faith.

Niche winner

FTSE 250-listed Games Workshop (LSE: GAW) also makes the cut.

It strikes me as one of those rare businesses that truly has an economic moat — qualities that mean it can continue to outperform peers over many years.

True, fantasy games won’t be everyone’s cup of tea (including mine). However, Games Workshop undoubtedly has a captive audience of fans willing to shell out for the latest sets/merchandise.

All this makes for some solid fundamentals. Margins, for example, are sky-high. And if balance sheets were measured on attractiveness, this balance sheet would be a catwalk model.

The same goes for returns on capital employed — essentially, what the company gets back for what it puts in. It’s things like this that compound value and leave shareholders with wonderful outcomes.

The cost-of-living crisis may still hold back trading for a while. With its valuable IP and many avenues left to exploit it however, I can see myself staying invested “forever”.

Down… but not out

A final FTSE stock I’d be loathed to part with is one that hasn’t actually performed that well for me.

Vimto-maker Nichols (LSE: NICL) has been in my portfolio for quite a few years. The share price hasn’t exactly gone where I wanted it to over that time.

So why do I hang on? Well, it’s another great business, albeit one that’s faced numerous headwinds. None of these have really been of its own making. Think pandemic. Think high inflation. These things are temporary.

Again, the balance sheet is a thing of beauty. The dividends regularly chucked out have gone some way to compensate for the share price struggles too.

As a long-term investor, this is the kind of stock I want to own. It’s a solid company that sells products people habitually buy.

It will take time, but I’m confident Nichols will recover.

The post 3 stocks I will “never” sell appeared first on The Motley Fool UK.

One technique I like to use in this situation is to look for shares that are trading close to their 52-week lows. These have typically underperformed the market for some reason, but they may now be close to a turning point.

My latest trawl through the market has unearthed two possible bargain buys.

An affordable treat

My first choice is drinks firm Nichols (LSE: NICL), which owns the Vimto brand. This is popular in the UK, but also has a big following in some overseas markets, especially the Middle East and Africa.

Sales were hit hard by pandemic restrictions on pubs and restaurants. But the out-of-home market has largely returned to normal now. Nichols also has plans in the pipeline that management believes could deliver “significant opportunities” for higher profits.

For me, this company has two big attractions. One is that it’s a defensive business, selling an affordable product that’s bought regularly by many people.

Vimto’s strong brand has supported double-digit profit margins for many years. Until the pandemic, Nichols’ dividend had not been cut for 30 years.

The second attraction is that it’s a family business with very conservative finances. At the end of December, the company reported a net cash position of £56m — equivalent to 15% of the current share price.

Of course, there’s always a risk that Nichols’ best days are behind it and that it will continue to suffer from a lack of growth. I can’t be sure this won’t happen, especially in today’s tough economic climate.

The future is always uncertain. But on balance, I think the proven quality of this business should drive further success. In my view, Nichols shares could be a good long-term investment at current levels.

A reliable 5.5% income

My second choice is quite different. FTSE 250 property group LXi REIT (LSE: LXI) specialises in owning properties with very long leases.

The majority of the group’s portfolio is made up of budget hotels (Travelodge/Premier Inn), theme parks (including Alton Towers and Thorpe Park), private hospitals, and supermarkets.

Overall, LXi’s portfolio has 80 tenants, with a weighted average of 27 years until the first lease break, or expiry.

Management has completed some refinancing this year, which I think has reduced the risk of future problems. However, the firm hasn’t avoided missteps completely.

LXi’s share price slumped in September after the company announced a £500m deal to buy 18 Sainsbury’s supermarkets. Funding the deal would have required a sizeable share issue as well as new debt.

LXi subsequently withdrew from this deal, but the share price hasn’t yet recovered. However, three directors have bought more than £800,000 of stock since then. This suggests to me they believe the shares offer value at current levels. I agree.

A nasty UK recession could put pressure on some of LXi’s key tenants. But on balance, I think this situation looks a good bet for long-term income. With a forecast yield of 5.5%, I’m tempted to add LXi to my own portfolio.

The post 2 UK stocks to buy now at 52-week lows appeared first on The Motley Fool UK.

“Positive start”

Today’s interim results from Vimto-owner Nichols should provide some comfort to investors. Revenue increased 13.8% to £67.4m over the first six months of 2021, with adjusted pre-tax profit moving almost 32% higher to £8.9m.

Sure, some improvement was expected due to the loosening of restrictions. Even so, news that the company’s Vimto Dilutes range significantly outperformed the UK market between January and June bodes well.

Sales of Vimto have been rebounding overseas too. International growth of 42.3% was recorded compared to the prior year. Sales in regions such as the Middle East (the drink is incredibly popular over Ramadan) appear to have held up well.

And the outlook? Well, Nichols believes that its “positive start” to 2021 should allow it to meet management expectations for the full year. However, I now wonder if the recent weather might lead to a slight increase in guidance next time around.

All told, I’m satisfied with today’s update and would be happy to add to my position today. A good recovery in sales, not to mention a strong balance sheet and solid portfolio of brands (which now includes SLUSH PUPPiE), makes me think this is one of the best stocks to buy now in this space.  

“Better than anticipated” trading

Today’s results from Nichols followed hot on the heels of fellow drinks maker AG Barr. Like the former, Barr has had to contend with the shutdown of the hospitality industry over the pandemic. Like Nichols, the company’s now showing signs of recovery.

Yesterday, Barr announced that full-year profit would now likely be ahead of expectations due to “better than anticipated” trading. This helped its previously-sluggish share price to recapture some of its lost mojo.

Again, I think Barr will do well in time and there’s more upside ahead. It’s another quality operator that’s conservatively run. It also has a good number of ‘sticky brands’ such as IRN-BRU, Rubicon and Funkin. So I’m tempted to continue accumulating the shares.

Sales tailwind

As a holder of both stocks, it’s hard for me to sit on the fence when looking at NICL and BAG. Notwithstanding this, I’m encouraged by recent trading. I also suspect the blazingly-hot summer in their home market will prove a tailwind for sales.

This isn’t to say I shouldn’t be careful. Owning multiple companies in the same sector isn’t without risk. Although no lasting damage appears to have been done, the introduction of the sugar tax on soft drinks a few years ago was proof that even the most defensive companies can face challenges.

Going forward, it goes without saying that Delta infection levels may get so bad that some restrictions may need to be re-introduced. This may hamper demand for both product stocks. 

So long as I keep my exposure in check by investing elsewhere, I think the reward will be worth it if I bought more now. 

The post UK heatwave! Here are 2 of the best stocks to buy now appeared first on The Motley Fool UK.

One example of the former could be Associated British Foods (LSE: ABF).

Cheap UK shares

It’s easy to see why investors have been running from the £13bn-cap owner of Primark. Like many, the FTSE 100 company was hit hard by the first lockdown and the dramatic slowdown in retail sales. The second UK lockdown just makes things worse.

When combined with restrictions elsewhere in Europe, 57% of ABF’s total selling space is now temporarily closed. This will likely lose the company an estimated £375m in sales.

Notwithstanding this, ABF would be one of the very few retailers I’d consider buying at the current time. 

For one, the FTSE 100 giant is much more than Primark. The company actually has its fingers in a number of different sector pies, including sugar, agriculture, and ingredients. Now, this diversification won’t guarantee the share price won’t have further to fall, but it does make ABF a more defensive option than your typical listed retailer. It also goes some way to making up for the fact that budget-focused Primark doesn’t sell online.

Another reason to suggest now might be a good time to buy into ABF is that finances still look pretty solid. At the end of its last financial year (mid-September), the company had net cash before lease liabilities of £1.56bn. That’s a far better position compared to others in the market’s top tier.  

Trading at under 15 times earnings, ABF hasn’t been this much of a bargain for a while. Since clothes will always need replacing (and Primark’s value offering should appeal to shoppers during recessionary times), these cheap UK shares look to be anything but a value trap.  

Undervalued

Another stock that I think is too cheap right now is soft drinks company Nichols (LSE: NICL).

Sure, recent trading hasn’t been great. Like others in the space, Nichols has seen revenue and profits tumble over 2020. This has been due to lockdowns and the closure of shops and travel concessions that sell its drinks. Seen in this context, the fall of the Vimto-owner’s share price back to where it was during March’s market crash does make some sense. 

Like ABF however, I think there are reasons to be optimistic. The reinstatement of dividends back in June certainly smacks of confidence. I think it’s unlikely new CEO Andrew Milne would want to reverse that decision when he takes over the reins in January. The small-cap’s balance sheet is also in great shape. Nichols had almost £47m net cash in June.

A forecast price-to-earnings ratio of 16 for FY21 might not scream value but it’s important to put this in perspective. For years, Nichols traded far above this level, and justifiably so. Operating margins and returns on capital employed have long been consistently high.

Admittedly, I’m biased. I’ve held the stock for years. But I see the current price weakness as an opportunity rather than something to ruminate on. News of a falling infection rate and/or vaccine breakthrough could see these cheap shares fizz back to form.

The post Cheap UK shares: this FTSE 100 company looks a bargain to me appeared first on The Motley Fool UK.

Best UK shares to buy

With so much uncertainty swirling around the UK and global economy, I think it may be best to focus on high-quality stocks with a worldwide presence and strong balance sheets. 

With that in mind, I think it could be worth taking a closer look at Fevertree Drinks (LSE: FEVR). This company has grown from a start-up into one of the UK’s most promising growth businesses over the past few years. 

It recently started expanding into America, after taking over the UK market. Lockdown has hurt the business, but like many consumer goods champions, Fevertree’s strong customer following should help the business pull through. 

Indeed, analysts are forecasting a 30% decline in net income this year, followed by growth of 45% in 2021. Over the past six years, net income has surged from just £1.3m to £50m. As the company continues to focus on growth, I think it’s likely that this trend will continue. 

It has no debt and also supports a dividend yield of 1%. These qualities make the business stand out as one of the best UK shares to buy now. 

Centamin 

In uncertain times investors buy gold. That’s good news for gold miners like Centamin (LSE: CEY). Currently trading at a forward price-to-earnings (P/E) multiple of 16.1, the African-based group looks cheap compared to its defensive nature and growth potential. 

It also has income potential. The price of gold has jumped this year and that has helped Centamin’s bottom line. At a time when so many other companies have had to cut their dividends due to falling profits and sales, the rising gold price has helped the group maintain its cash returns to investors. The stock currently supports a dividend yield of 5%, compared to the market average of 3.5%. 

As well as this income potential, Centamin has no debt and enough cash to sustain its dividend for nearly four years without any income.

That’s why I think this is one of the best UK shares for income and growth.

Nichols

Finally, I have my eye on soft drinks producer Nichols (LSE: NICL). The company’s brands span the still, carbonated, post-mix and frozen drinks categories, which gives it a defensive nature. Even at the height of the coronavirus lockdown, consumers still had to eat and drink.

This suggests the business has what it takes to weather further coronavirus uncertainty and potentially survive another lockdown. 

After recent declines, the stock is trading at a forward P/E of 19.7, which is just below its long term average of 20. It also offers a dividend yield of nearly 3% and the balance sheet is stuffed full of cash.

At the end of the firm’s most recently reported financial period, Nichols’ cash balance was worth two years of dividends.

Like the UK shares listed above, these qualities make the company highly appealing, in my opinion. 

The post Best UK shares to buy? I’d invest £5k in these 3 stocks appeared first on The Motley Fool UK.

Turning out something fizzy in a can and slapping a label on it does not, however, guarantee success. Business models differ, consumer tastes have to be considered and marketed to appropriately, and competition is ever-present. Therefore an investor still needs to do their research.

The larger beverage companies will probably be well known to investors. So, let’s venture off the beaten track and explore the drinks makers with market caps under £1bn. We have soft drinks makers AG Barr and Nichols (LSE:NICL), and C&C Group, which produces ciders, beers and spirits. Finally, we have Stock Spirits (LSE:STCK), which produces, you guessed it, spirits, but market mainly in Eastern Europe.

Recipes for success

The four companies will be ranked on three measures each for profitability and return on investment, two measures of balance sheet strength, two measures of growth (in revenue and EPS), and dividend yield. For each company, we will average their rankings, and the winner will be the one whose mean is the closet to four. The table below shows the relevant data for each of the companies.

It looks like Nichols is the winner, based on the information collected, with an average score of 3.64. Second place goes to Stock Spirits with an average of 2.36, third to AG Barr with 2.27, and fourth to C&C Group with 1.72.

More pop less fizz

The data collected reflects the past performance of the companies analysed. Investment performance depends on the future. Therefore, broker recommendations can serve as a useful guide for the future. I have typically used the highest percentage of buy or outperform recommendations in picking the best prospect.

By this measure, Stock Spirits is the winner. As of 14 May, 100% of recommendations for the share were either buy or outperform. Nichols comes dead last; all five suggestions are that the stock should be held. These are, of course, smaller-cap stocks, and analyst coverage is relatively low, which may distort the results.

If we look at share price forecasts for the two stocks, the highest expectations for Nichols and Stock Spirits are 49.5% and 53.2% gains, respectively, over 12 months. There is not much separating the two stocks here, yet the analysis of the recommendations provides a stark difference. Something does not quite add up.

Sharing the best drink

Nichols recently announced it is suspending its dividend despite having £40m in the bank, which is enough to cover the dividend payment four times over, and zero debt. Investors will be disappointed by this, but it does point to Nichols having the edge over Stock Spirits in financial strength. 

Stock Spirits is by no means a slouch in the balance sheet department. However, given the coronavirus crisis, I would tend to favour the additional strength and past performance of Nichols. However, Stock Spirits looks like a solid company and is favoured by a few brokers. 

The post Which are the best FTSE-listed small beverage stocks to invest in right now? appeared first on The Motley Fool UK.

Regular Motley Fool readers will know I’ve been banging on for years in praise of the couple of dozen long-established family businesses listed on the UK stock market. Pubs group Fuller, Smith & Turner (LSE: FSTA), soft drinks firm Nichols (LSE: NICL), and lighting company FW Thorpe (LSE: TFW) are three such firms. Let me show you their blue-chip credentials, and why I’d be more than happy to buy them today.

Building long-term wealth

Strong balance sheets, and careful stewardship through multiple economic cycles and market crashes, are features of these businesses. I believe these qualities align well with the aims of investors seeking to steadily build wealth over the long term.

Furthermore, with a largely stable shareholder base of family members, and like-minded long-term investors, these companies’ share prices tend to hold up relatively well through the sort of market crash we’re currently experiencing.

The table below shows the performances of the FTSE 100, Fullers, Nichols, and Thorpe since markets went into free-fall after 21 February.

Seven decades of dividend growth

Fullers (founded 1845) owns premium pubs and hotels, as well as craft cider and gourmet pizza restaurant chain The Stable. As you can see, it’s outperformed the FTSE 100. This is despite it being in one of the sectors most heavily impacted by Covid-19 fears. For example, blue-chip Whitbread, the owner of Premier Inn — and food and drink chains, including Brewers Fayre — has seen its shares plummet 46%.

Fullers has a strong, freehold property-backed balance sheet. Furthermore, the sale of its brewing business last year, with cash proceeds of over £200m, now looks very timely. The company has a remarkable dividend record of seven decades of unbroken growth. The running yield of 3% and price-to-earnings (P/E) ratio of 14 indicate value against historical standards. And the same is true for Nichols and Thorpe.

Defensive out-performer

Nichols (founded 1908) owns a portfolio of still and carbonated drinks brands, headed by its flagship brand Vimto. The superior performance of its shares (-5%) versus the FTSE 100 reflects the defensive characteristics of the business. Having said that, it’s also outperformed Footsie drinks giant Diageo (-23%), which is widely seen as an exemplar of blue-chip quality.

Nichols’ latest annual results show cash of £40.9m on the balance sheet at the year-end, and no debt. The cash-adjusted P/E is 17 and the running dividend yield is 3%.

Another cash-rich small-cap stock

FW Thorpe (founded 1936) designs, manufactures and supplies professional lighting systems. It serves diverse industries and customers. Nevertheless, it’s more geared to the general economic backdrop than a company like Nichols. In other words, it’s a cyclical rather than defensive business. Yet its shares (-14%) have significantly outperformed not only the FTSE 100 during this market crash, but also classy blue-chip sector peer Halma (-19%).

Thorpe is another cash-rich family business. It had £30.8m on its balance sheet and no debt at its last year-end. The cash-adjusted P/E is 17.8 and the running dividend yield is 2%.

Hopefully, you can now see why I believe Fullers, Nichols and Thorpe deserve to be called blue-chip small-caps.

The post 3 high-quality FTSE small-cap stocks I’d buy in this market crash appeared first on The Motley Fool UK.

The mid-cap’s shares were up a stunning 15% this morning as the company reported that adjusted pre-tax profit for the 2020 financial year (which ended on 25 January) would be “at the top end of current market expectations, just ahead of £37m.”

Despite facing “a combination of challenging trading conditions during the year,” Barr said revenue was likely to come in around £255m. While this may be 9% lower than the £279m achieved in 2018, investors were clearly comforted by news that sales of its flagship drink returned to growth in the fourth quarter after consumers had previously baulked at management’s decision to increase prices. Elsewhere, the company’s Funkin cocktail solutions continue to win fans and issues relating its Rockstar and Rubicon brands appear to have been resolved. 

The outlook is also positive. Although the market “remains challenging,” Barr predicted that the “encouraging trading momentum” witnessed towards the end of its financial year is likely to continue in 2020.

Taking the above into account, I remain bullish on the FTSE 250 stock and continue to rate it as a decent addition to most quality-focused portfolios. At 20 times forecast earnings even before today’s news, the shares are hardly cheap.

As one of the UK’s most successful fund managers recently remarked, however, the assumption that value stocks will deliver superior returns has been misplaced for a while now. But the fact that there’s also minimal debt on the balance sheet may prove hugely beneficial if/when sentiment on the economy sours and this great bull run finally comes to an end.

Next to pop?

AG Barr isn’t the only member of the drinks industry to have found things tough recently. Tonic water specialist Fevertree‘s troubles are well publicised. Less talked about is Vimto-maker Nichols (LSE: NICL).

Shares in the business have been under pressure of late following news that Saudi Arabia and the UAE have implemented a 50% tax on sweetened drinks, regardless of the sweetening method used by the companies manufacturing them.

This means the latter can’t simply reformulate their products (as they have in the UK following the introduction of the sugar tax). As a result, the company warned in December that FY20 pre-tax profit may come in “materially below current expectations.“

While clearly a setback for Nichols, I wonder if the market might be overreacting. At roughly £7m, sales in these countries represent only a small proportion of its total revenue. Moreover, the full impact won’t be known until after Ramadan (April 23-May 23).

Given the popularity of the Vimto brand, there’s always the possibility that things won’t turn out quite as bad as investors think. Aside from this, it’s worth mentioning Nichols continues to do just fine in its core UK market with sales hitting £117.7m in 2019, despite strong prior year comparatives. 

Factor in the relatively defensive nature of its business, consistent hikes to the dividend, a bulletproof balance sheet, and high returns on capital, Nichols still justifies its P/E ratio of 19, in my view. I have no hesitation in retaining (and potentially adding to) my holding in 2020.

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