Consider refreshing your portfolio with this tariff-dodging drinks specialist

Telegraph

29-04-2025

Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest.
Nobody but nobody knows what is coming next in the Trump-trade-and-tariffs drama. Not even the president himself, judging by how he has offered a 90-day delay in the imposition of reciprocal tariffs, crafted exemptions for technology hardware products and noted that the final duties levied on Chinese goods could be lower than suggested.
Talk of trade deals seems to boost share prices, while concerns over more policy confusion support gold and silver instead – and there can be no clearer argument for a balanced, diversified portfolio than that. Within the equity portion, the least comfortable place to be is probably that of a company which sources heavily from Asia and sells extensively into the US.
Merseyside-headquartered Nichols ticks neither box and its financial solidity, lofty margins and healthy cash flow all mean its shares can continue to provide valuable portfolio ballast, not to mention welcome dividends.
Last week's update from the soft drinks specialist, whose key brands include Vimto, Slush Puppie and Levi Roots, offered three items of good news.
First, it revealed that trading for the first three months of 2025 had met expectations. Andrew Milne, its chief executive, also left guidance for full-year revenues and profits unchanged, as growth in the UK packaged drinks and 'out of home' segments more than offset weakness in the international packaged arm, where a shift to a concentrate model in West Africa compounded the unavoidable near-term impact upon demand of Ramadan.
Second, Mr Milne revealed an increase in the net cash pile. Last year's final dividend of 17.1p a share will be paid on May 1, to take our tally of payments to 276.5p a share. The company's net cash balance sheet and cash flow mean there should be more to come for patient shareholders.
Finally, management's initial assessment of the Trump tariffs is that less than 2pc of sales may be affected.
Our support over the past seven years has not yielded a capital gain, even if the income offsets the paper loss, but the fault here is ours, not that of the company. We simply paid too high an earnings multiple at the point of entry, and the combination of Covid 19 and supply chain stress, plus the usual rough-and-tumble of competition and higher interest rates, left the rating exposed on the downside.
Even if 20pc-plus profit margins and returns on capital help to justify that valuation, the prevailing forward multiple of 20 times forward earnings is still not really bargain-basement territory, either.
Investors must therefore coolly assess whether Nichols can meet the medium-term financial goals laid out at last year's analysts' meeting. If so, pre-tax income could reach £45m and earnings per share exceed 90p, for which investors would currently be paying less than 14 times earnings. Such a rating would look tempting and at least tariffs may not prove an unwelcome, additional obstacle.
Questor says: hold
Ticker: NICL:AIM
Share price: £12.20
Update: S&U
This month's full-year results show a third straight drop in annual profits and a second consecutive reduction in the total dividend at specialist lender S&U, thanks to the combination of an increase in loan impairments, higher interest rates and regulatory pressure.
That all leaves the shares no higher than they were in 2013 and they may not do much until a court case and a regulatory inquiry that both relate to the wider car loan industry are complete, but we do at least have S&U's valuation on our side, in the shape of a healthy dividend yield and a discount to net asset value (Nav).
Consumers, lenders, regulators and politicians are waiting for a decision from the Supreme Court on an appeal from two companies, which wish to prove they did not mis-sell car finance to the detriment of consumers between 2007 and 2021.
S&U's Advantage Finance arm is also a specialist in car loans. It has suffered a dip in lending and collections and an increase in arrears and impairments, as consumers await the regulatory and legal findings. Property finance arm Aspen Bridging is taking up some of the slack and analysts do believe that group pre-tax profits will bounce back in the year to January 2026, but the share price suggests that investors are waiting to see it before they believe it.
The stock trades on a forward price-to-earnings ratio of less than eight and offers a dividend yield of 7.8pc, according to consensus analysts' forecasts. Moreover, the stock market capitalisation of £177m stands well below the company's Nav of £238m, to suggest a lot of bad news is already in the share price.
Ticker: SUS
Share price: £14.35