Nichols was added to my portfolio last September. I think I was a little impatient and should have waited a little longer for a pull-back in the share price. Here’s a link to the previous post around the time of the half year results.
They have today issued results for the full year to 31st December 2013. Sales increased 2% to just under £110m, profits were up 10% as a result of improved margins and once again they were able to increase the dividend 13.3% to 19.62p supported by basic earnings up 11% at 45.8p and cover of 2.3x. I have pencilled in a figure of 22.5p for the coming year which would put the shares on a forward yield of around 2.0% at the current share price of 1142p.
Around 80% of sales are generated in the UK and the remaining 20% from abroad, with continued growth in African markets where revenues increased 21% over the year and coupled with a stronger second half year (versus 2012) in the Middle East, where full year sales were £23.1m, 2% ahead of the previous year. The international expansion continues and new contracts have been signed for Nepal and Myanmar, both of which are due to come on line during 2014.
The balance sheet appears strong and the company has a net cash position of £34.3m - up 39% from £24.7m in 2012.
Commenting John Nichols, Non-Executive Chairman, said:
"I am pleased to report another excellent year for Nichols. We have successfully delivered on our strategy to increase our profitability and, pre exceptional items, we have delivered double digit growth to both profit before tax and earnings per share. The business continues to be highly cash generative and we propose a final dividend of 13.3p, taking the total dividend for the year up 13% to 19.62p (2012: 17.32p), reflecting the Board's confidence in the outlook for the Group."
These are very good results and I am very happy to continue holding.
One other point of note - many AIM listed shares can be used as a means to avoid or reduce Inheritance Tax (IHT) provided they are held for 2 years. The IHT limit has been frozen at £325,000 for the next five years which means many more people will come within this limit, particularly if property prices start to take off. A prospective saving of 40% tax can help to mitigate some of the concern of recent share price rises.
As ever please DYOR.