A policy change now tested by a deal

Nichols, the AIM-listed soft drinks group behind Vimto, changed how much of its Earnings it pays out earlier this year. (LSE:NICL) The revised Dividend and Capital allocation policy, announced in March 2026, lowered target dividend cover from about 2.0 times to 1.5 times adjusted earnings. In effect, a larger share of profits is now paid out as ordinary dividends.

Since then the group has spent most of its cash pile on an acquisition. (LSE:NICL) That combination raises a practical question for shareholders: how the higher payout policy fits with a Balance Sheet that has been reshaped. There has been no Nichols announcement since late August, so this article relies on the interim results of 29 July and the Acquisition announcement of 10 August 2026.

What the first half delivered

For the six months to 30 June 2026, Revenue rose 4.7% to £89.5 million, with growth across UK Packaged, International and Out of Home. (LSE:NICL) Adjusted operating profit increased 3.7% to £14.1 million and adjusted profit before tax rose 2.7% to £15.0 million. With no costs this year, reported profit before tax was also £15.0 million, against £11.4 million a year earlier.

Basic earnings per share were 30.30p. (LSE:NICL) Free cash flow, which the company defines as the increase in cash before acquisition funding and dividends, rose to £17.3 million from £14.2 million, and cash stood at £66.2 million at 30 June.

The first dividend under the new cover

The board declared an Interim Dividend of 20.2p, up 34.7% from 15.0p, and said the increase reflected both earnings growth and the move to 1.5 times cover. It was paid on 11 September 2026 to shareholders on the register at 7 August. On our calculation, 20.2p against basic earnings of 30.30p implies interim cover of almost exactly 1.5 times, consistent with the stated policy.

The company describes the policy as balancing Investment in organic growth with returning surplus cash, while keeping room for acquisitions. Dividends paid in the first half totalled £6.8 million in the Cash Flow statement.

How the acquisition changes the cash picture

On 10 August Nichols said it had acquired VITHIT, a functional drinks brand, for €75.0 million in cash, approximately £64 million, on a debt-free, cash-free basis. The deal was funded from existing cash. Set against the £66.2 million held at 30 June, that consumes most of the reserve, although the company said the group remained net cash positive on a pro forma basis and would rebuild reserves through cash generation. A new NatWest revolving Credit Facility was arranged for working capital.

Importantly for income-focused holders, the board reaffirmed the 1.5 times cover policy alongside the deal and said that, because the acquisition is expected to enhance earnings, it should raise earnings and therefore dividends per share from 2027. That is management's expectation rather than a commitment to any figure.

Risks to the payout

Because the dividend is now tied more tightly to earnings, any shortfall in profit would feed through more directly. Lower interest income is one small pressure: net interest income fell to £0.9 million as rates eased, and a smaller cash balance after the acquisition reduces it further, on our reading. Integration of VITHIT, Middle East trading conditions and input costs are other variables.

The board expects full-year performance in line with market expectations, which it cited as company-compiled consensus adjusted profit before tax of £35.1 million as at 27 July 2026. The LSE delayed price for the 3 November 2026 session, was 1,070p.

Next steps

No results date for the 2026 full year had been announced in the LSE listing reviewed. The final dividend, which will be the first full-year test of the new cover policy, would be expected to be proposed with those results.