The deal, three months on

Nichols (LSE:NICL) announced on 10 August an agreement to buy VITHIT, a Dublin-based maker of vitamin-enriched drinks, for €75.0m in cash, about £64m at the Exchange Rate quoted at the time. It is a sizeable step for a Business that has historically grown mostly through its own brands and that, until now, has kept a large cash pile on its balance sheet.

Chief executive Andrew Milne described VITHIT as an outstanding Brand with a differentiated product in a rapidly growing soft drinks category.

About the company

Nichols owns the Vimto brand and other soft drinks, with products sold in the UK and in international markets, particularly in the Middle East and Africa. It has also operated as a licensing and Partnership business, with products such as a protein water developed with Myprotein. Historically, the company has held a large cash balance and grown mostly through its own brands.

What Nichols is buying

Founded in 2001, VITHIT sells low-calorie, low-sugar drinks fortified with vitamins and other functional ingredients, ranging from bottled still drinks to sparkling cans and effervescent products. It is distributed in the UK and Ireland through grocery, convenience, foodservice and specialist retail, and has a presence in 13 other international markets.

In 2025 VITHIT generated Revenue of €26.5m, adjusted operating profit of €4.2m and adjusted pre-tax profit of €4.1m. Its sales have grown at roughly 9.5% a year over three years and by more than 90% since its 2021 financial year. Founder and chairman Gary Lavin is stepping down, while Nichols plans to keep the Dublin office.

Cash, Debt and the dividend

LSE:NICL is paying the full consideration in cash. Before the deal, its interim results to 30 June 2026 showed cash of £66.2m, free Cash Flow of £17.3m for the half, revenue up 4.7% to £89.5m and adjusted operating profit up 3.7% to £14.1m. NatWest is providing a new revolving Credit Facility for working capital, and the board said it expected the group to remain net cash positive including the acquisition.

Shareholders' income appears protected on the company's stated policy. The interim Dividend was raised 34.7% to 20.2p, reflecting a revised dividend cover of 1.5 times earnings, and the board reaffirmed that policy and its wider capital allocation framework when announcing the deal. It said it would keep substantial financial flexibility after completion.

Why it matters

The Acquisition shifts LSE:NICL towards the functional and better-for-you end of the market, where it had previously relied on brand extensions and partnerships, such as the Myprotein Clear Whey Protein Water launch it announced in July. On the 2025 figures, VITHIT's revenue would add a meaningful slice to a group whose half-year revenue was under £90m, although currency movements will affect the sterling translation. Management expects the deal to enhance Earnings immediately, before around £2.5m of one-off transaction costs, and to deliver returns comfortably above Nichols' cost of capital.

The trade-off is that a cash buffer previously cited as a source of resilience will be noticeably smaller, and future returns will partly depend on making a newly acquired business grow.

On simple arithmetic, the €75.0m price equates to about 18 times VITHIT's 2025 adjusted operating profit and a little under three times its revenue.

The price of VITHIT

A price of €75.0m for revenue of €26.5m is about 2.8 times revenue, and for adjusted operating profit of €4.2m is about 17.9 times. These figures are calculated from the 2025 numbers, so they relate to the past year, not the future. Adjusted pre-tax profit of €4.1m implies a very small interest cost, which means the business carries little debt. Growth of 9.5% a year over three years and more than 90% since 2021 shows the speed at which sales have grown.

Effect on cash

Cash of £66.2m at 30 June compares with the cost of about £64m, so the purchase would use most of the cash balance if it were paid wholly from it. The new revolving credit facility from NatWest provides working capital, and the board says the group should remain net cash positive including the acquisition. Free cash flow of £17.3m in the half suggests the group can rebuild cash quickly, at about £35m a year at that rate.

Interim results and dividend

Revenue of £89.5m, up 4.7%, and adjusted operating profit of £14.1m, up 3.7%, show steady growth, with an Operating Margin of about 15.8%. The Interim Dividend of 20.2p, up 34.7%, reflects a revised cover of 1.5 times. The board reaffirmed its dividend policy and capital allocation framework when announcing the deal.

Where VITHIT fits

VITHIT sells low-calorie, low-sugar drinks with added vitamins and functional ingredients through grocery, convenience, foodservice and specialist retail in the UK and Ireland, and has a presence in 13 other markets. Those formats fit the trend towards functional drinks that the company says it wants to join. The plan to keep the Dublin office means the team that built the brand stays in place, although the founder and chairman, Gary Lavin, is stepping down.

Brand portfolio and international sales

The company's core brand, Vimto, has a long history and a loyal international following, particularly in the Middle East, and it also sells in the UK. The acquisition adds a brand that grew by building on health-conscious trends, which are different from the traditional soft drinks trends that Vimto serves. If the new brand can use the company's distribution, sales could grow faster than they would on its own, though that would depend on retailers' willingness to stock the products.

The price paid for VITHIT is a significant part of the company's cash, and the company said it expects to remain net cash positive. That suggests the Balance Sheet will still be conservative after the purchase.

The founder's departure is a transition risk, since a brand's early success often depends on a founder's relationships and taste. Keeping the Dublin office in place supports continuity for the team.

Risks and next steps

Integration is the main operational risk, particularly with the long-serving founder departing and some managers leaving after a transition period. Functional drinks are a crowded and fast-moving category with well-funded competitors, and VITHIT's historical growth rate may not persist under new ownership.