I rather like the attitude of soft drinks maker AG Barr (BAG) in the face of the threat from Chancellor of the Exchequer George Osborne to impose a sugar tax. Unlike some of its rivals in the British Soft Drinks Association, Barr is not threatening legal action but learning instead to live with life under the new regime.
There is, after all, two years before the proposed tax comes in and chief executive Roger White is going into consultations over the tax in a positive frame of mind. Given that this Budget has already unravelled to some extent, who knows what concessions can be wrung out of Osborne in the intervening months.
Barr reckons that 40% of its products are already in the tax-free band and it expects the proportion to be approaching 70% in two years. It has stepped up the production of water and diversified into cocktail mixers.
The company’s shares took a real beating on Budget day and the following day, losing 43p to 511p compared with 660p a year ago. Yet results to 30 January released this week showed profits up 7% on flat revenue thanks to an improvement in margins. Market share has been maintained at home and international sales are racing ahead from an admittedly low base.
The dividend total is up 10%. I suspect that the shares will bottom out soon. Those investors who believe that management is the most important ingredient in any company should take a look.
Holiday Companies Unaffected by Tragedy
Whenever terrorism strikes I always remind myself that the majority of people die in bed, mostly in their own bed. Perhaps holidaymakers take the same view, for bookings have held up remarkably well despite the refugee crisis in South East Europe, killings in North Africa and bombs in Paris and Brussels. There seems to be always some other destination to try.
TUI (TUI) issued a trading update showing that winter holidays were 95% sold out at 3% higher prices while the more important summer season is shaping up a little better than last year, with bookings up 2% and prices up 1%.
The shares have on three occasions in the past 12 months fallen back after reaching 1270p and they hit a low of 975p a few days ago but they responded well to the trading statement.
Regular readers know that I consider holiday companies too volatile for my tastes but I must say that if you have held onto TUI throughout the recent share price falls this is not a good time to be selling out.
This was a more upbeat statement than the one a few days earlier from Thomas Cook (TCG). Cook has sold a lower percentage of winter and summer holidays than TUI and seems to be struggling more with pushing up prices and coping with disruption to key destinations such as Turkey. Total sales are lower than last year.
Cook shares are down from the 160p peak reached last May after a surge that got way ahead of itself. They currently trade around 90p. There has been no dividend for three years and no immediate prospect of one. Cook did manage a profit in the year to last September after four years of losses but I cannot see any realistic case for buying the shares at this stage.
What Next?
Investors have decided that the update from Next (NXT) just before Easter was truly awful. The shares slumped from £66.60 to £54 in three days, a fall of nearly 20%. I didn’t feel that so heavy a tumble was justified. Sales, profits and dividend were all higher in the year to January.
What spooked investors was this sentence: “The year ahead may well be the toughest we have faced since 2008.”
Next has a history of understating its prospects. The market is assuming that this time it is not bluffing. I disagree. While I don’t normally invest in retailers, if the shares have not recovered by the time the next ISA allowance is available I shall take a stake.
