Markets: week ahead
AG Barr margin test | Aviva deal | AMTE Power update
Investors in soft drinks maker AG Barr will be looking for further clues about its profit margins and growth across its range when it reports half-year figures on Tuesday.
The producer of Irn-Bru has faced a number of challenges including regulation on sugar content, Covid and lockdowns, carbon dioxide shortages, input cost inflation and the uncertainty caused by Scotland’s proposed deposit return scheme.
It is also seeking a successor to long-serving CEO Roger White who is retiring, though no update on that is expected with the figures.
AJ Bell investment director Russ Mould says: “The firm is also having to adapt to changes in consumer tastes and trends. Since the end of lockdowns, mixers, juices and lemonade have declined in volume and value, to reflect the normalisation of home consumption, while on trade volumes in bars and restaurants and hospitality venues has recovered steadily.
“Sports and energy drinks have shown robust growth. AG Barr’s acquisitions of Boost and oat milk maker MOMA are both designed to broaden its product portfolio.”
The trading update in August was very solid and flagged total sales growth of 33% in the six months to July 2023 to £210 million, thanks to last December’s purchase of Boost. Like-for-like sales growth was 10%.
But in the fiscal year to January 2023, the total UK soft drinks market saw volumes drop 2.2% and value rise by 8.8%.
“AG Barr has flagged that profit margins will be lower this year, thanks to the sales contribution from the lower-margin MOMA and Boost operations, investment in brands and products and input cost pressures.”
Looking forward to the full year, analysts are hoping for a 3% jump in underlying profits to £46.7 million, driven by a 27% jump in revenues.
After a hiatus during covid, AG Barr is once more paying dividends. In the year to January 2023, the company paid out 13.1p a share. Analysts are looking for a figure closer to 15p a share this time, so an increase on last year’s first-half payment of 2.5p a share is likely.”
Aviva, the FTSE-100 insurer, has acquired AIG’s UK protection business for £460 million.
It said the deal supports its strategy to grow capital-light businesses and adds 1.3 million individual protection customers and 1.4 million group protection members.
The purchase is being funded through internal resources.
Amanda Blanc, chief executive said: “This acquisition brings significant strategic and financial benefits to Aviva.”
Shareholders in the battery manufacturer AMTE Power will be updated today on the company’s plans to raise £2 million through a shares issue.
Shares in the company remain suspended following concerns by the London Stock Exchange over settlement issues.
It is yet to be revealed what impact Rishi Sunak’s push back on electric vehicles will have on the company’s plans for a megafactory in Dundee.
Asian equity markets were mostly in retreat this morning with Chinese stocks leading losses amid persistent concerns over the property market.
Embattled real estate developer Evergrande Group indicated that it will be unable to issue new debt due to an ongoing government investigation into its unit Hengda Real Estate Group.
The Hang Seng (-1.43%) is emerging as the biggest underperformer, while Japan’s Nikkei (+0.58%) is bucking the regional trend. US stock futures are indicating a rebound, though. with those on the S&P 500 (+0.27%) and NASDAQ 100 (+0.34%) moving higher.
In commodities, the oil price rally ran out of steam last week. Brent was down -0.70% to $93.27/bbl (-0.03% Friday) after rising by over +11% over the previous three weeks. WTI saw a similar down move of -0.82% to $90.03 (+0.45% Friday). Nonetheless, energy supply risks remained in focus last week.