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The London and European markets rebounded as on 26th June 2020 (before the market close). Meanwhile, the FTSE-100 index was up by 0.38 per cent, trading at 6,170.62 (before the market close at 3.00 PM GMT+1). Despite the rising coronavirus cases, the positive market movement was supported by strong investor sentiment.
The other critical factors to watch out, which can impact the market were:
- As per the US Commerce Department report, the US GDP declined by 5 per cent in the first quarter from January to March. As per the industry experts, the GDP numbers will be further lower for the second quarter.
- The European Central Bank chief Christine Lagarde stated that Eurozone had probably passed through the lowest point; however, there could be a second wave.
- The Brent oil price was trading at USD 40.55 per barrel down by 1.22 per cent (as on 26th June 2020, before the market close at 3:00 PM GMT+1). The expected recovery demand echoed in the oil prices.
Given the above market conditions, we will discuss two consumer staples stocks - A.G. Barr PLC (LON:BAG) and Stock Spirits Group PLC (LON:STCK). As on 26th June 2020, (before the market close at 3.00 PM GMT+1), BAG was up by approximately 2.72 per cent while STCK’s stock price was down around 1.28 per cent. Let’s walk through their operational and financial updates.
A.G. Barr PLC (LON:BAG) – PepsiCo to acquire Rockstar Energy Beverage
A.G. Barr PLC is a manufacturer and seller of aerated water and soft drinks. The Group is incorporated in the UK and listed on FTSE-250. The Group’s leading brands include Rockstar, Snapple and San Benedetto. The Group has also launched a cocktail mixer under Funkin brand.
Annual Result FY2020 (year ended 25th January 2020) as reported on 8th April 2020
The Group generated revenue of GBP 255.7 million, which was down 8.4 per cent year on year. The fall in sales was primarily because of the average summer in the UK. The profit before tax excluding exceptional item was GBP 37.4 per cent, which declined by 17.3 per cent year on year. The basic earnings per share were 26.50 pence. The Group generated net cash from operations of GBP 40.1 million, which was down by 10.1 per cent year on year.
As on 25th January 2020, the Group has a cash balance of GBP 10.9 million and has withdrawn complete GBP 60 million from the revolving credit facility. To preserve cash, the Group has put some of the workforces on furlough under government’s job retention scheme and has scaled down marketing and commercial activity. The Board has decided not to pay a final dividend for FY20.
Financial Performance FY2020
(Source: Company Website)
Segmental Performance
The Group reports the performance under three business divisions, namely Carbonated soft drinks, Still soft drinks & water and Funkin. The revenue of the Carbonated soft drinks segment was down by 8.4 per cent to GBP 196.4 million due to fall in sales volume by 9.2 per cent, the division added close to 76 per cent to the Group revenue. The carbonated segment was affected by the inflated cost of goods. The Still & water segment revenue was down by 18.2 per cent to GBP 40.1 million. The Funkin business delivered a strong performance as the revenue grew to GBP 19.2 million, ready-to-drink-cocktail was added to the portfolio.
Pepsico to acquire Rockstar brand
On 11th March 2020, PepsiCo announced their interest to acquire Rockstar Energy Beverages. Since 2007, the Group is the franchise partner of Rockstar and has distribution rights in the UK, Ireland and few European countries whereas since 2009 PepsiCo is a distribution partner in North America. The Rockstar brand adds close to 8 per cent of the total Group sale.
On 23rd June 2020, the Group received a notice to terminate the sale and distribution contract with Rockstar Inc from 23rd August 2020; however, the Group expects that it will continue to manufacture, distribute, and sell Rockstar energy drinks.
Share Price Performance
1-Year Chart as at June-26-2020, before the market close (Source: Refinitiv, Thomson Reuters)
A.G. Barr PLC shares were up by 2.24 per cent to trade at GBX 469.26 per share (as on 26th June 2020, before the market close at 11.00 AM GMT+1). Stock 52 week High and Low were GBX 935.00 and GBX 401.00, respectively. The Group had a market capitalization of GBP 514.21 million.
Business Outlook
The Group believes the current economic conditions will have a severe impact on the business. The “out-of-home” consumption has dropped, which will impact the sale of soft drinks. The sales of “take-home” purchase were resilient; however, it’s hard to determine the future due to the behavioural shift. The Group has put business re-engineering program into action which will support sustainable growth. The Group believes that there could be supply-chain disruption and exchange rate volatility due to the Brexit.
Stock Spirits Group PLC (LON:STCK) – Declared Interim Dividend Amid the Challenging Market Conditions
Stock Spirits Group PLC is a leading owner and producer of alcoholic beverages. The key markets of the Group are Poland, the Czech Republic, Italy, Slovakia, Croatia and Bosnia and Herzegovina. The customers of the Group include supermarket chains, bars, restaurants and hotels. The Group is listed on FTSE All-Share.
H1 FY2020 Interim Result (six months period ended 31st March 2020) as reported on 13th May 2020
The Group generated underlying revenue (excluding 2019 acquisitions) of EUR 180.7 million up by 15.1 per cent on constant currency. The underlying EBITDA was up by 25.6 per cent on constant currency to EUR 44.2 million and reported adjusted EPS of 7.41 cents per share. The Group generated free cash flow of EUR 26.8 million and had a free cash flow conversion of 58.9 per cent.
As on 31st March 2020, the Group had a net debt of EUR 55.4 million. The Group declared an interim dividend of 2.77 € cents per share. The Group has not slashed the workforce strength or has put any of it, staff, on furlough. All the manufacturing facilities, including the third-party sites, were operational.
H1 FY2020 Summary
(Source: Company Website)
Regional Performance
The revenue growth in Poland was up by 25.2 per cent on a reported basis to EUR 104.9 million; the growth was driven by robust performance across all major spirits categories. The reported EBITDA was EUR 28.5 million; the increase in excise duty was passed to customers. Vodka, whisky and brandy are the primary spirit categories in Poland. The on-trade sale is approximately 10 per cent.
In the Czech Republic, the spirit market was tight due to an increase of 13 per cent on excise duty in January 2020 and discounts provided by competitors. Despite this, the reported revenue growth was up by 20.8 per cent to EUR 54.2 million. Rum, vodka and whiskey are the primary spirit categories. The on-trade sale is close to 32 per cent.
Italian region reported revenue was EUR 14.8 million, including EUR 3.3 million from Distillerie Franciacorta. Italy contributes 7.8 per cent of the total Group revenue.
Share Price Performance
1-Year Chart as at June-26-2020, before the market close (Source: Refinitiv, Thomson Reuters)
Stock Spirits Group PLC shares were down by 0.21 per cent to trade at GBX 234.50 per share (as on 26th June 2020, before the market close at 11.02 AM GMT+1). Stock 52 week High and Low were GBX 258.06 and GBX 119.80, respectively. The Group had a market capitalization of GBP 468.78 million.
Business Outlook
The Group is putting efforts to mitigate the supply chain disruption. Given the severity of the pandemic, Group refrained from providing any guidance for the year. The Group believes the Consumer demand for spirits to remain upbeat and to benefit from stockpiling. The on-trade channel sales (bars, clubs, restaurants, and hotels) contribute significantly to the total sales; the recovery of this segment is highly uncertain and will depend on ease in the lock-down. The increase in excise duty and VAT pose as a risk for the future operations of the Group.
