“Positive start”

Today’s interim results from Vimto-owner Nichols should provide some comfort to investors. Revenue increased 13.8% to £67.4m over the first six months of 2021, with adjusted pre-tax profit moving almost 32% higher to £8.9m.

Sure, some improvement was expected due to the loosening of restrictions. Even so, news that the company’s Vimto Dilutes range significantly outperformed the UK market between January and June bodes well.

Sales of Vimto have been rebounding overseas too. International growth of 42.3% was recorded compared to the prior year. Sales in regions such as the Middle East (the drink is incredibly popular over Ramadan) appear to have held up well.

And the outlook? Well, Nichols believes that its “positive start” to 2021 should allow it to meet management expectations for the full year. However, I now wonder if the recent weather might lead to a slight increase in guidance next time around.

All told, I’m satisfied with today’s update and would be happy to add to my position today. A good recovery in sales, not to mention a strong balance sheet and solid portfolio of brands (which now includes SLUSH PUPPiE), makes me think this is one of the best stocks to buy now in this space.  

“Better than anticipated” trading

Today’s results from Nichols followed hot on the heels of fellow drinks maker AG Barr. Like the former, Barr has had to contend with the shutdown of the hospitality industry over the pandemic. Like Nichols, the company’s now showing signs of recovery.

Yesterday, Barr announced that full-year profit would now likely be ahead of expectations due to “better than anticipated” trading. This helped its previously-sluggish share price to recapture some of its lost mojo.

Again, I think Barr will do well in time and there’s more upside ahead. It’s another quality operator that’s conservatively run. It also has a good number of ‘sticky brands’ such as IRN-BRU, Rubicon and Funkin. So I’m tempted to continue accumulating the shares.

Sales tailwind

As a holder of both stocks, it’s hard for me to sit on the fence when looking at NICL and BAG. Notwithstanding this, I’m encouraged by recent trading. I also suspect the blazingly-hot summer in their home market will prove a tailwind for sales.

This isn’t to say I shouldn’t be careful. Owning multiple companies in the same sector isn’t without risk. Although no lasting damage appears to have been done, the introduction of the sugar tax on soft drinks a few years ago was proof that even the most defensive companies can face challenges.

Going forward, it goes without saying that Delta infection levels may get so bad that some restrictions may need to be re-introduced. This may hamper demand for both product stocks. 

So long as I keep my exposure in check by investing elsewhere, I think the reward will be worth it if I bought more now. 

The post UK heatwave! Here are 2 of the best stocks to buy now appeared first on The Twelfth Magpie.

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Paul Summers owns shares in AG Barr and Nichols. The Motley Fool UK has recommended AG Barr and Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A UK share ready to fizz

As a holder of the stock, I never expected today’s final results from drinks firm AG Barr (LSE:BAG) to be all that impressive. And so proved to be the case.

Due to the enforced closure of bars and pubs, the producer of thirst-quenching brands such as IRN-BRU and Rubicon has been hit hard by the pandemic. Revenue fell 11.2% to £227m over the 12 months to 24 January. Pre-tax profit also decreased — by 12.3% — to £32.8m (or £26m once one-off costs were deducted). Despite this, there were a few bits of good news.

Partly as a result of steps taken to control costs, Barr ended the year with £50m in net cash. That’s up significantly from the £10.9m logged at the end of the previous financial year. This comforts me. As an investor, I need to know a business I part-own has a sufficiently robust balance sheet to negotiate inevitable periods of ‘sticky’ trading. 

In other news, CEO Roger White said the company had “the clear intention to recommence dividend payments in 2021.” The fact that it hasn’t done so already is actually a positive for me. As nice as dividends are, I don’t want a business showering me with cash until it’s confident in its outlook. 

All told, I’ve no problem staying invested. That’s not to say I expect the share price to motor back to its 2019 high for a while. 

While the lifting of restrictions should be good news for AG Barr, it would be foolhardy to assume there won’t be obstacles ahead. The possibility of a third wave of the coronavirus can’t be ignored. Especially if the vaccine programme runs into trouble.

This is a UK share for the ‘bottom drawer’. 

Sweet treat

Of course, there are other ‘reopening’ options available in the small/mid-cap space. Chocolatier Hotel Chocolat (LSE: HOTC) is another example of one that could do very nicely in time. 

Now, it’s quite reasonable to say that sales of chocolate are unlikely to rocket as we approach summer. This is particularly the case if we get a heatwave! 

As a counter to this argument, I suspect HOTC’s next update on trading could be better than some in the market are expecting. It should, after all, take into account trading in the Easter period. If reports are to be believed, many in the UK are treating this weekend as a second Christmas and spending lots on decorations and, very likely, chocolate eggs.

On top of this, the recent decision by rival Thorntons to abandon its high street stores could prove a boon to the £500m-cap. It should allow HOTC to assume pole position at the luxury end of the UK market.

Like AG Barr, I wouldn’t buy Hotel Chocolat stock if I were only considering holding it for a few weeks or months. Investing requires patience. Trying to predict where a share price will go in the very near term is asking for trouble.

On a mid-to-long-term basis, however, I’m confident these UK shares could do very well for holders.

The post 2 UK shares to buy for the great ‘reopening’ appeared first on The Twelfth Magpie.

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Paul Summers owns shares in AG Barr. The Motley Fool UK has recommended AG Barr. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

But let’s stay optimistic. Thanks to their ability to rapidly increase revenue and profits, I think there are many small-cap growth stocks whose share prices could really shine. Here are three with strong potential. 

Drink up

Assuming bars, pubs, and sporting venues are allowed to fully open by spring, I think beverage firms such as AG Barr (LSE: BAG) could do well. Drinks companies do have a habit of bouncing back firmly after general market setbacks. This time should be no different.

That’s not to overlook just how hard the last year has been. Revenue and pre-tax profit have tumbled in 2020 due to the incredible headwinds faced by the hospitality sector. I’m also under no illusion that it will take some doing for Barr to recover back to the 950p mark it hit in 2019.

Then again, it’s got a lot going for it. In addition to its flagship IRN-BRU brand, Barr looks financially solid. The business had over £30m in net cash when it last reported to the market.

Although not currently paying out dividends, management does expect cash returns to resume in 2021 too. That’s the sort of bullish talk I like to hear.

Right space, right time

As widely expected, the share price of infection prevention specialist Tristel (LSE: TSTL) has enjoyed an excellent 2020. The £250m business is up almost 40% year-to-date. That’s despite sales being lower in early 2020 due to many operations being deferred by the pandemic.

Positively, CEO Paul Swinney revealed last week that Tristel had seen a “substantial recovery in demand” for its products since October. Pre-Brexit stockpiling by the NHS was a factor.

One reason the shares could continue rising in 2021 relates to the company winning approval from various regulatory bodies. In the US, Tristel has already spoken of “very encouraging progress” relating to its FDA test programme for its ‘Duo for Ultrasound’ disinfectant. Additional positive feedback has come from the Canadian regulator on its ‘Duo for Ophthalmology’ submission. 

Trading at 40 times forecast earnings already, at least some of this potential is already priced in. Even so, Tristel is a highly profitable, niche business with excellent finances. If another market crash presents me with an opportunity to do so, I’m backing the truck up. 

Ready to strike

For those of a risk-tolerant nature, ten-pin bowling firm Hollywood Bowl (LSE: BOWL) could also be worth backing.

While its offering is easily replicated, I think Bowl has a chance of recovering from the pandemic more speedily than, say, the UK’s battered airlines. A few games of bowling is far more affordable to families in tricky times than a holiday abroad. Even those with the means to travel when restrictions lift may adopt a ‘wait and see’ approach.

Only last week, the company reported it had seen “strong customer demand and better than expected performance” when it reopened after the first lockdown. That’s got to be encouraging.

The new tier 4 restrictions won’t help things in the near term. However, this may provide new investors an opportunity to strike on UK shares like this before the real recovery kicks in.

The post 3 UK small-cap growth shares I think could DOUBLE in 2021 appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Nichols and AJ Barr. The Motley Fool UK has recommended AG Barr, Hollywood Bowl, and Nichols. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The company has welcomed a rush of investors over the last few years, attracted by the fat margins and high returns on capital it generated. Yes, AG Barr exuded quality. Until, that is, earlier this year when management warned on profits following its decision to switch focus to increasing prices rather than volume.  

Having lost a third of its value, it’s only natural today’s interim results would attract attention. So, was it a temporary blip, or a sign of tough times ahead? Fortunately for holders, it looks like the former.

Based on trading for the six months to 27 July, the company believes it “remains on course” to meet its revised predictions for the full year, despite ongoing economic uncertainty. That’s not to say that these results were sparkling.

Revenue and pre-tax profit were both down by a little under 11% and 24%, respectively, compared to the same period in 2018. Despite taking steps to address previously-identified issues with its Rockstar and Rubicon ranges, the company also said the benefits “will not be felt until later in the second half of the financial year.” On a more positive note, there’s been an encouraging response to the launch of its new IRN-BRU Energy drink. The Funkin cocktail range continues to perform well too.  

AG Barr’s shares are up almost 6% this morning, suggesting investors are willing to forget the last few months. I can’t blame them. After all, the mid-cap still has a strong balance sheet, ‘sticky’ brands and trading should remain resilient in the event of a recession. A forecast dividend yield of 2.6% isn’t massive but can be considered adequate compensation while things get back on track.

So while a forecast price-to-earnings ratio of 22 certainly doesn’t make this stock ‘unmissable’, I remain bullish on AG Barr’s ability to reward investors over the medium-to-long term.

Ahead of expectations

Another example of a company that experienced a big drop in its share price not too long ago would be chocolatier Hotel Chocolat (LSE: HOTC). The stock tumbled from a high of around 400p back in June 2018 to just above the 250p mark only six months later. Since then however, it’s rebounded strongly. 

Today’s results for the full-year to the end of June go some way to justifying this bounce with the company logging a 14% rise in revenue (to £132.5m) and an 11% increase in pre-tax profit to (£14.1m). According to CEO and co-founder Angus Thirlwell, the latter was “slightly ahead of expectations.”

Over the period, the company opened 14 stores in the UK and ROI, two in the US and two in Japan, with a further five international sites scheduled to open over the next six months. More than 900,000 people have now signed up to its VIPMe loyalty scheme.

The only problem with all this good news is that the valuation — at 34 times forecast FY20 earnings even before markets opened this morning — looks rather frothy. Although further growth is expected, I’m not sure I’d be buying today.

Should markets dip again in the run-up to Halloween (our official EU departure date), Hotel Chocolat might just be worth biting into. 

The post Is this battered growth stock now an unmissable buy? appeared first on The Twelfth Magpie.

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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s one of the busiest weeks of the year for first-half company results, and a great opportunity to check up on our existing shareholdings and to look for new candidates. Here are three that are worth closer scrutiny.

A great engineer?

GKN (LSE: GKN) makes major components, like driveshafts, fitted to many of the world’s cars, in addition 07bn to aerospace components. As such, it’s a relatively safe haven in these traumatic post-Brexit days, with the company’s first half announcement telling us “there should be little [Brexit] impact on GKN over the medium term and 2016 is expected to be another year of growth“.

Sales rose by 17% to £4,518m, with adjusted pre-tax profit up 12% to £344m and adjusted EPS up 7% to 15.5p, and the interim dividend was lifted 2% to 2.95p per share. Net debt did rise, however, from £769m at the end of December to £918m. Cost-cutting is expected to bring annualised savings of £30m from 2017, with a one-off £35m charge in the second half of this year.

GKN shares are up 2% to 296p as I write, and that puts them on a full-year P/E of just 10.8, dropping to 10 on 2017 forecasts, with expected dividend yields of a little over 3%. That looks good value to me, and I see an opportunity here to take advantage of a currently unloved sector.

Cheeky young bank

Challenger bank Virgin Money Holdings (LSE: VM) released first-half figures today, and they look pretty impressive, with underlying pre-tax profit climbing 53% to £101.8m. Net mortgage lending rose by 29% in the period, to £2.2bn, reflecting the bank’s potential as a newcomer to the market. Credit card balances are up 31% with cash on deposit up 8%, and key liquidity measures all look very solid.

On the key Brexit worry, Virgin said it’s “in a strong position to deal with a period of post-referendum uncertainty“, experiencing “continued strong customer demand and no evidence of changes in customer behaviour“.

Investors were pleased and pushed the shares up 7% to 262p, but they look anything but overpriced. They’re valued at just 8.8 times forecast full-year earnings, dropping to only 7.5 on 2017 forecasts, with a 3% dividend yield predicted for 2017. I see a strong prospect in a depressed sector.

A super growth share

Shares in Fevertree Drinks (LSE: FEVR) have more than doubled in the past 12 months and have nearly five-bagged over the past two years. Today’s first-half figures from “the world’s leading supplier of premium carbonated mixers” provided an extra 5% boost, taking the price up to 842p.

The company reported a 69% rise in revenue to £40.6m with adjusted EBITDA up 72% to £12.4m and EPS up 83% to 8.12p. Net cash stood at £18.6m, up from £7.9m at the same stage last year, and the interim dividend was lifted by 97% to 1.54p per share (though full-year forecasts suggests a yield of only 0.5%).

The big question now is of valuation, with the shares valued at a heady 50 times predicted 2016 earnings, falling only as far as 44 on 2017 forecasts. Though we’re looking at a strong company, it has all the look of an overblown growth share to me, and I can’t help feeling there’ll be a correction in the not-too-distant future.

The post 3 hot shares to buy on results day? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of GKN. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A defensive bargain?

Premier Foods (LSE: PFD) might perhaps seem an unexciting prospect, but it did get a few hearts beating in March when a takeover approach from McCormick & Company sent the shares soaring. It didn’t come off and the price fell again, but Premier Foods shares are still up 48% since the bid, to 46.8p.

Today the company told us that Q1 sales were up 1.9% with the fourth consecutive quarter of sales growth. Worried about Brexit? Chief executive Gavin Darby reckons the firm’s “immediate financial exposure is expected to be limited“.

Expectations for the full year are unchanged, so at this stage we’re looking at a welcome 5% EPS rise, putting the shares on a forward P/E of just 5.5. Year-end net debt stood at £534m, which goes some way to explaining the apparent undervaluation of the company with a market cap of £385m, but I think we’re still looking at a decent long-term investment.

Precious gold and silver

There’s been a bit of a flight towards gold and silver of late, and today’s high prices for those metals have given Hochschild Mining (LSE: HOC) a boost. Production volumes in its first six months came in ahead of expectations, with 8.2m ounces of silver and 118,100 ounces of gold unearthed in the half.

Debt fell from $366m to $280m during the period, with cash up from $84m to $103m, and full-year production guidance was raised. Chief executive Ignacio Bustamante described the first half as “pivotal in Hochschild’s recent history,” so should we buy the shares?

Priced at 213p, we’re looking at a P/E of 43 this year as the company swings back into positive EPS, and that would drop to around 16.5 if the 160% rise in EPS forecast for 2017 comes off. But it’s based on today’s precious metals prices staying with us, and with the global economic outlook improving and the attractiveness of shares getting better, I think that’s a very risky assumption. Not for me.

Depressed by Brexit?

Shares in Britvic (LSE: BVIC) have slumped by 13% so far in 2016, to 619p, but since the end of June they’ve been staging a bit of a comeback. Did today’s Q3 update bring any cheer for hard-pressed investors?

Reported revenue came in 5.3% ahead of the same period last year, at £346.3m (though that translated to a 0.7% drop in organic revenue to £326.5m), as chief executive Simon Litherland told us the quarter’s performance was better than the first half’s. There’s certainly a Brexit risk here, with Mr Litherland pointing to higher input costs as a result of the fall in Sterling.

The share price weakness has dropped Britivic’s forward P/E to 13, and to 12.4 on 2017 forecasts, and has boosted the predicted dividend yields to around 4%. There are some risks, which will become clearer as Brexit progresses. But with those dividends looking well covered, I see the shares as good value.

The post Do today’s updates turn these three shares into cracking buys? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.