Nick Train takes a hit as AG Barr shares fizzle out

Nick Train has suffered another hit to his portfolio as one of his beloved consumer brands AG Barr issues a surprise profit warning.

The maker of Scottish fizzy drink Irn Bru saw its shares dive 25% off the back of a gloomy pre-close trading update in which it warned profits for the year could decline by as much as 20%.

Train owns some 14% of the company or some 16 million shares, making him the largest institutional shareholder.

‘Brand challenges’

CEO Roger White blamed weaker profits on “brand challenges” in the beverage group’s Rockstar energy and Rubicon juice drinks as well as poor spring and early summer weather in Scotland and northern parts of England and said this would also result in 10% lower revenue of £123m for the 26 weeks to 27 July 2019.

He added the group would also likely incur exceptional costs in the current year as it takes action to regain momentum.

“While the Funkin business goes from strength to strength, it has been a challenging start to the year for Barr Soft Drinks,” the AG Barr boss said.

“Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance. We are focused on returning to growth and will continue to take the actions we believe necessary to succeed in the dynamic environment within which we operate”.

Train is an ardent believer in the enduring power of “beloved brands” and has hit back against critics who say these companies are “perilously expensive,” arguing they have the potential to become more valuable in the 21^st century despite the disruptive power of online shopping.

His concentrated UK equity portfolio contains just 22 names, including AG Barr, Cadbury maker Mondelez and Dove soap owner Unilever.

According to the fund’s June factsheet nearly half of the portfolio is held in what would be classed as consumer staples, with 20.3% held in beverage brands, 9.3% in food producers and another 16.8% in personal goods.

Before Tuesday’s profit warning AG Barr had been one of the stronger performers in the Lindsell Train UK Equity fund, a mirror of his Finsbury Growth & Income trust.

The global equities manager first purchased the maker of Irn-Bru in 2001 for around 77p per share, when Lindsell Train was handed the Finsbury Growth & Income mandate. Since then, shares in the Scottish soft drink maker have increased tenfold and are currently trading at £8.22 per share.

Train has also recently been hurt by his exposure to the UK’s largest D2C player Hargreaves Lansdown, which took a reputational hit for its endorsement of Neil Woodford after his equity income fund was forced to suspend dealing.

In the immediate aftermath Train’s eponymous boutique racked up a £150m loss as Hargreaves saw £1.1bn knocked off its share price. Since then its shares have recovered slightly and are trading above £20.50 a share.

Good news for Burberry

However there was good news for another one of Train’s favourite brands on Tuesday – Burberry. The British luxury retailer saw its shares surge 13% after its first quarter sales beat expectations thanks to strong growth in China and the buzz generated from its spring collection designed by Riccardo Tisci.

Burberry makes up a chunkier weighting in the Lindsell Train UK Equity fund, featuring among its largest holdings at 7.1% of the portfolio. AG Barr is not in the fund’s top 10.

Train’s £7.2bn UK equity fund has handily beat peers in the IA UK All Companies over one year, returning 13% compared with the sector which is down 1.7%. Over three and five years it has produced double and nearly triple the average returns of the sector.

Source: Trustnet