The Guardian - 24.07.2019

Section:GDN 1N PaGe:31 Edition Date:190724 Edition:01 Zone: Sent at 23/7/2019 20:26 cYanmaGentaYellowb

Wednesday 24 July 2019 The Guardian •

Financial^31

T

hat bill-payers got

stuff ed in the deal

that brought the

Hinkley Point C

project into existence

is beyond dispute

these days. Even ministers

barely quibble with the National

Audit Offi ce’s assessment that

consumers will be paying through

the nose for 35 years. The defence

has tended to be: don’t worry,

we’ve triggered a “resurgence” in

the nuclear industry and the next

reactors will be relative bargains.

Life has not worked out

as planned. The government

stretched the limits of fi nancial

acceptability to try to persuade

Hitachi to construct a £16bn plant

at Wylfa in Anglesey , but still

couldn’t get the Japanese fi rm to

Business view

Nils Pratley

Let’s pray a love-in

with the ‘regulated

asset base’ model does

not re-ignite ministerial

fantasies about a

resurgence in nuclear

▲ Hinkley Point C power station,

under construction in Somerset

Nuclear power reimagined

• but still at core hideously

expensive and far from ideal

Gin slung: cool

start to British

summer leaves

Fever-T re e le s s

than sparkling

Sarah Butler

A cool start to the summer, rising
competition and a slowdown in the
gin trend knocked the fi zz out of Fever-
Tree Drinks, which has posted a worse
than expected slowdown in UK sales.
Shares in the tonic water maker
fell 9.6% yesterday, wiping more
than £280m off the company’s value,
as it admitted that poor weather in
the three months to 30 June had
dampened growth rates .”
Fever- Tree has been a strong stock-
market performer since its fl oat in 2014

• creating a £2.4bn business that has
  made multi million-pound fortunes
  for co-founders Tim Warrillow and
  Charles Rolls – but its shares have
  retreated nearly 50% since their peak
  last year.
  The latest share decline came as
  Fever- Tree said UK sales rose 5% in the
  six months to 30 June, when analysts
  had expected 8%. Total sales rose 13%,
  versus a hoped-for 15%, as underlying
  profi ts for the whole group rose by 8%
  to £36.7m.
  Analysts said Fever- Tree was
  battling against a major promotion by
  rival Schweppes as well as a general
  slowdown in the drinks trade com-
  pared with last year’s hot summer.
  Warrillow, Fever– Tree’s chief exec-
  utive, said the industry had faced

an “exceptionally tough” period

compared with last year when the

hot weather combined with the royal

wedding and World Cup to create a

thirst for G&T.

Warrillow and Rolls co-founded

Fever-Tree in 2005, naming it after the

colloquial term for the cinchona tree,

the bark of which produces quinine –

a key ingredient in tonic water.

The British gin revival has also lost

momentum, although Fever -Tree said

it was still growing by more than 10%,

albeit in comparison with growth of

more than 50% last year.

Fever– Tree’s slowdown comes after

the Irn Bru maker, AG Barr, issued a

profi ts warning last week. It said it

expected sales to drop 10% this year

because of cooler weather and a recipe

change prompted by the sugar tax.

Russ Mould, investment director

at stockbroker AJ Bell, said fi rst-half

sales growth of 24% in the US was an

important counterpoint to trading in

Fever- Tree’s domestic market. He said:

“Fever- Tree’s poor UK growth was not

disaster territory as the company’s

future growth is arguably depend-

ent on cracking the US market – and

progress here is good.

“Ultimately Fever- Tree has become

a victim of its own success. Soaring

growth rates in recent years have raised

expectations for its performance and

failure to deliver anything but superior

rates leaves it open to fi erce criticism.”

▲ Andy Murray in action during

the Fever-Tree Championship at the

Queen’s Club in London in June.

PHOTOGRAPH STEVEN PASTON/ PA

Source: Refinitiv

35

30

20

25

Fever-Tree shares have fallen

nearly 50% since their peak of

£39.56 in 2018

£40

Jan

2018

Apr Jul Oct Jan

2019

Apr Jul

Supermarket sales under a cloud

Sales at UK supermarkets have

fallen for the fi rst time in three

years, after the cold weather in

early summer resulted in poor

sales of soft drinks, alcohol and ice

cream.Grocery sales were down

0.5% in the 12 weeks to 14 July,

compared with the same period

a year earlier, dragged lower by

weak performances from the UK’s

big four supermarkets, according

to market share data from Kantar.

Tesco, Sainsbury’s, Asda and

Morrisons, which together account

for two-thirds of grocery sales,

suff ered a collective 2.1% sales fall

over the period, as shoppers reined

in spending compared with last

year’s heatwave.

Overall, beer sales slid 11% and

cider was down 13% as consumers

spent £75m less on alcohol than

during the same period last year.

Soft-drink sales were down by

5.4% and ice cream by nearly 15%

year-on-year, although shoppers

spent 15% more on chocolate during

the wet weather.

Aldi , Lidl and the Co-op bucked

the trend. Lidl increased sales by

7%, Aldi by 6.7% and Co-op by 0.2%.

Sarah Butler

sign up. Nuclear still wasn’t getting

cheaper.

Now here’s the government’s

latest eff ort to resurrect the show

• “an innovative funding model”.
  Of course, it’s not really innovative.
  The “regulated asset base” (RAB)
  approach, which could be used
  at Sizewell B in Suff olk, which is
  intended to copy the design of
  Hinkley in Somerset, is common in
  other parts of the utility world.
  Think of the RAB method as an
  attempt to knock the sharp edges
  off the fi nancial arrangements at
  Hinkley. There, the developer EDF
  carries the risks of cost overruns
  but is allowed to charge sky-high
  guaranteed prices once the plant
  is up and running. Under RAB,
  consumers would start to pay for
  a plant before it is built but the

electricity at the end should be

cheaper. For their part, investors get

a lower, but safer, regulated return.

Genius? Not really. Aside from

exposing consumers to the cost

of overruns, RAB eff ectively also

requires them to provide fi nancing

at zero interest, a point made by the

National Infrastructure Commission

last year. Little wonder that the juice

should be cheaper than Hinkley’s –

some of the costs will be hidden.

But is RAB an improvement?

Possibly. Competition among

outside investors to provide

capital may trim a few costs. And

by the time Sizewell could be

commissioned in 2021, EDF should

have completed its second plant

in China. So we may be better

able to judge whether the French

state-backed fi rm has learned from

its wretched experience with the

Flamanville plant in Normandy.

So, yes, the RAB model is worth

a consultation. But , as the same

NIC report said: “There is limited

experience of using the RAB model

for anything as complex or as risky

as nuclear.” Second, no fi nancing

model can disguise that the

technology is hideously expensive.

The NIC said last year that the

UK shouldn’t rush to tie itself to

an expensive nuclear future and

should instead back renewables,

notably wind and solar. Even

after recognising the need to have

secure “baseload” supplies, it

recommended commissioning only

one more nuclear plant, on top of

Hinkley, before 2025. That remains a

commonsense analysis. Renewables

are winning the price race.

Let us pray, then, that a love-

in with RAB does not re-ignite

ministerial fantasies about a

“resurgence” in nuclear..

Not on the money

Only a month ago, the banknote

printer De La Rue looked a takeover

target in the making. The CEO,

Martin Sutherland , had said he’d

quit after a profi ts warning. Then the

chairman, Philip Rogerson , said he

wanted to retire, followed by Andy

Stevens , the senior independent

director. In the wings, an activist

investor, Crystal Amber, was stirring

up bidders.

Then the Serious Fraud Offi ce

launched an inquiry – into

“suspected corruption” in the

group’s conduct of business in South

Sudan. The share price fell 16% to a

16-year low of 251p. Filling three big

boardroom posts by the end of the

year already looked a challenge –

and more so now.

Still, Rogerson has an early

opportunity to reveal how he will

execute his “orderly” succession

plan, because the annual meeting of

shareholders takes place tomorrow.

The gathering may be lively.

▲ Fever-Tree grew by more than 50%

last year as Britain had a hot summer

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