Applied Nutrition has raised its full-year profit outlook after annual revenues surged 50 per cent to £160 million in Liverpool amid sustained demand for its sports protein products.
The sports nutrition business reported the revenue jump for the year to 31 July and expects full-year adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) to rise 40 per cent year-on-year to £43.3 million. That forecast beats market expectations of £42 million, excluding the impact of its acquisition of US-based Nutrablend in June.
In the current financial year, the group expects adjusted earnings to reach £49 million with annual revenue forecast to hit £205 million, both exceeding City expectations.
However, the company warned that "significantly higher" whey protein costs would eat into profit margins over the year ahead.
Applied Nutrition was founded in 2014 by Liverpudlian former scaffolder Thomas Ryder. The Liverpool-based firm manufactures sports nutrition supplements, protein powders, and fitness health products, and is backed by media personality Coleen Rooney and FTSE 100 retail giant JD Sports.
Global prices for whey protein, a milk derivative widely used in exercise supplements, have spiked in recent years. The increase has been driven in part by the widespread adoption of weight-loss drugs, which have prompted users to alter their diets and exercise regimes dramatically.
Applied Nutrition expects whey-based products to account for a larger proportion of total sales following the relaunch of its Critical Whey powder product line.
Rising Costs and US Expansion
The company also flagged that an anticipated increase in US sales during the current financial year will drag on its Ebitda margin. The margin pressure follows its acquisition of US contract manufacturer Nutrablend in June.
Despite the margin pressure, stockbroking firm Peel Hunt said it sees potential upside from the company's expansion into North America, where its new manufacturing facility holds significant capacity for white-label production.
Following the trading update, shares in Applied Nutrition rose 0.6 per cent to 3223.5p, bringing the stock's gains for the year to over 26 per cent.
Investment broker Berenberg noted that Applied Nutrition possesses "early-stage global growth potential" but cautioned that investors would keep a close eye on any further dilution of operating margins.
Berenberg analyst Adam Tomlinson said: "For Applied Nutrition to retain its premium valuation rating, management will need to show that underlying margins remain healthy and stable."
