MIDAS SHARE TIPS UPDATE: Hasn't our tip scrubbed up well! Shares in flavourings firm Treatt rise threefold

Updated: 07:47 EDT, 14 April 2020

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Treatt has several characteristics in common with FW Thorpe, our other Midas tip this week.

Both bear the name of their founder and can trace their roots back for decades. Both have evolved considerably since the early days, while retaining a reputation for top quality products and service. And both have a strong culture, focused on making sure employees feel valued.

These traits have stood both businesses in good stead and should continue to do so, even at this difficult time.

Liquid assets: Treatt makes natural ingredients and flavourings used in numerous products, including drinks, food and soaps

Treatt floated on the stock market in 1989 and has never missed a dividend since. That enviable track record looks set to continue, despite the raging uncertainty caused by Covid-19.

Treatt makes natural ingredients and flavourings used in numerous products, including beer and spirits, tonics and flavoured water, tea and coffee, crisps and other savoury snacks. They are also used in soaps, hand cleansers and general cleaning products.

With much of the country in lockdown, consumer habits are changing fast. People are drinking more, snacking more, washing more and cleaning their homes more often.

These patterns are borne out by Treatt's results. Last week, chief executive Daemmon Reeve delivered an upbeat trading statement for the six months to March 31, saying that orders have been strong, particularly for ingredients used in liquid hand soaps, floor cleaning products, and drinks, both alcoholic and non-alcoholic.

The group took early action to manage Covid-19. No employees have been furloughed and business continues, while observing government guidelines.

Reeve took the helm eight years ago, when Treatt was largely a trading company, buying and selling natural extracts and ingredients.

Since then, the group has become a key supplier to many multinational businesses, helping them produce popular goods, such as iced tea, premium tonics and spirits.

Treatt is based in Bury St Edmunds, Suffolk, and was due to move into a state-of-the-art new facility this year. Construction has been held up by the coronavirus and the move is more likely to take place next year than this, but that does allow the group to conserve cash in the coming months.

In the US, meanwhile, Treatt is firing on all cylinders after doubling capacity in fast-growing areas such as health and wellness, and exotic teas.

Before the Covid-19 pandemic took hold, brokers were forecasting solid results for this year, backed by a 4.5 per cent increase in the dividend to 5.75p, rising to 6.1p in 2021.

In the current environment, there can be no guarantees about either payment, but Treatt seems better able to cope than many peers and its track record provides extra reassurance.

Almost every employee owns shares in the business too, so they are deeply committed to its continued success.

Midas verdict: Midas recommended Treatt in June 2014, when the shares were £1.59 and Reeve was just beginning to stamp his footprint on the business. Last week, Treatt's shares closed at £4.96, one of the few stocks to have risen this year.

Looking ahead, there is room for optimism. Reeve's strategy is bearing fruit, Treatt's ingredients are in demand and the company is financially secure. A strong hold for existing shareholders and an attractive punt for new investors too.