Irn-Bru maker AG Barr enjoys double-digit growth and signals end of era: DRS on track but 'considerable work to be done'
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Chief executive Roger White hailed an “excellent financial performance” as he revealed that annual revenues had risen by 18.2 per cent on a reported basis, to £317.6 million. Adjusted profit before tax topped £43.5m in the year to January 29, up 13.3 per cent on the previous 12 months. The board is recommending a final dividend of 10.6p per share to give a proposed total dividend for the full year of 13.1p, a 9.2 per cent increase on the year before.
White, who in 2004 became the first chief executive from outside the Barr family, said: “Over the past 12 months we delivered an excellent financial performance and made significant progress across our strategic objectives, an achievement only made possible by our committed and hardworking teams. We are now in an investment phase, designed to capitalise on the strategic growth opportunities ahead.
“We are seeing some margin compression and that will continue,” he added. “We can see ourselves returning to historic margin levels but not for the next couple of years. We are doing our best to keep our range of products as affordable as possible - shouldering an element of the pain.”
Those inflationary pressures resulted in the adjusted operating margin cooling to 13.6 per cent, from 14.9 per cent a year earlier. Profit margins were also impacted by accelerated investment, including “significant” marketing for the Funkin cocktail mixer and Moma porridge and oat drink brands.
The Cumbernauld-based group also said it was well advanced in its preparations for Scotland’s deposit return scheme (DRS), currently due to go live in August, saying it had the potential to increase the availability and quality of recycled material, as well as supporting the firm’s long-term circular packaging goals. It has previously warned that the introduction of DRS has the potential to “impact consumer purchasing behaviour”.
White said: “There is still considerable work to be done but we fundamentally agree with the principle of having an effective and efficient way of creating circular packaging and avoiding waste. It’s just how that is executed that’s the tricky bit. We would have preferred a UK-wide system that allowed for minimal fraud and the least burden on consumers and industry. That was our position but that wasn’t taken up by the Scottish Government so now we’re meeting our obligations.”
The scheme will see a refundable 20p deposit added to all single-use drinks containers made of PET plastic, metal or glass.
Meanwhile, the group, whose other brands include Rubicon, Snapple and Strathmore mineral water, said that after 62 years with the business Robin Barr had informed the board of his decision not to seek re-election at May’s annual shareholder meeting. Following a board succession planning process, it was also announced that Julie Barr will relinquish her company secretarial duties and subject to shareholder approval will join the board as a non-executive director.
Chairman Mark Allen said: “We are hugely indebted to Robin for all his years of service, not to mention the balanced and insightful guidance he has provided to the board as the business has developed across the last 60 years or so. I am delighted that Julie will join the board in due course and I am certain her experience and skills will complement and further strengthen our board capabilities.”
White added: “It’s a fair old shift to put in and Robin will be missed by all of us at the board meetings but I’m sure we will see him continue to do his ‘Irn-Bru duties’. Julie is a very capable individual and will be a different but great addition to our board.”
On the group’s most recent acquisitions, White said the firm had bought “great businesses with fantastic potential for the long run”. Highlighting a strong balance sheet, with just under £53m in cash, he added: “If we can find the right things that create long-term value then I’d like to think we are in a position to be able to facilitate that.”
John Moore, senior investment manager at wealth firm RBC Brewin Dolphin, said: “AG Barr continues to pop. Despite a tough backdrop, trading remains strong and the company’s positive momentum continues, with recent acquisitions making a positive contribution to the bottom line. Cost pressures remain a concern and have heightened a little since AG Barr last updated the market, but the company is demonstrating its ability to successfully mitigate this issue.
“Despite making some significant investments, AG Barr still has a substantial amount of cash on its balance sheet, which should not only help support the dividend but could be used for further investment and bolt-on acquisitions to consolidate the company’s growing market position.,” he added.
Aarin Chiekrie, equity analyst at investment platform Hargreaves Lansdown, noted that margins had dipped as a result of cost inflation, significant marketing spend and the impact from acquiring the lower margin Moma and Boost brands, but described the overall outcome as a “sweet set of full-year results”.
Analysts at house-broker Shore Capital said the results were a “little ahead of expectations” and made for a year of strong progress, adding: “We reiterate our view that AG Barr is a high-quality company, with an attractive brand portfolio building a strong net cash position and attractive medium to long-term growth potential and ambitions.”