Irn-Bru maker AG Barr pledges action on rising costs as sales buoyed by summer demand
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The iconic Scottish soft drinks firm warned that the squeeze on discretionary consumer spending was likely to impact purchasing behaviour in the months ahead as it reported a strong first-half performance.
Chief executive Roger White said the firm had seen sales recover strongly following the pandemic while “reasonable” summer weather and high temperatures, particularly south of the Border, aided the results for the 26 weeks to the end of July.
Cumbernauld-based Barr, which is also behind the likes of the Rubicon and Funkin brands, posted interim revenues of £157.9 million, up 16.7 per cent on a similar period a year earlier.
Adjusted profit before tax came in at £25.3m, an increase of 22.8 per cent, though the reported profit inched up just 1.2 per cent to £24.7m.
Trading benefited from the year-on-year Covid recovery, particularly in the on-trade and out-of-home sectors. Operating margin, while impacted by cost inflation, has been supported by sales growth, cost control and stronger pricing, the group noted.
An interim dividend of 2.5p per share was declared, an increase on the prior year of 25 per cent.
White said the business was seeing cost pressures mount “across the board”, including labour costs, though immediate job losses are not on the cards following an earlier restructuring.
“We continue to take action to mitigate the cost pressures we face both in the short term across the balance of the current financial year and where possible into 2023,” he added.
“We anticipate in the coming months that the current economic environment will impact consumer purchasing behaviour, however we currently remain confident that our strategy and actions will allow us to deliver a full-year profit performance ahead of the prior year.”
John Moore, senior investment manager at wealth firm RBC Brewin Dolphin, said: “AG Barr has delivered a strong set of results in a highly challenging set of circumstances, underlining its resilience as a business. The cost of living crisis and rising energy costs are significant uncertainties for the company, but there is a confidence in [the] statement that suggests the management team are ready to weather the storm.
“The 25 per cent increase to the dividend is also good news for shareholders and is well covered by a strong balance sheet, with cash built up over the past two years.”
Charlie Williams, equity research assistant at investment group Hargreaves Lansdown, noted: “Soft drinks and cocktail group AG Barr is finally seeing momentum after a difficult period during lockdowns. The group has continued investment into renowned brands like Irn-Bru and is starting to reap rewards, backed up by successful launches of new product lines.
“AG Barr isn’t immune to the inflationary pressures, though. Cost management remains a key focus, but recent price hikes have already seen volumes fall and management remains conscious of consumer spending patterns as incomes get squeezed.”
AG Barr flagged a balance sheet with £61.3m of cash and cash equivalents.