Irn-Bru maker AG Barr attempts to regain its fizz after slide in sales to £255m: shares surge
Irn-Bru maker AG Barr has flagged profits at the upper end of hopes thanks to price hikes and given a confident outlook for the year ahead.
The bullish trading update follows a torrid period for the iconic soft drinks firm, which is also behind the Rubicon, Strathmore and Funkin brands.
A shock profit warning in July came after what the group described as an “unprecedented” period for the soft drinks industry with “changing pricing and promotional dynamics” following the launch of a sugar-tax levy alongside CO2 shortages and weather-related challenges.
Updating investors, the Cumbernauld-based company said adjusted profit before tax was expected to be at the top end of current market expectations, just ahead of £37 million.
Revenue for the financial year ended 25 January is expected to be reported as £255m, which would mark a fall on £279m the year before.
The firm said it had faced a “combination of challenging trading conditions during the year”, particularly across the key summer period.
It added that it had adjusted its promotional and pricing position “to align more closely with the market”. While this had an impact on volume, it also delivered an increase in average prices, “re-establishing our consumer pricing position”, Barr noted.
The core Irn-Bru brand returned to growth in the final quarter of the year and Funkin “continues to perform strongly”, the group added.
Bosses are overhauling the business which will result in exceptional costs in the period of between £1.5m and £2m, though this is expected to be almost entirely offset by a one-off gain related to the removal of a wind turbine at its Cumbernauld site.
The group told investors: “Our business remains strongly cash generative and, as planned, our £30m share repurchase programme completed during the period. Our balance sheet remains robust.
“The external landscape remains challenging. However, we exit the year with encouraging trading momentum which we expect to continue into 2020.”
Chief executive Roger White said: “Our focus remains the delivery of long-term value growth. We are taking action to reset our business and we enter the new financial year with confidence and a strong trading plan.”
The firm plans to announce its full-year results on 24 March.
Shares were up about 14 per cent in morning trade.
John Moore, senior investment manager at Brewin Dolphin, said: “[This] update should provide further reassurance to investors who were spooked by last year’s profits warning.
“The normally reliable company is contending with a challenging market, including tough comparators, the sugar tax, and unfavourable weather over the past year or so – but it is still managing to deliver, assisted by a very strong balance sheet. There is also a bullishness to this latest statement from AG Barr.”
Analysts at house broker Shore Capital noted: "Against the backdrop of a challenging period of trade, especially so mid-year, the company has re-grouped to deliver new guidance above the top end of the current £34-36.8m range.
"To us Barr is a great business, innovative, high quality management, strong values, with fine brands, an excellent manufacturing base and very robust financial constitution."