Irn-bru maker hit by hospitality rout as Forfar jobs axed

● AG Barr cautions over pandemic but sticks with full-year guidance, for now

Irn-bru maker AG Barr has been forced to cut jobs amid a slump in sales to the hospitality sector, taking the fizz out of a “creditable” first-half performance.

The soft drinks giant said group sales to its hospitality customers fell by some 65 per cent across the first six months of the financial year, peaking as high as 95 per cent during the early period of full lockdown.

It noted that its Strathmore bottled water brand had taken a significant hit and as a result the manufacturing workforce at its Forfar site had been reduced. A £10 million impairment charge has been taken for the Strathmore brand and assets.

The news came as the Cumbernauld-headquartered firm posted revenues of £113.2m for the six months to 25 July, down 7.6 per cent on a year earlier. Statutory profit before tax tumbled 62 per cent to £5.1m, though prior to exceptional items the figure was up by just over 19 per cent to £16.6m.

Boss es said they had taken “swift action” to control costs, conserve cash and “underpin financial stability”. The group also brought to a close the use of the UK government’s Job Retention Scheme by the end of July.

The shareholder dividend position remains“under review” with payments expected to resume in 2021.

Chief executive Roger White told investors: “We remain on course to deliver a full-year performance in line with the revised expectations we communicated in the July trading update.

“We have continued to invest in our core brand equity for the long term, maintained our quality and service standards and remain a profitable and cash generative business in a robust drinks sector.

“We are confident that our business will continue to prove its resilience for the balance of this year and beyond.”

Despite the decline in revenues, Barr grew its market value share of soft drinks, both in Scotland and in England and Wales, “reflecting the unusual market dynamics being experienced”.

John Moore, senior investment manager at Brewin Dolphin, noted: “Unsurprisingly, it’s a tough trading environment for AG Barr – the company has suffered significantly from the closure of the hospitality sector in recent months, which typically helps margins as well as sales.

“Irn-bru is still getting AG Barr through, as its bestknown brand, but basing its second-half projection son the UK not entering a significant second lockdown period may prove optimistic given the direction of travel in the last week or so.

“Nevertheless, the business remains robust and, with a strong cash position, it is in a good position to weather current conditions.”

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “AG Barr’s products are disproportionately weighted towards ‘on the go’ impulse purchases. In the long run we think Irn-bru remains reasonably well positioned.”