Investors overjoyed with Irn-bru owner despite Omicron doubts
SOFT drinks chief Roger White of AG Barr has said the threat of the Omicron variant to the hospitality industry could have ramifications for the Scottish company, but it is too soon yet to say whether the situation is serious.
In an unscheduled trading update the maker of Irn-bru reported continuing sales growth ahead of expectations in the second half of the year, prompting a profit upgrade that drove its shares more than 13 per cent higher by the close of yesterday’s trading.
Sales have been particularly strong in the “on the go” and hospitality sectors, which have outperformed on the same period last year when stricter restrictions were in place to control the spread of Covid.
The update from AG Barr was issued just hours before First Minister Nicola Sturgeon declined during a press conference to rule out the possibility of strengthening public health “protections” to combat the new Omicron variant.
She added that the Scottish Government would be seeking assurances from Westminster that further business support funding will be made available if it becomes necessary to reimpose restrictions that have previously shut down large swathes of the hospitality and retail sectors. Asked afterwards about this, a Downing Street spokesman said there are no plans to restart the furlough programme.
Asked whether such talk was concerning, Mr White said “it’s very hard to have a crystal ball”.
“The last 18 months have certainly taught me that trying to predict the future is pretty tricky, so we’re not sure what this all means but we’re close enough to the end of our financial year and we believe our end-of-line business resilience is there, and the stock and availability is there,” he said.
“From our perspective this may have ramifications but for us at the minute we think the business is robust and the resilience that we have built in should hopefully support us, but it’s hard to tell because it is quite a fast-moving situation.”
Despite disruptions across the supply chain and continuing cost pressures, AG Barr said sales and profits for the year to February will be ahead of previous expectations. Assuming “no significant changes to current market conditions”, the company is now guiding towards revenues in the region of £264 million and pre-tax profits of approximately £41m, up from £32.8m last year and £37.4m in the previous year prior to the pandemic.
“With the re-opening of hospitality over the summer, AG Barr has clearly been a net beneficiary,” analysts at Liberum wrote in a note to investors. “With the ‘pingdemic’ affecting part of the recovery this year, we see the Covid19 recovery [continuing] to benefit next year.”
Mr White said supply chain constraints were a combination of “mostly external factors” including the availability of materials, of labour to supply these materials, and the availability of distribution to ship out to customers.
“In the middle of an explosion of activity we’ve had to cope with some degree of Covid disruption which is ongoing, and labour challenges in certain parts of the work environment, so it’s a wee bit of everything,” he said.
“However, the good news from our point of view is we’ve managed to navigate a considerable amount of that challenge and maintained resilience and been able to underpin the volume that’s been coming our way.”
He added: “It’s more of a generalist thing – people are struggling to maintain supply on a regular basis right across the piece in lots of areas, but we get there in the end generally, it’s just a little bit more tricky. It means a lot more rescheduling, and it means a lot more waiting for things to arrive rather than it being just in time as it would normally be.”
Shares in AG Barr closed yesterday’s trading at their highest in more than a month, up 61p at 529p.