Shares surge 9% for soft drinks giant Barr as City backs strategy
SHARES in Irn-bru maker AG Barr leapt by nearly 10% after profits beat expectations and analysts underlined scope for the Scottish company to drive further growth and margins.
Cumbernauld-based Barr reported a 15.5% rise in profits to £51.3 million as revenue surged by 25.9% to £400m in the year ended January 28, adding that the
“positive brand momentum” had carried into the new financial year.
The company declared that its margin rebuild plan was “well under way” amid signs that the rate of cost inflation, in areas such as commodities and labour, was beginning to ease towards the end of last year, adding that it remained “confident in our strategy and the continued delivery of revenue and profit growth in the year ahead”.
Research analysts Darren Shipley and Clive Black at house broker Shore Capital declared there was “much to like” about Barr’s results as they upgraded their profit forecasts for the company for the next two years.
The analysts said the results “make for very pleasant reading”.
They stated in a note for investors: “With a higher base and the earlier-than-anticipated in-house manufacture of Boost/rio volumes, we put through a c10% upgrade to FY25 and FY26 forecasts, driven by the acceleration in the delivery of the margin rebuild targets set out 12 months ago (14-15%).”
Anubhav Malhotra at Liberum said: “The market underappreciates both the sales growth and margin recovery potential of the business. There is potential for additional share buybacks, special dividends and further acquisitions due to the strong net cash position of c.£54m.”
The results were the last annual update to the City delivered by longserving chief executive Roger
White, who is stepping down after more than 20 years. He is being replaced by Euan Sutherland, a former boss of Superdry and the Co-op, who joins on May 1.
Asked to comment on cost inflation, Mr White told The Herald: “Whilst it is not plain sailing, some of the big volatility has come out of the market now. In some of the commodity groups and in some of the utility areas, there is much less general bad news. However, there is still underlying and real inflation in wages and in costs. Obviously, the most recent inflation figures suggest things are more under control. But we have seen high single digit [percentage] cost price increases for our customers and this year it is probably more like low single digit.”
On consumer demand for AG Barr products, which as well as Irn-bru include fruit-based soft drink Rubicon, cocktail puree brand Funkin, and Boost energy drink, Mr White said: “I think it has been by and large fairly consistent. It is driven by long-standing trends. Value for money remains important for people, but so does taste. People are buying brands they believe in, but they have got to be valued correctly.
“The one area that remains a little bit more challenged is the on-trade where particularly late-night venues have had a tough time for the past 12 months.”
The results were posted shortly after the company announced a review of its Barr Soft Drinks’ sales and distribution operations which supply the independent retail sector, and an update to the integration of Boost energy drinks division, which Barr acquired in a deal worth up to £32m in December 2022.
The two developments could lead to nearly 200 redundancies in total, with 160 potentially affected at Barr Soft Drinks and 35 at Boost, amid plans to close the energy drink’s small office in Leeds. Around two-thirds of the sales distribution jobs at risk are in Scotland, with the rest in England, though the firm hopes to find “suitable employment” for people affected in different roles. Barr currently employs about 1,000 people in total.
Meanwhile, Barr announced separately that long-standing commercial director Jonathan Kemp will not be seeking re-election at the company’s annual meeting on May 31, “owing to family health reasons”. Barr said Mr Kemp will continue to lead the commercial function until September.
Mr White said of Mr Kemp: “Jonathan has had a huge impact on the business over the 20 years that he has been there.”
The board recommended a final dividend of 12.4p per share, giving a total dividend for the full year of 15.05p. This is an increase of 14.9% on the prior year. Shares in AG Barr closed up 48p, or 9.34%, at 562p.