Sales regain some fizz at AG Barr but outlook uncertain

● Full-year sales likely to be down 12-15% providing there is no new hard lockdown

Irn-bru maker AG Barr has pointed to signs of a recovery as lockdown measures ease but the soft drinks group is still braced for a double-digit slide in full-year sales.

The group, which is also behind the Rubicon, Strathmore and Funkin brands, warned of a “high level of uncertainty” around trading for the balance of the current year, in relation to “shopping behaviours and consumer consumption patterns”.

In a first-half trading update, Barr said that lockdown had triggered “a period of significant trading volatility”, with initial consumer stockpiling followed by a shift towards larger, less frequent takehome purchasing.

Crucially, the Cumbernauld-based firm was hit by the shutdown of the hospitality sector as well as a material reduction in the “out of home” consumption of soft drinks.

But it provided a glimmer of hope in its update, telling investors: “As lockdown measures have recently started to ease, we are seeing sales in the hospitality and ‘on the go’ consumption segments beginning to recover, albeit slowly.”

Revenue for the 26 weeks ended 25 July is expected to be about £113 million, which would mark an 8 per cent decline on the year before. For the three-month period April to June, revenue fell 12 per cent, year-on-year.

Barr added: “Our current scenario planning, based on an underlying assumption that the UK will not enter into a further significant period of lockdown, suggests that our full year revenue performance for the year ending January 2021 will be in the region of 12-15 per cent below the prior year, with a modest reduction in operating profit margin.”

The firm said its core soft drinks business, focused on Irn-bru, maintained market share with a strengthening of its position within Scotland.

Staff have been brought back from furlough and the group does not intend to access the UK government’s return-towork “bonus” initiative.

Chief executive Roger White said: “I am incredibly proud of how our teams across the business have responded to the pandemic.

“These have been difficult times for everyone, however, despite the challenging environment, we have maintained our quality and service standards, thanks to the dedication and adaptability of our people.

“We are a profitable and cash generative business in a robust drinks sector and I am confident that our business will continue to prove its resilience for the balance of the year and beyond.”

Analysts at house brokerage Shore Capital noted: “In the face of the closure of the UK food and beverage channel and considerable disruption to convenience and mainstream grocery activity, we see Barr trading and our forecasts as underscoring the resilience, agility and high quality of this proprietary business with great heritage and, we believe, much brighter times to come.”

Last month, Barr flagged the ending of its sale and distribution contract with Rockstar.