Irn-Bru manufacturer AG Barr has overcome supply disruption that impacted the business in the summer, while stronger first half figures relied on new brands.
Revenue in the 26 weeks to 1 August grew 8.5% to £247.4 million, driven by core brand performance and acquisitions. Adjusted profit before tax increased by 2.6% to £36.1m, with an adjusted operating margin maintained at 15%.
The company resolved summer supply issues and is progressing with manufacturing expansions. Integration of Fentimans and Frobishers is complete, with cost synergies expected from the second half. Net bank debt stood at £47m.
The board said the company remains on track to meet full-year market expectations of 10% revenue growth. The interim dividend is 3.82p per share.
Chief executive Euan Sutherland said: “We made strong progress against our strategic priorities during the first half of the year, with continued momentum across our brands and strong execution against our strategic growth drivers.
“Despite supply constraints impacting customer service in the peak summer months, our core brand portfolio performed well in the market, supported by successful rebrands, innovation and marketing.
“Our recent acquisitions have expanded our addressable market and investment in our manufacturing capabilities continues to significantly strengthen the business for the long term.
“Looking ahead, we remain confident in the significant opportunities for the business and our ability to build on this momentum in the second half.
“With our acquisitions now fully integrated and our investment programme progressing well, we remain on track to deliver full year performance in line with market expectations.
“We will continue to focus on delivering above-market growth and creating sustainable long-term value for our shareholders.”
Market reaction
Alex Pugh, analyst at Freetrade, said: “This should have been Irn-Bru’s dream summer, with a heatwave, Scotland at the World Cup, and a fresh rebrand. Barr still outgrew the market, but around £10m of sales slipped away because it couldn’t get stock onto shelves, thanks to factory upgrades which caused disruption.
“Supply chain problems are fixable. But fading demand isn’t. Strip out the acquisitions and growth looks flatter. Barr has swung from £41m net cash to net debt after two deals and a year of factory spending. AG Barr bought Frobishers and posh mixer brand Fentimans. It’s used cash and borrowing to do it, betting it can grow those brands faster inside Barr than they’d grow alone.
“So, a lot’s riding on the second half. Barr needs roughly 16% profit growth in H2 after under 3% in H1, and guidance has shifted from double-digit revenue growth in August to around 10% today. It’s a tweak, but the market will notice.
“The long-term bets are revealing. Boost Water+ shows Barr can win in the functional hydration category, which has grown fast as shoppers move away from sugary fizzy drinks.
“But cocktail brand FUNKIN’s sales falling by a sixth show how premium trends can waver, thanks to headwinds out of the firm’s control. With Fentimans added and fuel costs not yet passed on to shoppers, the firm’s pricing power is about to be tested.”
Nick Sherrard, managing director of Label Sessions, said: “AG Barr has recovered well from the summer disruption and is on track to deliver its full-year guidance thanks to disciplined cost control and investment in its operations. But what is helping the company to outperform the wider soft market right now is the strength of its brands.
“Irn-Bru is a staple in Scotland, gaining popularity in other parts of the UK and further afield, while product innovation means it continually has fresh appeal to consumers. Rubicon is growing, while the addition of Fentimans and Frobishers looks like a deft touch, bringing higher-end options into its stable of brands.
“In an increasingly consolidated soft drinks market, the bigger question will be what is next for AG Barr. Recent acquisitions mark a step change in its growth, and you can’t rule out additional deals to further diversify its portfolio in the next year or two if the right opportunities arise.”
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