Update - UK: AG Barr achieves "solid performance" - analysts
Panmure analysts hailed AG Barr's decision to invest in a new production facility
Panmure Gordon analysts have hailed AG Barr's first-half results as "a solid financial performance", and in line with expectations.
Earlier today (27 September), AG Barr reported an increase in first-half net profits, but said it remains cautious about the second half of the year. For the six months to 30 July, net profits increased by 11.6% to GBP12.5m (US$19.4m), while sales rose by 4% to GBP123.9m.
In a note following the release of the figures, Panmure analysts said: "AG Barr continues to deliver a solid financial performance with its interim results in line with our expectations. The company's investment in its key growth brands delivered a respectable 4% revenue growth ... in a challenging market. This combined with focused cost savings limited the impact of higher input costs."
The soft drinks maker's performance was driven by sales increases of 2.3% in carbonates and 9.8% in still brands. Irn-Bru sales however, declined by 1.2% in the period.
Nonetheless, the analysts said the decline "shouldn't be regarded as too disappointing given the tough prior-year comparatives and the challenging trading environment".
Panmure also hailed the firm's decision to invest in a new production facility in the south of the UK. AG Barr is currently undertaking a GBP10m (US$15.6m) upgrade of its Cumbernauld site, but work has been hit with delays.
"It is envisaged that the new facility will have canning and PET capabilities which should alleviate the pressure on capacity at its Cumbernauld site and highlights the growth ambitions of the management team," the analysts said. "The operational issues at Cumbernauld have largely been resolved but the company still expects to use third party production in H2."
AG Barr's share price climbed by 1.85% to GBP1.210 at 1137 BST on the firm's results announcement.
"Over the past 12 months the shares have performed broadly in line with the FTSE All Share," Panmure said. "We expect the company to maintain its long-term premium rating over its peers and keep our 'hold' recommendation and 1200p target price."
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