In the Spotlight - AG Barr's H1
Analysts remained optimistic about the Irn-Bru makers first-half
AG Barr shares slid in London Trading earlier this week, despite the Scottish soft drinks maker recording a 19% increase in first-half pre-tax profits and a 14% rise in sales.
The firm's shares, which stood at GBP9.00 (US$14.26) at the start of January, slid 0.32% resting at GBP12.55 on Wednesday (29 September).
Yet, while investors were clearly cashing in on early gains, analysts remained optimistic about the Irn-Bru makers first-half.
Collins Sarri Statham analyst Ravi Lockyer told the Guardian that the firm performed well despite challenges within the company. "Impressively, the strong financial performance was achieved against a backdrop of significant operational change within the group, which meant it incurred double running costs of around GBP500,000 as it switched to a new third party distributor," Lockyer said.
"However, chief executive Roger White said that these costs would end this year, and expects annualised efficiency savings of GBP1m to kick in when manufacturing is consolidated at a single site in early 2011," he added.
For the six months to the end of July, the Irn-Bru maker earned GBP16m (US$25.3m), boosted by strong demand for its core brands, and despite the spectre of soaring input costs.
Total sales rose by 13.9% year-on-year to reach GBP119.2m, driven by a strong performance across the whole business. But it was sales of its Rubicon CSD brand that put a rocket under AG Barr in the first half, with sales of the brand up by 37%, thanks in part to a GBP5m cricket sponsorship deal with broadcaster Sky over the summer.
Yet despite the sparkling results, the maker of Tizer and St Clements said sales growth in the second half would be impacted by tougher comparatives, poor late summer weather and weaker consumer confidence.
Drinks makers such as AG Barr have been hit by a sharp rise in exotic fruit pulp costs in recent months.
Chief executive Roger White noted that some fruit costs had doubled, but stressed the company was "working hard" to minimise the impact on its customers.
He told the Scotsman that the company would continue to invest "a lot of money" building the brand in Scotland. "We don't take our position for granted," White said.
He added: "We have seen growth across the UK, but the strong areas for Rubicon are from the south of the UK going north while Irn-Bru is the opposite way - strong in Scotland and pushing south."
Nicola Mallard, an analyst at Investec Securities was equally optimistic, describing the results as "excellent", adding that the firm's margins continue to benefit from cost controls.
Broker Altium maintained its 'hold' recommendation as it concluded that interim figures had come in “ahead of expectations on all lines", according to the Financial Times.
It added: “Its overall performance underpins our confidence that volume gains are not being driven by short-term promotional and pricing activity but rather long-term brand investment.”
Despite this, shares continued to slide this week, resting at GBP12.26 in London Trading this morning.
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