- AG Barr reports revenue growth of 17% in year-end update
- Profit expected to be ahead of expectations
- Shares up more than a quarter since October
Beverages stocks like Pepsico (PEP:NASDAQ) and Coca-Cola (KO:NYSE) have been popular with investors as soft drinks are seen as an affordable treat despite a gloomy economic backdrop and those with strong enough brands have demonstrated pricing power.
The manufacturer of Irn-Bru and Rubicon, AG Barr (BAG) demonstrated these qualities in a year-end trading update which revealed 17% revenue growth, implying volume growth not just the impact of double-digit inflation, and pointed to profit ‘slightly ahead’ of market expectations.
The shares responded with 2.9% advance to 542.1p, extending their gains from October lows to more than 25%.
For the year to January 29, AG Barr expects to report revenue of £315 million, up 17% from £268.6 million in the previous financial year, and the company pointed to further revenue growth in 2023.
‘ROBUST PLATFORM TO DEAL WITH INFLATIONARY PRESSURES’
The planned introduction of a DRS (deposit return scheme) in Scotland in August 2023 will see consumers pay a 20p deposit when buying a drink in a single-use container. They will get the sum back if the container is returned. AG Barr says: ‘Our internal implementation planning for DRS is well-advanced and we believe our strong brand portfolio and ongoing actions to mitigate inflation will support the delivery of our growth ambitions.’
The company also expects its year end cash position to be robust. Full year results are set to be announced on 28 March.
Liberum analyst Wayne Brown commented: ‘We think this is a strong performance by AG Barr as it has successfully passed through further price increases while still delivering volume growth even in the second half.
‘The company’s strong brands and its distribution mix, with 60% of sales from the impulse and wholesale channels, provides it with a robust platform to deal with inflationary pressures.’
