Shares in AG Barr (BAG) fizzed up 3% to 548p after the Irn-Bru maker’s sales and profits for the year to January 2022 surpassed pre-pandemic levels on strong trading, leading the cash generative company to resume dividends to shareholders.
Putting the disruption caused by the pandemic behind it, the resilient soft drinks group said trading in the early weeks of the new financial year has been ‘well ahead’ of the prior year and ‘in line’ with management’s expectations.
RESILIENT BREW
The Cumbernauld based maker of iconic Scottish fizzy drink Irn-Bru as well as the Rubicon and Funkin brands served up adjusted pre-tax profits of £41.5 million for the 53 weeks to January 2022, 26.5% above full year 2021 and 11% ahead of pre-Covid 2020’s £37.4 million.
Sales bubbled up 18.3% to £268.6 million with AG Barr highlighting that all of its brands are in growth, with its core brands trading ahead of pre-pandemic levels.
‘Our business and brands have once again proven their resilience in uncertain and often challenging circumstances,’ commented CEO Roger White.
‘We have accelerated our revenue growth and consequently delivered a strong financial performance. In the year we have recommenced our dividend, alongside paying a one-off special dividend, and our balance sheet has continued to strengthen.’
TASTY MOMENTUM
White insisted his charge enters the new financial year ‘with good momentum and exciting brand and sales plans’.
Like most companies, AG Barr is ‘facing significant inflationary pressures but we are well placed as a group to deal with these and will continue to seek to manage our exposure proactively through mitigating actions across revenue management, pricing, procurement and cost control.’
THE EXPERTS’ VIEW
‘Backed by a very strong financial constitution,’ said Shore Capital, ‘Barr has the foundations to withstand shocks as well as fund future organic and inorganic growth. After a period of notable headwinds, we see Barr as, once again, a high-quality equity that can do a good job in a mid-cap consumer portfolio.’
With a buy rating and 690p price target on AG Barr, Investec Securities believes Barr shares offer ‘excellent value’. The broker commented: ‘A strong set of full year results from Barr, showing a full recovery with sales and profits back to above pre-Covid levels. It is accompanied by a cash rich balance sheet, with ample resources for investing in growth.’
AJ Bell investment director Russ Mould commented: ‘While the company is sitting pretty, sustaining this positive momentum won’t be easy. There are considerable uncertainties about the strength of consumer spending once we move into April and energy prices shoot up. Inflationary pressures in general are intensifying and consumers will have to make some serious decisions about where they spend money, and where they cut back.
‘While it couldn’t have foreseen the Ukraine war pushing up the cost of living further, AG Barr last year taking steps to diversify its income might prove to have been a wise move. An investment in plant-based foods group Moma gives it a position in the foods sector and a new avenue through which to explore earnings growth opportunities.
‘Decent weather this spring and summer would be a major boost to the company, so too the Queen’s Jubilee bank holiday break which could turn out to be a four-day bumper sales period for all companies in the hospitality sector.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
