- Revenue, profit up sharply year-on-year
- Warning of second-half margin hit
- Dividend up 25%
Soft drinks maker AG Barr’s (BAG) results for the six months to 31 July revealed strong sales growth year-on-year while protecting margins, no mean feat in the current inflationary environment.
However the name behind iconic Scottish brand Irn-Bru dipped 0.6% to 494.5p as it flagged a hit to margins in the second half as surging input costs look set to persist. A bleak wider market backdrop is unlikely to have helped sentiment.
Margins are guided to drop from 16.2% in the first half to 14% in the second half thanks to ‘increasing costs? continued brand investment and the volume impact of reduced consumer confidence’.
AG Barr is still confident of profit growth for the year as a whole. Sales of small ticket items like cans of soft drink are probably less vulnerable to a slowdown in discretionary spending as they represent a relatively inexpensive treat or luxury for consumers.
First-half revenue was up 16.7% to £157.9 million and adjusted pre-tax profit was up 22.8% to £25.3 million - benefiting by comparison with a period which was still blighted by Covid restrictions. The company increased the dividend by 25% to 2.5p.
‘MAJOR VIRTUES IN TOUGHENING TIMES’
Shore Capital analyst Darren Shirley commented: ‘AG Barr has a strong H1 in the bag and ordinarily we would be looking at raising our 2023 financial year expectations given the broad-based momentum. However, we are in a period when visibility on the consumer is as low as I have experienced in my 20-year-plus career.
‘In addition, AG Barr continues to face into a lack of visibility around parts of its supply chain, for example CO2, with volatility also across other raw materials, packaging and increasingly operating costs (energy).’
Shirley adds: ‘AG Barr has a high-quality portfolio of leading UK brands, supported by sustained cash generation and a strong balance sheet. We such traits as major virtues in toughening times, and believe the time may be upon us when the group’s balance sheet strength can support more “growthier” ambitions.’
