SOFT drinks maker AG Barr yesterday joined the feelgood factor surrounding the Commonwealth Games by revealing it was outperforming its rivals.
Growth across the range of brands contributed to the surge in sales, whereas last year it had been driven largely by energy drink Rockstar, which it distributes on licence.
In a trading update Barr said it expects half-year revenues from its range of brands – which also include Rubicon, Tizer and Strathmore Water – to leap by 5.6 per cent to about £135 million. This is 5 per cent up on the previous year’s performance and compares to a UK soft drinks market growing by just 1.6 per cent in value and which saw volumes fall by 0.3 per cent, as measured by market researcher Nielsen.
The firm, whose main rival in the UK is Britvic, added that the soft drinks market will continue to be highly competitive in the second half of the year, with promotional price competition putting pressure on the business.
“Our balance sheet remains strong and our capital investment plans are in line with management expectations,” said the firm. It said its margins were in line with its expectations and it remained confident on its full-year targets.
Barr signed an agreement with Las Vegas-based Rockstar Inc in 2007 to sell and distribute three flavours. It renewed the deal in 2012 for a further 15 years as the brand quickly became popular and has grown year-on-year in the UK. It was the country’s first non-carbonated energy drink. Rockstar Pink Sugar Free is the first energy drink specifically targeted at women.
Analyst Sahill Shan at N+1 Singer said the pre-close statement was “highly reassuring”, adding: “We understand the revenue number was well underpinned by both volume and price inflation. Speaking to management this morning it is encouraging to learn that top-line growth in the first half has been similar across the key brands.” Shan said much of the growth in the last year had been driven by Rockstar.
However, chief executive Roger White told The Scotsman: “Growth this year has been significantly more balanced across the portfolio, with the brands growing much more in line with each other.”
Shan predicts first-half operating earnings to be ahead of sales growth because of lower costs, and has raised the share price target from 667p to 678p.
Investec analyst Nicola Mallard said: “AG Barr continues to outperform the UK soft drinks market. It looks set to deliver a revenue advance of over 5 per cent in the first half and we expect the profit advance to better this.
“The group still has the important summer months (including the current Commonwealth Games sponsorship) and Christmas trading period ahead of it, so we make no changes to forecasts today. Our target price moves up to 661p, but our recommendation remains ‘add’.”