Sugar-free products put fizz into Irn-Bru maker

Irn-Bru maker AG Barr turned in a strong trading performance in the second half of 2016. Picture: John Devlin/TSPL
Irn-Bru maker AG Barr turned in a strong trading performance in the second half of 2016. Picture: John Devlin/TSPL
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Irn-Bru maker AG Barr has overcome “highly competitive” market conditions to turn in a stronger trading performance in the second half but flagged another tough year ahead.

The Cumbernauld-based firm said it will meet profit expectations despite a slight dip in revenue to £257 million for the 52 weeks to 28 January.

Product launches including Irn-Bru XTRA – a no-added sugar variant of “Scotland’s other national drink” – and Rubicon Spring helped add some sparkle to trading in the second half of the year.

Barr said that, on a like-for-like basis, revenue growth from its ongoing business would be about 1.5 per cent once the effects of an extra trading week last year and the discontinued Orangina franchise are taken into account.

The group, which also produces Snapple and Strathmore water, said it managed to maintain “tight control” of costs, while a company-wide overhaul helped cut overheads in the fourth quarter. It is investing £10m in its production and distribution centre in Milton Keynes.

READ MORE: Irn-Bru maker to axe 90 jobs as sales lose fizz

In September, the firm announced that it was cutting 90 jobs while grappling with a shift in consumer tastes towards low-sugar drinks after the UK government announced plans for a sugar levy in 2018.

The job cuts, which accounted for about 10 per cent of the workforce, was part of a company-wide revamp expected to cost around £4m.

In a trading update yesterday, Barr told investors: “Looking ahead, the uncertain economic environment indicates that 2017 will be another challenging year for UK-based businesses.

“However our strong and flexible business model, our differentiated brands and our well-invested asset base ensure we are well placed to continue to deliver long-term value to shareholders.”

Results are due on 28 March.

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House broker Shore Capital said it was leaving its forecasts unchanged, with an adjusted profit before tax of £42.5m on the cards, which would be slightly up on the year before.

Shore Capital noted: “We believe Barr has made considerable operational progress in [the financial year] with the business reorganisation… There has also been some significant innovations to our minds with the launch of Irn-Bru XTRA and Rubicon Spring, products that anecdotally have been well received in the Shore Capital network of offices.

“Taking into account the company’s high-quality management team that has a strong track record of financial delivery, an excellent brand portfolio and a particularly robust balance sheet, we believe the current valuation looks attractive.”

Analysts at brokerage Numis, which has an “add” recommendation on the shares, noted: “This update is a solid one, with the eye-catcher being the improvement in the like-for-like for sales for the full year versus that seen in the first half.”

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