Barr waters down sugar tax impact

Irn-Bru maker AG Barr has reported a 7 per cent hike in annual profits and said it expects to minimise the impact of the proposed sugar tax.

Irn-Bru cans

The Cumbernauld-based group, which is also behind Rubicon and Tizer, said “at least two thirds of our portfolio will be lower or no sugar” by the time the levy kicks in. Some 40 per cent of the group’s portfolio currently has a low sugar content.

The drinks sector was sent reeling by the announcement of the new tax in the Budget earlier this month, which aims to raise more than £500 million a year to help fund sports for schools after it is introduced in April 2018.

Barr said its annual pre-tax profits rose 7 per cent to £41.3 million, although sales slipped just under 1 per cent to £258.6 million in a “difficult market” in the UK.

A proposed final dividend of 9.97p per share, up from 9.01p, would give a total dividend for the year of 13.33p per share, an increase of 10 per cent over the prior year.

Management at the soft drinks maker, led by chief executive Roger White, has had a number of meetings with the Treasury ahead of making its formal submission on the sugar levy proposal.

White has called the tax plans “extremely disappointing”.

He said: “Although the details of the Chancellor’s proposed soft drinks levy are still to be consulted upon, we believe our combination of brand strength, ongoing product reformulation and consumer driven innovation will allow us to minimise the financial impact on the business at the proposed point of implementation in April 2018.”

Parts of the soft drinks industry are understood to be considering taking legal action against the government through European courts on the basis that other types of food and drink, such as fruit juice and milkshakes, are not included.

Similar taxes in Scandinavia have been successfully challenged. But AG Barr said it has no plans to join any legal action.

Analysts at brokerage Investec described the results as “robust”. In a note, they said: “AG Barr reported unchanged profits in FY16, a robust performance against a challenging soft drink market and significant change programme.

“We make no changes to forecasts at this early stage of the year with the group confirming that trading year-to-date is in line with its expectations.”

Phil Carroll at Barr’s house broker Shore Capital said: “We note management’s response in regard to the ‘sugar tax’ which we see as being both co-operative and pro-active in nature.”