Irn-Bru maker AG Barr has battled the new sugar tax, a CO2 shortage and extreme weather to report a solid rise in half-year sales and pledged further investment in its brands.
The Cumbernauld-headquartered group, which also makes Rubicon and Tizer, reported a 4 per cent hike in underlying pre-tax profits to £18.2 million for the six months to 28 July on sales that were 5.5 per cent higher at £136.9m.
It said its “growth momentum has not been interrupted” in spite of headwinds hitting the sector and a “challenging and volatile marketplace”.
An interim dividend of 3.9p per share was declared by the soft drinks maker – up 5 per cent on the year before.
Chief executive Roger White said: “We have delivered a solid financial performance in the first half of the financial year, navigating through the soft drinks industry levy implementation, reformulation, extremes of weather and CO2 shortages in addition to a dynamic consumer, customer and macro-economic environment. Our core brands have performed well and have good momentum with both consumers and trade customers.”
He added: “We plan to invest further across the second half of the financial year which we anticipate will have a moderate impact on margins. We remain on target to meet our profit expectations for the full year.”
The group revamped its iconic Irn-Bru drink and other products to reduce the sugar content ahead of the launch of the new soft drinks sugar tax in April.
But AG Barr also had to contend with a market-wide shortage of CO2 at the height of the summer heatwave, when demand for fizzy drinks surged.
Added to this was a period of extreme weather, with the Beast from the East in early spring and the searing temperatures in June and July.
The firm said its share of the market by volume increased by around 15 per cent as it continued to see a growing following for Irn-Bru outside of Scotland, particularly in England and Wales thanks to an ongoing marketing push.
Alasdair Ronald, senior investment manager at Brewin Dolphin, said: “Warmer weather contributed to sales growth of 5.5 per cent, although this had been reported early in August.
“It was reassuring that operating profit margins exceeded 13 per cent and, thanks to a lower tax rate, there was a good increase of 8.6 per cent in earnings per share.
“Perhaps it’s no surprise that analysts will be focusing on the performance of Irn Bru, which has contained 50 per cent less sugar since January.
“The company’s claim that most people won’t taste the difference appears to have been borne out in these results and the market will also be pleased with early signs of success with new products and partnerships – AG Barr highlighted its ventures with San Benedetto and Bundaberg, in particular.”
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “The sugar tax, a CO2 shortage and extreme weather have made the first half of the year a tumultuous one for the soft drinks industry. Against that background AG Barr’s volume growth has outpaced the sector.”