Irn-Bru maker AG Barr to reveal Covid sales hit but operating margins maintain some fizz

AG Barr, the maker of Scotland’s most iconic soft drink, Irn-Bru, will this week look for a summer rebound as lockdown measures ease and hospitality awakens from its enforced hibernation as it reveals a hit to 2020 sales.

The firm has already braced investors for a slide in revenues of about 11 per cent compared with the year before as lockdowns and restrictions hit hospitality and impulse sales.

Analysts expect this week’s full-year results to show that operating margins have held up despite the trading pressures, though they will be keeping a close eye on any write downs and one-off costs.

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In a trading update in January, the soft drinks group said revenue for the financial year just ended was expected to be about £227 million, down on the £255.7m reported a year earlier.

The Irn-Bru maker will be hoping for a summer rebound as lockdown measures ease and hospitality awakens from its enforced hibernation.
The Irn-Bru maker will be hoping for a summer rebound as lockdown measures ease and hospitality awakens from its enforced hibernation.

That forecast was marginally ahead of the revised guidance issued in July and reconfirmed in interim results announced in September.

The Cumbernauld-headquartered firm, which is also behind the Rubicon, Strathmore and Funkin brands, said that in the first four months of the second half trading was at the upper end of its predictions.

However, coronavirus developments since early December, and in particular increased social restrictions across the UK and an entry into full lockdown, were having a negative impact, most notably in the hospitality and “drink now” categories, bosses noted.

Chief executive Roger White said at the time: “I am pleased with the performance we have delivered against a very difficult backdrop which further demonstrates the underlying resilience of our people, business and brands.

“We expect the months ahead to be challenging for everyone, however I remain confident in our ability to navigate these very uncertain times.”

Ahead of the full-year results, due on Tuesday, William Ryder, equity analyst at financial services firm Hargreaves Lansdown, said: “Unlike rivals such as Fevertree or Coca-Cola, Irn-Bru maker AG Barr’s products are not especially popular in bars and restaurants. Instead, most sales come from retail stores.

“This has meant bar and restaurant closures during lockdowns have had a more muted impact on the group than on some competitors, though cocktail brand Funkin has seen sales hit hard.

“However, as fewer of us have been out and about, on-the-go impulse purchases have fallen. AG Barr will need these sales to return as society normalises, so commentary on recent trading and brand strength will be of particular interest.”

He added: “Operating margins are expected to be roughly equal to last year, meaning operating profit will be better than markets had expected. Given margins of 14.9 per cent last year, this means operating profit should be around £34m.

“However, there are sure to be several underlying items in the books, such as write downs and a one-off, as-yet unknown, compensation payment for the termination of AG Barr’s agreement to distribute Rockstar in the UK.”

John Moore, senior investment manager at investment firm Brewin Dolphin, said: “It’s been a very tough and volatile trading environment for AG Barr. Nevertheless, AG Barr has remained a cash generative business with a strong balance sheet.”

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