Irn-Bru maker braced for 'challenging' few months as hospitality and 'impulse' sales dry up

Irn-Bru maker AG Barr has braced investors for a “challenging” few months as lockdown hits hospitality and impulse sales.

AG Barr is behind one of Scotland's most famous products, the iconic Irn-Bru soft drink.
AG Barr is behind one of Scotland's most famous products, the iconic Irn-Bru soft drink.

In a trading update, 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.

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

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Operating margin before exceptional items across the full financial year is expected to be in line with the prior 12 months leading to a profit before tax and exceptional items ahead of market expectations.

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, are now having an impact, most notably in the hospitality and “drink now” categories, bosses noted.

Barr said the business had remained “strongly cash generative throughout the year” and is expected to end the period with some £50m net cash in the bank.

Chief executive Roger White said: “Within a volatile environment our sites have remained safe and operational and I wish to thank our employees who have worked tirelessly to support our customers and consumers in these testing times.

“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.”

Full-year results for the 12 months to January 24 are expected to be announced on March 30.

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John Moore, senior investment manager at investment firm Brewin Dolphin, said: “It’s been a very tough and volatile trading environment for AG Barr – in many ways it is ‘phenomenal’ that the company expects revenues for the year to be ahead of revised expectations, while margins have also remained relatively resilient.

“However, unsurprisingly, there is a warning around the impact of increased social restrictions in the final weeks of 2020, when more lockdown measures began to be imposed.

“Nevertheless, AG Barr has remained a cash generative business with a strong balance sheet, holding cash equating to nearly 10 per cent of its market value. This puts the company in a good position when conditions settle to potentially look at expansion and acquisitions.”

In September, AG Barr said it had been forced to cut jobs amid a slump in sales to the hospitality sector, taking the fizz out of a “creditable” first-half performance.

It noted that its Strathmore bottled water brand had taken a significant hit and as a result the manufacturing workforce at its Forfar site had been reduced. A £10m impairment charge has been taken for the Strathmore brand and assets. It is though that about 35 people work at the site.

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Irn-Bru maker AG Barr cutting jobs amid hospitality sales wipe-out

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