Soaring costs could take fizz out of AG Barr's record sales

Soft drinks maker AG Barr has notched up record annual sales but admitted that soaring input costs and higher taxes will take the fizz out of this year's figures.

The maker of Irn-Bru and Rubicon fruit drinks said the sector as a whole would face "tough comparative trading" across 2011 as it unveiled double-digit rises in profit and turnover.

Total sales increased by 10.4 per cent to 222.4 million in the 12 months to 29 January - a performance that is unlikely to be matched this year despite the group confirming that sales in the first eight weeks were ahead year-on-year.

Chief executive Roger White said: "We wouldn't be guiding people to that level of sales growth. The market is likely to be slightly less buoyant. There are also cost increases coming through both from a tax point of view with VAT going up and general cost price inflation.

"We are stomaching a fair chunk of it and cutting our costs accordingly but will pass through some price increases."

Cumbernauld-based Barr said like-for-like sales had risen by more than 10 per cent for the second year running, helping it deliver pre-tax profits of 31.6m, a rise of 13.3 per cent on a year earlier.

A proposed final dividend of 18.66p-a-share will take the total payout for the year to 25.41p, up 10 per cent on 2009.

Shares in the group rose 4 per cent to 1,201p with City reaction to the numbers generally positive.

David Lowery, equity analyst at Faraday Research, who has a "buy" rating on Barr, said: "The group delivered strong growth across the portfolio last year, and has raised Rubicon brand revenues to almost double pre-acquisition level - impressive to say the least."

Evolution Securities also used the word "impressive" in describing the overall results but stuck to its "neutral" stance given the recent strong run on the shares.

Fellow brokerage Shore Capital retained its "sell" recommendation as it urged investors to take profits.

Barr, which also makes St Clements and Tizer, said it outperformed a UK soft drinks market that grew by 7 per cent through focusing on its core brands, Irn-Bru and Rubicon.

Sales of its core orange brew - famously referred to as "Scotland's other national drink" - grew by 10 per cent in the north of England thanks to marketing and sponsorship efforts, specifically surrounding rugby league.

An ongoing association with cricket and product launches helped Rubicon sales leap 22.5 per cent in the year.

The group said sales of the brand have now nearly doubled since it bought the business in August 2008.

White added: "The main focus is on organic growth but if opportunities that look like they could add lots of value came along then we are more than capable of acting."He said the cautious consumer backdrop would see the firm focus largely on the development of the "format, flavour and variants of existing brands".

"People tend to turn to what they know when things are difficult," observed White. "If you are going to have just one or two treats then you want to pick something you know you like."