Commonwealth Games boost Irn-Bru sales
IRN-BRU maker AG Barr will take the lid off fizzing half-time sales growth this week, driven by the company’s close links with the successful Glasgow-based Commonwealth Games and the opening of its new English plant.
The plant in Milton Keynes, designed to accelerate AG Barr’s drive into England, was not open in the first half of last year, and the group said in a summer trading update that sales were likely to have grown 5.6 per cent to about £135 million.
“With above market value growth and a clear strategy of moving southwards, [the group] remains on track to deliver organic growth,” Chris Wickham, analyst at Oriel Securities, said in a note.
Wickham said he believed Cumbernauld-based Barr should deliver 6 per cent organic growth compared with a market increase of about 2 per cent, and that a tight lid on costs will see profit margins lift to 13.5 per cent from 13.1 per cent.
Barr, on whom rival Britvic pulled the plug on a proposed £1.9 billion merger last year following a Competition Commission inquiry, is expected to cite the growth outperformance as providing a platform for further expansion in the south of England.
“Geographic expansion remains central to the growth outlook and for the investment case for AG Barr,” Wickham said. “In particular, the group’s flagship Irn-Bru brand continues to grow share by expanding southwards.”
Barr has expanded beyond its core Scottish customer base in the past four years, with England and Wales now chipping in comfortably more than half of group sales.
The drinks maker said in May it is to invest a further £4m in the Milton Keynes site, while confirming it intends to close its Tredegar carton- making factory in Wales with the loss of 67 jobs.
Barr’s other brands, including Rubicon, Tizer and Strathmore Water, are also expected to have turned in resilient performances when chief executive Roger White reports on Tuesday.
One analyst commented: “We’re not expecting any change to what has been a long-standing Barr growth story. A sales rise of 5.6 per cent is all the more creditable given the company is up against tough comparatives of a 5 per cent sales jump in the same period last year.
“The soft drinks market remains sharply competitive, but the company seems to be more than holding its own on organic growth.”
Another analyst said: “Britvic is history now, and it is easier for Barr to make it so because the group always delivers a story of internally generated growth whatever the sector headwinds.”
White is also expected to say following the referendum victory for the Better Together campaign that he never feared a victory for the Yes side would have triggered a soft drinks taste backlash towards the iconic Irn-Bru. City analysts believe falling commodity prices should help underpin the company’s further growth, with input prices expected to be lower next year, especially for the crucial component, sugar.
Charles Pick, drinks analyst at Numis Securities, forecasts interim pre-tax profits of £17.8m at Barr compared with £16.6m last time. The City consensus for annual profits at the group to January 2015 is £41.6m.