Irn-Bru maker AG Barr profits lose their fizz

AG BARR jolted the market with a profit warning yesterday as the maker of Irn-Bru revealed its half-time results had been hit by a “challenging backdrop” of poor weather and tough market conditions.

Traditional Irn-Bru bottle. Picture: Tony Marsh

The Cumbernauld‑based soft drinks maker said tough comparatives against a year ago when it sponsored Glasgow’s Commonwealth Games also had an impact as it posted an 11.3 per cent fall in profits to £16.9 million from £19m.

Barr said sales had continued to be squeezed since the half-year end on 25 July, and that it now expected its full-year profits to be broadly flat.

Some analysts had previously forecast a rise in annual profits of about 5 per cent to roughly £44m from £41.9m last time, and the shares closed down 5.7 per cent at 530p.

Roger White, chief executive of Barr, whose other drinks products include Rubicon, Tizer and Strathmore water, said it had been an “extremely demanding” first half.

“Market conditions have been difficult and are forecast to remain so,” said White, pictured right. “The weather since we last updated the market in July has been poor and although we have recovered some sales momentum, it is not yet at the run rate we have targeted.”

He added that there was slight deflation across the food and soft drinks sector, and coupled with poor summer weather “especially in the north of the UK” and regular price promotions meant that “the competition is greater for a smaller pie”.

The total soft drinks market, as measured by the Nielsen consultancy, declined 0.6 per cent in revenue in the latest period.

Barr’s turnover fell to £130.3m from £135.7m, although underlying earnings excluding exceptional items were up 3.3 per cent at £17.8m

The group said sales had also been dented by a switch-over in IT systems, while it closed a drinks carton plant in Tredegar, south Wales, and moved production to its Milton Keynes site.

It said it planned some “exciting brand developments” after announcing last month a £5m investment at its facility in Cumbernauld, which will see the installation of high-speed filling capability for its glass bottle range.

The move will see it end glass bottle returns after 110 years. The firm said it had seen a significant reduction in the number of bottles returned for 30p, with customers increasingly choosing to recycle at home instead.

Barr’s interim dividend is lifted 8 per cent to 3.36p. White said the hike reflected the underlying strength of the company and its balance sheet.

“Our job is to do right by shareholders for the medium and long term and not be overly fixated by immediate trading,” the chief executive said.

White added that that the company had higher hopes for recovery from 2016 onwards “when we anticipate we will do better. We will be less constrained by internal challenges”.

He also said that the integration of Funkin, the cocktail mixer business acquired earlier this year in a deal worth up to £21m, was going well.

Phil Carroll, an analyst at broker Shore Capital, said actions recently taken, such as changes to IT systems, should pay off in the long term.

He said: “We are reassured to see management continues to invest in its brands such as Irn-Bru, where it has been developing sponsorship plans with both the English Football League and the Scottish Professional Football league.”