Comment: White refuses to slake City thirst for bid news

SOFT drinks group AG Barr had a problem yesterday. The Irn-Bru maker wanted to talk about its resilient half-time trading performance amid the headwinds of strong consumer caution and torrid summer weather.

Everybody else wanted to talk about the progress of its £1.4 billion merger talks with larger peer Britvic to form one of the biggest soft drinks groups in Europe. An impasse that was non-porous.

Trading resilience is like your football team playing pretty well with the players you have got, overcoming a few injuries and perhaps having a decent cup run.

By contrast, teaming up with a much bigger business is like signing three new world-class players and moving to a new ground with much bigger capacity. It is landscape-changing.

But, surrounded by bankers and lawyers, AG Barr chief executive Roger White stuck to the organic trading script. And it wasn’t a bad one in these challenging times.

A fall in underlying pre-tax profit held to just £1.3 million and turnover up 5 per cent at £130m, as raw commodity prices such as sugar go through the roof and the summer rain pelts down, is no mean achievement.

Allied to an impressive 21 per cent return on capital employed and a 7.5 per cent rise in the dividend, Barr can at least make the point in its ongoing talks with Britvic – absolutely no details being divulged – that the Scots may be negotiating from a position of smaller size, but not weakness.

The latest trading performance, and its plans to plough ahead with a new factory in Milton Keynes to boost distribution of its brands south of the Border, show Barr has the capability to go it alone if its ambitions with Britvic come to nought.

But, somehow, I don’t think this negative scenario will play out. Britvic would give the Scottish business heft. Barr would give Britvic management with strong credibility in areas such as financial discipline and systems, with White assuming the same position in any new entity. Yesterday’s decent interim results were just soothing mood music for the marriage.

Cable yet to convince over business bank

WELL, at least we now know how much the UK government is prepared to bung into its new business bank: £1 billion. As seedcorn for such a welcome initiative, it is neither negligible, nor a game-changer. It will need a bigger amount than this from the private sector to make a real dent in the borrowing needs of small and medium-sized businesses.

There is also more detail from Business Secretary Vince Cable on when the new institution should be operational: within 18 months. That also seems a feasible timeframe. Not too long to appear distantly irrelevant, not too short to risk a botched implementation.

There also seems to be an over-
arching plan to use the business bank to bring together all the various business lending initiatives we have been bombarded with, to mixed effect, since the financial crisis broke in 2007-8.

That’s good. As John Cridland, the CBI employers’ lobby group director-general, has said, most of the business world is suffering “initiative-itis”. 
Better a move towards a one-stop shop for galvanising the business lending market.

However, as when the business bank idea was launched nearly a fortnight ago, there remains significant opacity on the project.

The state cash will be in the form of capital and guarantees, and will involve no new government borrowing, but the actual details of where the new Whitehall funding will come from will not be made public until the autumn statement in December. Equally, no pledges of private sector support, whether from banks or alternative lenders, have yet been sought.

There was just enough that was new to justify Cable recycling the recently-announced plan to yesterday’s Lib Dem conference. But not enough to be confident the business bank will be the answer to small and middle corporate Britain’s credit-easing prayers.