AG Barr shares fizz on better-than-feared profits outlook
Irn-Bru maker AG Barr has said signs of a turnaround for its drink brands after a tough 2019 is set to see a smaller-than-feared hit to annual profits.
Shares in the Scottish group jumped more than 14% after it said profits are set to come in at the top end of City expectations as it recovers from a challenging 2019 for soft drinks.
AG Barr, which also makes drinks including Rubicon and Tizer, warned last July over a profit drop of up to 20% as the UK’s sugar tax, CO2 shortages and unhelpful weather took its toll.
But in its latest update, it said Irn-Bru had returned to growth in the final three months of 2019 and confirmed turnaround plans were under way for its Rockstar and Rubicon brands.
The Cumbernauld-based group also said moves to hike prices may have dented sales, but have now brought its pricing in line with rivals.
It now expects underlying pre-tax profits to be “just ahead” of £37 million for the year to January 25, though sales are set to fall to around £255 million against £279 million the previous year.
While the hit to its bottom line is set to be lower than first feared, AG Barr is still facing a fall of close to 18% on the previous year’s £45.2 million in underlying profits.
Roger White, chief executive, said: “Our focus remains the delivery of long-term value growth.
“We are taking action to reset our business and we enter the new financial year with confidence and a strong trading plan.”
John Moore, senior investment manager at Brewin Dolphin, said AG Barr’s update signalled that “last year could be a temporary blip and the company is back on track”.
He added: “Today’s update from AG Barr should provide further reassurance to investors who were spooked by last year’s profits warning.
“The normally reliable company is contending with a challenging market, including tough comparators, the sugar tax, and unfavourable weather over the past year or so – but it is still managing to deliver, assisted by a very strong balance sheet.”
AG Barr suffered a torrid summer last year in particular for its fizzy drinks, particularly in its native Scotland due to poor early summer weather and as customers turned away from its reduced-sugar drinks ranges.
New recipes led to a backlash among some customers, who complained about the new tastes.
The Rockstar energy division has also had to contend with a crackdown and
awareness-raising by campaigners about teenagers consuming high-caffeine drinks. Several supermarkets have banned sales of the products to under-18s.
It launched three new Rockstar drinks by the end of the summer and introduced a new “recipe improvement activity” for Rubicon juice drinks.