AG Barr shares pop on strong profit forecast
Shares in Irn Bru-maker AG Barr jumped today after it told the market it expected profit before tax for its full-year to be in the upper end of expectations.
The soft drink maker said adjusted profit before tax is expected to exceed £37m in the financial year ended 25 January.
It said revenue for the period is expected to be around £255m, down from £279m the previous year.
Shares jumped nearly 14 per cent to 619p.
AG Barr warned on profits in July, predicting that full-year profit would come in 20 per cent below expectations.
The company said today: “We faced a combination of challenging trading conditions during the year, particularly across the summer period.”
It readjusted pricing in 2019 “to align more closely with the market”.
It said this had dented volume but had increased average realised price “re-establishing our consumer pricing position”.
The company said its plans to turn around struggling energy drink Rockstar and tropical brand Rubicon were being implemented, while Irn Bru returned to growth in the fourth quarter.
AG Barr said that “the external landscape remains challenging,” but added: “we exit the year with encouraging trading momentum which we expect to continue into 2020”.
Chief executive Roger White 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: “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.
“The turnaround plans for its Rockstar and Rubicon brands are positive moves, as is the business re-engineering programme. There is also a bullishness to this latest statement from AG Barr – underlined by the expectation that profits will come in at the top end of guidance – that suggests last year could be a temporary blip and the company is back on track.”
Hargreaves Lansdown equity analyst Nicholas Hyett said: “AG Barr endured a pretty miserable 2019, as higher prices dented volumes. However, it looks like the improved margins and relatively healthy winter sales have added some fizz to the year end, giving management a cautiously optimistic note in this trading update.
“While 2020 will benefit from less demanding comparatives, an increasingly health conscious consumer remains a challenge for the group and we’ll be interested to see how new low sugar alternatives to the famously sugary Irn-Bru have been faring when full year results come out in March.”