AG Barr has seen a strong start to the year as profit and revenues significantly improved from last year’s slump, but the fizzy drinks firm cautioned that the second half will lose its fizz as mounting costs come to bear.
Revenue at the firm, which owns brands Irn-Bru and Rubicon, reached £135.3m in the 27 weeks to 1 August, up 19.5 per cent on its first half last year.
Profits before tax reached £23.7m in the first half – a “record”, according to the company, and up almost 43 per cent on the lacklustre £16.6m seen in the first half last year.
AG Barr’s new ready to drink cocktails brands Funkin performed particularly well, and saw 150 per cent growth in the first half of the year.
Its positive results were further driven by a strong recovery in sales of its core brands such as Irn-Bru and Rubicon, as well as some soft drink and cocktail launches – two benefits that the company warned would not repeat in the second half.
The drinks company also joined the roster of companies warning of driver issues squeezing supply chains, and said: “In recent weeks we have seen increased challenges across the UK road haulage fleet, associated in part with the Covid-19 pandemic, impacting customer deliveries and inbound materials.”
“In addition, the risks associated with the wider labour pool and the current Covid-19 pandemic response are areas we continue to monitor closely. …We believe the commitment and capability of our workforce and supply base will stand us in good stead in these uncertain times,” the firm said.
AG Barr also used the update to announced a recommencement of dividends, comprising an interim dividend of 2 pence per share, plus a one-off special dividend of 10 pence per share – an encouraging sign, according to John Moore, senior investment manager at Brewin Dolphin.
“The business took prudent action during the pandemic to protect its balance sheet, which is reflected in the amount of cash it holds today,” Moore said.
“The recommencement of dividends, along with the payment of a special dividend, points to the management team’s confidence – but there are challenges ahead, not least in the well-publicised form of supply chain shortages.”
Reigning in expectations, the firm forecast year-end margins to be only slightly ahead of last year’s.
Chief executive Roger White said AG Barr had delivered resilient growth during the first half of the year.
“Our positive first half performance reflects these fundamentals as well as the encouraging performance of recent innovation launches in both soft drinks and cocktails,” he said.
“We remain on track to deliver strong full year profit performance, slightly ahead of our 2019/20 pre-Covid level.”
AG Barr’s share price fell as much as 4.2 per cent on Tuesday lunchtime, when they were trading at 523 pence per share.