Irn-Bru owner AG Barr shares pop despite slump in revenue
Irn-Bru maker AG Barr shares hiked this morning as it clung onto its revised full-year expectations despite receiving a hammer blow during the coronavirus crisis.
Revenue fell 7.6 per cent year on year to £113.2m for the six months to 25 July.
Profit before tax climbed 19.4 per cent to £16.6m over the period, up from £13.9m in January. However, statutory profit before tax plummeted 62.2 per cent to £5.1m, down from £13.5m.
AG Barr boosted its operating margin to 15.1 per cent, up from 11.7 per cent last year, and it hiked earnings per share from 9.83p last year to 10.52p this year.
The Irn-Bru maker generated cash flow of £30.1m during the half-year, with £30.4m of net cash at the bank.
The drinks company, which also makes drinks such as Rubicon and Funkin, withheld its dividend, saying its “position remains under review”. The firm said dividend payments are expected to resume in 2021.
Shares were up 14.2 per cent to 425.5p at midday.
Why it’s interesting
Analysts at Shore Capital nodded to AG Barr’s high liquidity and strong cash generation as “reasons to be cheerful” amid tough market conditions.
The Irn-Bru maker admitted that “the circumstances which have arisen as a result of the Covid-19 pandemic have significantly impacted life and business in the UK and beyond,” but assured investors that it remains in a strong position.
AG Barr took swift action to conserve cash and underpin its financial stability as the crisis unfolded in March.
It carried out a robust cost-cutting programme as the hospitality sector ground to a halt during lockdown.
Online sales grew more than 170 per cent over the six month period as traditional sales dwindled, the company announced today. Irn-Bru remained AG Barr’s strongest product during lockdown, but Rubicon sales saw a nine per cent slump amid the coronavirus crisis.
AG Barr announced it will cease production of its Snapple and Rockstar drinks as part of plans to simplify its portfolio.
John Moore, senior investment manager at Brewin Dolphin, said: “Irn-Bru is still getting AG Barr through as its best-known brand, but basing its second half projections on the UK not entering a significant second lockdown period may prove optimistic.
“Nevertheless, the business remains robust and, with a strong cash position, it is in a good position to weather current conditions.”
What AG Barr said
Chief executive Roger White said:
“We remain on course to deliver a full year performance in line with the revised expectations we communicated in the July 2020 trading update. We have continued to invest in our core brand equity for the long term, maintained our quality and service standards and remain a profitable and cash generative business in a robust drinks sector. We are confident that our business will continue to prove its resilience for the balance of this year and beyond.”
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