Irn-Bru maker AG Barr warns on full-year profits growth
- Credit: Vismedia
Irn-Bru maker AG Barr has warned it is unlikely to grow full-year profits after poor summer weather and an “extremely demanding” first half.
The Cumbernauld-based firm said sales had continued to be hit since a difficult half-year to July 25 and had failed to hit targets despite some improvement.
It now expects annual profits to be “broadly” in line with the previous year, although the group hopes to return to growth in 2016.
Interim results showed the impact of tough trading as pre-tax profits fell 11.3% to £16.9 million, although earnings on an underlying basis rose 3.3% to £17.8 million.
Shares in the FTSE 250-listed firm dropped 5%.
AG Barr said as well as tough comparisons from a year earlier and heightened competition in the market, sales have also been dented by a switch-over in IT systems, while it closed a drinks carton plant in Tredegar, south Wales, and moved production to its Milton Keynes site.
The group said it had “been through an extremely demanding six months”.
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Chief executive Roger White said: “Market conditions across the first half have been difficult and are forecast to remain so.
“The business is responding well to the market challenges but the weather since we last updated the market in July has been poor and, although we have recovered some sales momentum, it is not yet at the run rate we have targeted.”
He added that even with “satisfactory” trading over the key Christmas period, full-year results were now expected to be “broadly” similar to a year earlier.
The group said sales for the six months to July 25 fell to £130.3 million from £135.7 million a year earlier.
Stripping out the impact of losing the Orangina brand and Finlays water, it saw a decline of 2.8%.
The company, which also makes Tizer and Rubicon, said its performance compared to a period last year when it was buoyed by its sponsorship of the Commonwealth Games in Glasgow.
Barr said it was planning a number of “exciting brand developments” after last month announcing a new £5 million investment at its facility in Cumbernauld, North Lanarkshire, which will see the installation of new, high-speed filling capability for its glass bottle range.
The move will see it end glass bottle returns after 110 years.
It said it had seen a “significant reduction” in the number of bottles returned for 30p, with customers increasingly choosing to recycle at home instead.
Phil Carroll, analyst at Shore Capital, said AG Barr had been impacted by a combination of internal upheaval, as well as challenging trading in the wider soft drinks market, where prices are falling amid heightened competition.
He added the actions recently taken, such as changes to its IT systems, should pay off in the long term.
He said: “We are reassured to see management continues to invest in its brands such as Irn-Bru, where it has been developing sponsorship plans with both the English Football League and the Scottish Professional Football league.”