IRN-Bru manufacturer AG Barr, which is merging with larger rival Britvic, has seen off tough competition in the UK soft-drinks market to deliver strong year-on-year growth in sales over the past 18 weeks.
AG Barr's latest buoyant trading update, published yesterday, will reinforce the view that the Scottish company is going into the deal with its English- headquartered peer from a position of strength.
The Lanarkshire-based group, whose chief executive Roger White will lead the enlarged Barr Britvic Soft Drinks business, reported that its revenues in the 18 weeks to December 1 were up by 9% on the same period of last year. Sales volumes at AG Barr, which also produces the Barr-branded portfolio of carbonated drinks and the Rubicon exotic fruit juice range, were in this 18-week period up 6.6% on a year earlier.
AG Barr noted that the UK soft-drinks market was, according to industry analyst Nielsen, up by only 3.3% year-on-year in value terms over the 26 weeks to November 24, with volumes flat.
It declared: "Our core brands have performed well in what has continued to be a competitive but robust soft-drinks market."
AG Barr added that, over the 18 weeks to December 1, its profit margins had performed in line with its expectations.
Phil Carroll, analyst at stockbroker Shore Capital, said in a note on the AG Barr trading statement: "The take-home soft drinks market, according to data by AC Nielsen, grew 3.3% in value in the 26 weeks to 24th November, so, while it is not a perfect comparison to the data period reported by Barr, we do believe it broadly implies that Barr has taken some market share during the period with its revenue growth comfortably ahead of the market."
The year-on-year sales growth reported yesterday by AG Barr for the 18 weeks to December 1 represented a significant acceleration.
After 10 months of AG Barr's current financial year to January 2013, revenues are 6.5% ahead of the year-earlier period. This growth has been achieved against testing comparatives, given that, in the opening 10 months of its financial year to January 2012, AG Barr had achieved revenue growth of 4.6%.
Damian McNeela, analyst at stockbroker Panmure Gordon, cited his belief that Irn-Bru's "BRU Island" promotion, which gave people the chance to win a holiday to the Cape Verde islands, had contributed particularly strongly to the company's sales performance in the latest 18-week period. He said he believed all parts of AG Barr's portfolio had contributed to the good sales performance.
Mr McNeela maintained his forecast that AG Barr would achieve 2% growth in pre-tax profits in its current financial year to January 2013, noting the UK soft-drinks market "remains extremely competitive" in the run-up to Christmas.
AG Barr raised its profit before tax and exceptional items by 6.2% to £33.6m in the year to January 2012.
Mr Carroll said of AG Barr's trading over the 18 weeks to December 1: "The acceleration in revenue growth -was strong, in our view, benefiting in particular from the timing of marketing investment behind Irn-Bru and its BRU Island promotion. Elsewhere, we believe there has been good growth across the wider portfolio too, such as for Rubicon and the Barr brand."
Looking ahead, AG Barr said: "As we now enter the important Christmas period we anticipate that the marketplace will remain highly competitive. However, our sales execution activities are well developed and we remain confident of delivering our plans for the full year."
Shares in AG Barr rose 2.1p or 0.44% to 480p yesterday, giving the company a stock market worth of about £560m. Britvic, which has a stock market value of nearly £950m, and AG Barr announced agreed terms of a recommended all-share merger on November 14.
AG Barr said a detailed submission about the merger had been sent to the Office of Fair Trading competition authority, with a response expected in mid-January. It meanwhile noted good progress with construction of its new factory at Milton Keynes.