IRN-Bru manufacturer AG Barr has revealed its first-half sales will likely be down five per cent, reflecting poor weather and tough comparative figures for last year when trading was buoyed by Commonwealth Games-related promotional activity.
AG Barr’s shares fell 27p or 4.3 per cent to 606p in the wake of its trading statement yesterday.
However, AG Barr chief executive Roger White highlighted his aim of returning to sales growth in the second half of the company’s financial year to January 2016.
He highlighted the fact that there had been heavy promotional activity behind the company’s product portfolio, including Irn-Bru, the Barr-branded range of carbonated drinks, mineral water Strathmore, and Rubicon exotic fruit juice drinks, in March and April last year ahead of the Commonwealth Games.
Mr White noted these tended to be quieter months, in which AG Barr would not normally undertake such levels of promotional activity.
And he added that AG Barr’s promotional push had started later than usual this year.
He also highlighted a “north-south split” in terms of weather. AG Barr is a major player in the soft-drinks market in the north of England as well as in Scotland.
Mr White summed this up by contrasting the hot and sunny weather at the Davis Cup tennis tournament in London with the wind and rain at the Open Golf championship at St Andrews last weekend.
He said: “There has been quite a north-south split. The weather hasn’t been great nationally. Certainly, when it has improved in the south, it hasn’t improved in the north this year.”
AG Barr said that revenue in the six months to July 25 was expected to be around £128 million, down about five per cent on the same period of the prior financial year.
House broker Investec estimated, in the wake of the trading statement, that AG Barr would make first-half profits before tax of about £17m to £17.5m. The company posted pre-tax profits of £19m in the six months to July last year.
Investec stuck with its projection that AG Barr would make underlying pre-tax profits of £44.9m in the year to January 2016.
This would represent a significant increase from £41.9m in the prior financial year.
Mr White highlighted the continuing competitive nature of the UK soft drinks market.
However, asked about the outlook for the second half of the financial year, he said: “I think the opportunity for us to get the momentum back in sales is definitely there. We just want to get on, and get back into growth now.”
AG Barr also highlighted a major project to redesign the company’s business processes, which it said had given it “some short-term customer service challenges which have also impacted our overall revenue performance”.
Mr White highlighted the importance of “building a platform for the future” through this business process redesign project.
He meanwhile reiterated AG Barr’s ambitions to expand in Scandinavia and in other European markets such as Germany.
Mr White said that AG Barr was making “good progress” on this front.
It had just launched Rubicon in Germany, he noted.
He added that Rubicon, energy drink Rockstar, and Snapple were already being sold in Scandinavian markets.
The company, which is based at Cumbernauld near Glasgow and employs more than 1,000 people, said: “Assuming there are no significant changes to the competitive or customer landscape, and that we continue to make good progress on all our change initiatives, we plan to regain sales momentum which would enable us to meet our expectations for the full year.”
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