IRN-Bru manufacturer AG Barr has revealed plans for a factory in the south of England after achieving a rise in first-half profits in spite of poor summer weather, tough prior-year sales comparatives, fierce competition, and the economic downturn.

 

Chief executive Roger White hailed the results as “particularly positive”, with underlying pre-tax profit inching up to £16.2 million for the six months to July 30 from £16m for the same period last year.

Revenue rose 4% to £124m but was offset by rising raw material costs.

Cumbernauld-based AG Barr, whose brands also include the Barr soft drinks range and Tizer, raised its interim dividend 8.1% to 7.3p a share to be paid on October 21.

Investors sent the company’s shares up 22p, or 1.9%, to 1210p.

AG Barr, which styles its flagship brew as Scotland’s other national drink, revealed it is bringing forward plans to open a new factory south of the Border to cope with rising sales. It is still looking for a site.

It has almost completed an expansion of its Cumbernauld base and earlier this year closed its factory in Mansfield, Nottinghamshire, where around 100 people worked.

Mr White said: “The issue is we are growing faster than we had assumed and that is coming out of England and Wales.”

He added: “We have had to bring that decision forward by 18 months or two years and deal with that now rather than in a couple of years’ time.”

He said AG Barr had opted against simply expanding the Cumbernauld site further due to the costs of distribution and “corporate risk”, such as a fire at its headquarters.

Mr White said building a new facility would give the company a better return than if it had brought Mansfield up to scratch.

In future, canning and bottling will be split between Scotland and England, although the secret “essence” of Irn-Bru will continue to be produced at its Cumbernauld site.

The decision comes after AG Barr overcame tough market conditions to post revenue and profit gains.

Mr White said that after a strong start to the year the market weakened in June and was hit further by poor weather over the summer.

This led to a fall in Irn-Bru sales in Scotland and UK-wide, against strong gains the year before.

Overall, sales north of the Border were flat over the period after Scotland had what Mr White described as “the worst summer in 100 years”.

AG Barr is hoping to reinvigorate sales north of the Border by launching Fiery Irn-Bru, its first Irn-Bru brand extension, in a limited edition run.

Fruit juice brand Rubicon, which AG Barr bought in 2008, saw revenues rise 8.8% while its Caribbean brand KA netted a 72% sales increase after the launch of a still range.

AG Barr said anticipated meeting market expectations for the full year. The City predicts AG Barr will post pre-tax earnings of around £33m.

Mr White said: “This is a particularly positive result given the challenging comparatives we faced in the first half of the year, the relatively poor summer weather, which has impacted the soft drinks market and a competitive market backdrop.”

He added: “Whilst we remain cautious regarding the second half, given the market context, we are confident that we have a strong programme of activity including further innovation, which should help maintain our growth momentum.

“The combination of less demanding comparatives, better cost visibility, a strong programme of brand activity and good sales momentum gives us confidence that, assuming no significant adverse changes in the marketplace, we will meet our expectations for the full year.”

Wayne Brown, analyst at Collins Stewart said AG Barr had put in a “commendable performance”.