By Scott Wright

SHARES in AG Barr closed down more than three per cent after the Irn-Bru maker warned of “increased challenges” to distribution amid the ongoing shortage of heavy goods vehicle (HGV) drivers.

Cumbernauld-based Barr declared the driver scarcity, which has sparked panic buying at petrol stations and led to empty shelves in supermarkets, was affecting deliveries to customers and its sourcing of materials.

And it pointed to concerns over a shortfall of workers in other sectors, warning “risks associated with the wider labour pool and the current Covid-19 response are areas we continue to monitor closely”.

The comments were made by Barr as the soft drinks giant reported a pre-tax profit before exceptional items of £23.7 million for the 27 weeks ended August 1 – up 42.8 per cent on the same period last year. It was a record first-half result for Barr, which reiterated that it expects to deliver a profit “slightly ahead of our 2019/20 pre-Covid 19 level”.

The company said: “In recent weeks we have seen increased challenges across the UK road haulage fleet, associated in part with the Covid-19 pandemic, impacting customer deliveries and inbound materials. In addition, the risks associated with the wider labour pool and the current Covid-19 response are areas we continue to monitor closely.”

It added: “We believe the commitment and capability of our workforce and supply base will stand us in good stead in these uncertain times.”

A spokeswoman said the driver shortages were focused on the third-party providers used to support its distribution operations, as opposed to its directly employed people.

She said: “We do have our own fleet, both primary and radial distribution, however we do rely on our third party contracted logistics provider for much of our primary transport activity – in common with most FMCG businesses. So the driver issues are in most cases not with company employees.”

The spokeswoman added the company has “not had any major issues with regard to the current fuel availability issues.”

Barr highlighted its concerns as it reported that revenue had increased by 19.5% in the first half to £135.3m, noting that it had seen the benefit in the last six months from the recovery of the ‘on-the-go’ consumption as restrictions have eased. It also highlighted a good response to new product launches, such as Rubicon Raw Energy. The Rubicon brand saw sales rise by 26.2% in the first half.

Barr said ‘at home’ sales have remained strong, continuing a major theme of the pandemic, but pointed to improving trends in the hospitality sector. This was evident in the performance of Funkin, its cocktail ingredient business, which reported a sales rise of 229.5% in the on-trade. It noted that the rise has been driven by customer re-stocking and a “significant increase” in cocktail sales as hospitality venues reopened.

Although the on-trade is open once more, Funkin continued to grow sales for the ‘at-home’ market, which climbed by 114.3% to £10.2m. This represented 54.5% of Funkin’s total first-half sales, which reached £18.7m.

Barr cheered investors by re-starting pay-outs for shareholders. The board recommended an interim dividend of 2p per share, and has also approved a special dividend of 10p per share. It noted that the special dividend was in recognition of a “number of one-off cash inflows that were outside normal trading.”

John Moore, senior investment manager at Brewin Dolphin, said: “AG Barr has delivered a strong set of results, buoyed by the performance of its brands – particularly Funkin – the return of ‘on the go’ sales, and a warm summer. The business took prudent action during the pandemic to protect its balance sheet, which is reflected in the amount of cash it holds today.

“The recommencement of dividends, along with the payment of a special dividend, points to the management team’s confidence – but there are challenges ahead, not least in the well-publicised form of supply chain shortages. Nevertheless, AG Barr is a robust business and appears to be emerging from the pandemic stronger than it went in.”

Chief executive Roger White said: “AG Barr is a growth-focused business operating in resilient and growing market categories, with dynamic brands, great people and a strong financial position. Our positive first-half performance reflects these fundamentals as well as the encouraging performance of recent innovation launches in both soft drinks and cocktails. We remain on track to deliver strong full year profit performance, slightly ahead of our 2019/20 pre-Covid level.”

Shares closed down 18p at 521p.