Irn-Bru maker AG Barr has warned margins will be hit in the second half as it feels the impact of faltering consumer confidence and sustained pressure on costs.

But the company declared it remains confident of increasing profits this year.

Cumbernauld-based Barr underlined the boost to trade from Covid recovery, notably in the on-trade and out-of-home sectors, and good summer weather as it made a profit of £24.7 million for the 26 weeks to July 31, up 1.2 per cent. That came as revenue climbed by 16.7% to £157.9m, the company reported this morning.

The company noted that its operating margin had been impacted by cost inflation but had been supported by sales growth, cost control and its pricing approach.

However, it warned that the level of margin seen in the opening half “will not be sustained across the second half of the year given the impact of increasing costs, our continued brand investment and the volume impact of reduced consumer confidence”.

Chief executive Roger White said: "We made a very strong start to the year and continue to see good momentum across our business and brands. That said, the UK's high level of inflation has accelerated across the summer and is creating a well-documented cost-of-living crisis for many consumers, alongside increasing challenges for industry. 

“We continue to take action to mitigate the cost pressures we face both in the short term across the balance of the current financial year and where possible into 2023. 

“We anticipate in the coming months that the current economic environment will impact consumer purchasing behaviour, however we currently remain confident that our strategy and actions will allow us to deliver a full-year profit performance ahead of the prior year.”

The company this morning announced interim dividend of 2.5p per share, an increase of 25% on the prior year.

John Moore, senior investment manager at RBC Brewin Dolphin, said: “AG Barr has delivered a strong set of results in a highly challenging set of circumstances, underlining its resilience as a business. The cost-of-living crisis and rising energy costs are significant uncertainties for the company, but there is a confidence in today’s statement that suggests the management team are ready to weather the storm.

“The 25% increase to the dividend is also good news for shareholders and is well covered by a strong balance sheet, with cash built up over the past two years. AG Barr has a core set of brands performing well, the question is what the company will do next with its investments in STRYKK and Moma, and what other investment opportunities may come up in the changing and uncertain business environment. The company is well placed facing into what is generally a difficult backdrop.”