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AG Barr blames the weatherman, awaits the taxman

The weather adds to the deflationary pressures in the soft drinks market but the group's keen eye on costs protects margins
September 27, 2016

The soft drinks market is facing a confluence of challenges from consumers moving towards low- or no-sugar drinks, the potential "punitive and unnecessary" sugar tax and broad deflationary pressures. But AG Barr (BAG) chief executive Roger White suggests the reported period's near 3 per cent drop in like-for-like sales was a result of "much more benign factors" than these results suggest. Colder weather was a key issue, he said, and since the period end, improved temperatures had helped sales.

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Its three-year 'Fit for the future' overhaul is nearing completion and 90 jobs will be lost due to a business-wide reorganisation. There will be a one-off £4m cost for this but an ongoing annual benefit of £3m. Mr White says the programme had seen AG Barr concentrate manufacturing into two heavily invested sites in Milton Keynes and Cumbernauld, which allowed the group to closely manage its costs. Overall, the operational changes should support margins for the full year. The bottom line was helped this term by the closure of its defined benefit pension scheme, which led to a £4.1m net exceptional gain.

Analysts at Investec expect pre-tax profit of £42.6m for the year to January 2017, leading to EPS of 29p compared with £41.3m and 29.5p in FY2015.

AG BARR (BAG)
ORD PRICE:520pMARKET VALUE:£607m
TOUCH:519-520p12-MONTH HIGH:615pLOW: 455p
DIVIDEND YIELD:2.6%PE RATIO:16
NET ASSET VALUE:145p*NET DEBT:4%

Half-year to 30 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201513016.911.63.3
201612621.114.33.53
% change-4+25+24+5

Ex-div: 6 Oct

Payment: 21 Oct

*Includes intangible assets of £107m, or 91.4p a share