AG Barr (BAG)'s talks with Britvic (BVIC) over a potential merger didn't quite overshadow what was plainly a difficult trading period for the manufacturer of popular Scottish drink, Irn-Bru. A combination of appalling summer weather, a weak take-home drink market and huge discounting by competitors during the Jubilee and the Olympics led to an 8 per cent fall in pre-tax profits, even though overall volumes rose by 2.8 per cent.
The highly competitive background to the drinks market meant AG Barr was more vulnerable to cost fluctuations, particularly for sugar, and margins duly came under pressure. As a result, operating profit fell nearly 7 per cent to £15.6m, despite a 5 per cent rise in revenues. Consumers were also more careful about buying soft drinks, avoiding impulse purchases in favour of the sort of "buy one get one free" promotions that were heavily touted by AG Barr's rivals. The company seems to have steered clear of this type of promotion in favour of investment in capacity, with a new plant at Milton Keynes due to come onstream next year.
Overall, management was optimistic about achieving the targets for this year, but this is dependent on trading conditions staying stable. Broker Canaccord Genuity downgraded estimates by 2.5 per cent ahead of these results and now expects flat pre-tax profits of £33.8m and EPS of 22.2p.
AG BARR (BAG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 453p | MARKET VALUE: | £ 529m | |
| TOUCH: | 450-453p | 12-MONTH HIGH: | 484p | LOW: 344p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 107p* | NET DEBT: | 9% | |
| Half-year to 28 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 124 | 16.2 | 10.8 | 2.43 |
| 2012 | 130 | 14.8 | 10.1 | 2.61 |
| % change | +5 | -9 | -6 | +7 |
Ex-div:03 Oct Payment:19 Oct *Includes intangible assets of £74.4m, or 64p a share | ||||
