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Sales soar at AG Barr

The drinks brand was able to grow margins and report good progress across its portfolio
Sales soar at AG Barr
  • Results aided by reopening of hospitality
  • Cocktail brand Funkin a growth standout

AG Barr (BAG) posted its best revenue and profit figures since 2019 as it recorded strong growth across its core brand portfolio. The producer of the orange nectar known as Irn-Bru, renowned in certain circles as an excellent hangover cure, rebounded from a pandemic-hit 2021 and reinstated the dividend.

All three of the company’s core brands – Irn-Bru, Rubicon, and Funkin – saw sales rise against both the 2021 and 2020 (pre-Covid) financial years. Taking the latter as a more reasonable basis for comparative performance, Irn-Bru sales were up by 6 per cent, Rubicon by a quarter, and Funkin by 92 per cent.

AG Barr has been keen to further expand into the energy category of soft drinks. Alongside the existing Irn-Bru energy drink, Rubicon Raw was launched in the year which management said is “aimed at the growing number of consumers entering the energy category who are looking for a more natural, juice-based energy proposition”. This strategy seems to be paying off.

In relative growth terms, consumer cocktail brand Funkin was the company’s standout in the year. It delivered revenue of £37mn and a margin of 39.8 per cent, driven by the reopening (and restocking) of hospitality venues and a robust take home performance.

Chief executive Roger White told Investors’ Chronicle that much of the sales growth story was to do with trading channels reopening after the comparatives were hit by restrictions on hospitality and out of home business, but that progress also reflected “investment in marketing activity and innovation activity in the year”.

But despite this spend, and the wider cost pressures facing the business, the company managed to grow the operating margin. This was up by 83 basis points to 15.6 per cent, a solid result.

Importantly, the company isn’t resting on its laurels. It took a 61.8 per cent stake in MOMA Foods Limited in the year, which sells oat milk, porridge, muesli, and granola. White said the purchase was due to management’s belief in the “high-growth” nature of plant-based milk, but reiterated it would be a small part of the overall business moving forwards.  

Investec analysts said that “the shares are some way below historical (pre-Covid) levels, as are the valuation multiples.” Indeed, the shares are trading on a consensus 18 times forward earnings, nicely below the five-year average of 21 times. The company delivered a strong set of results, and its brand equity and pricing strategy are allowing it to stand strong in the face of inflationary pressures. Buy.

Last IC View: Hold, 532p, 29 Sep 2021

AG BARR (BAG)   
ORD PRICE:542pMARKET VALUE:£ 607mn
TOUCH:542-544p12-MONTH HIGH:579pLOW: 463p
DIVIDEND YIELD:2.2%PE RATIO:22
NET ASSET VALUE:218p*NET CASH:£64.3mn
Year to 30 JanTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
201826444.932.315.6
201927944.531.516.6
202025637.426.54.00
202122726.017.2nil
202226942.225.112.0
% change+19+62+46-
Ex-div:12 May   
Payment:10 Jun   
*includes intangible assets of £98.6mn, or 88p a share NB: 2022 dividend yield excludes 10p special dividend paid on 29 October 2021