AG Barr bids adieu to CEO Roger White as sales surge

AG Barr’s (BAG) outgoing (and long-serving) chief executive Roger White will be leaving the beverage group in decent shape, at least judging by its sales figures for FY2024. Group chairman Mark Allen pointed out that White, who will step down from the board at the end of April, led the “transformation of AG Barr from a regional soft drinks business” into a “highly successful multi-beverage, branded company”.

That’s a fair assessment, and doubly significant given that volumes increased markedly across the differentiated product offering, with the Rubicon brand deemed the “standout” performer. Within the sub-categories, demand for lemonade and mixers continued to trail away, whereas energy and sports drinks again found favour with consumers.

Sales were bolstered by the first full-year contribution from the Boost portfolio, although management will be looking to increase margins across the newly integrated assets. The adjusted operating margin fell by 130 basis points to 12.3 per cent, reflecting the anticipated dilution from the integration of the Boost energy drinks and Moma oat milk during the year. Nonetheless, the Irn-Bru producer closed out the year with annual adjusted pre-tax profits 16.1 per cent to the good at £50.5mn.

Management cited the January Circana survey, which showed that the overall value of the UK market increased by 8.3 per cent against a 2.9 per cent volume decline. AG Barr had to contend with “a volatile regulatory environment” and prolonged inflationary pressures through much of 2023. On that basis, it would be fair to suggest that the Scottish beverage maker has outperformed the market. Indeed, its seemingly upmarket counterpart, Fevertree Drinks (FEVR), posted a 23 per cent fall in annual underlying cash profits on the same day as AG Barr’s release.

Easing inflation should underpin margins, and we recognise potential 15 per cent upside based on the consensus target rate. Buy.

Last IC view: Buy, 485p, 26 Sep 2023