AG Barr (BAG) faced two major issues during the first half: the new soft drinks industry levy and a shortage of carbon dioxide used to make fizzy drinks. But analysts believe these results demonstrate the group's "tactical agility", especially as revenues improved 5.5 per cent on the back of a 7.2 per cent increase in sales volumes, which outstripped an industry-wide volume improvement of 3.8 per cent. AG Barr’s market share also grew 15 per cent, with a particularly good performance from orange soft drink IRN-BRU in England and Wales.
The drinks company has invested heavily in reformulating products to contain less or no sugar in light of the new tax in the UK, as well as keeping up with changing consumer tastes. But while sales volumes improved, this added expense meant operating margins contracted from 13.9 per cent to 13.4 per cent year on year. Demand for drinks during the recent heatwave also led to higher levels of short-term working capital, meaning free cash flow conversion more than halved to 41 per cent.
Analysts at Numis expect pre-tax profits of £45.2m during the year to January 2019, giving EPS of 32.5p, compared with £44.1m and 31.3p in FY2018.
| AG BARR (BAG) | ||||
| ORD PRICE: | 723p | MARKET VALUE: | £828m | |
| TOUCH: | 723-724p | 12-MONTH HIGH: | 751p | LOW: 597p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 176p* | NET CASH: | £4.2m | |
| Half-year to 28 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 130 | 19.4 | 13.5 | 3.71 |
| 2018 | 137 | 18.2 | 12.7 | 3.90 |
| % change | +5 | -6 | -5 | +5 |
| Ex-div: | 04 Oct | |||
| Payment: | 26 Oct | |||
| *Includes intangible assets of £104m, or 91p a share | ||||
