AG Barr announces jobs cuts after sales fall in first half

Sales from soft drinks maker AG Barr lost some of their fizz in the first half of the year amid continuing challenging conditions, but cash flowed strongly and management announced a 10% staff reduction as part of new restructuring plans.

Chief executive Roger White warned that market conditions "remain volatile and somewhat unpredictable" but said initial benefits of investment in product development and innovation were coming through and the company remained on track to deliver underlying profit slightly ahead of last year.

He said the final phase of the 'Fit for the Future' business improvement programme would be "a business reorganisation which will create a faster, more efficient and leaner organisational structure".

The restructure was said to be likely to affect 10% of the total employee base, with around 90 job losses possible before the end of the current financial year, with a one-off cash cost of roughly £4m but an ongoing annual benefit of close to £3m.

Looking back on the six months to 31 July, against a soft drinks sector that lost 0.7% of value and 0.4% in volume, the FTSE 250 maker of Irn Bru, Rubicon and Tizer saw total revenue drop 3.6% to £125.6m and by 2.8% on a like-for-like underlying basis.

Profit on ordinary activities before tax and exceptional items of £17.0m was up from £16.9m, while reported PBT benefited from a pension credit to rise 25% to £21.1m.

This meant earnings per share rose 24% to 14.33p and the board proposed a 5% hike in the half-time dividend to 3.53p per share.

As free cash flow bubbled up to £19.6m, more than £12.3m than in the same period in the prior year due to tighter capital management and payment cycle timing, this enabled net debt to be cut to £6.6m from £19.9 a year ago and £11.3m at the year end.

House broker Shore Capital said the results were "solid", given the continued challenging market backdrop for soft drinks in the UK, with the timing of the July period end not favourable for the company given how poor the weather was in the important summer months of June and July.

"Whilst Barr has historically proven that it can deliver strong second half performances, we believe that market conditions at present are such that nothing is guaranteed and it is best to work from a more cautious perspective," analyst Phil Carroll said.

He cautiously shaved his forecasts for EPS for FY2017F and FY2018F by 2% and 4% respectively.