AG Barr full-year revenue seen up 7.5%

Irn-Bru maker AG Barr said on Thursday that full-year revenue is expected to be up around 7.5% on the year, thanks in part to strong trading across its core brands.

Total revenue for the 52 weeks to 27 January 2018 is expected to come in at approximately £277m compared to £257.1m the year before.

The group said it has continued to outperform the total UK soft drinks market and increased its overall market share. In addition, since its announcement last March that over 90% of its portfolio would be moving to lower or no sugar, Barr has extended its innovation and reformulation programme and now expects up to 99% of its portfolio to contain less than 5g of total sugars per 100ml before the implementation of the soft drinks sugar tax in April.

The group, which replaced its regular Irn-Bru with a new lower sugar version last month - much to the dismay of some of its fans - said that extensive research and testing in preceding years gave it confidence that it had achieved an “excellent” taste match, adding that the consumer response so far has been encouraging.

Barr said its balance sheet remains robust, supported by strong free cash flow, and it continues to invest across the business while progressing the share repurchase programme announced last March.

“We have not been immune to the external cost pressures faced by many businesses throughout 2017, particularly in relation to the weakness of sterling, however we remain confident of delivering profit growth for the year in line with our expectations.”

Looking ahead, it expects another “challenging” year for UK businesses against a backdrop of continued uncertain economic conditions.

“In addition the soft drinks industry faces significant changes in regulation, customer dynamics and consumer preferences, bringing both challenges and opportunities. We believe that our strong and flexible business model, our portfolio of brands which reflect the requirements of today's consumer, and our exciting innovation pipeline, ensure we remain well placed to capitalise on opportunities to grow our business and deliver long-term value to shareholders.”

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "With sales slightly ahead of expectations, and well ahead of the market, these are a strong set of numbers from AG Barr.

"However, the real story is the reformulation of the group’s products, particularly the flagship Irn-Bru. Taking the sugar out of the famously sugary Glaswegian soft drink without significantly altering the taste is controversial and has attracted petitions and protests.

"The group says early signs are encouraging, which is...well, encouraging. But the new formulation was only introduced in January and it’s still early days. We’ll have to wait for first quarter numbers to get detail on how the new recipe bears up to the scrutiny of a consumer base which honed its taste buds on the complexities of scotch whisky."

At 0820 GMT, the shares were up 0.9% to 648p.