AG Barr posts jump in profits but warns over margin hit

Irn-Bru maker AG Barr posted a rise in full-year profit and revenue on Tuesday as it hailed a strong performance across its soft drinks portfolio, but warned over a short-term hit to operating margins due to inflationary pressures and ongoing investment.

In the year to 29 January 2023, adjusted pre-tax profit rose 13.3% to £43.5m, with reported pre-tax profit up 5.2% at £44.4m. Revenues were ahead 18.2% at £317.6m.

The company said its soft drinks division enjoyed "particularly strong" market share value gains in England and Wales, but a more subdued performance in Scotland, which did not benefit from the better summer weather experienced in much of the rest of the UK.

Meanwhile, the Boost business - which became part of the group in December 2022 - has performed "exceptionally well" within the total soft drinks market across the past 12 months, it said, with a double-digit increase in its value and volume share.

Chief executive Roger White said: "Over the past 12 months we delivered an excellent financial performance and made significant progress across our strategic objectives, an achievement only made possible by our committed and hardworking teams.

"Our strategy to build and develop a multi-beverage portfolio capable of significant long-term growth is progressing well. We are now in an investment phase, designed to capitalise on the strategic growth opportunities ahead. We do anticipate a short-term impact on operating margins, as a result of the combination of this investment, ongoing inflationary cost pressures, and the initial dilutive impact from the Boost acquisition. This growth and investment phase will support the rebuilding of our operating margin over the medium term and the creation of a stronger and more sustainable business."

At 0955 BST, the shares were down 2.3% at 529.50p.

Victoria Scholar, head of investment at Interactive Investor, said: "Investors are shrugging off the earnings beat, focusing on margin pressures with shares trading lower by more than 1%, landing the stock in negative territory year-to-date. Drinks brands have been facing headwinds on two fronts both on the cost side as well as the consumer side with the cost-of-living crisis prompting households to make cutbacks on non-essential items.

"Over recent months, shares have been rebounding, helped by the broader pick-up in market sentiment since the lows in October with shares up almost 15% over the past half year."