AG Barr cheers investors with resilient first half

Revenue in the six months to 25 July fell 8% to £113.2m at the drinks company, after the lockdown closed bars and restaurants, while pre-tax profits tumbled 62% to £5.1m. However, the fall in profits was largely due to restructuring costs and one-off items, including a £10m impairment on its Strathmore water brand following the shuttering of the hospitality sector.

Stripping out those exceptional items, operating costs were lower year-on-year, while profits rose 19% to £16.6m.

Net cash flow from operating activities was also ahead, up 105% at £24m.

Roger White, chief executive, said: “We remain on course to deliver a full-year performance in line with revised expectations. We have continued to invest in our core brand equity for the long term, maintained our quality and service standards, and remain a profitable and cash-generative business in robust drinks sector.

“We are confident that our business will continue to prove its resilience for the balance of this year and beyond.

By 1230BST, shares in the London-listed group had surged 17% to 436.5p.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “AG Barr’s products are disproportionately weighted towards the ‘on the go’ impulse purchase and the hospitality sector. Both routes were hit hard by the lockdown.

“However, the all-important cash flow statement looks far healthier. The Strathmore impairments are a paper charge, and AG Barr has also been leaning heavily on suppliers and customers to help it keep cash on the balance sheet.

“In the long run we think Irn-Bru remains reasonably well-positioned. While there are some questions about whether management are making the most of the portfolio, these brands won’t go out of fashion any time soon, and a debt-free balance sheet gives the group flexibility and firepower that many other companies would love to have at present.”

Wayne Brown, analyst at Liberum, called the results “a very strong outturn demonstrating the resilience of the brands and the agility of the model to flex its pack and format mix to the challenges the group faced due to Covid”.