24th Mar 2015 13:20
LONDON (Alliance News) - AG Barr PLC Tuesday reported higher pretax profit and revenue for its last financial year, as its key IRN-BRU, Barr, Rubicon and Strathmore brands all grew and outperformed the broader market, particularly the Strathmore water brand.
It remained cautious about the overall drinks market outlook this year, particularly in the UK, but said its deal to sell Snapple in Europe, its acquisition of cocktail mixers company Funkin Ltd, and launch of Strathmore flavoured waters, amid other measures, gave it confidence.
The soft drinks manufacturer said pretax profit rose to GBP38.6 million in the year to January 25, compared with GBP34.3 million a year earlier, as revenue rose to GBP260.9 million, from GBP254.1 million, and margins increased as it cut overheads, improved its supply chain and as input costs fell. Its closely-watched pretax profit excluding exceptional items rose to GBP41.9 million from GBP38.1 million.
It will pay a final dividend of 9.01 pence per share, up from 8.19 pence a year before, bringing the total dividend for the year to 12.12p, up 10% on the year.
The company said total IRN-BRU invoiced sales grew by 1.6%, with a strong contribution from the sugar free range, and having benefited significantly from its sponsorship of the Glasgow 2014 Commonwealth Games. Sales of the sugar free product grew by over 20% in England and Wales.
"We set out in 2014 to grow our Sugar Free brands ahead of our total growth and we have successfully delivered against this objective," it said.
Sales of Rubicon grew 3.4% despite a poor performance from the fruit juice market during the year, largely thanks to an 8.1% sales increase for the carbonated product. The still product grew just 1.5%.
Strathmore sales, meanwhile grew by over 20%. The company said it strengthened the brand through its association with sport through its sponsorship of the Glasgow Commonwealth Games and its new partnership with Scottish Rugby. It's expecting the Strathmore Twist flavoured water range to grow strongly going forward.
Still, Chief Executive Roger White said he expects overall market conditions to remain challenging going forward, with the UK soft drinks market "experiencing a period of price deflation which will, if sustained, make it more difficult for many businesses to deliver the top line growth of recent years".
"Whilst our year has started slowly, reflecting tough comparative trading and promotional phasing, we are confident that our management actions, combined with our proven business model, will enable us to further unlock the significant potential that A.G. BARR offers its shareholders this year and into the future," White said.
White told Alliance News that the slow start to the year was in line with expectations given last year's strong comparative performance. He said that he expects "the momentum in the business to grow as the year goes on".
AG Barr bought Funkin in early February, a deal that moved it into the cocktail mixer market for the first time.
"This is a small but significant step into a new, high growth sub-category of the drinks sector. It also provides further incremental growth potential for the group, both in the UK and internationally, as well as the opportunity to enhance our position in the on-trade and hotel, restaurant and café hospitality market segments," the company said.
"We think [Funkin Ltd] has some strong growth momentum in the business which we will look to capitalise on," White told Alliance News, adding that it is still "early days".
"Comparative trading will be a little bit tougher in the first half of the year, but over the full year we still expect to make good progress," he said.
The company also has a new partnership with Dr Pepper Snapple Group to develop the Snapple brand in the UK and on a wider European basis. It took over brand management in January of this year. Last year, Snapple UK sales grew by 35% from a low base.
"The Snapple brand represents an opportunity to drive profitable growth across a number of markets and this, combined with our existing portfolio of brands focussed outside the U.K., provides us with exciting opportunities for new growth," the company said.
AG Barr shares were trading down 0.9% at 671.00 pence Tuesday afternoon, but are still up 12.8% so far in 2015.
Investec raised its current financial year earnings forecasts for AG Barr, saying that while the year could be tough for the drinks category, Barr has plans that should "help deliver organic growth".
The broker said Barr's pretax profit was around GBP0.4 million above its expectations, and it has nudged up its current year forecast for the pre-items pretax profit to GBP44.9 million, from GBP44.3 million, to reflect that beat as well as to include the Funkin deal. Earnings per share in the current year is now expected to be 30.6p, up from the broker's previous forecast of 29.9p.
It also raises its price target for the stock to 714 pence from 673 pence, although it has moved its recommendation to Add from Buy.
Shore Capital also said Barr's pretax profit was slightly ahead of its GBP41.7 million forecast, although it retains its Hold recommendation on the stock.
"We continue to anticipate Barr to deliver another year of profit growth amidst a challenging market environment but given the perceived level of market risk, we believe the shares look fair value," it said.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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