28th Mar 2023 11:57
(Alliance News) - Analysts were pleased with AG Barr PLC's results on Tuesday, after the soft drinks maker posted an increase in revenue and profit ahead of market consensus.
"AG Barr continues to pop," said John Moore, senior investment manager at RBC Brewin Dolphin.
"Despite a tough backdrop, trading remains strong and the company's positive momentum continues, with recent acquisitions making a positive contribution to the bottom line."
Cumbernauld, Scotland-based AG Barr said annual revenue rose 18% in the financial year that ended on January 29 to GBP317.6 million from GBP268.6 million the year before.
Pretax profit rose 5.2% to GBP44.4 million from GBP42.2 million, as adjusted pretax profit increased by 13% to GBP43.5 million from GBP38.4 million a year earlier.
These results are "modestly" ahead of Liberum's expectations for AG Barr. Liberum expected revenue to come in at GBP315 million and pretax profit of GBP42.7 million.
Shoe Capital agreed with Liberum that AG Barr's results were "modestly ahead of expectations".
The Rubicon and Irn-Bru maker declared a final dividend of 10.6 pence, bringing the annual total to 13.1p, which is up 9.2% from 12.0p the year prior.
"This was a very solid performance, with key brands all showing growth, most notably Rubicon. Most impressively volumes were up 8% in Rubicon," said Peel Hunt analysts Andrew Ford & Charles Hall.
Shoe Capital added: "Rubicon was a star performer."
Looking ahead, Chief Executive Officer Roger White: "We are now in an investment phase, designed to capitalise on the strategic growth opportunities ahead."
For financial 2024, AG Barr expects operating margins to be hit by its investments, as well as cost inflation, and the "initial dilutive impact" from the Boost acquisition. However, the company said it remains confident of delivering further revenue and profit growth in the year ahead in line with board expectations.
Back in December, Barr bought Boost Drinks Holdings Ltd for an initial payment of GBP20 million.
"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," CEO White added.
Peel Hunt said that it has left its guidance going forward unchanged, and it has already included the impacts of anticipated "short-term impact on operating margins" in its guidance. "The company has a net cash position of GBP52.9 million, insulating it from rate rises and providing significant protection of its distributions, and we believe its earnings will remain resilient against continued consumer uncertainty," Peel Hunt analysts Ford & Hall explained.
Shoe Capital also chose to keep its financial 2024 expectations for AG Barr unchanged. It expects revenue of GBP385 million and pretax profit of GBP46.1 million.
"We reiterate our view that AG Barr is a high-quality company, with an attractive brand portfolio building, strong net cash position and attractive medium to long term growth potential and ambitions," Shore Capital said.
However, Liberum said: "Looking ahead, we modestly upgrade our numbers (to be more in-line with consensus) and see the potential for more M&A as the group take advantage of the current economic climate. Considering the cost challenges the fact we are today upgrading is a sign of the quality of the business and how counter cyclical the group is."
Liberum upped its guidance for financial 2024. It said it now expects revenue of GBP388 million, up from GBP380 million. It also nudged its pretax profit guidance to GBP45 million from GBP44 million. "This is a very strong outlook considering the implementation of DRS in Scotland in August, continued stubborn inflation and the consumer outlook," Liberum added.
Scotland will implement its Deposit Return Scheme in August. The scheme will see consumers pay a deposit of 20 pence when they buy a drink in a single-use container. They will then get the deposit back when they return the empty can or bottle.
Additionally, the firm said Non-Executive Director Robin Barr will not seek re-election at its annual general meeting in May.
Barr has been with the company for 62 years, having been executive chair for 31 years until 2009.
The company said Julie Barr will relinquish her company secretarial duties and stand for election at the AGM, joining the board in May.
AG Barr was founded in Falkirk in 1875 by Robert Barr. The AG comes from son Andrew Greig Barr, who built the company's first drinks factory in Glasgow and oversaw the launch of what then was called 'Iron Brew'.
Shares were down 3.3% at 524.00 pence each on Tuesday around midday in London.
Liberum recommends a 'buy' rating for AG Barr, with a target price of 600p.
By Sophie Rose, Alliance News reporter
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