22nd Sep 2020 09:51
(Alliance News) - Irn-Bru maker AG Barr PLC on Tuesday said significant changes in consumer purchasing and consumption patterns due to the Covid-19 pandemic resulted in a 62% slump in first half profit.
The soft drinks maker added that revenue for the year ending January 2021 will be 12% to 15% below the prior-year level, with a modest reduction in operating profit margin due to adverse sales mix and operational de-leverage, mitigated by ongoing cost savings.
AG Barr noted that this annual forecast is based on the assumption that the UK will not enter into a further significant period of lockdown.
For the six months to July 25, AG Barr recorded pretax profit of GBP5.1 million, down 62% from GBP13.5 million a year ago. Revenue fell 7.6% to GBP113.2 million from GBP122.5 million.
The sharp drop in profit resulted from a GBP11.5 million in exceptional charges that stemmed from Covid-19. The exceptional charges relate to the company's restructuring programme and a GBP10 million impairment on the Strathmore bottled water brand, which has been significantly hurt by a slump in hospitality sector demand.
AG Barr said, as part of the restructuring programme, it has decided to cease to produce and sell the franchise juice brand Snapple during the first half of financial 2022. Snapple accounted for less than 1% of revenue in financial 2020.
Stripping out exceptional costs, first half pretax profit rose 19% to GBP16.6 million.
Chief Executive Roger White said: "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 a robust drinks sector. We are confident that our business will continue to prove its resilience for the balance of this year and beyond."
On dividend payments, AG Barr said it will keep its position under review. On the basis of current underlying assumptions related to the UK's Covid-19 recovery, dividends may resume in 2021.
Shares in AG Barr were up 12% at 416.00 pence each in London on Tuesday morning.
By Tapan Panchal; [email protected]
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