31st Jan 2023 14:30
(Alliance News) - AG Barr PLC expects annual profit to top the market view, though inflation and a Scottish regulatory rule on single-use packaging somewhat cloud the outlook for the Irn-Bru maker.
AG Barr expects revenue in the half-year to January 29 to climb 17% to GBP315 million from GBP268.6 million. Profit will be "slightly ahead of current market expectations", it predicts.
It expects more growth in revenue in financial 2024, though it warned red-hot inflation and the introduction of a new regulatory rule for the consumer could take some fizz out of sales.
In AG Barr's native Scotland, the deposit return scheme will be introduced in August. Under the DRS scheme, consumers will pay a 20 pence deposit when buying a drink in a single-use container. They will get the sum back if the container is returned.
DRS and rampant inflation "have the potential to impact consumer behaviour", AG Barr said.
Analysts at Liberum are still bullish on the stock though. They rate AG Barr at 'buy' with a 600.00 pence price target, lifted from 525p. AG Barr shares were 4.4% higher at 550.00p each in London on Tuesday afternoon.
"AG Barr remains a top defensive pick, with significant potential for growth and margin expansion once the transitionary impacts of inflation and DRS implementation have played out," Liberum analysts said.
Looking ahead, M&A could be at play for AG Barr, according to RBC Brewin Dolphin analyst John Moore.
"With a strong cash position, further additions to AG Barr's stable could be in the offing as smaller peers struggle in the current environment," Moore added.
In 2022, AG Barr bolstered its ranks by acquiring Boost Drinks Holdings Ltd for GBP20 million. The Cumbernauld, Scotland-based firm also stumped up GBP3.4 million to acquire the remaining 38% of Moma Foods Ltd, a plant-based milk seller.
AG Barr now has sole ownership of the brand, having first invested in the company in December 2021.
By Eric Cunha, Alliance News news editor
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