23rd Sep 2014 11:13
LONDON (Alliance News) - Scottish soft-drinks maker AG Barr PLC Tuesday said an increase in volume and strong demand for its Strathmore water brand and its iconic Irn Bru drink, drove an increase in its first-half profit and revenue, and also announced a new 10-year franchise deal to sell the Snapple brand in the UK and EU.
The Irn Bru maker declared a 10% increase in its interim dividend to 3.11 pence per share, after it posted a pretax profit of GBP16.5 million for the six months to July 27, up from GBP13.2 million a year earlier, buoyed by a 5.4% increase in revenue.
"This was all driven by underlying volume growth, strong brand support, for example from the Commonwealth Games, and advertising, new flavours and brand extensions," Chief Executive Roger White told Alliance News after the company released its results Tuesday.
Looking into the second-half of the year, AG Barr said it expects market conditions to remain both "dynamic and challenging", but White said that in this very competitive UK soft drinks market, it will continue to invest in advertising, marketing and promotional spend in order to keep up against some of the bigger players like Britvic.
"We will continue to invest in marketing; Irn Bru and Rubicon will be the recipients of a lot of our spend," said White.
AG Barr's first-half revenue rose to GBP135.7 million, up from GBP128.7 million a year earlier, boosted by 6.2% growth in volume.
White said sales in Scotland currently account for around 38% of total revenue, with just under 60% from England and Wales, and the remainder made up of international sales.
"In Scotland we grew sales by 4.5%, England and Wales by 6.5% and internationally by 4.9%. We want to make sure we continue with that going forward," said White.
AG Barr said volume growth in the first-half was driven by its Strathmore water brand, which it said benefited from increased distribution, innovation and further sector growth. In value terms, carbonates grew by 4.5% and still drinks by 6.3%, AG Barr said.
"During the year we launched Strathmore Twist flavours which a doing well. Water has been a big part of market growth and flavoured water is a big part of that," said White.
Geographically, AG Barr said that going forward it will look to expand its brands regionally, pushing Irn Bru in the south and its Rubicon brand in the north.
The Scottish company also said it has signed a 10-year deal with Snapple Beverage Corp, a subsidiary of the Dr Pepper Snapple Group, giving it the exclusive rights to sell, market and distribute the Snapple brand in the UK and several other EU countries. The agreement will commence in January 2015.
"We will be working in partnership with Snapple to develop that brand in EU territories. The main markets it has a small presence in already is the UK, Ireland, Germasny and Denmark. We will be pushing there first and then elsewhere in Europe. We Believe it should do well in Scandinavia and continental Europe," said White.
Japanese drinks company Suntory last year bought the Lucozade and Ribena brands from GlaxoSmithKline, and AG Barr's Orangina contract, which was due to expire at the end of 2014, was terminated early and transfered into the new Suntory Lucozade Ribena operation. White said that with the Orangina franchise deal now gone, is sees good potential with Snapple.
"The Orangina deal is gone. This we think gives us a slightly different platform for growth in the medium term in the UK and further afield," said White.
AG Barr, the producer of other drinks brands including Tizer, said it continues to invest in increased levels of marketing, innovation and consumer promotional activity.
"In the period, we have seen our gross margins and operating margins improve by around 100 basis points as we benefited from the efficiencies related to volume growth and improved cost control," the company said.
Earlier this year, AG Barr said it was relocating its in-house carton production capacity in Wales to its Milton Keynes facility, where it will invest GBP4 million in a new high-speed carton production line, to boost efficiency, support demand and future capacity. White said Tuesday that those investment plans are progressing well.
"It's all on time and on budget. We have a lot to do but we're getting on with it and it's going well,2 said White.
AG Barr shares were trading 0.8% higher Tuesday early afternoon at 636.62 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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