29th Mar 2016 09:24
LONDON (Alliance News) - AG Barr PLC on Tuesday reported growth in profit in its recently-ended financial year, although revenue fell slightly in a challenging UK drinks market which faced a tough comparative the year before.
The soft drinks company, which owns brands including Irn-Bru carbonated drink, Rubicon juice and Strathmore water, said its pretax profit in the year ended January 30 rose to GBP41.3 million from GBP38.6 million the year before, as revenue fell slightly to GBP258.6 million from GBP260.9 million.
Profit was lifted as there were no exceptional items in the year, compared with an exceptional cost of GBP3.3 million in the year before. The prior year's pretax profit would have been higher at GBP41.9 million without the exceptional cost.
Sales were hit by price deflation and volume underperformance, AG Barr said, as well as disappointing summer weather. The prior year benefited from better weather and marketing around the Glasgow Commonwealth Games.
AG Barr said the UK soft drinks market has not yet appeared to benefit from the improvement in underlying consumer purchasing power and rise in disposable income, as soft drinks makers are forced into price competition with each other, leading to lower volumes and lower prices.
Consumers also are changing their preferences towards healthier, lower-sugar products. The overall growth driver for AG Barr was bottled water, but this was offset by declines in fruit juice, dilutables, sports drinks and some carbonated products.
AG Barr added that it is working to reformulate and realign its portfolio to meet these changing consumer preferences by substantially reducing the sugar content of its products. It has already reduced the average calorific content of the portfolio by 8.8% in four years, which it said it expects to accelerate over the next year.
"We are well positioned to benefit from the high levels of loyalty to our existing brands along with the opportunities to further drive the distribution of our differentiated portfolio of increasingly relevant brands," Chief Executive Roger White said in a statement.
White also briefly noted the recently announced plans by the UK government to place a levy on drinks with high levels of added sugar in 2018, a move which hit shares in AG Barr following the Budget earlier this month.
The drinks company expects that following the reformulation of its products, at least two thirds of its portfolio will have lower or no sugar by 2018, meaning they will be levy-free. Currently, around 40% of its products have low or no sugar.
The remainder of the portfolio which will attract a levy will still be able to grow on brand loyalty, AG Barr said.
"Although the details of the chancellor's proposed soft drinks levy are still to be consulted upon, we believe our combination of brand strength, ongoing product reformulation and consumer driven innovation will allow us to minimise the financial impact on the business at the proposed point of implementation in April 2018," White said.
"We are well-placed to continue our delivery of consistent long-term shareholder value based on our proven solid business fundamentals, our balance sheet strength and capacity and our ability to flex and develop our strategy to maximise our long-term growth potential," he added.
AG Barr will pay a total dividend of 13.33 pence for the year, which is up 10% on the prior year.
"Market conditions in the core UK soft drinks market are not expected to substantially change as we look forward. Top-line growth remains under pressure and changes in consumer preferences offer challenges and opportunities in equal measure," White said.
Shares in AG Barr were trading up 0.1% at 519.50 pence on Tuesday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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