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Fall in pound will impact costs

Irn-Bru maker axes 90 workers as sales dip

Irn-Bru XtraIrn-Bru manufacturer AG Barr will cut its workforce by 10% after delivering broadly flat half-year results in a weak market which suffered from price-cutting, the fall in the pound and poor weather.

The reduction in 90 employees across the commercial, supply chain and central functions will be implemented before the end of the current financial year.

The likely one-off cash cost associated with this reorganisation is about £4 million but with an ongoing annual benefit of £3m.  All of these costs will be recognised as exceptional in the current year financial statements

Pre-tax profit before exceptional items came in at £17 million (2015: £16.9m) on revenues of £125.6m (2015: £130.3m).

The soft drinks market in the period was down 0.7% in value and 0.4% in volume reflecting a deflationary market with increased promotional activity.

Deflation, although still a feature, has levelled out from its previous position and the company says it is generally anticipated that the current period of food and drink price deflation could turn into a period of modest price inflation in 2017.

The company says the fall in sterling, if sustained, will lead to higher input costs across a number of our key commodities. 

“We currently forecast this to have a year on year impact of circa £3m – £4m in 2017 however we are taking action to offset this cost where possible.

“We are beginning to see the benefits of our product development and innovation initiatives with both consumers and customers.  Market conditions remain volatile and somewhat unpredictable however, assuming a strong trading performance in the key festive period, we remain on track to deliver profit (before tax and exceptionals) slightly ahead of last year.”

Roger White, Chief Executive said: “We have delivered a solid first half performance, maintaining market share, improving our operating margin with a slight improvement in our pre-exceptional profit versus the prior year. 

“This is despite continued price deflation in the UK market, a challenging customer and consumer environment as well as poor weather in the important early summer months leading up to the end of the reporting period.

“Good progress has been made across the key areas of innovation, product reformulation, brand development and operational efficiency.  We will continue to focus on these areas throughout the second half of the financial year.

“Following our significant investment in assets, infrastructure and systems, delivered through our Fit for the Future business improvement programme, we are announcing the programme’s final phase, a business reorganisation which will create a faster, more efficient and leaner organisational structure. 

“We are beginning to see the benefits of our product development and innovation initiatives with both consumers and customers.  Market conditions remain volatile and somewhat unpredictable however, assuming a strong trading performance in the key festive period, we remain on track to deliver profit (before tax and exceptionals) slightly ahead of last year.”

Key Points

●    Total revenue was £125.6m (2015: £130.3m).  Like for like revenue from ongoing business declined 2.8%

●    Profit on ordinary activities before tax and exceptional items at £17.0m (2015: £16.9m)

●    Profit before tax was £21.1m including an exceptional credit of £4.1m (2015: £16.9m with no exceptional items)

●    Free cash flow was £19.6m.  Net debt stood at £6.6m (representing a net debt/EBITDA ratio of 0.3 times)

●    The Funkin business continues to perform ahead of expectations with revenue up 28% in the period

●    Strong International performance, with revenue up 16%

●    Rockstar franchise territory extension signed September 2016 – includes Russia and Italy

●    Entering final stage of 3-year Fit for the Future programme with announcement of business reorganisation

●    Interim dividend of 3.53p per share (2015: 3.36p), an increase of 5% on the prior year



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