AG Barr remains confident
Barr takes £10m hospitality hit on Strathmore as jobs cut
Strathmore took a big hit from lockdown
Soft drinks firm AG Barr said it had laid off workers in Forfar and taken a £10m impairment charge on its Strathmore brand and assets which have been significantly hit by the challenges in the hospitality sector.
Across the first six months of the financial year, group sales to hospitality customers fell by c.65%, peaking at c.95% during the full lockdown period.
Current forecasts assume the UK will not enter into a further significant period of lockdown and indicate that full year revenue performance for the year ending January 2021 will be in the region of 12-15% below the prior year.
The company is forecasting a “modest reduction” in operating profit margin and says it expects to resume dividend payments in 2021.
The Strathmore brand in particular has been impacted by the lockdown given the significance of its sales in the hospitality sector.
“Whilst we are seeing some recovery across hospitality, it will take time for the sector to regain momentum and as such we do not anticipate Strathmore returning to pre-COVID-19 sales levels in the foreseeable future,” said the company.
“Regrettably, as a consequence we have reduced our manufacturing workforce at our Forfar site and the brand and asset valuations have been impaired.”
Irn-Bru saw revenue grow by 1% in the first half of the financial year, continuing the positive momentum which the brand delivered across the second half of the prior year.
For the Funkin business, sales declined by 34% reflecting the hospitality sector challenges, however within this retail and on-line sales grew by over 170%, with the nitro infused ready-to-drink cocktails in particular delivering a strong performance.
The Funkin brand remains a significant long-term growth opportunity in both the recovering on-trade and in the retail channel, where the brand is gaining momentum. The company will be delivery its first Funkin TV advertising campaign in partnership with Sky alongside the launch of a number of new products across the Funkin portfolio.
Group half-year pre-tax profit before an exceptional charge of £11.5m (£10m non-cash impairment and £1.5m in redundancy payments) rose 19.4% to £16.6m from £134.9m while the statutory PTB came in 62.2% lower at £5.1m from £13.5m.
For the six months ended 25 July 2020 the group delivered revenue of £113.2m (2019/20 : £122.5m).
Roger White, chief executive, said: “We remain on course to deliver a full year performance in line with the revised expectations we communicated in the July 2020 trading update.
“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.”