AG Barr to pay special dividend as market recovers
The firm said the market was re-adjusting
Soft drinks firm AG Barr is re-introducing dividends and has announced a special payout to shareholders following a number of one-off cash inflows outside normal trading.
The company will pay an interim dividend of 2p per share (2020/21: nil) payable on 29 October to shareholders on the register on 8 October. A special dividend of 10p per share will also be payable.
In a half year statement it said trading has been strong across both business units, Barr Soft Drinks and Funkin, resulting in an “unusually high profit performance”.
The company admitted some vulnerability around the driver crisis. “In recent weeks we have seen increased challenges across the UK road haulage fleet, associated in part with the COVID-19 pandemic, impacting customer deliveries and inbound materials.
“In addition, the risks associated with the wider labour pool and the current COVID-19 pandemic response are areas we continue to monitor closely.”
For the 27 weeks ended 1 August the group delivered revenue of £135.3m, up 19.5% on the prior year. On a like-for-like basis, excluding the extra week of trading, revenue was £128.5m, an increase of 13.5%.
Statutory profit before tax in the period was £24.4m (2020/21: £5.1m).
The company said the 2020 soft drinks market was characterised by the migration of out-of-home consumer demand into the home environment.
This position is now reversing as the hospitality sector and on-the-go channels begin to recover. As a consequence market share data, skewed by these unusual market dynamics, is now beginning to return to a “more normalised read”.
Roger White, chief executive, commented: “AG Barr is a growth-focused business operating in resilient and growing market categories, with dynamic brands, great people and a strong financial position.
“Our positive first half performance reflects these fundamentals as well as the encouraging performance of recent innovation launches in both soft drinks and cocktails.
“We remain on track to deliver strong full year profit performance, slightly ahead of our 2019/20 pre-COVID level.”
John Moore, senior investment manager at Brewin Dolphin, said: “AG Barr has delivered a strong set of results, buoyed by the performance of its brands – particularly Funkin – the return of ‘on the go’ sales, and a warm summer.
“The business took prudent action during the pandemic to protect its balance sheet, which is reflected in the amount of cash it holds today.
“The recommencement of dividends, along with the payment of a special dividend, points to the management team’s confidence – but there are challenges ahead, not least in the well-publicised form of supply chain shortages.
“Nevertheless, AG Barr is a robust business and appears to be emerging from the pandemic stronger than it went in.”
AJ Bell investment director Russ Mould was more cautious. He said: “Even a recovery in sales and profits, a net cash balance sheet and the return of dividend payments are failing to raise a cheer for soft-drink maker AG Barr’s first-half results.
“Perhaps investors are more concerned about the prospect of shortages of carbon dioxide and haulage capacity as well as wider input cost pressure, given the clear hint from chief executive Roger White that profit margins may be lower in the second half than the first.”
He admits that ” it might not pay to overdo the gloom as management still expects operating margins to exceed last year’s 14.8%, on an adjusted basis for the full-year, even if that implies a sharp drop in the second half from the 17.7% reached in the first six months.”