AG Barr takes hit as inflation squeezes margins
Irn-Bru manufacturer AG Barr saw its profit margin squeezed as it chose not to pass on the full effects of inflation on its costs.
An adjusted operating profit margin of 12.5% for the half year compared with 16.2% in the previous year and was in line with the board’s expectations.
Margins were impacted by “persistent cost inflation, alongside the known near-term impact of the lower margin Boost division [acquired last December],” it said in its interim statement published today.
“In addition, we chose not to pass on the full impact of cost inflation to customers in order to remain focused on offering consumers great value, affordable brands in an uncertain and challenging economic environment. “
Reported profit before tax in the period increased 12.6% to £27.8m (2022/23 H1 : £24.7m) as a result of revenue growth across the group, with strong volume growth and market share gains in soft drinks in particular.
Adjusted profit in the period was £27m, an increase of 6.7% on the prior year first half (2022/23 H1 : £25.3m).
Revenue was £210.4m representing year on year growth of 33.2% on a reported revenue basis, including the contribution from the Boost Drinks business, and 10.4% on a like-for-like basis.
The board declared an interim dividend of 2.65 pence per share representing a 6% rise on the previous year.
CEO Roger White said: “We have made significant financial and strategic progress in the first half and have exciting plans in place for the balance of the year to sustain our growth momentum.
“We remain confident in delivering a full year profit performance in line with our recently increased market expectations and are well positioned to deliver strong shareholder returns for the long-term.”
The board announced last month that Mr White will step down from his role as CEO, and retire from the group within the next 12 months and the search for his successor is under way.
Speaking later to Daily Business Mr White said he had not finalised his plans and had told those who have contacted him about his next steps that he is “not yet available”. He said he was fully focused on the job in hand.
“The business is growing strongly, our profit performance was good and we have a margin rebuild under way,” he said.
He said the debacle over the government’s failed deposit return scheme had been a “wasted effort” which had impacted on the business planning agenda.
The company has been hit by industrial action and 10 drivers remain on strike.
“We would like to resolve the situation even though it has had no impact on our customers,” he said.
Robin Barr stepped down from the Board in May after 62 years with the company. Julie Barr and Louise Smalley took up non-executive director positions in May and June respectively.
In a note this morning, house broker Shore Capital said: “We view AG Barr as a well-balanced and attractive investment, with high-quality, high-value fixed assets, very strong brand portfolio [and] rock solid balance sheet.”
Shares fell 0.5p to 484.5p.