Soft drinks firm AG Barr is best known for its Irn-Bru brand, now one of the top five carbonates in the UK, but one of its other products proved to be the star performer over the past year.

The Cumbernauld-based company is expected to deliver another year of top line growth with all three core brands – IRN-BRU, Rubicon and Boost – producing strong returns.

However, Rubicon was the stand-out performer, achieving another year of double digit revenue growth.

Euan Sutherland, who succeeded long-serving Roger White as chief executive last summer, said the board was confident of growth in all its brands and further progress on margins.

Revenue  for the year ending 25 January is expected to come in at £420m (2023/24: £400m), representing c.5% year-on-year growth.

The company is forecasting a strong improvement in adjusted operating margin of about 13.5% (2023/24 :12.3%), helping to drive double digit profit growth.

The Boost strategy, to focus on value over volume and synergy benefits, gained momentum in H2 with a step up in profitability.  The brand is now fully integrated into our commercial operation and the insourcing of manufacturing remains on track.

Funkin’s ready-to-drink business continued to grow at pace through retail distribution gains and innovation.  This went some way to mitigate on-going challenges within the on-premise market.

The company said it had completed the projects to strengthen its convenience channel route to market and integrate Boost into the Soft Drinks business. 

“These projects deliver significant commercial and operational synergies.  As previously advised, they give rise to a one-off cost of c.£5m in the 2024/25 financial year, which will be treated as an adjusting item,” it said in a trading update.

The multi-year supply chain investment programme continues on plan, supporting brand growth, efficiency improvements and synergy benefits.  Overall capital spend in the year of c.£19m included a new small format PET line and an upgraded large format PET line at the Cumbernauld site, providing increased capacity and capability.

The company remains highly cash generative, ending the year with more than £60m of net cash (2023/24:  £53.6m).

It has welcomed a new chief commercial officer, Dino Labbate, who joined this month.

Mr Sutherland said: “AG Barr is in line to deliver another year of strong top line growth, margin improvement and cash generation. 

“These headline metrics highlight excellent progress towards our long-term financial goals.  We have sustained brand momentum despite the well trailed wider market pressures, and continue to make good progress towards our margin target.

“We are committed to consistent long-term revenue growth and have confidence in further margin improvement as per our previous guidance.  Our expectations for 2025/26 are unchanged and in line with market expectations.”

Full year results will be reported on 25 March. 

Market reaction

“The last decade has thrown a lot at AG Barr, in the form of new regulations on sugar content, Covid-19, carbon dioxide shortages and input cost inflation (and they are all before the usual issues of competition and changing trends in consumers’ tastes), but the Scottish firm’s latest trading update suggests it is coping admirably,” says AJ Bell investment director Russ Mould.

“Sales are up, profit margins are expanding faster than analysts had expected and cash flow remains strong, even as AG Barr continues to invest in capacity and its supply chains.

“The company now looks poised to make record profits in the year to January 2025 and follow up with a further advance in 2026, which may help to explain why the shares are trading close to five-year highs.

“The key to the investment case for AG Barr remains its efforts to rebuild profit margins after a torrid series of challenges and cost pressures over the past five years.

“The good news is that the company continues to adapt to changes in consumer tastes and trends, in terms of both product and its route to market, and drive cost efficiencies.”

“After a hiatus during the pandemic, AG Barr is firmly back on the dividend growth trail. New chief executive officer Euan Sutherland and the board sanctioned a 17% increase in the interim dividend and the full-year results in March may well offer a boost to the final payment too.

“Overall, analysts expect a 10% increase in the total dividend to 16.5p for the year to January 2025, with a further 12% advance to 18.4p in the coming year.”

John Moore, senior investment manager at RBC Brewin Dolphin, said: “AG Barr’s trading statement confirms the strong momentum at the company, with a 5% uplift in sales translating into double-digit profits growth.

“However, the Irn-Bru maker is not sitting on its laurels, with a £24 million investment in capex and strategic initiatives this year underlying its long-term ambitions.

“Meanwhile, cash to hand of £60m provides management with the opportunity to consider further acquisition targets. Whilst the share price has been in the doldrums of late, this statement should remind investors of the business’s core qualities.”