Shares surge 9% in Irn-Bru maker as City backs strategy

webnexttech | Shares surge 9% in Irn-Bru maker as City backs strategy

The company declared that its margin rebuild plan was “well under way” amid signs that the rate of cost inflation, in areas such as commodities and labour, was beginning to ease towards the end of last year, adding that it remained “confident in our strategy and the continued delivery of revenue and profit growth in the year ahead”. Research analysts Darren Shipley and Clive Black at house broker Shore Capital declared there was “much to like” about Barr’s results as they upgraded their profit forecasts for the company for the next two years. READ MORE: New Edinburgh office revealed for Morton Fraser MacRoberts The analysts said the results “make for very pleasant reading, with a modest beat to recently raised guidance confirming an excellent strategic and financial performance”. They stated in a note for investors: “With a higher base and the earlier-than-anticipated in-house manufacture of Boost/Rio volumes, we put through a c10% upgrade to FY25 and FY26 forecasts, driven by the acceleration in the delivery of the margin rebuild targets set out 12 months ago (14-15%).” Anubhav Malhotra at Liberum said: “The market underappreciates both the sales growth and margin recovery potential of the business – H2’24 saw material margin increases vs H1’24. There is potential for additional share buybacks, special dividends and further acquisitions due to the strong net cash position of c.£54m.” The results were the last annual update to the City delivered by long-serving chief executive Roger White, who is stepping down after more than 20 years at the helm at the end of April. He is being replaced by Euan Sutherland, a former boss of Superdry and the Co-op, who joins on May 1. Asked to comment on cost inflation, Mr White told The Herald: “Whilst it is not plain sailing by any manner of means from a cost point of view, some of the big volatility has come out of the market now. In some of the commodity groups and in some of the utility areas, there is much less general bad news. However, there is still underlying and real inflation in wages and in costs coming through, as that wage inflation filters its way through. READ MORE: Rosebank in Falkirk to open doors to public for first time “Obviously, the most recent inflation figures would appear to suggest that things are a little bit more under control and that hopefully things are moving in the right direction. But we have seen last year high single digit [percentage] cost price increases for our customers and this year it is probably more like low single digit. That is much more normalised, I would say.” On consumer demand for AG Barr products, which as well as Irn-Bru include fruit-based soft drink Rubicon, cocktail puree brand Funkin, and Boost energy drink, Mr White said: “I think it has been by and large fairly consistent. It is driven by long-standing trends. Value for money remains important for people but so does taste. People are buying brands they believe in and that deliver for them, but they have got to be valued correctly. “There is pretty consistent consumer behaviour across the different channels. The one area that remains a little bit more challenged is the on-trade where particularly late-night venues have had a tough time for the past 12 months. We continue to see that being a feature.” The results were posted shortly after the company announced a review of its Barr Soft Drinks’ sales and distribution operations which supply the independent retail sector, and an update to the integration of Boost energy drinks division, which Barr acquired in a deal worth up to £32 million in December 2022. READ MORE: Bill Costley puts Souter’s Inn near Turnberry up for sale The two developments could lead to nearly 200 redundancies in total, with 160 potentially affected at Barr Soft Drinks and 35 at Boost, amid plans to close the energy drink’s small office in Leeds. Around two-thirds of the sales distribution jobs at risk are in Scotland, with the rest in England, though the firm hopes to find “suitable employment” for people affected in different roles, with retraining offered in certain circumstances. Barr currently employs about 1,000 people in total. The company is now engaged in a consultation process over the cuts. Mr White said: “We announced this on the 14th of March, so we are literally just starting the process now. That will go on through April and into May.” Meanwhile, Barr announced separately that long-standing commercial director Jonathan Kemp will not be seeking re-election at the company’s annual meeting on May 31, “owing to family health reasons”. Barr said Mr Kemp will continue to lead the commercial function until September 30, 2024, and then “remain available to the company as required for a further 12-month period following which he will retire from the business”. Mr White said of Mr Kemp: “Jonathan has had a huge impact on the business over the 20 years that he has been there. Whether it is his commercial acumen or his larger-than-life personality, he is the epitome of all that is good about the brands and the business.” The board recommended a final dividend of 12.4p per share, giving a total dividend for the full year of 15.05p. This represents an increase of 14.9% on the prior year. Shares in AG Barr closed up 48p, or 9.34%, at 562p.

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