AG Barr sees profits boosted 10%

By Arabella Mileham

Published: 24 March, 2015

Soft drinks manufacturer AG Barr saw a 10% boost to its pre-tax profit to £41.9m, with turnover up 2.7% to £290.9m in the 12 months to 25 January.

The Scottish company's makes Irn-Bru, Rubicon and Strathmore spring water but it entered the cocktail mixer segment last month after buying Funkin for an initial cash consideration of £16.5m. A further £4.5 million will be payable subject to it hitting financial targets.

In the company annual results, chairman John Nicolson said the acquisition broadened and strengthened the company's portfolio and moved the company into areas where there was "real strategic value".

"This is a small but significant step into a new, high growth sub-category of the drinks sector. It also provides further incremental growth potential for the Group, both in the UK and internationally, as well as the opportunity to enhance our position in the on-trade and hotel, restaurant and café hospitality market segments," it said.

Core brands Irn-Bur and Strathmore water saw a boost from the Glasgow 2014 Commonwealth Games, with Irn-Bru sales up 1.6%, and Strathmore water seeing growth of 20%. However, there were however "significant" declines in fruit juice and sports drinks, although Rubicon saw "solid" overall growth of 3.4%.

Chief executive Roger White said it was an "excellent financial performance" under difficult market conditions, noting that areas of traditional growth had become more difficult and consumer preferences were changing.

City analyst Nicola Mallard of Investec noted that capital expenditure was high at (£20-25m) and the Funkin purchase after the end of the financial year will help tip the company back into net debt by the end of the financial year 2016. "But still the balance sheet will be in excellent shape on our estimates," she said.

Funkin, which operates in the UK and USA, turned over £9 million in 2014. In February, Funkin's chief executive Andrew King confirmed the company will operate as a standalone business unit.

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