In This Article:
Questor is The Telegraph’s stockpicking column, helping you decode the markets and offering insights on where to invest for the past six decades.
Shares in AG Barr went a bit flat after last week’s interim results but they had just reached a five-year high and the statement did not feature anything that was particularly incrementally positive.
Equally, however, there were no negative surprises either and the results ultimately suggested that the drinks maker has done well to adapt to, and come through, a period that has thrown up new regulations on sugar content, Covid, carbon dioxide shortages, input cost inflation and a lot more besides, and position itself for further growth in the process.
Sales, profits and the dividend were all higher in the first six months of the fiscal year to January 2025 to leave AG Barr on track to set new all-time peaks for revenues and earnings in the next fiscal year, to January 2026, if analysts’ forecasts prove accurate.
The acquisitions of Rio and oat milk maker Moma have both broadened the Cumbernauld-headquartered company’s product portfolio, which is still spearheaded by the iconic Irn-Bru fizzy drink and its three other big brands, namely Rubicon, Boost and Funkin.
First-half sales were up 5.2pc in total. Soft drinks rose 7pc, to suggest that AG Barr is outgrowing its target market, which grew by 2pc in the same period, and Moma grew its sales by 7.7pc, although this business represents less than 5pc of the group.
The one area of softness was Funkin, the pre-mixed cocktail business, where sales fell, as consumers cut back on nights out and late-night drinking thanks to the squeeze on their pockets from inflation.
After last year’s dip in profit margins, shareholders will be pleased to see AG Barr delivering on its target of an improvement this year (at least once the £4.4m of restructuring charges relating to the merger of the Boost brands and a switch from selling directly to using wholesalers in the independent stores channel is excluded).
The underlying operating margin rose to 13pc, compared to 12.3pc across the whole of 2024, and analysts have pencilled in 13.2pc for the year overall. That is still some way below the pre-Covid peak of 17.1pc, reached in 2018, but it should mean that operating profit continues to grow, with the prospect of further momentum in 2026 as cost efficiencies are realised from the integration of Boost and the sales channel switch.
Meanwhile, a solid balance sheet continues to buttress the business and give it time to invest in, and protect, its competition position in the face of multiple challenges. Attention will then switch to the balance sheet.