AG Barr performance shrugs off failed Britvic deal
Reporting on the company's trading update issued before the close of its financial year N+1 Singer analyst Sahill Shan said net debt was better than expected.
"We currently estimate year-end net debt of £7M versus £10M guidance, but sense an outturn closer to £4-5M."
In the wake of its failed merger with Britvic last year, the business was maintaining its aim to double its size, said Shan. "This is a clear signal of management’s ambition, and given its track record, it would be foolhardy to not back them."
'International sales momentum'
However, he cautioned: "The plan however will inevitably require a corporate move and achieving some international sales momentum."
AG Barr's 6.1% annual sales growth to £252M was in line with N+1 Singer forecasts, and was likely to have been driven by the firm's presence in core markets, he said.
"There is no market data with the update, but our sense is that the group has once again outperformed given its strong positioning in the two faster growing categories last year of carbonates and water."
Within these areas, he believed its Rockstar energy drink had contributed significantly to sales, whereas its Rubicon brand had struggled against fierce category competition.
Although AG Barr's sales largely met predictions, its performance still compared favourably to the substantial growth it had achieved in its previous financial year, said Shan.
'No let up in promotional activity'
He concluded the company was in a good place to achieve financial objectives in the coming year, but stressed the challenges ahead. "The overall market place remains a mixed bag with no let up in promotional activity."
High levels of promotional activity towards the end of the year had held back AG Barr's profit margins, he added.
Panmure Gordon analyst Damian McNeela said similar market dynamics would prevail in the coming year. "The market remains competitive and promotional activity remains high, with the carbonated category continuing to fare better than the relatively more expensive stills category."
AG Barr issued no update on progress on the development of its Milton Keynes production facilities.
The company expected total revenue for the final quarter (Q4) of its financial year to be up 5.5% on the same period last year.
'Fiercely competitive backdrop'
Investec analyst Nicola Mallard said: "AG Barr has delivered a good close to its financial year ... This was achieved against a fiercely competitive backdrop and also strong comparatives from the group’s 2H [second half] last year."
McNeela said: "Our assertion remains that AG Barr is a well-run company, with a strong balance and continues to deliver against its organic growth strategy."
