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Sectors > Beverages

AG Barr plans for ‘highly competitive Christmas’

By Mike Stones , 10-Dec-2012
Last updated on 10-Dec-2012 at 14:46 GMT

Irn-Bru maker AG Barr has announced revenue up by 9% for the 18 weeks to December 1, as the firm prepares for a “highly competitive” Christmas market.

The firm reported sales volumes up by 6.6% compared with the same period last year. Year-to-date revenue to December 1 rose by 6.5%.

AG Barr said in its latest interim management statement: “As we now enter the important Christmas period, we anticipate that the marketplace will remain highly competitive. However, our sales execution activities are well developed and we remain confident of delivering our plans for the full year.”

City analyst Shore Capital agreed that promotional activity in the lead up to Christmas remained intense. “Coca-Cola is promoting three for £3 on two-litre PET bottles, Britvic’s two-litre PET bottles are half price. Irn-Bru is currently on two for £2.50,” said analysts Clive Shirley and Darren Black.

Promotional activity

Shirley and Black said the performance was driven by Barr’s major brands but also benefitted from the timing of promotional activity of Irn-Bru in the second half of this year. The timing of Irn-Bru’s ‘Bru Island’ promotion made a particularly strong contribution to volume performance, they added.

Reflecting the highly competitive soft drinks market and the uncertainty about Christmas trading, Shore Capital retained its forecast of 5.6% revenue growth to £250.3M, with an operating margin of 13.7%. That should deliver adjusted profit before tax growth of 2% profit before tax growth to £34.3M in financial year 2013, said Shirley and Black.

They retained they ‘hold’ advice on  AG Barr’s stock.

Office of Fair Trading

Meanwhile, after the boards of AG Barr and Britvic agreed to a merger last month, a prospectus was produced last week. General meetings are due to take place on January 8. Shirley and Black said: “Providing the Office of Fair Trading gives a positive response to the merger − expected by mid-January − and we see no reason why this wouldn’t be the case, the merger is due to become effective on January 31 2013.”

Speaking last month, Gerald Corbett, Britvic non-executive chairman, said the merger of AG Barr and Britvic would create “a world-class soft drinks company”.

The management statement also reported “good progress” with the development of the firm’s new manufacturing and logistics facility at Magna Park, Milton Keynes. “The site's construction is now well underway, with handover of the building from the developer anticipated in February 2013 and the fit-out expected to commence soon after,” said the firm.

Commissioning is expected to take place in August 2013.

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