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A.G Barr maintains Britvic merger radio silence

By Ben Bouckley , 24-Sep-2012
Last updated on 24-Sep-2012 at 11:55 GMT

A.G Barr has not revealed any details on the progress of talks regarding its possible merger with PepsiCo bottler Britvic, as it reported H1 2012 results today.

Results in line with expectations saw the UK soft drinks firm grow revenues 4.9% to £130m ($210m), driven by volume growth in key brands Rubicon (7.3%) and Barr (9.7%) as A.G Barr extends their geographic distribution.

But operating profit thus fell circa. 7% to £15.6m, and adverse currency movements meant that adjusted profit before tax (PBT) fell 10% to £14.9m.

Olympic competition

Irn-Bru sales also fell slightly due to selective promotions, while adjusted operating margins fell 12% because of higher input costs (particularly sugar), ongoing brand investment and a shift in mix away from the higher margin impulse channel.

“The latter was driven largely by the changes in consumer purchasing behaviour due to the poor weather, as consumers shifted purchasing away from impulse outlets towards the more promotionally driven take-home channel,” A.G Barr said today.

Describing “intense” competition in UK soft drinks over the last six months, the company pointed to the London Olympics and the Queen’s Diamond Jubilee.

“However it is the drive to increase volume through promotion by some of our industry competitors which has had the greatest impact on the market,”A.G Barr said.

“Many major brands have increased the volume of sales promoted through 'buy one get one free' and less than half price activity,” the firm added, noting that it had responded with measured promotions that sought to maintain brand equity. 

Britvic synergies dialed in

On September 5 A.G Barr announced that it had approached Britvic with a view to a possible merger to create a joint group, 63% owned by the latter’s shareholders.

Analyst consensus at the time was that the tie-up was more attractive for Britvic’s shareholders than A.G Barr’s , and the latter’s board said today that talks continue.

Shore Capital analyst Phil Carroll said in early September that, due to Britvic’s exclusive bottling agreement with PepsiCo for sales of Pepsi and 7UP in the UK and Ireland, a PepsiCo board member at Britvic suggested tacit blessing for the Barr talks.

Others analysts have suggested that PepsiCo itself or Suntory could swoop for Britvic, as we head towards the October 3 deadline for any merger with A.G Barr.

Damian McNeela, an analyst at Panmure Gordon, today reaffirmed a ‘hold’ rating on A.G Barr’s stock, and said any potential merger synergy savings had already been dialled into the share price (452p as we went to press).

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