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AG Barr results impress City analyst

By Mike Stones+

05-Dec-2013

Soft drinks manufacturer AG Barr’s third-quarter results have impressed City analysts N+1 Singer Equity Research and Investec.

The Irn Bru manufacturer’s interim management statement – covering trading from July 29 to December 1 – revealed revenue up by 8%, with volume up by 6.4% compared with the same period last year.

Revenue over the year-to-date rose by 6.7%, with volume up by 5.1%, outperforming the market, according to the firm. It quoted Nielsen figures confirming the market increased in value by 4.1% and volume by 3.1% over the same period.

N+1 Singer Equity Research analyst Sahill Shan described results as “a strong update”, with sales growth building on the 5.6% achieved in the first half.

‘Good momentum across its brands’

“We understand management has seen good momentum across its brands, especially Rockstar,” said Shan. “The only disappointment seems to be the Rubicon franchise which is facing more competition. Given longer-term growth aspirations for this brand and recent Milton Keynes investment, we feel it is important that management revive momentum in this core category.”

AG Barr management was intent on doubling the size of the business and this will be driven via a combination of organic growth, corporate activity and adding an international leg to the business, said Shan.

The analyst maintained his ‘hold’ advice on AG Barr’s stock on valuation grounds, but added “Our fundamental stance on mid-term growth prospects is positive”.

Much was said to depend on the key Christmas trading period, Shan added.

‘Barely a slowdown’

Investec analyst Nicola Mallard said the results showed “barely a slowdown” from the strong second quarter performance, which had benefited from the stronger summer weather-led market.

“The group is focusing a little more on driving volumes given the competitive nature of the market and also the greater availability of product now from Milton Keynes, but, importantly, not at the expense of margins,” said Mallard.

Investec retained its ‘buy’ advice on the firm’s stock.

AG Barr confirmed trading had been supported over recent months by strong performance at its new Milton Keynes site. “We are progressing well through the plant commissioning phase and have completed the logistics transfer programme on time,” said the firm. The second phase of investment at Milton Keynes was said to be under consideration.

The firm said in a statement accompanying its results: “The soft drinks market remains highly competitive as we enter the important Christmas trading period. We are now executing our strong seasonal trading plans and remain confident of delivering our full year performance expectations despite tough year-on-year trading comparatives.”

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