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Introduction & Market Context
AG Barr (LON:BAG) reported solid interim results for the 26 weeks ended July 27, 2024, with performance outpacing the broader UK soft drinks market. The Scottish beverage company, best known for its flagship IRN-BRU brand, delivered growth across key metrics despite challenging market conditions where the overall soft drinks category saw volume declines.
The company’s shares have performed well in 2024, trading at 695p as of July 29, up 0.58% on the day of the results presentation and near the upper end of its 52-week range of 555p to 728p.
Financial Performance Highlights
AG Barr reported revenue of £221.3 million for H1 2024, representing a 5.2% increase compared to the same period last year. This growth was driven by both volume increases and favorable price/mix effects, with case volumes rising 3.2% to 36 million.
As shown in the following comprehensive financial scorecard, the company delivered improvements across most key metrics:
Adjusted profit before tax increased by 8.5% to £29.3 million, though reported profit before tax declined by 10.4% to £24.9 million due to £4.4 million in one-off costs related to business change projects. These adjusting items primarily consist of people costs associated with the closure of the Barr Direct operation and the integration of the Boost business.
The company’s profit bridge illustrates how volume growth and price/mix improvements more than offset increased costs:
Particularly noteworthy was the substantial improvement in gross margin, which expanded by 260 basis points to 40.3%. This enhancement was primarily driven by the soft drinks segment, which contributed a 2.7 percentage point increase.
Brand Performance and Market Position
AG Barr’s core soft drinks business delivered a 7.0% revenue increase, significantly outperforming the broader UK soft drinks market, which saw value growth of 2.0% but volume declines of 0.4%.
The company’s brand portfolio showed mixed but generally positive performance across categories:
IRN-BRU capitalized on a successful Euro 2024 marketing campaign and limited edition product launches, achieving distribution gains in England with a 2.5% year-over-year increase in store presence. This expanded distribution contributed to approximately 5% growth in retail sales.
Rubicon emerged as a standout performer with strong double-digit revenue growth, including a 30% volume increase for the RAW product line. The brand benefited from the "Release the Sunshine" marketing campaign across television, social media, and outdoor advertising, supported by extensive sampling activities.
Boost Energy, acquired by AG Barr in December 2022, delivered retail sales growth ahead of the overall soft drinks market, while the Funkin Cocktails ready-to-drink (RTD) cans performed strongly in retail despite weakness in the on-trade segment.
Operational Improvements and Margin Strategy
AG Barr’s operating margin improvement strategy showed tangible progress, with adjusted operating margin increasing by 50 basis points to 13.0%. This improvement came despite increased investments in marketing and people.
The company’s margin rebuild program is visualized in the following chart:
The margin enhancement was supported by several operational initiatives, including the in-sourcing of Boost and Rio production and the closure of the Barr Direct operation in June 2024. Symbol and independent retailers are now serviced through the wholesale channel, supported by an expanded field sales team.
Manufacturing investments continued with a new small format PET line installed in Cumbernauld and further in-sourcing of Boost and Rio can production at the Milton Keynes facility. The company’s cash allocation reflects these strategic investments while maintaining a strong balance sheet:
Despite capital expenditures of £7.4 million and dividend payments of £13.8 million, AG Barr maintained a healthy net cash position of £43.7 million at the end of the period.
Outlook and Forward Guidance
Looking ahead, AG Barr maintained its previous guidance for the full year 2024/25, projecting mid-single-digit revenue growth and an operating margin of approximately 13%. The company remains on track to achieve its medium-term margin target of 14-15% by 2025/26.
The full-year outlook is summarized in the following table:
The company expects to incur approximately £5 million in one-off costs related to business change projects for the full year, with £4 million of this being cash costs. Capital expenditure is projected at around £20 million, and the progressive dividend policy will continue.
CEO Euan Sutherland emphasized the company’s long-term strategy is built on a strong consumer base, consistent brand investment, commercial execution, and integrated manufacturing. The company aims to deliver a "5 / 15 / 20" financial model over the long term, with further details on an updated business strategy expected in March 2025.
With its strong brand portfolio, operational improvements, and clear strategic direction, AG Barr appears well-positioned to continue outperforming the broader UK soft drinks market despite ongoing inflationary pressures and challenging consumer environments.
Full presentation:
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