Irn-Bru manufacturer AG Barr is still committed to a merger with Britvic, according to its latest financial statement covering the 15 weeks from January 27 to May 12.
AG Barr 'outperformed a sluggish market' said Panmure Gordon
The company said it was cooperating with the Competition Commission investigation into the proposed merger of the two drinks businesses and expected a decision early next month.
“The strategic attraction of the merger, as previously described to all shareholders, has not changed and the board will accordingly reconsider the transaction once the Competition Commission findings are available,” said the statement.
Last week Britvic announced a £30M cost saving plan – involving the possible loss of hundreds of jobs and the closure of two factories and a warehouse – in a move some City analysts said heralded the firm’s decision to abandon the merger .
Meanwhile, AG Barr reported that total revenue for the 15 weeks to May 12 2013 had increased by 2.4%, compared with the same period last year.
‘Out-performed a sluggish market’
City analyst Panmure Gordon said the firm had reported “good top-line performance” and had “out-performed a sluggish market”.
Graham Jones, Panmure Gordon executive director equity research – consumer staples, said the 2.4% sales rise implied AG Barr was: “taking market share against a UK soft drinks market that is flat in revenue terms (Source Nielsen). The flat market has obviously been impacted by the poor weather, combined with a strong prior year performance.”
Jones added that the company was managing to recover raw material price inflation, and noted margins were in line with expectations, despite what the firm termed “significant increases in competitor promotional activity”.
Panmure Gordon maintained its forecast of 4.2% earnings per share growth to 25.4p for January 2014 and retained its ‘hold’ advice on the company’s stock.
Earnings per share growth
AG Barr said the Milton Keynes facility remained on schedule for commissioning within the next eight weeks. AG Barr took possession of the site at the start of May, and is now installing £12M of equipment ready for commissioning at the start of July.
Its core brands continued to perform well despite the weather, economic challenges and significant increases in competitor promotional activity, said the firm.
“As we now enter the key summer trading period we anticipate that the marketplace will remain highly competitive,” said the statement. “Our commercial and operational plans are well developed and we remain focused on delivering a strong result for the year.
“The capacity of our balance sheet together with our strong track record and proven business model supports the multiple opportunities that exist to develop our business. We remain very confident in our future prospects.”
In addition to Irn Bru, AG Barr makes Tizer and Rubicon.
Its prospective partner Britvic makes Tango, Robinsons, J2O and sells PepsiCo brands under an exclusive licence.
