A.G. BARR p.l.c.
(“A.G. BARR” or “the Group”)
A.G. BARR p.l.c., a branded multi-beverage business with a portfolio of market-leading UK brands, including IRN-BRU, Rubicon, FUNKIN and Boost
INTERIM RESULTS FOR THE 26 WEEKS ENDED 30 JULY 2023
Strong first half performance – confident of delivering full year profit in line with recently increased market expectations.
Financial summary
| 26 wks to 30 July 2023 | 26wks to 31 July 2022 | Change | ||
| Revenue | £210.4m | £157.9m | 33.2% | |
| Like-for-like revenue * | £174.3m | £157.9m | 10.4% | |
| Reported profit before tax | £27.8m | £24.7m | 12.6% | |
| Adjusted profit before tax *1 | £27.0m | £25.3m | 6.7% | |
| Adjusted operating profit margin *1 | 12.5% | 16.2% | (3.7)pp | |
| Cash and cash equivalents | £47.3m | £61.3m | (22.8)% | |
| Basic EPS | 18.87p | 18.98p | (0.6)% | |
| Interim dividend per share | 2.65p | 2.50p | 6.0% |
Highlights
○ Strong financial performance and significant progress across strategic priorities – including successfully bringing Boost Drinks and MOMA Foods into the A.G. Barr Group
○ Increased profit delivered by strong trading across the Group, with volume growth and market share gains in soft drinks in particular
○ Acceleration of innovation plans enabling a number of exciting brand launches across the Group in the second half of the year
○ Operating margin in line with expectations reflecting the impact of current lower margin Boost business model
○ EPS down as a result of higher tax rate; excluding this impact, EPS in growth (up 12%)*
○ Strong balance sheet with £47.3m of cash and cash equivalents, reflecting H2 2022/23 acquisitions
○ Interim dividend of 2.65 pence per share representing an increase on the prior year of 6.0%
Roger White, Chief Executive, commented:
“We have made significant financial and strategic progress in the first half and have exciting plans in place for the balance of the year to sustain our growth momentum.
We remain confident in delivering a full year profit performance in line with our recently increased market expectations and are well positioned to deliver strong shareholder returns for the long-term.”
For more information, please contact :
A.G. BARR 0330 390 3900 Instinctif Partners 020 7457 2020
Roger White, Chief Executive Justine Warren
Stuart Lorimer, Finance Director Matthew Smallwood
___________________________________________________________________
Interim statement
We are pleased to report a strong financial performance in the first half of the current year and have made significant progress across our strategic priorities.
Revenue was £210.4m representing year on year growth of :
● 33.2% on a reported revenue basis, including the contribution from the Boost Drinks business acquired in December 2022
● 10.4% on a like-for-like* basis
Reported profit before tax in the period increased 12.6% to £27.8m (2022/23 H1 : £24.7m) as a result of revenue growth across the Group, with strong volume growth and market share gains in soft drinks in particular.
Adjusted profit*1 in the period was £27.0m, an increase of 6.7% on the prior year first half (2022/23 H1 : £25.3m).
Adjusted operating profit margin*1 of 12.5% in the reporting period (2022/23 H1 : 16.2%) was in line with our expectations, impacted by persistent cost inflation, alongside the known near-term impact of the lower margin Boost division. In addition, we chose not to pass on the full impact of cost inflation to customers in order to remain focused on offering consumers great value, affordable brands in an uncertain and challenging economic environment.
Market context
Soft drinks : The total UK soft drinks market increased in value by 8.8% across the period, while reported volumes fell by 4.2%. Sustained price inflation has continued to feature across the market. Against this backdrop we have gained both value and volume market share.
(Source : Circana data for the 26 weeks to 29 July 2023)
Cocktails : The value of GB cocktails across the on-trade continues to grow and is now worth £716m. This growth in value has been driven primarily by inflation, with a slight reduction in cocktails’ overall share of the spirits market. We believe this reflects current wider economic conditions, and expect on-trade cocktail consumption to return to growth in the longer term.
Ready to drink (RTD) cocktails in the take home market grew 14.6%, more than four times the rate of the RTD category as a whole. FUNKIN remains the number one RTD cocktail brand within this growing sector.
(Source: Nielsen pre-mixed alcoholic drinks total coverage MAT 29/07/2023 ; CGA Q1 2023)
Oat milk : Total dairy milk alternatives grew in value by 1.0% however within this market the oat milk sub category grew by 12%. Oat milk is driving category growth and is now the biggest segment, making up 52% of the dairy milk alternatives category.
MOMA’s oat milk sales grew twice as fast as the oat milk category as a whole.
(Source : Nielsen Top 5 Grocery 52 weeks to 3 June 2023)
Business performance
Trading has been strong across the Group :
| Reported revenue (£m) | Change vsH1 2022/23 (%) | Like for like revenue* (£m) | Change vsH1 2022/23 (%) | |
| Soft drinks | £181.9m | 38.9% | £145.8m | 11.3% |
| FUNKIN | £23.3m | 2.6% | £23.3m | 2.6% |
| Other | £5.2m | 23.8% | £5.2m | 23.8% |
Across soft drinks, revenue growth has been driven by volume, price and mix, alongside effective execution of our sales plans and successful consumer marketing activity. The IRN-BRU brand grew revenue by 8% gaining further market share in England and Wales and the Rubicon brand enjoyed a very strong period with revenue increasing by 17%. The Boost brand grew by 37% and made excellent volume progress driven by significant distribution gains.
FUNKIN delivered further UK off-trade growth of 11%, supported by increased consumer marketing investment and continued exciting innovation. While cocktail consumption in the on-trade slowed following last year’s post-Covid high, FUNKIN maintained its position as the UK’s Number 1 cocktail brand.
Within the MOMA Foods division, brand and consumer marketing investment supported significant year on year revenue growth of 24%, as oat milk continued to outperform other plant-based milk categories.
Having accelerated our innovation plans across the summer, we have a number of exciting brand launches planned across the Group in the second half of the year. We are particularly excited to extend the IRN-BRU brand further with PWR-BRU, a new and distinctive addition to our portfolio within the high growth energy category which launched in August.
Cash flow and balance sheet
Net cash from operating activities at £15.1m was ahead of the prior year (2022/23 H1 : £11.4m). Our strong profit performance was partially offset by higher working capital and an increased corporation tax rate (25% versus 19% in the prior year).
The absolute levels of working capital have increased versus the prior year through the inclusion of the Boost business, acquired in December 2022. The increase in overall net working capital primarily reflects the phasing of trading activity during the period, with strong revenues achieved in June remaining in receivables at the balance sheet date and higher inventory levels reflecting strong production performance but lower, weather impacted, revenues in July. Our balance sheet management remains tightly controlled with healthy inventory levels and no significant unrecoverable trade debt.
Capital expenditure in the first half of the year was £6.5m (2022/23 H1 : £7.0m). This reflects the phasing of the capital investment programme towards the second half of the year. Our asset refresh programme at our Cumbernauld factory continues on plan and to budget, with the successful upgrade of the site’s primary PET line completed and successfully commissioned during the period. Full year capital expenditure is estimated at around £15m (2022/23 : £14.6m). In the medium term capital expenditure is expected to be maintained in the range of £15-20m as our Cumbernauld programme completes and we continue our capacity expansion plans across the Group to support our growth and access to benefits from production in-sourcing.
The Group closed the period with cash balances of £47.3m (2022/23 H1 : £61.3m), a reduction of £14.0m on the prior year as a result of the Boost and MOMA acquisitions at the end of 2022/23. The closing cash balance was £5.6m less than the period opening position (£52.9m) due to the normal funding of dividend, tax and capital expenditure, alongside the seasonal demands for working capital during our peak summer trading period.
Earnings per share reduced by 0.6% to 18.87p per share. This was attributable to the new higher corporation tax rate despite the increase in ongoing operating profit, the addition of the contribution from the Boost acquisition and the benefit of increased finance income from cash on deposit.
Responsibility
We continue to make good progress across our responsibility agenda. Our journey towards net-zero is progressing, with the arrival of a number of new lower emission bio-fuelled commercial vehicles. We have strengthened our charity partnership with Marie Curie, enjoying high levels of employee engagement and enthusiastic fundraising support. We are also proud to report that FUNKIN achieved a further significant milestone in its development, successfully attaining B Corp status, certifying its high standards of social and environmental performance.
Board
After over 62 years with the business, Robin Barr stepped down from the Board in May and we would once again like to recognise the invaluable role Robin played for over six decades.
The Board welcomed Julie Barr and Louise Smalley, who took up their Non-Executive Director positions in May and June respectively.
As communicated on 1 August, Roger White intends to step down from his role as CEO, and retire from the Group within the next 12 months. The Board has commenced a formal succession process, including an external search, to ensure a smooth leadership transition.
Dividend
The Board has declared an interim dividend for the 26 weeks ended 30 July 2023 of 2.65 pence per share (2022/23 : 2.50 pence) payable on 27 October 2023 to shareholders on the register on 6 October 2023.
Outlook
In a year of investment across the business, supporting the Group’s long-term revenue and profit growth ambitions, we are pleased to report we have made significant financial and strategic progress in line with our plan.
Our medium-term plan to rebuild operating profit margin is progressing well, supported by brand and portfolio development, Group manufacturing optimisation and disciplined cost control.
We have strong plans in place across the business for the balance of the year to support our growth momentum. In August we communicated our expectation of delivering a full year profit performance marginally above the top end of analyst consensus. Despite the extended period of poor weather across the summer, we remain confident in delivering in line with these revised market expectations.
Our portfolio of leading brands, clear business strategy, talented teams and the quality of our infrastructure all ensure we are well positioned to deliver strong shareholder returns for the long-term.
Mark Allen Roger White
Chairman Chief Executive
* Items marked with an asterisk are non-GAAP measures. Definitions and relevant reconciliations are provided at the end of this announcement
1 Adjusted profit* and adjusted profit margin* reflect the release of a £0.8m prior year accrual related to two months of the earn-out associated with the acquisition of Boost Drinks Limited in December 2022. Certain conditions associated to the earn-out have not been met and as such the earn-out, agreed at the time of the acquisition, is now not payable. New incentive arrangements have been put in place with Simon Gray pursuant to which a cash bonus of up to £3.0m may be earned by him, in the period to January 2025, subject to certain performance targets being achieved. This incentive arrangement constitutes a smaller related party transaction for the purposes of Listing Rule 11.1.10R. As a result, a written confirmation has been obtained by the Company from its sponsor pursuant to LR 11.1.10R(2)(b) stating that the terms of the incentive arrangement are fair and reasonable as far as the Company’s shareholders are concerned.
| Consolidated Condensed Income Statement | ||||||
| Unaudited | Unaudited | Audited | ||||
| Six months ended 30 July 2023 | Six months ended 31 July 2022 | Year ended 29 January 2023 | ||||
| Note | £m | £m | £m | |||
| Revenue | 6 | 210.4 | 157.9 | 317.6 | ||
| Cost of sales | (131.0) | (88.5) | (189.5) | |||
| Gross profit | 6 | 79.4 | 69.4 | 128.1 | ||
| Other income | – | – | 1.3 | |||
| Operating expenses | (52.2) | (43.9) | (84.1) | |||
| Operating profit | 8 | 27.2 | 25.5 | 45.3 | ||
| Finance income | 9 | 0.7 | – | 0.5 | ||
| Finance costs | 9 | (0.1) | (0.7) | (1.4) | ||
| Share of after tax results of associates | – | (0.1) | – | |||
| Profit before tax | 27.8 | 24.7 | 44.4 | |||
| Tax on profit | 10 | (6.8) | (3.8) | (10.5) | ||
| Profit for the period | 21.0 | 20.9 | 33.9 | |||
| Earnings per share (p) | ||||||
| Basic earnings per share | 11 | 18.87 | 18.98 | 30.47 | ||
| Diluted earnings per share | 11 | 18.67 | 18.81 | 30.22 | ||
| Consolidated Condensed Statement of Financial Position | ||||
| Unaudited | Unaudited | Audited | ||
| As at 30 July 2023 | As at 31 July 2022 | As at 29 January 2023 | ||
| Note | £m | £m | £m | |
| Non-current assets | ||||
| Intangible assets | 115.6 | 97.9 | 116.2 | |
| Property, plant and equipment | 102.2 | 96.6 | 102.5 | |
| Right-of-use assets | 5.2 | 3.8 | 5.4 | |
| Loans and receivables | – | 1.5 | 1.5 | |
| Investment in associates | – | 0.6 | 0.7 | |
| Retirement benefit surplus | 3.2 | – | 2.4 | |
| 226.2 | 200.4 | 228.7 | ||
| Current assets | ||||
| Inventories | 36.0 | 24.0 | 34.7 | |
| Trade and other receivables | 93.9 | 68.5 | 60.4 | |
| Derivative financial instruments | 13 | – | – | 0.1 |
| Current tax assets | – | 0.6 | – | |
| Short-term investments | – | – | 40.0 | |
| Cash and cash equivalents | 47.3 | 61.3 | 13.6 | |
| 177.2 | 154.4 | 148.8 | ||
| Total assets | 403.4 | 354.8 | 377.5 | |
| Current liabilities | ||||
| Loans and other borrowings | 14 | – | – | 0.7 |
| Trade and other payables | 90.7 | 63.5 | 72.3 | |
| Derivative financial instruments | 13 | 0.3 | 0.2 | 0.1 |
| Lease liabilities | 14 | 1.6 | 1.1 | 1.5 |
| Provisions | 0.5 | 0.9 | 0.8 | |
| Current tax liabilities | 0.9 | – | 0.7 | |
| 94.0 | 65.7 | 76.1 | ||
| Non-current liabilities | ||||
| Loans and other borrowings | 14 | – | 0.2 | – |
| Deferred tax liabilities | 28.8 | 21.7 | 28.2 | |
| Lease liabilities | 14 | 3.2 | 2.7 | 3.6 |
| Put liability | – | 5.6 | – | |
| Contingent consideration | – | – | 0.8 | |
| Retirement benefit obligations | 15 | – | 1.2 | – |
| 32.0 | 31.4 | 32.6 | ||
| Capital and reserves attributable to equity holders | ||||
| Share capital | 4.7 | 4.7 | 4.7 | |
| Share premium account | 0.9 | 0.9 | 0.9 | |
| Share options reserve | 4.0 | 2.6 | 3.4 | |
| Other reserves | (0.1) | (5.1) | 0.1 | |
| Retained earnings | 267.9 | 251.1 | 259.7 | |
| Total shareholder equity | 277.4 | 254.2 | 268.8 | |
| Non-controlling interest in equity | – | 3.5 | – | |
| 277.4 | 257.7 | 268.8 | ||
| Total equity and liabilities | 403.4 | 354.8 | 377.5 | |
| Consolidated Condensed Statement of Comprehensive Income | |||
| Unaudited | Unaudited | Audited | |
| Six months ended 30 July 2023 | Six months ended 31 July 2022 | Year ended 29 January 2023 | |
| £m | £m | £m | |
| Profit for the period | 21.0 | 20.9 | 33.9 |
| Other comprehensive income | |||
| Items that will not be reclassified to profit or loss | |||
| Remeasurements on defined benefit pension plans (Note 15) | 0.7 | (1.9) | (1.5) |
| Deferred tax movements on items above | (0.2) | 0.5 | 0.6 |
| Items that will be or have been reclassified to profit or loss | |||
| Cash flow hedges: | |||
| (Losses)/gains arising during the period | (0.3) | – | 0.2 |
| Deferred tax movements on items above | 0.1 | – | – |
| Other comprehensive income/(expense) for the period, net of tax | 0.3 | (1.4) | (0.7) |
| Total comprehensive income for the period | 21.3 | 19.5 | 33.2 |
| Attributable to: | |||
| Equity shareholders of the parent Company | 21.3 | 19.7 | 33.2 |
| Non-controlling interests | – | (0.2) | – |
| Consolidated Condensed Statement of Changes in Equity (Unaudited) | ||||||
| Share capital | Share premium account | Share options reserve | Other reserves | Retained earnings | Total | |
| £m | £m | £m | £m | £m | £m | |
| At 29 January 2023 | 4.7 | 0.9 | 3.4 | 0.1 | 259.7 | 268.8 |
| Profit for the period | – | – | – | – | 21.0 | 21.0 |
| Other comprehensive (expense)/income | – | – | – | (0.2) | 0.5 | 0.3 |
| Total comprehensive (expense)/income for the period | – | – | – | (0.2) | 21.5 | 21.3 |
| Company shares purchased for use by employee benefit trusts (Note 16) | – | – | – | – | (2.6) | (2.6) |
| Proceeds on disposal of shares by employee benefit trusts | – | – | – | – | 0.8 | 0.8 |
| Recognition of share-based payment costs | – | – | 1.0 | – | – | 1.0 |
| Transfer of reserve on share award | – | – | (0.3) | – | 0.3 | – |
| Deferred tax on items taken directly to reserves | – | – | (0.1) | – | – | (0.1) |
| Dividends paid | – | – | – | – | (11.8) | (11.8) |
| At 30 July 2023 | 4.7 | 0.9 | 4.0 | (0.1) | 267.9 | 277.4 |
| Consolidated Condensed Statement of Changes in Equity (Unaudited) | ||||||||
| Share capital | Share premium account | Share options reserve | Other reserves | Retained earnings | Total | Non-controlling interests | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| At 30 January 2022 | 4.7 | 0.9 | 1.6 | (5.1) | 242.4 | 244.5 | 3.7 | 248.2 |
| Profit for the period | – | – | – | – | 21.1 | 21.1 | (0.2) | 20.9 |
| Other comprehensive expense | – | – | – | – | (1.4) | (1.4) | – | (1.4) |
| Total comprehensive income/(expense) for the period | – | – | – | – | 19.7 | 19.7 | (0.2) | 19.5 |
| Recognition of share-based payment costs | – | – | 1.0 | – | – | 1.0 | – | 1.0 |
| Transfer of reserve on share award | – | – | (0.1) | – | 0.1 | – | – | – |
| Deferred tax on items taken directly to reserves | – | – | 0.1 | – | – | 0.1 | – | 0.1 |
| Dividends paid | – | – | – | – | (11.1) | (11.1) | – | (11.1) |
| At 31 July 2022 | 4.7 | 0.9 | 2.6 | (5.1) | 251.1 | 254.2 | 3.5 | 257.7 |
| Consolidated Condensed Statement of Changes in Equity (Audited) | ||||||||
| Share capital | Share premium account | Share options reserve | Other reserves | Retained earnings | Total | Non-controlling interests | Total | |
| £m | £m | £m | £m | £m | £m | £m | £m | |
| As at 30 January 2022 | 4.7 | 0.9 | 1.6 | (5.1) | 242.4 | 244.5 | 3.7 | 248.2 |
| Profit for the year | – | – | – | – | 33.9 | 33.9 | – | 33.9 |
| Other comprehensive income/(expense) | – | – | – | 0.2 | (0.9) | (0.7) | – | (0.7) |
| Total comprehensive income for the year | – | – | – | 0.2 | 33.0 | 33.2 | – | 33.2 |
| Company shares purchased for use by employee benefit trusts (Note 16) | – | – | – | – | (0.7) | (0.7) | – | (0.7) |
| Recognition of share-based payment costs | – | – | 2.0 | – | – | 2.0 | – | 2.0 |
| Transfer of reserve on share award | – | – | (0.2) | – | 0.2 | – | – | – |
| Derecognition of put liability | – | – | – | 1.3 | (1.3) | – | – | – |
| Recognition of non-controlling interests | – | – | – | 3.7 | – | 3.7 | (3.7) | – |
| Dividends paid | – | – | – | – | (13.9) | (13.9) | – | (13.9) |
| At 29 January 2023 | 4.7 | 0.9 | 3.4 | 0.1 | 259.7 | 268.8 | – | 268.8 |
| Consolidated Condensed Cash Flow Statement | |||
| Unaudited | Unaudited | Audited | |
| Six months ended 30 July 2023 | Six months ended 31 July 2022 | Year ended 29 January 2023 | |
| £m | £m | £m | |
| Operating activities | |||
| Profit for the period before tax | 27.8 | 24.7 | 44.4 |
| Adjustments for: | |||
| Interest and dividends receivable | (0.7) | – | (0.5) |
| Interest payable | 0.1 | 0.7 | 1.4 |
| Impairment of investment in associate | 0.7 | – | – |
| Write off of loans and receivables | 1.5 | – | – |
| Contingent consideration | (0.8) | – | 0.8 |
| Revaluation of put liability | – | – | (2.7) |
| Depreciation of property, plant and equipment | 5.4 | 4.9 | 9.8 |
| Amortisation of intangible assets | 0.6 | 0.7 | 1.2 |
| Share-based payment costs | 1.0 | 1.0 | 2.0 |
| Loss/(gain) on sale of fixed assets | 0.1 | (0.2) | (1.0) |
| Share of results of associates | – | 0.1 | – |
| Operating cash flows before movements in working capital | 35.7 | 31.9 | 55.4 |
| (Increase)/decrease in inventories | (1.3) | 0.2 | (4.5) |
| Increase in receivables | (33.5) | (24.2) | (7.6) |
| Increase in payables | 20.4 | 8.6 | 4.3 |
| Difference between employer pension contributions and amounts recognised in the income statement | – | (1.7) | (4.9) |
| Cash generated by operations | 21.3 | 14.8 | 42.7 |
| Tax paid | (6.2) | (3.4) | (6.8) |
| Net cash from operating activities | 15.1 | 11.4 | 35.9 |
| Investing activities | |||
| Acquisition of subsidiary (net of cash acquired) | – | – | (18.6) |
| Purchase of property, plant and equipment | (6.5) | (7.0) | (14.6) |
| Proceeds on sale of property, plant and equipment | – | 0.2 | 1.6 |
| Funds placed on fixed term deposit | (25.0) | – | (40.0) |
| Funds returned from fixed term deposit | 65.0 | – | – |
| Interest received | 1.1 | – | 0.1 |
| Net cash used in investing activities | 34.6 | (6.8) | (71.5) |
| Financing activities | |||
| Acquisition of minority interest | – | – | (3.4) |
| Loans received | 5.0 | – | – |
| Loans repaid | (5.7) | (0.1) | (0.3) |
| Lease payments | (1.0) | (0.8) | (1.7) |
| Purchase of Company shares by employee benefit trusts | (2.6) | – | (0.7) |
| Proceeds from disposal of Company shares by employee benefit trusts | 0.8 | – | – |
| Dividends paid | (11.8) | (11.1) | (13.9) |
| Interest paid | – | – | (0.2) |
| Net cash used in financing activities | (15.3) | (12.0) | (20.2) |
| Net increase/(decrease) in cash and cash equivalents | 34.4 | (7.4) | (55.8) |
| Cash and cash equivalents at beginning of period | 12.9 | 68.7 | 68.7 |
| Cash and cash equivalents at end of period | 47.3 | 61.3 | 12.9 |
| Cash and cash equivalents per the cash flow statement comprises cash and cash equivalents per the statement of financial position of £13.6m, net of bank overdrafts of £0.7m for the year ended 29 January 2023. | |||