IRN-BRU maker AG Barr expects to report higher profit, but warned continued uncertainty over Brexit as well as regulatory intervention could soon affect the firm.
The Scottish drinks company announced it will post full-year profit ahead of the previous year and in line with expectations.
AG Barr’s revenue is thought to be around £277 million for the year ending January 26, a rise from the £264.1m it reported for the previous 12 months.
The firm said the impact of the so-called sugar tax “has been evident across the UK soft drinks market with value growth significantly outstripping volume in the period”, but added that it expects to go back to a “more value-led trading strategy” in the coming year.
The reported profits follow a year in which the company revamped its signature drink Irn-Bru – as well as some of its other products – to reduce sugar content ahead of the sugar levy’s introduction in April.
The production of the full-sugar version came to an end in January 2018, prompting backlash among fans of the drink.
While the launch of the levy does not appear to have impacted profits, AG Barr did warn that “further regulatory intervention is on the horizon” in the soft drinks sector.
The group also warned that “current political and economic uncertainty in the UK looks set to continue”.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said AG Barr had bucked a trend in which sugar tax-related price hikes have meant slow volume growth for the soft drinks industry.
“The group’s been able to keep prices largely flat, since its new recipe was below the sugar cap, and that means AG Barr’s been able to boost the amount it’s selling – we think that’s been a good move and will help margins in the long run.
“With wider uncertainties lingering though, there’s no telling how much of a headache Brexit will be.
“Added to that, it’s very likely we’ll see more regulatory clampdowns in the medium term, and that’ll mean another round of shake-ups for the industry,” she said.
AG Barr is set to complete its £30m share purchase programme this year, later than indicated, but the firm said it has a tight control on costs and a robust balance sheet.
Full-year results are expected on March 26.
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