Top story

AG Barr has posted strong first half growth as out-of-home consumption rebounded and the soft drinks maker benefited from the warm summer weather.

Group sales were up 16.7% in the 26 weeks to 31 July to £157.9m in the first half, up 20% on a like for like basis.

Both its business units saw strong growth, with Barr Soft Drinks up 12.3% and Funkin up 21.4%.

Growth was driven by ongoing brand investment and the execution of pricing and promotional activity.

Trading performance further benefited from the year-on-year Covid-19 recovery across the market, particularly in the on-trade and out of home sectors, as well as good summer weather.

The group said the addition of its MOMA oat milk acquisition also supported overall revenue performance.

Operating margin, while impacted by cost inflation, was supported by sales growth, cost control the group’s successful pricing approach.

Therefore adjusted operating profit margin was flat at 16.2%, with adjusted profit up 22.8% to £25.3m, taking into account an additional week last year and the sale of property, as well as an adjustment related to its MOMA acquisition.

Headline pre-tax profits edged up to £24.7m from £24.4m.

However, due to cost pressures, brand investment and the volume impact of reduced consumer confidence, the group said it does not anticipate sustaining current margins through the second half.

CEO Roger White commented: “We made a very strong start to the year and continue to see good momentum across our business and brands. That said, the UK’s high level of inflation has accelerated across the summer and is creating a well documented cost of living crisis for many consumers, alongside increasing challenges for industry.

“We continue to take action to mitigate the cost pressures we face both in the short term across the balance of the current financial year and where possible into 2023.

“We anticipate in the coming months that the current economic environment will impact consumer purchasing behaviour, however we currently remain confident that our strategy and actions will allow us to deliver a full-year profit performance ahead of the prior year.”

AG Barr shares have edged down 0.3% to 496p so far this morning.

Morning update

Travel food retailer SSP Group has issued a pre-close trading update, detailing a strong end to the year as passenger numbers rebound.

For the three months to 30 September, SSP said it enjoyed strong performance with revenues expected to by at 91% of pre-Covid 2019 levels.

The rebound was driven by a continued recovery of passenger numbers, notwithstanding some disruption to the travel sector over the summer.

The performance also includes the benefit from net contract gains and price increases compared to the same period in 2019.

SSP said its revenue recovery is being led by domestic and leisure travel across both the air and rail sectors, with business and commuter travel also recovering, albeit more slowly.

In Continental Europe revenue is expected to be 95% of 2019 levels, driven by increasing numbers of air passengers over the summer holiday season.

North America revenue is also expected to be 95% of pre-Covid levels, reflecting the ongoing recovery in domestic air travel.

In the UK trading in both air and rail has continued to strengthen, despite the impact of the industrial action in the rail network over the summer, with revenues expected to be at 86% of previous levels.

In the Rest of the World, revenues have rebounded to 86% of pre-Covid levels, with strong performances in India, Australia, Thailand and Egypt. However, passenger numbers remain very low in China and Hong Kong.

SSP said it has continued to make further progress on business development in the second half, extending and renewing contracts as well as winning new tenders to augment its existing pipeline.

As a result of the recent trends, it is now planning to accelerate the mobilisation of its pipeline from 2023 onwards. By 2025 this pipeline of new outlets is expected to add approximately £500m to revenues compared to 2019.

For the current full year, we now expect to deliver sales of approximately £2.17bn and EBITDA of approximately £140m, slightly ahead of previous full year guidance.

It said the strength of this second-half bottom line performance reflects the benefit of operating leverage, as sales recover, as well as our ongoing management of inflationary cost pressures through productivity and pricing initiatives.

For its 2023 financial year, while there remains considerable uncertainty in the macroeconomic environment, the group said it remains confident that its “flexible and resilient business model will enable us to continue to offset cost inflation, manage supply chain and labour volatility, and optimise profitability and returns”.

It forecasts returning to “broadly pre-Covid 19 levels” of like for like sales and EBITDA by 2024.

CEO Patrick Coveney commented: “Passenger numbers are rebounding across the global travel sector and - thanks to the commitment and hard work of our colleagues and support from our clients and brand partners - our trading has now recovered to near 2019 levels. With a strong client and customer proposition, we are winning new business across the world and continue to have a high success rate in renewing contracts.

“As we look forward in this challenging macroeconomic environment, we remain confident in the ongoing resilience of the group’s business model and continue to see significant potential for both near and long-term growth.”

Finally this morning, Domino’s Pizza Group ha announced that Elias Diaz Sese, currently a non-executive director of DPG, will become Chief Executive Officer on an interim basis.

This change will be effective from 10 October 2022, with Diaz Sese working closely with outgoing CEO Dominic Paul to facilitate a smooth transition.

He brings 20 years’ experience in leadership roles in global consumer food brands and franchise businesses, including leadership roles with Restaurant Brands International, including CEO of Tim Hortons and President Asia Pacific for Burger King.

Most recently, as President Northern Europe, he led the Kraft Heinz turnaround in the UK.

He has been a non-executive director of DPG since October 2019 so is “already familiar with the direction of the Group, its franchisees and its management team”.

Chairman Matt Shattock said: “I am delighted that Elias has agreed to take up the role of CEO on an interim basis. Elias is very familiar with our sector given that he has held leadership roles in a number of major consumer food brands and has experience of being a franchisee himself.

“Elias has a deep understanding of the Domino’s business, has built strong relationships with the management team and franchisees and holds a significant personal shareholding in the Group. He is committed and will focus on the continued effective and rapid execution of Domino’s strategy while giving the Board time to ensure we find the right permanent CEO. Working alongside our new CFO Edward Jamieson, Elias is uniquely positioned to step into this role as we look to capitalise on the opportunities in today’s challenging market.”

Elias Diaz Sese added: “Domino’s is a great business with a superb brand and world-class franchisees. For the past three years I’ve worked closely with the Board and management team to create the current strategy, which I firmly believe is the right one to drive Domino’s future growth, and which I’m committed to executing at pace.

“I’m really excited to get started and to work with our franchisees and colleagues to continue to accelerate the delivery of the strategic plan to deliver sustainable growth and returns.”

On the markets this morning, the FTSE 100 is up 0.6% to 7,059.5pts.

Risers include SSP Group, up 5.3% to 223p, Compass Group, up 3.2% to 1,871p and Naked Wines, up 3% to 84p.

Fallers include Bakkavor, down 1% to 91p and Hilton Food Group, down 0.7% to 605.7p.

Yesterday in the City

While the pound fluctuated yesterday – hitting a 50-year low in the process before recovering – the FTSE ended the day flat at 7,021pts.

Unilever closed up 1.8% at 4,100p after the announcement CEO Alan Jope will step down at the end of 2023.

Other risers included FeverTree, up 5.3% to 933.5p, Nichols, up 3.2% to 1,125p, Haleon, up 3.2% to 286.4p, Reckitt Benckiser, up 2.9% to 6,172p, Diageo, up 2.1% to 3,850p Pets at Home, up 2% to 305.4p and Coca-Cola HBC, up 2% to 1,948p.

Fallers included Naked Wines, down 4.1% to 81.6p, Premier Foods, down 4% to 95.4p, Marks & Spencer, down 3.3% to 103p, Glanbia, down 3.1% to €11.73, WH Smith, down 2.7% to 1,324p and B&M European Value Retail, down 2.2% to 311.2p.