AG Barr scores ‘own goal’ in distribution mishap

A distribution mishap has wiped around £10m off AG Barr’s balance sheet, deflating an otherwise strong start to the year and cutting 6.7% off its share price.

A surprise update told investors this morning (4 August) that first-half revenue for the financial year was expected to be around £246m, up 8% on the prior year.

Both Fentimans and Frobishers have now been integrated into the business, and continued core brand growth had set up AG Barr for even higher revenues.

But “reduced stock availability” due to inventory being in the wrong locations – linked to the group’s capability and capacity change programme and third party manufacturers – knocked sales by £10m.

The company said market share gains, “exciting innovation performance” and supply chain improvements gave it confidence of an improved second-half performance. It anticipates double-digit growth over the full year, and to meet profit expectations in the year.

“Consumer demand for our brands is strong, with all core brands gaining market share,” said CEO Euan Sutherland. “The supply constraints which impacted Q2 performance are being resolved and, with strengthening trading momentum driven by our refreshed core brands and new product development, we remain confident for the full year.”

But the mishap exasperated some, with Panmure Liberum analyst Anubhav Malhotra calling the error “particularly frustrating”.

“AG Barr has scored an own goal,” he said. “Underlying demand remained strong, and if not for the commercial planning mishap, the group would have met, if not beaten, expectations.”

Malhotra added that while teething problems were understandable in the midst of a strategic overhaul under a largely new leadership team, while integrating two acquisitions, investors would now be looking for “more consistent execution”.

“We remain positive on the shares given the opportunity to broaden the reach and appeal of AG Barr’s core and newly acquired brands, although missing the boost from favourable weather and a summer packed with major sporting events is likely to weigh on sentiment in the near term.”