City snapshot: AG Barr revenues jump but profits hit by cost inflation

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Acquisitions and organic revenue growth helped AG Barr grow first half revenues by a third, but profits were hit by lower margin business and soaring costs.

Reporting its results for the six months to 30 July, the Irn-Bru maker said its revenues of £210.4m representing growth of 33% on a reporting basis, boosted by its Boost Drinks acquisitions from December 2022.

Sales were up 10.4% on a like-for-like basis.

Across soft drinks, revenue growth has been driven by volume, price and mix, Irn-Bru grew revenue by 8% gaining further market share in England and Wales. 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 innovation.

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.

Reported profit before tax in the period increased 12.6% to £27.8m as a result of revenue this growth across the group, with strong volume growth and market share gains in soft drinks in particular.

Adjusted profit in the period was £27m, an increase of 6.7% on the prior year first half as margins fell to 12.5% from 16.2%.

This drop in margin was in line with expectations as the group was impacted by persistent cost inflation, alongside the known near-term impact of the lower margin Boost division.

In addition, margin was impacted be the decision not to pass on the full impact of cost inflation to customers in order to remain focused on offering affordable brands.

The group’s medium-term plan to rebuild operating profit margin is “progressing well”, supported by brand and portfolio development, group manufacturing optimisation and disciplined cost control.

In August it said it expected to deliver a full year profit performance marginally above the top end of analyst consensus. Despite the extended period of poor weather across the summer, the group said it remains confident in delivering in line with these revised market expectations.

“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,” said CEO Roger White.

“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.”

AG Barr shares are up 2.1% on the news to 494.9p.

Morning update

Beauty player PZ Cussons has posted double-digit annual growth and held margins flat as it benefited from the acquisition of Childs Farm and strong organic growth.

Reported revenue grew 10.7% to £656.3m as a result of like-for-like revenue growth of 6.1%, the contribution of Childs Farm, which was acquired in March 2022, and favourable FX movements.

Organic growth of 6.1% reflected price/mix growth of 12.1% and volume declines of 6.0%.

Childs Farm contributed £10.9m to revenue growth, and translational FX movements, reflecting a weakening of sterling against most reporting currencies, contributed £15.7m.

The group saw growth in most of its ‘must win’ brands, with Carex, Sanctuary Spa and Cussons Baby declining during the year.

Organic revenue growth in the fourth quarter of the year was 6.7%, driven by an 11.2% improvement in price/mix and a 4.5% decline in volume.

Adjusted operating profit margin broadly flat as an 80bps improvement in gross profit margin funded increased investment in capabilities and offset cost inflation.

Continued profitable revenue growth in Nigeria contributed to the group’s 12.6% growth in adjusted profit before tax, but the impact of the resulting tax charge and increased non-controlling interest led to an adjusted EPS decline of 10.7%.

On a statutory basis, the operating margin declined by 200bps and EPS declined by 26.8%, reflecting a £16.5m of the Sanctuary Spa brand, as well as increased investment related to transformation.

So far in its new financial year performance to date has been in line with expectations, with modest year-on-year growth in LFL revenue and a higher operating profit margin.

The group said it has seen continued good revenue growth in Nigeria and ANZ, a stable performance in the UK, offset by a further decline in Indonesia.

Looking forwards, it said the macroeconomic environment in Nigeria, including the foreign exchange market and other fiscal reforms, will be a key determinant of our overall group 2024 financial results.

It said it had a number of operational and corporate plans in place to mitigate these challenges and are already executing a number of these to improve the performance of the business.

Overall it expects to deliver a fourth consecutive year of group organic revenue growth, with strong constant currency operating profit growth, benefiting from the changes already made to strengthen the business as well as a slightly more benign input cost environment.

CEO Jonathan Myers commented: “We have delivered a third consecutive year of like-for-like revenue growth and increased operating profit by over 10% since launching our strategy nearly three years ago. We have achieved these improvements by investing in our brands and capabilities, serving cost-conscious consumers better with targeted innovation and productivity initiatives helping us to reduce complexity across the group.

“Group performance in the new financial year has been in line with our expectations and, with clear near-term priorities, we expect to deliver another year of LFL revenue and strong constant currency operating profit growth in 2024. There is more to do as we seek to maximise the company’s full potential, and there are well-documented challenges to be navigated in Nigeria. However, we continue to believe that we can build a higher growth, higher margin, simpler and more sustainable business.”

Finsbury Food Group, which is set to be taken private via a £143.4m takeover from investor Frisbee Bidco, has posted strong annual growth, but profits were hit by persistent cost inflation.

Group revenue in the year to 1 July 2023 was up 16% to £413.7m.

This growth was the result of volume uplift of 1.7% including the Lees acquisition in the second half of the year and price uplift of 14.3%.

The recovery of foodservice is driving much of this growth with a 25.1% revenue increase year on year, with UK retail revenues up 11.8%.

Sales from Finsbury’s overseas division also increased by 25% driven by a strong cake performance in France.

Overall performance was bolstered by a strong second half performance, with revenues for the six months increasing 17.1% year on year.

Group adjusted operating profit at £19.8m was up 10.9% on last year, driven by the acquisition of Lees, growth in overseas markets and the continuing success of its ‘operating brilliance’ programme in the UK.

However, the challenges of persistent and significant cost inflation have adversely affected adjusted operating profit margins which at 4.8% is slightly down on last year’s figure of 5%.

Gross margins reduced by 2.4 percentage points to 30.0% as it continues to be impacted by this significant cost inflation.

CEO John Duffy said: “To have delivered revenue performance, which is in line with market expectations, in light of the significant macro-economic challenges that we have had to overcome, is testament to our resilient business model, ability to align ourselves with consumer trends and the dedication of our teams. Across the group, we have seen a stable performance in UK retail, ongoing recovery in UK foodservice and continued growth in our Overseas division.

“The entire group’s relentless focus and commitment towards our strategic objectives has not wavered and we have built on the strong foundations of our group scale platform with further progress made on our journey to operating brilliance. We will continue this drive over the coming years as we commence on five-year automation journey which will be a key enabler for the group.

“Looking ahead, whilst we are starting to see some of the inflationary pressures ease, costs remain inflationary, and we expect to have to navigate further macroeconomic challenges over the course of the current financial year. We will continue to deliver for our customers through our diversified product range and channels.”

Finally this morning, vaping and consumer goods supplier Supreme has issued a trading update head of its AGM later this morning.

The group has “traded strongly” in the year ended 31 March 2023, delivering significant growth within its vaping activities, alongside solid organic growth across its remaining categories.

This momentum has continued to build tum in the first half of the current financial year and it remains on track to “deliver our strongest financial performance as a listed company”.

Following record profitable growth in the first half of its 2024 financial year, the company now expects trading for the year ended 31 March 2024 to be significantly ahead of market expectations.

It has issued revenue guidance of around £195m-£205m and adjusted EBITDA guidance of approximately £28m-£30m, an increase of £3.5m compared with market expectations.

Around £2m of this increased EBITDA has arisen from its business, with around £2m of the incremental Adjusted EBITDA arising from the opportunity with its ElfBar brand, while around £1.5m is from its core business.

In addition, the investment into working capital to support the Elf opportunity has been managed better than expected and as a result the company now expects a stronger cash position at half year and year end than initially anticipated.

Management now anticipates the contribution of the distribution of Elf and Lost Mary brands across 2024, based on current legislation, will be around £4m of adjusted EBITDA from around £40m of revenue.

Vaping category remains a key growth driver for Supreme and it continues to attract significant demand for vaping products from key retailers, with demand across our principal 88Vape brand particularly strong.

In light of recent regulatory concerns around disposable vapes it said: “As an industry leader, Supreme acknowledges the wider concerns of youth vaping and remains fully supportive of any proactive measures or changes in legislation that potentially restricts specific products, packaging, flavours or point of sale in the UK.”

It added: “The board remains pleased with the group’s ongoing financial and operational strategic progress and believes we are ideally positioned to deliver on our medium to long term growth potential.”

On the markets this morning, the FTSE 100 is down another 0.2% to 7,612.9pts.

Risers include Britvic, up 2./1% to 888.5p, Nichols, up 1.6% to 1,026.6p and Ocado, up 1.6% to 667.4p.

Fallers include Just Eat Takeaway.com, down 1.7% to 1,062p, Coca-Cola Europacific Partners, down 1.3% to 59.2p and Pets at Home, down 0.9% to 339.6p.

Yesterday in the City

The FTSE 100 started the week on the back foot, dropping a further 0.8% to 7,624pts.

Consumer and grocery fallers included Imperial Brands, down 5.7% to 1,639.5p, Ocado – continuing its poor share price performance from last week – down 5% to 657p, British American Tobacco, down 3.3% to 2,622p, Just Eat Takeaway.com, down 3% to 1,080p, Deliveroo, down 2.8% to 112.4p, Pets at Home, down 2.5% to 342.6p and SSP Group, down 2.3% to 210p.

The day’s few risers included THG, up 1.5% to 70.2p, Naked Wines, up 1.4% to 59p, Virgin Wines, up 1.1% to 47p and Bakkavor, up 0.9% to 95p.