Irn Bru

The Scottish drinks producer ended its first half with £30.4m of net cash in the bank – an improvement of £26m on this time a year ago

Fresh fears of another lockdown triggered a dramatic sell-off on Monday, with the FTSE 100 losing more than £50bn in value as it fell by 3.4%. It was the worst day for London’s blue-chip index for three months, with h Hospitality, travel, leisure and food-to-go stocks were all affected.

Despite the challenges, shares in Irn-Bru maker AG Barr fizzed more than 15% higher to 430p on Tuesday after it assured investors of the strength of its balance sheet and floated the prospect of a resumption in dividend payments next year.

The Scottish drinks producer ended its first half with £30.4m of net cash in the bank – an improvement of £26m on this time a year ago.

Clive Black at house broker Shore Capital said: “AG Barr gained market share across Great Britain and is a well-oiled machine with strong solvency ratios, considerable liquidity and a capability to face into any strong future headwinds whilst flourishing in calmer times.” Underlying profits at the business in the six months to 25 July 2020 increased 19.4% to £16.6m as the group acted quickly to control costs and conserve cash.

However, it was forced to write down the value of its Strathmore water brand by £10m as the coronavirus lockdown played havoc with hospitality sales and impulse buys.

After exceptional charges, pre-tax profits declined 62.2% to £5.1m in the first half, with revenues down 7.6% to £113.2m. Retail growth for Irn-Bru offset some of the foodservice losses, with sales in the sector down as much as 95% at the height of lockdown and 65% behind in the half.

AG Barr forecast full-year revenues would fall by 12%-15%, with a modest reduction in operating profit margin, assuming the UK doesn’t go back into a long lockdown.

Wayne Brown at Liberum said he expected the second half to be challenging. “Nonetheless, the resilience shown during Covid-19, the flexibility of management to adapt to the changing trading patterns with a quick shift in product and channel mix underpins our confidence that AG Barr remains a high-quality company.”

Meanwhile, shares in travel concession group SSG rallied 12% on Wednesday after it said losses wouldn’t be as big as first thought after aggressive cost-cutting. However, the Upper Crust operator reported second-half sales would plunge by £1.3bn to be 86% lower than a year ago as two-thirds of its sites remained closed.

The stock has lost more than 70% in value so far this year.