FDBusiness.com

Having broken through the £200 million sales barrier and lifted profits by 20% while significantly outperforming the UK soft drinks market in its 2009 financial year, Glasgow-based AG Barr has now commenced a £10 million expansion programme at its Cumbernauld site in Scotland.

According to AG Barr, the UK soft drinks market, in contrast to the prior year, when volume declined by over 2%, increased by 1% in volume terms and by 2% in value terms in the 52 week period ending 23rd January 2010. Indeed, the difficult economic environment appears to have had limited impact on the overall market and carbonates in particular have continued to show good growth across the year.

“Consumers have continued to purchase a wide repertoire of soft drinks and have maintained a preference for established product groups that deliver both quality and value. Retailer branded soft drinks have not increased their share of the market, perhaps reflecting the competitive nature of pricing and promotion across the category as a whole,” explains Roger White, chief executive of AG Barr. “The soft drinks category has once again demonstrated its ability to deliver growth in volume and in value terms despite difficult macro economic conditions. The landscape remains competitive but consumers continue to respond well to both existing brands and products and to well executed innovation.”

Roger White, chief executive of AG Barr.

Market growth was driven by the strong performance of carbonates with all sectors performing strongly with the fastest growth coming from energy drinks. The water market recovered, registering 5% volume growth and 2% value growth during the year.

“Over the period we have seen excellent growth across our key brands as we look to appeal to more people, more often, in more areas across the market,” he adds.

Financial Performance

AG Barr outperformed the UK soft drink market to increase profit on ordinary activities before tax and exceptional items from £23.1 million to £27.9 million on turnover ahead by 18.7% to £201.4 million for the twelve months to January 30th 2010. Like for like sales, stripping out the impact of the Rubicon acquisition, increased by 10.6% as AG Barr’s core carbonate brands and still juice brands grew well ahead of the market. Indeed, the group’s flagship Irn-Bru brand increased revenue by over 5% with strong growth in England and Wales.

Having successfully integrated the Rubicon juice business over the course of its last financial year, AG Barr increased operating margins by 1.2%. Net debt was reduced by 29.5% during the year and stood at £22.1 million on January 30th last, reflecting continuing efforts to improve cash management and capital efficiency across the business.

“Our core business sales performance was excellent and the Rubicon brand has added a new dimension to our business. Our sales growth continues to be underpinned by substantial investment in our brands and infrastructure. In the last year we have maintained a tight control of all our costs allowing us to improve margins once again,” points out Roger White. “We continue to face an uncertain economic outlook with the additional challenge of substantial operational changes across 2010/11. However, looking forward we remain confident in our ability to deliver against our strategy.”

Broader Portfolio

AG Barr has been successfully broadening its product portfolio, which was traditionally dominated by carbonates, headed by the Irn-Bru brand. The company’s carbonates grew by 10.1% in value terms, well ahead of the overall market in 2009. The addition of Rubicon helped the group’s still drinks and water segment, which also includes the Strathmore brand, to contribute £17.2 million to turnover growth. Indeed, still drinks and water now account for 22.4% of group revenue, up from 16.5% in the previous year.

£10 Million Investment

The UK’s largest independent soft drinks producer has recently commenced an investment and restructuring programme, including a £10 million investment to expand production capacity at its Cumbernauld site in Scotland and the planned closure of its Mansfield site in England. This will entail moving between 60 and 70 million litres of production from Mansfield to Cumbernauld.

“The £10 million investment at the Cumbernauld facility is largely about replacing our filling capacity with higher output machinery which will allow us to consolidate all of the production from our Mansfield site into the Cumbernauld site,” says Roger White. “The investment is really about underpinning what we already do in Cumbernauld, but to make bigger, faster and more efficient production facilities around the site.”