Proactive Investors - A.G.Barr PLC (LON:BAG), the owner of drinks brands like Irn Bru, was able to satisfy analysts with its in-line interim results, and with schemes focused on improving operating margins, the group looks set to achieve its full-year targets.
Shore Capital, the drinks manufacturer’s house broker, said: “Results (26 weeks to 30 July 2023) are in line with our expectations, containing strong total and LFL sales growth and the anticipated short-term EBIT margin contraction driven by the mix effect of the acquired Boost business.”
In a previous trading update, the Scottish company upped guidance to slightly above the top end of analyst consensus and Shore Capital has reiterated this by predicting that pre-tax profits will reach £47.5 million for the full year, up from £43.5 million the year prior.
“In August, we communicated our expectation of delivering a full-year profit performance marginally above the top end of analyst consensus. Despite the extended period of poor weather across the summer, we remain confident in delivering in line with these revised market expectations,” the company’s trading update revealed.
One key focus for the drinks firm following the acquisition of Boost, the energy drink, was to improve operating margins considering that the newly purchased brand operates at a much lower margin due to outsourcing production.
AG Barr added: “Our medium-term plan to rebuild operating profit margin is progressing well, supported by brand and portfolio development, group manufacturing optimisation and disciplined cost control.”
Expecting the group’s margins to remain subdued over the medium term, Shore Capital still keeps confident about the group’s offering pointing to “a leading stable of proprietary brands, a world-class manufacturing infrastructure and a very strong balance sheet”.
“We see much to like,” the investment firm concluded.
Shares in AG Barr remain subdued on Tuesday trading flat, having opened at around 498p.