AG Barr takes £5m hit from failed merger

The Scottish firm said costs of the aborted deal add up to £4.9m, helping knock profits during the six months to the end of July by 10 per cent to £13.2m.

Barr, which dates back to 1875 and also makes Tizer and Rubicon, called time on the £1.4bn merger in July after Hertfordshire-based Britvic rejected a sweetened revised approach.

But the group, which is based in Cumbernauld, near Glasgow, but has operations across the UK including a sales office in Sheffield, said it “successfully navigated” a tough market despite the distraction of the deal.

July’s heatwave helped it compensate for intense competition, with rivals fighting for market share by slashing prices after the freezing start to the year.

Barr said the “depth and quantum” of promotions has continued to accelerate.

It said Irn-Bru – dubbed Scotland’s other national drink – was bolstered by a TV advertising campaign, while Rubicon and Barr brands achieved good growth thanks to better availability. Barr said the brands maintained “strong market positions” as it grew sales by 5.8 per cent to £128.7m, including 4.2 per cent growth in volumes and price hikes making up the balance.

Its fizzy drinks revenues rose seven per cent and still drinks rose two per cent.

Barr’s growth outstripped a 4.5 per cent rise in the total soft drinks market, which saw volumes up 3.1 per cent during the half.

The heatwave impact was underlined by second-quarter market growth of more than double the first quarter.

Barr added the market in its Scottish heartland was slightly weaker than in England and Wales.

Barr is increasingly advancing south with its brands, and hailed progress on its state-of-the-art new factory and distribution site in Milton Keynes, which is now in production and performing ahead of target.

But boss Roger White said Barr has made “good progress across all fronts” and is confident of meeting expectations.

He said: “We successfully navigated the challenging market conditions in the early part of 2013 and have accelerated our growth in the second quarter.”

Stripping out £3.4m of exceptional items, which include £2m on the failed merger, its Milton Keynes expansion and £460,000 of costs for telesales and distribution redundancies, first-half profits rose 12 per cent to £16.6m.

The accumulated £4.9m of merger costs includes fees for lawyers and other advisers and getting the deal past the Competition Commission.

Barr hiked its dividend eight per cent to 2.83p per share.

Roger White, chief executive of AG barr, said: “We have made good progress across all fronts in the year to date.”

He added: “Our brands, assets and people are all performing well, benefiting from continued high levels of investment.

“We remain very confident in the long-term growth potential of our brands and business.” But Mr White said the firm expects general trading to remain challenging despite the benefit of a prolonged period of good summer weather.

Charles Pick, analyst at Numis Securities, said: “Barr has again outpaced the overall soft drinks market... and the outlook statement is a confident one.”

But he warned the group is coming up against tougher comparatives from the second half of 2012.

Analysts from Shore Capital said: “Overall, the results look to be in line with our expectations from a profit perspective with revenue coming in revised slightly higher than guided in the group’s pre-close trading state- ment.

“This has resulted in a slightly lower margin performance than we expected despite what is still a robust increase in profits.

“The net debt position at the period end was also ahead of our forecast.”

AG Barr said that net debt was £15.8m.

AG Barr can trace its roots back to 1875 when Barr’s soft drinks business was started by former chairman Robin Barr’s great grandfather Robert Barr at Burnfoot Lane in Falkirk.