A.G. BARR p.l.c.
(“A.G. BARR”)
Trading update
A.G. BARR p.l.c., (“A.G. BARR” or the “Group”), which produces and markets some of the UK's leading drink brands, including IRN-BRU, Rubicon and Funkin, today announces a trading update in respect of the 26 weeks ended 25 July 2020.
Safety, wellbeing and operational resilience
As the COVID-19 situation has evolved, safety and wellbeing have been our number one priority. Having successfully introduced a range of enhanced safety and hygiene measures across all our operations, we have maintained continuity of production and continued to deliver a high level of customer service and quality.
Trading
We ended the 2019/2020 financial year with an encouraging sales performance which continued into the first 8 weeks of the new financial year. However, following the UK-wide commencement of lockdown on 23 March 2020, we entered a period of significant trading volatility, initially characterised by consumer stockpiling and then a general shift towards larger, less frequent take-home purchasing. We were also exposed to the complete closure of the hospitality sector as well as a material reduction in the “out of home” consumption of soft drinks.
While these shopping and consumption patterns continued throughout the “full lockdown” period across April, May and June, we believe sales benefited from the favourable weather during this time. As lockdown measures have recently started to ease, we are seeing sales in the hospitality and 'on the go' consumption segments beginning to recover, albeit slowly.
Against this backdrop, revenue for the 26 weeks ended 25 July 2020 is expected to be c.£113m, a c.8% decline on the prior year (2019 : £122.5m). For the 3-month period April to June, revenue declined c.12% against the same period in the prior year.
The impact of COVID-19 caused considerable variability in trading patterns across our key customer channels during full lockdown as detailed below :
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|
Customer channels |
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|
Impulse |
Major retail |
Hospitality |
Other |
TOTAL |
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Group revenue % split for FY 19/20 |
c.40% |
c.43% |
c.10% |
c.7% |
100% |
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Estimated net revenue index Apr-Jun 20 versus same 3 months in prior year |
c.90 index |
c.110 index |
c.5 index |
c.80 index |
c.88 index |
Barr Soft Drinks
The latest IRI Marketplace data shows the total UK soft drinks market increasing in value by 1.2% and in volume by 2.4% for the 20 weeks to 14 June 2020. Against this market backdrop we have maintained our total market value share and have seen a strengthening of our position within Scotland, with value share up 3.8%.
Funkin
The Funkin business has been materially impacted by the challenging hospitality environment, however this has been partially offset by a marked increase in retail and on-line sales, with the nitro infused ready-to-drink cocktails in particular delivering a strong performance.
Financial stability
In light of the uncertainty arising from the COVID-19 pandemic, we took a number of precautionary measures across the period to underpin our existing strong financial position. The business continues to generate positive cash flow and as a consequence our balance sheet remains strong.
In respect of government support, by 31 July we will have brought to a close our use of the Government's Job Retention Scheme and do not intend to access the additional return to work “bonus” initiative.
Outlook
Given the difficult prevailing circumstances the business has responded well to the challenges we have faced and has delivered a creditable performance in the first 6 months of trading, notwithstanding the relatively weaker comparative trading period in the prior year.
As the country gradually emerges from lockdown there remains a high level of uncertainty around the balance of year trading, in terms of both shopping behaviours and consumer consumption patterns.
Our current scenario planning, based on an underlying assumption that the UK will not enter into a further significant period of lockdown, suggests that our full year revenue performance for the year ending January 2021 will be in the region of 12-15% below the prior year, with a modest reduction in operating profit margin reflecting the impact of sales mix and operational de-leverage. This scenario incorporates the estimated adjustment for Rockstar no longer being part of our portfolio for the final quarter of the financial year, as well as our expectations of how customer channel dynamics will evolve as lockdown eases.
We expect to confirm a number of full-year non-recurring exceptional cash and non-cash items at the Interim results in September, including the previously communicated compensation associated with the termination of our sale and distribution contract with Rockstar Inc.
Roger White, Chief Executive Officer, commented :
“I am incredibly proud of how our teams across the business have responded to the COVID-19 pandemic. These have been difficult times for everyone however, despite the challenging environment, we have maintained our quality and service standards, thanks to the dedication and adaptability of our people. We are a profitable and cash generative business in a robust drinks sector and I am confident that our business will continue to prove its resilience for the balance of the year and beyond”.