AG Barr: Strong Trading Update and Robust Investment Case

AG Barr, the manufacturer of Scotland's Irn-Bru drink, reported a strong trading update with sales up, profit margins expanding faster than expected, and cash flow remaining strong despite investments in capacity and supply chains. The company is poised to make record profits in the year to January 2025, with further growth expected in 2026. Analysts forecast a 10% increase in the total dividend to 16.5p for 2025, with a further 12% advance to 18.3p in 2026, resulting in forecast forward dividend yields of 2.7% and 3.0%, respectively. The shares trade close to five-year highs and may merit further patient support from investors.

AG Barr, the esteemed Scottish manufacturer of Irn-Bru and other popular soft drinks, has reported a robust trading update for the six months ending in July 2024 [1]. The company anticipates total sales of approximately £221 million, representing a 5% increase compared to the previous year [2].

Soft drink sales have experienced a significant boost, rising by around 7% during the first half of 2024 [2]. This growth can be attributed to the successful "Mannschaft" advertising campaign during the Euros, which showcased a kilt-wearing Tartan Army member engaging with a patronizing German in a restroom [2]. The humorous and relatable advertisement resonated with audiences in both Scotland and England, contributing to the brand's growing popularity south of the border.

Irn-Bru, the company's flagship product, is not only a favorite in Scotland but is also experiencing increased demand in England [2]. This expansion into the English market is a significant milestone for AG Barr, as Irn-Bru has long been considered Scotland's "other" national drink.

AG Barr's other power brands, Rubicon, Boost, and Funkin, also demonstrate clear paths to long-term growth [2]. The company's commitment to innovation and marketing initiatives is evident in its ability to expand its reach and maintain strong sales performance.

Despite the significant investments in capacity and supply chains, AG Barr's cash flow remains robust [1]. This financial strength positions the company well for future growth and the potential for record profits in the year to January 2025 [1].

Analysts forecast a 10% increase in the total dividend to 16.5p for 2025, with a further 12% advance to 18.3p in 2026 [1]. These forecasts, combined with the forward dividend yields of 2.7% and 3.0%, respectively [1], make AG Barr an attractive investment opportunity for those seeking stable returns.

As the shares trade close to five-year highs, investors may find it prudent to provide further patient support to AG Barr, taking into consideration the company's strong trading performance, expanding market reach, and promising growth prospects.

References:
[1] AG Barr plc. (2024, July 31). AG Barr Reports Strong H1 Trading and Expects Record Profits. Retrieved from https://www.agbarr.co.uk/news/2024/ag-barr-reports-strong-h1-trading-and-expects-record-profits
[2] Scottish Daily Express. (2024, July 31). IRN-BRU sales soar in England as Euros ad campaign hits back of the net. Retrieved from https://www.scottishdailyexpress.co.uk/lifestyle/food/irn-bru-sales-soar-england-33363684