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Anti-sugar trend sours revenue at AG Barr

Published: 08:35 27 Sep 2016 BST

A can of Irn-Bru
Barr is developing no added-sugar or sugar-free versions of favourites such as Irn-Bru

A.G. Barr plc (LON:BAG) took a revenue hit from an anti-sugar drive but posted slightly sweeter first-half profits and a 5% dividend hike.

The soft drink maker said lower and no-sugar products had done better as consumers respond to negative press around added sugar drinks in the last six months.

It is reacting by developing new no added-sugar products including Irn-Bru Extra and Rubicon Spring, both of which have experienced good initial demand. Spring water volumes also increased 7%.

"We expect these new introductions to our portfolio to make a material contribution to the business across the balance of the year," Barr said.

The government's proposed introduction of a soft drink sugar tax hit Barr and rival Britvic Plc (LON:BVIC) when it was first announced.

But the news boosted shares in companies like PureCircle Limited (LON:PURE), which has developed a natural sugar substitute from the stevia leaf.

Barr said the planned tax was "a punitive and unnecessary distortion to competition in the UK market which will be very complex, expensive and difficult to implement.

"We believe our positive actions and sugar reduction progress, along with those of many of our competitors within the soft drinks industry, make the implementation of a soft drinks only sugar tax an unnecessary measure," it said.

Revenue in the six months to July 30 fell to £125.6mln from £130.3mln a year ago, but pre-tax profit on ordinary activities before one-off items was £17mln compared to £16.9mln beforehand.

Pre-tax profit was £21.1mln including a one-off credit of £4.1mln, versus £16.9mln a year ago with no exceptional items.

It proposed an interim dividend of 3.53p per share, up from 3.36p last time.

Chief executive Roger White said: "We are beginning to see the benefits of our product development and innovation initiatives with both consumers and customers.

"Market conditions remain volatile and somewhat unpredictable. However, assuming a strong trading performance in the key festive period, we remain on track to deliver pre-tax profit before exceptionals slightly ahead of last year."

Shares in Barr fell 2p, or 0.4%, to 520.5p.

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