AG Barr PLC (LON:BAG) has forecast an increase in its revenues for the first half of the financial year as the hot summer weather provided a boost to the soft drinks market.
The FTSE 250 drink maker, whose products include IRN-BRU (Scotland’s ‘other national drink’), said it expected revenue for the 26 weeks ended 28 July 2018 to be around £136mln, a 5% increase on the same period last year.
READ: AG Barr shares jump as Irn-Bru sees ‘biggest ever’ year of sales-boosting profits, revenues and dividends
The company also said that its core brands had performed well over the period, citing IRI UK soft drinks market data that showed growth of 4.5% in value terms and a 1.4% increase in volume as the sector recovered from severe weather in the first quarter and was boosted by the hot summer weather across the UK.
Barr added that its IRN-BRU brand had performed particularly well in the period, with the regular formula increasing volume and value share of the total market alongside “strong growth” in its IRN-BRU XTRA brand.
In its other brands, the firm said it had seen further significant growth in Rubicon Spring and the recent launch of Street Drinks by Rubicon as well as “encouraging early progress” for its partnership brands San Benedetto and Bundaberg.
In its outlook, the company maintained its full-year profit expectations although it added that the impact of the sugar tax was still to be fully determined and was continuing an investment programme which would have “a moderate impact” on margins in the current financial year.
The update will be seen as good news for investors, particularly following a solid performance in the previous year which saw IRN-BRU record its ‘best ever year of sales’ with an 8% jump over the period in addition to a 4.2% increase in pre-tax profits.
George Salmon, equity analyst at Hargreaves Lansdown, commented: "More market share gains for AG Barr will reassure investors spooked by the imposition of the soft drinks levy, but the fact the group is stepping up the marketing spend shows it’s not putting its feet up just yet."
He added that while the company's investment in marketing and product innovation would impact margins and "could see profit growth limited to the low single-digit percentages this year", the decision to up spending was a positive one since it was "unlikely to prevent Barr extending its remarkable record of dividend growth".
In mid-morning trading Wednesday, AG Barr shares were up 0.5% at 681p.
--Adds analyst comment and share price--