The Investment Column: AG Barr success story continues

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The Independent Online
AG Barr is hardly the most forthcoming of companies when it comes to releasing financial information. The Glasgow-based drinks group, which makes Irn-Bru, Tizer and Orangina, releases only a single page of financial statistics to accompany its results and makes investors wait for the annual report for any more.

Still, given the recent performance of the shares there are unlikely to be any complaints. The stock has jumped from 320p at the beginning of last year to 451p, up another 12.5p yesterday. And the good news continued yesterday with a thumping set of figures for the 12 months to 25 October.

In effect they were a second set of interims as the company is changing its year end. They showed a huge jump in pre-tax profits from pounds 5m to pounds 10.8m on turnover up just 7 per cent, beating all analysts' forecast by some margin.

The main reasons for the increase were lower sugar prices helped by the strong pound and halving of the price of plastic bottles used in manufacture over the last 18 months. A further pounds 1m in costs savings came from the benefits of operating from the new factory in Cumbernauld in Scotland. The good news on costs is that plastic bottle and sugar prices are still low and the company feels there is scope for more efficiency gains at the new plant as it beds down.

It wasn't just a cost story. UK sales of AG Barr's own brands rose 7.5 per cent, although sales growth has slowed in recent weeks.

The key to AG Barr's longer term success is its invasion of the English market. Its Irn-Bru brand has a huge market share in Scotland but is only just starting to make progress south of the border.

Another potential problem is the recent decision by Pernod-Ricard to sell Orangina to Coca-Cola. However, as AG Barr has a franchise agreement to bottle and distribute the brand in Britain until December 2002 this issue is five years away.

On Greig Middleton's 15-month forecast of pounds 11.3m, the shares trade on a forward rating of 11. AG Barr remains a minnow in a market dominated by giants but at these levels the shares look decent value.