AG Barr sales lose some fizz in first quarter

27th May 2015 07:11

Some of the fizz has gone out of Irn Bru maker AG Barr in the first quarter, with group sales down 1.1% compared to last year's strong start, which was boosted by the Commonwealth Games.Excluding a new contribution from the recently acquired Funkin cocktail mixers business, like-for-like sales were down roughly 5%, with volumes faring slightly better.But the Glasgow-based company said this return to more normal trading had seen margins hold up well in the 15 weeks to 9 May, despite only modest value growth of the wider drinks market of 0.7%.In a statement ahead of its annual shareholder meeting, the FTSE 250 group said the slower start should precede a return to sales growth in the second half of the financial year and that it remained on course to meet expectations for the full year despite the continued challenging conditions of the grocery retail market."We have a strong summer brand programme planned across all of our core brands and expect to see a return to sales growth in the second half of this financial year," Barr said, with Funkin expected to continue growth that had seen it contribute just under £3m to gross sales in the recent period. A warehousing expansion project at its Milton Keynes site saw development agreements signed for the building of further capacity, including the acquisition of an additional 1.54 acres of land and an agreement to purchase a neighbouring 3.86 more acres. The total cost of this development is £11m including £4m for the land for additional future expansion.Analyst Nicola Mallard at Investec acknowledged that the slightly reduced revenue performance was anticipated given a weak market, tough comparatives from last year and a different promotional timetable versus last year too. "We had already flagged the likelihood of lower 1H revenues, although this may not be true of profits, given margins are holding up well."Mallard said she expected the extra promotional activity later in the second and third quarters, covering the key summer months, to be reflected in a stronger second-half revenue performance."A more imminent milestone will be later this week when its project redesign system, after significant testing, goes live."