AG Barr - get busy with this fizzy
The tales of pain and total business disruption are recorded daily as companies of all shapes and sizes report how they have fared during the Covid-19 crisis.
Many have been total horror stories ending with mega-demands of Government cash to keep them in operation.
Others were quite speedy in seeking additional funding from their brokers and their shareholders, although most were handled as Placings to institutional and professional investors, effectively leaving private shareholders to suffer the inevitable equity dilution that such raisings incur.
It is interesting to note each day’s results identifying the companies that have been able to withstand the impact of the virus on their business.
Very few have not suffered in some way or another.
On Tuesday I read the Trading Update of the FTSE 250-listed A.G. Barr (LON:BAG) the Scottish drinks group, best known for its Irn-Bru carbonated soft drink, often described as ‘Scotland’s other national drink’.
I have followed this group for, what feels like, decades – and I have always been impressed by its business.
The group, apart from the 1901 launched Irn-Bru, also has the market leading Rubicon fruit and juice drinks and the Scottish spring water Strathmore brand, amongst many others in its portfolio.
Across its ten locations the company, which is over 145 years old, employs some 1,000 people.
So, you can imagine that when the hospitality sector was hit by the ‘lockdown’ it saw a quick fall back in its business.
The Trading Update actually showed that the group has coped well against such pressures and maintained continuity of its production and continued to serve its customers well.
Revenue for the 26 weeks ended 25 July is expected to be around £113m, which is only an 8% drop on the same period last year. That is impressive.
For the year to end January 2021 estimates are suggesting that sales could show through at £228m, with pre-tax profits down just over 25% at £27.5m, worth some 20p per share in earnings.
The Trading Update quoted Roger White, the CEO, “we are a profitable and cash generative business in a robust drinks sector and I am confident that our business will continue to prove its resilience for the balance of the year and beyond".
The group has 112m shares in issue, of which 81-year old William Barr, now a non-executive director, owns over 6m shares (5.39%).
Large holders include Rathbone (14.0%), Lindsell Train (13.9%), Troy Asset (4.78%), Sanford DeLand Asset (4.55%), Caledonia Investments (3.89%), Fidelity Management (3.10%), The Vanguard Group (2.14%), Castlehill Holdings (2.08%) and Schroder Private Banking (1.74%).
The £486m group will be announcing its interim results on Tuesday 22 September, which is when we will see a further current year update.
On the face of it the shares at 434p look expensively rated. However, this group is tightly run and well backed by its assets and has real history as its experience of handling hassles.
They have been up to nearly 690p in the last year and held fairly firm of late at around the current price level.
Come the interims I see the shares lifting higher.
This week Liberum Capital have a ‘buy’ rating on the group’s shares looking for 625p.
I consider that my Target Price of 525p is an easy objective.