AG Barr – IRN-BRU maker’s shares looking good at 687p, big corporate newsflow could push them higher TP 810p

06.05.2025

Last Wednesday, 30th April, AG Barr (LON:BAG), the £770m-capitalised branded multi-beverage group, declared that it is now in discussions with a potential buyer for its Strathmore bottled water business.

Just six weeks ago, the group stated that, as part of its new strategic programme, it was looking to ‘discontinue’ that part of its business.

Barr bought Strathmore from Constellation Brands way back in 2006, paying £15m for the Forfar-based operation.

However, it had been struggling to compete in the last few years – so the decision to close it down, at the cost of some 23 jobs, had been made as part of the major group rejuvenation plan being put in place by Barr’s new CEO Euan Sutherland.

Whatever value the potential buyer puts on the Strathmore interests, it might be more attractive than the costs of closing it down.

The Business

The Scottish-based group, with its main operations in Cumbernauld in North Lanarkshire, manufactures, distributes, and sells a range of beverages.

It operates with three main segments to its business: Soft drinks, Cocktail solutions and Other.

The Soft drinks segment comprises two business units: Barr Soft Drinks and Boost Drinks.

Barr Soft Drinks includes various brands such as IRN-BRU, Bundaberg, OMJ!, Rubicon, Simply Fruity, Rubicon RAW, Sun Exoti, and Tizer.

The Boost Drinks portfolio includes energy, sport, iced coffee, protein and including the franchise brand, Rio.

The Cocktail solutions segment consists of pre-mixed cocktails, syrups, mixers and purees.

The Other segment represents its MOMA business unit, comprising oat milk drinks and other oat-based products.

Its products include Cream Soda, Passion Fruit Martini Nitro Can, Citric Syrup, Mojito Mixer and others.

Market Shares of its Great Brands

In IRN-BRU it has Scotland’s number 1 Grocery Brand (1.3% market share), Rubicon is the fastest growing OFC (other flavoured carbonates) brand in the UK (0.8% market share), its Boost product is a top-3 sport drink and energy stimulation brand (0.5% market share), while its Funkin Cocktails is the UK’s number 1 Cocktail Brand (21% market share).

Recent Results

On Tuesday 25th March, the group reported strong growth and improved returns in its results for the year to 25th January.

Sales were up 5.1% at £420.4m (£400.0m) while adjusted pre-tax profits were 15.8% better at £58.5m (£50.5m), lifting earnings 17.4% to 39.77p (33.88p) and hoisting its dividend up 12.0% to 16.86p (15.05p) per share.

Impressively the group’s net cash at bank position was 19.2% higher at £63.9m, (£53.6m).

Management Comment

Commenting upon the group’s last trading year, CEO Euan Sutherland stated that:

“I look back on the year as one in which we made significant progress towards our long-term strategy of consistently delivering mid-single digit Revenue growth, mid-teens Operating Margin and 20% Return on Capital Employed (ROCE).

We ended the year in strong financial health, with our brands and business well-positioned for further growth.

The external environment is expected to remain challenging, driven by factors such as ongoing inflation and the recent national insurance increase.

However, we are committed to navigating the pressures and meeting our goals.

With a refreshed leadership team and exciting commercial plans for 2025/26, I am confident that our strategy will continue to drive growth and success in the years to come.”

The Equity

There are 112,028,871m shares in issue.

The larger holders include Lindsell Train (9.99%), Rathbones Investment Management (4.47%), The Vanguard Group (3.43%), Caledonia Investments (2.93%), Schroder Bank (2.84%), Royal London Asset Management (2.71%), Fidelity Management & Research (2.16%), FIL Investment Advisors (1.72%) and BlackRock Investment Management (1.65%).

Analyst Views

In a recent note by Panmure Liberum, the broker considered that:

“AG Barr is a compounder worth owning in the current uncertain market environment, in our view, as it has no tariff risk, benefits from the dollar weakness, is well hedged on commodities for the year ahead, and has upside risk to margins from self-help levers.

We think AG Barr offers significant growth opportunities in distribution, innovation, pack formats, portfolio development and M&A, and a refreshed top leadership team is using the current margin tailwinds to support a push for deeper distribution, and better innovation, backed by more marketing.

A CMD planned for June should provide more colour to its strategy.

With >£60m in net cash, the group has significant M&A firepower available but if the right M&A opportunity fails to arrive, we would expect further cash returns to shareholders.

Its valuation is on the higher side with the shares trading at 15.4x P/E and 8.8x forward EV/EBITDA for a 12% EPS CAGR over 2024-27E.

However, we note that peers Nichols, Coca Cola HBC and Fever-Tree trade at 18x, 17x and 30x P/E respectively.”

In My View

The shares of AG Barr have so much to offer investors, great cash generation, increasing profitability and the prospect of good corporate newsflow over the next three months or so – its AGM is being held in Glasgow on Friday 23rd May, thereafter it is holding a Capital Markets Day in London on Tuesday 3rd June and then the Interim Trading Update is due on Tuesday 29th July.

The group’s shares, which have been up to 703p recently, are now 687p from which level I believe they offer some very appealing upside in price.