Merger costs hit Barr profits
Irn-Bru maker AG Barr has revealed a £5 million blow from its failed merger with Robinsons firm Britvic but claimed victory amid a cut-throat soft drinks market.
The Scottish firm said costs of the aborted deal add up to £4.9 million, helping knock profits during the six months to the end of July by 10% to £13.2 million.
Barr, which dates back to 1875 and also makes Tizer and Rubicon, called time on the £1.4 billion merger in July after Hertfordshire-based Britvic rejected a sweetened revised approach.
But the group, based in Cumbernauld near Glasgow, said it "successfully navigated" a tough market despite the distraction of the deal.
July's heatwave helped it compensate for intense competition, with rivals fighting for market share by slashing prices after the freezing start to the year. Barr said the "depth and quantum" of promotions has continued to accelerate.
It said Irn-Bru - dubbed Scotland's other national drink - was bolstered by a TV advertising campaign, while Rubicon and Barr brands achieved good growth thanks to better availability.
Barr said the brands maintained "strong market positions" as it grew sales by 5.8% to £128.7 million, including 4.2% growth in volumes and price hikes making up the balance. Its fizzy drinks revenues rose 7% and still drinks rose 2%.
Barr's growth outstripped a 4.5% rise in the total soft drinks market, which saw volumes up 3.1% during the half.
The heatwave impact was underlined by second-quarter market growth of more than double the first quarter. Barr added the market in its Scottish heartland was slightly weaker than in England and Wales.
Barr is increasingly advancing south with its brands, and hailed progress on its state-of-the-art new factory and distribution site in Milton Keynes, which is now in production and performing ahead of target.
But boss Roger White said Barr has made "good progress across all fronts" and is confident of meeting expectations.
He said: "We successfully navigated the challenging market conditions in the early part of 2013 and have accelerated our growth in the second quarter."
Stripping out £3.4 million of exceptional items, which include £2 million on the failed merger, its Milton Keynes expansion and £460,000 of costs for telesales and distribution redundancies, first-half profits rose 12% to £16.6 million.
The accumulated £4.9 million of merger costs includes fees for lawyers and other advisers and getting the deal past the Competition Commission.
Barr hiked its dividend 8% to 2.83p per share.
Charles Pick, analyst at Numis Securities, said: "Barr has again outpaced the overall soft drinks market... and the outlook statement is a confident one."
But he warned the group is coming up against tougher comparatives from the second half of 2012.