AG Barr (BAG) 550p

Gain to date: 13.5%

We flagged Scottish soft drinks maker AG Barr (BAG) in August 2023 arguing the company was not being given sufficient credit by the market for its sales momentum. We highlighted the strength of its portfolio of brands including Irn-Bru and Rubicon.

WHAT HAS HAPPENED TO SINCE WE SAID TO BUY?

We were on the money when we flagged ‘the scope for further upgrades’ as the company boosted guidance for the 12 months to 31 January 2024 in a 1 February trading update – with the notable detail that costs have stabilised. Prior to that, in October 2023, the company announced the £12.3 million acquisition of the Rio tropical drinks brand – a deal which was funded out of existing net cash.

Commenting on the company’s strong trading, Liberum analyst Anubhav Malhotra says: ‘Cost inflation has returned to normal levels and the supply chain capex program is on track, with the group now having more confidence and visibility of delivering margin benefits from the program. We see scope for more [upgrades] as we see potential for faster revenue growth and faster margin recovery over the next two years.’

The company has also announced a replacement for longstanding and well-regarded chief executive Roger White who steps down at the end of April.

Saga (SAGA), Superdry (SDRY) and Co-op alumni Euan Sutherland is taking over. Significantly, he has served for eight years on the board as non-executive director at AG Barr peer Britvic (BVIC). White is on hand until the end of July to help smooth the transition.

WHAT SHOULD INVESTORS DO NOW?

While the stock has enjoyed decent gains and now trades on 15 times forecast earnings for the year to January 2025, we remain fans and continue to expect more earnings upgrades over the medium term. A strong balance sheet, with Liberum forecasting year-end net cash of around £50 million, provides AG Barr with the wherewithal to pursue further accretive acquisitions. 

‹ Previous2024-02-08Next ›