Pre-tax profits, before exceptionals, fell by 8% to £14.9M in the six months to July 28. The drop reflected rising input costs and increased sales through supermarkets.
Speaking before the results, Grant Thornton said the proposed merger with Britvic should be highly beneficial for both parties – provided they plan the financial engineering of Britvic’s debt.
Earlier this month the two companies announced they were in merger talks. They had agreed already that Britvic shareholders would own 63% and AG Barr shareholders would own 37% of the group, and that AG Barr ceo Roger White would become ceo of the combined group.
Vasu Majumdar, Grant Thornton’s associate director corporate finance, told FoodManufacture.co.uk that the management of AG Barr, lead by White, had a strong track record of successful acquisitions.
‘Reverse takeover’
While it was described as a merger, many in the city viewed it as a reverse takeover by AG Barr, he added.
“AG Barr has been very successful in making acquisitions and Roger White has been the key driver making sure all the businesses are working well together not only culturally but bedding into their infrastructure,” said Majumdar.
For example, when AG Barr took over Rubicon its turnover was about £20M and in three years it tripled to £60M. It’s takeover of Strathmore Water had also been highly successful.
Majumdar said the two company’s products and strengths complemented each other well.
Performing strongly
AG Barr had the number one spot in carbonates in Scotland with Irn-Bru, and Rubicon had helped it grow carbonates, with Strathmore performing strongly in water and Rubicon also giving it strength in still juices.
“Each one has carved out a profitable niche within the category with Rubicon in particular punching above its weight,” he said.
But, while AG Barr had performed strongly in wholesale and in the multiple retailers it had invested less in the foodservice and on-trade sectors and had consequently made little headway in them.
In contrast, Britvic with its Robinson’s and J20 brands was particularly strong in foodservice and the on-trade and the combined group would be able to obtain far greater distribution for the AG Barr products.