A.G. Barr – Lots in the bag for shareholders #BAG
This is just a very quick note on A.G. Barr, the Glasgow-based drinks company. It announced final results on Tuesday which were well-received by the market (latest share price 791p, market cap £900 million).
The drinks industry – both alcoholic and nonalcoholic – has been a fine investment sector, and I am keen to figure out the best opportunities available presently. So far, Britvic and C&C have been added to my personal portfolio.
A.G. Barr’s collection includes IRN-BRU (its biggest brand), Snapple, Strathmore, Simply Fruity, and a host of others which I must admit I am unfamiliar with.
Long-term financial trends at this FTSE-250 component show reassuring uptrends in sales and profits. Barr’s dividend has been rising since at least the early 1990s, making it a certifiable dividend champion.
Results for the year ending January 2019 demonstrate more of the same. There is a 5.6% increase in sales, although this translates to just a 2.5% increase in adjusted PBT (the adjustments are very modest, so the difference between adjusted and statutory profits is not a concern).
A very cursory inspection of the balance sheet suggests that there is little to worry about on this front, and the company is currently buying back £30 million of shares. Share buybacks are an ongoing theme in my portfolio (I love finding good companies buying back their equity).
Rather like Britvic, Barr claims to have shrugged off the sugar levy, having reformulated its drinks in response. And it has also pulled through the carbon shortage which affected all makers of fizzy drinks.
Outlook – the company warns about the likelihood of more regulation and changing consumer dynamics, but considers itself well-positioned for further growth.
My view – I am still learning about Barr’s, but am fairly certain it will enjoy a permanent place on my watchlist.
IRN-BRU has been around since 1901, and I imagine that it will still be around another 100 years from now.
Unfortunately, the market is pricing it at over 23x forward earnings, so quick returns are unlikely. I’ll be keeping my eye on this.