Half-year profits slumped 11% at Irn-Bru maker AG Barr after the drinks firm revealed it had been forced to swallow almost £5 million in costs following a failed merger bid with rival Britvic.
Cumbernauld-based Barr, which also counts Forfar’s Strathmore water among its stable of brands, unveiled an 8% increase in its interim dividend despite pre-tax earnings slipping to £13.2m during the six months to the end of July.
An otherwise strong performance during Barr’s “excellent” summer was hampered by exceptional charges.
Operating profits fizzed by more than 12%, to £16.6m, before the one-off costs, with sales shooting ahead of the market as turnover climbed 5.8% on last year to £128.7m.
Exceptionals included professional and legal bills relating to the proposed merger, which totalled £2m over the six months and took the overall cost of the aborted deal to £4.9m.
Meanwhile, £900,000 was booked against commissioning costs for a new plant in Milton Keynes, and a further £500,000 earmarked for redundancy costs to be paid during the second half related to an already-announced restructure of telesales and distribution functions.
Chief executive Roger White said he “remained very confident” about the firm’s potential for growth.
“We have made good progress across all fronts in the year to date,” he said. “We successfully navigated the challenging market conditions in the early part of 2013 and have accelerated our growth in the second quarter.
“Our brands, assets and people are all performing well, benefiting from continued high levels of investment. We remain very confident in the long-term growth potential of our brands and business.”
Barr’s £1.4 billion all-share reverse takeover had been approved by both sets of shareholders and was set to create Europe’s largest drinks firm before the Office of Fair Trading unexpectedly announced it would be examining the proposal in February.
In an intervention which effectively swept the deal off the table, the OFT said surveys had shown some Britvic brands which include Tango and Robinsons squash were “sufficiently close alternatives” to Barr’s offerings to raise anti-competition concerns.
But, following months of delay and a full investigation, the Competition Commission said it was content that the merger would not “result in a substantial lessening of competition”, and would not cause wholesale prices to rise significantly.
Britvic bosses used the intervening time to tackle its own performance appointing a new chief executive in Simon Litherland, and launching a drive designed to create efficiencies of about £30m a year.
Barr sweetened the terms of its offer but not enough to stop Britvic backing out.
The disappointment came just weeks ahead of the £1.35bn sale of Ribena and Lucozade to Japanese drinks firm Suntory earlier this month.
Barr had been among a string of names to be linked with the traditional British brands.
But chairman Ronald Hanna yesterday said AG Barr had posted “a robust performance” during the period, despite the “distraction” of its corporate challenges.
Analysts agreed, with Damian McNeela and Graham Jones at Panmure Gordon praising the “well-run company”, with a strong balance sheet and record of delivery against its organic growth strategy.
Charles Pick, analyst at Numis Securities, said: “Barr has again outpaced the overall soft drinks market … and the outlook statement is a confident one.”