Soft drinks giant AG Barr has reported a sharp fall in profits after incurring costs related to the closure of its direct sales operation and integration of the Boost energy drinks business, sending shares tumbling by more than 8%.

The Irn-Bru maker booked a 10.4% drop in profit before tax to £24.9 million for the 26 weeks ended July 27 after on-off costs of £4.4m.

The costs relate to the closure of direct sales operations at three sites in England – in Moston, Greater Manchester, Wednesbury near Birmingham and Dagenham, Greater London - and the Leeds office for Boost.

Barr said in March that up to 160 employees would be affected by the change to its route-to-market strategy, which replaces the direct-to-store delivery model with an enlarged field sales operation and brands supplied through existing wholesale channels. However, it said then that it expected additional field sales roles to be created to support the new route to market.

Read more:

At the same time, the company announced it would close the Boost office in Leeds as part of the integration of the energy drink into Barr Soft Drinks, with the move affecting 35 roles as a result of the duplication of activities.

The restructuring ultimately led to a net reduction in headcount of around 150 after some people were redeployed into new roles.

Barr acquired Boost Drinks in a deal worth up to £32m in December 2022.

The firm said today that the closure of the Barr Direct operation was completed in June, while the integration of Boost is expected to be complete during the second half.

However, Barr declared underlying trading had been strong in the first half, as the company reported revenue had increased by 5.2% to £221.3m, driven by a 7% rise in soft drinks. Rubicon and Irn-Bru both delivered volume and price gains, the firm said, as adjusted profit before tax increased by 8.5% to £29.3m.

The company said the UK soft drinks market was up 2% compared with the same period last year. Growth was price-led with volumes marginally down (0.4%), partly because of "disappointing" early summer weather. Barr noted that it had out-performed the market on volume and value.

The firm reported net cash at bank of £43.7m at the halfway stage, down from £47.3m with the reduction attributed to the acquisition of soft drinks brand Rio in October.

And it recommended an interim dividend of 3.1p per share, an increase of 17% on the prior year.

Russ Mould, investment director at AJ Bell, gave a glowing report card to the firm for the first half. “The last decade has thrown a lot at AG Barr, in the form of new regulations on sugar content, Covid-19, carbon dioxide shortages and input cost inflation (and they are all before the usual issues of competition and changing trends in consumers’ tastes), but the Scottish firm’s latest set of first-half results suggest it is coping admirably,” he said.

“Sales, profits and the dividend are all up and although the share price is not fizzing higher today it already stands at a five-year high, in recognition of how both revenues and net earnings could set new all-time peaks in the next fiscal year, to January 2026, if analysts’ forecasts prove accurate.”

Barr signalled its confidence of delivering a full-year performance in line with current market expectations, “assuming a reasonably settled external environment”. Mr Mould noted that the current consensus is for Barr to report a “5% increase in the top line to a record £421m, with further progress expected in fiscal 2026”, and an operating profit of £55.5m.

Euan Sutherland, who succeeded Roger White as chief executive of Barr earlier this year, said: “My first few months with the business has further cemented my view that AG Barr is an excellent business with exciting, tangible and deliverable growth opportunities.

“I am pleased to report a strong set of first half results. The business has delivered both revenue and profit growth as well as good progress on our key strategic margin rebuild programme. We continue to invest in our supply chain to build the capacity to support our growth plans and manufacture more volume in-house. This will deliver tangible benefits including enhanced margin and improved service resilience.”

He added: “We anticipate a strong H2 performance from our four core brands – Irn-Bru, Rubicon, Boost and Funkin - in particular, with current trading momentum underpinned by further marketing and innovation activities. Guidance on 2024/25 revenue and operating margin is unchanged. We remain confident of continued, sustainable growth over the long term, in line with our strategic ambitions.”

Shares in AG Barr closed down 8.46%, or 56p, at 606p.