Financial Trading Blog
Stock of the day 22/03/2016 – AG Barr PLC
AG Barr’s 2015 may as well have ended in September; after revealing an 11.3% fall in half year pre-tax profits to £16.9 million the stock slumped around 8%, a decline that continued until the company hit lows not seen since late 2013. And once it fell below the £5.30 mark the stock couldn’t really recover, a dull final quarter eventually ending with AG Barr at £5.31.
Whilst that gradual slide continued as 2016 got underway, the Irn Bru-maker’s fortunes briefly improved at the end of January as the company revealed its latest update. Despite a ‘challenging and highly competitive’ market the company revealed it expects to see only a slight 1.5% dip in revenue to £257 million after a notably improved performance in its second half, with fourth quarter revenue actually growing by 2.5%. That leaves the company on track to meet the slight 1% dip in underlying profits (to £41.5 million) expected by analysts.
(Source: IT-Finance.com 22/03/2016)
That vaguely reassuring update saw the stock hit a 5-ish month high of £5.57 as January came to a close, investors buoyed by AG Barr’s course-righting results. Frustratingly for AG Barr that rise was to be short-lived, the stock seeing its first sustained fall under £5 since late 2012 after plunging around 10% in the first week of February thanks to the market-wide sell-off that opened the month. Things did pick up at the start of March, however, the broad recovery seeing AG Barr climb all the way back to £5.58.
Yet George Osborne soon to put a stop to AG Barr’s recovery. As the Chancellor announced a new sugar tax on soft drinks in his annual budget last Wednesday investors fled AG Barr like the plague, the stock dropping over 7% in 2 days as questions arose over the long-term cost of the new levy. Reports that soft drinks companies may be lining up a legal challenge to the tax has seen AG Barr recover some of those losses, though it still sits at a far reduced current trading price of £5.14 (IT-Finance.com, 22/03/2016). The company now faces the unenviable task of having to answer investors’ questions over the impact of the sugar tax whilst also delivering on its promise of matching its full year expectations.
AG Barr PLC has a consensus rating of ‘Hold’ with an average target price of £5.86.
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