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AG Barr (BAG) has warned in a pre-close trading update that it expects full-year profits to fall by up to a fifth after trading has been hit by poor UK weather and pricing increases.

The Irn-Bru manufacturer said it expected revenue for the half-year to 27 July to be about £123m – about a 10% decline on the previous year.

It did not expect to recover fully from the volume impact in the first five months of this year and the current trading it was experiencing, despite what it said was a strong second-half plan.

The company also said it expected exceptional costs to be incurred in the current financial year as it took action to regain momentum, meaning it it likely to poast a 20% drop in full-year profit from last year’s £45m.

AG Barr said 2018 was an unprecedented year for soft drinks with changing pricing and promotional dynamics in the market following the introduction of the Soft Drinks Industry Levy alongside carbon dioxide shortages and last year’s long, hot summer.

It said it placed an intentional short-term trading focus on volume which successfully boosted growth and returned the Barr Soft Drinks business to its long-term value driven approach, increasing price positioning in the market.

While it said it anticipated that volume would be impacted by this return to its traditional pricing strategy, trading in the financial year to date had been below its expectations.

This had been exacerbated by some specific brand challenges, particularly in Rockstar energy and Rubicon juice drinks, as well as disappointing spring and early summer weather, most notably in Scotland and the North of England.

This was further compounded as the company approached the half year when the previous year’s comparative weather was at its peak, it said.

The group reported it had taken action to address specific brand-related issues, including the planned launch of three new Rockstar products at the end of the summer, and recipe improvement activity for Rubicon juice drinks.

The benefits, however, would not be felt until later in the second half of the financial year.

In a transitional pricing year for its core carbonates, led by Irn-Bru, it was seeing “positive indications” of acceptance of the new price positioning.

Its innovation performance and pipeline remained strong with encouraging initial interest in its recently launched Irn-Bru Energy product, the company statement said.

Funkin continued to perform strongly and the recent launch of nitro-infused premium cocktails in cans was already exceeding expectations.

Further guidance would be provided at the interim results on 24 September.

Roger White, chief executive, said: “While the Funkin business goes from strength to strength, it has been a challenging start to the year for Barr Soft Drinks.

“Weather comparatives and trading, particularly in the impulse on-the-go market, have been even tougher than expected which, along with some brand specific challenges, have led to a short-term impact on our financial performance.

“We are focused on returning to growth and will continue to take the actions we believe necessary to succeed in the dynamic environment within which we operate.”

Morning update

Chapel Down (CDGP) has announced the exercise of share options under its employee share option scheme.

Application has been made for 10,000 new ordinary shares of 5p each to be admitted to the NEX Exchange.

It said the new shares would rank on an equal footing with the company’s existing ordinary shares.

The new shares are expected to start trading on Friday.

The company will have 144,143,335 ordinary shares in issue following admission with each share carrying the right to one vote.

On the markets this morning, the FTSE 100 rose 0.02% to 7,533.3pts in early trading

Early risers include Glanbia (GLB), up 2.1% to €14.6, C&C Group (CCR), up 1.5% to €4.1, British American Tobacco (BATS), up 0.5% at 2,940p, and DS Smith (SMDS), up 0.3% at 368.9p.

Fallers so far today include Britvic (BVIC), down 2.3% to 864p, Just Eat (JE), off 0.4% at 635.4p, WH Smith (SMWH), down 0.4% at 2,070p and Marks and Spender Group (MKS), down 0.2% to 207.9p.

Yesterday in the City

The FTSE 100 closed up 0.34% at 7,531.7p.

Finsbury Food Group (FIF), the UK speciality bakery manufacturer of cake, bread and morning goods for retail and foodservice, saw its shares rise 3.9% to 67p after reporting a full year like-for-like group sales increase of 3.1% to £299.3m.

Sales in the second half increased 5.7% against the equivalent period in the previous year, it said in a trading update for the full financial year ended 29 June before entering its close period.

It said organic growth, price recovery and new business wins drove the stronger performance in the second half.

The day’s fallers included Stock Spirits Group (STCK), off 2.3% at 213p, Tesco (TSCO), down 0.8% at 240.2p, Cranswick (CWK), down 0.8% at 2,550p, Fevertree Drinks (FEVR) fell 0.8% at 2,190p and Reckitt Benckiser Group (RB), dropped 0.7% at 6,548p.

Stocks on the up included Just Eat (JE), up 4.3% at 638.2p, Science in Sport (SIS), up 3.2% at 65p, Majestic Wine (WINE), up 3% at 276.5p and B&M European Value Retail (BME), up 2.4% at 350.7p.

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