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(Sharecast News) - Shares in AG Barr were weaker on Tuesday due to a lack of upgrades despite a strong first-half report from the Scottish soft drink and energy drink manufacturer, though Peel Hunt still kept its positive view on the stock.
The Irn-Bru maker posted a 3.3% increase in revenue and 20.1% jump in adjusted profits underpinned by a solid performance from the soft drinks business, in particular Boost. Meanwhile, the adjusted EBIT margin improved significantly to 15% from 13% last year, helped by manufacturing efficiencies and cost discipline.
However, expected increases to marketing spend in the second half is expected to offset the progress made to the bottom line.
"Given the strength of the first half an upgrade might have been expected, but the increased marketing spend in 2H is set to hold this back," Peel Hunt said.
"Management flagged that the market is seeing that promotional activity has intensified, in the grocery multiple channel in particular, and consumer confidence remains subdued. However, it remains confident in guidance and the long-term opportunity."
The broker highlighted the stock's valuation, trading at 16 times next year's earnings and at an EV/EBITDA multiple of 8.6.
Peel Hunt kept a 750p target price for the shares, which were down 0.3% at 676p by 1422 BST.
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