Britvic — Brand portfolio proving resilient

Britvic (LSE: BVIC)

Last close As at 27/02/2024

GBP8.67

−1.50 (−0.17%)

Market capitalisation

GBP2,167m

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Research: Consumer

Britvic — Brand portfolio proving resilient

Britvic reported robust FY23 results despite the weaker consumer environment, reflecting the resilience of its brand portfolio. Price/mix offset limited volume declines resulting in revenue growth of 6.6%, despite unfavourable summer weather and tougher comparators. Inflationary pressures were mitigated through pricing actions and cost discipline, as adjusted EBIT grew 6% at a margin of 12.5%. Investment in its existing brand portfolio and the recent addition of two bolt-on acquisitions in high growth categories underpins management’s confidence heading into FY24.

Written by

Milo Bussell

Associate Analyst, Consumer and Media

Britvic_resized

Consumer

Britvic

Brand portfolio proving resilient

Consumer

ADR QuickView

27 November 2023

Price

$21.03

Market cap

$2,610m

Underlying £ price converted at US$1.25/£

ADR/Ord conversion ratio 2:1

Share price graph

Share details

Code

BVICY

Listing

OTC

Shares in issue

129m

Business description

Britvic is a soft-drink beverage company with headquarters in the UK. The company participates in the marketing and manufacturing of popular brands including PepsiCo in Great Britain and Ireland. Britvic also has operations in France, Brazil and selected other EU markets.

Bull

The soft drinks segment is relatively resilient.

The business continues to make progress against its strategic objectives, including sustainability-focused targets.

Market leadership status: number one in branded still soft drinks and number two in branded carbonated soft drinks in Great Britain, and number one in ready-to-drink juice in Brazil.

Bear

The outlook for consumer demand remains subdued given the macroeconomic environment.

Some brands are part-owned by third parties

Volumes declined in FY23 due to adverse summer weather.

Analysts

Milo Bussell

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Britvic reported robust FY23 results despite the weaker consumer environment, reflecting the resilience of its brand portfolio. Price/mix offset limited volume declines resulting in revenue growth of 6.6%, despite unfavourable summer weather and tougher comparators. Inflationary pressures were mitigated through pricing actions and cost discipline, as adjusted EBIT grew 6% at a margin of 12.5%. Investment in its existing brand portfolio and the recent addition of two bolt-on acquisitions in high growth categories underpins management’s confidence heading into FY24.

FY23 results

Britvic reported FY23 robust revenue growth of 6.6% y-o-y on a constant currency basis and 8.1% on a reported basis to £1.7bn (FY22: £1.6bn). Top-line growth was driven by price/mix growth as group volumes declined 2.2%, resulting from tougher Q422 comparators as well as unfavourable weather in July and August 2023. Adjusted EBIT grew 5.9% to £218m (FY22: £206m), slightly ahead of market expectations (Refinitiv: £215m). Adjusted EPS rose 6.5% to 61p (FY22: 57.3p), reflecting EBIT growth and fewer number of shares due to the buyback programme. Strong free cash flow of £130m enabled leverage to be maintained y-o-y at 1.9x adjusted net debt/EBITDA, well within the 1.5–2.5x target range. The FY23 dividend was 30.8p (FY22: 29p), consistent with management’s 50% payout ratio.

Execution on strategy

Britvic continues to deliver against its strategy of sustainable growth. The strength of its brand portfolio enabled Britvic to take price relatively early with volumes seeing a limited decline. The company continued to invest in its supply-chain capacity, and the acquisitions of Jimmy’s Iced Coffee in Great Britain and Extra Power in Brazil provide further opportunities in fast-growth new categories. The focus on sustainability through its ‘Healthier People, Healthier Planet’ strategy provides consumers with healthier low- and no-sugar products while minimising Britvic’s environmental impact across its supply chain.

Valuation

Britvic trades on a consensus FY24e P/E multiple of 13.5x, a c 12% discount to the UK beverages sector (excluding Fevertree) and a c 13% discount to AG Barr, which reflects that some of its brands are part-owned by third parties and its more leveraged balance sheet. We believe these discounts should narrow if the balance sheet deleverages. The sector is exposed to a weaker consumer environment and above-average inflationary pressures, although these are starting to ease.

Consensus estimates

Year
end

Revenue
(US$m)

Adjusted EBIT
(US$m)

Adjusted EPS
(US$)

DPS
(US$)

P/E
(x)

Yield
(%)

09/22

2,022.9

257.5

1.43

0.73

14.7

3.4

09/23

2,185.8

273.0

1.53

0.77

13.8

3.7

09/24e

2,308.6

292.2

1.56

0.79

13.5

3.7

09/25e

2,392.0

310.7

1.70

0.85

12.3

4.1

Source: Refinitiv (Priced at 24 November 2023)

EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.

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This report has been commissioned by Britvic and prepared and issued by Edison, in consideration of a fee payable by Britvic. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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London │ New York │ Frankfurt

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United Kingdom

General disclaimer and copyright

This report has been commissioned by Britvic and prepared and issued by Edison, in consideration of a fee payable by Britvic. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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