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Research: Consumer
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.
Britvic |
Brand portfolio proving resilient
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Consumer |
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23 November 2023 |
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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 13.3x, a c 13% discount to the UK beverages sector (excluding Fevertree) and a c 14% 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.
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Consensus estimates
Source: Refinitiv (Priced at 23 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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Research: Healthcare
The FDA has accepted Immix’s Investigational New Drug (IND) application for lead CAR-T asset NXC-201. In our view, this decision from the FDA represents encouraging progress for Immix in delivering, potentially, the first outpatient CAR-T therapy, provided the data continue to be supportive. This regulatory decision enables Immix to start dosing patients with amyloid light chain amyloidosis (ALA) in the US as part of the NEXICART Phase Ib/IIa clinical trial, which has previously been operating in Israel. Further, management has communicated that the favourable tolerability profile of the therapy to date could warrant a potential expansion into autoimmune indications; we await additional updates on this front. NXC-201 has demonstrated a desirable safety and efficacy profile in 72 patients with ALA or multiple myeloma (MM) to date, potentially supporting NXC-201 as the first outpatient CAR-T therapy.