Britvic — Buoyant volumes in H124

Britvic (LSE: BVIC)

Last close As at 24/06/2024

965.50

4.00 (0.42%)

Market capitalisation

2,399m

More on this equity

Research: Consumer

Britvic — Buoyant volumes in H124

Britvic’s interim results showcased a positive first half of FY24, with strong revenue growth across core brands and geographies. This was underpinned by a robust increase in volumes, reflecting product innovation and growth across its strategic pillars. Positive price/mix helped enable a 70bp improvement in margins. The enhanced profitability permitted a 16% increase in the interim dividend. Britvic continues to make strategic progress against the growth pillars of family favourite brands, Brazil and new growth areas. Management remains confident in the outlook, particularly with several key consumer activation events upcoming in the critical summer trading period. The company announced its third share buyback programme of up to £75m over the next 12 months.

Written by

Milo Bussell

Analyst, Consumer and TMT

Beckton-Factory

Consumer

Britvic

Buoyant volumes in H124

Consumer

QuickView

20 May 2024

Price

1,004p

Market cap

£2,498m

Share price graph

Share details

Code

BVIC

Listing

LSE

Shares in issue

249.5m

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 market 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 uncertain given the macroeconomic environment.

Some brands are part-owned by third parties.

Uncertainty about inflationary pressures in staff costs and inputs.

Analysts

Milo Bussell

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Britvic is a research client of Edison Investment Research Limited.

Britvic’s interim results showcased a positive first half of FY24, with strong revenue growth across core brands and geographies. This was underpinned by a robust increase in volumes, reflecting product innovation and growth across its strategic pillars. Positive price/mix helped enable a 70bp improvement in margins. The enhanced profitability permitted a 16% increase in the interim dividend. Britvic continues to make strategic progress against the growth pillars of family favourite brands, Brazil and new growth areas. Management remains confident in the outlook, particularly with several key consumer activation events upcoming in the critical summer trading period. The company announced its third share buyback programme of up to £75m over the next 12 months.

H124 results

Britvic’s positive momentum continued in H124, with revenue up 11.2% at constant currency and 10.9% reported to £880.3m (H123: £794.0m). This reflected a beneficial price/mix and a 4.4% increase in volume growth in the period, which was particularly strong in Q2 at 7.4%. Adjusted EBIT was up 17.7% to £100.4m (H123: £85.3m), representing a 70bp improvement in the margin at 11.4%. Adjusted EPS grew 18.5% y-o-y to 27.0p (H123: 22.8p), leading to a 15.9% increase in the dividend to 9.5p (H123: 8.2p), among other factors. Leverage increased slightly to 2.3x (H123: 2.2x), reflecting the Brazil acquisition near the end of FY23.

Delivering against strategy

The company continues to make progress against its growth strategy, including 7.0% growth in its family favourite brands, 34.7% in Brazil and 63.5% in new growth areas including Plenish, Aqua Libra and London Essence. Investment in the brand portfolio, including innovation in product and a Pepsi refresh in the spring, helped drive volumes. Looking to H224, management’s confidence is underpinned by a number of consumer activation events across the summer, including the Champions League final and UEFA Euro 2024 competition. Its Healthier People, Healthier Planet strategy allows Britvic to embed sustainable business practices in the way it operates as it grows.

Valuation: Continued discount to peers

Britvic trades on a consensus FY24e P/E multiple of 15.3x, an 4.2% discount to the UK beverages sector (excluding Fevertree) and a 9.8% discount to AG Barr, which has narrowed since our last note. This could reflect the fact that some of its brands are third-party owned and its more leveraged balance sheet.

Consensus estimates

Year
end

Revenue
(£m)

PBT
(£m)

EPS
(p)

DPS
(p)

P/E
(x)

Yield
(%)

09/22

1,618.3

180.3

57.3

29.0

17.5

2.9

09/23

1,748.6

186.9

61.0

30.8

16.5

3.1

09/24e

1,890.5

204.0

65.5

32.8

15.3

3.3

09/25e

1,964.5

221.1

71.8

35.7

14.0

3.6

Source: LSEG (priced at 20 May 2024)

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.

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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. Where Edison has used consensus estimates within this publication, we do not guarantee their accuracy or completeness.

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 2024 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

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