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Research: Consumer
Britvic’s recovery continued in H2, with continued growth in at-home channels while out-of-home rebounded. GB and Brazil both posted revenue growth, while Other International was affected by weaker performance in France, caused – among other things – by poor summer weather. Organic revenue growth was 6.6%, while adjusted EBIT was up 10% on the same basis. Adjusted EPS was up 2.5% to 44.3p, as it was adversely affected by a one-off deferred tax charge. The dividend per share is 24.2p, up 12%. Current trading is encouraging, with volumes in the first six weeks of the year ahead of both FY21 and FY20. Management remains confident in making further progress with revenue, profit and margin growth in 2022 despite inflationary cost pressures.
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Britvic |
Emerging stronger
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Consumer |
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29 November 2021 |
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Britvic is a research client of Edison Investment Research Limited |
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Britvic’s recovery continued in H2, with continued growth in at-home channels while out-of-home rebounded. GB and Brazil both posted revenue growth, while Other International was affected by weaker performance in France, caused – among other things – by poor summer weather. Organic revenue growth was 6.6%, while adjusted EBIT was up 10% on the same basis. Adjusted EPS was up 2.5% to 44.3p, as it was adversely affected by a one-off deferred tax charge. The dividend per share is 24.2p, up 12%. Current trading is encouraging, with volumes in the first six weeks of the year ahead of both FY21 and FY20. Management remains confident in making further progress with revenue, profit and margin growth in 2022 despite inflationary cost pressures.
FY21 results
Reported revenue was down 0.5%, but up 6.6% on a like-for-like and constant currency basis. Adjusted EBIT was up 10% on this comparable basis, and up 6.5% on a reported basis, with adjusted EBIT margin up 40bp to 12.6%. Adjusted EPS was up 2.5% to 44.3p and adjusted net debt was £31.9m lower year-on-year as a result of the strong free cash flow generation. Adjusted net debt/EBITDA for FY21 is back to the 2019 level.
Delivering the strategy
Britvic continues to make progress against its strategic objectives: it has accessed new growth spaces, simplified its Irish business and converted all GB immediate consumption packs to 100% recycled PET. Group margin was up while Britvic rebuilt investment in the business, and the outlook is confident that the multiple operational headwinds can be mitigated through a combination of agile supply chain, revenue management and cost saving actions.
Valuation: Discount should narrow
Britvic trades at a consensus FY22e P/E of 16.6x, a c 20% discount to the UK beverages sector (excluding Fever Tree) and a c 10% discount to AG Barr, reflecting its more geared balance sheet and the fact that some of its brands are part-owned by third parties. We believe those discounts should narrow over time with reducing balance sheet leverage, although in the shorter term, inflationary cost pressures and some COVID-19 uncertainty remain the biggest risks for the whole sector.
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Consensus estimates
Source: Refinitiv, company data |
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Research: TMT
IQE has announced that year-on-year growth in the volumes of GaAs epiwafers was lower in Q421 than it had expected. We believe this relates to supply chain issues in the smartphone industry, which are likely to be resolved during FY22, rather than consumer demand for handsets. We have changed our estimates in line with revised management guidance, cutting FY21 PBT from a £0.1m profit to a £9.2m loss, and our FY22 PBT estimate from a £7.3m profit to a £4.7m loss.