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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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26 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 17.0x, 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
The latest correspondence from the Irish regulator clarifies the volume limits within which EML’s Irish-regulated subsidiary can trade while its remediation plan is being carried out. PFS Card Services Ireland (PCSIL) can sign new customers and launch new programmes as long as it stays within the material growth restrictions set by the regulator. This represents a step forward in meeting the regulator’s requirements and should allow the business to resume implementing programmes that had been put on hold. EML continues to target substantial completion of the remediation programme by the end of CY21 and full completion by the end of March 2022.