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Research: Consumer
Britvic reported a further sequential, ie quarter-on-quarter, improvement in underlying revenue growth in Q323, albeit against a slightly easier comparator from Q322, with positive price/mix in all geographies and volume growth in all countries except for negative or ‘soft’ volumes in Brazil and France, respectively. After a somewhat wet July, ie post this trading update, in the UK’s peak trading period, it is reassuring that management confirmed FY23 revenue and EBIT will be in line with market expectations. The announced two bolt-on acquisitions are consistent with the strategy of leveraging Britvic’s existing infrastructure into new drinks categories and generating revenue and operational synergies.
Britvic |
Improved revenue growth in Q323
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Consumer |
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27 July 2023 |
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Britvic is a research client of Edison Investment Research Limited |
Britvic reported a further sequential, ie quarter-on-quarter, improvement in underlying revenue growth in Q323, albeit against a slightly easier comparator from Q322, with positive price/mix in all geographies and volume growth in all countries except for negative or ‘soft’ volumes in Brazil and France, respectively. After a somewhat wet July, ie post this trading update, in the UK’s peak trading period, it is reassuring that management confirmed FY23 revenue and EBIT will be in line with market expectations. The announced two bolt-on acquisitions are consistent with the strategy of leveraging Britvic’s existing infrastructure into new drinks categories and generating revenue and operational synergies.
Positive price/mix and volume growth, mainly
Britvic’s Q323 revenue increased by 9.9% y-o-y on a constant currency basis and 10.6% on a reported basis, to c £477m. This represented a slight acceleration from H123’s 7.9.% growth, but Q323 was against a slightly easier comparative from Q322 of 11.2% growth, versus H122’s 18.5% growth. The geographic trends in Q323 appear broadly consistent with the first half: UK growth has been a relatively stable c 10% in every quarter so far this year and Brazil remains modestly negative, due to volumes. However, Other International enjoyed a decent pick-up in growth to 13.3% y-o-y, with ‘soft volumes’ in France being the only slight negative.
Bolt-on acquisitions
Britvic has announced the acquisitions of Jimmy’s Iced Coffee, a ready-to-drink brand in the UK, and Extra Power energy drinks in Brazil, both of which have grown quickly in growth categories. At £17m sales (year-end June 2023) and BRL113m sales (year-end December 2023) (current BRL/£0.16), we estimate they represent an incremental c 3% and 10%+ of Britvic’s revenues for each country, respectively. Management states they will add net leverage of c 0.2x net debt/EBITDA.
Valuation
Britvic trades on a consensus FY24e P/E multiple of 13.8x, a c 15% discount to the UK beverages sector (excluding FeverTree) and a c 12% discount to AG Barr, which reflects that some of its brands are part-owned by third parties and a more geared balance sheet. We believe those discounts should narrow over time if the balance sheet deleverages. The sector is exposed to weak consumer spending and above-average inflationary pressures, which are beginning to ease.
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Consensus estimates
Source: Refinitiv 26 July 2023 |
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Research: Consumer
Britvic reported a further sequential, ie quarter-on-quarter, improvement in underlying revenue growth in Q323, albeit against a slightly easier comparator from Q322, with positive price/mix in all geographies and volume growth in all countries except for negative or ‘soft’ volumes in Brazil and France, respectively. After a somewhat wet July, ie post this trading update, in the UK’s peak trading period, it is reassuring that management confirmed FY23 revenue and EBIT will be in line with market expectations. The announced two bolt-on acquisitions are consistent with the strategy of leveraging Britvic’s existing infrastructure into new drinks categories and generating revenue and operational synergies.