Britvic — A good interim performance

Britvic (LSE: BVIC)

Last close As at 21/11/2024

965.50

4.00 (0.42%)

Market capitalisation

2,399m

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Research: Consumer

Britvic — A good interim performance

Britvic has delivered another strong performance in H1, with organic constant currency revenue growth of 1.9%, organic adjusted EBIT margin up 30bps and adjusted EPS up 5.2%. The business capability programme (BCP) is due to be completed during H219, bringing higher capacity and increased flexibility to the company. Looking ahead, as capex and leverage normalise to lower levels, and planned returns and further growth from the BCP programme come to fruition, the wide discount to peers may narrow.

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Consumer

Britvic

A good interim performance

Beverages

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23 May 2019

Price

932.5p

Market cap

£2,466m

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Share details

Code

BVIC

Listing

LSE

Shares in issue

264.4m

Business description

Headquartered in the UK, Britvic is a soft-drink beverage company. The company participates in the marketing and manufacturing of popular brands including PepsiCo in Great Britain and Ireland. Through a number of acquisitions, Britvic has expanded its operations into Ireland, France and, more recently, Brazil.

Bull

Market leadership status: number one in branded still soft drinks and number two in branded carbonated soft drinks in Great Britain.

Growing share in an expanding underlying Great Britain market.

Further benefits of business capability programme in rationalising supply chain still lie ahead in FY19.

Bear

French business performance remains somewhat weak.

Brands are in part owned by third parties.

Net debt leverage of 2.4x at end H119 may appear high, although medium-term target range is 2–2.5x. However, on reducing capex, leverage should fall through FY19 to consensus forecast of 1.7x in FY20.

Analysts

Sara Welford

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Britvic is a client of Edison Investment Research Limited

Britvic has delivered another strong performance in H1, with organic constant currency revenue growth of 1.9%, organic adjusted EBIT margin up 30bps and adjusted EPS up 5.2%. The business capability programme (BCP) is due to be completed during H219, bringing higher capacity and increased flexibility to the company. Looking ahead, as capex and leverage normalise to lower levels, and planned returns and further growth from the BCP programme come to fruition, the wide discount to peers may narrow.

Strong brands continue to drive growth

GB Stills revenue grew an impressive 4.9% y-o-y, with all three core brands showing improvements. The Robinsons brand has been successfully revitalised through a premiumisation strategy, which is attracting more consumers to the brand. GB Carbs successfully navigated the soft drinks industry levy (SDIL), though volume and revenue growth in H119 were affected by phasing of the SDIL introduction last year. By geography, total GB revenue was up 3.1%. Ireland revenues were down 0.9% due to soft on-trade alcohol sales through Counterpoint. France remained soft due to the managed volume decline in private label. Brazil and International were up strongly, though growth in the latter is expected to moderate during H2 as the company starts to lap distribution gains in the US.

Strategy: Good shareholder returns

Britvic’s strategy revolves around four key themes: (1) generate profitable growth in core markets; (2) realise global opportunities; (3) step-change its business capability; and (4) build trust and respect. This has generated good returns with a five-year EPS CAGR of 9.8% and DPS CAGR of 8.9%, and management believes it will continue to be a winning combination to deliver dependable and profitable growth. As the transformational BCP enters its final implementation phase during H219, capex should begin to normalise, while the benefits of the BCP should underpin long-term growth and cash generation.

Valuation: Reducing leverage and sustained growth should narrow discount

Britvic trades at a consensus FY19e P/E of 15.9x, a 37% discount to the UK beverages sector, and a 45% discount to AG Barr (calendarised), reflecting its geared balance sheet, partial ownership structure and steady earnings growth. However, we believe that with sustained earnings and income delivery, and reducing balance sheet leverage, those discounts should narrow.

Consensus estimates

Year
end

Revenue
(£m)

Adjusted EBIT (£m)

PBT
(£m)

EPS
(p)

DPS
(p)

EV/EBITDA
(x)

P/E
(x)

Yield
(%)

09/17*

1,430.5

195.5

164.7

52.9

26.5

11.2

17.7

2.8

09/18

1,503.6

206.0

175.2

56.3

28.2

10.6

16.7

3.0

09/19e

1,564.5

215.7

186.2

58.5

29.6

10.3

15.9

3.2

09/20e

1,600.1

226.2

200.5

62.3

31.4

9.5

15.0

3.4

Source: Britvic, I/B/E/S. Note: *Adjusted.

Disclaimer

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United States of America

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

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NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Disclaimer

General disclaimer and copyright

This report has been prepared and issued by Edison Investment Research.. Edison Investment Research standard fees are £49,500 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 Edison analyst 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.

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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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