Britvic profit loses its fizz as France law hurts sales
Fizzy drink maker Britvic suffered almost a 25 per cent plunge in annual profit, it revealed today, following a writedown of French assets.
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The figures
Profit before tax sank 24.3 per cent to £110.3m for the year to the end of September after Britvic struggled with a new law in France and wrote down £31.2m in local assets.
Revenue climbed 2.8 per cent year on year to £1.55bn while adjusted cash flow recorded a £116m inflow, compared to last year’s £65m outflow.
The firm behind Tango, J20 and Fruit Shoot trimmed adjusted net debt by £9.4m to £575.5m.
Basic earnings per share shrank 31 per cent to 30.6p, however, though Britvic managed to hike its full year dividend 6.4 per cent to 30p per share.
Why it’s interesting
Britvic blamed its profit slump on “a challenging year” in France following the introduction of a law designed to force companies to improve suppliers’ pay.
That has raised prices for Britvic’s brands, which has hurt sales. “In this legislative environment, many companies have found their growth challenged and this has led to further intense competition across our branded portfolio,” the company added.
It also wrote down £31.2m in value for three juice manufacturing sites it is looking to sell to rival Refresco.
However, the firm posted a 4.4 per cent year-on-year increase in adjusted operating profit to £214.1m thanks to sales of its low sugar and fruit-based drinks like Robinsons, Pepsi Max and R Whites.
“Sales of Britvic’s low sugar and fruit-based beverages are a bright spot in the report,” said Ask Traders’ senior market analyst Steve Miley.
“This is an area we expect to see expand going forward given the current low sugar push in the UK and some European countries.”
Investors disappointed by the profit drop sold off shares in early trading, knocking Britvic’s share price 2.8 per cent lower to 957.5p. But Liberum advised shareholders to hold onto the stock.
“The guidance statement is light on the detail but we suspect consensus FY2020 to come down a few percentage points,” the brooker said.
“We are excited for Britvic’s free cash flow story to improve but believe it is priced into the shares.”
Chris Daly, chief executive of the Chartered Institute of Marketing, credited the firm’s refreshed marketing strategy for Robinsons with pushing UK revenue higher.
“The FTSE 250 company has a refreshed strategy focusing on key categories for growth including the launch of new products in the adult soft drink market,” he added, citing a marketing push for Pepsi Max.
“Although Coca-Cola has long been synonymous with the festive period, retailers may yet be persuaded to give Britvic’s cola brand a larger share of shelf space.”
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What Britvic said
Chief executive Simon Litherland said:
I am pleased to report that Britvic has once again delivered a strong performance, with good momentum in our key brands and categories. In 2019 we have increased revenue, adjusted margin and earnings before interest and taxes, as well as significantly improving free cashflow generation.
Our commercial execution, innovation agenda and revenue management continue to deliver results. Our transformational business capability programme is now complete – and importantly forms a key part of our broader commitment to building a more flexible and sustainable business model going forward.
Building on this strong platform, I am confident that Britvic is well placed to capitalise on the future growth opportunities in the years ahead. While we anticipate conditions to remain challenging, we fully expect that we will make further progress in 2020.
Main image credit: Britvic