Soft drinks business Britvic (BVIC) is fizzing higher on a 5.1% rise in earnings before interest, tax and amortisation in the year to 1 October. This is ahead of consensus expectations thanks to lower costs.
Broker UBS says the company behind big brands such as Robinsons and J2O, beat anticipated earnings growth by 40 basis points as spending efficiencies helped to reduce expenditure.
Shares in Britvic are up 7.6% to 816.5p on the strong results as sales increased 7.7% to £1,540m. Organic revenue was up 2.5%.
A 2.5% drop in profit after tax to £111.6m has been largely overlooked as this includes planned costs related to the business capability programme.
SUGAR TAX SET TO CAUSE ‘HIGH UNCERTAINTY’
Britvic has warned next year’s soft drink levy in the UK and Ireland will create a ‘high level of uncertainty’ in the short term, but believes its strong portfolio of brands will help navigate the difficult environment.
The levy means companies will have to pay tax depending on the total sugar content of the drink in a crackdown on dangerous levels of added sugar, which is seen as contributing to rising obesity.
Firms will have to pay a levy from 6 April 2018 of 18p per litre if the drink has 5g or more of sugar per 100ml or 24p per litre if it has 8g of sugar or more.
One of the weakest performing areas for Britvic is GB Stills as sales dropped 4.7% to £285.2m, which was primarily due to price deflation in Robinsons squash.
Shore Capital analyst Phil Carroll says the profit performance was ahead of expectations despite the anticipated weaker performance in the fourth quarter in its core markets.
The analyst expects the market to be cautious around the sugar levy and anticipates no upgrades for the current financial year at present.
