Shares in soft drinks maker Britvic (BVIC) improved 1.4% to 821.5p on Thursday after the company behind the Fruit Shoot, Robinsons and Tango brands served up slightly better-than-expected annual results and said it was ‘confident’ in its future growth prospects.

This was despite the beverages business cutting its dividend and cautioning that Covid-19 restrictions would continue to hurt its performance, especially in the first half of the current financial year.

For the year ended 30 September 2020, Britvic’s pre-tax profit rose from £110.3 million to £111.2 million despite an 8.6% drop in revenue to £1.41 billion. Free cash flow generation was strong, yet Britvic prudently decided to cut its final dividend by 28% to 21.6p to reflect its 50% pay-out policy.

OUT-OF-HOME HIT

The FTSE 250 company, which also produces and sells Pepsi, 7UP and Lipton Ice Tea in Britain and Ireland under exclusive agreements with US drinks and snacks giant PepsiCo, actually started the financial year with strong momentum.

Sales, earnings and margin were all on the up before the momentum was interrupted by the onset of the pandemic, which absolutely hammered demand in the out-of-home sector, though trading improved significantly after restrictions were lifted in the summer.

Chief executive Simon Litherland explained that the performance in the at-home channels has been ‘robust, with increased demand for our trusted portfolio of brands in larger pack formats, and we have taken market share’, although the out-of-home channels ‘continue to be impacted by trading restrictions and social distancing measures reducing capacity, and people continuing to work from home for the foreseeable future.’

CAUTIOUSLY OPTIMISTIC

In the outlook statement, Britvic warned: ‘We have started the new financial year with some form of restrictions on either trading and/or the movement of people in all our markets, and this will undoubtedly continue to affect performance, especially in the first half of the financial year.’

Yet the company expressed confidence it can continue to ‘respond positively and with agility as events unfold. Soft drinks have repeatedly proven to be a highly resilient category, and Britvic fully intends to be at the forefront of its recovery.’

Litherland insisted Britvic continues to ‘navigate the changing landscape successfully’. Even though out-of-home trading has inevitably been impacted, Britvic has ‘continued to gain market share in our key growth markets of GB and Brazil, and we have successfully protected cash and our overall financial strength.’

Confidence in the ability of his charge to drive future growth has been bolstered by the inking of a new and exclusive 20-year franchise bottling agreement with PepsiCo for the production, distribution, marketing and sales of its fizzy soft drink brands in Great Britain, including Pepsi, 7UP and Mountain Dew.

This new agreement extends the relationship, which began back in 1987, to 2040. Importantly it also allows Britvic to take on the Rockstar energy brand, further broadening its drinks portfolio.

READ MORE ON BRITVIC HERE

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Issue Date: 26 Nov 2020