Panmure Gordon analyst, Damien McNeela, made his comments in a note following Britvic’s first quarter (Q1) results yesterday, which revealed that the soft drinks giant (the UK’s largest supplier of still soft drinks, and the number two player in carbonates) saw revenues rise 2.5% to £295m (€352m).
Britvic CEO, Paul Moody, said the company would continue to compete “strongly and effectively” in each of its markets.
He said: “We expect the general economic and trading environments to remain challenging, but…are confident in our ability to deliver another solid set of results for the year ahead, in line with expectations.”
Strong showing from Pepsi
Strong performance in GB carbonated soft drinks and in France (with revenues up 5.8% and 12.1% respectively to £120.8m and £54.5m) fuelled this growth, with GB sales led by Pepsi (produced and sold by Britvic under licence in GB and Ireland), which gained a 2% market share in take-home cola.
“However, the ongoing weak consumer environment resulted in further deteriorations in GB stills and Ireland, where revenues declined by 1.7% and 10% respectively,” said McNeela.
Britvic itself glossed the former figure by noting that stills, “showed an improving performance compared to recent quarterly trends”.
But the flipside of good growth in GB carbs (volume sales also up 5.6%) was that consumers “continue to switch out of higher-priced stills” where revenues fell, McNeela said, a factor that, he added, probably meant a negative mix effect for Britvic’s GB margins.
Moreover, Ireland remained a difficult consumer market for Britvic, with sales down 10% to £37.8m, although the firm retained its market share.
Britvic’s board glossed the situation thus: “Half of the 10% revenue decline is attributable to third-party brands, largely alcohol, which we distribute via the licensed wholesale business where the on-to-off trade shift was especially market.”
Commenting on the firm’s impressive French performance, McNeela said: “France delivered a strong performance with sales up 12%, driven by strong pricing [with price increases pushed through to counter input inflation] but encouragingly has managed to grow both volume and value share within the syrups market.”
Sluggish international growth
Elsewhere, Britvic International saw lacklustre 1.7% sales growth for Q1 (41.5%: Q1 2011), but Britvic said this reflected the timing of international concentrate shipments to Australia – compared to a stock build last year, and reaffirmed its overall 20% international revenue growth guidance for 2012.
In a pre-closing update prior to its full-year results release on March 2012, Britvic rival A.G Barr predicted a like-for-like sales increase of 12% for 2012, fuelled by growth in Irn-Bru, Rubicon and KA – and said it would continue to develop plan to invest in production capacity in the south of the UK.
In its July 2011 interim report, A.G Barr (2011 turnover: £222.4m) said that to meet long-term growth ambitions it anticipated investing in a new site with canning and additional PET capacity, to come on stream over the course of 2012/13.
Discussing today’s update, McNeela said: “Consumers continue to be value-focused and as such the company benefited from the expansion in distribution of its [cheaper] Barr brand across the UK, as well as promoting Irn-Bru at low price points.
“Exotic brands Rubicon and KA continued to deliver double-digit growth, benefiting from increased promotion in the impulse channel.”
But despite the firm’s report of strong trading on a “buoyant total soft drinks market”, McNeela said Panmure saw better share value in Britvic or Nichols, since comparatively A.G Barr’s shares were trading at an approximate 20% premium to these rivals on an Enterprise Value/EBITDA basis.