Bad weather blamed for Britvic revenue fall
Ahead of the firm’s trading update on Thursday, analysts have predicted underlying revenues to have dropped by 0.5per cent to £1,048M for 2011.
Damian McNeela, an analyst at Panmure Gordon, said that Thursday’s results are “likely to provide confirmation of a challenging year” for the firm, with a tough consumer environment and rising input costs also contributing to the drop.
He added: “However, the prospect of moderating input cost inflation, on-going cost optimisation programmes and new product innovation should allow the company to deliver low double digit EPS [earnings per share] growth over the next three years. We reiterate our Buy recommendation and 400p price target.
Britvic’s shares have declined by 34% this year, with the firm underperforming on the FTSE All Share by 26%.
Underperforming
McNeela said: “This represents a discount to its international peer group of 44% and 17% respectively. We believe that the magnitude of this discount is undeserved and anticipate that on-going cost optimisation programmes and new product innovation should deliver low double digit EPS growth over the next three years.”
Group EBITDA (earnings before interest, taxes, depreciation, and amortization) is expected to rise 2% representing a fall in operating profit margins to 10.6%.
Panmure Gordon expects the trend of volume growth in UK carbonates sector to continue with an estimated revenue growth of 7% to £502M. This rise is a result of value-focussed customers switching over from stills, said McNeela. Revenues for UK stills are therefore expected to decline by 2% to £357M.
Revenues in Ireland are also expected to decline by 11% to £159M as a result of “the challenging business environment”. More positive results have been predicted for Britvic’s international business which is expected to deliver 15% revenue growth to £30M.
Growth
Panmure Gordon said it was satisfied with the forecasts which, as a result of the decline are now broadly in line with consensus due to low predictions in September.
Meanwhile, earlier this month, Britvic appointed Simon Litherland as new managing director of its UK business.
Litherland joined the firm from Diageo, where he had responsibility for a portfolio of brands such as Guinness, Smirnoff, Johnnie Walker and Bailey’s.
Paul Moody, chief executive of Britvic said: “I am delighted that Simon is joining Britvic. He brings a wealth of experience, having performed a similar role at Diageo. The creation of the post of a GB Managing Director is a step forward for Britvic, giving the GB business a tighter focus and allowing the Group Executive Committee to concentrate on our strategy of growing internationally both through acquisitions and extending existing franchise agreements.”
