Golden Virginia is one of Imperial Brands’ many products

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Tobacco supplier Imperial Brands (IMB) is preparing to take a £160m hit to its profits this year after the collapse of wholesaler Palmer & Harvey last night.

The Lambert & Butler, Davidoff and Golden Virginia maker said in a short statement to the London Stock Exchange that the group was “disappointed to learn” that despite Imperial’s on-going support the directors of P&H had appointed administrators.

Imperial, along with rival tobacco supplier Japan Tobacco International, has supported P&H with significant amounts of bridging capital in the past few months while rescue talks were ongoing with private equity firm Carlyle.

But the collapse of those talks resulted in P&H appointing PwC as administrator, with 2,500 staff made redundant immediately.

Imperial said it was prepared to explore further alternatives but other parties had been unwilling to pursue these to a successful conclusion

It added that the collapse would lead to a one-off impact on group operating profit in the current financial year of up to £160m, with the majority relating to excise duty which is non-recoverable.

“We do not anticipate any significant disruption to our UK operations,” the group said. “We have well-prepared contingency plans which will ensure that the on-going supply to Imperial’s retail customers remains unaffected.”

Shares in Imperial plunged 1.8% to 3,079.6p as markets opened this morning.

British American Tobacco (BAT), which isn’t exposed to P&H, also fell 1.4% to 4,901p this morning as investors worried about a supply shortage in the market.

Morning update

Britvic (BVIC) revenues increased 7.7% to £1.5bn in the year ended 1 October as it benefitted from its acquisitions in Brazil and a pick up in the UK soft drinks market.

Adjusted EBITA jumped 5.1% to £195.5m as a result, with the group attempting to protect profitability in response to rising costs driven by underlying cost inflation and the weakening of sterling.

The GB soft drinks market, as measured by Nielsen, grew value ahead of volume for the first time in several years, the group said.

Sales in the UK carbonates division of Britvic jumped 3.7% to £617.8m on a 1.4% rise in volumes, with Pepsi Max the main driver of growth as consumers continued to reduce sugar intake.

However, the stills division continued to struggle, with price deflation in the competitive squash category taking a toll on Robinsons and driving down revenues 4.7% to £299.2m.

“Britvic has again demonstrated the resilience of our business, delivering another strong set of results,” CEO Simon Litherland said.

“We have grown both organic revenue and margins whilst continuing to progress our strategic priorities. I am particularly encouraged that we have increased the proportion of revenue generated from innovation and accelerated the returns from the business capability programme.

“While April 2018 brings uncertainty with the introduction of the Soft Drinks Industry Levy in GB and Ireland, we are well placed to navigate it thanks to the strength and breadth of our brand portfolio and our exciting marketing and innovation plans. This, combined with our continued focus on revenue and cost management, means we remain confident of making further progress next year.”

Shares in Britvic leapt 7% to 811p on the back of the positive set of results and optimism from the group.

Shop prices remained teetering on the edge of inflationary territory last month as four years of deflation looked to be coming to an end, according to the BRC and Nielsen monthly monitor.

For a third consecutive month, shop prices decreased at an annual rate of 0.1% in November – the shallowest deflation rate in the past four years.

Non-food price deflation eased in November to 1.1% from 1.5% in October – the lowest deflation since May 2013.

Food inflation slowed to 1.5% in November from 2.2% in October, with fresh food inflation decelerating sharply to 1.3% in November from 2.2% in October and ambient food inflation continuing to ease to 1.8% from 2.2%.

Mike Watkins, head of retailer and business insight at Nielsen said the peaking of food inflation was a welcome boost to shoppers with Christmas shopping underway.

“Many inflationary increases are still being absorbed by retailers and are not being passed on to the consumer in the form of higher prices,” he added. “Nevertheless, the deflation in non-food continues to overshadow the discounting and promotional activity taking place in this channel as consumers become more cautious and look for ways to save on their household bills.”

BRC chief executive Helen Dickinson said: “For the third consecutive month shop price inflation remained static, still teetering on the edge of a return to inflationary territory. November now marks the 55th consecutive month of deflation with the current rate the shallowest in the last four years.

“Meanwhile the forces driving inflation continue to play out differently across the industry. While food inflation has fallen back in line with global prices, non- food deflation is as low as its been for more than three years, as hedging contracts come to an end and with them, retailers’ ability to shield their customers from the currency depreciation.”

Yesterday in the City

Ocado (OCDO) shares soared 20.5% to 308.7p as the online grocer finally unveiled its first, long-awaited, international technology partnership. The deal with French supermarket group Casino saw investors pile back into Ocado.

It was also a good day for pork and poultry supplier Cranswick (CWK), which bounced 8.7% higher to 3,279p. The group revealed a 23% rise in sales to £714.6m in the six months to 30 September, with like-for-like revenues up 18%.

Food-to-go supplier Greencore (GNC) registered a 2.2% increase to 196.2p on a 9.5% rise in pro forma revenues last year. Reported revenues rose 56.5% to £2.3bn thanks to the addition of Peacock Foods in the US.

Unilever (ULVR) was lifted 2.1% to 4,324p after a statement to the markets ahead of its annual investor events said that its strategic plans were progressing well.

Elsewhere, there were rises for Morrisons (MRW), Diageo (DGE) and Sainsbury’s (SBRY), up 2% to 216.4p, 1.7% to 2,650p and 1.2% to 229.5p respectively.

Tesco (TSCO) rose 1.2% to 195.2p and Bookers (BOK) nudged ahead 1.1% to 217.8p.

Fallers included B&M European Value Retail (BME), down 1% to 382p, TATE & Lyle (TATE), down 0.4% to 670.5p, and Britvic, down 0.1% to 758.5p ahead of this morning’s results.