Source: Britvic

Britvic group revenue has increased 7.9% to £794m

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Robinsons owner Britvic has posted a double-digit rise in profits in the first half, as margins improved on pricing growth and a reduction of marketing spend.

Releasing its results for the six months to 31 March 2023, Britvic saw group revenue increase 7.9% on a constant currency basis to £794m.

This was wholly driven by pricing actions, with volumes marginally down, though returning to growth of 0.6% in the second quarter as overall revenues increased by 8.4%.

Britvic said the growth reflected its successful execution of pricing plans in each of its markets through the first half.

In addition to base price, it said it had used other levers to help mitigate inflationary pressure, including pack mix, promotional optimisation, productivity initiatives and disciplined cost management.

Adjusted EBIT, on a constant currency basis, increased 16.7% to £85.3m, resulting in an adjusted EBIT margin of 10.7%, an 80bps improvement year on year.

This increase in adjusted EBIT margin reflects the strong trading performance and phasing of advertising and promotion spend into the second half.

In its GB region it delivered a strong performance, growing revenue across both its own brands and the PepsiCo portfolio, with retail and hospitality channels increasing revenue by 9.7% and 12.5% respectively.

While GB volumes in the first half were down 0.8%, performance improved in the second quarter, with volume growth of 1.2%. 

It said it “went early with price movements” in Q1 this year, to offset double-digit cost inflation and to avoid the lag it experienced last year, when cost of goods increases impacted from the start of the financial year but it only able responded through pricing in Q2.

Pepsi Max continued to lead the cola category growth, while Tango posted 39.7% revenue growth. The group has also commissioned another can line at its Rugby factory to meet demand for its carbonates brands.

While Brazil delivered double-digit revenue growth over several years, the extreme inflation experienced last year required a correction in margin as the division is particularly reliant on juice pricing, especially its fruit processing business, which is exposed to agricultural commodities.

Elsewhere, Ireland delivered a strong first half, but in France trading has been more challenging in the highly competitive retail market.

Britvic said that, while all companies had faced significant economic uncertainty and considerable inflationary pressures, the soft drinks category continued to demonstrate “high levels of resilience”.

It stated: “Soft drinks are an affordable staple, offering great quality and value choices for all occasions. We have a portfolio of leading brands enjoyed by millions of consumers. Our strategy is building momentum, and we will continue to invest to unlock growth.”

CEO Simon Litherland added: “We have delivered an excellent start to the year, making great progress on our People, Planet and Performance measures. Our continued focus on lower calorie, healthier drinks has resulted in some standout performances, including Pepsi Max and Tango in Great Britain as well as Ballygowan ‘Hint of Fruit’ in Ireland. We have successfully mitigated the impact of the challenging inflationary environment, while continuing to offer consumers great quality and value at affordable prices.

“Looking ahead, we will be activating a series of exciting marketing and innovation campaigns this summer. We have a fantastic portfolio, a well-invested business, and a very talented team, so I am confident that we will continue to make further strong progress this year and beyond, creating value for all our stakeholders.”

Britvic shares are up 1% to 938p this morning on the news.

Morning update

Food-to-go stalwart Greggs has posted surging growth in the first 19 weeks of the year.

The chain posted like-for-like growth of 17.1% in the first 19 weeks of 2023, helped by the comparative impact of the 2022 trading period that was affected by Omicron.

Like-for-like sales growth in the 10 weeks to 13 May has averaged 15.7%, although Greggs expects this figure to continue to normalise as the group annualises against the actions taken in 2022 to mitigate against inflation.

Total sales in the 19 weeks to 13 May 2023 were £609m, up from £495m.

During the period it opened 63 new shops, including 25 with franchise partners, with the pipeline for the remainder of the year “strong”.

In the year to date it closed 26 shops, giving a total of 2,365 shops trading at 14 May (comprising 1,908 company-managed shops and 457 franchised units).

Investment projects at its Birmingham and Amesbury distribution centres are underway to deliver additional logistics capacity to support further expansion of its shop estate, with the additional capacity expected to become available in the second half of 2024.

“We have made a good start to the year with sales in line with plans and continued progress on our strategic initiatives. Looking ahead, whilst we expect the macro backdrop to continue to be challenging, we are confident in making further progress,” it stated.

“Although we expect to see ongoing material cost inflation, we have good forward cover on key commodities. Consumer disposable incomes are likely to stay under pressure, but we remain confident that our outstanding value proposition continues to be compelling.”

Despite these uncertainties, the board expectations for the full year are unchanged.

Tobacco group Imperial Brands has posted a “resilient” first half, despite temporarily increased volume declines against a strong 2022 performance.

During the first six months of the its 2023 financial year, the group said it continued to make good progress implementing its strategy “to build a more sustainable business able to grow profitably and consistently”.

During the first half, tobacco volumes were temporarily weaker against the Covid-affected period of last year and reflecting its April 2022 exit from Russia.

Excluding Russia, volumes declined 6.8%. However, it offset these declines with strong pricing action.

Next generation product revenues were up 19.8% as strong growth in Europe of 35.1% more than offset declines in the US caused by marketing denial order uncertainty.

Reported revenues increased 0.3% to £15.4bn.

The group said it remained firmly on track with its five-year strategic plan to transform Imperial and was on course to deliver against the guidance and expectations for the current year.

It continues to expect low single-digit constant currency tobacco and NGP net revenue growth with constant currency adjusted operating profit growth accelerating to deliver mid-single digit over the next three years.

For the current year – inclusive of the impact of its Russian exit – it expects to grow adjusted group operating profit at the lower end of its mid-single digit range at constant currency.

Improvement in adjusted operating profit growth in the second half will be driven by pricing actions taken in the first half, the improving geographic mix, operational gearing and cost savings. However, these tailwinds will be partially offset by continued cost inflation and increased NGP investment.

CEO Stefan Bomhard commented: “We are now in the third year of our five-year strategy, and this means we are moving from the initial foundation-building phase to a period of improving financial delivery.

“Business performance for the first half of fiscal year 2023 was resilient, despite temporarily increased volume declines against a strong comparator. As expected, this reflects a return to pre-Covid buying patterns as well as our decision to exit Russia last year. In tobacco, we have delivered further share gains in aggregate across our portfolio of top five markets, while also achieving strong pricing to help mitigate the volume declines. We have now recorded stable or growing aggregate market share in these markets in each of the last four six-month periods after many years of sharp declines. In NGP, we have delivered a step-up in innovation with new product and market launches in all three categories: vapour, heated tobacco and modern oral.

“We remain on track to deliver the acceleration in adjusted operating profit growth in the second half in line with our guidance and expectations. I am confident the actions we have taken are creating a stronger, more resilient business capable of driving shareholder returns through a growing dividend and an ongoing share buyback.”

On the markets this morning, the FTSE 100 is up another 0.1% to 7,787.2pts.

Early risers include Nichols, up 4.4% to 1,080p, Hilton Food Group, up 3.5% to 739p and THG, up 3.3% to 63.5p.

Fallers include Virgin Wines, down 4.4% to 33p, Hotel Chocolat, down 2% to 168p and Greggs, down 1.6% to 2,800p. 

Yesterday in the City

The FTSE 100 started the week up 0.3% at 7,777.7pts.

Risers included Bakkavor, up 3.5% to 94.6p, WH Smith, up 1.7% to 1,660p, Kerry Group, up 1.5% to €95.00, AG Barr, up 1.2% to 517p, Coca-Cola Europacific Partners, up 0.8% to €61.50 and B&M European Value Retail, up 0.8% to 495.4p.

Fallers included Ocado, down 2.4% to 431p, THG, down 2.4% to 61.4p, Hotel Chocolat, down 2% to 171.5p, Greencore, down 1.8% to 82p, Domino’s Pizza Group, down 1.5% to 298p, Just Eat, down 1.3% to 1,458p and Tesco, down 0.9% to 273.2p.