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Britvic has posted a double digit rise in sales and profits as both in and out-of-home channels grew and immediate consumption bounced back to pre-Covid levels.

Overall revenues for the six months to 31 March were up 18.5% on a comparable basis to £719.3m (and 16.6% on a reported basis).

Revenue growth has accelerated during the period, with sales up 16.5% in Q1 and by 20.8% in Q2, while underlying group revenue increased 13.6% against the comparable period of the first half of 2020 before the pandemic began to significantly impact performance.

Sales growth was driven by volume and pricing growth across all business units.

Britvic saw continued growth in at-home channels, while out-of-home channels recovered back towards pre-COVID levels

It said that pricing activity, promotional strategy, management of mix and disciplined cost control has this far helped to mitigate the impact of inflation.

In its GB region revenues were up 19.3% year-on-year (and up 13.6% versus pre Covid 2020). Out-of-home revenue increased by 59.0%, as it lapped prior year trading restrictions and the channel continued its recovery back to 2019 levels, and at-home continued to grow increasing 4.4% year-on-year.

In Brazil it saw a continuation of double-digit revenue growth with revenue at constant currency up 15.3% driven by both volume and ARP growth of 5.9% and 8.9% respectively.

Adjusted EBIT increased 20.7% to £73.5m, resulting in an adjusted EBIT margin of 10.2%, a 20bps improvement year-on-year.

The increase in EBIT margin reflects a positive channel mix as out-of-home volumes recovered and improved operating leverage. This was achieved while increasing the group’s investment, most notably in A&P, digital capabilities, operational capacity, and sustainability-related activities.

Profit after tax increased 48.7% to £45.8m.

CEO Simon Litherland commented: “I am delighted with our first half performance. We have accelerated revenue growth across our markets and made good progress against our strategic priorities. We have successfully executed pricing and cost actions to mitigate significant levels of inflation, while continuing to rebuild investment to support our near and longer-term growth ambitions. We continue to generate strong cash flow and have increased the interim dividend by 20%.

“The current geo-political uncertainty is likely to result in continued cost inflation and pressure on consumer spending at least into 2023. I remain confident however that we will continue to successfully navigate the headwinds, thanks to our portfolio of leading brands, strong customer relationships, smart revenue management capability and the resilience of our supply chain and our people.

“This will enable us to maintain our positive momentum, progress our key performance metrics and strategic priorities, and continue to create value for all our stakeholders.”

Meanwhile, Britvic announced it will commence an initial share buyback programme of £75m in the next 12 months, “reflecting the strength of our balance sheet and confidence in our growth strategy”.

Britvic shares have nudged up 0.1% to 855p this morning.

Morning update

Drinks supplier and distributer C&C Group posted a strong rebound in sales a return to profitability as it benefitted from the reopening of the on-trade following Covid closures.

The group saw net revenues rebound 87.8% to €1.44bn in the 12 months to 28 February.

Performance driven by 207.8% growth in on-trade net revenue as a consequence of fewer trading restrictions in the year. There were 267 days of trading where the on-trade was open across Ireland and the UK, compared with just 117 days in the previous year.

Additionally, it continued to post strong off-trade performance despite the re-opening of the on-trade, with net revenues of €376.3m, down just 3.4% year-on-year.

The group said it saw strength in its branded portfolio, with Bulmers and Tennent’s twelve month off-trade brand volume share growing by 330bps and 110bps respectively compared with pre-pandemic levels.

It also optimised its Irish branded portfolio through ABV and pack format changes ahead of the introduction of Minimum Unit Pricing, with early indications showing that Bulmers has performed strongly compared to the market.

It returned to an operating profit of €47.9m from a loss of €63.6m last year, with operating margins back up to 3.3% with then rebounding to 4.1% in the second half.

The group said it managed “challenging inflationary environment” through the combination of our €18m cost reduction plan, input cost hedging and the implementation of a price increase in November 2021.

The new financial year has started strongly, it said, with net revenue 12% ahead of pre-Covid levels for the two months to 30 April 2022 and 140% of 2021.

The benefit of no on-trade restrictions, easing of the pressures on supply chains and additional public holidays has created a more positive trading environment over recent months, it said.

Recently implemented price increases, hedged positions and cost savings programme have provided a degree of protection against cost inflation. However, additional input cost pressure, particularly at our manufacturing facilities, will likely necessitate further price increases, it warned.

It also said it plans to increase investment behind its brands and continue to execute efficiency improvement plans, primarily in its GB business unit, but remains vigilant of the macro-economic backdrop and consumer environment and the potential for reduced spending as the year progresses.

CEO David Forde commented: “Following a period of unprecedented challenges for the hospitality sector, we are delighted to be back serving our customers and delivering our iconic and much-loved brands to our on-trade and off-trade partners. Encouraged by the reaction and resilience of the industry, we are pleased with how trading has recovered and the subsequent strength of customer and consumer demand, which we believe reflects the enduring importance of the on-trade and the role that it plays in our society.

“The year finished with a robust return of the on-trade, and we are excited for the opportunities ahead. C&C has and will continue to enhance its branded portfolio through increased investment and product development, utilising our system strength to win in cider and strengthen our position in premium beer. Through investment in technology, we are creating a more streamlined and efficient business which will, in turn, deliver an improved customer experience and service.

“Looking forward, we are operating in an evolving and challenging inflationary cost environment and will continue to monitor this closely over 2023 and beyond. We have already taken action to afford the business a degree of protection, nevertheless we are susceptible to further increases in our cost base which would necessitate further price increases. Despite the current positive sentiment in the hospitality sector post reopening, we are mindful of the pressures being faced by consumers and its potential impact on future demand.”

Meanwhile, it announced the sale of its entire minority interest in Admiral Taverns to Proprium Capital Partners, with whom it originally invested into Admiral Taverns in September 2017, for total gross aggregate cash consideration of €65.8m (£55m).

The sale of the shares will be completed and consideration will be paid in three tranches during the current financial year.

As part of the divestment, C&C has negotiated a long-term supply agreement into the Admiral estate which includes our owned and agency brands.

Elsewhere, tobacco player Imperial Brands saw a £436m drop in first half profits as its exit from Russia hit its bottom line.

Reported operating profit of £1.2bn in the six months to 31 March was down £436m year-on-year, driven by a £201m charge related to its exit from Russia and associated markets (£201m) and non-recurrence of gains on disposal of Premium Cigar Division last year (£281m).

However, group adjusted operating profit was up 2.9%, driven by reduced losses in Next Generation Products, reflecting prior year market exits.

Net revenues in the period were up 0.3% at £3.5bn at constant currency, with tobacco up 0.1% and NGP up 8.7%.

Reported revenue reduced 1.3%, due to lower excise duty in Europe

Tobacco price mix of +0.8% reflects pricing of +1.2% and adverse mix of -0.4% (driven by product mix in the Americas and market mix in Africa Asia and Australia).

Recent price increases in Q2 (up 3.8%) support improved price mix in second half of the year, it said.

Overall volumes were down 0.7%: reflecting strong volume performance in the USA, Middle East and Australia, offsetting declines in Europe as COVID-19 restrictions ease

NGP net revenue growth of 8.7% to £101m was driven by strong progress across all categories in Europe.

CEO Stefan Bomhard commented: “We are now 18 months into our five-year strategy to build a more sustainable Imperial capable of consistent growth - and I am pleased with the progress we are making.

“These results provide further evidence that we have achieved the stabilisation of our core combustible business. During the first half of the year, we increased aggregate market share in the five priority markets which account for around 70% of our operating profit, while maintaining pricing discipline. This strong performance is an outcome of our tighter performance management and disciplined investment in sales execution and brand building.

“Meanwhile, our more focused approach to our broader portfolio of markets is delivering a stronger performance from regions, such as Africa. In April, we delivered on our earlier commitment to exit Russia, with the orderly transfer of our business to local investors.

“In next generation products, consumers have given positive feedback on our recent trials, validating our new insights-driven approach. We will now roll out our Pulze and iD heated tobacco proposition to further European markets and, in US vape, we are extending our refreshed blu marketing proposition. We have also started a pilot in France for an all-new vapour device, the first new NGP product from our redesigned innovation pipeline.

“Our focus for the remainder of 2022 will be to invest further in our five priority markets and begin the roll-out of our NGP strategy. While these are uncertain times, as we move into 2023, we will have in place the capabilities and culture necessary to support the next phase of our strategy and deliver sustainable growth in shareholder value.”

Yesterday in the City

The FTSE 100 started the week up 0.6% to 7,464.8pts following the strong day of trading on Friday.

Risers include Coca-Cola Europacific Partners, up 4.1% to €51.10, Devro, up 3% to 207p, Nichols, up 2.5% to 1,425p, Sainsbury’s, up 2.4% to 244.6p, Hotel Chocolat, up 2.3% to 327.5p, Tesco, up 2% to 286.7p and Marks & Spencer, up 1.8% to 144.3p.

Fallers included Bakkavor, down 4.3% to 101.4p, DS Smith, down 3.1% to 304.8p, Premier Foods, down 1.9% to 105.4p, Deliveroo, down 1.8% to 83.7p, SSP Group, down 1.5% to 230.1p and PZ Cussons, down 1% to 204p.

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