from Britvic Plc (isin : GB00B0N8QD54)
Britvic plc Interim Results
Britvic plc (BVIC ) Britvic plc Interim Results – 16 May 2023 For the six months ended 31 March 2023 ‘An excellent start to the year’
Group Financial Headlines:
Highlights:
1. Adjusted for constant currency exchange rates
Simon Litherland, Chief Executive Officer commented: “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.”
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There will be a webcast of the presentation given today at 09:00am by Simon Litherland (Chief Executive Officer) and Chris Hancock (Chief Strategy Officer). The webcast will be available at www.britvic.com/investors with a transcript available in due course. To ask a question on the webcast, please dial +0808 109 0700 or +44 (0) 33 0551 0200 and quote Britvic Interim Results when prompted by the operator.
Note to editors
About Britvic Britvic is an international soft drinks business rich in history and heritage. Founded in England in the 1930s, it has grown into a global organisation with 37 much-loved brands sold in over 100 countries.
The company combines its own leading brand portfolio including Fruit Shoot, Robinsons, Tango, J2O, London Essence, Teisseire and MiWadi with PepsiCo brands such as Pepsi, 7UP and Lipton Ice Tea, which Britvic produces and sells in Great Britain and Ireland under exclusive PepsiCo agreements.
Britvic is the largest supplier of branded still soft drinks in Great Britain and the number two supplier of branded carbonated soft drinks in Great Britain. Britvic is an industry leader in the island of Ireland with brands such as MiWadi and Ballygowan, in France with brands such as Teisseire, Pressade and Moulin de Valdonne and in its growth market, Brazil, with Maguary, Bela Ischia and Dafruta. Britvic is growing its reach into other territories through franchising, export and licensing.
Britvic is a purpose driven organisation with a clear vision and a clear set of values. Our purpose, vision and values sit at the heart of our company, driving us forward together to create a better tomorrow. We want to contribute positively to the people and world around us. This means ensuring that our sustainable business practices, which we call Healthier People, Healthier Planet, are embedded in every element of our business strategy.
Our purpose: Enjoying life’s everyday moments Our vision: To be the most dynamic soft drinks company, creating a better tomorrow Our values: We care, We’re courageous, Own it, Stronger together, Act with Pace
Britvic is listed on the London Stock Exchange under the code BVIC and is a constituent of the FTSE 250 index.
Find out more at Britvic.com
Cautionary note regarding forward-looking statements This announcement includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors including the COVID-19 pandemic, which may cause the actual results, performance, or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as required by the Listing Rules and applicable law, Britvic undertakes no obligation to update or change any forward-looking statements to reflect events occurring after the date such statements are published. This announcement contains inside information related to a share buyback programme. The person responsible for making this announcement is Clare Thomas, Company Secretary.
Alternative performance measures The annual financial statements of the Group are prepared in accordance with UK-adopted International Financial Reporting Standards (IFRS). The condensed set of financial statements included in this interim results announcement has been prepared in accordance with UK-adopted IAS 34 ‘Interim Financial Reporting’. We use certain non-IFRS alternative performance measures to provide additional information about the Group’s performance. Non-IFRS measures may be considered in addition to, but not as a substitute for or superior to, information presented in accordance with IFRS and are also used internally to measure and manage the business. Non-IFRS measures are defined in the glossary on page 15 and reconciled to the nearest IFRS measure in Appendix 1.
Market data GB take-home market data referred to in this announcement is supplied by Nielsen and runs to 25 March 2023. ROI take-home market data referred to is supplied by Nielsen and runs to 26 March 2023. French market data is supplied by Nielsen and runs to 26 March 2023.
Next scheduled announcement Britvic will publish its Q3 trading statement on 27 July 2023.
Chief Executive Officer’s Review Today we report our results for the six months to 31 March 2023. I am delighted with our progress in the first half, both in terms of key performance measures and our strategic priorities. Once again, the Britvic team demonstrated their passion and commitment, and I want to thank them for this and the crucial part they play in driving our progress. The elevated inflationary environment and global supply chain challenges are well-documented in the media and we have not been immune to these pressures. Our procurement and commercial teams have done an outstanding job of ensuring continuity of supply and effective revenue management, while continuing to offer consumers fantastic, affordable brands.
Revenue and adjusted EBIT are ahead of last year, at +7.9% and +16.7% respectively, on a constant currency basis. Consumer demand has remained solid, with only a modest volume decline in the first half. Through a combination of revenue growth management actions and cost discipline we have been able to mitigate the cost inflation pressures. More recently, we have seen a sequential improvement, with Q2 volume slightly ahead of last year, up 0.6%. Adjusted EBIT margin was 80bps ahead of last year, aided by the planned phasing of A&P expenditure into the second half. Britvic is a highly cash-generative business with a robust, well-financed balance sheet. With confidence in our strategy and growth momentum, we are confirming a further share buyback programme of up to £75m over the next 12 months, following the completion in February 2023 of the initial £75m buyback announced last year.
Healthier People, Healthier Planet is a key pillar of our strategy. Across our portfolio, we continue to expand our offering of healthier choices with lower sugar reformulations and the introduction of an ‘added benefits’ Robinsons range. Our focus on the planet will see Ballygowan in Ireland produced using 100% locally-sourced renewable electricity. In GB, we are investing £8 million in an industry leading heat recovery system at our Beckton site, which will save 1,200 tonnes of carbon annually and decarbonise 50% of the site’s heat demand. Our Aqua Libra business launched London's first WasteShark in Canary Wharf to clear plastic waste from the area's bodies of water.
A growth strategy
With a portfolio of market-leading brands, multi-channel routes to market, collaborative customer relationships and a well-invested supply chain, we set out our strategic framework as follows:
Our future focus remains on four key strategic priorities:
Market review Great Britain In GB, we have delivered a strong performance, growing revenue across both our own brands and the PepsiCo portfolio. The retail and hospitality channels increased revenue by 9.7% and 12.5%, respectively. We went early with price movements in Q1 this year, to offset double digit cost inflation and to avoid the lag we experienced last year, when cost of goods increases impacted us from the start of the financial year but we were only able to respond through pricing in Q2. We have seen a sequential improvement in volumes as we moved into Q2, returning to volume growth and building momentum as we head towards the key summer trading period. Importantly we have carefully managed promotional activity, pack architecture and mix, ensuring that our brands continue to provide consumers with great quality and value at affordable price points. Pepsi MAX has continued to lead the cola category growth. Our taste challenge results show that 70% of consumers prefer the taste of Pepsi MAX, and our range of appealing flavours continue to drive incremental brand and category growth. In Champions League football and music festival sponsorship, MAX has proven marketing platforms with strong consumer appeal, providing fantastic in-outlet activation opportunities. Tango has continued its success this year, with 39.7% revenue growth. Brand retail sales value, at £84m, has grown by £53m since 2019. Much of the growth has been driven by our range of great-tasting, sugar-free variants, such as Berry Peachy, Dark Berry and, more recently, Paradise Punch. The focus on flavour innovation means that new flavours account for 50% of brand value, compared to 20% in 2019. Our new Dark Berry advertising campaign is now live, and our Berry Peachy emoji parody #PeachPolice campaign won Best Social Strategy at the prestigious 2023 Campaign Media Awards. Led by our in-house studio INFUSED in collaboration with our agency mSIX and content partners LADbible Group, this was one of the first campaigns to take insights from our marketing excellence programme and create a digital-first ecosystem that genuinely engaged with our targeted Gen Z audience. We have commissioned another can line at our Rugby factory to meet demand for our carbonates brands. Not only will this support increasing consumer demand for our multi-pack cans, but it has also enabled us to bring Rockstar production in-house. Since taking on the brand in 2021 under a co-pack model, we have suffered several issues that have impacted our ability to supply customers and effectively activate marketing campaigns. The energy category is a significant opportunity for us, and with PepsiCo, we will continue building brand equity. This year we are increasing investment, resourcing a new regional field sales team to deliver outstanding execution in outlet. We will soon be announcing an exciting new music partnership. The new line also allows us to launch Lipton Ice Tea in a can format. Widely available in Europe, this will be a brand-new pack format for Lipton in GB, enabling us to continue to grow the brand. Our plant-based brand, Plenish, continued to build scale. Being part of Britvic has enabled the brand to expand distribution and gain listings, leveraging our strong customer relationships. The retail sales value for the shots range increased by 62%, and plant-based milk was up by 26%. London Essence has expanded distribution in retail, and the Freshly Infused fount can now be found in 1,200 outlets. AquaLibra Co also continues its growth and, ahead of Global Recycling Day on 18 March, launched London's first WasteShark in Middle Dock at Canary Wharf in partnership with the Canary Wharf Group. The WasteShark is a marine robot designed to be harmonious with the environment, which will clear plastic waste from the area's bodies of water while collecting data to improve the surroundings.
In the second half of the year, we have some exciting plans. We recently started the relaunch of Robinsons to accelerate our flavour concentrates business and lead the squash category in GB. Established in 1823, Robinsons has a retail value of £200m. Bought by nearly half of all UK households, with over nine million glasses consumed daily, the brand has firmly secured its position in homes nationwide. Our latest activity, building on the success of the recent good/better/best portfolio segmentation, is designed to disrupt the category norms by making the squash aisle more exciting and easier to navigate. As well as a new brand visual identity to improve shelf standout, we are bringing to market a new range of innovations, pack formats and an exciting new marketing campaign. Also in the second half, our new small PET line will go live in Beckton, facilitating the acceleration of our targeted growth in Immediate Consumption. Beckton will also be the home for our innovative new heat recovery system. The £8m investment is part funded by a £4.4m government grant from the Department for Energy Security and Net Zero. This is one of the largest grants ever awarded, reflecting the innovative nature of the technology. The system will enable us to switch our heating from natural gas boilers to carbon free heat extractors. Brazil We have invested in sponsoring Carnival, a vast series of events that brings people out onto the streets to celebrate. In addition, we have activated our brands around sport, sponsoring events such as Circuito das Estações (The Circuit of the Stations), which is synonymous with street racing across the major cities of Brazil. There are four stages, each representing a new season of the year and a time to seek a new goal. Other sports sponsorships have included the Maguary football team and the South American volleyball championships. Other International Ireland delivered a strong first half, with growth across the portfolio and successful revenue management activity. I am particularly pleased with the success of Ballygowan’s ‘Hint of Fruit’. Leveraging the strong brand equity of Ireland’s leading water brand, we innovated into the growing flavoured water category. Sugar-free, and with less than 3 calories per serve, Ballygowan with a ‘Hint of Fruit’ is sourced locally and available in 3 great tasting flavours: Strawberry, Summer Fruits, and Mango and Passion Fruit. A year after launch, it has achieved an 18% share of the flavoured water category and nearly €6m of retail sales value, making it the number one soft drink launch in Ireland. As part of our healthier planet strategy, and in keeping with the Ballygowan brand, we’ve recently entered into an agreement for Ballygowan production to be 100% wind powered, helping to reduce our direct carbon emissions by 90%. This has been achieved through a new Customer Corporate Power Purchase Agreement (CPPA) with Flogas Enterprise, and is the first Irish-based CPPA of its kind with a drinks brand in Ireland. It will allow Britvic Ireland to fund electricity generation, producing enough electricity annually to power our production facility in Newcastle West. Every Ballygowan bottle is also made from 100% recycled plastic and is fully recyclable. In France, trading has been more challenging in the highly competitive retail market. Pricing discussions have been difficult and have concluded much later than in our other markets. In the first half, we faced double-digit inflation with minimal price benefit to mitigate the impact; while pricing has now gone through, it is not sufficient to cover inflation and we are also yet to observe volume impacts in market. Strategically we continue to build resilience, simplifying the Teisseire range globally, with a strong new visual identity, and consistent branding across all markets. Going forwards, this will improve supply chain resilience and manufacturing benefits, as well as support customer negotiations. In addition, we continue to focus on innovation, with lower sugar and natural ingredient ranges to meet consumer needs. Our global premium brands, London Essence and Mathieu Teisseire, continued to make progress in the first half. London Essence has secured an exclusive pouring agreement with Ennismore Hotels, a premium global hospitality brand majority-owned by Accor, as well as Ritz Carlton listings in Melbourne and Hong Kong. The crafted soda range has expanded with two new flavours – Aromatic Orange & Fig, and Raspberry & Rose. While Mathieu Teisseire recently won gold at the prestigious Monde selection awards 2023 for four of our new flavours. New listings have also been secured for two tea chains across China as well as new listings in Thailand, Indonesia, and Malaysia. Outlook While all companies have faced significant economic uncertainty and considerable inflationary pressures, the soft drinks category continues to demonstrate high levels of resilience. 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. This year and into the future, I am confident we will continue to make further progress, creating value for both our shareholders and all our stakeholders. Financial Review Overview
We have delivered a strong start to the year, with revenue, adjusted EBIT margin, and adjusted EBIT ahead of last year. Group revenue increased 7.9% year-on-year on a constant currency basis. We saw a sequential improvement with second-quarter revenue increasing 8.4% year-on-year and volume returning to growth, up 0.6%.
We have successfully executed pricing plans in each of our markets through the first half. In addition to base price, we have used other levers to help mitigate inflationary pressure, including pack mix, promotional optimisation, productivity initiatives and disciplined cost management. Brand contribution is ahead of last year, aided by the favourable phasing of A&P into the second half of the year.
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. The increase in adjusted EBIT margin reflects the strong trading performance and phasing of A&P into the second half.
Adjusted EPS increased 17.5% year-on-year. The interim dividend equates to 8.2p per share, a year-on-year increase of 5.1%, reflecting multiple factors including the accelerated profit delivery in the first half. We remain committed to a 50% dividend pay-out policy.
Since 31 March 2022, we have paid dividends of £75.3m and executed a share buyback of £75.0m, while maintaining our leverage with an adjusted net debt/EBITDA ratio of 2.2x at 31 March 2023. Our confidence in the prospects of the business and cash generation has resulted in the Board’s decision to confirm a further share buyback programme of £75.0m over the next 12 months, subject to market conditions and other uses of capital.
Below is a summary of the segmental performance and explanatory notes related to items, including taxation, interest, and free cash flow generation.
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