Britvic’s revenues for first nine months of 2020 were £1,028m, down 5.1% at constant currency, while Q3 revenue was £329m, down 16.3%, which was in line with company expectations. Britvic gained market share across its business units. As expected, the COVID-19 pandemic caused significant declines in out-of-home consumption, which were partly offset by gains in at-home consumption.
Previous company guidance, issued in March, suggested the impact of full COVID19 restrictions on adjusted EBIT, net of mitigating actions, would be £12–18m per month. Lockdown restrictions started to ease as Britvic entered its crucial summer trading period, but management comments that it is too early to judge the impact this will have on the business, and hence it maintains its previous estimated monthly impact.
In its Q2 results, Coca-Cola stated that global unit case volume trends have been improving sequentially, from a decline of c 25% in April to a decline of c 10% in June, and unit case volume for July is down mid-single digits, as lockdown restrictions are eased globally. This should provide some comfort, as it suggests the situation for the entire soft drinks sector should be improving for Britvic’s crucial summer trading period.
Britvic trades at a consensus FY21e P/E of 14.5x, a c 40% discount to the UK beverages sector and a c 30% discount to AG Barr, reflecting its geared balance sheet and the fact some of its brands are part-owned by third parties. We believe those discounts should narrow over time with reducing balance sheet leverage, although in the shorter term COVID-19 uncertainty remains the biggest risk for the whole sector.