Yahoo Finance Britvic warns on consumer spending as profits soar amid price hikes
Soft drinks company Britvic (BVIC.L) has posted a near 50% jump in half-year profits thanks to its increased prices at the start of the year to offset soaring inflation.
However the Tango, Robinsons squash and J2O maker issued a warning on declining consumer spending thanks to a sharp cost of living crisis sweeping the country.
Pre-tax profits came in at £59.3m ($74m) for the six months to the end of March, up from £39.8m a year earlier, while revenues during the period rose 18.5% to £719.3m, the company revealed.
Britvic said it had also seen strong trading continue into April, with double-digit revenue growth year-on-year, which was in line with expectations. It was boosted by the lifting of restrictions on hospitality compared to 2021.
The group said drinks bought for “immediate consumption” had now bounced above pre-pandemic levels, while trade overall across bars and restaurants also recovered strongly.
In its UK market, Britvic revenues leapt 19.3% higher, with out-of-home sales soaring 59% on the previous year. Sales of drinks through retailers continued to grow, up 4.4% year-on-year across Britain.
It comes as UK inflation hit 7% in the year to March, with expectations for it to reach as high as 10% later this year. This is five times the Bank of England's 2% target.
“The current geo-political uncertainty is likely to result in continued cost inflation and pressure on consumer spending at least into 2023,” Simon Litherland, chief executive, said on Tuesday.
“I remain confident however that we will continue to successfully navigate the headwinds.”
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Britvic added that “while soft drinks are not immune to changes in consumer spending, both the category and Britvic’s leading family favourite brands have historically shown themselves to be resilient” to wider economic turmoil.
It announced plans to increase shareholder returns, launching a £75m share buyback programme over the next year, as well as upping its dividend by 20% from 6.5p per share to 7.8p per share.
Shares in the London-listed firm were 0.6% lower on the day.
Victoria Scholar, head of investment at Interactive Investor said: "Like many businesses Britvic is dealing with sharply increasing input costs and wages and is also bracing for softening demand as the cost-of-living crisis and a broader UK economic slowdown take their toll.
"While Britvic has been in recovery mode since March, the stock has a long way to go in order to retest the high from the start of 2022.”
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