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SocGen upgrades Britivic to 'buy'
Societe Generale upgraded drinks maker Britvic to 'buy' from 'hold' following the company's interim results on Wednesday, which it said were a beat.
The bank said Britvic reported "strong results all the way down the income statement", with revenue of £733.2m, EBIT of £80.5m and earnings per share of 21.2p all higher than consensus expectations of £721m, £77.9m and 19.4p, respectively.
In addition, SocGen said the company's sugar tax strategy "plays to Max strength".
"Britvic has chosen not to launch different pack sizes for sugar-added and sugar-free variants, with a higher shelf price for Pepsi than for Pepsi Max. This supports the spirit of the legislation and also plays to its strength, with Max gaining of cola (up 200 basis points value share in the first half) at the expense of Classic and Zero Coke.
"We think the sugar tax will have a minimal adverse impact on profits, and that momentum in the business is strong."
Britvic fizzed higher on Wednesday after saying it entered the soft drinks levy environment in GB with strong momentum, with Robinsons back in growth and Pepsi Max continuing to outperform a highly competitive cola category.
"We have worked closely with customers ahead of the levy introduction to ensure soft drinks shelf and feature space is maintained. We are beginning to see an increased focus on low and no sugar brands, where Britvic has an advantaged portfolio, due to our long-standing reformulation and innovation programme. Recent competitor reformulation and promotional strategy appears, at this stage, to be broadly as we anticipated," the company said.
SocGen kept its 12-month price target on the stock unchanged at 945p.
At 1440 BST, the shares were up 1% to 823.50p.