Britvic slumps to multi-month lows

Having fizzed to a record high earlier this month, Britvic shares lost some of that sparkle today as investors reacted to "solid" trading and a number of recent headwinds at the Robinsons, Fruit Shoot and Pepsi MAX firm.

Most significantly, the company is facing a one-off hit worth up to £40 million from the proposed closure of its factory in Norwich in 2019. It is also having to absorb a number of costs in relation to the collapse of wholesaler Palmer & Harvey, although it does not anticipate any longer-term impact.

Recent trading offered investors another reason to pause for breath, with shares down by as much as 7% at 725p today. Chief executive Simon Litherland said it had been a "solid" start to the new financial year, with first quarter revenues up 3.3% to £337.2 million. This masked a mixed performance, with GB stills revenues down 6.6% but carbonates up 4.9%.

The latter was helped by the continued success of zero-sugar product Pepsi MAX, which has performed strongly in a "very competitive market".

The low-calorie product, which Britvic produces and sells under an exclusive agreement with Pepsi Co, is a significant part of the company's response to the introduction of the UK levy on sugary soft drinks in April.

Having overhauled its GB portfolio since 2013, Britvic now believes 94% of its owned brands and 72% of its full GB portfolio will be below or exempt from the levy. This is part of its 2020 goal of reducing the average number of calories per 250ml serving by 20%.

Litherland admits there will be some industry uncertainty from the soft drinks levy, although he said the breadth of the group's portfolio, and its marketing and innovation plans, meant he was "confident of further progress in 2018".

Citi supports this view, with no change to its 'buy' rating or underlying annual earnings estimates of around £201.5 million following the trading update.

Jefferies is more cautious. The broker reiterated its 'hold' recommendation and 800p price target after today's 0.7% rise in like-for-like sales came in below its own expectations for 1.2% growth.

Analyst Edward Mundy said: "Medium-term, we see a favourable outlook with profits underpinned by cost savings.

"However, with the stock trading on 14x 2018 PE, we question whether significant further multiple expansion is likely given uncertainties over the 2018 sugar tax."

Britvic started out in the 1930s as the British Vitamin Products Company and was established to use soft drinks to bring an affordable source of vitamins to the people of Britain.

It makes and produces Robinsons, J2O, Fruit Shoot, R Whites and Purdeys, as well as Pepsi, Pepsi MAX, Gatorade and 7UP on behalf of Pepsi Co.

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