Coca-Cola HBC is trying to claw its way back to achieving the sort of margins of about 11 per cent that it enjoyed before the financial crisis, but it is turning out to be a slow process.
The company bottles and sells Coke in 28 countries. It is among the less visible members of the FTSE 100 and is originally Greek (the HBC stands for Hellenic Bottling Company). With so many territories to trade in, some obviously are doing better than others. About 45 per cent of its business comes from Russia, Nigeria and Italy, the first two being difficult markets at present.
The 2015 figures showed further improvement, although they were largely in line with market expectations. Strictly comparable earnings were ahead by 11 per cent to €473.2 million. There are several swing factors. The company had the advantage of lower input costs because of the low price of sugar and plastic.
Foreign exchange movements were a negative: net sales revenue is down by 2.5 per cent because of a 5.1 per cent adverse foreign exchange impact. The company increased volumes across its three areas, established, developing and emerging markets, which boosted margins, as the extra output meant that its plants were more profitable and volumes were up by 2.6 per cent.
The rest of the one percentage-point improvement in margins, to 7.5 per cent, was down to the long-running restructuring, involving the investment of €450 million over the past seven years. Coca-Cola HBC has been consolidating production into larger plants and selling into larger distributors, while saving money on transport and other logistics. As a result, revenues per case, excluding currencies, were up for a fifth year in a row, rising by 0.3 per cent. Initiatives put in place this year will lead to further savings of €25 million from 2017 onwards.
As oil-producing economies, Russia and Nigeria are concerns. Still, those self-help measures are delivering improvements even in difficult economies such as Italy and Greece.
The shares have not been terribly reliable performers since they were quoted in London, but they rose 39p to £14.13 after yesterday’s numbers. They sell on a multiple of 20 times’ earnings. That looks a full enough valuation, given the uncertainties in some key markets.
MY ADVICE Avoid for now
WHY The measures being taken are helpful, but the shares are on a high multiple
After the sale before Christmas of a portfolio of offices in Slough for £325 million, the restructuring that has been going at Segro since the former Slough Estates bought Brixton in 2009 is over and the company can now focus on being a provider of commercial and logistics space.
This is a hot market to be in. The process was accelerated by this week’s deal to form a partnership with Roxhill, a specialist developer, that will allow Segro access to more than ten million square feet of warehousing as and when planning permission is granted. The company has picked up more land and options that can be developed, including so-called “last mile” sites used for home deliveries.
The Roxhill deal overshadowed figures from 2015 from Segro, although these show progress on all fronts. Vacancies across the estate, at 4.8 per cent, compare with 14.5 per cent at the time of the Brixton deal. Full year dividends are up by 3.3 per cent, so the shares, up 2½p at 434¼p, offer a 3.6 per cent yield, attractively high for the sector.
MY ADVICE Buy long term
WHY Company is in logistics, a hot spot in property
