The cancellation of this year’s Wimbledon tennis championships was a blow not only to tennis fans (Dominic Walsh writes). It also robbed Britvic of its annual opportunity to promote its Robinsons squash brand. This would have been the 85th year in a row that it would have been the official soft drink sponsor of the world’s most illustrious tennis tournament.
Robinsons’ association with Wimbledon dates back to 1934, when lemon barley water was first concocted as a refreshing drink to hydrate the players. It is a relationship that evokes strawberries and cream and stripey blazers, but it is a partnership that is founded on hard-nosed commercialism.
Britvic deploys its tennis campaign to keep Robinsons as the No 1 squash and it takes tough decisions when it needs to. Last year Britvic closed the 92-year-old Robinsons factory in Norwich, with production of squash and Fruit Shoot moving to east London, Leeds and Rugby. The move to a three-site network was designed for efficiency, generating fewer road miles and giving Britvic the ability to respond to changing consumer trends more speedily by expanding the range of liquids and pack sizes.
It is not only Robinsons that has a long and rich heritage. Britain’s second biggest soft drinks maker behind Coca-Cola was founded in the mid-19th century by a chemist in Chelmsford who began to make homemade soft drinks. It owns brands including Tango, R Whites and Ballygowan and acquired Robinsons in 1995, launching Fruit Shoot in 2000. Since 1987 it also has been the British bottler for Pepsi — handling manufacturing, marketing and sales — and has turned the sugar-free Pepsi Max into a big success, tapping into growing consumer demand for low and no-sugar drinks. The introduction of the sugar tax in 2018 created turbulence in the market, but Britvic claims that the levy didn’t derail its growth strategy, saying that pre-Covid-19 it was “accelerating the consumer trend towards our heartland of low and no-sugar brands”.
One area of progress has been its international growth, although in France, where it owns the popular Teisseire brand, there have been headwinds. Last year its results took a big hit from a French law passed to protect farmers and smaller distributors from the impact of promotions by large retailers, seeking to rebalance commercial relationships by specifying minimum limits on retailer margins and a maximum on supplier volumes sold on promotion. The legislation pushed up the price of Britvic-branded products, which in turn hit its sales volumes, but recent trading in France shows promise.
Britvic remains a strong company, but its third-quarter update shows the ravages of Covid-19. Revenues in the three months fell by 16.3 per cent to £328.9 million, with year-to-date revenue down 5.1 per cent at £1.03 billion. As with so many drinks companies, its results are made up of a sharp decline in out-of-home consumption partly offset by strong growth in drinking at home.
In March, the group estimated the impact of pandemic restrictions on its adjusted operating profits at between £12 million and £18 million a month. In theory, the position should be improving, with restrictions easing as the crucial summer trading period kicked in. While most analysts have penciled in an improvement, Britvic is being cautious and for the time being is maintaining its guidance on the monthly hit.
Simon Litherland, 55, chief executive, said that he was confident over the long-term prognosis, but insisted that in the short-term there was “a high degree of uncertainty about the pace and level of full recovery”.
ADVICE Buy
WHY Britvic’s chief executive is being overly cautious and the shares should soon start to rise
St Modwen Properties
St Modwen has reinstated its dividend in a show of confidence from management (Louisa Clarence-Smith writes).
The FTSE 250 company, which has a portfolio of warehouses, business parks and strategic land, as well as a housebuilding division, announced a 1.1p interim payout yesterday, having cancelled the 2019 final dividend.
Yesterday it said that demand had returned for homes and remained strong for its industrial and logistics space. St Modwen — whose chief executive, Mark Allan, 48, went to Land Securities at the start of the pandemic — sold 280 homes over the year, down by a third on the previous 12 months, as margins fell from 14.8 per cent to 10.7 per cent.
Elsewhere, its performance was mixed. The strategic land and regeneration division, which accounts for 27 per cent of the portfolio, suffered a writedown of 53 per cent for two large sites in South Wales because of changes in legislation and remediation costs. The value of the remaining land portfolio fell by 16 per cent and retail values fell by 19 per cent. Valuations of its industrial and logistics properties, which account for almost half the portfolio, remained stable and more than half the 1.2 million sq ft development pipeline that is due to be completed this year has been let.
After the company reported a first-half loss of £134.5 million yesterday, driven in part by a large writedown of large sites in south Wales, its shares fell by 7 per cent. They are down 31 per cent since the start of the year and are trading at a 22 per cent discount to reported net asset value. The interim dividend is lower than last year’s 3.6p-a-share payout.
Howevfer, St Modwen, which has made cost savings of between £6 million and £7 million this year, is one of the more resilient listed property companies, with strong demand from businesses for storage space. Moreover, the housing market has bounced back more strongly than expected since restrictions were eased. Private sales are back to last year’s levels under Rob Hudson, the chief financial officer who became interim chief executive. The company has £157 million of cash and a loan-to-value ratio of 28.1 per cent.
ADVICE Buy
WHY Housebuilding sector and warehouse demand offer potential for earnings rise