Cost-cutting Britvic exceeds 2014 profits forecast

By Mark ASTLEY

- Last updated on GMT

Cost-cutting Britvic exceeds 2014 profits forecast

Related tags Soft drinks

British soft drinks giant Britvic has exceeded its 2014 forecast with a 18% increase in full-year operating profit. 

In its results for the year ended September 28 2014, published earlier today, Britvic reported revenue of £1.344bn, up 2.4% from £1.321bn in FY 2013.

Operating profit meanwhile jumped 17.6% from £135.9m to £158.1m - topping profits guidance of between £148m and £156m.

Commenting, Simon Litherland, CEO, Britvic, attributed the result, in part, to the "accelerated delivery"​ of its cost saving efforts.

"This is a strong set of results and we have made excellent progress during the year implementing our new strategy,"​ said Litherland.

"On track"

Britvic, the UK's largest supplier of still soft drinks, boasts a beverage brand portfolio that includes Robinsons, Tango, J20, and Fruit Shoot. 

It also produces and sells Pepsi, 7UP, and Mountain Dew Energy in the UK and Ireland through a licencing agreement with PepsiCo.

In July 2013, the company rejected an all-share merger proposal from AG Barr, the British firm behind IRN-BRU. 

It instead opted for a cost-cutting drive aimed at funding expansion. In line with this strategy, Britvic recently closed tow plants in the UK and shuttered operations in Ireland. 

Cost savings next year are forecast to total £25m - leaving it "on track"​ to hit its £30m 2016 target.

Savings are also being reinvested, with £25m set aside for warehousing and a high-speed plastic bottle line. It also plans to launch Fruit Shoot multi-packs in the US in the second half of 2015.

Year ahead

Looking ahead, it has issued operating profits guidance of between £164m and £173m - figure underpinned by cost savings.

"This year has begun slowly, reflecting the increasingly challenging trading conditions,"​ said Litherland.

"However, we are confident of further improving our profitability in 2015, as we bring to market our strong innovation and marketing plans and benefit from the delivery of the cost savings programme."

In a note on the Britvic results, Fiona Cincotta, senior market analyst at spread betting firm Finspreads, said the company's highly-debated decision to reject the proposed AG Barr merger may actually be paying off. 

"Cost savings were in fact more beneficial than the company had hoped for,"​ she said in a note. 

"Whilst that is of course a positive, there's a small implication performance on a cost bases might moderate a bit in future."

"Do these results vindicate the board's decision to reject an all-share merger proposal from AG Barr last year, to focus on expansion via costs instead? Well they're along the right lines,"​ Cincotta added.

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