Britvic's shares fall on Numis downgrade

Britvic’s shares fell on Monday after Numis cut its rating to ‘add’ from ‘buy’ and reiterated a target price of 697p ahead of the soft drink maker’s first quarter update.

Numis said the company’s first quarter trading update on 31 January is likely to reveal sales were boosted by an easy comparative in the same period the previous year and favourable foreign exchange movements.

“The update may therefore be a slight plus for sentiment, although there could also be a reminder of the need to pass on higher input costs of £25-30m this fiscal year at the Great Britain (GB) operations,” Numis said.

Numis said the Carbonates business is likely to be the “star performer” as Pepsi makes further market share gains and benefits from last July's business win with Subway.

GB Stills is expected to be the weakest major division, Numis added, saying it will take time to resolve the factors that dogged its performance in the 2016 full year results. Revenues at the stills business fell 7% in 2016 as the removal of the added sugar range of Robinsons in 2015 resulted in a decline in sales as fewer consumers switched to the new formulation than originally anticipated.

Among the group’s smaller operations, Numis believes Britvic’s Brazilian squash manufacturer Ebba could deliver a “spectacular sales advance off a modest base due to the follow-through effects of last fiscal year’s pricing actions, moves to upgrade the performance of the business, the launch of Fruit Shoot Maguary in Sao Paulo and sterling's marked weakness (the Real has even appreciated versus the dollar first quarter on first quarter)”.

Shares dropped 1.53% to 579p at 1021 GMT.