Interactive Investor

Insider: buying after these shares go soft

14th December 2020 14:28

Graeme Evans from interactive investor

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This chairman is buying shares in his business for the first time in years. Analysts are positive too. 

Britvic (LSE:BVIC) chairman John Daly has backed the J20 and Robinsons maker ahead of Christmas after buying the FTSE 250-listed stock for the first time in three years.

Daly made his £40,250 purchase on Thursday at a price of 805p, having seen the company's shares lose some of their recent fizz following annual results a fortnight ago.

The company has faced considerable disruption from pub closures, but this is being offset by homebound families spending more on brands including Tango and Fruit Shoot.

CEO Simon Litherland told investors that the soft drinks sector had shown itself to be a highly resilient category and that Britvic was determined to “be at the forefront of its recovery”.

He underpinned his optimism by promising shareholders they will get a dividend payment in February of 21.6p a share from 2020 trading, albeit 28% lower than a year ago and the first time the divi has been cut during 15 years on the stock market.

But with Britvic maintaining its 50% pay-out ratio and still gaining market share in the UK at-home channel, it continues to have plenty of support in the City. Morgan Stanley is among the company's most optimistic backers after using the recent results to reiterate a price target of 1,000p, which would better the record high of 987p achieved in October 2019.

The broker said the results showed Britvic's resilience and that a valuation of 14 times 2021 earnings continued to look attractive. JP Morgan Cazenove is at 900p after praising the company's progress on costs and cash generation.

UBS has the same price target and pointed out that Britvic was trading at a 43% discount to the European staples sector. The Covid-19 impact is still unclear, however, with the bank noting the very wide range of earnings expectations for 2021 of between £182 million and £221.9 million.

The earnings figure fell by 22.6% to £165.8 million in November's annual results.

Underpinning the current valuation is the company's long-term partnership with PepsiCo, which was recently extended for another 20 years and includes bottling for Pepsi, 7Up and Mountain Dew in the UK, as well as the Rockstar energy brand.

In their partnership dating back to 1987, Britvic was one of the three launch markets for PepsiMax in 1993 and released 7Up on British tastebuds during the same decade.

The Pepsi deal and November's vaccine optimism helped shares rally from 750p in mid-October to 877p a month later, but they have fallen back since as tier restrictions and extended pub closures threaten to have a big impact on Britvic's out-of-home channel over Christmas.

Daly, who until 2013 was chief operating officer of British American Tobacco (LSE:BATS) during two decades with the FTSE 100 company, last bought Britvic shares in 2017 when they were at 795p. His purchase last week took his holding from 15,000 shares to 20,000.

Fishing chiefs return shares to market 

Former CEO Darren Bailey and three managers have sold shares in Angling Direct (LSE:ANG) after a big leap in the stock market value of the UK's leading provider of fishing tackle.

The quartet also sold shares in October, following their exercise of share options in the summer. The dealings disclosed on Tuesday show they each netted £67,691 from selling 100,000 of shares at about 67.6p. Shares were 30p in March and 55.5p at the start of October.

The AIM-traded stock listed three years ago at 64p, with an ambition to rationalise a fragmented industry of smaller outlets and to grow online sales. 

Fortunes have been boosted by better-than-expected sales growth of 30.5% in the nine months to the end of October, as well as strong web sales during November's lockdown in England.

The Norfolk-based company has seen interest in angling surge during the pandemic due to it being a socially-distanced, local and healthy sport, with additional staycation benefits.

Its 38 retail sites were able to offer a call and collect service during the lockdown, which together with a rapidly growing presence in mainland Europe contributed to a successful Black Friday period for the group.

The company now expects underlying earnings of at least £3.8 million for the year to the end of January, which is better than City forecasts and compares with a small loss for the previous year when trading was impacted by Christmas floods.

Brexit and ongoing Covid-19 uncertainty mean the company will continue to adopt a prudent approach to planning for the next financial year.

The managers selling shares were financial controller Keith Easton, commercial manager Stewart Downing and e-commerce manager Wouter Putman. Bailey holds a 3.9% stake and remains on the board, having been replaced as chief executive by former Dunelm chief operating officer Andy Torrance in February.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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