Interactive Investor

Shares round-up: Britvic, Mothercare

26th November 2020 15:27

Graeme Evans from interactive investor


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Soft drinks titan returns to paying a dividend, while Mothercare puts its UK store closures behind it.

Britvic (LSE:BVIC) returned to the dividend-paying ranks today as the Fruit Shoot and J20 soft drinks maker impressed the City with its resilience in the face of widespread pub closures.

Today's annual results moderately beat expectations on several key metrics, with the 28% year-on-year decline in earnings per share to 43.2p coming in about 4% better than hoped.

The impact of homebound families buying brands including Robinsons and Tango during the lockdown helped partially offset the Covid-19 disruption for Britvic's out-of-home channel, with revenues down 6.8% overall to £1.41 billion in the year to 29 September.

While the 2021 financial year has started with further uncertainty, CEO Simon Litherland said there were opportunities for Britvic to capitalise on trends accelerated by the pandemic.

He added:

“Soft drinks has repeatedly proved itself to be a highly resilient category, and we fully intend to be at the forefront of its recovery."

Litherland underpinned his optimism by declaring a full-year dividend of 21.6p a share for payment to shareholders on the register on 3 February. This is 28% lower than a year ago and the first time the award has been cut during 15 years on the stock market.

But it still represents a positive milestone for the company after the interim dividend was put on hold earlier this year. The pay-out is worth £57.7 million and is in line with Britvic's policy of awarding 50% of its earnings per share.

The shareholder award is being made after net debt reduced by £45.8 million and the company's latest modelling showed that another year of reduced trading due to Covid-19 restrictions was unlikely to result in it breaching debt covenants.

Shares bucked today's downward trend in the FTSE 250 index by rising 3% to 834.5p. They were close to 600p in March, when the company warned that a full lockdown in all its markets would cost it £12 million to £18 million per month during peak seasonal trading. 

The stock has risen by 13% so far in November, but analysts at Morgan Stanley have a price target of 1,000p. They said today's results showed resilience, with a price multiple of 14 times 2021 earnings continuing to look attractive at a 40% discount to the EU beverages sector.

Another consumer stock faring well despite the Covid-19 uncertainty is Mothercare (LSE:MTC), which published its half-year results today. It said its transformation plan was complete after a refinancing set the seal on its reinvention as a capital-light, international franchise brand.

Chairman Clive Whiley said the company was in better shape than when it entered the pandemic, with other breakthroughs including a five-year funding agreement with trustees of the group's defined benefit pension schemes.

Having put its loss-making UK stores into administration last year, it now has a ten-year franchise agreement with Boots UK to sell its products in store and online.

Whiley said Mothercare looked to be in a position to move forward as a profitable and cash-generative franchise business in 40 international territories. He added:

“The restructuring phase of Mothercare is now all but complete.”

The impact of Covid-19 has varied enormously across the world, leading to a 56.5% decline in group revenues to £44.4 million and an adjusted loss of £4.4 million in the six months to 10  October. Mothercare expects to report a small underlying loss for the year as a whole.

Shares rose 3% to 12.95p, which compares with a level below 4p in March. In October, we reported that had Whiley bought £22,500 worth of Mothercare shares at 10p.

Mothercare first listed on the London Stock Exchange in 1972 but with the company now a small cap stock worth £46 million it today announced plans to delist from the main market and apply for admission to the AIM junior market from the first quarter of 2021.

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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