The Investment Column: Britvic could yet provide sparkle

Moss Bros; BTG

Share price: 222p (+17.75p)

Britvic has not had the best of starts to its career as a listed company. The soft drinks group has had two profits warnings since its December float.

Yesterday, it told investors that its full-year results would miss forecasts. To blame are falling sales of fizzy drinks. Britvic has a 14-year licence to sell ranges from PepsiCo, including Tango and Gatorade, in the UK from which it generates about 40 per cent of total turnover.

The UK's growing obsession with healthy living has caused consumers to abandon fizzy drinks in favour of fresh juices and flavoured waters, although it is unclear exactly what is so unhealthy about carbonated drinks. Britvic is also under pressure from the launch of Coca-Cola's Coke Zero diet drink aimed at young men.

The company's interim results yesterday revealed a 9 per cent drop in sales of carbonated products. And things seem to have got worse over the past month as the sales decline has accelerated. Overall, the group reported a pre-tax loss of £5.3m for the 28 weeks to 16 April, compared with a profit of £20m for the same period in 2005 and a 5 per cent fall in sales to £323m.

Going forward, a lot is hinging on Britvic's marketing campaigns during the World Cup and Wimbledon. PepsiCo is a sponsor of the England team while Robinsons will sponsor Andy Murray and Tim Henman at this year's tennis championships. A new television advertising campaign featuring the two Wimbledon hopefuls is due to start soon.

Of course, the group also has a good stable of non-fizzy soft drinks, including J2O, which it invented in 1998, Fruit Shoot, aimed at children, and branded mineral waters. Still beverages account for about half of Britvic's revenues and are enjoying strong sales growth, so the group will not miss out on the fad for healthy living.

In the immediate aftermath of yesterday's profits warning, the stock hit an all-time low of 170p. However, it rallied strongly in the afternoon to close at 222p leaving the company valued at just 13 times forecast earnings. The shares are underpinned by a 4.5 per cent dividend yield, which is two times covered, and strong cashflows. They are so strong, in fact, that a private-equity bid for the company looks distinctly possible). Buy.

Moss Bros

Our view: Avoid

Share price: 84p (-1p)

There was further evidence of the weak state of the clothes retail arena yesterday when Moss Bross put out a slightly disappointing trading statement at its annual meeting. Although the menswear group reported a 1.5 per cent increase in like-for-like sales for the first 16 weeks of the current year, this figure failed to live up to the expectations of some analysts. The same was true of Moss Bros' guidance on profit margins which were flat. There were hopes they would rise.

Most brokers were hoping to see the retailer post a profit of about £7.5m this year. Given its present performance, Moss Bros will probably struggle to do so. Recent updates from the likes of French Connection and Next have highlighted the particularly difficult conditions on the high street for clothes retailers. The unseasonable weather has not helped matters and trading is likely to deteriorate during the World Cup as many men opt to watch the football matches instead of going out to buy a suit from the retailer.

Over the past three years, the retailer has had several makeovers and is now focused on selling fashion gear to young men, although it still carries ranges for City gents.

The key behind the recovery in profits at the company during this time has been the improvement in gross margins, which have gone from 44 per cent in 2002 to about 53 per cent today. This has been achieved by better buying of stock and less discounting.

Trading at 16 times forward earnings, Moss Bros shares stand at a premium to it peers, which is probably unjustified. There is better value elsewhere in the retail sector.

BTG

Our view: Buy

Share price: 172.5p (+12.5p)

After years of making promises to investors, BTG is finally starting to deliver. Yesterday's annual results made impressive reading. The biotechnology company, formed out of the old National Enterprise Board and privatised in 1995, swung into profit to the tune of £1.5m, compared with a loss of £34m last year, and revealed a 31 per cent rise in revenues to £50m.

Unlike most in the sector, BTG is now in a position to generate cash. Key to the near-term performance of its shares will be the timing of a licensing deal for its varicose veins treatment, Varisolve.

The group is known to be in talks with several possible partners, including major players in the pharmaceuticals industry, and an announcement is expected before the end of 2006. When it is unveiled, shares in BTG should rise sharply.

But Varisolve its by no means the group's only product. It has one of the healthiest pipelines in the sector, along with a £44m cash pile to fund it for the foreseeable future. Buy.

News
The Banksy image in Folkestone before it was vandalised
people
Life and Style
tech

Sales of the tablet are set to fall again, say analysts

Sport
football West Brom vs Man Utd match report: Blind grabs point, but away form a problem for Van Gaal
Arts and Entertainment
Gotham is coming to UK shores this autumn
tvGotham, episode 2, review
PROMOTED VIDEO
News
i100
Arts and Entertainment
Bloom Time: Mira Sorvino
tvMira Sorvino on leaving movie roles for 'The Intruders'
News
Brian Harvey turned up at Downing Street today demanding to speak to the Prime Minister
news

Met Police confirm there was a 'minor disturbance' and that no-one was arrested

Arts and Entertainment
George Lucas poses with a group of Star Wars-inspired Disney characters at Disney's Hollywood Studios in 2010
films

George Lucas criticises the major Hollywood film studios

Voices
Chris Grayling, Justice Secretary: 'There are pressures which we are facing but there is not a crisis'
voices

Does Chris Grayling realise what a vague concept he is dealing with?

Life and Style
A street vendor in Mexico City sells Dorilocos, which are topped with carrot, jimaca, cucumber, peanuts, pork rinds, spices and hot sauce
food + drink

Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets

News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
The charity Sands reports that 11 babies are stillborn everyday in the UK
lifeEleven babies are stillborn every day in the UK, yet no one speaks about this silent tragedy
News
Blackpool is expected to become one of the first places to introduce the Government’s controversial new Public Space Protection Orders (PSPOs)
news

Parties threaten resort's image as a family destination

Life and Style
Northern soul mecca the Wigan Casino
fashionGone are the punks, casuals, new romantics, ravers, skaters, crusties. Now all kids look the same
Life and Style
gaming

I Am Bread could actually be a challenging and nuanced title

News
Nigel Farage has backed DJ Mike Read's new Ukip song
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Customer Service Executive / Inbound Customer Service Agent

£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...

ASP.NET Web Developer / .NET Developer

£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Project Coordinator - 12 month contract

£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...

Day In a Page

Oscar Pistorius sentencing: The athlete's wealth and notoriety have provoked a long overdue debate on South African prisons

'They poured water on, then electrified me...'

If Oscar Pistorius is sent to jail, his experience will not be that of other inmates
James Wharton: The former Guard now fighting discrimination against gay soldiers

The former Guard now fighting discrimination against gay soldiers

Life after the Army has brought new battles for the LGBT activist James Wharton
Ebola in the US: Panic over the virus threatens to infect President Obama's midterms

Panic over Ebola threatens to infect the midterms

Just one person has died, yet November's elections may be affected by what Republicans call 'Obama's Katrina', says Rupert Cornwell
Premier League coaches join the RSC to swap the tricks of their trades

Darling, you were fabulous! But offside...

Premier League coaches are joining the RSC to learn acting skills, and in turn they will teach its actors to play football. Nick Clark finds out why
How to dress with authority: Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear

How to dress with authority

Kirsty Wark and Camila Batmanghelidjh discuss the changing role of fashion in women's workwear
New book on Joy Division's Ian Curtis sheds new light on the life of the late singer

New book on Ian Curtis sheds fresh light on the life of the late singer

'Joy Division were making art... Ian was for real' says author Jon Savage
Sean Harris: A rare interview with British acting's secret weapon

Sean Harris: A rare interview with British acting's secret weapon

The Bafta-winner talks Hollywood, being branded a psycho, and how Barbra Streisand is his true inspiration
Tim Minchin, interview: The musician, comedian and world's favourite ginger is on scorching form

Tim Minchin interview

For a no-holds-barred comedian who is scathing about woolly thinking and oppressive religiosity, he is surprisingly gentle in person
Boris Johnson's boozing won't win the puritan vote

Boris's boozing won't win the puritan vote

Many of us Brits still disapprove of conspicuous consumption – it's the way we were raised, says DJ Taylor
Ash frontman Tim Wheeler reveals how he came to terms with his father's dementia

Tim Wheeler: Alzheimer's, memories and my dad

Wheeler's dad suffered from Alzheimer's for three years. When he died, there was only one way the Ash frontman knew how to respond: with a heartfelt solo album
Hugh Bonneville & Peter James: 'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'

How We Met: Hugh Bonneville & Peter James

'Peter loves his classic cars; I've always pootled along fine with a Mini Metro. I think I lack his panache'
Bill Granger recipes: Our chef's heavenly crab dishes don't need hours of preparation

Bill Granger's heavenly crab recipes

Scared off by the strain of shelling a crab? Let a fishmonger do the hard work so you can focus on getting the flavours right
Radamel Falcao: How faith and love drive the Colombian to glory

Radamel Falcao: How faith and love drive the Colombian to glory

After a remarkable conversion from reckless defender to prolific striker, Monaco's ace says he wants to make his loan deal at Old Trafford permanent
Terry Venables: Premier League managers must not be allowed to dictate who plays and who does not play for England

Terry Venables column

Premier League managers must not be allowed to dictate who plays and who does not play for England
The Inside Word: Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past

Michael Calvin's Inside Word

Brendan Rodgers looks to the future while Roy Hodgson is ghost of seasons past