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.

PROMOTED VIDEO
News
video
Life and Style
tech
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Extras
indybest
News
Albus Dumbledore, the headmaster of Hogwarts School of Witchcraft and Wizardry has been the teaching profession's favourite teacher
education
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Luis Suarez looks towards the crowd during the 2-1 victory over England
sport
Life and Style
Cheesecake frozen yoghurt by Constance and Mathilde Lorenzi
food + drinkThink outside the cool box for this summer’s frozen treats
News
John Barrowman kisses his male “bride” at a mock Gretna Green during the Commonwealth Games opening ceremony
peopleBarrowman's opening ceremony message to Commonwealth countries where he would be sent to prison for being gay
Sport
Sir Bradley Wiggins removes his silver medal after the podium ceremony for the men’s 4,000m team pursuit in Glasgow yesterday
Commonwealth games Disappointment for Sir Bradley in team pursuit final as England are forced to settle for silver
Sport
Alistair Brownlee (right) celebrates with his gold medal after winning the men’s triathlon alongside brother Jonny (left), who got silver
England's Jodie Stimpson won the women’s triathlon in the morning
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

Junior Research Analyst - Recruitment Resourcer

£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...

Senior Analyst - Financial Modelling

competitive: Progressive Recruitment: This really is a fantastic chance to joi...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform