Soft drinks, strong spirits the cocktail for Britvic
Herts-based soft drinks specialist Britvic estimates a multimillion pound hit to EBITA – earnings before interest, tax and amortisation – because of the coronavirus pandemic. But it says it has access to more than £1 billion of finance it can draw down in the worst case scenario.
Based on its modelling work to date, in the event that current conditions persist across the company’s key markets of GB, Ireland, France and Brazil, EBITA could be cut by anything between £12 million and £18m a month.
The Hemel Hempstead company said the welfare of its people remained paramount. “Where possible our people are working from home and where this is not possible in our supply chain and transactional services teams, we are doing our utmost to distance and protect our employees,” the company said.”
Britvic said that prior to recent developments, trading in the quarter was broadly in line with expectations. But it added that the recently announced closure of on trade outlets and restrictions in people movement in each of its markets would significantly affect consumption both in outlet and on the go. “We therefore anticipate a material impact to the company's revenue and earnings in 2020,” it said in a trading update to the UK stockmarket.
CEO Simon Litherland said Britvic started from a strong financial position, as a highly cash generative business with a robust balance sheet. Its net febt to EBITDA at the end of FY19 was 2.1x.
It has an open and strong relationship with a broad and supportive banking group and is a long-standing issuer in the private placement market. This combination provides access to around £1 billion of facilities, which will help the business to absorb the impacts of the COVID-19 outbreak.
Britvic recently successfully refinanced its £400m revolving credit facility up to 2025, with the potential to extend the maturity to 2027 with lender consent.
There is also an accordion mechanism in place to increase the facility size by up to another £200m (again with lender consent). It also has access to £600m of private placement notes, of which it recently refinanced £150m.
Britvic also intends to explore the newly announced Covid Commercial Financing Facility (CCFF) from the Bank of England. It says it remains fully engaged with all of its lenders and should it require further headroom or flexibility, is confident it could achieve this.
Litherland said: “I have spoken many times about Britvic's resilience in the face of tough external circumstances. Never has that been tested as much as is happening now.
“Soft drinks has historically been a resilient category in any downturn. Britvic starts from a strong financial position and we are taking further action to protect our cashflow and profitability.
“Our brands' consumer appeal is enduring in good times and bad and we are confident in our ability to bounce back strongly as normality returns. The long-term investment case for Britvic remains intact.”