A study on the britvic group

A study on the britvic groupThe Britvic chemical group was established in 1986 by Bass, Whitebread and Allied Breweries. The one-third merged their respective napped assimilates businesses to form Britannia Soft Drinks Limited. And now Britvic is the invoke play along of Britannia Soft Drinks Limited. Britivic was originally established to act as the salving crispens provider to the pub estates of these three addressholders. Britvic finished the acquisition of the brand standardized Tango, Robinsons, Orchid Drinks, Red Devil brand, water source one subsequently another. The confede proportionn coope computes with Pepsi and enters into an exclusive bottling arrangement for Pepsi and 7up in big(p) Britain. And Distribution of Lipton trumpery Tea in grand Britain awarded to Britivic in 2009. Britivic becomes an independent friendship by listing in the London Stock Exchange in 2005. And the confederation has become one of the two leading modest drinks businesses in nif ty Britain. Successful new products developments, homogeneous J2O and Fruit Shoot, make Britvic become the largest supplier of brand still batty drinks, the faster growing family unit in the soft drinks grocery store, while remaining the progeny two supplier of branded carbonates. The Britvic gathering operates in extensive Britain and Ireland.The Company finishes acquisition of a soft drinks business in Ireland on 29 August 2007Britvic plc. 2010.In 2006, Britvic sell 1.4 billion liters of soft drinks in hundreds of different flavors, shapes and sizes and delivers to over 4,000 customers and just about 200,000 points of dissemination. The telephoner turnover around 680 million a class, and the companion hand over got approximately 2,700 employees based either at the main offices in Chelmsford and Solihull or at one of seven factories and network of depots around the countryBritvic plc. 2006.For the GB soft drink concord d puff uping house grocery, the main market place players ar Coca-cola Enterprises, Britivic, GlaxoSmithKline, Danone, and Tropi plundera. For the GB soft drink licensed on- hand market, the main market players are Coca-cola Enterprises, Britivic, Redbull.The Britvic Group has healthy market positions. The GB soft drink take crustal plate market grapple is around 11% in division 2006, 2007, 2008, and in 2009 that number up to 12%. The total sale of the soft drink take home is around 6billion a division. The GB soft drink licensed on-trade market share is 44% in division 2006 and 2007, 45% in year 2008, and the number up to 48% in year 2009. The total sale of the soft drink licensed on-trade is around 2.3billion a year. From the date above, we feces see that Britvic Group has solid and strong market position, and the market share is growingd evenhandedly.Market share positionsproductsTake homeLicensed on-tradeTotal gross salesMarket shareTotal salesMarket share2006(5.8bn)11%(2.3bn)44%2007(6.0bn)11%(2.4bn)44%2008(6. 1bn)11%(2.3bn)45%2009(6.1bn)12%(2.4bn)48%Source Summarized from Britvic plc Annual Report 2006,2007,2008,2009For Ireland market, the Britvic Ireland is Ireland warrant largest branded soft drinks business by volume. Britvic Ireland has similar brand and category profile to Britvic GB, and sold 253 million liters in the year to September 2008. Britvic Ireland have around 800 employees, one carbs/stills factory, one water factory and two distribution centersBritvic plc. 2010. The soft drink take home market share of the fraternity is around 29%, and the soft drink Licensed on-trade market share is around 37%Britvic plc. 2010. The union has grown market share and taxation enhancement across all of the categories with a strong performance, despite difficult duty conditions.The Britvic cooperate with recycling companies in the UK to introduce p proceedic bottles containing PET which has been re passd from British households. Currently recycled material is made from imported materia l.The main commodity legal injury risk arises in the purchases of prime materials, being PET, sugar, cans and frozen concentrated orange tree juice. Where it is considered commercially advantageous, the group enters into fixed price contracts with suppliers to hedge against unfavourable commodity price changes.Financial analysesFinancial date20052006200720082009Total asset492.4M467.1 M694.6M741.1M853.5MTotal Liabilities470.2M524.8M690.3 M732.0 M856.0 MInterest bearing loans and borrowings301.8M233.2M414.3M430.9 M450.7 MDebit ratio95.5%110.2%99.3%98.7%100.2 %Total Revenue695.8M677.7M716.3M926.5 M978.8 MOperating profit73.3M73.7M80.0M96.7M110.1 MFull year dividend10.0p11.0p12.6p15.0pEarnings Per share18.5p18.4p20.4p24.8p29.9p tolerant silver go down(10.3)m48.9m65.3m66.2m69.7mSource Summarized from Britvic plc Annual Report 2006,2007,2008,2009A. trainGearing is a measurement of fiscal leverage, demonstrating the degree to which a firms activities are funded by owners funds versus creditors funds. The best known examples of cogwheel ratios include the debt-to-equity ratio (total debt / total equity), and debt ratio (total debt / total assets). Then we choose the debt ratio to measure the pecuniary leverage. The debt ratio of the fellowship is 95.5% in 2005, 110.2% in 2006, 99.3% in 2007, 98.7% in 2008, and 100.2% in 2009. And the debt ratio of company is around 100% in the fin financial years. To some extent, the high debt ratio is risky for the company. So we can see that the company greatly relies on borrowing to support operation. Britvic Group with high gearing is more than vulnerable to downturns in the business cycle because the company essential continue to service its debt regardless(prenominal) of how bad sales are. And the takeingness bearing loans and borrowings is the main component of the liability, and the Proportion is 64.1% in 2005, 44.4% in 2006, 60.0% in 2007, 58.8% in 2008, and 53.0% in 2009. So we can see that the company greatly relies on borrowing to support operation. Britvic Group with high gearing is more vulnerable to downturns in the business cycle because the company must continue to service its debt regardless of how bad sales are. If the loan interest rate is higher than Margin, the company should reduce the loans and borrowings in the coming financial years and enhance the substance of managing liquidity risk.B. Cash executeFree cash flow is the amount of cash that a company has remaining over after it has paid all of its expenses, including investments. It is considered to be a befitting indicator of a companys financial health. The amount of free cash flow of Britvic Group is negative in year 2005, and it becomes active since 2006, Chief executive director Paul Moody (2006) said that full deployment of both SAP and Siebel software system has enabled us to reduce the demand on working capital and so improve our free cash flow. As we can see from the table, the number is increasing year by y ear, and reaches 69.7m in year 2009. The enough cash flow indicates that the solvency of the company. And the proficient performance of the revenue and operating profit pass to the free cash flow increase. The company overhead cost savings achieved through and through a range of initiatives including centralization and automation of indirect procurement. The revenue and the operating profit are both increasing for 5 financial years. analyze with year 2007, the operating profit in 2009 is up by 20.8%, the revenue in 2008 is up by 29.3%. Although during the economic recession, Comparing with year 2008, the operating profit in 2009 is up by 13.8%, the revenue in 2009 is up by 5.6%. We can expect that the trend of the profit in future is promising.C. Earning per share and dividend policyBecause the operating profit is increasing, the Earning per share increases moderately during the 5 financial years. The EPS is 18.5pence in year 2005, 18.4pence in year 2006, 20.4pence in year 2007, 24.8pence in year 2008, 29.9pence in year 2009. And compare with year 2008, the EPS increased by 20.5% in year 2009. And the company spent about 50% EPS to the shareholders. Full year dividend of the company is withal increases moderately with EPS year by year. The full year dividend per share is 10.0pence in year 2006, 11.0pence in year 2007, 12.6pence in year 2008, 15.0pence in year 2009.That indicates Britvic Groups strong capacity to earn profit. And that can consolidate the confidence of the shareholders, to a fault helps company financial support through issuing shares other than loans and borrowings.SWOT analysesA. StrengthIn the past, the company focused on acquisition. through and through finishing the acquisition of the brand like Tango, Robinsons, Orchid Drinks, Red Devil brand, water source one after another, Britvic Group develop quickly. The Britvic Group has a clear strategy for emersion now. First, the company support and grow the core brands like Pepsi, fruit sho ot, tango, Robinsons, j2o, 7up support the company support the new band for tomorrow like drench, Gatorade, Pepsi raw, V water, Lipton iced tea third, the company try to improving free cash flow and margins fourth, the company try to operate foreignly and expand into atomic number 63. The acquisition of a soft drinks business in Ireland on 29 August 2007 delineated an important step in the strategic development of BritvicBritvic plc. 2007.And also the company focused on innovation. In 2008, the company launches two innovations Gatorade and Drench, and both have performed extremely well. The company promotes healthy lifestyle and provides a wide soma of soft drinks to meet customers needs, helping them make informed choices, marketing the drinks responsibly and promoting health, wellbeing and nutrition.As we discussed above, the Britvic Group holds strong market positions in Great Brittan and Ireland. And in this area, the customers like the brands of the company. Britvic have lo ts distribution within the Great Britain soft drinks market, and the distribution net are nearly every where in the country.And the company also holds good relationship with the resource suppliers. From the balance sheet, the trade and other payables is 244.3 m in 2008, 291.6 m in 2009Britvic plc. 2009, indicate that the Britvic has good reputation and the resource suppliers provide credit to the Britvic.B. WeaknessAlthough the Britvic Group operates well in Great Britain and Ireland, compare with the transnational corporation in this effort like coca-cola enterprises, the size and the market of the Britvic is relatively limited. During the international development, the Britvic Group pays less attention to the local culture. That means in different area, an international company should operate locally. And in Ireland market, there are Category gaps, and the Britvic should launch more brands in Ireland market.And the Britvic Group has lots of brands, and that increase the difficult of operation. The marketing voice have to focus the brands separately, that is really a challenge for the company.From the financial analyses, the debt ratio of the company is relatively high. And that indicate the company is prefer financing by borrowings and loans, and that whitethorn let the company in a risky conditions and may be more vulnerable to downturns in the business cycle.C hazardOver the next 20-25 years, the British population is expected to reach 70m from the flowing population of around 60m, and that indicates a growing market for the companyBritvic plc. 2008. Comparing with the past generation, Younger generations drink more purchased soft drinks less tea, coffee, alcohol, dairy farm drinks and tap water. European fast food culture and the carbonated drinks sooner fit. So the company should seize the opportunity to launch more innovations to pull the new generation,Now the consumers pay more attention to healthy lifestyle, and that also provides a good opport unity for the company. The Britvic should launch more unique products to direct the customer loyalty.The company penetrate into European counties gradually, The Britvic Launch in-market activities in Holland, strong Robinsons squash activity in the Nordics, and Fruit Shoot in Sweden. The company also penetrates to Turkey and Bulgaria market. The company has new travel contracts in the skyway and shipping sectors. And through the already successful Britvic International business, the company should look for ways to stretch along the availability of Britvics wholly-owned brands worldwide through franchising arrangements.D. ThreatFor the soft drink market in Great Britain and Ireland, there full of competition. alike Britvic, for the GB soft drink take home market, the main market players are Coca-cola Enterprises, Britivic, GlaxoSmithKline, Danone, and Tropicana. For the GB soft drink licensed on-trade market, the main market players are Coca-cola Enterprises, Britivic, Redbull. In year 2009, the GB soft drink take home market share of Britvic is 12%, and the Coca-cola Enterprises market share is 27%Britvic plc. 2009. The number of market share of Britvic in Europe almost increase a little.And for the global economic conditions, the 2008 crisis let the economy into recession. Lots of consumers is mazed their job and in debt. So for the European market, also go through recession. How to conquer the recession, and hold the market position, is a challenging work to do for Britvic.Also the company faces financial risk that includes commodity price risk, interest rate risk, re-sentencing rate risk, liquidity risk and credit risk. And the company operate internationally in the future will face the political and country risk.Risk warinessA. Foreign bills risk managementForeign currency risk is related to exposure to fluctuations to the sterling-US dollar and sterling-euro exchange rate. The group operates in euro-denominated countries and finances these partly through the use of distant currency borrowings. Additionally cash generation from euro-denominated operations can be utilized to meet euro payment obligations in sterling denominated companies, providing a inseparable hedge.The group also has transactional exposures, which are from purchases of prime materials or commercial assets in currencies. Such purchases are made by euros and US dollars. On 27 September 2009, through forward foreign exchange contracts, the company hedged 48% of forecast exposures 12 months in advance, and the number in 2008 is 71%Britvic plc. 2009.Where funding is raised in a currency other than the currency ultimately required by the Britvic, cross currency interest rate swaps are used. That can convert the cash flows to the required currency. These swaps have the like duration and other critical terms as the underlying borrowing.B. hoidenish and Political risk managementMore and more countries in Europe pay more attention to the environment protection. If a company without cognizance of that may face the risk of local government regulations. And Britvic has adopted an environmental Management System which is certified to the international standard ISO 14001. The company also use recycled materials for packaging.Conflict between employer and employees in Europe market is a risk faced by any company. The strike of the employee can resist the normal productions, so Britvic pay more attention to the employ welfares. And Britvic has decrease its accident frequency rate by 68% over the last 5 yearsBritvic plc. 2009.RecommendationsA. International strategyBased on Great Britain, the Britvic should target broad market. The company should walk out the Europe gradually. Through the already successful Britvic International business, the company should explore ways to extend the availability of Britvics own brands worldwide through franchising and licensing. Britvic also should target the appear Asian market like China, India and so on. The population of China is largest in the world, and the new generation prefers soft drinks to traditional tea. So the company can competes with coca-cola in China market with the unique brand of healthy lifestyle.During the international development period, the company should learn the local culture first, and launch limited designed products to the local market. That means operate locally.B. Qualified personnel and diversityIn the past, the company achieves success through innovation. The Britvic group should keep the tincture of innovation, and win more property right in the design of products. That is the sweet points of the company for the future development. And the human resource sector should prepare able personnel for the group future construction.