UK shares are having a rough week, but FTSE 250 drinks manufacturer Britvic (LSE:BVIC) issued an upbeat trading update with improved profit guidance for the year. Sales over the summer were particularly good, and it’s embarking on an exclusive bottling agreement with PepsiCo. This 20-year agreement extends a well-established relationship since 1987. It gives Britvic the right to produce, distribute, market and sell Pepsico soft drink brands throughout the UK in a franchising capacity. So could Britvic be among the best shares to buy now?
Throughout the summer and autumn, nationwide restrictions have encouraged shoppers to buy more of Britvic’s offerings for drinking at home. Whether this will continue once normality resumes is unclear. However, Britvic remains confident in its ability to invest and grow throughout 2021. I think this is reassuring, and the defensive nature of its dependable products gives me optimism for its future.
Debt, sustainability goals and growth
In an encouraging sign for shareholders, the FTSE 250 group is also working on reducing its net debt. It hopes its year-end adjusted net debt balance will come in at £40m-£50m lower than last year.
With pressure on companies to improve sustainability and planet protection, Britvic is on a mission to comply. It plans for all its UK manufactured plastic bottles to be made from 100% recycled plastic by the end of 2022. This is a big improvement on its previous target.
I like its business model, and the products it sells. I also think Britvic has enough of a selection of drinks to give it long-term strength. At the time of writing, Britvic has a price-to-earnings ratio (P/E) of 25, which is quite high. This could be off-putting if it weren’t the norm these days for solid-looking companies to have a relatively high P/E. Earnings per share are 30p, and its 3.9% dividend yield remains on hold.
Fluctuating share price
The Britvic share price is down 12% year-to-date but has risen 44% since its March market crash low. The FTSE 250 stalwart IPO’d back in 2005 with a share price around £2.10. Investors buying back then, who still hold the shares today, will have made a 275% gain, despite the intermittent fluctuations. This is the beauty of lifelong investing. By following a buy-and-hold strategy, the share price ups and downs can largely be ignored, and any dividends reinvested for capital accumulation and compound gains.
I think Britvic is a solid company, producing a range of drinks that people know and like. Consumers still need to drink and will continue to buy the brands they love. In its recent update, management indicated it would continue marketing and bringing out new products in 2021.
I think management knows how to give people what they want and will adapt as necessary to continue to grow. So yes, I do think it could be among the UK’s best shares to buy now. I like what I see, and I’d consider adding it to a long-term portfolio.
Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Britvic. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.