Britvic proposed acquisition and interim results 2010

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Proposed Acquisition of Groupe Fruité Entreprises SA.

We'll come onto your interim results in a moment, but first, you're today announcing that you've entered into an agreement to lead to the acquisition of Fruité Entreprises SA. What's the rationale behind the deal?

Well, we've consistently talked about building our presence overseas, and particularly in North and Western Europe, so clearly, buying a business in France makes good sense. More importantly, though, the business has a market-leading brand in Teisseire, and Teisseire is the market-leading syrup brand. We clearly, with Robinsons, operate in squash, so we understand the market. In addition to that, they have a very strong infrastructure - manufacturing and sales. So we're pretty confident that we can bring some of our brands into the French market as well as develop their brands. So it's really a perfect strategic fit for Britvic.

But why does it make sense for Britvic now?

We've looked at the business over the last couple of years. We've looked at a number of businesses in Continental Europe. As ever, the opportunity comes along; you then have to strike. We saw the opportunity when it became available, and we then pursued the acquisition.

After your experiences in Ireland though, are you concerned about another acquisition against an uncertain economic backdrop?

Well, there's no doubt that at the time we bought the business in Ireland, nobody could predict the economic downturn that the world then suffered. So we have been managing the business against an economic downturn. What we focused on in Ireland is transferring our capability, building the business and its brands, and driving against the synergy case that we declared at the outset.

Our view about the business in France is very different. We see the French economy coming out of recession. It probably went in earlier and has come out sooner than most other European markets. And as we look specifically at the soft drinks market in France, it's showing good growth. The syrup market is showing growth, and indeed as is the juice market. So circumstances are very different and we believe the opportunity to drive the business in France is very clear.

And can we expect any news of more acquisitions?

We have been very clear in our ambition. We've talked always about potentially building our relationship with Pepsi, with other territories and other geographies. But we've also talked about seeing businesses that have brands and infrastructure and technologies that would be attractive. So as and when we see opportunities again, then certainly we'd look very closely at them.

Interim results

Coming back to the results you're releasing today, how have you performed in the first half of the year?

We're very pleased with the performance. We've seen Group revenues grow by 4.6 per cent. Within GB and International, we've seen revenues grow by 8.8 per cent. We've seen very strong growth in our EBIT margin, and our earnings per share growth is 38 per cent. Now that financial performance is reflective of a very strong market performance, where all of our key brands in key categories have grown their share. So overall, we're driving good top-line growth and importantly, converting it very effectively down to strong bottom-line performance.

So have you seen signs of a return in consumer confidence?

Well, in GB there is some sign of that. We've seen the stills market beginning to show growth. Certainly during the depth of the recession, there was no doubt that people switched away from premium categories within stills in particular. We're now seeing some recovery. But we're also seeing continued strength with the carbonates market as well. So some signs of recovery.

If you look at the Irish business, unfortunately there isn't quite the same sign of improving consumer confidence. We're still seeing consumers chase value, and therefore they're moving into major multiples, away from the High Street. We're seeing the pub market show some signs of stability, but still we're showing low double-digit decline year-on-year. A very different position in Ireland.

Outlook

What are you seeing in current trading?

Well, clearly what we're trading against is a very tough year-on-year comparison. Q3 last year was particularly strong. But as we look at the first few weeks of the quarter, we're really pleased with the robust performance of the business.

And what are your priorities for the rest of the year?

These are really very clear. We've got some very big brand activities, notably around the World Cup and Robinsons at Wimbledon. We're going to cement the success we've already seen in the early days of our new product development, particularly Mountain Dew and the 600ml pack. And crucially, we're going to keep driving the performance of the business, both at top line and bottom line, and flawless execution is at the heart of our plan.

So what is the outlook for Britvic?

I think it looks very strong. We've got a wonderful portfolio of brands, which we've demonstrated can grow both the market and also our participation in that. We very successfully implemented some new innovation during the course of both last year and this year that's building. We're driving off the new distribution, certainly reflecting the announcement earlier in the year about the business deal we struck with Compass. So I think despite the uncertainty about the consumer in the UK, we're very confident that the brand strength will continue driving the success of Britvic.

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