Britvic prioritises dividend over spending as sales fall
DRINKS company Britvic is to cut its capital expenditure in a bid to maintain its dividend, as sales continue to tumble in Ireland and the UK and the business deals with the fallout from a product recall in Britain.
In an unusual move, the firm said it would reduce the amount of money it spends on product development and instead try to keep rewarding shareholders.
This was after the company had revealed a lacklustre trading statement for its fiscal third quarter, showing falling revenue across the board.
Last week, Britvic said it expected to take a hit of as much as €25m on a recall of its 'Fruit Shoot' drinks after a fault was found with the lid on the bottles.
In response, the firm is now cutting back on its capital expenditure, rather than slashing its dividend.
"The third quarter has been extremely challenging for Britvic," said company chief executive Paul Moody.
"The weak consumer environment and very disappointing weather at a key time for soft-drink sales had a marked impact on our performance.
"The decision to recall Fruit Shoot resulted in a further negative impact towards the end of the quarter. In the foreseeable future, our resources will be fully focused on re-establishing Fruit Shoot in the market as soon as possible."
In Ireland, sales dropped 11.1pc as a result of volumes sliding 7.6pc and a 4.2pc fall in average retail price.
"Price deflation continues with increased promotional intensity and adverse channel mix as the grocery channel performed better than the impulse and pub and club channels," said Britvic.
The picture was little better in Britain, where sales slid 5.1pc on a constant currency basis.
Shares closed up 3.5pc in London at 295p on the report, coming as it a did a week after a profit warning from Britvic, but analysts criticised the reduction in research spending.
"While some investors will be pleased to see expectations for the absolute forecast dividend raised again, the decision to defer business investments is questionable," said Davy Stockbrokers' Richard O'Donovan.