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Britvic warns slow start to year in flat soft drinks market

Britvic, the Fruit Shoot and Tango producer, warned that the UK's supermarket price war and consumer health concerns would lead to a flat soft drinks market this year, saying its own financial year had got off to a slow start.

Shares in the FTSE 250 company fell by 6 per cent on Wednesday, taking the fizz out of full-year results that exceeded expectations. The share price fall also reflected the company's full-year operating profit forecast that was towards the bottom of analysts' consensus range.

Simon Litherland, chief executive, said: "We see little growth in the market because of big box grocery seeing declines and pressure from discounters. The shopper is challenged and increasingly focused on health. We've got to drive the growth opportunities."

He said that: "The year has begun slowly, reflecting the increasingly challenging trading conditions."

Britvic said it expected earnings before interest and tax in its financial year to the end of September 2015 of £164m-£173m, underpinned by cost savings. This was skewed to the bottom of analysts' expectations of £169m- £175m.

Andrea Pistacchi, analyst at Citi, which is co-house broker, said the company's forecast "seems conservative. We believe management has chosen to be cautious."

Britvic makes two-thirds of its profits in the UK and the rest in France, Ireland, other European markets and the US. It launched Fruit Shoot in India this summer.

Mr Litherland said the group, which is also PepsiCo's UK bottler, had taken market share from other colas in the UK where it was also preparing for a relaunch of 7UP, the US company's carbonated lemon and lime drink.

In the US, it was preparing to roll out multi-packs of Fruit Shoot for the first time in the second half of next year. This would give it access to a broad market with a retail sales value of $2bn against $200m for the single-serve category in which it has operated in the US to date.

The group reported a 45 per cent increase in pre-tax profits to £120m in the year to September 28, though this was distorted by exceptional charges in both years. These related, in part, to restructuring costs and charges for the aborted 2013 merger with rival AG Barr, maker of Irn-Bru.

Underlying pre-tax profits rose by 23 per cent on sales up 2.4 per cent at constant currencies.

Mr Litherland said cost savings had exceeded 2014 targets by £2m and the group was on track to deliver cumulative savings of £25m in its current financial year.

Net debt fell to 1.9 times earnings before interest, tax, depreciation and amortisation from 2.2 times in the previous year.

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