Vodafone misses expectations and Britvic could see reopening boost

“After last week’s inflation-inspired global markets sell-off, equities are racing to claw back lost territory with gains seen across Europe and Asia on Tuesday. The FTSE 100 advanced 0.6% to 7,073 while gains in the region of 0.9% were seen across mainland Europe,” says Russ Mould, Investment Director at AJ Bell.

“It looked like a risk-on day for UK stocks, with investors bidding up shares in energy, mining and consumer cyclicals. That would suggest new-found optimism towards global economic growth and that investors are trying to look beyond short-term issues around the Indian Covid variant.

“A lot of faith is being put in a strong vaccine rollout and therefore there is confidence that companies will enjoy strong earnings growth this year. Earnings growth is a key driver for share price growth.

“Walmart and Home Depot will report earnings later today, giving some indication of consumer spending confidence in the US.”

Vodafone

“Who’d have thought it, people being less ‘mobile’ in general is bad news for mobile telecoms groups like Vodafone, which saw its revenue and earnings hit by lower roaming charges as individuals were unable to travel thanks to the pandemic.

“Handset sales have also slumped, suggesting we’re not so bothered about having the latest, fancy new phone when we’re stuck at home.

“Since his appointment in 2018 CEO Nick Read has been trying to transform Vodafone from a bloated couch potato of a business into a leaner operator on a fast track to growth. However, every couch to 5k challenge has its setbacks and so it’s proving for Vodafone today.

“There may be some concern that amid the pressure on earnings the company may struggle to maintain a dividend which it cut significantly in 2019.

“At least the longer-term portents are a bit more positive, supported by growth in Germany and a faster rollout of next generation mobile and fixed networks as well as making market share gains in the broadband market and reducing the level of customer churn.

“The demerger of its masts business Vantage Towers, now listed on the Frankfurt Stock Exchange, has helped take a bite, albeit a baby-sized one, out of the company’s substantial debt pile.”

Britvic

“If there is one underappreciated beneficiary of lockdown restrictions being eased, it’s Britvic. A lot of attention has been made to pubs and restaurants being able to let people back indoors and what that might do for beer and wine sales. However, the good old soft drink will naturally get a look in from the reopening boom as well.

“Britvic owns a lot of popular brands which has helped the business stay fairly resilient during the pandemic as families have flocked to stock shelves at home with names such as Robinsons squash.

“Britvic also has a valuable franchise bottling deal with PepsiCo in Great Britain for the production, distribution, marketing and sales of its carbonated soft drink brands including Pepsi and 7Up, again big names that have been on many household shopping lists during lockdowns.

“Although many of the leisure outlets selling its products have been shut on and off during the past year, Britvic has still been able to crack on with strategic developments. These include increasing its digital presence, creating plans for more environmentally friendly packaging, and preparing for the relaunch of the Rockstar brand.

“Under the circumstances, its ability to keep innovating and have a steady stream of product sales, albeit at reduced rates, has helped the business avoid any serious damage from the pandemic. Now it is well positioned to benefit as the on-trade (pubs, restaurants, hotels) reopens.”

These articles are for information purposes only and are not a personal recommendation or advice.