A wet summer is usually particularly soggy for soft drinks firms and things were no different for Britvic this year. With few hot days to spur demand for thirst-quenching refreshment, the maker of Robinsons Barley Water and J20 said that sales fell 1.5 per cent in the six months to the end of September.

However, against the general market, in which water sales slumped by 21 per cent, pure juice drinks fell by 10 per cent and fizzy fruit drinks were down 21 per cent, life at Britvic looks impressively sunny. The company took market share in sales of water and pure juice, with Pennine Spring, the UK’s third-largest water brand, displaying particularly good growth.

Some of this success came from improving the presentation and the mix of products sold, allowing Britvic to increase average prices about 1 per cent over the year. Focusing on these efforts, rather than chasing higher volume sales, paid off in the tough market.

However, Britvic remains weak in some product areas, such as fresh fruit juices and smoothies, which are some of the fastest-growing sectors in the soft drinks market. The company needs to push into this health zone because fizzy drinks, such as Pepsi and 7Up, which Britvic distributes in the UK, making up nearly half of group sales, are unlikely to be a big growth area given mounting concern about sugary, additive-filled food and drink aimed at young people.

Pepsi gained some share over the summer, and the signs are that sugar-free versions of the fizzy drinks are attracting back some of those customers who had looked for a healthier option elsewhere.

However, longer-term real growth is likely to come from new ideas based on more natural ingredients with health benefits, particularly since the Food Standards Agency published evidence on the link between hyperactivity in children and certain additives.

It may be hard to adapt brands such as Pepsi and Tango to that world.

On the plus side, still drinks offer higher profits than fizzy drinks, and better sales growth in this area will also help to lift margins. The company says that it is confident of achieving a 0.1 to 0.15 percentage point rise in margins.

The other good news is that Britvic’s resilience over the summer marks a change of form for the company, which has endured a tough time since its 2005 flotation, having issued two profit warnings last year.

As the company embarks on the integration of C&C, Pepsi’s Irish bottler, and looks to more acquisitions across Europe, investors can take comfort from management’s much steadier hand.

Yesterday the stock rose 7 per cent, partly buoyed by the summer performance and also by general hopes that the drinks sector might attract bid attention, given Heineken and Carlsberg’s admission of interest in the brewer Scottish & Newcastle. Permira, the private equity firm, remains in the wings at Britvic with a 14 per cent stake, but there is no guarantee of a bid. The stock trades on about 13 times earnings, a discount to rivals in its sector, but the outlook is uncertain. Hold.

Evolution

It may have made a name for itself as the canny acquirer of businesses at knockdown prices, but yesterday the stockbroker Evolution was itself at the centre of bid speculation.

Shares rose on rumours that the company had received an approach in March. The stockbroker’s cash pile, valued at about £64 million at the end of June, might make it an attractive target for a private individual or rival bank and the sector is surely ripe for further consolidation.

Evolution’s shares have had a rocky ride in the past six months – mostly in a downward direction – as the firm shared in the general negative sentiment towards financial stocks resulting from the credit crunch. It is arguably more attractive now to a buyer than it would have been six months ago. Apart from the lower price, there are hopes that the public markets will strengthen, given the credit squeeze on private equity, providing stockbrokers with plenty of work.

However, Evolution is now priced at about 13 times earnings, relatively high compared with similar rivals. Its strong cash balance and position in asset management underpin that premium to some extent but Evolution still looks more likely to be an acquirer than a target. Hold.

The Restaurant Group

Amid all the headlines being grabbed by the flotation plans of Wagamama, Gaucho Grill and Tragus Group, the Café Rouge owner, it is easy to forget what a thoroughly competent job The Restaurant Group (TRG) does in running rather less glamorous brands. Garfunkel’s, Frankie & Benny’s and Blubeckers may not get the juices flowing, but they make good returns for TRG’s shareholders. The acquisition yesterday of Brunning & Price for £32 million is in the same vein, bringing 14 pubs, mostly in northwest England. Again, it’s hardly a deal to set pulses racing, but set beside Blubeckers it strengthens TRG’s position in the rapidly expanding pub-restaurant market.

TRG, unlike most of the current crop of flotation candidates, largely eschews the high street. This is not suprising, given its dismal track record with brands such as Deep Pan Pizza, but at least it gained credit for quickly recognising that the high street was not its best suit and getting out of it.

TRG’s strength is in servicing semi-captive audiences in leisure parks, railway stations, airports, shopping centres and destination pubs. The group recently reported strong half-year results, despite the weather and smoking bans, and it is well placed to withstand any consumer spending downturn. Hold.

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