TIDMBVIC
RNS Number : 9023T
Britvic plc
26 November 2013
Britvic plc Preliminary Results - 26 November 2013
Britvic plc announces its preliminary results for the 52 weeks
ended 29 September 2013(1) (2)
All numbers quoted are on a constant currency basis and are
pre-exceptional and other items, unless otherwise stated.
Financial highlights:
-- Full year revenue growth of 4.4% to GBP1,321.9m
-- Strong EBITA growth of 18.4% to GBP137.9m with a 120bps improvement in margin
-- Brand contribution growth across all business units
-- Strong free cash flow generation of GBP103.5m, resulting in a
9.9% reduction in adjusted net debt
-- Adjusted net debt /EBITDA ratio reduced to 2.2x from 2.8x
-- Adjusted earnings per share up 27.5% to 35.2p and full year
dividend increases by 4.0% to 18.4p
Strategic highlights:
-- Strategic initiatives remain on-track to deliver GBP30m of
cost savings per annum by 2016, GBP10m of which will be invested
into the international growth opportunities
-- Agreement concluded with PepsiCo Americas Beverages (PAB) for
a 15 year bottling agreement for further manufacturing and
distribution in the USA. As a result Fruit Shoot will be
distributed in 41 states during 2014
-- Fruit Shoot market share in GB back at pre-recall levels and ahead internationally
52 weeks 52 weeks % change % change
ended 29 ended 30 actual exchange constant(2)
September September rate exchange
2013 2012 rate
GBPm(1) GBPm (1)
------------------------- ----------- ----------- ----------------- -------------
Group Revenue 1,321.9 1,256.4 5.2% 4.4%
Group EBITA(2) 137.9 115.6 19.3% 18.4%
EBITA Margin(2) 10.4% 9.2% 120bps 120bps
Group EBIT 135.0 112.7 19.8% 18.8%
Group Profit Before
Tax 108.1 84.4 28.1% 26.7%
Group Profit After
Tax 82.6 62.9 31.3% 29.5%
Group Profit After
Tax, After Exceptional
And Other Items 61.9 57.4 7.8% 6.5%
Adjusted Earnings Per
Share(3) 35.2p 27.2p 29.4% 27.5%
Weighted Average No.
of Shares 243.2 241.6 0.7% -
Full year Dividend
Per Share 18.4p 17.7p 4.0% -
Underlying Free Cash
flow (4) 103.5 62.1 66.7% -
Group Adjusted Net
Debt (5) (402.3) (446.7) 9.9% -
Adjusted Net Debt:
EBITDA 2.2X 2.8X 0.6X -
ROIC(6) 21.3% 16.4% 490bps -
------------------------- ----------- ----------- ----------------- -------------
The board is proposing a final dividend per share of 13.0p,
resulting in the full year dividend being ahead of last year by
4.0%. This reflects the board's confidence in the future prospects
for our business, the strong free cash flow generation and our
stated progressive dividend policy.
Simon Litherland, Chief Executive Officer commented:
"We have delivered a strong financial performance in a year of
significant change for our business. We have grown revenue and
price in all of our business units and gained market value share,
resulting in operating profit growth in excess of 18%. We have also
reduced debt by nearly 10%, on the back of improved free cash flow
generation. We have made good progress on the strategic initiatives
that we communicated back in May and remain on-track to deliver
GBP30m per annum of cost savings from 2016. Today's announcement of
a new agreement with PepsiCo Americas Beverages (PAB) for
significant additional expansion in the USA is further evidence of
the growth opportunities that exist for our brands
internationally.
"While we anticipate that the consumer environment will remain
challenging in 2014, trading in the new financial year is slightly
ahead of a strong first quarter performance last year and we are
confident of delivering EBIT in the range of GBP148m to GBP156m for
the full year."
For further information please contact:
Investors:
Rupen Shah / Steve Nightingale +44 (0)1442 284330
Media:
Susan Turner / Marisa Fitch +44 (0)7808 098579 / +44 (0)7808 098292
Mike Smith/Nick Cosgrove (Brunswick) +44 (0)207 4045959
There will be a live webcast of the presentation given today at
10:00am by Simon Litherland (Chief Executive Officer) and John
Gibney (Chief Financial Officer). The webcast will be available at
http://ir.britvic.com/, with a transcript available in due course.
There will also be a conference call today at 2.30pm GMT (9.30am
Eastern Standard Time) to provide investors and analysts with an
opportunity to ask questions.
UK Access Number 0203 139 4830
UK Toll Free 0808 2370030
US Access Number 1 718 873 9077
US Toll Free 1866 928 7517
Participant PIN Code 68613470#
A recording of the call will be available for seven days.
Toll Access Number + 44 (0) 203 426 2807
UK Toll Free Number 0808 237 0026
Conference Reference 643633#
Definitions
(1) Where appropriate, comparisons are quoted using constant
exchange rates. Constant currency change removes the impact of
exchange rate movements during the period by retranslating prior
year foreign currency denominated results of the group at current
period exchange rates to aid comparability.
(2) EBITA is defined as operating profit before exceptional and
other items and amortisation. Only amortisation attributable to
intangibles related to acquisitions is added back, in the period
this is GBP2.9m (2012: GBP2.9m as reported last year). EBITA margin
is the EBITA as a proportion of group revenues.
(3) Adjusted earnings per share amounts are calculated by
dividing adjusted earnings by the average number of shares during
the period. Adjusted earnings is defined as the profit/(loss)
attributable to ordinary equity shareholders before exceptional and
other items adjusted for the adding back of acquisition related
amortisation. Average number of shares during the period is defined
as the weighted average number of ordinary shares outstanding
during the period excluding any own shares held by Britvic that are
used to satisfy various employee share-based incentive programmes.
The weighted average number of ordinary shares in issue for
adjusted earnings per share for the period was 243.2m (2012:
241.6m).
(4) Underlying free cash flow is defined as net cash flow
excluding movements in borrowings, dividend payments and
exceptional and other items.
(5) Group adjusted net debt is defined as group net debt, adding
back the impact of derivatives hedging the balance sheet debt.
(6) Return on invested capital (ROIC) - is defined as operating
profit after applying the tax rate for the period, stated before
exceptional and other items, as a percentage of invested capital.
Invested capital is defined as non-current assets plus current
assets less current liabilities, excluding all balances relating to
interest bearing liabilities and all other assets or liabilities
associated with the financing and capital structure of the group
and excluding any deferred tax balances and effective hedges
relating to interest-bearing liabilities.
All numbers in this announcement, other than where stated or
included within the financial statements, are disclosed before
exceptional and other items.
Reconciliation from actual exchange rate to constant exchange
rate
2012 actual Change 2012 constant
exchange rate GBPm exchange rate
GBPm GBPm
------------------------------ --------------- ------- ---------------
Group Revenue 1,256.4 9.4 1,265.8
------------------------------ --------------- ------- ---------------
Group EBIT 112.7 0.9 113.6
------------------------------ --------------- ------- ---------------
Group Profit Before Tax 84.4 0.9 85.3
------------------------------ --------------- ------- ---------------
Group Profit After Tax (PAT) 62.9 0.9 63.8
------------------------------ --------------- ------- ---------------
Group PAT, After Exceptional
And Other Items 57.4 0.7 58.1
------------------------------ --------------- ------- ---------------
Group EBITA (3) 115.6 0.9 116.5
------------------------------ --------------- ------- ---------------
Adjusted Earnings Per Share
(4) 27.2p 0.4p 27.6p
------------------------------ --------------- ------- ---------------
The preliminary results announcement for the 52 week period
ended 29 September 2013 has been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. The preliminary statement of results was approved
by the board on 25 November 2013. The preliminary statement of
results does not represent the full group financial statements of
Britvic plc and its subsidiaries which will be delivered to the
Registrar of Companies in due course. The preliminary statement of
results have, however, been extracted from the statutory accounts
for the 52 week period ended 29 September 2013 on which an
unqualified report, which did not contain an emphasis of matter
reference or a statement under Section 498 (2) or (3) of Companies
Act 2006, has been made by the company's auditors. The financial
information for the 52 week period ended 30 September 2012 has been
extracted from the Britvic Annual Report for that period as filed
with the Registrar of Companies.
Notes to editors
About Britvic
Britvic is one of the leading branded soft drinks businesses in
Europe. The company leverages its own leading brand portfolio
including Robinsons, Tango, J(2) O, Fruit Shoot, Teisseire and
MiWadi with PepsiCo brands such as Pepsi, 7UP and Mountain Dew
Energy which Britvic produces and sells in GB and Ireland under
exclusive PepsiCo agreements.
Britvic is the largest supplier of branded still soft drinks in
Great Britain (GB) and the number two supplier of branded
carbonated soft drinks in GB. Britvic is an industry leader in the
island of Ireland with brands such as MiWadi and Ballygowan, and in
France with brands such as Teisseire and Fruité. Britvic is growing
its reach into other territories through franchising, export and
licensing. Britvic's management team has successfully developed the
business through a clear strategy of organic growth and
international expansion based on creating and building scale
brands. Britvic is listed on the London Stock Exchange under the
code BVIC and is a constituent of the FTSE 250 index.
Cautionary note regarding forward-looking statements
This announcement includes statements that are forward-looking
in nature. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the group to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Except as
required by the Listing Rules and applicable law, Britvic
undertakes no obligation to update or change any forward-looking
statements to reflect events occurring after the date such
statements are published.
Market data
GB take-home market data referred to in this announcement is
supplied by Nielsen and runs to 28 September 2013. Britvic GB pub
& club market data referred to in this announcement is supplied
by CGA and runs to August 2013. ROI grocery market data referred to
in this announcement is supplied by Nielsen and runs to 6 October
2013. ROI pub and club market data is also supplied by Nielsen and
runs to the end of September 2013. French market data is supplied
by IRI and runs to 22 September 2013.
Next scheduled announcement
Britvic will publish its quarter one interim management
statement on 29 January 2014.
Chief Executive Officer's Strategic Review
We have reported a strong set of results for our financial year
ending 29 September 2013. As well as an improvement in the
underlying performance of the business we have made good progress
on both the strategic initiatives we announced in May and on the
international growth opportunities of our brands.
Performance highlights
Although market conditions remained difficult in each of our
business units, we saw some notable successes across the business
and benefitted from the warm weather, with an exceptionally hot
July.
-- In GB stills, Fruit Shoot has recovered from the impact of
the recall in July 2012 with its take-home market share at the end
of the financial year back to pre-recall levels. Brand perception
measures, such as "Brand you love" and "Happy to give to your
child", recovered from the low point of 2012.
-- In GB carbonates, in a particularly competitive environment,
we protected our volume whilst growing both price and revenue.
Pepsi gained market value share, building on its share gains in
2012.
-- Our International business unit and our franchising model
gained further momentum. Earlier in the year we announced that
distribution would be expanded to 32 states in the USA in time for
the summer. In addition we saw Fruit Shoot roll-out nationally in
Spain with Pepsi South West Europe. In India we remain on-track to
produce Fruit Shoot in-market by mid-2014 through the distribution
agreement with the Narang Group.
-- In France, our syrups brands continued to perform well and
gained further market share. Fruit Shoot successfully returned to
the market and is performing ahead of where it was pre-recall.
-- In Ireland, our own brands increased market share, despite
the difficult trading conditions in that market.
Towards the end of the financial year market performance was
more subdued across all business units, for example, in GB in
September take-home market volumes were down 1.2%.
A new strategy for the business
In May I communicated that Britvic has the potential to become
one of the most admired soft drinks businesses in the world by:
-- Becoming the benchmark integrated branded soft drinks
business for both PepsiCo and our own brands in GB &
Ireland
-- Fully exploiting global category opportunities in Kids, Family and Adult
-- Creating a simple focused operating model, empowering our
people and matching resource and capability to the opportunities
and:
-- Being a trusted and respected member of the communities in which we operate
To achieve this vision we set out a new strategy to drive market
leading profit growth underpinned by margin enhancing revenue
growth. The strategy has two parts, firstly our full portfolio
markets of GB and Ireland and secondly the International and France
business where we will leverage our category leadership of kids,
family and adult categories. Further details of the strategy can be
found in the annual report.
Delivery of the strategy requires a new streamlined organisation
structure based on three clear principles: Simplicity to reduce
complexity, enabling faster decision making and a lower cost
operating model; Focus against fewer strategic priorities matching
resources and capability to execute better and; Accountability
ensuring we have clear ownership to deliver the performance. We
have announced our new operating model and appointed our senior
leadership and management teams.
The restructuring of our GB and Ireland teams is due to be
largely completed by quarter two 2014. We are now working hard to
simplify our internal ways of working across all functions and will
continue to fully support all employees impacted by change,
including those in the Supply Chain who will leave the business
between February and May 2014, or relocate between sites following
the closure of Chelmsford & Huddersfield.
We also announced that we would deliver GBP30m of annualised
cost savings by 2016, of which GBP25m would be realised by 2015. Of
these savings we intend to reinvest a net GBP10m into the
International business. We are on track to achieve these savings
and the phasing that we outlined at the interims with the
announcement of the new strategy.
Strategic initiatives update
1. Increase operational leverage through fewer manufacturing
sites by redistributing capacity, reducing the cost base and
improving our asset utilisation
o Production to end in Huddersfield and Chelmsford by March
2014
o Ballygowan becomes the single water brand for GB and Ireland
in spring 2014
o Achieved a 7% reduction in the number of production lines
2. Fundamentally change the Irish operating model
o Combined senior leadership team for GB and Ireland
appointed
o Belfast warehouse closed November 2013
o Licensed wholesale separated from the core business
3. Transform our procurement and product optimisation initiatives
o Increased investment in people, systems and insight
o Implemented a strategic sourcing programme for key raw
materials, such as juice
o Consolidated the indirect supplier base in GB by 16% and
Ireland by 29%
4. Implement a commercial change programme in GB to ensure our
brands deliver strong and profitable revenue growth
o Developing a stronger partnership with intermediaries and
direct customers to deliver a more efficient and profitable route
to market solution
o Moved from three to two sales channels
o Improving our end-outlet contact model
International update
Our International business progressed well this year with a
number of significant developments:
-- In the USA we saw distribution for Fruit Shoot grow to 32
states following further expansion with PepsiCo Americas Beverages
(PAB) and a new agreement with the independent bottler, Pepsi Cola
Bottling Company of Pittsburgh
-- An agreement with PepsiCo South West Europe for the national
distribution of Fruit Shoot in Spain
-- A distribution agreement for Fruit Shoot with the Narang
Group will see the brand available to consumers in India
mid-2014
-- The establishment of a management team and fully resourced
business unit to drive our international expansion
-- Today we have announced further material developments in the
USA with the signing of a long term exclusive bottling agreement
with PAB, for both expanded distribution and additional
manufacturing capacity. This will see Fruit Shoot available in 41
states next year.
Being trusted and respected in our communities
Acknowledging the need to further incorporate the principles of
corporate responsibility into the core of our business, in 2012 our
executive team approved a new sustainable business strategy. This
ensures that Britvic is well placed to address the key social and
environmental risks facing us, including public health and
responsible resource use, and acts on the opportunities that give
us a business advantage. Finally, we aim to positively contribute
to the communities on which we impact - whether that's our
employees, our consumers or the local geographies where we have a
physical presence. In addition we recognise our impact on global
communities, particularly those from which we source ingredients
and all our direct suppliers are required to adhere to our ethical
trading policy.
Full details of our Sustainable Business programme and the
progress we have made can be found in the annual Sustainable
Business report. This can be downloaded from the results and
presentation section of the website (www.britvic.com) or a hard
copy can be requested by writing to:
The Director of Corporate Affairs
Britvic plc
Breakspear Park
Hemel Hempstead
HP2 4TZ
We recognise that the diversity of our workforce is important to
the success of the business and the board will be taking steps to
address this. In 2013, women comprised 15% of our board and
executive team membership, 27% of senior managers and 31% of total
employees. There is currently one female on the Britvic plc board
and a female General Counsel and Company Secretary.
The organisation has faced a year of uncertainty, firstly with
the aborted merger and then with the focus on implementing the new
strategy. The commitment and the passion shown by the Britvic team
has been outstanding. In 2014 we will continue to implement our new
strategy and we have comprehensive plans across the group to drive
growth, including new innovation for Robinsons with "Squash'd",
Fruit Shoot partnering with Angry Birds, Teisseire sponsoring the
Tour De France and Pepsi will bring football to life in its unique
way. We recognise that there is a further period of change for our
people, as we continue to implement our new operating model and
change the way we work and that the external consumer environment
will continue to be challenging.
However, I am confident that, with the team we have, our
portfolio of great brands and our strong plans, we will continue to
prosper and realise our ambition to be one of the world's most
admired soft drinks businesses.
Chief Financial Officer's Review
The following is based on Britvic's results for the 52 weeks
ended 29 September 2013 (1) (2) *
*Definitions can be found on page 3 of this document
Key performance indicators
The principal key performance indicators that management use to
assess the performance of the group are as follows:
-- Volume growth - increase in number of litres sold by the
group relative to prior period, excluding factored brands.
-- Average Realised Price (ARP) - average revenue per litre
sold, excluding factored brands.
-- Revenue growth - increase in sales achieved by the group relative to prior period.
-- Brand contribution margin - revenue less material costs and
all other marginal costs that management considers to be directly
attributable to the sale of a given product, divided by revenue.
Such costs include brand specific advertising and promotion costs,
raw materials, and marginal production and distribution costs.
Management uses the brand contribution margin to analyse Britvic's
financial performance, because it provides a measure of
contribution at brand level.
-- EBITDA - is defined as earnings before interest, tax,
depreciation, amortisation, profit or loss on disposal of tangible
and intangible assets, and exceptional and other items.
-- Operating profit margin - the group focuses on EBITA
(earnings before interest, tax and acquisition related
amortisation) before exceptional and other items as the key
operating profit measure. Margin is calculated by dividing EBITA by
revenue. Each business unit's performance is reported down to the
brand contribution level.
-- Underlying free cash flow - is defined as net cash flow
excluding movements in borrowings, dividend payments, exceptional
and other items.
-- Return on invested capital (ROIC) - is defined as operating
profit after applying the tax rate for the period, stated before
exceptional and other items, as a percentage of invested capital.
Invested capital is defined as non-current assets plus current
assets less current liabilities, excluding all balances relating to
interest bearing liabilities and all other assets or liabilities
associated with the financing and capital structure of the group
and excluding any deferred tax balances and effective hedges
relating to interest-bearing liabilities.
Overview
In the period, total group volumes (excluding factored products
in Ireland) were 2,066.9m litres, down 0.4% on 2012, as a result of
the reduced supply of Fruit Shoot at the start of the financial
year. Average realised price grew by 5.4% and revenue of
GBP1,321.9m was ahead of last year by 4.4% on a constant currency
basis.
The group focused on building sustainable profit and margin
improvement. Significant progress was achieved against this
objective with all business units delivering pricing and brand
contribution margin growth. As a result, group EBITA was up 18.4%
to GBP137.9m and EBITA margin increased by 120bps to 10.4%. This
includes the remaining GBP8m cost of the Fruit Shoot recall that
occurred in July 2012 which was accounted for as an operating
cost.
We have maintained a disciplined approach to improving free cash
flow generation and this has led to a strong improvement in free
cash flow of 66.7% (GBP103.5m inflow) versus the prior year,
leading to a further reduction in adjusted net debt of 9.9% to
GBP402.3m. As a result, the business saw a significant deleverage
with the adjusted net debt to EBITDA ratio falling to 2.2X from
2.8X last year, thereby already achieving the target we set for
2014.
GB stills 52 weeks ended 52 weeks ended % change
29 September 30 September actual exchange
2013 2012 rate
GBPm GBPm
--------------- --------------- -----------------
Volume (millions litres) 398.7 402.9 (1.0)
ARP per litre 85.3p 79.8p 6.9
Revenue 340.1 321.7 5.7
Brand contribution 154.5 141.2 9.4
Brand contribution margin 45.4% 43.9% 150bps
Full year volume was down 1.0%, reflecting the limited
availability of Fruit Shoot earlier in the year. Supply returned to
historical levels in January 2013 with a phased return of
promotional activity in quarter two. Fruit Shoot has now returned
to its take-home market share to pre-recall levels and its brand
perception measures are strong. Robinson's double concentrate
continued to grow with the introduction of the 500ml pack this
year. J(2) O also grew this year, in part helped by the warm
weather this summer which had a positive impact on both at-home
social occasions and casual dining in the pub and club channel.
Brand contribution margin was up by 150 basis points in the
year. The growth in margin was due to a combination of effective
promotional management and positive product mix which drove the
strong ARP growth as well as a lower raw material cost
inflation.
GB carbonates
52 weeks ended 52 weeks ended % change
29 September 30 September actual exchange
2013 2012 rate
GBPm GBPm
----------------- ----------------- ------------------
Volume (millions litres) 1,153.9 1,154.1 0.0
ARP per litre 46.5p 44.9p 3.6
Revenue 536.4 517.9 3.6
Brand contribution 200.1 188.7 6.0
Brand contribution margin 37.3% 36.4% 90bps
In what was a competitive environment, we maintained our volume
position and grew ARP, leading to revenue growth of 3.6%. Following
our 2012 Olympic year share gains in carbonates and especially on
Pepsi, we are delighted that we have successfully held take-home
market volume share and gained market value share.
Brand contribution was up 6.0%, with a 90bps margin improvement.
This was as a result of both the focus on revenue and promotional
management as well as the strong performance of the Impulse channel
which benefited our overall mix.
International 52 weeks ended 52 weeks ended % change
29 September 30 September actual exchange
2013 2012 rate
GBPm GBPm
--------------- --------------- -----------------
Volume (millions litres) 37.7 38.2 (1.3)
ARP per litre 99.5p 76.8p 29.6
Revenue 37.5 29.3 28.0
Brand contribution 14.1 8.3 69.9
Brand contribution margin 37.6% 28.3% 930bps
Note: Concentrate sales revenue are included in both revenue and
ARP but do not have any associated volume
International delivered strong growth in both ARP and revenue,
with volumes declining by 1.3%. The volume decline reflected the
switch to a concentrate model for the US Fruit Shoot business that
impacted the first half of the year. In addition, we saw some
volume loss as a result of price increases on some low margin
export volumes. This volume loss was offset by the growth of, more
profitable, Fruit Shoot volume into Belgium and the Netherlands.
Fruit Shoot has returned successfully in these markets and is
performing ahead of where it was pre-recall.
The ARP growth of 29.6% in part, reflects the growth of Fruit
Shoot concentrate sales in the U.S. where we saw distribution in 32
states ahead of the summer period. Today we are also announcing a
new agreement with PepsiCo Americas Beverages for a long-term
exclusive bottling agreement that will see Fruit Shoot distribution
expand to 41 states during 2014.
Ireland 52 weeks ended 52 weeks ended
29 September 30 September % change % change
2013 2012 actual exchange constant exchange
GBPm GBPm rate rate
--------------- --------------- ------------------ --------------------
Volume (millions
litres) 199.0 201.3 (1.1) (1.1)
ARP per litre 56.8p 54.3p 4.6 2.3
Revenue 136.9 138.7 (1.3) (3.5)
Brand contribution 49.0 44.6 9.9 7.2
Brand contribution
margin 35.8% 32.2% 360bps 360bps
Note: Volumes and ARP include own-brand soft drinks sales and do
not include factored product sales included within total revenue
and brand contribution.
The underlying market conditions remained difficult in Ireland
throughout 2013. In the second half of the year we saw a tangible
benefit from the warm weather in July and August whilst the market
in September was much more subdued. Over the year, we grew
take-home market value share with a minimal loss of volume share,
reflecting our focus on revenue management. The decline in the
licensed wholesale business was the driver of the 3.5% revenue
decline and more than offset the revenue growth in the core branded
business. The licensed wholesale business margin is materially
lower than the core branded business, which as a result had a
positive mix impact on brand contribution and margin.
France 52 weeks ended 52 weeks ended
29 September 30 September % change % change
2013 2012 actual exchange constant exchange
GBPm GBPm rate rate
--------------- --------------- ------------------ --------------------
Volume (millions
litres) 277.6 278.3 (0.3) (0.3)
ARP per litre 97.6p 89.4p 9.2 6.4
Revenue 271.0 248.8 8.9 6.2
Brand contribution 67.9 59.2 14.7 11.5
Brand contribution
margin 25.1% 23.8% 130bps 120bps
In France, we saw a marginal volume decline of 0.3%, reflecting
the limited availability of Fruit Shoot earlier in the year. The
syrups portfolio continued to perform well, gaining market share
and benefiting from the warm weather in quarter four. Fruit Shoot
is ahead of where it was pre-recall and continued to grow
throughout the year, out-performing the kid's category. As a result
overall revenue grew by 6.2% outperforming the total soft drinks
market which, as measured by IRI, grew value by 0.9%.
Fixed costs 52 weeks ended 52 weeks ended % change
29 September 30 September actual
2013 2012 exchange
GBPm GBPm rate
--------------- --------------- ----------
Non-brand A&P (7.3) (7.8) 6.4
Fixed supply chain (100.7) (100.3) (0.4)
Selling costs (124.5) (118.0) (5.5)
Overheads and other (118.1) (103.2) (14.4)
Total (350.6) (329.3) (6.5)
------------------------ --------------- --------------- ----------
Total A&P investment (70.3) (62.5) (12.5)
A&P as a % of revenue* 5.4% 5.1% (30)bps
* excludes 3(rd) Party Revenue
Fixed costs were up by 6.5% this year and included the GBP8m
remaining costs associated with the recall of Fruit Shoot and the
cost of the expanded in-market team supporting our USA Fruit Shoot
business communicated last year. In addition "overheads and other"
included a provision for employee incentives triggered by the
relevant performance measure, compared to a zero incentive payment
in 2012.
A&P increased in both absolute terms, by GBP7.8m, and by
30bps as a % of net revenue which is in line with the guidance we
provided at the interim results and is core to our strategy of
reinvesting part of our growth in margin to build stronger brand
equity in the medium term.
Exceptional and other items
In the period, we accounted for a net charge of GBP25.5m of
pre-tax (GBP20.7m post tax) exceptional and other costs. These
include:
-- Corporate exceptional items of GBP9.6m costs, relating to
advisory fees regarding the aborted merger with A.G. Barr plc, in
line with previous disclosures.
-- Corporate exceptional items of GBP23.5m, relating to the
implementation of the strategic cost initiatives announced at
interims in May. Cash related items totalled GBP10.6m with
non-cash, primarily factory closure write-off costs of GBP12.9m
-- Other fair value movements gain of GBP7.6m. Within
exceptional and other items we include the fair value movement of
financial instruments where hedge accounting could not be applied.
This was made up of two items, a number of share swaps to satisfy
our employee incentive share schemes and interest-rate swaps.
The cash costs of exceptional items in the period were GBP16.1m
made up of GBP1.5m from the previous year and GBP14.6m from the
current year.
Interest
The net finance charge before exceptional and other items for
the 52 week period for the group was GBP26.9m compared with
GBP28.3m in the same period in the prior year, reflecting the lower
debt profile of the group.
Taxation
The tax charge before exceptional items was GBP25.5m which
equates to an effective tax rate of 23.6% (52 weeks ending 30
September 2012: 25.5%). The reduction in the effective tax rate
reflects the fall in the UK corporation tax rate, the revaluation
of deferred tax liabilities related to the pension funding
partnership and the impact of the mix of profits by business
unit.
Earnings per share
Adjusted basic EPS for the period, excluding exceptional and
other items and acquisition related amortisation, was 35.2p, up
29.4% on the same period last year of 27.2p.
Basic EPS (after exceptional and other items charges post-tax)
for the period was 25.5p compared with 23.8p for the same period
last year.
Dividends
The board is recommending a final dividend of 13.0p per share,
an increase of 4.8% on the dividend declared last year, with a
total value of GBP31.7m. The final dividend will be paid on 7
February 2014 to shareholders on record as at 6 December 2013. The
ex-dividend date is 4 December 2013.
Cash flow and net debt
Underlying free cash flow was a GBP103.5m inflow, a 66.7%
improvement compared to a GBP62.1m inflow the previous year.
Working capital saw a small outflow of GBP6m primarily as a result
of the stock build ahead of the closure of our two factories in GB
and the year-end being one day earlier than the end of the month,
whilst in other costs we saw a reduction in cash outflow during the
period as there was no requirement to purchase shares to satisfy
bonus schemes given the nil pay-out from December 2012. Furthermore
in other costs there was a cash inflow from the exercise of options
given the share price growth that the business saw. Capital
expenditure was lower than our previous guidance of GBP40m to
GBP50m, largely due to re-phasing into 2014. The pension
contributions increase was due to the planned GBP2.5m increase in
the GB defined benefit deficit contribution and the remainder of
the full impact of the Northern Ireland deficit payments which
started part way through the previous year. Overall adjusted net
debt came down by over GBP44m and took our leverage to 2.2X EBITDA
from 2.8X last year. The adjusted net debt (taking into account the
foreign exchange movements on the derivatives hedging our US
Private Placement debt) at 29 September 2013 was GBP402.3m,
compared to 2012 of GBP446.7m.
Strategic cost savings
A dedicated project management office (PMO) has been established
to oversee both the delivery and tracking of the cost and benefit
analysis of the strategic initiatives that contribute to the GBP30m
cost savings and operating model design. The programme change
director reports to both the executive committee and the board on a
regular basis to update them on the associated revenue costs,
capital, exceptional items and risk.
Treasury management
The financial risks faced by the group are identified and
managed by a central treasury department, whose activities are
carried out in accordance with board approved policies and subject
to regular audit and Treasury Committee reviews. The department
does not operate as a profit centre and no transaction is entered
into for trading or speculative purposes.
Key financial risks managed by the treasury department include
exposures to movements in interest rates and foreign exchange
whilst managing the group's debt and liquidity, currency risk,
interest rate risk and cash management. The group uses financial
instruments to hedge against interest rate and foreign currency
exposures.
The group has GBP891m of committed debt facilities consisting of
a GBP400m bank facility which matures in 2016 and a series of
private placement notes with maturities between 2014 and 2022,
providing the business with a secure funding platform. At 29
September 2013, the group's unadjusted net debt of GBP458.4m
(excluding derivative hedges) consisted of GBP1.0m drawn under the
group's committed bank facilities, GBP547.3m of private placement
notes, GBP3.9m of accrued interest and GBP0.5m of finance leases,
offset by net cash and cash equivalents of GBP91.5m and unamortised
loan issue costs of GBP2.8m. After taking into account the element
of the fair value of interest rate currency swaps hedging the
balance sheet value of the private placement notes, the group's
adjusted net debt was GBP402.3m which compares to GBP446.7m in
2012.
In November 2013, the group reached agreement with a number of
investors in the USA private placement market to raise an
additional $170.4m equivalent of funding for terms of between 7 and
12 years. This funding is subject to documentation and due
diligence which is scheduled to be completed in December 2013.
Where this funding is dollar-denominated this has been hedged using
cross-currency interest-rate swaps to meet the group's desired
funding profile and to manage the associated foreign currency risk
to the profit and loss account. Further detail of the group's
financial risk management objectives and policies can be found in
note 24 of the consolidated financial statements.
Pensions
At 29 September 2013, the IAS19 pension deficit in respect of
the group defined benefit pension schemes was GBP19.3m (2012: net
deficit of GBP3.7m). This increase is predominately driven by
changes to the underlying market conditions on which the valuation
assumptions are based for the GB plan including a decrease in the
discount rate from 4.85% at 30 September 2012 to 4.55% at the 29
September 2013. The group principal pension scheme is the Britvic
Pension Plan which has both a defined benefit and defined
contribution section. The defined benefit section was closed to new
members on 1 August 2002, and closed to future accrual for active
members from 10 April 2011, with new members being invited to join
the defined contribution scheme. The actuarial valuation as at 31
March 2013 is currently underway, and will be completed by 30 June
2014. Paul Moody took early retirement on 28 February 2013. In
accordance with agreed policy he chose to receive the portion of
his pension provided by the Britvic Executive Top-up Scheme (BETUS)
as a cash sum in April 2013. As a result of this, a GBP0.5m gain
has been recognised in exceptional and other items in the income
statement for the period. The amount recognised during the year as
an expense in relation to the group defined contribution schemes
was GBP11.4m (2012: GBP10.8m). For further disclosure, please see
note 22 to the financial statements.
Business resources
The main resources the group uses to achieve its results
are:
-- An extensive portfolio of stills and carbonates brands,
including Robinsons, Pepsi, 7UP, Tango, J(2) O and Fruit Shoot. The
breadth and depth of Britvic's portfolio enables it to target
consumer demand across a wide range of consumption occasions, in
all the major soft drinks categories and across all relevant routes
to market. Britvic Ireland owns a number of leading brands in the
Republic of Ireland and Northern Ireland, including Club,
Ballygowan and MiWadi as well as the rights to the Pepsi, 7UP and
Mountain Dew brands. In France the portfolio includes the leading
syrup brand Teisseire as well as Moulin de Valdonne, Pressade and
Fruit Shoot.
-- A successful long-standing relationship with PepsiCo that
resulted in the exclusive bottling agreement (EBA) being renewed in
GB in 2003 for a further 15 years, with an extension to 2023 on
admission to the London Stock Exchange. The EBA for Ireland lasts
until 2015. This relationship gives Britvic the exclusive right to
distribute the Pepsi and 7UP brands in GB and Ireland, access to
all new carbonated drinks developed by PepsiCo for distribution in
GB and Ireland and, to support the development of its carbonates
offering, access to PepsiCo's consumer insight, marketing best
practice, brand and product development expertise and technological
know-how. Britvic has added to its portfolio with Mountain Dew
Energy in GB and Ireland and has also been appointed in recent
years as the exclusive GB bottler of Gatorade, Lipton Ice Tea and
SoBe.
-- A strong customer base. For example, in the GB take-home
market, Britvic's customers include the "Big 4" supermarkets
(Tesco, J Sainsbury's, Asda and Wm Morrisons) together with a
number of other important grocery retailers. The group has
significant supply arrangements with a number of key players in the
GB pubs and clubs sector and leisure and catering channels. Through
Britvic International, the group has built on the success of the
Robinsons and Fruit Shoot brands by introducing these products into
markets outside GB.
-- Britvic also has a well-invested and flexible group
production capability and distribution network that enables its
soft drinks to be made available to consumers across all of its
operating territories.
Risks and Uncertainties
Risk management process
Britvic operates a robust risk management process that has been
further strengthened over recent years.
Risk identification, analysis and mitigation planning is
undertaken at all levels of the business through functional and
operational teams. Each risk is assigned an owner at management
level who has responsibility for ensuring that appropriate actions
are taken to manage the risk. A dedicated Risk and Insurance
Manager manages and supports this process and owns the group-wide
risk register.
Risks are regularly reviewed and monitored by Business Unit or
functional management teams. The executive team review the major
risks across the group on a quarterly basis to ensure that the
management of these risks has appropriate focus. The board review
these at least twice a year.
Principal Risks
The principal risks that could potentially have a significant
impact on our business in the future are set out below, together
with the actions we are taking to mitigate these.
SOFT DRINKS MARKET
The economic environment could reduce consumer spending on our
brands
Risk: Whilst our products are relatively low value goods, they
are non-essential items. Pressure on consumer spending could reduce
spend on our products, or they may switch to cheaper non-branded
alternatives.
Mitigation: The soft drinks category has proven to be reasonably
resilient and we offer a range of everyday value products to meet
the consumer need for reduced spending. We understand what the
consumer wants and develop products designed to meet their spending
requirements.
A change in consumer preferences could reduce sales of our
brands
Risk: Consumer preferences evolve over time and in the FMCG
environment it is necessary to keep up with consumer requirements
and tastes and develop our products to meet these. Failure to do
this could result in consumers switching away from Britvic
products.
Mitigation: We offer a range from everyday value to premium
products across a range of sub-categories and operate in a number
of different markets, therefore we are not reliant on the
preferences of one set of consumers. We closely monitor consumer
trends in order to anticipate changes in preferences and match our
offerings to these trends across our diversified portfolio and
markets. We regularly develop our current products and aim to offer
innovative new products to create new sub-categories and generate
consumer needs.
Increased competition could reduce our profitability through
reducing the average realised price of our products or reducing
sales
Risk: We operate in a highly competitive market with relatively
low barriers to entry and high levels of promotional activity.
There is a risk that our competitors increase their activity or new
products enter the market and take market share from our
products.
Mitigation: We have strong brands that show resilience even when
under pressure from competitor promotional activity. In established
markets, we operate a strong promotional programme ourselves and
develop strategies for growth that are aligned to consumer
preferences. We also continuously monitor the market and are able
to develop tactics to respond to changes in the competitive
environment where appropriate; however in many cases we are
confident that our brand strength and understanding of the category
ensure that the strategy we are following is robust. The
diversification of our geographical profile also helps to reduce
the risk.
Health and obesity debate could reduce sales of our products
Risk: There is currently a high level of media and government
scrutiny on health and obesity in our core markets; GB, Ireland and
France. 'Sugary drinks' are often cited as one of the issues
affecting national obesity levels in media reports. Despite the
fact that many of our products are low calorie, negative reporting
and lack of understanding could result in consumers switching away
from our products or spending less on soft drinks.
Mitigation: We offer a range of soft drinks, many of which are
low calorie products containing no sugar. Nutritional information
is shown on all of our products and, in GB, we have signed up to
the government's front of pack labelling scheme. We actively
consider the consumer health debate as part of our strategy
development and ensure that our product development provides a
range of lower calorie choices.
A termination or variation of the bottling and distribution
arrangements with PepsiCo could significantly reduce our business
in GB and Ireland
Risk: We bottle a number of PepsiCo products in GB and Ireland,
including Pepsi and 7UP and this makes up a significant proportion
of our carbonated drinks portfolio in these markets. At the end of
the bottling agreements (or earlier in specific circumstances)
PepsiCo can terminate our right to sell their brands.
Mitigation: We place significant emphasis on developing our
relationship with PepsiCo, which includes maintaining an
appropriate level of communication between the two businesses to
deal with on-going operational issues. This is further
strengthening through the development of the Fruit Shoot franchise
in the US with PepsiCo and the independent Pepsi bottlers. The
addition of more PepsiCo products to the Britvic portfolio in
recent years demonstrates the strength of this relationship.
SUPPLY RISKS
Increasing commodity demand and pricing could impact our
profitability
Risk: We utilise a wide variety of commodities in our products,
many of which are subject to crop availability and increasing
demand from around the world. As a result of this, there is a risk
that we are not able to source the products that we require when we
would like to, or we have to pay more than we planned to for them.
In addition, the market commodity prices could fluctuate
significantly which could impact on the profitability of our
products going forward.
Mitigation: We manage the risk associated with availability of
supply through a robust programme of understanding future
requirements, developing new sources and strategic partnerships
through our Procurement Transformation programme. In addition, we
ensure that sustainability of prime materials is a key
consideration in our product development process. We aim to manage
the impact of market price fluctuations through sourcing much of
our planned requirements through forward contracts and hedging
arrangements.
A product quality issue leads to a recall and significant
cost
Risk: Our products are generally of very high quality and are
not high risk products for causing any significant harm, however
there is a risk that a faulty or contaminated product is supplied
to the market. This could result in a costly product recall and
claims against the company if injury or damage is caused.
Mitigation: We have robust quality control measures and
processes in place to maintain the high quality of our products
supplied at all times. These have been further strengthened in
response to the Fruit Shoot recall required during 2012.
Loss of a key operational site could reduce product availability
and therefore sales
Risk: A severe event could lead to the loss of use of a key site
of production or distribution.
Mitigation: We seek to maintain multiple sources of supply for
our products wherever possible. In addition, we review and manage
the resilience of our sites to significant events and put
protection in place where practical and beneficial to the business
to do so.
REGULATORY RISKS
Increase in the group's funding needs or obligations in respect
of our pension scheme
Risk: The required revaluations of the pension schemes may
highlight a worsening deficit position that requires the company to
provide additional cash contributions to meet future needs. The
triennial pension valuation for the largest of our defined benefit
schemes, for GB employees, will be completed during the current
financial year.
Mitigation: The group pensions function works closely with the
pension Trustees to ensure an appropriate portfolio is in place to
fund pension requirements and spread risk in the most appropriate
way. New employees of the company are enrolled into a defined
contribution scheme thereby limiting future liabilities. The
largest of Britvic's defined benefit schemes was closed to future
accrual in April 2011 (closed to new members in 2002). This scheme
is now partially funded by a Pension Funding Partnership and
funding requirements have been agreed to 2017.
Future regulations that affect the sale of soft drinks may
impact our profitability
Risk: There is a wide range of regulations that we are required
to comply with, ranging from controlling the content, labelling and
packaging of our products to the marketing of them. Changes in
these regulations in the markets in which we operate could result
in direct additional taxation on our products, increased cost to
produce our brands or changes to the nature of the product such
that is not as desirable to the consumer, therefore reducing sales.
In addition, regulations may impact our ability to market or sell
certain products or engage with specific consumers.
Mitigation: We proactively engage with the relevant authorities
both directly and through a number of trade organisations to ensure
we can fully participate in the future development of legislation.
We also continuously develop our product portfolio and develop new
products in anticipation of likely regulatory requirements.
Changes in tax legislation could impact our shareholder
returns
Risk: We operate in a number of tax jurisdictions with
complicated and different tax requirements and legislation
regularly changes. Any changes in tax legislation or rates could
potentially impact the distributable profits of the organisation.
In addition, the subjective nature of some tax treatments could
lead to challenge from the relevant tax authorities which could
result in disputes. At the current time, there is a risk that any
potential 'sugar tax' in GB or Ireland could impact some of our
products.
Mitigation: We have a dedicated tax team, supported by external
advisors, who ensure that we comply with all tax regulations and
requirements. We monitor likely changes in these and consider the
impact that these could have on our business, taking action to
mitigate this impact where possible. We have a broad portfolio of
low sugar products that should not be affected by any 'sugar tax',
and would look to minimise the impact on the profitability of our
other products to the extent that it is possible through consumer
pricing.
MACRO ECONOMIC ENVIRONMENT
Macro-economic factors could adversely impact the business
Risk: We have a number of exposures as a result of changes in
the macro-economic environment, particularly counterparty credit
risk through our banking relationships and currency fluctuations.
Whilst we are not directly exposed to any high risk areas in the
Eurozone, we would be indirectly affected through the impact on
those that we deal with and the on the wider economy.
Mitigation: We closely monitor and manage our exposure to wider
economic factors to the extent that it is possible or beneficial to
do so, in particular, hedging our currency requirements.
IT RISKS
A systems issue could result in significant disruption to the
business over a prolonged period or permanent loss of records and
data if the IT disaster recovery plans are not adequate
Risk: As Britvic has grown, both through acquisition and
organically, so has its reliance on IT systems to function, a
failure of which could halt production or the ability to deliver
goods. There are disaster recovery plans in place should a
catastrophic failure occur, however should these prove to be
inadequate this would result in permanent loss of records and data
that would have a significant impact on our ability to operate.
Mitigation: The management of our data centre has been
outsourced to a professional provider with both robust disaster
recovery and business continuity plans capable of meeting both our
current and future needs.
Inadequate security over the IT network could result in data
loss or corruption
Risk: All IT networks are at risk of unwanted access which can
have adverse consequences in terms of data leakage or loss, or
systems failures.
Mitigation: Much of system is now hosted by a professional
provider who is well set up to maintain robust cyber security. We
review our security processes at least annually and conduct
penetration tests to identify weaknesses and take corrective
action.
Consolidated income statement
For the 52 weeks ended 29 September 2013
52 weeks 52 weeks
ended 29 September 2013 ended 30 September 2012
------------------------- -------------------------
Before Exceptional Total Before Exceptional Total
exceptional & other exceptional & other
& items* & other items*
other items
items
Note GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Revenue 1,321.9 - 1,321.9 1,256.4 - 1,256.4
Cost of sales (646.9) - (646.9) (624.6) - (624.6)
----------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Gross profit 675.0 - 675.0 631.8 - 631.8
Selling and distribution
costs (351.5) - (351.5) (353.3) - (353.3)
Administration expenses (188.5) (26.2) (214.7) (165.8) (4.8) (170.6)
------------- ------------ -------- ------------- ------------ --------
Operating profit /
(loss) 6 135.0 (26.2) 108.8 112.7 (4.8) 107.9
Finance costs 9 (26.9) 0.7 (26.2) (28.3) (2.1) (30.4)
----------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Profit / (loss) before
tax 108.1 (25.5) 82.6 84.4 (6.9) 77.5
Taxation 10 (25.5) 4.8 (20.7) (21.5) 1.4 (20.1)
----------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Profit / (loss) for
the period attributable
to the equity shareholders 82.6 (20.7) 61.9 62.9 (5.5) 57.4
----------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Earnings per share
Basic earnings per
share 11 25.5p 23.8p
Diluted earnings per
share 11 25.3p 22.4p
Adjusted basic earnings
per share** 11 35.2p 27.2p
Adjusted diluted earnings
per share** 11 34.9p 26.5p
* See note 5.
** Adjusted basic and diluted earnings per share measures have been
adjusted by adding back exceptional & other items (see notes 5 and
11) and amortisation relating to acquired intangible assets (see note
14).
All activities relate to continuing operations.
Consolidated STATEMENT OF COMPREHENSIVE INCOME
For the 52 weeks ended 29 September 2013
52 weeks ended 52 weeks ended
29 September 30 September
2013 2012
Note GBPm GBPm
------------------------------------------------- ----- --------------- ---------------
Profit for the period attributable to
the equity shareholders 61.9 57.4
Other comprehensive income:
Items that will not be reclassified to
profit or loss
Actuarial (losses)/gains on defined benefit
pension schemes 22 (32.4) 9.2
Deferred tax on actuarial (losses)/gains
on defined benefit pension schemes 10 4.4 (7.9)
Current tax on additional pension contributions 10 3.1 4.6
------------------------------------------------- ----- --------------- ---------------
(24.9) 5.9
------------------------------------------------- ----- --------------- ---------------
Items that may be subsequently reclassified
to profit or loss
Losses in the period in respect of cash
flow hedges 25 (1.4) (17.0)
Amounts recycled to the income statement
in respect of cash flow hedges 25 0.1 9.5
Deferred tax in respect of cash flow
hedges accounted for in the hedging reserve 10 0.4 2.1
Exchange differences on translation of
foreign operations 25 - (3.9)
Tax on exchange differences accounted
for in the translation reserve 10 (2.9) 4.0
Deferred tax on other temporary differences 10 0.2 -
------------------------------------------------- ----- --------------- ---------------
(3.6) (5.3)
------------------------------------------------- ----- --------------- ---------------
Other comprehensive income for the period,
net of tax (28.5) 0.6
------------------------------------------------- ----- --------------- ---------------
Total comprehensive income for the period
attributable to the equity shareholders 33.4 58.0
------------------------------------------------- ----- --------------- ---------------
Consolidated BALANCE SHEET
As at 29 September 2013
2013 2012
Note GBPm GBPm
--------------------------------------- ----- ---------- --------
Assets
Non-current assets
Property, plant and equipment 13 215.7 236.6
Intangible assets 14 317.0 305.2
Other receivables 16 3.8 3.6
Other financial assets 25 62.5 92.1
Pension asset 22 0.1 7.5
599.1 645.0
--------------------------------------- ----- ---------- --------
Current assets
Inventories 17 90.8 73.8
Trade and other receivables 18 266.1 257.4
Other financial assets 25 12.8 0.1
Cash and cash equivalents 19 94.0 49.5
--------------------------------------- ----- ---------- --------
463.7 380.8
--------------------------------------- ----- ---------- --------
Total assets 1,062.8 1,025.8
Current liabilities
Trade and other payables 23 (381.5) (357.2)
Bank overdrafts 19 (2.5) (1.9)
Interest bearing loans and borrowings 21 (91.6) (0.6)
Other financial liabilities 25 (1.4) (4.4)
Current income tax payable (17.0) (7.8)
Provisions 27 (10.5) -
(504.5) (371.9)
Non-current liabilities
Interest bearing loans and borrowings 21 (458.3) (558.7)
Deferred tax liabilities 10e (27.8) (34.1)
Pension liability 22 (19.4) (11.2)
Other financial liabilities 25 (10.0) (10.9)
Other non-current liabilities 26 (1.9) (1.9)
--------------------------------------- ----- ---------- --------
(517.4) (616.8)
--------------------------------------- ----- ---------- --------
Total liabilities (1,021.9) (988.7)
--------------------------------------- ----- ---------- --------
Net assets 40.9 37.1
--------------------------------------- ----- ---------- --------
Capital and reserves
Issued share capital 20 49.0 48.5
Share premium account 25.0 17.7
Own shares reserve (1.1) (0.8)
Share scheme reserve 7.5 4.2
Hedging reserve 2.7 3.6
Translation reserve 19.6 22.5
Merger reserve 87.3 87.3
Retained losses (149.1) (145.9)
--------------------------------------- ----- ---------- --------
Total equity 40.9 37.1
--------------------------------------- ----- ---------- --------
The financial statements were approved by the board of directors
and authorised for issue on 25 November 2013. They were signed on
its behalf by:
Consolidated statement of cash flows
For the 52 weeks ended 29 September 2013
2013 2012
Note GBPm GBPm
--------------------------------------------- ------ ------- -------
Cash flows from operating activities
Profit before tax 82.6 77.5
Finance costs 9 26.2 30.4
Other financial instruments (6.0) (1.4)
Impairment of property, plant and equipment
and intangible assets 13,14 12.9 14.9
Depreciation 13 36.6 34.4
Amortisation 14 7.1 9.5
Share based payments 28 6.2 3.0
Net pension charge less contributions (17.2) (31.1)
(Increase)/decrease in inventory (14.9) 10.9
Increase in trade and other receivables (4.7) (2.0)
Increase/(decrease) in trade and other
payables 9.9 (2.8)
Increase in provisions 10.5 -
Loss on disposal of tangible and intangible
assets 3.8 1.5
Income tax paid (11.2) (12.5)
--------------------------------------------- ------ ------- -------
Net cash flows from operating activities 141.8 132.3
--------------------------------------------- ------ ------- -------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.3 2.2
Purchases of property, plant and equipment (26.3) (43.9)
Purchases of intangible assets (8.9) (5.4)
Net cash flows used in investing activities (34.9) (47.1)
--------------------------------------------- ------ ------- -------
Cash flows from financing activities
Finance costs - (0.1)
Interest paid (26.6) (28.5)
Interest bearing loans repaid (0.9) (1.0)
Issue of shares 7.1 2.0
Purchase of own shares - (9.3)
Dividends paid to equity shareholders 12 (42.5) (42.5)
--------------------------------------------- ------ ------- -------
Net cash flows used in financing activities (62.9) (79.4)
--------------------------------------------- ------ ------- -------
Net increase in cash and cash equivalents 44.0 5.8
Cash and cash equivalents at beginning
of period 47.6 43.0
Exchange rate differences 29 (0.1) (1.2)
--------------------------------------------- ------ ------- -------
Cash and cash equivalents at the end of
the period 19 91.5 47.6
--------------------------------------------- ------ ------- -------
Consolidated income statement of changes in equity
For the 52 weeks ended 29 September 2013
Issued Share Own Share Hedging Translation Merger Retained Total
share premium shares scheme reserve reserve reserve losses
capital account reserve reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
At 2 October
2011 48.3 15.0 (1.0) 7.8 9.0 22.4 87.3 (166.3) 22.5
Profit for the
period - - - - - - - 57.4 57.4
Other
comprehensive
income - - - - (5.4) 0.1 - 5.9 0.6
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
- - - - (5.4) 0.1 - 63.3 58.0
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
Issue of shares 0.2 2.7 (2.4) - - - - - 0.5
Own shares
purchased
for share
schemes - - (9.3) - - - - - (9.3)
Own shares
utilised
for share
schemes - - 11.9 (5.6) - - - (2.0) 4.3
Movement in
share
based schemes - - - 2.0 - - - - 2.0
Current tax on
share based
payments - - - - - - - 0.6 0.6
Deferred tax on
share based
payments - - - - - - - 1.0 1.0
Payment of
dividend - - - - - - - (42.5) (42.5)
At 30 September
2012 48.5 17.7 (0.8) 4.2 3.6 22.5 87.3 (145.9) 37.1
Profit for the
period - - - - - - - 61.9 61.9
Other
comprehensive
income - - - - (0.9) (2.9) - (24.7) (28.5)
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
- - - - (0.9) (2.9) - 37.2 33.4
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
Issue of shares 0.5 7.3 (2.1) - - - - - 5.7
Own shares
utilised
for share
schemes - - 1.8 (1.8) - - - 1.4 1.4
Movement in
share
based schemes - - - 5.1 - - - - 5.1
Current tax on
share based
payments - - - - - - - 1.0 1.0
Deferred tax on
share based
payments - - - - - - - (0.3) (0.3)
Payment of
dividend - - - - - - - (42.5) (42.5)
--------- ------------ --------- -------
At 29 September
2013 49.0 25.0 (1.1) 7.5 2.7 19.6 87.3 (149.1) 40.9
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
notes to the Consolidated financial statements
1. General information
Britvic plc (the "company") is a company incorporated in the
United Kingdom under the Companies Act 2006. It is a public limited
company domiciled in England & Wales and its ordinary shares
are traded on the London Stock Exchange. Britvic plc and its
subsidiaries (together the "group") operate in the soft drinks
manufacturing and distribution industry, principally in the United
Kingdom, Republic of Ireland and France.
The operating companies of the group are disclosed within note
31.
The financial statements were authorised for issue by the board
of directors on 25 November 2013.
2. Statement of compliance
The financial information has been prepared on the basis of
applicable International Financial Reporting Standards as adopted
by the European Union (IFRS), as they apply to the financial
statements of the group.
3. Accounting policies
Basis of preparation
The financial statements have been prepared on a going concern
basis. For further detail, please refer to note 32.
The consolidated financial statements have been prepared on a
historical cost basis except where measurement of balances at fair
value is required as explained below. The consolidated financial
statements of the group are presented in pound sterling, which is
also the functional currency of the company, and all values are
rounded to the nearest 0.1 million except where otherwise
indicated.
Basis of consolidation
The consolidated financial statements of the group incorporate
the financial information of the company and the entities
controlled by the company (its subsidiaries) in accordance with IAS
27 'Consolidated and Separate Financial Statements'. The financial
statements of subsidiaries are prepared for the same reporting
period as the company, using consistent accounting policies. All
intra-group transactions, balances, income and expenses are
eliminated on consolidation. The results of subsidiary undertakings
acquired or disposed of in the year are included in the
consolidated income statement from the date the group gains control
or up to the date control ceases respectively. Control comprises
the power to govern the financial and operating policies of the
investee so as to obtain benefit from its activities and is
achieved through direct or indirect ownership of voting rights;
currently exercisable or convertible potential voting rights; or by
way of contractual agreement.
Revenue recognition
Revenue is the value of sales, excluding transactions with or
between subsidiaries, after the deduction of sales related
discounts and rebates, value added tax and other sales related
taxes. Revenue is recognised when goods are delivered and accepted
by customers, when the significant risks and rewards of ownership
of the goods have passed to the buyer and the amount can be
measured reliably.
Sales related discounts are calculated based on the expected
amounts necessary to meet claims by the group's customers in
respect of these discounts and rebates.
Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any impairment losses. Cost comprises
the aggregate amount paid and the fair value of any other
consideration given to acquire the asset and includes costs
directly attributable to making the asset capable of operating as
intended. Depreciation is calculated so as to write off the cost of
an asset, less its estimated residual value, on a straight-line
basis, over the useful economic life of that asset as follows:
Plant and machinery 3 to 20 years
Vehicles (included in plant and machinery) 5 to 7 years
Equipment in retail outlets (included in fixtures, fittings,
tools and equipment)
5 to 10 years
Other fixtures and fittings (included in fixtures, fittings,
tools and equipment)
3 to 10 years
Land is not depreciated.
Freehold properties are depreciated over 50 years.
Leasehold properties are depreciated over 50 years, or over the
unexpired lease term when this is less than 50 years.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Gains and losses on disposals
are determined by comparing proceeds with carrying amount, and are
included in the consolidated income statement in the period of
derecognition.
The carrying values of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable and are written
down immediately to their recoverable amount. Useful lives and
residual amounts are reviewed annually and where adjustments are
required these are made prospectively.
Goodwill
While the original acquisition of Britannia Soft Drinks Limited
was accounted for under the merger method, business combinations on
or after 4 October 2004 have been accounted for under IFRS 3
'Business Combinations' using the acquisition method. On
acquisition, the assets, liabilities and contingent liabilities of
a subsidiary are measured at their fair values at the date of
acquisition. Any excess of the cost of acquisition over the fair
values of the identifiable net assets acquired is recognised as
goodwill. Any deficiency of the cost of acquisition below the fair
values of the identifiable net assets acquired (discount on
acquisition) is credited to the consolidated income statement in
the period of acquisition.
Following initial recognition, goodwill is measured at cost less
accumulated impairment losses. Goodwill is not amortised.
Goodwill is reviewed for impairment at least annually and
whenever events or changes in circumstances indicate that the
carrying value may be impaired. As at the acquisition date, any
goodwill acquired is allocated to the group of cash-generating
units expected to benefit from the combination's synergies by
management. Impairment is determined by assessing the recoverable
amount of the group of cash-generating units to which the goodwill
relates. Where the recoverable amount of the cash-generating units
is less than the carrying amount, an impairment loss is recognised
immediately in the consolidated income statement.
On disposal of a subsidiary the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
Intangible assets
Trademarks, franchise rights and customer lists
Intangible assets acquired separately are measured on initial
recognition at the fair value of consideration paid. Following
initial recognition, intangible assets are carried at cost less any
accumulated amortisation or impairment losses. An intangible asset
acquired as part of a business combination is recognised outside
goodwill, at fair value at the date of acquisition, if the asset is
separable or arises from contractual or other legal rights and its
fair value can be measured reliably.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Amortisation is charged on assets with finite
lives on a straight-line basis over a period appropriate to the
asset's useful life.
The carrying values of intangible assets with finite and
indefinite lives are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be
recoverable.
Intangible assets with indefinite useful lives are also tested
for impairment annually either individually or, if the intangible
asset does not generate cash flows that are largely independent of
those from other assets or groups of assets, as part of the cash
generating unit to which it belongs. Such intangibles are not
amortised. The useful life of an intangible asset with an
indefinite life is reviewed annually to determine whether
indefinite life assessment continues to be supportable. If not, the
change in the useful life assessment from indefinite to finite is
made on a prospective basis.
Software Costs
Software expenditure is recognised as an intangible asset only
after its technical feasibility and commercial viability can be
demonstrated. Acquired computer software licences and software
developed in-house are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software. Costs
include resources focussed on delivery of capital projects where
the choice has been made to use internal resource rather than
external resources. These costs are amortised over their estimated
useful lives of three to seven years on a straight line basis.
Impairment of assets
The group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the group makes an estimate of the asset's recoverable amount. An
asset's recoverable amount is the higher of an asset's fair value
less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows
that are largely independent of those from other assets or groups
of assets. Where the carrying amount of an asset exceeds its
recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects senior management's
estimate of the cost of capital. Impairment losses of continuing
operations are recognised in the consolidated income statement in
those expense categories consistent with the function of the
impaired asset.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such an indication
exists, the recoverable amount is estimated. A previously
recognised impairment loss is reversed only if there has been a
change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is
the case the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset
in prior years. Goodwill impairment losses cannot subsequently be
reversed.
Inventories and work in progress
Inventories are stated at the lower of cost and net realisable
value. Cost comprises direct materials and, where applicable,
direct labour costs and those overheads that have been incurred in
bringing inventories to their present location and condition. Cost
is determined using the weighted average cost method. Net
realisable value represents the estimated selling price less all
estimated costs of completion and costs to be incurred in
marketing, selling and distribution.
Financial assets
The group determines the classification of its financial assets
at initial recognition. When financial assets are recognised
initially, they are measured at fair value, which is normally the
transaction price, plus directly attributable transaction costs for
those financial assets not subsequently measured at fair value
through profit or loss. The group assesses at each reporting date
whether a financial asset or group of financial assets is
impaired.
Loans and receivables
The group has financial assets that are classified as loans and
receivables. Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not quoted in
an active market, do not qualify as trading assets and have not
been designated as either fair value through profit or loss or
available for sale. Such assets are carried at amortised cost using
the effective interest method if the time value of money is
significant. Gains and losses are recognised in the consolidated
income statement when loans and receivables are derecognised or
impaired, as well as through the amortisation process.
Derivative financial instruments and hedging
The group uses derivative financial instruments such as forward
currency contracts and interest rate swaps to hedge its risks
associated with foreign currency and interest rate fluctuations.
All derivative financial instruments are initially recognised and
subsequently remeasured at fair value. Derivatives are carried as
assets when the fair value is positive and as liabilities when the
fair value is negative.
The fair value of forward currency contracts is calculated by
reference to current forward exchange rates for contracts with
similar maturity profiles. The fair value of interest rate swap
contracts is determined by reference to market values for similar
instruments.
For those derivatives designated as hedges and for which hedge
accounting is appropriate, the hedging relationship is documented
at its inception. This documentation identifies the hedging
instrument, the hedged item or transaction, the nature of the risk
being hedged and how effectiveness will be measured throughout its
duration. Such hedges are expected at inception to be highly
effective.
Any gains or losses arising from changes in the fair value of
derivatives that do not qualify for hedge accounting are taken to
the consolidated income statement. The treatment of gains and
losses arising from revaluing derivatives designated as hedging
instruments depends on the nature of the hedging relationship, as
follows:
Cash flow hedges
Hedges are classified as cash flow hedges when hedging exposure
to variability in cash flows that is either attributable to a
particular risk associated with a recognised asset or liability or
a highly probable forecast transaction. For cash flow hedges, the
effective portion of the gain or loss on the hedging instrument is
recognised in other comprehensive income, while the ineffective
portion is recognised in the consolidated income statement. Amounts
previously recognised in other comprehensive income are transferred
to the consolidated income statement in the period in which the
hedged item affects profit or loss, such as when a forecast sale
occurs. However, when the forecast transaction results in the
recognition of a non-financial asset or liability, the amounts
previously recognised in other comprehensive income are included in
the initial carrying amount of the asset or liability.
If a forecast transaction is no longer expected to occur,
amounts previously recognised in other comprehensive income are
transferred to the consolidated income statement. If the hedging
instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as a hedge is
revoked, amounts previously recognised in other comprehensive
income remain in equity until the forecast transaction occurs and
are then transferred to the consolidated income statement or
included in the initial carrying amount of a non-financial asset or
liability as above.
Net investment hedges
Financial instruments are classified as net investment hedges
when they hedge the group's net investment in foreign operations.
Some of the group's foreign currency borrowings qualify as hedging
instruments that hedge foreign currency net investment balances.
The effective portion of gains or losses on translation of
borrowings designated as net investment hedges is recognised in
other comprehensive income. Any ineffective portion is recognised
immediately in the consolidated income statement. Upon disposal of
the associated investment in foreign operations any cumulative gain
or loss previously recognised in other comprehensive income is
recycled through the consolidated income statement.
Fair value hedges
Hedges of the change in fair value of recognised assets or
liabilities are classified as fair value hedges. For fair value
hedges, the gain or loss on the fair value of the hedging
instrument is recognised in the consolidated income statement. The
gain or loss on the hedged item attributable to the hedged risk
adjusts the carrying amount of the hedged item and is also
recognised in the consolidated income statement. If the hedge
relationship no longer meets the criteria for hedge accounting, the
hedged item would no longer be adjusted and the cumulative
adjustment to its carrying amount would be amortised to the
consolidated income statement based on a recalculated effective
interest rate. The fair value gain on loss on the hedging
instrument would continue to be recorded in the consolidated income
statement.
Derecognition of financial instruments
The derecognition of a financial asset takes place when the
contractual rights to the cash flows expire, or when the
contractual rights to the cash flows have either been transferred
or an obligation has been assumed to pass them through to a third
party and the group does not retain substantially all the risks and
rewards of the asset.
Financial liabilities are only derecognised when they are
extinguished, that is, when the obligation is discharged, cancelled
or expires.
Share-based payments
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date at which they
are granted. Fair value is determined by an external valuer using
an appropriate pricing model. In valuing equity-settled
transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares ('market
conditions').
The cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in which
the performance conditions are fulfilled, ending on the date on
which the relevant employees become fully entitled to the award
('vesting date'). The cumulative expense recognised for
equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the number of equity instruments that, in the opinion
of the Directors and based on the best available estimate at that
date, will ultimately vest (or in the case of an instrument subject
to a market condition, be treated as vesting as described below).
The consolidated income statement charge or credit for a period
represents the movement in cumulative expense recognised as at the
beginning and end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance conditions are satisfied.
Taxation
The current income tax expense is based on taxable profits for
the period, after any adjustments in respect of prior periods. It
is calculated using taxation rates enacted or substantively enacted
by the balance sheet date and is measured at the amount expected to
be recovered from or paid to the taxation authorities.
Provision is made for deferred tax liabilities, or credit taken
for deferred tax assets, on all material temporary differences
between the tax base of assets and liabilities and their carrying
values in the consolidated financial statements.
The principal temporary differences arise from accelerated
capital allowances, provisions for pensions and other
post-retirement benefits, provisions for share-based payments and
unutilised losses incurred in overseas jurisdiction.
Deferred tax assets are recognised to the extent that it is
regarded as probable that future taxable profits will be available
against which the temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the periods in which the asset or liability will be
settled based on the tax rates enacted or substantively enacted by
the balance sheet date.
Provisions
Provisions are recognised when: the group has a present legal or
constructive obligation as a result of past events; it is probable
that an outflow of resources will be required to settle the
obligation; and the amount can be reliably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognised as interest
expense.
Pensions and post-retirement benefits
The group operates a number of pension schemes. These include
both defined benefit and defined contribution plans.
Defined benefit plans
The defined benefit pension liability or asset in the balance
sheet comprises the total for each plan of the present value of the
defined benefit obligation less any past service cost not yet
recognised and less the fair value of plan assets out of which the
obligations are to be settled directly. Plan assets are measured at
fair value based on market price information and in the case of
quoted securities, the published bid price. Plan liabilities are
measured on an actuarial basis, using the projected unit credit
method and discounted at an interest rate equivalent to the current
rate of return on a high quality corporate bond of equivalent
currency and term to the plan liabilities.
The movement in the defined benefit pension asset or liability
in the balance sheet consists of four main elements:
- The service cost of providing pension benefits to employees
for the period which is recognised in the consolidated income
statement.
- A charge representing the unwinding of the discount on the
plan liabilities during the year which is included within
administrative expenses.
- A credit representing the expected return on the plan assets
during the year which is included within administrative expenses.
This credit is based on the market value of the plan assets, and
expected rates of return, at the beginning of the period.
- Actuarial gains and losses. These may result from: differences
between the expected return and the actual return on plan assets;
differences between the actuarial assumptions underlying the plan
liabilities and actual experience during the year; or changes in
the actuarial assumptions used in the valuation of the plan
liabilities. Actuarial gains and losses, and taxation thereon, are
recognised immediately in other comprehensive income.
Changes to benefits under a defined benefit plan are accounted
for as follows:
- Past service cost is the increase in the present value of the
defined benefit obligation for employee service in prior periods,
resulting from changes to post-employment benefits. Past service
costs are recognised in profit or loss on a straight-line basis
over the vesting period or immediately if the benefits have
vested.
- When a settlement (eliminating all obligations for part or all
of the benefits already accrued) or a curtailment (reducing future
obligations as a result of a material reduction in the scheme
membership or a reduction in future entitlement) occurs the
obligation and related plan assets are re-measured using current
actuarial assumptions and the resultant gain or loss is recognised
in the consolidated income statement during the period in which the
settlement or curtailment occurs.
Any net pension assets arising are assessed for
restrictions.
Defined contribution plans
Under defined contribution plans, contributions payable for the
period are charged to the consolidated income statement as an
operating expense.
Employee benefits
Wages, salaries, bonuses and paid annual leave are accrued in
the period in which the associated services are rendered by the
employees of the group.
Leases
Leases in which substantially all the risks and rewards of
ownership of the leased asset are retained by the lessor are
classified as operating leases by the group. Leases in which the
group assumes substantially all the risks and rewards of ownership
are classified as finance leases.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease. Any
lease incentives received are credited to the consolidated income
statement on a straight-line basis over the term of the leases to
which they relate.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less, which are readily
convertible into known amounts of cash and subject to insignificant
risk of changes in value. For the purposes of the statement of cash
flows, bank overdrafts repayable on demand are a component of cash
and cash equivalents.
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are
recognised at the lower of their original invoiced value and
recoverable amount.
Provision is made when collection of the full amount is no
longer considered probable. Balances are written off when the
probability of recovery is assessed as being remote.
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised
in the balance sheet at fair value less directly attributable
transaction costs and are subsequently measured at amortised cost
using the effective interest rate method.
Gains and losses arising on the repurchase, settlement or
otherwise cancellation of liabilities are recognised respectively
in finance income and finance cost.
Foreign currencies
Functional and presentation currency
The consolidated financial statements of the group are presented
in pounds sterling. The presentation currency of the consolidated
financial statements is the same as the functional currency of the
company.
Transactions and balances
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are translated at the
rate of exchange ruling at the balance sheet date. All differences
are taken to the consolidated income statement, except when hedge
accounting is applied and for differences in monetary assets and
liabilities that form part of the Groups net investment in a
foreign operation. These are taken in other comprehensive income
until the disposal of the net investment, at which time they are
recognised in profit and loss.
Foreign operations
The consolidated income statement and statement of cash flows of
foreign operations are translated at the average rate of exchange
during the period. The balance sheet is translated at the rate
ruling at the reporting date. Exchange differences arising on
opening net assets and arising on the translation of results at an
average rate compared to a closing rate are both recognised in
other comprehensive income. On disposal of a foreign operation, the
accumulated exchange differences previously recognised in other
comprehensive income are included in the consolidated income
statement.
Certain of the group's financial instruments are classified as
net investment hedges when they hedge the group's net investment in
foreign operations. See derivative financial instruments and
hedging policy above for further detail.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the board of directors of the
company.
Issued share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Other reserves
Share premium account
The share premium account is used to record the excess of
proceeds over the nominal value on the issue of shares.
Own shares reserve
The own shares reserve is used to record purchases by the group
of its own shares, which will be distributed to employees as and
when share awards made under the Britvic employee share plans
vest.
Share scheme reserve
The share scheme reserve is used to record the movements in
equity corresponding to the cost recognised in respect of
equity-settled share based payment transactions. Amounts recognised
in the share scheme reserve are transferred to retained losses upon
subsequent settlement of any awards that vest either by issue or
purchase of the group's shares, or when awards lapse.
Hedging reserve
The hedging reserve records the effective portion of movements
in the fair value of forward exchange contracts, interest rate and
cross currency swaps that have been designated as hedging
instruments in cash flow hedges.
Translation reserve
The translation reserve includes cumulative net exchange
differences on translation into the presentational currency of
items recorded in group entities with a non-sterling functional
currency net of amounts recognised in respect of net investment
hedges.
Merger reserve
The merger reserve arose as a result of the non-pre-emptive
share placement which took place on 21 May 2010. It was executed
using a structure which created a merger reserve under Section
612-3 of the Companies Act 2006.
Own shares
The cost of own shares held in employee share trusts and in
treasury is deducted from shareholders' equity until the shares are
cancelled, reissued or disposed. Where such shares are subsequently
sold or reissued, the fair value of any consideration received is
also included in shareholders' equity.
Exceptional and other items
The group presents items as exceptional and other items on the
face of the consolidated income statement to allow shareholders to
understand better the elements of financial performance in the
year, so as to facilitate comparison with prior periods and to
assess trends in financial performance more readily.
-- 'Exceptional' items include those significant items of income
and expense which, because of the size, nature and infrequency of
the events giving rise to them, merit separate presentation.
-- 'Other' items include fair value movements on financial
instruments where hedge accounting cannot be applied. These items
have been included within 'exceptional and other items' because
they are non-cash and do not form part of how management assesses
performance.
Key judgements and sources of estimation uncertainty
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported for assets and liabilities as at the balance sheet date
and the amounts reported for revenues and expenses during the year.
However, the nature of estimation means that the actual outcomes
could differ from those estimates. In the process of applying the
group's accounting policies, management has made the following
judgements which have the most significant effect on the amounts
recognised in the financial statements.
Post-retirement benefits
The determination of the pension and other post-retirement
benefits cost and obligation is based on assumptions determined
with independent actuarial advice. The assumptions include discount
rate, inflation, pension and salary increases, expected return on
scheme assets, mortality and other demographic assumptions. These
key assumptions are disclosed in note 22.
Impairment of goodwill and intangible assets with indefinite
lives
Determining whether goodwill and intangible assets with
indefinite lives are impaired requires an estimation of the value
in use of the cash generating units to which the goodwill /
intangible asset has been allocated. The value in use calculation
requires an estimate of the future cash flows expected to arise
from the cash-generating unit and a suitable discount rate in order
to calculate present value. Further details are given in note
15.
Cross currency interest rate swaps
The group measures cross currency interest rate swaps at fair
value at each balance sheet date. The fair value represents the net
present value of the difference between the projected cash flows at
the swap contract rate and the relevant exchange/interest rate for
the period from the balance sheet date to the contracted expiry
date. The calculation therefore uses estimates of present value,
future foreign exchange rates and interest rates. Information
regarding cross currency interest rate swaps is provided in notes
21 and 25.
New standards adopted in the current period
During the period, the group adopted a number of interpretations
and amendments to standards which had an immaterial impact on the
consolidated financial statements of the group.
New standards and interpretations not applied
The group has not applied the following IFRSs, which may be
applicable to the group, that have been issued but are not yet
effective:
Effective date
- periods commencing
on or after
International Financial Reporting Standards
(IFRS)
IFRS 7 Amendment to IFRS 7 - Offsetting 1 January 2013
of assets and liabilities
IFRS 9 Financial Instruments - Classification 1 January 2015
and measurement
IFRS 10 Consolidated financial statements 1 January 2013
IFRS 11 Joint arrangements 1 January 2013
IFRS 12 Disclosures of interests in other 1 January 2013
entities
IFRS 13 Fair value measurement 1 January 2013
International Accounting Standards (IAS)
IAS 19 IAS 19 (revised 2011) - Employee 1 January 2013
benefits
IAS 27 IAS 27 (revised 2011) - Separate 1 January 2013
financial statements
IAS 32 Amendment to IAS 32 - Offsetting 1 January 2014
of assets and liabilities
IAS 36 Amendment to IAS 36 - Recoverable 1 January 2014
amount disclosures for non- financial
assets
IAS 39 Amendment to IFRS 9 - Novation 1 January 2014
of derivatives and continuation
of hedge accounting
Other
Annual improvements Annual improvements 2011 1 January 2013
IFRIC Interpretation IFRIC 21 - Levies 1 January 2014
21
The directors do not anticipate that the adoption of these
standards, which will be adopted in line with the effective date
will have a material impact on the group's reported income or net
assets in the period, with the exception of IAS 19 revised which is
not anticipated to have a material impact on net assets, but the
impact on the reported income of the group is not possible to
determine as it will depend on conditions at the time of
adoption.
The most significant change for Britvic under IAS 19 revised is
the replacement of interest cost and expected return on plan assets
with a finance cost component which is determined by applying the
same discount rate used to measure the defined benefit obligation
to the net defined benefit liability or asset. The difference
between the actual return on plan assets and the discount rate will
be presented in other comprehensive income. The effect at the date
of adoption will depend on market interest rates, rates of return
and the actual mix of scheme assets at that time. Other changes
will include the treatment of expenses paid in relation to the
plans and the narrative disclosures. The directors consider that
this change will not have a material impact on the Group
consolidated results.
4. Segmental reporting
For management purposes, the group is organised into business
units and has five reportable segments as follows:
-- GB Stills - United Kingdom excluding Northern Ireland
-- GB Carbs - United Kingdom excluding Northern Ireland
-- Ireland - Republic of Ireland and Northern Ireland
-- France
-- International
These business units sell soft drinks into their respective
markets.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is
evaluated based on brand contribution. This is defined as revenue
less material costs and all other marginal costs that management
considers to be directly attributable to the sale of a given
product. Such costs include brand specific advertising and
promotion costs, raw materials and marginal production and
distribution costs. However, group financing (including finance
costs) and income taxes are managed on a group basis and are not
allocated to reportable segments.
Transfer prices between reportable segments are on an arm's
length basis in a manner similar to transactions with third
parties.
52 weeks ended 29 GB GB Carbs Total Ireland France International Adjustments Total
September 2013 Stills GB
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Revenue
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
- External 340.1 536.4 876.5 136.9 271.0 37.5 - 1,321.9
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
- Inter-segment*** 22.9 8.3 31.2 18.0 1.4 - (50.6) -
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
363.0 544.7 907.7 154.9 272.4 37.5 (50.6) 1,321.9
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Brand contribution 154.5 200.1 354.6 49.0 67.9 14.1 - 485.6
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Non-brand advertising
& promotion* (7.3)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Fixed supply chain** (100.7)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Selling costs** (124.5)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Overheads and other
costs* (118.1)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Operating profit
before exceptional
& other items 135.0
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Finance costs before
exceptional & other
items (26.9)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Exceptional & other
items (25.5)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Profit before tax 82.6
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
52 weeks ended 30 GB GB Carbs Total Ireland France International Adjustments Total
September 2012 Stills GB
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Revenue
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
- External 321.7 517.9 839.6 138.7 248.8 29.3 - 1,256.4
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
- Inter-segment*** 15.0 9.6 24.6 8.0 0.8 - (33.4) -
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
336.7 527.5 864.2 146.7 249.6 29.3 (33.4) 1,256.4
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Brand contribution 141.2 188.7 329.9 44.6 59.2 8.3 - 442.0
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Non-brand advertising
& promotion* (7.8)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Fixed supply chain** (100.3)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Selling costs** (118.0)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Overheads and other
costs* (103.2)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Operating profit
before exceptional
& other items 112.7
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Finance costs before
exceptional & other
items (28.3)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Exceptional & other
items (6.9)
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
Profit before tax 77.5
----------------------- -------- --------- ------ -------- ------- -------------- ------------ --------
* Included within 'administration expenses' in the consolidated
income statement. Costs included within 'overheads and other costs'
relate to central costs including salaries, IT maintenance,
depreciation and amortisation.
** Included within 'selling and distribution costs' in the consolidated income statement
*** Inter-segment revenues are eliminated on consolidation
Geographic information
Revenues from external customers
The analysis below is based on the location where the sale
originated.
2013 2012
GBPm GBPm
--------------------- -------- --------
United Kingdom 940.3 900.4
Republic of Ireland 110.6 107.2
France 271.0 248.8
--------------------- -------- --------
Total revenue 1,321.9 1,256.4
--------------------- -------- --------
Non-current assets
2013 2012
GBPm GBPm
--------------------- ------ ------
United Kingdom 236.7 260.1
Republic of Ireland 107.8 104.8
France 192.0 181.3
--------------------- ------ ------
Total 536.5 546.2
--------------------- ------ ------
Non-current assets for this purpose consist of property, plant
and equipment, intangible assets and other receivables.
5. Exceptional and other items
Exceptional and other items are those items of financial
performance that management believe should be separately disclosed
by virtue of the size, nature and infrequency of the events giving
rise to them to allow shareholders to better understand the
elements of financial performance in the period so as to facilitate
comparison with prior periods and to assess trends in financial
performance more readily.
Unless otherwise stated, exceptional and other items are
included within administration expenses in the consolidated income
statement.
52 weeks ended 52 weeks ended
29 September 30 September
2013 2012
GBPm GBPm
------------------------------- ----- --------------- ---------------
Net pension gain (a) - 21.1
Asset impairments (b) (12.9) (14.9)
Strategic restructuring costs (c) (10.6) (11.0)
Aborted merger costs (d) (9.6) -
Property and relocation costs (e) - (1.3)
Other fair value movements* (f) 7.6 (0.8)
Total exceptional and other
items before tax (25.5) (6.9)
-------------------------------------- --------------- ---------------
* For the 52 weeks ended 29 September 2013, a gain of GBP6.9m is
included within administration expenses (52 weeks ended 30
September 2012: GBP1.3m gain) and a gain of GBP0.7m is included
within finance costs (52 weeks ended 30 September 2012: GBP2.1m
loss) in the consolidated income statement.
a) In 2012, the net pension gain related to an Ireland pension curtailment gain.
b) In 2013, asset impairments relates to the planned closure of
two factories as part of the strategic cost initiatives announced
in May 2013.
In 2012, asset impairments related to the impairment of SAP
implementation costs in Ireland.
c) Strategic restructuring costs in 2013 relate to the
implementation of cost initiatives announced in May 2013, including
costs associated with the closure of two factories and planned
changes to the business operating model.
In 2012, restructuring costs included GB-related restructuring
costs of GBP3.7m, Ireland restructuring costs of GBP5.2m and
corporate acquisition due diligence costs of GBP2.1m.
d) In 2013, costs related to the previously proposed merger of Britvic plc and A.G.Barr plc.
e) In 2012, property and relocation costs related to the
transfer of the Britvic plc head office from Chelmsford to Hemel
Hempstead and a credit against an onerous lease provision relating
to rental income received from a sublet during that year.
f) Other fair value movements relate to the fair value movement
of derivative financial instruments where hedge accounting cannot
be applied.
Details of the tax implications of exceptional items are given
in note 10a.
6. Operating profit / (loss)
This is stated after charging:
2013 2012
GBPm GBPm
--------------------------------------------------- ------ ------
Cost of inventories recognised as an expense 646.9 624.6
Including: write-down of inventories to net
realisable value 1.5 3.6
Research and development expenditure written
off 0.6 0.6
Net foreign currency exchange differences 1.1 2.4
Depreciation of property, plant and equipment 36.6 34.4
Amortisation of intangible assets 7.1 9.5
Operating lease payments - minimum lease payments 13.1 21.4
--------------------------------------------------- ------ ------
7. Auditor's remuneration
2013 2012
GBPm GBPm
----------------------------------------------------- ----- -----
Audit of the group financial statements 0.2 0.2
Audit of subsidiaries 0.4 0.4
----------------------------------------------------- ----- -----
Total audit 0.6 0.6
----------------------------------------------------- ----- -----
Audit related assurance services - -
Other assurance services 0.1 -
All taxation advisory services - 0.2
Corporate finance services (excluding amounts
included above in tax advisory and other assurance
services) 0.7 1.2
Other non-audit services not covered above 1.6 1.3
----------------------------------------------------- ----- -----
Total non-audit services 2.4 2.7
----------------------------------------------------- ----- -----
Total fees 3.0 3.3
----------------------------------------------------- ----- -----
8. Staff costs
2013 2012
GBPm GBPm
------------------------------------------- ------ ------
Wages and salaries* 119.4 125.4
Social security costs 20.3 19.0
Net pension charge/(income) (note 22) ** 8.7 (7.3)
Expense of share based compensation (note
28) 6.2 3.0
------------------------------------------- ------ ------
154.6 140.1
------------------------------------------- ------ ------
* GBP6.7m (2012: GBP6.4m) of this is included within 'strategic
restructuring costs' in exceptional and other items (note 5).
** In 2012, the pension income includes a curtailment gain of
GBP21.3m in relation to changes in the Ireland defined benefit
pension plan which is included within exceptional and other items
(note 5).
2013 2012
GBPm GBPm
----------------------------------------------- ----- -----
Directors' emoluments 2.7 1.5
Aggregate gains made by directors on exercise
of options - 0.7
2013 2012
No. No.
----------------------------------------------- ----- -----
Number of directors accruing benefits under - -
defined benefit schemes
----------------------------------------------- ----- -----
The average monthly number of employees during the period was
made up as follows:
2013 2012
No. No.
--------------------- ------ ------
Distribution 331 370
Production 1,508 1,465
Sales and marketing 979 1,038
Administration 458 464
--------------------- ------ ------
3,276 3,337
--------------------- ------ ------
9. Finance costs
2013 2012
GBPm GBPm
------------------------------------------- ------ -----
Bank loans, overdrafts and loan notes 26.9 28.3
Fair value movement on interest rate swap
(see note 25) (0.7) 2.1
------------------------------------------- ------ -----
Total finance costs 26.2 30.4
------------------------------------------- ------ -----
10. Taxation
a) Tax on profit on continuing operations
2013
------------------------------------
Before Exceptional Total
exceptional & other
& other items
items
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------ -------
Income statement
Current income tax
Current income tax (charge) / credit (26.9) 3.3 (23.6)
Amounts over/(under) provided in
previous years 1.2 (1.1) 0.1
--------------------------------------------- ------------- ------------ -------
Total current income tax (charge)
/ credit (25.7) 2.2 (23.5)
--------------------------------------------- ------------- ------------ -------
Deferred income tax
Origination and reversal of temporary
differences (0.5) 1.4 0.9
Impact of change in UK tax rate on
deferred tax liability 3.0 0.2 3.2
Amounts (under)/over provided in
previous years (2.3) 1.0 (1.3)
Total deferred tax credit 0.2 2.6 2.8
--------------------------------------------- ------------- ------------ -------
Total tax (charge) / credit in the
income statement (25.5) 4.8 (20.7)
--------------------------------------------- ------------- ------------ -------
Statement of comprehensive income
Current tax on additional pension
contributions 3.1
Deferred tax on actuarial losses
on defined benefit pension schemes 4.4
Deferred tax in respect of cash flow
hedges accounted for in the hedging
reserve 0.4
Tax on exchange differences accounted
for in the translation reserve (2.9)
Deferred tax on other temporary differences 0.2
--------------------------------------------- ------------- ------------ -------
Total tax credit in the statement
of comprehensive income 5.2
--------------------------------------------- ------------- ------------ -------
Statement of changes in equity
Current tax on share options exercised 1.0
Deferred tax on share options granted
to employees (0.3)
Total tax credit in the statement
of changes in equity 0.7
---------------------------------------- ------
2012
------------------------------------
Before Exceptional Total
exceptional & other
& other items
items
GBPm GBPm GBPm
--------------------------------------- ------------- ------------ -------
Income statement
Current income tax
Current income tax (charge) / credit (13.0) 3.2 (9.8)
Amounts underprovided in previous
years (2.1) (0.3) (2.4)
--------------------------------------- ------------- ------------ -------
Total current income tax (charge)
/ credit (15.1) 2.9 (12.2)
--------------------------------------- ------------- ------------ -------
Deferred income tax
Origination and reversal of temporary
differences (8.8) (1.7) (10.5)
Impact of change in UK tax rate on
deferred tax liability 2.0 0.2 2.2
Amounts overprovided in previous
years 0.4 - 0.4
Total deferred tax charge (6.4) (1.5) (7.9)
--------------------------------------- ------------- ------------ -------
Total tax (charge) / credit in the
income statement (21.5) 1.4 (20.1)
--------------------------------------- ------------- ------------ -------
Statement of comprehensive income
Current tax on additional pension
contributions 4.6
Deferred tax on actuarial losses
on defined benefit pension schemes (7.9)
Deferred tax in respect of cash flow
hedges accounted for in the hedging
reserve 2.1
Tax on exchange differences accounted
for in the translation reserve 4.0
Total tax credit in the statement
of comprehensive income 2.8
--------------------------------------- ------------- ------------ -------
Statement of changes in equity
Current tax on share options exercised 0.6
Deferred tax on share options granted
to employees 1.0
Total tax credit in the statement
of changes in equity 1.6
---------------------------------------- ----
b) Reconciliation of the total tax charge
The tax expense in the consolidated income statement is higher
(2012: higher) than the standard rate of corporation tax in the UK
of 23.5% (2012: 25%). The differences are reconciled below:
2013
------------------------------------
Before Exceptional Total
exceptional & other
& other items
items
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------ -------
Profit / (loss) before tax 108.1 (25.5) 82.6
--------------------------------------------- ------------- ------------ -------
Profit / (loss) multiplied by the UK
average rate of corporation tax of 23.5% (25.4) 6.0 (19.4)
Permanent differences 0.4 (0.6) (0.2)
Impact of change in UK tax rate on deferred
tax liability 3.0 0.2 3.2
Tax underprovided in previous years (1.1) (0.1) (1.2)
Overseas tax rates (2.4) (0.7) (3.1)
(25.5) 4.8 (20.7)
--------------------------------------------- ------------- ------------ -------
Effective income tax rate 23.6% 25.0%
--------------------------------------------- ------------- ------------ -------
2012
------------------------------------
Before Exceptional Total
exceptional & other
& other items
items
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------ -------
Profit / (loss) before tax 84.4 (6.9) 77.5
--------------------------------------------- ------------- ------------ -------
Profit / (loss) multiplied by the UK
average rate of corporation tax of 25% (21.1) 1.7 (19.4)
Permanent differences 1.2 (0.6) 0.6
Impact of change in UK tax rate on deferred
tax liability 2.0 0.2 2.2
Tax underprovided in previous years (1.7) (0.3) (2.0)
Overseas tax rates (1.9) 0.4 (1.5)
(21.5) 1.4 (20.1)
--------------------------------------------- ------------- ------------ -------
Effective income tax rate 25.5% 25.9%
--------------------------------------------- ------------- ------------ -------
c) Unrecognised tax items
The temporary differences associated with investments in
subsidiaries for which a deferred tax liability has not been
recognised total GBP5.6m (2012: GBP3.8m). No deferred tax has been
provided in respect of these differences, since the timing of the
reversals can be controlled and it is probable that the temporary
differences will not reverse in the future.
The group expects that future remittances of earnings from its
overseas subsidiaries will be covered by the UK dividend exemption
and so the un-remitted earnings of these subsidiaries are not
disclosed above.
A deferred tax asset of GBP0.4m (2012: GBPnil) has not been
recognised in respect of tax losses.
d) Impact of rate change
Finance Act 2013 enacted reductions in the UK corporation tax
rate from 23% to 21% from 1 April 2014 and to 20% from 1 April
2015. The effect of the new rate is to reduce the deferred tax
provision by a net GBP2.1m, comprising a credit of GBP3.2m to the
income statement and a charge of GBP1.1m to the consolidated
statement of comprehensive income.
e) Deferred tax
The deferred tax included in the balance sheet is as
follows:
2013 2012
GBPm GBPm
Deferred tax liability
Accelerated capital allowances (6.8) (9.8)
Acquisition fair value adjustments (17.6) (17.8)
Other temporary differences (0.1) (0.1)
Post employment benefits (13.5) (19.5)
Deferred tax liability (38.0) (47.2)
------------------------------------------------------ ------- -------
Deferred tax asset
Employee incentive plan 3.7 3.6
Unutilised losses incurred in overseas jurisdictions 5.1 4.4
Other temporary differences 1.4 5.1
Deferred tax asset 10.2 13.1
------------------------------------------------------ ------- -------
Net deferred tax liability (27.8) (34.1)
------------------------------------------------------ ------- -------
Certain deferred tax assets and liabilities have been offset.
The following is the analysis of the deferred tax balances (after
offset) for financial reporting purposes:
2013 2012
GBPm GBPm
------------------------------ ------- -------
Net deferred tax assets - -
Net deferred tax liabilities (27.8) (34.1)
------------------------------ ------- -------
(27.8) (34.1)
------------------------------ ------- -------
The deferred tax included in the consolidated income statement
is as follows:
2013 2012
GBPm GBPm
Employee incentive plan 0.4 (1.1)
Accelerated capital allowances 3.0 7.8
Post employment benefits 1.5 (19.0)
Acquisition fair value adjustments 1.3 0.9
Unutilised losses incurred in overseas jurisdictions 0.7 3.1
Other temporary differences (4.1) 0.4
Deferred tax credit/(charge) 2.8 (7.9)
------------------------------------------------------ ------ -------
In 2013, GBP2.6m credit of the group's overall deferred tax
credit relates to exceptional items (2012: GBP1.5m charge).
11. Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit / (loss) for the period attributable to the equity
shareholders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to the ordinary equity shareholders of
the parent by the weighted average number of ordinary shares
outstanding during the period plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in
the basic and diluted earnings per share computations:
2013 2012
GBPm GBPm
------------------------------------------------------ ------ ------ ------
Basic earnings per share
Profit for the period attributable to equity
shareholders 61.9 57.4
------------------------------------------------------ ------ ------ ------
Weighted average number of ordinary shares
in issue for basic earnings per share 243.2 241.6
------------------------------------------------------ ------ ------ ------
Basic earnings per share 25.5p 23.8p
------------------------------------------------------ ------ ------ ------
Diluted earnings per share
Profit for the period attributable to equity
shareholders 61.9 57.4
------------------------------------------------------ ------ ------ ------
Weighted average number of ordinary shares
in issue for diluted earnings per share 244.7 256.6
------------------------------------------------------ ------ ------ ------
Diluted earnings per share 25.3p 22.4p
------------------------------------------------------ ------ ------ ------
The group presents as exceptional and other items on the face
of the consolidated income statement, those significant items
of income and expense which, because of the size, nature and
infrequency of the events giving rise to them, merit separate
presentation to allow shareholders to understand better the
elements of financial performance in the period, so as to facilitate
comparison with prior periods and to assess trends in financial
performance more readily.
To this end, basic and diluted earnings per share are also
presented on this basis with the amortisation of acquisition
related intangible assets also added back using the weighted
average number of ordinary shares for both basic and diluted
amounts as per the table below.
The group modifies adjusted diluted earnings per share to exclude
the impact of share options that have been granted but not
yet vested, if applicable.
2013 2012
Note GBPm GBPm
------------------------------------------------------ ------ ------ ------
Adjusted basic earnings per share
Profit for the period attributable to equity
shareholders 61.9 57.4
Add: Net impact of exceptional and other
items 20.7 5.5
Add: Intangible assets amortisation (acquisition
related) 14 2.9 2.9
------------------------------------------------------ ------ ------ ------
85.5 65.8
------------------------------------------------------ ------ ------ ------
Weighted average number of ordinary shares
in issue for basic earnings per share 243.2 241.6
------------------------------------------------------ ------ ------ ------
Adjusted basic earnings per share 35.2p 27.2p
------------------------------------------------------ ------ ------ ------
Adjusted diluted earnings per share
Profit for the period attributable to equity
shareholders before exceptional items and
other items and acquisition related intangible
assets amortisation 85.5 65.8
------------------------------------------------------ ------ ------ ------
Weighted average number of ordinary shares
in issue for diluted earnings per share 244.7 248.8
------------------------------------------------------ ------ ------ ------
Adjusted diluted earnings per share 34.9p 26.5p
------------------------------------------------------ ------ ------ ------
12. Dividends paid and proposed
2013 2012
GBPm GBPm
-------------------------------------------------- ----- -----
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2012: 12.4p per share (2011:
12.6p per share) 29.6 29.9
Interim dividend for 2013: 5.4p per share (2012:
5.3p per share) 12.9 12.6
Dividends paid 42.5 42.5
-------------------------------------------------- ----- -----
Proposed
Final dividend for 2013: 13.0p per share (2012:
12.4p per share) 31.7 30.1
-------------------------------------------------- ----- -----
13. Property, plant and equipment
Freehold Leasehold Plant Fixtures, Total
land land and fittings,
and and machinery tools
buildings buildings and equipment
GBPm GBPm GBPm GBPm GBPm
------------------------------ ----------- ----------- ----------- --------------- --------
At 2 October 2011, net
of accumulated depreciation
and impairment 59.9 28.7 105.1 50.1 243.8
Exchange differences (1.4) (0.6) (2.9) (0.1) (5.0)
Additions 3.5 0.4 20.2 15.5 39.6
Disposals at cost (0.9) - (12.1) (7.5) (20.5)
Depreciation eliminated
on disposals 0.1 - 11.0 6.3 17.4
Depreciation charge for
the year (2.1) (0.7) (19.6) (12.0) (34.4)
Impairment - - - (4.3) (4.3)
At 30 September 2012, net
of accumulated depreciation
and impairment 59.1 27.8 101.7 48.0 236.6
Exchange differences 1.0 0.4 1.8 - 3.2
Additions 3.8 2.5 15.2 6.3 27.8
Disposals at cost (0.1) - (3.5) (12.4) (16.0)
Depreciation eliminated
on disposals 0.1 - 1.9 9.9 11.9
Depreciation charge for
the year (2.4) (0.9) (20.3) (13.0) (36.6)
Impairment * - (0.8) (10.4) - (11.2)
------------------------------ ----------- ----------- ----------- --------------- --------
At 29 September 2013 net
of accumulated depreciation
and impairment 61.5 29.0 86.4 38.8 215.7
------------------------------ ----------- ----------- ----------- --------------- --------
At 29 September 2013
Cost (gross carrying amount) 83.9 43.1 272.9 162.6 562.5
Accumulated depreciation
and impairment (22.4) (14.1) (186.5) (123.8) (346.8)
------------------------------ ----------- ----------- ----------- --------------- --------
Net carrying amount 61.5 29.0 86.4 38.8 215.7
------------------------------ ----------- ----------- ----------- --------------- --------
At 30 September 2012
Cost (gross carrying amount) 77.9 39.9 255.1 166.6 539.5
Accumulated depreciation
and impairment (18.8) (12.1) (153.4) (118.6) (302.9)
------------------------------ ----------- ----------- ----------- --------------- --------
Net carrying amount 59.1 27.8 101.7 48.0 236.6
------------------------------ ----------- ----------- ----------- --------------- --------
* The impairment in 2013 principally relates to the write down
of plant and machinery following the strategic cost initiative
announcement in May 2013, and has been included within exceptional
and other items (see note 5).
Finance leases
The net book value of freehold land and buildings and plant and
machinery includes GBP0.2m and GBP0.1m respectively (2012: GBP0.2m
and GBP0.3m respectively) in respect of assets held under finance
leases. The assets are pledged as security for the finance lease
liabilities.
14. Intangible assets
Trademarks Franchise Customer Software Goodwill Total
rights lists costs
GBPm GBPm GBPm GBPm GBPm GBPm
Cost as at 2 October
2011, net of accumulated
amortisation 99.9 22.6 40.3 32.3 142.8 337.9
Exchange differences (7.4) (1.6) (2.9) (0.2) (5.9) (18.0)
Additions - - - 5.4 - 5.4
Amortisation charge
for the period - (0.7)* (2.2)* (6.6) - (9.5)
Impairment - - - (10.6) - (10.6)
Cost as at 30
September 2012,
net of accumulated
amortisation 92.5 20.3 35.2 20.3 136.9 305.2
Exchange differences 5.0 1.0 1.8 - 3.9 11.7
Additions - - - 8.9 - 8.9
Amortisation charge
for the period - (0.7)* (2.2)* (4.2) - (7.1)
Impairment ** - - - - (1.7) (1.7)
At 29 September
2013 97.5 20.6 34.8 25.0 139.1 317.0
--------------------------- ----------- ---------- --------- --------- --------- --------
At 29 September
2013
Cost (gross carrying
amount) 126.6 24.8 49.7 65.5 205.6 472.2
Accumulated amortisation
and impairment (29.1) (4.2) (14.9) (40.5) (66.5) (155.2)
--------------------------- ----------- ---------- --------- --------- --------- --------
Net carrying amount 97.5 20.6 34.8 25.0 139.1 317.0
--------------------------- ----------- ---------- --------- --------- --------- --------
At 30 September
2012
Cost (gross carrying
amount) 120.1 23.6 47.2 56.0 198.9 445.8
Accumulated amortisation
and impairment (27.6) (3.3) (12.0) (35.7) (62.0) (140.6)
--------------------------- ----------- ---------- --------- --------- --------- --------
Net carrying amount 92.5 20.3 35.2 20.3 136.9 305.2
--------------------------- ----------- ---------- --------- --------- --------- --------
* Acquisition related amortisation (see note 11).
** The impairment in 2013 relates to the write down of goodwill
relating to the Water business following the strategic cost
initiative announcement in May 2013, and has been included within
exceptional and other items (see note 5).
Trademarks
Britvic Ireland and Britvic France
Trademarks represent those trade names acquired which the group
plans to maintain. All trademarks have been allocated an indefinite
life by management. A list of the trademarks held in respect of the
Britvic Ireland and Britvic France segments is shown in note
15.
It is expected, and in line with existing well-established
trademarks within the group, that the trademarks with indefinite
lives in respect of Britvic France and Britvic Ireland will be held
and supported for an indefinite period of time and are expected to
generate economic benefits. The group is committed to supporting
its trademarks and invests in significant consumer marketing
promotional spend.
Franchise rights
Franchise rights represent the franchise agreements acquired as
part of the Britvic Ireland business combination which provide the
long term right to distribute certain soft drinks. These agreements
have been allocated a 35 year useful economic life. As at 29
September 2013 these intangible assets have a remaining useful life
of 29 years. The franchise agreement itself has a contract life
less than the useful economic life. The useful economic life has
been determined on the basis that the renewal of the contract is
highly probable.
Customer lists
Britvic France
Customer lists recognised on the acquisition of Britvic France
relate to those customer relationships acquired. These intangible
assets have been allocated useful economic lives of 20 years. At 29
September 2013 these intangible assets have a remaining useful life
of 17 years.
Britvic Ireland
Customer lists represent those customer relationships acquired
which are valued in respect of the grocery and wholesale
businesses. These customer lists have been allocated useful
economic lives of between 10 and 20 years. At 29 September 2013
these intangible assets have a remaining useful life of between 4
and 14 years.
Software costs
Software is capitalised at cost. These intangible assets have
been assessed as having finite lives and are amortised using the
straight-line method over a period of 3 to 7 years. As at 29
September 2013 these intangible assets have a remaining useful life
of up to 7 years.
Goodwill
Goodwill is subject to an impairment review at each reporting
date in accordance with IAS 36 'Impairment of Assets'. Further
detail is provided in note 15.
Intangible assets recognised on the acquisition of Britvic
Ireland and Britvic France are valued in euros and translated to
sterling at the reporting date.
15. Impairment testing of intangible assets
Carrying amount of goodwill and trademarks with indefinite
lives
The carrying amount of goodwill acquired through business
combinations, and trademarks with indefinite lives recognised as
part of fair value exercises on acquisitions, are attributable to
the following cash-generating units:
2013 2012
GBPm GBPm
Goodwill
Orchid 6.0 6.0
Tango 8.9 8.9
Robinsons 38.6 38.6
Britvic Soft Drinks business (BSD) 7.8 7.8
Water business - 1.7
Britvic Ireland 16.6 15.8
Britvic France 61.2 58.1
------------------------------------------ ------ ------
139.1 136.9
------------------------------------------ ------ ------
2013 2012
GBPm GBPm
------------------------------------------ ------ ------
Trademarks with indefinite lives
Britvic Ireland
Britvic 6.3 6.0
Cidona 5.5 5.3
Mi Wadi 8.6 8.1
Ballygowan 2.4 2.2
Club 14.2 13.5
------------------------------------------ ------ ------
37.0 35.1
------------------------------------------ ------ ------
Britvic France
Teisseire 47.9 45.4
Moulin de Valdonne 3.9 3.7
Pressade 4.5 4.3
Fruité 4.2 4.0
------------------------------------------ ------ ------
60.5 57.4
------------------------------------------ ------ ------
Total Trademarks 97.5 92.5
------------------------------------------ ------ ------
The Britvic Ireland and Britvic France goodwill and trademarks
with indefinite lives are valued in euros and translated into
sterling at the reporting date. The movements in the carrying
amount of goodwill from the prior year relate to translation
movements and the impairment of goodwill related to the Water
business.
With the exception of Britvic Ireland and Britvic France
goodwill, all other goodwill amounts were recognised on
acquisitions made within Britvic GB.
Trademarks with indefinite lives were recognised as part of the
fair value exercises relating to the 2007 acquisition of Britvic
Ireland and the 2010 acquisition of Britvic France. They were
allocated by senior management to the individual cash-generating
units for impairment testing as shown in the table above.
Method of impairment testing
Goodwill and intangible assets with indefinite lives
Impairment reviews of goodwill and intangible assets are
undertaken by senior management annually. Value in use calculations
are performed for each cash-generating unit using cash flow
projections and are based on the latest financial budgets prepared
by senior management and approved by the board of directors. Senior
management expectations are formed in line with performance to date
and experience, as well as available external market data.
The group has considered the impact of the current economic
climate in determining the appropriate discount rate to use in
impairment testing. The applicable pre-tax discount rate for cash
flow projections is:
At 29 September At 30 September
2013 2012
Britvic GB 8% 11%
Britvic Ireland 10% 11%
Britvic France 10% 12%
Cash flows beyond a one year period are extrapolated based on
growth and discount rates as described below.
Key assumptions used in value in use calculations
The following describes each key assumption on which management
has based its cash flow projections to undertake impairment testing
of goodwill.
Volume growth rates - reflect senior management expectations of
volume growth based on growth achieved to date, current strategy
and expected market trends.
Discount rates - reflect senior management's estimate of the
pre-tax cost of capital adjusted where necessary to reflect the
different risks of different countries in which the group operates.
The estimated pre-tax cost of capital is the benchmark used by
management to assess operating performance and to evaluate future
capital investment proposals.
Marginal contribution - being revenue less material costs and
all other marginal costs that management considers to be directly
attributable to the sale of a given product. Marginal contribution
is based on financial budgets approved by the Britvic plc board.
Key assumptions are made within these budgets about pricing,
discounts and costs based on historical data, current strategy and
expected market trends.
Advertising and promotional spend - financial budgets approved
by senior management are used to determine the value assigned to
advertising and promotional spend. This is based on the planned
spend for year one and strategic intent thereafter.
Raw materials price, production and distribution costs, selling
costs and other overhead inflation - the basis used to determine
the value assigned to inflation is the forecast increase in
consumer price indices in the relevant market. This has been used
in all value in use calculations performed.
Intangible assets with finite lives
No indicators of impairment were identified on intangible assets
with finite lives and no impairment was recognised against these
assets.
Results and conclusions
Following the strategic cost initiative announcement in May
2013, the carrying value of goodwill relating to the Water business
of GBP1.7m has been impaired, and the impairment charge recognised
within exceptional and other items (see note 5).
The directors do not consider that a reasonably possible change
in the assumptions used to calculate the value in use of remaining
goodwill and intangible assets would result in any impairment.
16. Other receivables (non-current)
2013 2012
GBPm GBPm
--------------------------------------- ----- -----
Operating lease premiums 1.8 2.3
Prepayments 1.5 1.3
Other 0.5 -
--------------------------------------- ----- -----
Total other receivables (non-current) 3.8 3.6
--------------------------------------- ----- -----
Operating lease premiums relates to the un-amortised element of
lease premiums paid on inception of operating leases.
17. Inventories
2013 2012
GBPm GBPm
-------------------------------------------- ----- -----
Raw materials 27.1 22.2
Finished goods 54.9 42.5
Consumable stores 7.0 7.2
Returnable packaging 1.8 1.9
-------------------------------------------- ----- -----
Total inventories at lower of cost and net
realisable value 90.8 73.8
-------------------------------------------- ----- -----
18. Trade and other receivables (current)
2013 2012
GBPm GBPm
------------------- ------ ------
Trade receivables 236.4 207.7
Other receivables 10.1 19.7
Prepayments 19.6 30.0
------------------- ------ ------
266.1 257.4
------------------- ------ ------
Trade receivables are non-interest bearing and are generally on
credit terms usual for the markets in which the group operates. As
at 29 September 2013, trade receivables at nominal value of GBP1.6m
(2012: GBP2.5m) were impaired and fully provided against. Movements
in the provision for impairment of receivables were as follows:
Total
GBPm
------------------------- ------
At 2 October 2011 1.2
Charge for period 1.9
Utilised (0.5)
Unused amounts reversed (0.1)
At 30 September 2012 2.5
Charge for period 2.5
Utilised (1.9)
Unused amounts reversed (1.5)
At 29 September 2013 1.6
------------------------- ------
The group takes the following factors into account when
considering whether a provision for impairment should be made for
trade receivables:
-- Payment performance history; and
-- External information available regarding credit ratings.
The ageing analysis of trade receivables is as follows:
Past due but not impaired
-------------------------------------------------
Total Neither <30 30 - 60 - 90 - > 120
past days 60 days 90 days 120 days
due nor days
impaired
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------ ---------- ------ --------- --------- ------ -----------
2013 236.4 218.1 7.3 4.1 0.9 1.2 4.8
2012 207.7 196.5 6.7 0.3 2.0 0.5 1.7
The credit quality of trade receivables that are neither past
due nor impaired is considered good. Refer to note 24 for details
of the group's credit risk policy. The group monitors the credit
quality of trade receivables by reference to credit ratings
available externally.
19. Cash and cash equivalents
2013 2012
GBPm GBPm
-------------------------------------------- ------ ------
Cash at bank and in hand 94.0 49.5
-------------------------------------------- ------ ------
Cash and cash equivalents 94.0 49.5
Bank overdrafts (2.5) (1.9)
-------------------------------------------- ------ ------
Cash and cash equivalents in the statement
of cash flows 91.5 47.6
-------------------------------------------- ------ ------
During the year, short-term deposits are made for varying
periods of between one day and one month depending on the immediate
cash requirements of the group, and earn interest at the respective
short-term deposit rates. The fair value of cash and cash
equivalents is equal to the book value.
At 29 September 2013 the group had available GBP400.0m (2012:
GBP400.0m) of un-drawn committed borrowing facilities in respect of
which all conditions precedent had been met.
Where available, the group operates cash pooling arrangements
whereby the net cash position across a number of accounts is
recognised for interest purposes.
20. Issued share capital
The issued share capital is wholly comprised of ordinary shares
carrying one voting right each. The nominal value of each ordinary
share is GBP0.20. There are no restrictions placed on the
distribution of dividends, or the return of capital on a winding up
or otherwise.
Issued, called up and fully paid ordinary No. of shares Value
shares GBP
------------------------------------------- -------------- -----------
At 2 October 2011 241,400,052 48,280,010
Shares issued 944,499 188,900
At 30 September 2012 242,344,551 48,468,910
Shares issued 2,746,477 549,295
At 29 September 2013 245,091,028 49,018,205
------------------------------------------- -------------- -----------
Of the issued and fully paid ordinary shares, 231,547 shares
(2012: 217,994 shares) are own shares held by an employee benefit
trust. This equates to GBP46,309 (2012: GBP43,599) at GBP0.20 par
value of each ordinary share. These shares are held for the purpose
of satisfying the share schemes detailed in note 28.
An explanation of the group's capital management process and
objectives is set out in note 24.
21. Interest bearing loans and borrowings
2013 2012
GBPm GBPm
------------------------------- ------- ------
Current
Finance leases (0.2) (0.3)
Bank loans (0.2) (0.3)
Private placement notes (92.1) -
Less: unamortised issue costs 0.9 -
------------------------------- ------- ------
Total current (91.6) (0.6)
------------------------------- ------- ------
2013 2012
GBPm GBPm
------------------------------- -------- --------
Non-current
Finance leases (0.3) (0.5)
Bank loans (0.8) (1.1)
Private placement notes (459.1) (560.8)
Less: unamortised issue costs 1.9 3.7
Total non-current (458.3) (558.7)
------------------------------- -------- --------
Total interest bearing loans and borrowings (549.9) (559.3)
--------------------------------------------- -------- --------
The table below provides an analysis of amounts included within
current and non-current interest bearing loans and borrowings:
2013 2012
GBPm GBPm
------------------------- -------- --------
Finance leases (0.5) (0.8)
2007 Notes (270.3) (269.9)
2009 Notes (164.8) (171.8)
2010 Notes (112.2) (114.5)
Accrued interest (3.9) (4.6)
Bank loans (1.0) (1.4)
Capitalised issue costs 2.8 3.7
------------------------- -------- --------
(549.9) (559.3)
------------------------- -------- --------
Analysis of changes in interest-bearing loans and borrowings
2013 2012
GBPm GBPm
---------------------------------------------- -------- --------
At the beginning of the period (559.3) (573.2)
Net loans repaid 0.6 0.7
Repayment of finance leases 0.4 0.3
Amortisation and write off of issue costs (0.9) (0.9)
Net translation gain / fair value adjustment 8.6 13.5
Accrued interest 0.7 0.3
---------------------------------------------- -------- --------
At the end of the period (549.9) (559.3)
Derivatives hedging balance sheet debt * 56.1 65.0
---------------------------------------------- -------- --------
Debt translated at contracted rate (493.8) (494.3)
---------------------------------------------- -------- --------
* Represents the element of the fair value of interest rate
currency swaps hedging the balance sheet value of the private
placement notes. This amount has been disclosed separately to
demonstrate the impact of foreign exchange movements which are
included in interest bearing loans and borrowings.
Bank loans
The bank loans classified as non-current are repayable by
December 2018 (2012: December 2018).
Loans outstanding at 29 September 2013 attract interest at an
average rate of 4.03% for euro denominated loans (2012: 4.16%).
There were no sterling denominated bank loans outstanding at 29
September 2013 (2012: GBPnil).
Private placement notes
2007 Notes
On 20 February 2007, Britvic plc issued US$375m and GBP38m of
Senior Notes ('the 2007 Notes') in the United States Private
Placement market (USPP). The amount, maturity and interest terms of
the Notes are shown in the table below:
Interest
Series Tranche Maturity date Amount terms Swap interest
------- -------- ----------------- -------- ------------ --------------
A 7 year 20 February 2014 US$87m US$ fixed UKGBP fixed
at 5.80% at 6.10%
B 7 year 20 February 2014 US$15m US$ LIBOR UKGBP fixed
+ 0.5% at 6.07%
C 7 year 20 February 2014 GBP25m UKGBP fixed n/a
at 6.11%
D 10 year 20 February 2017 US$147m US$ fixed UKGBP fixed
at 5.90% at 5.98%
E 12 year 20 February 2019 US$126m US$ fixed UKGBP fixed
at 6.00% at 5.98%
F 12 year 20 February 2019 GBP13m UKGBP fixed n/a
at 5.94%
------- -------- ----------------- -------- ------------ --------------
Britvic plc makes quarterly or semi-annual interest payments in
US dollars and sterling under these notes. The 2007 Notes are
unsecured and rank pari passu in right of repayment with other
senior unsecured indebtedness of the company. In order to manage
the risk of foreign currency and interest rate fluctuations, the
group has entered into currency interest rate swaps whereby fixed /
floating US dollar interest is swapped for fixed sterling interest.
The swap contracts have the same duration and other critical terms
as the borrowings which they hedge and are designated as part of
effective hedge relationships (see note 25).
2009 Notes
On 17 December 2009, Britvic plc issued US$250.0m of Senior
Notes in the United States Private Placement market ('the 2009
Notes'). The 2009 Notes are additional borrowings to the 2007
Notes.
Britvic plc makes semi-annual interest payments in US dollars
under these notes. The 2009 Notes are unsecured and rank pari passu
in right of repayment with other senior unsecured indebtedness of
the group.
In order to manage foreign exchange risk, interest rate risk and
to ensure an appropriate mix of sterling and euro funding, the
group has entered into a number of cross currency interest rate
swaps. The 2009 Notes were swapped into floating rate sterling and
euro liabilities through a series of US dollar to sterling and,
with the exception of series A, sterling to euro swap instruments.
These cross currency interest rate swap contracts have the same
duration and other critical terms as the relevant borrowings they
hedge and are designated as part of effective hedge relationships
(see note 25).
The amount, maturity and interest terms of the 2009 Notes are
shown in the table below:
Series Tranche Maturity date Amount Interest terms Swap terms
------- -------- -------------- -------- --------------- ------------
A 5 year 17 December US$30m US$ fixed UKGBP LIBOR
2014 at 4.07% + 1.44%
B 7 year 17 December US$75m US$ fixed EURIBOR +
2016 at 4.77% 1.69%
C 8 year 17 December US$25m US$ fixed EURIBOR +
2017 at 4.94% 1.70%
D 10 year 17 December US$ fixed EURIBOR +
2019 US$120m at 5.24% 1.75%
------- -------- -------------- -------- --------------- ------------
The 2009 USPP cross currency swaps converted an amount of US
dollar borrowings into a floating rate euro liability. To mitigate
exposure to changes in euro interest rates on a portion of this
liability, EUR75.0m of interest rate swaps were transacted into a
fixed rate euro liability with an effective date of December 2010.
These interest rate swaps do not form part of an effective hedge
relationship.
2010 Notes
On 17 December 2010, Britvic plc issued US$163m and GBP7.5m of
Senior Notes in the United States Private Placement market ('the
2010 Notes'). The 2010 Notes are additional borrowings to the 2007
and 2009 Notes.
Britvic plc makes semi-annual interest payments in US dollars
and sterling under these notes. The 2010 Notes are unsecured and
rank pari passu in right of repayment with other senior unsecured
indebtedness of the group.
In order to manage foreign exchange risk, interest rate risk and
to ensure an appropriate mix of sterling and euro funding, the
group has entered into a number of cross currency interest rate
swaps. The 2010 Notes were swapped into a mix of fixed and floating
rate sterling and fixed euro liabilities through a series of US
dollar to sterling and sterling to euro swap instruments. These
cross currency interest rate swap contracts have the same duration
and other critical terms as the relevant borrowings they hedge and
are designated as part of effective hedge relationships (see note
25).
The amount, maturity and interest terms of the 2010 Notes are
shown in the table below:
Series Tranche Maturity Amount Interest terms Swap terms
date
------- -------- ------------ -------- --------------- ------------
A 7 year 17 December GBP7.5m UKGBP fixed N/A
2017 at 3.74%
B 7 year 17 December US$25m US$ fixed UKGBP fixed
2017 at 3.45% 3.85%
US$25m US$ fixed EUR fixed
at 3.45% 3.34%
C 10 year 17 December US$ fixed UKGBP LIBOR
2020 US$37m at 4.04% +1.24%
US$ fixed EUR fixed
US$23m at 4.04% 3.85%
US$ fixed UKGBP fixed
US$10m at 4.04% 4.49%
D 12 year 17 December US$ fixed UKGBP LIBOR
2022 US$18m at 4.14% +1.18%
US$ fixed EUR fixed
US$25m at 4.14% 3.97%
------- -------- ------------ -------- --------------- ------------
The 2010 USPP cross currency swaps converted an amount of US
dollar borrowings into a floating rate sterling liability. To
mitigate exposure to interest rates on a portion of this liability,
GBP20.0m of 2-year interest rate swaps were transacted with an
effective date of December 2011. These interest rate swaps do not
form part of an effective hedge relationship.
2014 Notes
In November 2013, the group reached agreement with a number of
investors in the US private placement market to raise an additional
$170.4m equivalent of funding for terms of between 7 and 12 years.
This funding is subject to documentation and due diligence which is
scheduled to be completed in December 2013. Where this funding is
dollar-denominated this has been hedged using cross-currency
interest-rate swaps to meet the group's desired funding profile and
to manage the associated foreign currency risk to the profit and
loss account.
22. Pensions
The group's principal pension scheme for GB employees, the
Britvic Pension Plan (BPP) has both a defined benefit and
contribution section. The defined benefit section was closed to new
members from 1 August 2002 and closed to future accrual for active
members from 1 April 2011, with new members moving to the defined
contribution section for future service benefits.
Contributions are paid to the Plan as determined by the Trustee,
agreed by the company and certified by an independent actuary in
the Schedule of Contributions. The latest formal actuarial
valuation for contribution purposes was carried out as at 31 March
2010. The 31 March 2013 valuation is currently underway and is
expected to be completed by 30 June 2014. Changes to the
contributions payable could result.
The BPP is a limited partner of Britvic Scottish Limited
Partnership (Britvic SLP), which in turn is a limited partner in
both Britvic Property Partnership (Britvic PP) and Britvic Brands
LLP (Britvic Brands). Britvic SLP, Britvic PP and Britvic Brands
are all consolidated by the group. The investment held by BPP does
not represent a plan asset for accounting purposes and is therefore
not included in the fair value of the plan assets.
Properties were transferred to Britvic PP at a value of GBP28.6m
and certain group brands to the value of GBP72.4m were transferred
to Britvic Brands, all of which are leased back to Britvic Soft
Drinks Limited. The group retains operational flexibility over the
properties and brands including the ability to substitute the
properties and brands held by Britvic PP and Britvic Brands
respectively.
The BPP is entitled to a share of the profits in Britvic SLP for
the next 13 years. At the end of this period, the partnership
capital allocated to the BPP will be changed to an amount equal to
any funding deficit of the BPP at this time, up to a maximum of
GBP105m.
In addition to the expected partnership income of at least GBP5m
per annum, the group will make payments to the BPP of GBP15m per
annum by 31 December each year, from 2013 to 2017. During this year
GBP12.5m of additional contributions were paid to the BPP, of which
GBP7.5m was paid by the group and GBP5.0m relates to income
received from the pension funding partnership structure.
The amount recognised as an expense in relation to the BPP
defined contribution scheme in the consolidated income statement
for 2013 was GBP10.6m (2012: GBP10.5m).
Britvic's business in GB also has a secured unfunded
unregistered retirement benefit scheme called The Britvic Executive
Top Up Scheme (BETUS) which provides benefits for members who have
historically exceeded the Earnings Cap, or the Lifetime Allowance
whilst members of the defined benefit section of the BPP. BETUS
closed to future accrual on 10 April 2011 which coincided with the
closure of the defined benefit section of the BPP.
The Britvic Northern Ireland Pension Plan (BNIPP) was closed to
new members on 28 February 2006, and since this date new employees
have been eligible to join a Stakeholder plan with Legal &
General. The latest formal actuarial valuation for contribution
purposes was carried out as at 31 December 2011.
In relation to the Britvic Ireland Pension Plan (BIPP),
following the changes made in 2012 no deficit recovery
contributions are currently required. The next valuation is due as
at 1 January 2015. The Trustee has been undertaking investment
de-risking to protect the on-going funding position achieved as a
result of the 2012 changes.
The amount recognised as an expense in relation to the Irish
defined contribution schemes in the consolidated income statement
for 2013 was GBP0.8m (2012: GBP0.3m).
All group pension schemes are administered by trustees who are
independent of the group's finances.
The assets and liabilities of the pension schemes were valued on
an IAS 19 basis at 29 September 2013 by Towers Watson (BPP),
Invesco (BIPP) and Buck (BNIPP).
Included within the pension liability on the consolidated
balance sheet is an accrual of GBP2.1m (2012: GBP1.8m) in respect
of Britvic France. The liability represents an unfunded pension
obligation made up of two components being retirement indemnities
of GBP1.9m (2012: GBP1.6m) and long-service cash payments due on
retirement of GBP0.2m (2012: GBP0.2m).
Principal assumptions
Financial assumptions
2013 2013 2013 2012 2012 2012
% % % % % %
ROI NI GB ROI NI GB
--------------------------- ----- ---------- ---------- ----- ---------- ----------
Discount rate 4.25 4.60 4.55 4.20 4.70 4.85
Rate of compensation
increase 3.00 3.75 n/a 3.00 3.60 n/a
Expected long term return
on plan assets 4.25 5.21 4.84 4.85 5.21 5.61
Pension increases - 1.95-2.45 1.95-3.05 - 1.65-2.05 1.80-2.75
Inflation assumption 2.00 2.45 3.35 2.00 2.00 2.90
--------------------------- ----- ---------- ---------- ----- ---------- ----------
To develop the expected long term rate of return on assets
assumption, the group considered the level of expected returns on
risk free investments (primarily government bonds), the historical
level of the risk premium associated with the other asset classes
in which the portfolio is invested and the expectations for future
returns of each asset class. The expected return for each asset
class was then weighted based on the target asset allocation to
develop the expected long term rate on assets assumption for the
portfolio.
Demographic assumptions
The most significant non-financial assumption is the assumed
rate of longevity. This is based on standard actuarial tables,
which for the BPP are known as SAPS Series 1. The following life
expectancy assumptions have been used:
2013 2013 2013 2012 2012 2012
Years Years Years Years Years Years
ROI NI GB ROI NI GB
-------------------------------- ------- ------- ------- ------- ------- -------
Current pensioners (at age 65)
- males 22.7 22.0 22.2 23.1 21.0 22.1
Current pensioners (at age 65)
- females 24.5 25.0 24.8 24.7 23.8 24.7
Future pensioners currently
aged 45 (at age 65) - males 25.6 23.3 24.4 25.8 22.8 24.3
Future pensioners currently
aged 45 (at age 65) - females 26.8 26.6 27.1 26.9 25.3 27.0
-------------------------------- ------- ------- ------- ------- ------- -------
Sensitivities
Changes in assumptions used for determining retirement benefit
costs and obligations may have a material impact on the
consolidated income statement and balance sheet. The main
assumptions are the discount rate, the rate of inflation and the
assumed mortality rate. The following table provides an estimate of
the potential impact of each of these variables on the principal
pension plans.
Assumption Change in assumption Impact on ROI Impact on NI Impact on GB
plan plan liabilities plan liabilities
liabilities
Discount Increase/decrease Decrease/increase Decrease/increase Decrease/increase
rate by 0.1% by GBP1.2m by GBP0.5m by GBP11.0m
Inflation Increase/decrease Increase/decrease Increase/decrease Increase/decrease
rate by 0.1% by GBP0.6m by GBP0.3m by GBP8.4m
Mortality Increase/decrease Increase/decrease Increase/decrease Increase/decrease
rate in life expectancy by GBP0.8m by GBP0.8m by GBP16.3m
by one year
Net benefit income / (expense)
2013
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------- ------ ------ ------- -------
Current service cost (0.8) (0.2) - (1.0)
Interest cost on benefit obligation (2.4) (1.2) (24.0) (27.6)
Expected return on plan assets 2.4 1.2 23.9 27.5
Settlement gain - - 3.8 3.8
Net income / (expense) (0.8) (0.2) 3.7 2.7
------------------------------------- ------ ------ ------- -------
2012
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------- ------ ------ ------- -------
Current service cost (0.9) (0.2) - (1.1)
Interest cost on benefit obligation (3.4) (1.3) (26.5) (31.2)
Expected return on plan assets 2.5 1.2 25.9 29.6
Curtailment gain 21.3 - - 21.3
Net income / (expense) 19.5 (0.3) (0.6) 18.6
------------------------------------- ------ ------ ------- -------
The net income detailed above is recognised in arriving at net
profit from continuing operations before tax and finance costs /
income, and is included within cost of sales, selling and
distribution costs and administration expenses.
The settlement gain in 2013 has been recognised due to the
arrangement reached with the former chief executive upon his
retirement relating to his benefits under BETUS. The gain realised
on the extinguishment of this liability has been recognised in
exceptional and other items in the income statement.
The ROI curtailment gain in 2012 was recognised under IAS19
Employee Benefits arising from the removal of the guaranteed
pension indexation.
Taken to the statement of comprehensive income
2013
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------ ------ ------ ------- -------
Actual return on scheme assets 3.5 2.2 39.9 45.6
Less: Expected return on scheme
assets (2.4) (1.2) (23.9) (27.5)
------------------------------------ ------ ------ ------- -------
1.1 1.0 16.0 18.1
Other actuarial gains/ (losses) 4.1 0.8 (55.4) (50.5)
------------------------------------ ------ ------ ------- -------
Actuarial gains/(losses) taken
to the statement of comprehensive
income 5.2 1.8 (39.4) (32.4)
------------------------------------ ------ ------ ------- -------
2012
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------ ------- ------ ------- -------
Actual return on scheme assets 6.4 2.4 55.6 64.4
Less: Expected return on scheme
assets (2.5) (1.2) (25.9) (29.6)
------------------------------------ ------- ------ ------- -------
3.9 1.2 29.7 34.8
Other actuarial losses (12.3) (0.4) (12.9) (25.6)
------------------------------------ ------- ------ ------- -------
Actuarial (losses)/gains taken
to the statement of comprehensive
income (8.4) 0.8 16.8 9.2
------------------------------------ ------- ------ ------- -------
Net (liability)/asset
2013
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------- ------- ------- -------- --------
Present value of benefit obligation (54.8) (26.6) (562.4) (643.8)
Fair value of plan assets 53.2 26.7 546.7 626.6
Net (liability)/asset (1.6) 0.1 (15.7) (17.2)
------------------------------------- ------- ------- -------- --------
2012
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------- ------- ------- -------- --------
Present value of benefit obligation (53.6) (26.8) (503.9) (584.3)
Fair value of plan assets 47.2 23.8 511.4 582.4
Net (liability)/asset (6.4) (3.0) 7.5 (1.9)
------------------------------------- ------- ------- -------- --------
Movements in the present value of benefit obligation are as
follows:
2013
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------- ------- ------- -------- --------
At 30 September 2012 (53.6) (26.8) (503.9) (584.3)
Exchange differences (3.0) - - (3.0)
Settlement gain - - 3.8 3.8
Current service cost (0.8) (0.2) - (1.0)
Member contributions (0.3) - - (0.3)
Interest cost on benefit obligation (2.4) (1.2) (24.0) (27.6)
Benefits paid 1.2 0.8 17.1 19.1
Actuarial gains/(losses) 4.1 0.8 (55.4) (50.5)
At 29 September 2013 (54.8) (26.6) (562.4) (643.8)
------------------------------------- ------- ------- -------- --------
2012
ROI NI GB Total
GBPm GBPm GBPm GBPm
------------------------------------- ------- ------- -------- --------
At 2 October 2011 (64.4) (25.4) (481.2) (571.0)
Exchange differences 4.7 - - 4.7
Curtailment gain 21.3 - - 21.3
Current service cost (0.9) (0.2) - (1.1)
Member contributions (0.4) - - (0.4)
Interest cost on benefit obligation (3.4) (1.3) (26.5) (31.2)
Benefits paid 1.8 0.5 16.7 19.0
Actuarial losses (12.3) (0.4) (12.9) (25.6)
------------------------------------- ------- ------- -------- --------
At 30 September 2012 (53.6) (26.8) (503.9) (584.3)
------------------------------------- ------- ------- -------- --------
Movements in the fair value of plan assets are as follows:
2013
ROI NI GB Total
GBPm GBPm GBPm GBPm
-------------------------------- ------ ------ ------- -------
At 30 September 2012 47.2 23.8 511.4 582.4
Exchange differences 2.6 - - 2.6
Expected return on plan assets 2.4 1.2 23.9 27.5
Actuarial gains 1.1 1.0 16.0 18.1
Employer contributions 0.8 1.5 12.5 14.8
Member contributions 0.3 - - 0.3
Benefits paid (1.2) (0.8) (17.1) (19.1)
At 29 September 2013 53.2 26.7 546.7 626.6
-------------------------------- ------ ------ ------- -------
2012
ROI NI GB Total
GBPm GBPm GBPm GBPm
-------------------------------- ------ ------ ------- -------
At 2 October 2011 44.5 20.3 462.5 527.3
Exchange differences (3.6) - - (3.6)
Expected return on plan assets 2.5 1.2 25.9 29.6
Actuarial gains 3.9 1.2 29.7 34.8
Employer contributions 1.3 1.6 10.0 12.9
Member contributions 0.4 - - 0.4
Benefits paid (1.8) (0.5) (16.7) (19.0)
At 30 September 2012 47.2 23.8 511.4 582.4
-------------------------------- ------ ------ ------- -------
Categories of scheme assets as a percentage of the fair value of
total scheme assets
2013 2013
ROI NI GB Total Total
GBPm GBPm GBPm GBPm %
----------------- ----- ----- ------ ------ ------
Equities 30.7 13.8 225.3 269.8 43
Bonds and gilts 21.9 12.6 310.7 345.2 55
Properties 0.6 - 7.6 8.2 1
Cash - 0.3 3.1 3.4 1
----------------- ----- ----- ------ ------ ------
Total 53.2 26.7 546.7 626.6 100
----------------- ----- ----- ------ ------ ------
2012 2012
ROI NI GB Total Total
GBPm GBPm GBPm GBPm %
----------------- ----- ----- ------ ------ ------
Equities 24.7 11.7 249.8 286.2 49
Bonds and gilts 18.8 11.9 236.6 267.3 46
Properties 3.7 - 21.7 25.4 4
Cash - 0.2 3.3 3.5 1
----------------- ----- ----- ------ ------ ------
Total 47.2 23.8 511.4 582.4 100
----------------- ----- ----- ------ ------ ------
Analysis of expected return on assets by categories of scheme
assets
2013 2013
ROI NI GB Total Total
GBPm GBPm GBPm GBPm %
----------------- ----- ----- ----- ------ ------
Equities & real
estate 2.0 0.9 16.3 19.2 70
Bonds and gilts 0.4 0.3 7.5 8.2 30
Cash 0.0 0.0 0.1 0.1 0
----------------- ----- ----- ----- ------ ------
Total 2.4 1.2 23.9 27.5 100
----------------- ----- ----- ----- ------ ------
2012 2012
ROI NI GB Total Total
GBPm GBPm GBPm GBPm %
----------------- ----- ----- ----- ------ ------
Equities & real
estate 2.0 0.8 16.5 19.3 65
Bonds and gilts 0.5 0.3 9.2 10.0 34
Cash - 0.1 0.2 0.3 1
----------------- ----- ----- ----- ------ ------
Total 2.5 1.2 25.9 29.6 100
----------------- ----- ----- ----- ------ ------
History of experience gains and losses
2013 2012 2011 2010 2009
GBPm GBPm GBPm GBPm GBPm
------------------------------ -------- -------- -------- -------- --------
Fair value of schemes
assets 626.6 582.4 527.3 523.8 461.9
Present value of defined
benefit obligations (643.8) (584.3) (571.0) (641.0) (547.0)
------------------------------ -------- -------- -------- -------- --------
Deficit in the schemes (17.2) (1.9) (43.7) (117.2) (85.1)
------------------------------ -------- -------- -------- -------- --------
Experience adjustments
arising on plan liabilities 6.1 - 1.5 36.7 2.0
Experience adjustments
arising on plan assets 18.3 (34.8) (26.7) 27.2 (2.7)
------------------------------ -------- -------- -------- -------- --------
The cumulative amount of actuarial gains and losses recognised
since 4 October 2004 in the group statement of comprehensive income
is an overall loss of GBP81.6m (2012: loss of GBP49.2m). The
directors are unable to determine how much of the pension scheme
deficit recognised on transition to IFRS and taken direct to equity
of GBP1.3m is attributable to actuarial gains and losses since the
inception of those pension schemes. Consequently, the directors are
unable to determine the amount of actuarial gains and losses that
would have been recognised in the group statement of comprehensive
income before 4 October 2004.
Normal contributions of GBP1.0m are expected to be paid into the
defined benefit pension schemes during the 2014 financial year.
Additional contributions of GBP21.5m are expected to be paid
into the defined benefit pension schemes during the 2014 financial
year, of which GBP16.5m is expected to be paid by the group and
GBP5.0m by the partnership.
23. Trade and other payables (current)
2013 2012
GBPm GBPm
--------------------------------- ------ ------
Trade payables 237.1 230.9
Other payables 4.9 8.5
Accruals and deferred income 99.2 92.2
Other taxes and social security 40.3 25.6
--------------------------------- ------ ------
381.5 357.2
--------------------------------- ------ ------
Trade payables are non-interest bearing and are normally settled
on 60 - 90 day terms.
24. Financial risk management objectives and policies
Overview
The group's principal financial instruments comprise
derivatives, borrowings and overdrafts, and cash and cash
equivalents. These financial instruments are used to manage
interest rate and currency exposures, funding and liquidity
requirements and share price exposure arising under the group's
employee incentive schemes. Other financial instruments which arise
directly from the group's operations include trade receivables and
payables (see notes 18 and 23 respectively).
It is, and has always been, the group's policy that no
derivative is entered into for trading or speculative purposes.
The main risks arising from the group's financial instruments
are interest rate risk, foreign currency risk, credit risk and
liquidity risk. Additionally, the group is exposed to commodity
price risk and share price risk. The board of directors review and
agree policies for managing these risks as summarised below.
Interest rate risk
The group's exposure to the risk of changes in market interest
rates relates primarily to the group's long-term debt obligations
with floating interest rates.
The group's policy is to manage its interest cost by maintaining
a mix of fixed and variable rate debt. The group's policy is to
have an average over the next three years of between 25% and 80% of
its borrowings at fixed rates of interest. To manage this, the
group enters into interest rate swaps, cross currency swaps and
forward rate agreements which are designated to hedge underlying
debt obligations. At 29 September 2013 after taking into account
the effect of these instruments, approximately 97% of the group's
borrowings are at a fixed rate of interest (2012: 86%).
Interest rate risk table
The following table demonstrates the sensitivity to a reasonably
possible change in interest rates, with all other variables held
constant, on the group's profit before tax (through the impact on
floating rate borrowings) and equity (through the change in fair
values of applicable derivative instruments).
Increase Effect Effect
/ (decrease) on profit on equity
in basis /loss
points before
tax
GBPm GBPm
---------- -------------- ----------- -----------
2013
Sterling 200 - 18.7
(200) - (22.1)
Euro 200 0.7 6.5
(200) (0.8) (7.6)
2012
Sterling 200 (0.2) 24.5
(200) 0.2 (27.6)
Euro 200 1.6 7.0
(200) (1.8) (8.4)
Foreign currency risk
Foreign currency risk is primarily in respect of exposure to
fluctuations to the sterling-euro, sterling-US dollar and euro-US
dollar rates of exchange. The group has operations in
euro-denominated countries and finances these partly through the
use of foreign currency borrowings and cross currency swaps which
hedge the translation risk of net investments in foreign
operations. Additionally cash generation from euro-denominated
operations can be utilised to meet euro payment obligations in
sterling denominated companies, providing a natural hedge.
The group also has transactional exposures arising from
purchases of prime materials, capital expenditure and interest
costs in currencies other than the functional currency of the
individual group entities. Non functional currency purchases and
interest costs are made in the currencies of US dollars and euros.
As at 29 September 2013 the group has hedged 65% (2012: 69%) of
forecast net exposures 12 months in advance using forward foreign
exchange contracts.
Where funding is raised in a currency other than the currency
ultimately required by the group, cross currency interest rate
swaps are used to convert the cash flows to the required currency.
These swaps have the same duration and other critical terms as the
underlying borrowing.
The following table demonstrates the sensitivity to a reasonably
possible change in the US dollar and euro exchange rates, with all
other variables held constant, of the group's profit before tax
(due to changes in the fair value of monetary assets and
liabilities) and the group's equity (due to changes in fair value
of forward exchange contracts).
Foreign currency risk (continued)
Increase Effect Effect
/ (decrease) on profit on equity
in currency before
rate tax
% GBPm GBPm
---------------------- -------------- ------------ --------------------------
2013
Sterling / euro 10 (1.1) 6.5
(10) 1.1 (6.5)
Sterling / US dollar 10 (0.5) 1.3
(10) 0.5 (1.3)
Euro / US dollar 10 (1.1) 1.6
(10) 1.1 (1.6)
2012
Sterling / euro 10 (0.6) 5.1
(10) 0.6 (5.1)
Sterling / US dollar 10 - 0.9
(10) - (0.9)
Euro / US dollar 10 - 0.9
(10) - (0.9)
---------------------- -------------- ------------ --------------------------
Credit risk
The group trades only with recognised creditworthy third
parties. It is the group's policy that all customers who wish to
trade on credit terms are subject to credit verification
procedures. In addition, receivable balances are monitored on an
ongoing basis with the result that the group's exposure to bad
debts is not significant. The maximum exposure is the carrying
amount disclosed in note 18. For transactions that do not occur in
the country of the relevant operating unit, the group does not
offer credit terms without the approval of the Head of Finance
Shared Services. There are no significant concentrations of credit
risk within the group.
The group maintains a policy on counterparty credit exposures
with banks and financial institutions arising from the use of
derivatives and financial instruments. This policy restricts the
investment of surplus funds and entering into derivatives to
counterparties with a minimum credit rating maintained by either
Moody's, Standard & Poors or Fitch. The level of exposure with
counterparties at various ratings levels is also restricted under
this policy. The level of exposure and the credit worthiness of the
group's banking counterparties is reviewed regularly to ensure
compliance with this policy.
Commodity price risk
The main commodity price risk arises in the purchases of prime
materials, being polyethylene terephthalate (PET), sugar, steel and
frozen concentrated orange juice. Where it is considered
commercially advantageous, the group enters into fixed price
contracts with suppliers to hedge against unfavourable commodity
price changes.
Share schemes equity price risk
The group operates several employee incentive share schemes. It
has an exposure to the share price for the schemes in which shares
are purchased in the market to satisfy the requirements of the
plan. To hedge this risk the group has entered into a number of
total return share swaps against schemes maturing in 2014.
The following table demonstrates the sensitivity to a reasonably
possible change in the Britvic plc share price, with all other
variables held constant, of the group's profit before tax (due to
changes in the fair value of the share swaps).
Increase Effect
/ (decrease) on profit
in share before
price tax
% GBPm
------ -------------- ------------
2013 10 0.8
(10) (0.8)
2012 10 1.5
(10) (1.5)
Liquidity risk
The group monitors its risk of a shortage of funds using rolling
cash flow forecasts. These forecasts consider the maturity of both
its financial investments and financial assets (e.g. accounts
receivable, other financial assets) and projected cash flows from
operations. The objective of the group's liquidity policy is to
maintain a balance between continuity of funds and flexibility
through the use of bank loans and overdrafts and long term private
placement issuance. The bank loans entered into under the GBP400.0m
bank facility are unsecured however GBP1.0m of outstanding Britvic
France bank loans are secured. At 29 September 2013, GBP91.6m of
the group's debt will mature in less than one year (2012:
GBP0.6m).
The table below summarises the maturity profile of the group's
financial liabilities at 29 September 2013 based on contractual
undiscounted payments:
Less 1 to > 5 Total
than 5 years years
1 year
2013 GBPm GBPm GBPm GBPm
--------------------------------------- -------- --------- -------- --------
Secured bank loans 0.2 0.8 0.1 1.1
Private placement notes 113.2 285.7 253.4 652.3
Derivatives hedging private placement
notes - payments 67.9 229.2 215.7 512.8
Derivatives hedging private placement
notes - receipts (75.0) (256.4) (226.6) (558.0)
--------------------------------------- -------- --------- -------- --------
106.1 258.5 242.5 607.1
--------------------------------------- -------- --------- -------- --------
Interest rate swap - payments 1.6 2.1 - 3.7
Interest rate swap - receipts (0.3) (0.3) - (0.6)
--------------------------------------- -------- --------- -------- --------
1.3 1.8 - 3.1
--------------------------------------- -------- --------- -------- --------
Trade and other payables 341.2 - - 341.2
Finance leases 0.2 0.3 - 0.5
Other financial liabilities 1.4 - - 1.4
450.4 261.4 242.6 954.4
--------------------------------------- -------- --------- -------- --------
Less 1 to > 5 Total
than 5 years years
1 year
2012 GBPm GBPm GBPm GBPm
--------------------------------------- -------- --------- -------- --------
Secured bank loans 0.3 0.9 0.2 1.4
Private placement notes 27.4 331.2 320.1 678.7
Derivatives hedging private placement
notes - payments 18.5 243.4 265.2 527.1
Derivatives hedging private placement
notes - receipts (24.8) (271.6) (286.3) (582.7)
--------------------------------------- -------- --------- -------- --------
21.1 303.0 299.0 623.1
--------------------------------------- -------- --------- -------- --------
Interest rate swap - payments 1.6 3.5 - 5.1
Interest rate swap - receipts (0.8) (1.5) - (2.3)
--------------------------------------- -------- --------- -------- --------
0.8 2.0 - 2.8
--------------------------------------- -------- --------- -------- --------
Trade and other payables 324.3 - - 324.3
Finance leases 0.3 0.5 - 0.8
Other financial liabilities 4.4 - - 4.4
351.2 306.4 299.2 956.8
--------------------------------------- -------- --------- -------- --------
In respect of the private placement notes, the periods when the
cash flows are expected to occur (as shown by the tables above) and
when they are expected to affect the consolidated income statement
are the same.
Details with regard to derivative contracts are included in note
25.
All bank loans outstanding at year end were secured loans from
inception
Fair value hierarchy
The group uses the following valuation hierarchy to determine
the carrying value of financial instruments that are measured at
fair value:
Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
2013 Assets Liabilities
GBPm GBPm
------------------------------------------------------------- ------ -----------
Level 1 - -
Level 2
* Derivatives used for hedging 74.0 (8.5)
* Financial instruments at fair value through profit or
loss 1.3 (2.9)
Level 3 - -
Total 75.3 (11.4)
------------------------------------------------------------- ------ -----------
2012 Assets Liabilities
GBPm GBPm
------------------------------------------------------------- ------ -----------
Level 1 - -
Level 2
* Derivatives used for hedging 92.2 (6.9)
* Financial instruments at fair value through profit or
loss - (8.4)
Level 3 - -
Total 92.2 (15.3)
------------------------------------------------------------- ------ -----------
Capital management
The group defines 'capital' as being net debt plus equity.
The group's objectives when managing capital are to safeguard
the group's ability to continue as a going concern and maintain an
appropriate capital structure to balance the needs of the group to
grow, whilst operating with sufficient headroom within its bank
covenants.
The group manages its capital structure and makes adjustments to
it, in light of changes in economic conditions. To maintain or
adjust the capital structure, the group has a number of options
available to it including modifying dividend payments to
shareholders, returning capital to shareholders or issuing new
shares. In this way, the group balances returns to shareholders
between long term growth and current returns whilst maintaining
capital discipline in relation to investing activities and taking
any necessary action on costs to respond to the current
environment.
The group monitors capital on the basis of the adjusted net debt
/ EBITDA ratio. Adjusted net debt is calculated as being the net of
cash and cash equivalents, interest bearing loans and borrowings
and the element of the fair value of interest rate currency swaps
hedging the balance sheet value of the US private placement notes.
Adjusted net debt is shown in note 29. The adjusted net debt /
EBITDA ratio enables the group to plan its capital requirements in
the medium term. The group uses this measure to provide useful
information to financial institutions and investors.
25. Derivatives and hedge relationships
Fair values of financial assets and financial liabilities
Set out below is a comparison by category of carrying amounts
and fair values of all of the group's financial instruments, except
trade and other receivables and payables.
Book value Fair value Book value Fair value
2013 2013 2012 2012
GBPm GBPm GBPm GBPm
-------------------------------- ---------- ---------- ---------- ----------
Financial assets
Cash and cash equivalents 94.0 94.0 49.5 49.5
Cross currency interest rate
swaps * 62.5 62.5 92.1 92.1
Cross currency interest rate
swaps ** 11.4 11.4 - -
Forward currency contracts
** 0.1 0.1 0.1 0.1
Share swaps ** 1.3 1.3 - -
-------------------------------- ---------- ---------- ---------- ----------
169.3 169.3 141.7 141.7
-------------------------------- ---------- ---------- ---------- ----------
Financial liabilities
Interest-bearing loans and
borrowings (bank loans and
private placement notes):
Fixed rate borrowings (540.1) (572.6) (549.2) (598.9)
Floating rate borrowings (9.3) (9.3) (9.3) (9.3)
Bank overdrafts (2.5) (2.5) (1.9) (1.9)
Finance leases (0.5) (0.5) (0.8) (0.8)
Forward currency contracts
*** (1.2) (1.2) (1.9) (1.9)
Foreign exchange swaps *** (0.1) (0.1) (0.2) (0.2)
Cross currency interest rate
swaps **** (7.3) (7.3) (5.0) (5.0)
Interest rate swaps *** (0.1) (0.1) - -
Interest rate swaps **** (2.7) (2.7) (3.5) (3.5)
Share swaps *** - - (2.3) (2.3)
Share swaps **** - - (2.4) (2.4)
-------------------------------- ---------- ---------- ---------- ----------
(563.8) (596.3) (576.5) (626.2)
-------------------------------- ---------- ---------- ---------- ----------
* Included within 'Non-current assets: other financial assets'
on the consolidated balance sheet
** Included within 'Current assets: other financial assets' on the consolidated balance sheet
*** Included within 'Current liabilities: other financial
liabilities' on the consolidated balance sheet
**** Included within 'Non-current liabilities: other financial
liabilities' on the consolidated balance sheet
Non-derivative financial assets are categorised as loans and
receivables as defined in IAS 39 'Financial instruments -
recognition and measurement'. Non-derivative financial liabilities
are all carried at amortised cost.
The fair value of derivatives, which are quoted at market price,
has been calculated by discounting the expected future cash flows
at prevailing interest rates.
The fair value of the current trade and other receivables and
payables approximate to book value.
The fair value of fixed rate borrowings has been derived from
the sum of future cash flows to maturity discounted back to present
values at a market rate.
Derivatives not designated as part of hedge relationships
Interest rate swaps
The 2009 USPP cross currency swaps converted an amount of US
dollar borrowings into a floating rate euro liability. To mitigate
exposure to changes in euro interest rates on this liability,
EUR75.0m of interest rate swaps were transacted. These 5-year fixed
rate swaps had an effective start date of December 2010.
From the 2010 USPP issuance an amount of $55m was swapped into a
floating rate sterling liability. To mitigate exposure for a
proportion of this liability, GBP20.0m of 2-year interest rate
swaps were transacted with an effective date of December 2011.
Share swaps
The group operates several employee incentive share schemes. It
has an exposure to the share price for the schemes in which shares
are purchased in the market to satisfy the requirements of the
plan. To hedge this risk the group has entered into a number of
total return share swaps against schemes maturing in 2014.
FX swaps
As part of operational cash management EUR82.5m of euro /
sterling FX swaps were in existence at 29 September 2013 (2012:
EUR83.0m).
Hedging activities
The group has a number of derivative contracts which are
designated as part of effective hedge relationships. These are
included in other financial assets and liabilities as follows:
2013 2012
GBPm GBPm
-------------------------------------------- ------- -------
Consolidated balance sheet
Non-current assets: Other financial assets
Fair value of the 2007 USD GBP cross
currency fixed interest rate swaps(1) 36.9 49.9
Fair value of the 2009 USD GBP cross
currency floating interest rate swaps(3) 20.2 27.1
Fair value of the 2009 GBP euro cross
currency floating interest rate swaps(2) 5.4 11.1
Fair value of the 2010 USD GBP cross
currency floating interest rate swaps(3) - 1.6
Fair value of the 2010 GBP euro cross
currency fixed interest rate swaps (2) - 2.4
-------------------------------------------- ------- -------
62.5 92.1
-------------------------------------------- ------- -------
Current assets: Other financial assets
Fair value of the 2007 USD GBP cross 11.4 -
currency fixed interest rate swaps(1)
Fair value of forward currency contracts
(1) 0.1 0.1
Fair value of share swaps 1.3 -
-------------------------------------------- ------- -------
12.8 0.1
-------------------------------------------- ------- -------
Current liabilities: Other financial
liabilities
Fair value of forward currency contracts
(1) (1.2) (1.9)
Fair value of share swaps - (2.3)
Fair value of foreign exchange swaps (0.1) (0.2)
Fair value of interest rate swaps (0.1) -
-------------------------------------------- ------- -------
(1.4) (4.4)
-------------------------------------------- ------- -------
Non-current liabilities: Other financial
liabilities
Fair value of the 2010 USD GBP cross
currency fixed interest rate swaps(1) (4.9) (5.0)
Fair value of the 2010 GBP euro cross (1.6) -
currency fixed interest rate swaps(2)
Fair value of the 2010 USD GBP cross (0.8) -
currency floating interest rate swaps(3)
Fair value of share swaps - (2.4)
Fair value of interest rate swaps (2.7) (3.5)
-------------------------------------------- ------- -------
(10.0) (10.9)
-------------------------------------------- ------- -------
(1) Instruments designated as part of
a cash flow hedge relationship
(2) Instruments designated as part of
a net investment hedge relationship
(3) Instruments designated as part of
a fair value hedge relationship
There have been no significant changes to derivative contracts
designated as part of effective hedge relationships in the period.
As at the 29 September 2013 these hedging relationships are
categorised as follows:
Cash flow hedges
Forward currency contracts
At 29 September 2013, the group held 99 (2012: 68) US dollar and
47 (2012: 38) euro forward exchange contracts (the 'forward
currency contracts') designated as hedges of expected future
purchases from suppliers in US dollars and euros which the group
believe to be highly probable transactions. The forward currency
contracts are being used to hedge the foreign currency risk of
these highly probable transactions.
The forward currency contracts hedge the expected future
purchases in the period to 15 October 2014 and have been assessed
as part of effective cash flow hedge relationships. At the period
end there is a net unrealised loss of GBP1.2m (2012: net unrealised
loss of GBP1.8m), with a related deferred tax asset of GBP0.3m
(2012: related deferred tax asset of GBP0.4m), which has been
included in equity in respect of these contacts.
The terms of these forward contracts are detailed in the table
below.
Forward contracts to hedge expected future purchases Maturity range Average exchange
rate
----------------------------------------------------- --------------- ----------------
2013
GBP / US$ 20.9m Oct 2013 to $1.56/GBP
Oct 2014
GBP / EUR 77.6m Oct 2013 to EUR1.18/GBP
Sep 2014
Oct 2013 to
EUR / US$ 21.2m Sep 2014 $1.33/EUR
2012
GBP / US$ 13.8m Oct 2012 to $1.57/GBP
Sep 2013
GBP / EUR 64.3m Oct 2012 to EUR1.22/GBP
Sep 2013
Oct 2012 to
EUR / US$ 14.0m Mar 2013 $1.27/EUR
Cross currency interest rate swaps
2007 Notes / 2007 USD GBP cross currency interest rate swaps
The group continues to have a number of cross currency interest
rate swaps relating to the 2007 Notes. These cross currency
interest rate swaps (the '2007 cross currency interest rate swaps')
have the effect of fixing the borrowings into sterling and the rate
of interest payable on the 2007 Notes.
The 2007 cross currency interest rate swap instruments have the
same duration and other critical terms as the 2007 Notes and
continue to be designated as part of a cash flow hedge relationship
with the 2007 Notes. This has been assessed to be a highly
effective relationship as at 29 September 2013.
The fair value of the 2007 cross currency interest rate swap
instruments on the balance sheet at 29 September 2013 is:
2013 2012
GBPm GBPm
-------------------------------------------- ----- -----
Consolidated balance sheet
Non-current assets: Other financial assets
Fair value of the 2007 USD GBP cross
currency fixed interest rate swaps 36.9 49.9
Current assets: Other financial assets
Fair value of the 2007 USD GBP cross 11.4 -
currency fixed interest rate swaps
The movement in the fair value has been taken to the
consolidated statement of comprehensive income. A total loss of
GBP0.4m (2012: GBP8.7m gain) has been recycled to the consolidated
income statement in the year to match the foreign exchange gain on
the 2007 Notes.
Within equity there is a net unrealised gain of GBP6.5m (2012:
net unrealised gain of GBP8.4m) with a related deferred tax
liability of GBP1.3m (2012: deferred tax liability of GBP1.9m) in
respect of the 2007 cross currency interest rate swap
instruments.
2010 Notes / 2010 USD GBP cross currency fixed interest rate
swaps
The group continues to have a number of cross currency interest
rate swaps relating to the 2010 Notes. These instruments swap the
principal and interest from US dollars into sterling (the '2010 USD
GBP cross currency fixed interest rate swaps').
The 2010 USD GBP cross currency interest rate swaps, which swap
interest from fixed US dollar to fixed sterling, are designated as
part of a cash flow hedge relationship with the future cash flows
associated with the 2010 Notes. This has been assessed to be a
highly effective relationship as at 29 September 2013.
The fair value of these instruments on the balance sheet at 29
September 2013 is:
2013 2012
GBPm GBPm
------------------------------------------ ------ ------
Consolidated balance sheet
Non-current liabilities: Other financial
liabilities
Fair value of the 2010 USD GBP cross
currency fixed interest rate swaps (4.9) (5.0)
The movement in fair value has been taken to the consolidated
statement of comprehensive income. A total loss of GBP0.1m (2012:
GBP2.5m gain) has been recycled to the consolidated income
statement to match the foreign exchange gain on the 2010 Notes.
Within equity there is a net unrealised loss of GBP1.9m (2012:
net unrealised loss of GBP1.9m) with a related deferred tax asset
of GBP0.4m (2012: deferred tax asset of GBP0.4m) in respect of the
2010 cross currency interest rate swap instruments.
Fair value hedges
2009 Notes / 2009 USD GBP cross currency interest rate swaps
The group continues to have a number of cross currency interest
rate swaps in respect of the 2009 Notes. These instruments swap the
principal and interest from fixed US dollar into floating sterling
(the '2009 USD GBP cross currency interest rate swaps').
The 2009 USD GBP cross currency interest rate swaps are
designated as part of a fair value hedge relationship with the 2009
Notes. The fair value movements on the 2009 USD GBP cross currency
interest rate instruments are recorded in the consolidated income
statement, as is the fair value movement in the 2009 Notes.
The 2009 USD GBP cross currency interest rate swap contracts
have the same duration and other critical terms as the 2009 Notes
they hedge. The 2009 USD GBP cross currency interest rate swaps
have been assessed as part of a highly effective hedge relationship
as at 29 September 2013.
The fair value of the swap instruments at 29 September 2013,
included within 'Non-current assets: Other financial assets' on the
consolidated balance sheet, was GBP20.2m (2012: Non-current assets:
Other financial assets GBP27.1m).
2010 Notes / 2010 USD GBP cross currency floating interest rate
swaps
The group has entered into swap instruments which swap the
principal and fixed rate interest of the 2010 Notes to floating
sterling ('2010 USD GBP cross currency floating interest rate
swaps'). These instruments are designated as part of a fair value
hedge relationship with the 2010 Notes.
The fair value movements on the 2010 USD GBP cross currency
floating interest rate swaps are recorded in the consolidated
income statement, as is the fair value movement of the hedged item.
The swap contracts have the same duration and other critical terms
as the 2010 Notes they hedge.
The 2010 USD GBP cross currency floating interest rate swaps
have been assessed as part of a highly effective hedge relationship
as at 29 September 2013.
The fair value of the swap instruments at 29 September 2013,
included within 'Non-current liabilities: Other financial
liabilities' on the consolidated balance sheet was GBP0.8m (2012:
Non-current assets: Other financial assets GBP1.6m).
Net investment hedges
2009 GBP euro cross currency interest rate swaps
These instruments swap floating sterling liabilities into
floating euro liabilities. They have been designated as part of an
effective hedge of the net investment in Britvic Ireland.
The 2009 GBP euro cross currency interest rate swaps, along with
the underlying loan instruments, are being used to hedge the
group's exposure to foreign exchange risk on this euro investment.
Movements in the fair value of the 2009 GBP euro cross currency
interest rate swaps are taken to equity where they offset foreign
exchange movements on the translation of the net investment in
Britvic Ireland.
The fair value of the 2009 GBP euro cross currency interest rate
swaps at 29 September 2013, included within 'Non-current assets:
other financial assets' on the consolidated balance sheet is
GBP5.4m (2012: 'Non-current assets: other financial assets' of
GBP11.1m). No ineffectiveness has been recognised in the
consolidated income statement (2012: GBPnil).
2010 GBP euro cross currency interest rate swaps
These instruments swap fixed sterling liabilities arising from
the 2010 USD GBP cross currency fixed interest rate swaps into
fixed euro liabilities and have been designated as part of an
effective hedge of the net investment in Britvic France.
The 2010 GBP euro cross currency interest rate swaps, along with
the underlying loan instruments, are being used to hedge the
group's exposure to foreign exchange risk on this euro investment.
Movements in the fair value of the 2010 GBP euro cross currency
interest rate swaps are taken to equity where they offset foreign
exchange movements on the translation of the net investment in
Britvic France.
The fair value of the 2010 GBP euro cross currency interest rate
swaps at 29 September 2013, included within 'Non-current
liabilities: other financial liabilities' on the consolidated
balance sheet is GBP1.6m (2012: 'Non-current assets: other
financial assets' of GBP2.4m). No ineffectiveness has been
recognised in the consolidated income statement (2012: GBPnil).
The impact on the consolidated statement of comprehensive income
of the derivatives and hedge relationships described above is
summarised in the table below.
2013 2012
GBPm GBPm
------------------------------------------- ------ -------
Consolidated statement of comprehensive
income
Amounts recycled to the income statement
in respect of cash flow hedges
Forward currency contracts* 0.6 (1.7)
2007 cross currency interest rate swaps** (0.4) 8.7
2010 cross currency interest rate swaps** (0.1) 2.5
------------------------------------------- ------ -------
0.1 9.5
------------------------------------------- ------ -------
Gains/(losses) in the period in respect
of cash flow hedges
Forward currency contracts 0.1 (1.6)
2007 cross currency interest rate swaps (1.6) (11.7)
2010 cross currency interest rate swaps 0.1 (3.7)
------------------------------------------- ------ -------
(1.4) (17.0)
------------------------------------------- ------ -------
Exchange differences on translation of
foreign operations
Movement on 2009 GBP euro cross currency
interest rate swaps (5.7) 10.5
Movement on 2010 GBP euro cross currency
interest rate swaps (4.0) 3.5
Exchange movements on translation of
foreign operations 9.7 (17.9)
------------------------------------------- ------ -------
- (3.9)
------------------------------------------- ------ -------
* Offsetting amounts recorded in cost
of sales
** Offsetting amounts recorded in finance
costs
26. Other non-current liabilities
2013 2012
GBPm GBPm
----------------- ----- -----
Firm Commitment 1.9 1.9
----------------- ----- -----
A firm commitment exists in respect of the receipt of the 2009
and 2010 Notes.
27. Provisions
Restructuring Other Total
GBPm GBPm GBPm
---------------------------- -------------- ------ ------
At 30 September 2012 - 2.4 2.4*
Provisions made during the
year 11.4 - 11.4
Provisions used during the
year (2.9) (0.4) (3.3)
Exchange differences (0.1) 0.1 -
---------------------------- -------------- ------ ------
At 29 September 2013 8.4 2.1 10.5
---------------------------- -------------- ------ ------
* Included within trade and other payables in 2012.
Restructuring provisions
During the 52 week period ended 29 September 2013, the group
committed to a restructuring plan to reduce costs across the supply
chain and back office functions. Following the announcement of the
plan, the group recognised a provision of GBP11.4m for expected
restructuring costs, including contract termination costs,
consultation fees and employee termination benefits. Estimated
costs were based on the terms of relevant contracts. It is expected
that the remaining provision will be utilised within 2014.
Other provisions
Other provisions at 29 September 2013 and 30 September 2012,
primarily relate to onerous lease provisions that have arisen due
to the exit of certain group premises, and range from 3 to 10
years.
28. Share-based payments
The expense recognised for share-based payments in respect of
employee services received during the 52 weeks ended 29 September
2013, including national insurance of GBP1.1m (2012: GBP0.4m) and
dividend equivalents of GBPnil (2012: GBP1.0m), is GBP6.2m (2012:
GBP3.0m). This expense arises from transactions which are expected
to be equity-settled share-based payment transactions.
The Britvic Share Incentive Plan (SIP)
The SIP is an all-employee plan approved by HMRC. The plan
allows for discretionary annual awards of free ordinary shares with
a value of 3% of salary (subject to HMRC maximum limits) together
with an offer of matching shares on the basis of one free matching
share for each ordinary share purchased with a participant's
savings, up to a maximum of GBP50 (2012: GBP50) per four week pay
period. Employees are entitled to receive the annual free share
award, where granted by the group, provided they are employed by
the company on the last day of each financial year and on the award
date. There are no cash settlement alternatives.
Awards made during the period are shown in the table below. The
fair value of these awards is equivalent to the intrinsic value of
the shares.
No. of shares
----------------
2013 2012
----------------------------------------------- ------- -------
Annual free shares award - -
Matching shares award - 1 free share for every
ordinary share purchased 185,563 281,662
----------------------------------------------- ------- -------
The Britvic Executive Share Option Plan (Option Plan)
The Option Plan allows for options to buy ordinary shares to be
granted to selected employees. The option price is the average
market price of Britvic plc's shares on the three business days
before the date of grant. Options become exercisable on the
satisfaction of the performance condition and remain exercisable
until ten years after the date of grant.
The performance condition requires average growth in EPS of 7%
pa over a three year period in excess of the average growth in RPI
over the same period for the options to vest in full. If EPS growth
averages 3% per annum in excess of RPI growth, 25% (2012: 25%) of
the options will vest. Straight-line apportionment will be applied
between these two levels to determine the number of options that
vest and no options will vest if average EPS growth is below the
lower threshold.
In some circumstances, at the discretion of the company, an
option holder who exercises his/her option may receive a cash
payment rather than the ordinary shares under option. The cash
payment would be equal to the amount by which the market value of
the ordinary shares under option exceeds the option price. However,
it is expected that this plan will be equity-settled and as a
consequence has been accounted for as such.
The following table illustrates the movements in the number of
share options during the period.
Number of Weighted average
share options exercise price
(pence)
--------------------------------- -------------- ----------------
Outstanding as at 2 October 2011 8,764,386 314.8
Granted during the period 2,175,767 331.6
Exercised during the period (244,499) 233.1
Forfeited during the period (246,138) 406.4
Lapsed during the period (9,496) 347.0
Outstanding at 30 September 2012 10,440,020 318.0
Granted during the period 1,583,878 427.5
Exercised during the period (2,220,417) 253.7
Forfeited during the period (573,284) 367.7
Lapsed during the period (1,994,425) 364.4
--------------------------------- -------------- ----------------
Outstanding at 29 September 2013 7,235,772 347.1
--------------------------------- -------------- ----------------
Exercisable at 29 September 2013 2,739,540 257.1
--------------------------------- -------------- ----------------
The weighted average share price at the date of exercise for
share options exercised during the period was 491.1p (2012:
362.2p).
The share options outstanding as at 29 September 2013 had a
weighted average remaining contractual life of 6.8 years (2012: 6.7
years) and the range of exercise prices was 221.0p - 464.6p (2012:
221.0p - 464.6p).
The weighted average fair value of options granted during the
period was 79.8p (2012: 58.2p).
The fair value of equity-settled share options granted is
estimated as at the date of grant using a binomial model, taking
account of the terms and conditions upon which the options were
granted.
The Britvic Performance Share Plan (PSP)
The PSP allows for awards of ordinary shares or nil cost options
to be made to selected employees with vesting subject to the
satisfaction of a performance condition. Different performance
conditions apply to different groups of employees. Awards up to and
including 2008 were made in respect of ordinary shares. Awards
granted since 2009 have been in respect of nil cost options. Nil
cost options become exercisable on the satisfaction of the
performance conditions and remain exercisable until 10 years / 7
years after the date of grant for employees based in the UK /
Ireland respectively.
The performance condition applying to the total number of awards
granted to members of the senior leadership team during the current
period is divided equally between the total shareholder return
(TSR) and return on invested capital (ROIC) performance conditions
described below.
The TSR condition measures the company's TSR relative to a
comparator group (consisting of 18 companies) over a three year
performance period. The awards will not vest unless the company's
position in the comparator group is at least median. At median 25%
(2012: 25%) will vest, rising on a straight-line basis to 100%
vesting at upper quartile.
For the award granted during the 52 weeks ended 29 September
2013, the ROIC performance condition requires the company's ROIC to
be at least 21.5% (2012: 22.3%) over the three year performance
period for the award to vest in full. If ROIC is 20.7% (2012:
21.5%) over the performance period, 25% (2012: 25%) of the award
will vest. Straight-line apportionment will be applied between
these two levels to determine the percentage of awards that vest
and no awards will vest if ROIC is below the lower threshold.
Awards granted to members of the senior management team vest
solely subject to a performance condition which requires average
growth in EPS of 7% pa over a three year period in excess of the
growth in RPI over the same period for the awards to vest in full.
If EPS growth averages 3% pa in excess of RPI growth, 25% (2012:
25%) of the awards will vest. Straight-line apportionment will be
applied between these two levels to determine the number of awards
that vest and no awards will vest if average EPS growth is below
the lower threshold.
In some circumstances, at the discretion of the company, vested
awards may be satisfied by a cash payment rather than a transfer of
ordinary shares. However, it is expected that this plan will be
equity-settled and as a consequence has been accounted for as
such.
The following tables illustrate the movements in the number of
shares and nil cost options during the period.
Number of Number of Number of
Shares subject Shares subject Shares subject
to to to ROIC condition
TSR condition EPS condition
--------------------------------- --------------- --------------- ------------------
Outstanding at 2 October 2011 584,781 1,095,428 584,779
Granted during the period - 14,997 -
Vested during the period* (532,156) (916,249) (532,157)
--------------------------------- --------------- --------------- ------------------
Outstanding at 30 September 2012
and 29 September 2013 52,625 194,176 52,622
--------------------------------- --------------- --------------- ------------------
Number of Number of Number of
nil nil nil
cost options cost options cost options
subject to subject subject to
TSR condition to ROIC condition
EPS condition
--------------------------------- -------------- -------------- ---------------
Outstanding at 2 October 2011 699,278 1,342,025 699,278
Granted during the period 481,128 1,001,479 481,128
Forfeited during the period (62,591) (313,138) (62,591)
--------------------------------- -------------- -------------- ---------------
Outstanding at 30 September 2012 1,117,815 2,030,366 1,117,815
Granted during the period 372,514 746,155 372,514
Forfeited during the period (116,080) (244,435) (116,080)
Lapsed during the period (353,192) (578,173) (353,192)
--------------------------------- -------------- -------------- ---------------
Outstanding at 29 September 2013 1,021,057 1,953,913 1,021,057
--------------------------------- -------------- -------------- ---------------
* The share price on the date of vesting was 329.8p.
There were no nil cost options exercisable at 29 September 2013
(2012: nil).
The nil cost options outstanding as at 29 September 2013 had a
weighted average remaining contracted life of 8.2 years (TSR
condition) (2012: 8.2 years), 8.3 years (EPS condition) (2012: 8.0
years) and 8.2 years (ROIC condition) (2012: 8.2 years).
The weighted average fair value of nil cost options granted
during the period was 203.1p (TSR condition) (2012: 194.2p), 381.5p
(EPS condition) (2012: 323.0p) and 250.2p (ROIC condition) (2012:
322.7p).
The fair value of equity-settled shares and nil cost options
granted is estimated as at the date of grant using separate models,
taking account of the terms and conditions upon which the shares
and nil cost options were granted. The fair value of the options
subject to the TSR condition is determined using a Monte Carlo
simulation. The fair value of all other options is calculated using
the share price at the date of grant, adjusted for dividends not
received during the vesting period.
The following table lists the inputs to the model used in
respect of the Option Plan and PSP awards granted during the 52
weeks ended 29 September 2013. The comparative shows the inputs to
the model used in respect of the awards granted during the 52 weeks
ended 30 September 2012.
2013 2012
------------------------------------- ----- -----
Dividend yield (%) 4.45 3.6
Expected volatility (%) 32.2 27.9
Risk-free interest rate (%) 0.8 0.8
Expected life of option (years) 5.0 5.0
Share price at date of grant (pence) 421.0 329.8
Exercise price (pence) 427.5 331.6
------------------------------------- ----- -----
The expected volatility reflects the assumption that the
historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome.
29. Notes to the consolidated cash flow statement
Analysis of net debt
2012 Cash flows Exchange Other movement 2013
differences
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ -------------- -------
Cash at bank and in hand 49.5 44.4 0.1 - 94.0
Bank overdrafts (1.9) (0.4) (0.2) - (2.5)
Debt due within one year (0.6) 0.9 (0.3) (91.6) (91.6)
Debt due after more than one
year (558.7) - 9.0 91.4 (458.3)
-------------------------------- ------- ---------- ------------ -------------- -------
(511.7) 44.9 8.6 (0.2) (458.4)
Derivatives hedging the balance
sheet debt* 65.0 - (8.9) - 56.1
-------------------------------- ------- ---------- ------------ -------------- -------
Adjusted net debt (446.7) 44.9 (0.3) (0.2) (402.3)
-------------------------------- ------- ---------- ------------ -------------- -------
2011 Cash flows Exchange Other movement 2012
differences
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ -------------- -------
Cash at bank and in hand 43.0 7.7 (1.2) - 49.5
Bank overdrafts - (1.9) - - (1.9)
Debt due within one year - - - (0.6) (0.6)
Debt due after more than one
year (573.2) 1.0 13.5 - (558.7)
-------------------------------- ------- ---------- ------------ -------------- -------
(530.2) 6.8 12.3 (0.6) (511.7)
Derivatives hedging the balance
sheet debt* 78.2 - (13.2) - 65.0
-------------------------------- ------- ---------- ------------ -------------- -------
Adjusted net debt (452.0) 6.8 (0.9) (0.6) (446.7)
-------------------------------- ------- ---------- ------------ -------------- -------
* Represents the element of the fair value of interest rate
currency swaps hedging the balance sheet value of the Notes. This
amount has been disclosed separately to demonstrate the impact of
foreign exchange movements which are included in debt due after
more than one year.
30. Commitments and contingencies
Operating lease commitments
Future minimum lease payments under non-cancellable operating
leases are as follows:
2013
---------------------------
Land and Other Total
buildings
GBPm GBPm GBPm
---------------------------------- ----------- ------ ------
Within one year 3.2 8.4 11.6
After one year but not more than
five years 14.9 17.0 31.9
After more than five years 41.0 - 41.0
---------------------------------- ----------- ------ ------
59.1 25.4 84.5
---------------------------------- ----------- ------ ------
2012
---------------------------
Land and Other Total
buildings
GBPm GBPm GBPm
---------------------------------- ----------- ------ ------
Within one year 3.1 10.3 13.4
After one year but not more than
five years 13.4 17.0 30.4
After more than five years 44.0 0.2 44.2
---------------------------------- ----------- ------ ------
60.5 27.5 88.0
---------------------------------- ----------- ------ ------
Finance lease commitments
Future minimum lease payments under finance leases are as
follows:
2013 2012
GBPm GBPm
---------------------------------- ----- -----
Within one year 0.2 0.3
After one year but not more than
five years 0.3 0.5
More than five years - -
---------------------------------- ----- -----
0.5 0.8
---------------------------------- ----- -----
Due to the timing of the expiry of the finance lease
commitments, there is no material difference between the total
future minimum lease payments and their fair value.
Capital commitments
At 29 September 2013, the group has commitments of GBP8.0m
(2012: GBP3.3m) relating to the acquisition of new plant and
machinery.
Contingent liabilities
The group had no material contingent liabilities at 29 September
2013 (2012: none).
31. Related party disclosures
The consolidated financial statements include the financial
statements of Britvic plc and the subsidiaries listed in the table
below. Particulars of dormant and non-trading subsidiaries which do
not principally affect the group results have been excluded.
Name Principal activity Country of % Equity
incorporation interest
------------------------- ---------------------------- ---------------- ----------
Directly held
Britannia Soft Drinks England and
Limited Holding company Wales 100
Britvic Finance
No 2 Limited Financing company Jersey 100
Indirectly held
Britvic International Marketing and distribution England and
Limited of soft drinks Wales 100
Britvic Soft Drinks Manufacture and sale England and
Limited of soft drinks Wales 100
Britvic Irish Holdings Republic of
Limited Holding company Ireland 100
Britvic Ireland Manufacture and marketing Republic of
Limited of soft drinks Ireland 100
Britvic Northern Marketing and distribution Republic of
Ireland Limited of soft drinks Ireland 100
Supply of water-coolers Republic of
Aquaporte Limited and bottled water Ireland 100
Britvic Worldwide Marketing and distribution Republic of
Brands Limited of soft drinks Ireland 100
Britvic Property
Partnership Financing company Scotland 100
Britvic North America Marketing and distribution
LLC of soft drinks USA 100
Britvic France SNC Holding partnership France 100
Fruité Entreprises
SA Holding company France 100
Manufacture and sale
Fruité SAS of soft drinks France 100
Manufacture and sale
Bricfruit SAS of soft drinks France 100
Manufacture and sale
Unisource SAS of soft drinks France 100
Manufacture and sale
Teisseire SAS of soft drinks France 100
Teisseire Benelux Marketing and distribution
SA of soft drinks France 100
------------------------- ---------------------------- ---------------- ----------
Key management personnel are deemed to be the Executive and
Non-Executive Directors of the company and members of the Executive
Committee. The compensation payable to key management in the period
is detailed below.
2013 2012
GBPm GBPm
------------------------------ ------------------- -----
Short-term employee benefits 6.6 3.0
Post-employment benefits 0.1 0.6
Share-based payment 1.1 0.4
------------------------------ ------------------- -----
7.8 4.0
------------------------------ ------------------- -----
See note 8 for details of directors' emoluments.
There were no other related party transactions requiring
disclosure in these financial statements.
32. Going concern
The directors are confident that it is appropriate for the going
concern basis to be adopted in preparing the financial statements.
As at 29 September 2013, the consolidated balance sheet is showing
a net assets position of GBP40.9m (30 September 2012: net assets of
GBP37.1m).
Group reserves are low due to the capital restructuring
undertaken at the time of flotation. This does not impact on
Britvic plc's ability to make dividend payments.
The liquidity of the group remains strong in particular with
GBP491.2m of private placement notes with maturity dates between
2014 and 2022 and a GBP400.0m bank facility maturing in March 2016.
In addition, it is expected that additional private placement notes
will be secured in December 2013 subject to completion of
documentation and due diligence (see note 21).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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