TIDMBVIC
RNS Number : 9950X
Britvic plc
26 November 2014
Britvic plc Preliminary Results - 26 November 2014
Britvic plc announces its preliminary results for the 52 weeks
ended 28 September 2014. All numbers quoted are on a constant
currency basis and are pre-exceptional and other items, unless
otherwise stated.
Financial headlines:
-- Revenue growth of 2.4% to GBP1,344.4m, with volume growth of 1.5% and ARP growth of 1.0%
-- Group EBIT of GBP158.1m, up 17.6% on last year and ahead of
previous guidance, driven by disciplined revenue growth and
accelerated delivery of the strategic cost initiatives
-- 150bps expansion in EBITA margin
-- Reduction in adjusted net debt to GBP380.9m, with EBITDA ratio falling from 2.2x to 1.9x
-- Underlying free cash flow of GBP88.9m, ahead of previous guidance
-- Adjusted EPS of 41.8p, up 18.8% on last year
-- Full year dividend of 20.9p, up 13.6% on last year,
reflecting earnings growth and robust cash generation
Strategic highlights:
-- Strategic cost initiatives generated a higher in-year benefit
than originally anticipated, delivering a cumulative GBP25m gross
benefit in 2015
-- Increased investment during the year in the International
business unit, strategic marketing and innovation
-- Further investment in capacity in 2015 to support future
growth, including GBP25m capital spend in a new high speed PET line
and warehousing
-- Fruit Shoot USA multipack launch anticipated in H2 2015
-- Anticipate 2015 EBIT in the range of GBP164m to GBP173m,
underpinned by cost saving initiatives
52 weeks 52 weeks % change % change
ended ended actual exchange constant(1)
28 September 29 September rate exchange
2014 2013 rate
GBPm(2) GBPm(2)
-------------------------- -------------- -------------- ----------------- -------------
Group Revenue(5) 1,344.4 1,321.9 1.7% 2.4%
Group EBITA(8) 161.0 137.9 16.8% 17.3%
EBITA Margin(8) 12.0% 10.4% 160bps 150bps
Group EBIT(9) 158.1 135.0 17.1% 17.6%
Group Profit Before
Tax 132.9 108.1 22.9% 23.5%
Group Profit After
Tax 99.9 82.6 20.9% 20.9%
Group Profit After
Tax, After Exceptional
And Other Items 89.7 61.9 44.9% 44.9%
Adjusted Earnings Per
Share(10) 41.8p 35.2p 18.8% 18.8%
Weighted Average No.
of Shares 245.8 243.2 1.1% -
Full year Dividend
Per Share 20.9p 18.4p 13.6% -
Underlying Free Cash
Flow (11) 88.9 103.5 (14.1)% -
Group Adjusted Net
Debt (12) (380.9) (402.3) 5.3% -
Adjusted Net Debt:EBITDA 1.9x 2.2x 0.3x -
ROIC(13) 24.9% 21.3% 360bps -
-------------------------- -------------- -------------- ----------------- -------------
Simon Litherland, Chief Executive Officer commented:
"This is a strong set of results and we have made excellent
progress during the year implementing our new strategy. We have
delivered revenue and margin growth, and profit significantly ahead
of last year, despite challenging trading conditions in each of our
markets. Our international operations are also progressing
encouragingly and we anticipate the launch of Fruit Shoot
multi-packs in the USA in the second half of 2015. In addition we
continue to invest in our people and our infrastructure to ensure
we are well placed to deliver the growth opportunities available to
us.
The year has begun slowly, reflecting the increasingly
challenging trading conditions. However we are confident of further
improving our profitability in 2015, as we bring to market our
strong innovation and marketing plans and benefit from the delivery
of the cost savings programme."
The board is proposing a final dividend per share of 14.8p, up
13.8% on last year. This reflects the board's confidence in the
future prospects of our business, the robust free cash flow
generation and our stated progressive dividend policy.
For further information please contact:
Investors:
Rupen Shah (PLC Finance and Investor Relations
Director) +44 (0) 1442 284330
Steve Nightingale (Director of Investor
Relations) +44 (0) 1442 284330
Media:
Susan Turner (Director of Corporate Affairs) +44 (0) 7808 098579
Ben Foster/Lindsay Noton (Pendomer communications) +44 (0) 203 603 5220
There will be a live webcast of the presentation given today at
9am 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.
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) All numbers quoted are pre-exceptional and other items, unless otherwise stated.
(3) Volume is defined as number of litres sold, excluding
factored brands sold by Counterpoint in Ireland. No volume is
recorded in respect of international concentrate sales.
(4) ARP is defined as average revenue per litre sold, excluding
factored brands and concentrate sales.
(5) Group revenue is defined as sales achieved by the group net
of price promotional investment and retailer discounts.
(6) Brand contribution 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.
(7) Brand contribution margin is a percentage measure calculated
as brand contribution, divided by revenue. Each business unit's
performance is reported down to the brand contribution level.
(8) Group 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 (2013: GBP2.9m as reported last
year). EBITA margin is EBITA as a proportion of group revenues.
(9) Group EBIT is defined as operating profit before exceptional
and other items. EBIT margin is EBIT as a proportion of group
revenues.
(10) 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 245.8m (2013:
243.2m).
(11) Underlying free cash flow is defined as net cash flow
excluding movements in borrowings, dividend payments and
exceptional and other items.
(12) Group adjusted net debt is defined as group net debt,
adding back the impact of derivatives hedging the balance sheet
debt.
(13) 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.
Reconciliation from actual exchange rate to constant exchange
rate
2013 actual Change 2013 constant
exchange rate GBPm exchange rate
GBPm GBPm
------------------------------ --------------- ------- ---------------
Group Revenue 1,321.9 (9.4) 1,312.5
------------------------------ --------------- ------- ---------------
Group EBIT 135.0 (0.6) 134.4
------------------------------ --------------- ------- ---------------
Group Profit Before Tax 108.1 (0.5) 107.6
------------------------------ --------------- ------- ---------------
Group Profit After Tax (PAT) 82.6 - 82.6
------------------------------ --------------- ------- ---------------
Group PAT, After Exceptional
And Other Items 61.9 - 61.9
------------------------------ --------------- ------- ---------------
Group EBITA 137.9 (0.6) 137.3
------------------------------ --------------- ------- ---------------
Adjusted Earnings Per Share 35.2p - 35.2p
------------------------------ --------------- ------- ---------------
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 Great Britain (GB) and
Ireland under exclusive PepsiCo agreements.
Britvic is the largest supplier of branded still soft drinks in
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 27 September 2014. ROI take-home
market data referred to in this announcement is supplied by Nielsen
and runs to 5 October 2014. French market data is supplied by IRI
and runs to 21 September 2014.
Next scheduled announcement
Britvic will publish its quarter one interim management
statement on 27 January 2015.
Chief Executive Officer's Strategic Review
We have reported another strong set of results for our financial
year ended 28 September 2014 and have made excellent progress in
delivering our strategic initiatives. I am incredibly proud of our
company and its portfolio of leading brands and it is a privilege
to lead an organisation with such a passionate and talented team.
Our aspirational vision is to be the most dynamic, creative and
admired soft drinks company in the world and we have made great
progress in the last twelve months, in what were challenging market
conditions.
"Embed a winning culture and improve operating margin"
This has been a year of exceptional change as we continued to
implement our new strategy. We completed the re-design of our
organisation, matching our resource to the growth opportunities and
created a business that is simple, focused and accountable. We have
a new Executive Team in place, which includes all our business unit
Managing Directors for the first time. As an Executive Team we have
created and shared an exciting new vision for our business and set
some ambitious targets for ourselves. We have also created a new
set of values to guide our behaviours and facilitate effective
engagement and ways of working across the business.
As planned we have closed two factories in GB, a depot and a
call centre in Ireland, and consolidated back office functions in
GB and Ireland. Where possible we have found new roles for those
employees willing to relocate and supported those leaving the
business in finding alternative employment. I would like to
personally thank all affected employees for their commitment and
support during this time of change.
During the year we also set up an international business unit to
support our ambitious growth plans in the kids, family and adult
categories. It now operates as a fully resourced, standalone
business unit, with over one hundred employees, and is focused on
providing the necessary support to our in-market partners to
develop our brands locally, as well as market specific innovation
and the creation of relevant marketing campaigns. We have come a
long way in the last twelve months and have successfully managed
our way through a period of organisational change.
We have made strong progress this year despite challenging
trading conditions in each of our markets. Revenue and margins have
increased and profits are well ahead of last year. We are on-track
to deliver the GBP30m cost saving programme by 2016. The
overwhelming majority will have been delivered in the 2014/15
financial year. Our focus on generating cash has allowed us to
reduce net debt and increase the full year dividend by 13.6%.
"Leverage our portfolio in GB & Ireland and innovate to meet
changing consumer needs"
In GB our carbonates portfolio has continued to outperform the
market. We successfully grew volumes whilst the category was in
decline and increased market share. Pepsi has been the key driver
of this growth, led by Pepsi Max and its "no sugar, maximum taste"
proposition. Throughout the year we have executed a number of
exciting and impactful marketing campaigns, including the
"Unbelievable" campaign, which saw extensive, ground-breaking
advertising for the brand across the country and on-line. The Pepsi
Max YouTube channel was a focal point for our digital marketing and
we achieved over 50 million views across all platforms. Throughout
the summer Pepsi leveraged its connection with key football
personalities with limited edition packs on-shelf and the chance to
win some great prizes. We also launched an exciting new dispense
proposition for the leisure channel, allowing consumers to
personalise their soft drink experience, with added flavours.
The GB stills category has been challenged with only minor
volume growth, driven by plain water, which is not a scale category
for us. Growth in our stills portfolio is crucial to our future
success and is a priority for us. Whilst our overall performance
has been below what we wanted to achieve this year, there have been
positive highlights. Robinsons continued to lead the squash
category, and although we have seen increased competition from
private-label which impacted our volume, our focus has been to
protect price and maintain our brand equity. We have continued to
invest in the brand, as demonstrated by the launch of Robinsons
Squash'd, which has led the growth of the new water enhancer
sub-category. The launch was supported by an extensive marketing
campaign, including TV advertising, and we have been delighted with
its performance to date. Fruit Shoot performed well, gaining value
and volume share in the market. During the year, we stopped selling
the full sugar version of Fruit Shoot, as part of our commitment to
address public health, and we continued to encourage children to
get active with our 'skills' campaign. Lipton Ice Tea drove growth
in the emerging cold/hot drinks category, which grew its market
value by over 40%, over the year. As consumers continued to focus
on value, both when shopping for home and on nights out, the
premium juice drinks category has been challenged. J20, which is a
premium priced brand, has seen some share decline, as a result of
this trend.
In Ireland, we have a branded soft drinks business and a
licensed wholesale operation, called Counterpoint. The soft drinks
market was down, both in volume and value and we did lose some
market share. The carbonates category in particular was very
competitive and saw a significant amount of price-led promotions. A
highlight of our innovation programme in Ireland this year was the
introduction of a new Club Zero range with no added sugar, which is
proving popular with consumers. In November, we launched
Counterpoint as a standalone licensed wholesaler to supply the pub
and club trade across both the Republic of Ireland and Northern
Ireland. Since its launch it has added new categories, such as
snacks and wine to its range, allowing it to compete far more
effectively.
"Exploit global opportunities in kids, family and adult
categies"
The international business has continued to grow and we are
seeing the benefits of our investment in the establishment of a
standalone business unit. In the USA we have made great progress
with Fruit Shoot achieving national distribution in the convenience
and leisure channels. We signed a 15 year franchise for Fruit Shoot
with PepsiCo who started to manufacture Fruit Shoot in the USA.
Having signed an agreement with the Narang Group in May 2013, we
launched Fruit Shoot in India in the summer. Narang is a
well-established sales and marketing business who distribute a
range of leading brands across India. With a dedicated production
line in market we launched four flavours that were developed
specifically for the Indian consumer. Distribution was achieved in
the ten major cities that we targeted and a consumer awareness
campaign was launched in time for the Diwali festival, including TV
advertising.
In France, Fruit Shoot continued to grow, with the brand
establishing itself as the number one in the children's juice
drinks category. We also transferred a production line from GB to
France to supply Fruit Shoot both to the French market and into
Spain. We continued to invest in Teisseire, the number one syrups
brand in France. This year we extended the pack range with the
introduction of the PET "pump" pack to drive greater usage of
syrups. The early signs are very good as it brings new households
into the brand.
"Build trust and respect in our communities"
The past year has seen a surge of interest in health and sugar
levels in soft drinks. We strongly believe that all our drinks can
be enjoyed as part of a balanced diet and healthy lifestyle. We
offer a wide range of low calorie drinks and lead our marketing
with these drinks. We have continued to play an active role to help
address the challenge and in the last year we have launched a new
health strategy across all business units, which will build on our
achievements to date and continue to provide great tasting drinks,
while further reducing the average calorie content of our
portfolio.
Read more about our health strategy and our approach to
sustainability in the annual report.
Our future prospects are very exciting. We have transformed our
business and created the conditions for success with a new culture.
We have a clear purpose and aspirational vision. Despite the
challenging market place everyone in the business is focused on the
delivery of our strategy. We continue to invest and have the plans
in place to ensure we can continue to grow the business and create
value for all of our stakeholders.
Chief Financial Officer's Review
The following is based on Britvic's results for the 52 weeks
ended 28 September 2014.
A full list of definitions can be found on page 2 of this
document.
All numbers quoted are on a constant currency basis and are
pre-exceptional and other items, unless otherwise stated.
Overview
In the period the group sold over 2 billion litres of soft
drinks, an increase of 1.5% on the previous year, with Average
Realised Price (ARP) of 63.0p, increasing by 1.0%. The group's
revenue was GBP1,344.4m, up 2.4% compared to last year, on a
constant currency basis.
The focus has remained on building sustainable profit and margin
improvement. Both revenue growth and the delivery of the strategic
cost initiatives have contributed to the 17.3% growth in adjusted
EBITA, to GBP161m, and the resulting 150 basis points (bps)
improvement in operating margin to 12.0%. The strategic cost
initiative benefits have been realised in both brand contribution
and in fixed costs. In brand contribution we have seen the benefit
of our disciplined revenue management principles and the
realisation of our procurement strategy. In fixed costs we have
seen the benefit from the closure of a number of facilities and the
consolidation of back office functions.
Whilst the poorer summer weather in each of our European markets
did not help our cause, we were able to deliver EBIT of GBP158.1m,
marginally ahead of the previous guidance by achieving a higher
in-year benefit from the cost savings.
GB stills 52 weeks ended 52 weeks ended % change
28 September 29 September actual
2014 2013 exchange
GBPm GBPm rate
--------------- --------------- ----------
Volume (millions litres) 378.9 398.7 (5.0)
ARP per litre 88.5p 85.3p 3.8
Revenue 335.2 340.1 (1.4)
Brand contribution 159.4 154.5 3.2
Brand contribution margin 47.6% 45.4% 220bps
The GB stills category volume, as measured by Nielsen, was
marginally up this year. The driver of growth was plain water which
was up nearly 10%, a category which is not currently material for
us. Excluding water category volume was down 4%. Our volume decline
of 5% was primarily driven by two brands, J20 and Robinsons. J20
continued to be impacted by consumers seeking value, both at home
and dining out, whilst Robinsons lost volume share to own-label
squash. As part of our commercial change programme we have
continued to benefit from stronger revenue management disciplines
this year. We launched Robinsons Squash'd in the first half of the
year, which had a positive impact on ARP reflecting its price point
and small 66ml bottle size. Overall ARP increased by 3.8%, limiting
the revenue decline to 1.4%. Brand contribution increased by 3.2%
whilst margin improved by 220 bps.
GB carbonates 52 weeks ended 52 weeks ended % change
28 September 29 September actual
2014 2013 exchange
GBPm GBPm rate
--------------- --------------- ----------
Volume (millions litres) 1,204.7 1,153.9 4.4
ARP per litre 47.1p 46.5p 1.3
Revenue 567.8 536.4 5.9
Brand contribution 222.4 200.1 11.1
Brand contribution margin 39.2% 37.3% 190bps
Whilst the GB carbonates category volume was down, we increased
volume by 4.4% with an increase in ARP of 1.3% as a result of
disciplined revenue management. This led to an impressive revenue
increase of 5.9%. Pepsi, led by Pepsi Max, was the key driver of
growth, and we saw revenue growth across all major pack formats,
including cans, PET and dispense in the leisure trade. This was
supported by the successful execution of some exciting marketing
campaigns including the sponsorship of football personalities and
the Max "Unbelievable" campaign. Brand contribution was up 11.1%
and margin improved by 190bps.
France 52 weeks ended 52 weeks ended % change % change
28 September 29 September actual constant
2014 2013 exchange exchange
GBPm GBPm rate rate
--------------- --------------- ---------- ----------
Volume (millions
litres) 273.6 272.1 0.6 0.6
ARP per litre 93.2p 94.9p (1.8) 0.6
Revenue 254.9 258.2 (1.3) 1.2
Brand contribution 67.1 63.2 6.2 8.9
Brand contribution
margin 26.3% 24.5% 180bps 180bps
In France soft drink market volumes were marginally up and our
volume increase was slightly ahead of the market. The poorer
weather in the summer had a particularly negative impact on the
syrups category. With both volume and ARP up 0.6%, revenue
increased 1.2%. The major success story of the year was Fruit Shoot
which established itself as the number one brand in the category.
We also transferred a Fruit Shoot production line from GB to
France. Supply was limited whilst the line was commissioned,
impacting both France and other European markets. The line is now
fully operational, supplying France and Spain. Brand contribution
was up 8.9% and margin improved by 180bps.
Ireland 52 weeks ended 52 weeks ended % change % change
28 September 29 September actual constant
2014 2013 exchange exchange rate
GBPm GBPm rate
--------------- --------------- ---------- ---------------
Volume (millions
litres) 197.0 199.0 (1.0) (1.0)
ARP per litre 54.1p 56.8p (4.8) (2.9)
Revenue 128.3 136.9 (6.3) (4.5)
Brand contribution 47.0 49.0 (4.1) (1.7)
Brand contribution
margin 36.6% 35.8% 80bps 100bps
Note: Volumes and ARP include own-brand soft drinks sales and do
not include factored product sales included within total revenue
and brand contribution
Market conditions in Ireland remained difficult with consumers
continuing to seek value amid a competitive trading environment. In
our branded business volume declined by 1.0% and ARP declined by
2.9%, resulting in revenue down 4.5%, on a constant currency basis.
This includes the impact of a revenue decline for our licensed
wholesale business, Counterpoint, primarily due to consumers
switching from packaged to draught beer, which we do not currently
sell. The brand contribution decline was limited to 1.7% with a
100bps improvement in margin. During the year as part of the
strategic cost initiatives, we consolidated back office functions
into GB as well as closing a depot and a call centre. The benefit
of these is realised in fixed costs rather than brand
contribution.
International 52 weeks ended 52 weeks ended % change % change
28 September 29 September actual constant
2014 2013 exchange exchange rate
GBPm GBPm rate
--------------- --------------- ---------- ---------------
Volume (millions
litres) 44.3 43.2 2.5 2.5
ARP per litre 131.4p 116.4p 12.9 14.0
Revenue 58.2 50.3 15.7 16.9
Brand contribution 21.0 18.8 11.7 12.3
Brand contribution
margin 36.1% 37.4% (130)bps (150)bps
Note: Concentrate sales are included in both revenue and ARP but
do not have any associated volume
International is now a fully established business unit, with
responsibility for both our export markets and our franchise
markets. In the Netherlands and Spain Fruit Shoot has continued to
grow revenue. There has been significant progress in our franchise
markets of the USA and India. In the USA we signed a 15 year
distribution agreement for Fruit Shoot with PepsiCo Americas
Beverages (PAB) and in India we launched Fruit Shoot this summer
with our partner, the Narang Group. Revenue was up 16.9%, with
brand contribution up 12.3%. Margin declined 150bps, reflecting the
increased A&P spend as we increased investment behind the USA
and India.
Fixed costs 52 weeks ended 52 weeks ended % change
28 September 29 September actual
2014 2013 exchange
GBPm GBPm rate
--------------- --------------- ----------
Non-brand A&P (9.9) (7.3) (35.6)
Fixed supply chain (101.8) (100.7) (1.1)
Selling costs (120.7) (124.5) 3.1
Overheads and other (126.4) (118.1) (7.0)
Total (358.8) (350.6) (2.3)
------------------------- --------------- --------------- ----------
Total A&P investment (72.0) (70.3) (2.4)
A&P as a % of own-brand
revenue 5.4% 5.4% -
Fixed costs increased by 2.3% to GBP358.8m. During the year the
benefit of the strategic cost initiatives, such as the factory
closures in GB and the consolidation of GB and Ireland back office
functions, was realised in fixed costs. We have invested in the
establishment of both the international business unit and the
strategic marketing and innovation function. In addition we have
increased both trade marketing spend, which is reported in
overheads, and non-brand A&P. This increased investment is
focused behind our strategic growth drivers, primarily in the kids,
family and adult categories. A&P spend increased by 2.4% to
GBP72.0m, with the percentage of revenue measure flat at 5.4%.
Exceptional and other items
In the period, we accounted for a net charge of GBP12.8m of
pre-tax (GBP10.2m post tax) exceptional and other costs. These
include:
-- Corporate exceptional items of GBP14.1m, relating to the
implementation of the strategic cost initiatives announced at
interims in May 2013. This is slightly lower than the previous
guidance of GBP17m. The balance will be realised in 2015.
-- Other fair value movements gain of GBP2.3m. 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.
-- Write-off of unamortised finance fees of GBP1.0m related to
the early refinancing of the revolving credit facility.
The cash costs of exceptional and other items in the period were
GBP18.9m.
Interest
The net finance charge before exceptional and other items for
the 52 week period for the group was GBP25.2m compared with
GBP26.9m in the same period in the prior year, reflecting the lower
debt profile of the group and the benefit of the free cash flow
generation.
Taxation
The tax charge before exceptional and other items was GBP33.0m
which equates to an effective tax rate of 24.8% (52 weeks ended 29
September 2013: 23.6%). The increase in the effective tax rate
reflects the increase in the French corporate tax rate during the
period and start-up losses incurred in some of the group's
International expansion for which no tax relief is currently
available. In 2013 the group's effective tax rate had benefited
from the retranslation of its deferred tax liability on the phased
reduction in the UK corporate tax rate. A comparable benefit is not
available for 2014.
Earnings per share
Adjusted basic EPS for the period, excluding exceptional and
other items and acquisition related amortisation, was 41.8p, up
18.8% on the same period last year (35.2p). Basic EPS (after
exceptional and other items charges post-tax) for the period was
36.5p compared with 25.5p for the same period last year.
Dividends
The board is recommending a final dividend of 14.8p per share,
an increase of 13.8% on the dividend declared last year, with a
total value of GBP36.3m. The final dividend will be paid on 6
February 2015 to shareholders on record as at 5 December 2014. The
ex-dividend date is 4 December 2014.
Cash flow and net debt
Underlying free cash flow was a GBP88.9m inflow, compared to a
GBP103.5m inflow the previous year. Capital expenditure was
GBP22.4m higher than last year, largely as a result of the
implementation of the strategic initiatives. The increase in
pension contributions was due to the planned additional
contributions in GB from the previous 2010 triennial valuation
funding agreement. Overall adjusted net debt reduced by over GBP21m
and took our leverage to 1.9x EBITDA from 2.2x last year. The
adjusted net debt (taking into account the foreign exchange
movements on the derivatives hedging our US Private Placement debt)
at 28 September 2014 was GBP380.9m, compared to GBP402.3m at the
end of last year.
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.
On 20 February 2014, Britvic plc repaid US$102m and GBP25m of
notes in the United States private placement market (USPP). These
notes were repaid using funds received from the issuance of 2014
notes (see below). The 2007 cross currency interest rate swap
instruments which had been designated as part of a cash flow hedge
relationship against the future cash flows associated with this
maturing portion of the 2007 notes, also matured on 20 February
2014.
On 20 February 2014, Britvic plc issued US$114m and GBP35m of
Senior notes with maturities between 7 and 12 years in the United
States private placement market (the '2014 notes'). The proceeds
from the 2014 notes were principally used to repay amounts due in
relation to the maturity of certain tranches of the 2007 notes.
At 28 September 2014 the group has GBP920m of committed debt
facilities consisting of a GBP400m bank facility maturing in 2016
and a series of private placement notes with maturities between
2014 and 2026. As part of securing the group's medium term funding
platform, the GBP400m bank facility has been successfully
refinanced with improved terms, with a revised maturity of November
2019.
At 28 September 2014, the group's unadjusted net debt of
GBP419.0m (excluding derivative hedges) consisted of GBP1.4m drawn
under the group's committed bank facilities, GBP558.3m of private
placement notes, GBP3.6m of accrued interest and GBP0.3m of finance
leases, offset by net cash and cash equivalents of GBP143.3m and
unamortised loan issue costs of GBP1.3m. 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 GBP380.9m which compares to GBP402.3m
at 29 September 2013.
Pensions
At 28 September 2014, the IAS 19 (Revised) pension deficit in
respect of the group defined benefit pension schemes was GBP8.4m
(29 September 2013: net deficit of GBP19.3m). The reduction in the
deficit was mainly due to better than expected investment
performance and employer contributions, which was partly offset by
the higher liabilities due to changes in the financial
assumptions.
The defined benefit section of the GB plan 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 of this
scheme as at 31 March 2013 has been completed without committing
additional employer contributions as the funding level has improved
since the 2010 actuarial valuation. In addition to the valuation,
Britvic has reached agreement with the trustees to move the Plan's
assets towards an immunised portfolio by investing in debt
instruments. This will lead to the removal of equity risk from the
Plan's assets and a reduction in the volatility of the funding
level as a result of having investments that better match the
Plan's liabilities.
Consolidated income statement
For the 52 weeks ended 28 September 2014
52 weeks 52 weeks
ended 28 September 2014 ended 29 September 2013
------------------------------------- -------------------------------------
Before Exceptional Total Before Exceptional Total
exceptional & other exceptional & other
& items* & items*
other items other
items
Note GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Revenue 1,344.4 - 1,344.4 1,321.9 - 1,321.9
Cost of sales (617.5) - (617.5) (646.9) - (646.9)
------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Gross profit 726.9 - 726.9 675.0 - 675.0
Selling and distribution
costs (370.4) - (370.4) (351.5) - (351.5)
Administration expenses (198.4) (12.8) (211.2) (188.5) (26.2) (214.7)
------------- ------------ -------- ------------- ------------ --------
Operating profit/(loss) 6 158.1 (12.8) 145.3 135.0 (26.2) 108.8
Finance costs 9 (25.2) - (25.2) (26.9) 0.7 (26.2)
Profit/(loss) before
tax 132.9 (12.8) 120.1 108.1 (25.5) 82.6
Taxation 10 (33.0) 2.6 (30.4) (25.5) 4.8 (20.7)
------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Profit/(loss) for
the period attributable
to the equity
shareholders 99.9 (10.2) 89.7 82.6 (20.7) 61.9
------------------------- ----- ------------- ------------ -------- ------------- ------------ --------
Earnings per share
Basic earnings per
share 11 36.5p 25.5p
Diluted earnings per
share 11 36.2p 25.3p
Adjusted basic earnings
per share** 11 41.8p 35.2p
Adjusted diluted
earnings
per share** 11 41.5p 34.9p
* 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/(EXPENSE)
For the 52 weeks ended 28 September 2014
52 weeks ended 52 weeks ended
28 September 29 September
2014 2013
Note GBPm GBPm
------------------------------------------------- ----- --------------- ---------------
Profit for the period attributable to
the equity shareholders 89.7 61.9
Other comprehensive income/(expense):
Items that will not be reclassified to
profit or loss
Remeasurement losses on defined benefit
pension schemes 23 (12.3) (32.4)
Deferred tax on defined benefit pension
schemes 10a (2.0) 4.4
Current tax on additional pension contributions 10a 4.5 3.1
-------------------------------------------------- ----- --------------- ---------------
(9.8) (24.9)
------------------------------------------------- ----- --------------- ---------------
Items that may be subsequently reclassified
to profit or loss
Losses in the period in respect of cash
flow hedges 26 (11.9) (1.4)
Amounts recycled to the income statement
in respect of cash flow hedges 26 10.5 0.1
Deferred tax in respect of cash flow
hedges accounted for in the hedging reserve 10a 0.1 0.4
Exchange differences on translation of
foreign operations 26 (3.9) -
Tax on exchange differences accounted
for in the translation reserve 10a 0.7 (2.9)
Deferred tax on other temporary differences 10a 0.1 0.2
-------------------------------------------------- ----- --------------- ---------------
(4.4) (3.6)
------------------------------------------------- ----- --------------- ---------------
Other comprehensive income/(expense)
for the period, net of tax (14.2) (28.5)
-------------------------------------------------- ----- --------------- ---------------
Total comprehensive income for the period
attributable to the equity shareholders 75.5 33.4
-------------------------------------------------- ----- --------------- ---------------
Consolidated BALANCE SHEET
As at 28 September 2014
2014 2013
Note GBPm GBPm
--------------------------------------- ----- ---------- ----------
Assets
Non-current assets
Property, plant and equipment 13 221.0 215.7
Intangible assets 14 299.7 317.0
Other receivables 16 3.0 3.8
Other financial assets 26 64.6 62.5
Pension asset 23 - 0.1
--------------------------------------- ----- ---------- ----------
588.3 599.1
--------------------------------------- ----- ---------- ----------
Current assets
Inventories 17 84.7 90.8
Trade and other receivables 18 276.9 266.1
Other financial assets 26 4.5 12.8
Cash and cash equivalents 19 144.0 94.0
--------------------------------------- ----- ---------- ----------
510.1 463.7
Non-current assets held for sale 20 3.6 -
Total assets 1,102.0 1,062.8
Current liabilities
Trade and other payables 24 (379.7) (381.5)
Bank overdrafts 19 (0.7) (2.5)
Interest bearing loans and borrowings 22 (22.4) (91.6)
Other financial liabilities 26 (1.6) (1.4)
Current income tax payable (25.4) (17.0)
Provisions 28 (4.1) (10.5)
Other current liabilities 27 (0.4) -
(434.3) (504.5)
Non-current liabilities
Interest bearing loans and borrowings 22 (539.9) (458.3)
Deferred tax liabilities 10d (23.3) (27.8)
Pension liability 23 (8.4) (19.4)
Other financial liabilities 26 (9.9) (10.0)
Provisions 28 (1.6) -
Other non-current liabilities 27 (1.5) (1.9)
--------------------------------------- ----- ---------- ----------
(584.6) (517.4)
--------------------------------------- ----- ---------- ----------
Total liabilities (1,018.9) (1,021.9)
--------------------------------------- ----- ---------- ----------
Net assets 83.1 40.9
--------------------------------------- ----- ---------- ----------
Capital and reserves
Issued share capital 21 49.4 49.0
Share premium account 33.5 25.0
Own shares reserve (2.9) (1.1)
Share scheme reserve 11.2 7.5
Hedging reserve 1.4 2.7
Translation reserve 16.4 19.6
Merger reserve 87.3 87.3
Retained losses (113.2) (149.1)
--------------------------------------- ----- ---------- ----------
Total equity 83.1 40.9
--------------------------------------- ----- ---------- ----------
Consolidated statement of cash flows
For the 52 weeks ended 28 September 2014
2014 2013
Note GBPm GBPm
--------------------------------------------- ------ ------- -------
Cash flows from operating activities
Profit before tax 120.1 82.6
Finance costs 9 25.2 26.2
Other financial instruments (1.3) (6.0)
Impairment of property, plant and equipment
and intangible assets 13,14 0.6 12.9
Depreciation 13 31.5 36.6
Amortisation 14 10.4 7.1
Share based payments 29 9.1 6.2
Net pension charge less contributions (22.9) (17.2)
Decrease/(increase) in inventory 3.1 (14.9)
Increase in trade and other receivables (15.8) (4.7)
Increase/(decrease) in trade and other
payables 10.5 9.9
(Decrease)/increase in provisions (4.8) 10.5
Loss on disposal of property, plant and
equipment and intangible assets 1.1 3.8
Income tax paid (20.2) (11.2)
--------------------------------------------- ------ ------- -------
Net cash flows from operating activities 146.6 141.8
--------------------------------------------- ------ ------- -------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.7 0.3
Purchases of property, plant and equipment (49.2) (26.3)
Purchases of intangible assets (8.8) (8.9)
--------------------------------------------- ------ ------- -------
Net cash flows used in investing activities (57.3) (34.9)
--------------------------------------------- ------ ------- -------
Cash flows from financing activities
Interest paid (24.2) (26.6)
Interest bearing loans drawndown/(repaid) 0.2 (0.9)
Repayment of 2007 USPP Notes 22 (76.8) -
Issue of 2014 USPP Notes 22 105.8 -
Issue costs paid (0.4) -
Issue of shares 4.9 7.1
Dividends paid to equity shareholders 12 (46.8) (42.5)
--------------------------------------------- ------ ------- -------
Net cash flows used in financing activities (37.3) (62.9)
--------------------------------------------- ------ ------- -------
Net increase in cash and cash equivalents 52.0 44.0
Cash and cash equivalents at beginning
of period 91.5 47.6
Exchange rate differences 30 (0.2) (0.1)
--------------------------------------------- ------ ------- -------
Cash and cash equivalents at the end of
the period 19 143.3 91.5
--------------------------------------------- ------ ------- -------
ConsolidateD STATEMENT OF CHANGES IN EQUITY
For the 52 weeks ended 28 September 2014
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 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
Profit for the
period - - - - - - - 89.7 89.7
Other
comprehensive
income - - - - (1.3) (3.2) - (9.7) (14.2)
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
- - - - (1.3) (3.2) - 80.0 75.5
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
Issue of shares 0.4 8.5 (5.4) - - - - - 3.5
Own shares
utilised
for share
schemes - - 3.6 (3.5) - - - 1.3 1.4
Movement in
share
based schemes - - - 7.2 - - - - 7.2
Current tax on
share based
payments - - - - - - - 0.8 0.8
Deferred tax on
share based
payments - - - - - - - 0.6 0.6
Payment of
dividend - - - - - - - (46.8) (46.8)
--------- ------------ --------- -------
At 28 September
2014 49.4 33.5 (2.9) 11.2 1.4 16.4 87.3 (113.2) 83.1
----------------- --------- --------- --------- --------- --------- ------------ ---------- --------- -------
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
32.
The preliminary results announcement for the 52 week period
ended 28 September 2014 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 2014. 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 28 September 2014 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 29 September 2013 has been
extracted from the Britvic Annual Report for that period as filed
with the Registrar of Companies.
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.
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 pounds 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.
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 28 September 2014, the consolidated balance sheet is showing
a net assets position of GBP83.1m (29 September 2013: net assets of
GBP40.9m).
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
GBP520.2m of private placement notes with maturity dates between
2014 and 2026 and a GBP400m bank facility maturing in March 2016.
Agreement has been reached to refinance this facility with an
expected revised maturity date of November 2019.
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 recognised to the extent that it is probable that the
economic benefits will flow to the group and the revenue can be
reliably measured, regardless of when payment is being made.
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.
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. Sales related discounts comprise:
-- Long term discounts and rebates - which are sales incentives
to customers to encourage them to purchase increased volumes and
are related to total volumes purchased and sales growth
-- Short term promotional discounts - which are directly related
to promotions run by customers
For sales related discounts that must be earned, management make
estimates related to customer performance, sales volume and agreed
terms, to determine total amounts earned and to be recorded in
deductions from revenue.
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, 5 to 10 years
fittings, tools and equipment)
Other fixtures and fittings (included in fixtures, 3 to 10 years
fittings, tools and equipment)
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.
Non-current assets held for sale
The group classifies non-current assets as held for sale if
their carrying amounts will be recovered principally through a sale
rather than continuing use. Such non-current assets as held for
sale are measured at the lower of their carrying value and fair
value less costs to sell.
Property, plant and equipment and intangibles assets are not
depreciated or amortised once classified as held for sale.
Assets classified as held for sale are presented separately as
current items in the statement of financial position.
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
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.
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.
Research and development
Research costs are expensed as incurred. Development expenditure
is recognised as an intangible asset when the group can
demonstrate:
-- The technical feasibility of completing the intangible asset
so that the asset will be available for use
-- Its intention to complete and its ability to use the asset
-- How the asset will generate future economic benefits
-- The availability of resources to complete the asset
-- The ability to measure reliably the expenditure during development
-- The ability to use the intangible asset generated
Following initial recognition of development expenditure as an
asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the
asset begins when development is complete and available for use. It
is amortised over the period of expected future benefit. During the
period of development, the asset is tested for impairment
annually.
Impairment of intangible 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.
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.
Fair value
The group measures financial instruments, such as derivatives,
at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
-- In the principal market for the asset or liability; or
-- In the absence of a principal market, in the most
advantageous market for the asset or liability
The fair value of an asset or liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
The group uses valuation techniques that are appropriate in the
circumstance and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or
disclosed in the financial statements are categorised within the
fair value hierarchy, described as follows, based on the lowest
level input that is significant to the fair value measurement as a
whole:
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.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing categorisation at the end of each reporting
period.
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 the fair value of plan assets out
of which the obligations are to be settled directly. The cost of
providing benefits is determined using the projected unit credit
method, with actuarial valuations being carried out at the end of
each reporting period.
Remeasurement, comprising actuarial gains and losses, the effect
of the asset ceiling and the return on plan assets (excluding
interest), is reflected immediately in the statement of financial
position with a charge or credit recognised in other comprehensive
income in the period in which they occur. Remeasurement recognised
in other comprehensive income is reflected immediately in retained
earnings and will not be reclassified to profit or loss.
Past service cost is recognised in profit or loss in the period
of a plan amendment. Net interest is calculated by applying the
discount rate at the beginning of the period to the net defined
liability or asset.
Defined benefit costs are categorised as follows:
-- Service cost (including current service cost, past service
cost, as well as gains and losses on curtailments and
settlements);
-- Net interest expense or income; and
-- Remeasurement
The retirement benefit obligation recognised in the consolidated
statement of financial position represents the actual deficit or
surplus in the group's defined benefit plans. Any surplus resulting
from this calculation is limited to the present value of any
economic benefits available in the form of refunds from the plans
or reductions in future contributions to the plans.
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.
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.
On a refinancing any unamortised financing charges are
accelerated through the consolidated income statement.
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 group's 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 23.
Franchise rights
Franchise rights represent franchise agreements acquired as part
of the Britvic Ireland business combination which provides long
term rights to distribute certain soft drinks. These agreements
have been allocated a 35 year useful economic life. The franchise
agreement 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 franchise agreements is highly probable. A
significant emphasis is made on developing relationships with
Pepsico, which includes maintaining an appropriate level of
communication to deal with on-going operational issues. This is
further strengthened through the addition of Pepsico products to
Britvic's portfolio in recent years.
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. Management considers
these assets to have indefinite lives based on their historical
longevity, and a business model and strategy that is based on
development and expansion of Britvic's brands. 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
22 and 26.
New standards adopted in the current period
During the period, the group adopted a number of interpretations
and amendments to standards including IAS 19 (Revised) 'Employee
Benefits' and IFRS 13 'Fair Value Measurement', all of which had an
immaterial impact on the consolidated financial statements of the
group.
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.
Other changes include the treatment of expenses paid in relation to
the plans and the narrative disclosures.
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 (although in some
cases not yet adopted by the EU) but are not yet effective:
Effective date
- periods commencing
on or after
International Financial Reporting Standards
(IFRS)
IFRS 9 / IAS Financial Instruments - Classification 1 January 2015
39 and measurement
IFRS 10 Consolidated financial statements 1 January 2014
IFRS 11 Joint arrangements 1 January 2014
IFRS 12 Disclosures of interests in other 1 January 2014
entities
IFRS 15 Revenue Recognition 1 January 2017
International Accounting Standards (IAS)
IAS 27 (revised Separate financial statements 1 January 2014
2011)
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 / IFRS Amendment to IFRS 9 - Novation 1 January 2014
9 of derivatives and continuation
of hedge accounting
Other
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.
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 28 GB GB Total Ireland France International Total
September 2014 stills carbs GB
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- ------- ------ -------- ------- -------------- --------
Revenue 335.2 567.8 903.0 128.3 254.9 58.2 1,344.4
----------------------- -------- ------- ------ -------- ------- -------------- --------
Brand contribution 159.4 222.4 381.8 47.0 67.1 21.0 516.9
----------------------- -------- ------- ------ -------- ------- -------------- --------
Non-brand advertising
& promotion * (9.9)
----------------------- -------- ------- ------ -------- ------- -------------- --------
Fixed supply chain** (101.8)
----------------------- -------- ------- ------ -------- ------- -------------- --------
Selling costs** (120.7)
----------------------- -------- ------- ------ -------- ------- -------------- --------
Overheads and other
costs* (126.4)
----------------------- -------- ------- ------ -------- ------- -------------- --------
Operating profit
before exceptional
& other items 158.1
----------------------- -------- ------- ------ -------- ------- -------------- --------
Finance costs before
exceptional & other
items (25.2)
----------------------- -------- ------- ------ -------- ------- -------------- --------
Exceptional & other
items (12.8)
----------------------- -------- ------- ------ -------- ------- -------------- --------
Profit before tax 120.1
----------------------- -------- ------- ------ -------- ------- -------------- --------
52 weeks ended 29 GB GB Total Ireland France International Total
September 2013 stills carbs GB
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- -------- ------- ------ -------- ------- -------------- --------
Revenue *** 340.1 536.4 876.5 136.9 258.2 50.3 1,321.9
----------------------- -------- ------- ------ -------- ------- -------------- --------
Brand contribution
*** 154.5 200.1 354.6 49.0 63.2 18.8 485.6
----------------------- -------- ------- ------ -------- ------- -------------- --------
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
----------------------- -------- ------- ------ -------- ------- -------------- --------
* Included within 'administration expenses' in the consolidated
income statement. 'Overheads and other costs' relate to central
expenses including salaries, IT maintenance, depreciation and
amortisation.
** Included within 'selling and distribution costs' in the consolidated income statement.
*** As part of the implementation of the new operating model,
responsibility for France exports has been transferred to the
international business and prior year numbers have been restated to
ensure accurate comparisons.
Geographic information
Revenues from external customers
The analysis below is based on the location where the sale
originated.
2014 2013
GBPm GBPm
--------------------- -------- --------
United Kingdom 966.7 940.3
Republic of Ireland 109.2 110.6
France 268.2 271.0
Other 0.3 -
--------------------- -------- --------
Total revenue 1,344.4 1,321.9
--------------------- -------- --------
Non-current assets
2014 2013
GBPm GBPm
--------------------- ------ ------
United Kingdom 233.7 236.7
Republic of Ireland 105.3 107.8
France 183.6 192.0
Other 1.1 -
--------------------- ------ ------
Total 523.7 536.5
--------------------- ------ ------
Non-current assets for this purpose consist of property, plant
and equipment, intangible assets and other receivables.
5. Exceptional and other items
Unless otherwise stated, exceptional and other items are
included within administration expenses in the consolidated income
statement.
52 weeks ended 52 weeks ended
28 September 29 September
2014 2013
Note GBPm GBPm
------------------------------------ ------ --------------- ---------------
Asset impairments (a) (0.7) (12.9)
Gain on disposal of previously 0.7 -
impaired assets
Strategic restructuring costs (b) (14.1) (10.6)
Aborted merger costs (c) - (9.6)
Other fair value movements (d) 2.3 7.6
Write off of unamortised financing (e) (1.0) -
fees
------------------------------------ ------ --------------- ---------------
Total exceptional and other
items before tax (12.8) (25.5)
-------------------------------------------- --------------- ---------------
a) Asset impairments relates to the loss recognised on transfer
of a property from property, plant and equipment to held for sale
in Britvic GB following closure in 2014 as part of strategic cost
initiatives announced in May 2013.
In 2013, asset impairments related to the planned closure of GB
factories, also as part of the strategic cost initiatives announced
in May 2013.
b) Strategic restructuring costs in 2014 relate to the
continuation of cost initiatives announced in May 2013, following
the closure of two factories in Britvic GB and subsequent
reorganisation as well as integration of GB and Ireland back office
operations.
In 2013 costs also related to the implementation of cost
initiatives announced in May 2013, including costs associated with
the closure of factories and planned changes to the business
operating model.
c) In 2013, costs related to the previously proposed merger of Britvic plc and A.G.Barr plc.
d) Other fair value movements relate to the fair value movement
of derivative financial instruments where hedge accounting cannot
be applied. For the 52 weeks ended 28 September 2014, a gain of
GBP1.3m is included within administration expenses (52 weeks ended
29 September 2013: GBP6.9m gain) and a gain of GBP1.0m is included
within finance costs (52 weeks ended 29 September 2013 GBP0.7m
gain) in the consolidated income statement.
e) Following the decision to refinance the group's committed
bank facility, unamortised financing fees of GBP1.0m have been
written off to finance costs in the consolidated income statement
(see note 9).
Details of the tax implications of exceptional and other items
are given in note 10a.
6. Operating profit/(loss)
This is stated after charging: 2014 2013
GBPm GBPm
--------------------------------------------------- ------ ------
Cost of inventories recognised as an expense 617.5 646.9
Including: write-down of inventories to net
realisable value 1.1 1.5
Research and development expenditure written
off 2.6 0.6
Net foreign currency exchange differences 1.6 1.1
Depreciation of property, plant and equipment 31.5 36.6
Amortisation of intangible assets 10.4 7.1
Operating lease payments - minimum lease payments 11.7 13.1
--------------------------------------------------- ------ ------
7. Auditor's remuneration
2014 2013
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 - -
Corporate finance services (excluding amounts
included above in tax advisory and other assurance
services) - 0.7
Other non-audit services not covered above 1.4 1.6
------------------------------------------------------- ----- -----
Total non-audit services 1.4 2.4
------------------------------------------------------- ----- -----
Total fees 2.0 3.0
------------------------------------------------------- ----- -----
8. Staff costs
2014 2013
GBPm GBPm
------------------------------------------- ------ ------
Wages and salaries* 120.4 119.4
Social security costs 19.8 20.3
Net pension charge/(income) 11.1 8.7
Expense of share based compensation (note
29) 9.1 6.2
------------------------------------------- ------ ------
160.4 154.6
------------------------------------------- ------ ------
* In addition to the above, GBP7.5m (2013: GBP6.7m) is included
within 'strategic restructuring costs' in exceptional and other
items (note 5).
2014 2013
GBPm GBPm
----------------------------------------------- ----- -----
Directors' emoluments 2.5 2.7
Aggregate gains made by directors on exercise 1.5 -
of options
----------------------------------------------- ----- -----
2014 2013
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:
2014 2013
No. No.
--------------------- ------ ------
Distribution 300 331
Production 1,389 1,508
Sales and marketing 911 979
Administration 559 458
--------------------- ------ ------
3,159 3,276
--------------------- ------ ------
9. Finance costs
2014 2013
GBPm GBPm
---------------------------------------------- ------- -------
Finance costs
Bank loans, overdrafts and loan notes (25.3) (26.9)
Unwinding of discount in provisions (0.1) -
Write off of unamortised financing fees (see (1.0) -
note 5)
---------------------------------------------- ------- -------
Total finance costs (26.4) (26.9)
---------------------------------------------- ------- -------
Finance income
Bank loans, overdrafts and loan notes 0.2 -
Fair value movement on interest rate swap
(see note 26) 1.0 0.7
---------------------------------------------- ------- -------
Total finance income 1.2 0.7
---------------------------------------------- ------- -------
Net finance costs (25.2) (26.2)
---------------------------------------------- ------- -------
10. Taxation
a) Tax on profit on continuing operations
2014
------------------------------------
Before Exceptional Total
exceptional & other
& other items
items
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------ -------
Income statement
Current income tax
Current income tax (charge)/credit (36.2) 3.0 (33.2)
Amounts over/(under) provided in
previous years (2.0) 0.7 (1.3)
--------------------------------------------- ------------- ------------ -------
Total current income tax (charge)/credit (38.2) 3.7 (34.5)
--------------------------------------------- ------------- ------------ -------
Deferred income tax
Origination and reversal of temporary
differences 4.3 (0.4) 3.9
Amounts (under)/over provided in
previous years 0.9 (0.7) 0.2
--------------------------------------------- ------------- ------------ -------
Total deferred tax credit/(charge) 5.2 (1.1) 4.1
--------------------------------------------- ------------- ------------ -------
Total tax (charge)/credit in the
income statement (33.0) 2.6 (30.4)
--------------------------------------------- ------------- ------------ -------
Statement of comprehensive income
Current tax on additional pension
contributions 4.5
Deferred tax on defined benefit plans (2.0)
Deferred tax in respect of cash flow
hedges accounted for in the hedging
reserve 0.1
Tax on exchange differences accounted
for in the translation reserve 0.7
Deferred tax on other temporary differences 0.1
--------------------------------------------- ------------- ------------ -------
Total tax credit in the statement
of comprehensive income 3.4
--------------------------------------------- ------------- ------------ -------
Statement of changes in equity
Current tax on share options exercised 0.8
Deferred tax on share options granted
to employees 0.6
------------------------------------------ ----
Total tax credit in the statement
of changes in equity 1.4
------------------------------------------ ----
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 defined benefit plans 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
------------------------------------------ ------
b) Reconciliation of the total tax charge
The tax expense in the consolidated income statement is higher
(2013: higher) than the standard rate of corporation tax in the UK
of 22.0% (2013: 23.5%). The differences are reconciled below:
2014
------------------------------------
Before Exceptional Total
exceptional & other
& other items
items
GBPm GBPm GBPm
--------------------------------------------- ------------- ------------ -------
Profit/(loss) before tax 132.9 (12.8) 120.1
--------------------------------------------- ------------- ------------ -------
Profit/(loss) multiplied by the UK average
rate of corporation tax of 22.0% (29.2) 2.8 (26.4)
Permanent differences 0.4 0.1 0.5
Impact of change in UK tax rate on deferred
tax liability (0.2) 0.1 (0.1)
Tax underprovided in previous years (0.9) (0.1) (1.0)
Overseas tax rates (3.1) (0.3) (3.4)
--------------------------------------------- ------------- ------------ -------
(33.0) 2.6 (30.4)
--------------------------------------------- ------------- ------------ -------
Effective income tax rate 24.8% 25.3%
--------------------------------------------- ------------- ------------ -------
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%
--------------------------------------------- ------------- ------------- -------
c) Unrecognised tax items
The temporary differences associated with investments in
subsidiaries for which a deferred tax liability has not been
recognised total GBP7.5m (2013: GBP5.6m). 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.
No deferred tax asset has been recognised in respect of unused
tax losses of GBP4.3m (2013: GBP1.9m). Included in this amount are
tax losses of GBP2.8m (2013: GBP0.8m) that will expire in 7-8
years. Other losses may be carried forward indefinitely.
d) Deferred tax
The deferred tax included in the balance sheet is as
follows:
2014 2013
GBPm GBPm
Deferred tax liability
Accelerated capital allowances (5.4) (6.8)
Acquisition fair value adjustments (15.4) (17.6)
Other temporary differences - (0.1)
Post employment benefits (16.1) (13.5)
------------------------------------------------------ ------- -------
Deferred tax liability (36.9) (38.0)
------------------------------------------------------ ------- -------
Deferred tax asset
Employee incentive plan 5.7 3.7
Unutilised losses incurred in overseas jurisdictions 6.6 5.1
Other temporary differences 1.3 1.4
------------------------------------------------------ ------- -------
Deferred tax asset 13.6 10.2
------------------------------------------------------ ------- -------
Net deferred tax liability (23.3) (27.8)
------------------------------------------------------ ------- -------
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:
2014 2013
GBPm GBPm
------------------------------ ------- -------
Net deferred tax assets - -
Net deferred tax liabilities (23.3) (27.8)
------------------------------ ------- -------
(23.3) (27.8)
------------------------------ ------- -------
The deferred tax included in the consolidated income statement
is as follows:
2014 2013
GBPm GBPm
Employee incentive plan 1.4 0.4
Accelerated capital allowances 1.5 3.0
Post employment benefits (0.6) 1.5
Acquisition fair value adjustments 1.0 1.3
Unutilised losses incurred in overseas jurisdictions 1.3 0.7
Other temporary differences (0.5) (4.1)
------------------------------------------------------ ------ ------
Deferred tax credit/(charge) 4.1 2.8
------------------------------------------------------ ------ ------
In 2014, there is a GBP1.1m charge relating to exceptional items
(2013: GBP2.6m credit) included within the overall GBP4.1m deferred
tax credit (2013: overall GBP2.8m credit) in the consolidated
income statement.
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:
2014 2013
GBPm GBPm
---------------------------------------------- ------ ------
Basic earnings per share
Profit for the period attributable to equity
shareholders 89.7 61.9
----------------------------------------------- ------ ------
Weighted average number of ordinary shares
in issue for basic earnings per share 245.8 243.2
----------------------------------------------- ------ ------
Basic earnings per share 36.5p 25.5p
----------------------------------------------- ------ ------
Diluted earnings per share
Profit for the period attributable to equity
shareholders 89.7 61.9
----------------------------------------------- ------ ------
Weighted average number of ordinary shares
in issue for diluted earnings per share 247.5 244.7
----------------------------------------------- ------ ------
Diluted earnings per share 36.2p 25.3p
----------------------------------------------- ------ ------
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.
2014 2013
Note GBPm GBPm
-------------------------------------------------- ----- ------ ------
Adjusted basic earnings per share
Profit for the period attributable to equity
shareholders 89.7 61.9
Add: Net impact of exceptional and other
items 10.2 20.7
Add: Intangible assets amortisation (acquisition
related) 14 2.9 2.9
-------------------------------------------------- ----- ------ ------
102.8 85.5
-------------------------------------------------- ----- ------ ------
Weighted average number of ordinary shares
in issue for basic earnings per share 245.8 243.2
-------------------------------------------------- ----- ------ ------
Adjusted basic earnings per share 41.8p 35.2p
-------------------------------------------------- ----- ------ ------
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 102.8 85.5
-------------------------------------------------- ----- ------ ------
Weighted average number of ordinary shares
in issue for diluted earnings per share 247.5 244.7
-------------------------------------------------- ----- ------ ------
Adjusted diluted earnings per share 41.5p 34.9p
-------------------------------------------------- ----- ------ ------
12. Dividends paid and proposed
2014 2013
GBPm GBPm
-------------------------------------------------- ----- -----
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2013: 13.0p per share (2012:
12.4p per share) 31.8 29.6
Interim dividend for 2014: 6.1p per share (2013:
5.4p per share) 15.0 12.9
-------------------------------------------------- ----- -----
Dividends paid 46.8 42.5
-------------------------------------------------- ----- -----
Proposed
-------------------------------------------------- ----- -----
Final dividend for 2014: 14.8p per share (2013:
13.0p per share) 36.3 31.7
-------------------------------------------------- ----- -----
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 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
Exchange differences (2.1) (0.7) (2.6) (0.1) (5.5)
Additions 15.5 0.9 18.8 12.9 48.1
Disposals at cost - - (2.9) (15.2) (18.1)
Depreciation eliminated
on disposals - - 2.0 14.5 16.5
Depreciation charge for
the year (2.5) (0.9) (17.6) (10.5) (31.5)
Assets transferred to held
for sale (note 20) - (3.6) - - (3.6)
Reclassification - - 0.7 (0.7) -
(Impairment)*/impairment
reversal - (0.7) 0.1 - (0.6)
------------------------------ ----------- ----------- ----------- ----------- --------
At 28 September 2014 net
of accumulated depreciation
and impairment 72.4 24.0 84.9 39.7 221.0
------------------------------ ----------- ----------- ----------- ----------- --------
At 28 September 2014
Cost (gross carrying amount) 95.4 35.9 279.7 157.5 568.5
Accumulated depreciation
and impairment (23.0) (11.9) (194.8) (117.8) (347.5)
------------------------------ ----------- ----------- ----------- ----------- --------
Net carrying amount 72.4 24.0 84.9 39.7 221.0
------------------------------ ----------- ----------- ----------- ----------- --------
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
------------------------------ ----------- ----------- ----------- ----------- --------
* The impairment in 2014 relates to a loss on transfer of a
property held in the GB stills segment to non-current assets held
for sale (see note 20), and has been included within exceptional
and other items (see note 5).
The impairment in 2013 principally related to the write down of
plant and machinery following the strategic cost initiative
announcement in May 2013, and was 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 GBP0.1m and GBPnil respectively (2013: GBP0.2m
and GBP0.1m 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 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
Exchange differences (6.5) (1.5) (2.2) (0.1) (5.2) (15.5)
Additions - - - 8.8 - 8.8
Disposals at cost - - - (0.4) - (0.4)
Amortisation eliminated
on disposals - - - 0.2 - 0.2
Amortisation charge
for the period - (0.7)* (2.2)* (7.5) - (10.4)
--------------------------- ----------- ---------- --------- --------- --------- --------
At 28 September
2014 91.0 18.4 30.4 26.0 133.9 299.7
--------------------------- ----------- ---------- --------- --------- --------- --------
At 28 September
2014
Cost (gross carrying
amount) 117.9 23.1 46.5 72.8 196.6 456.9
Accumulated amortisation
and impairment (26.9) (4.7) (16.1) (46.8) (62.7) (157.2)
--------------------------- ----------- ---------- --------- --------- --------- --------
Net carrying amount 91.0 18.4 30.4 26.0 133.9 299.7
--------------------------- ----------- ---------- --------- --------- --------- --------
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
--------------------------- ----------- ---------- --------- --------- --------- --------
* Acquisition related amortisation (see note 11).
** The impairment in 2013 related 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 28
September 2014 these intangible assets have a remaining useful life
of 28 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 28
September 2014 these intangible assets have a remaining useful life
of 16 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 28 September 2014
these intangible assets have a remaining useful life of between 3
and 13 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 28
September 2014 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:
2014 2013
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
Britvic Ireland 15.5 16.6
Britvic France 57.1 61.2
------------------------------------ ------ ------
133.9 139.1
------------------------------------ ------ ------
2014 2013
GBPm GBPm
------------------------------------ ------ ------
Trademarks with indefinite lives
Britvic Ireland
Britvic 5.9 6.3
Cidona 5.2 5.5
Mi Wadi 8.0 8.6
Ballygowan 2.2 2.4
Club 13.2 14.2
------------------------------------ ------ ------
34.5 37.0
------------------------------------ ------ ------
Britvic France
Teisseire 44.7 47.9
Moulin de Valdonne 3.7 3.9
Pressade 4.2 4.5
Fruité 3.9 4.2
------------------------------------ ------ ------
56.5 60.5
------------------------------------ ------ ------
Total Trademarks 91.0 97.5
------------------------------------ ------ ------
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.
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 annual 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 28 September At 29 September
2014 2013
----------------- ---------------- ----------------
Britvic GB 9.6% 8.3%
Britvic Ireland 9.7% 10.2%
Britvic France 10.5% 10.0%
----------------- ---------------- ----------------
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
No impairments have been identified during the 52 week period
ended 28 September 2014. In 2013, following the strategic cost
initiative announcement in May 2013, the carrying value of goodwill
relating to the Water business of GBP1.7m was impaired, and the
impairment charge recognised within exceptional and other items
(see note 5).
Other than for the Britvic trademark within Britvic Ireland, 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. The
key assumption to which the calculation of value in use for the
Britvic trademark is most sensitive is the discount rate where a
change of 0.1% could reduce the recoverable amount to carrying
amount.
16. Other receivables (non-current)
2014 2013
GBPm GBPm
--------------------------------------- ----- -----
Operating lease premiums 2.4 1.8
Prepayments - 1.5
Other 0.6 0.5
--------------------------------------- ----- -----
Total other receivables (non-current) 3.0 3.8
--------------------------------------- ----- -----
Operating lease premiums relates to the un-amortised element of
lease premiums paid on inception of operating leases.
17. Inventories
2014 2013
GBPm GBPm
-------------------------------------------- ----- -----
Raw materials 27.5 27.1
Finished goods 49.1 54.9
Consumable stores 6.7 7.0
Returnable packaging 1.4 1.8
-------------------------------------------- ----- -----
Total inventories at lower of cost and net
realisable value 84.7 90.8
-------------------------------------------- ----- -----
18. Trade and other receivables (current)
2014 2013
GBPm GBPm
------------------- ------ ------
Trade receivables 250.0 236.4
Other receivables 9.0 10.1
Prepayments 17.9 19.6
------------------- ------ ------
276.9 266.1
------------------- ------ ------
Trade receivables are non-interest bearing and are generally on
credit terms usual for the markets in which the group operates. As
at 28 September 2014, trade receivables at nominal value of
GBP1.2m(2013: GBP1.6m) were impaired and fully provided against.
Movements in the provision for impairment of receivables were as
follows:
Total
GBPm
------------------------- ------
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
Charge for period 2.5
Utilised (0.5)
Unused amounts reversed (2.4)
--------------------------- ------
At 28 September 2014 1.2
--------------------------- ------
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 90 120 days
due days days days
nor
impaired
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------- ---------- ------ ------ ------ ------ ------------
2014 250.0 222.7 13.1 3.1 1.3 0.4 9.4
2013 236.4 218.1 7.3 4.1 0.9 1.2 4.8
The credit quality of trade receivables that are neither past
due nor impaired is considered good. Refer to note 25 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
2014 2013
GBPm GBPm
-------------------------------------------- ------ ------
Cash at bank and in hand 25.3 16.5
Deposits 118.7 77.5
-------------------------------------------- ------ ------
Cash and cash equivalents 144.0 94.0
Bank overdrafts (0.7) (2.5)
-------------------------------------------- ------ ------
Cash and cash equivalents in the statement
of cash flows 143.3 91.5
-------------------------------------------- ------ ------
During the year, short-term deposits are made for varying
periods 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 28 September 2014 the group had available GBP400.0m (2013:
GBP400.0m) of un-drawn committed borrowing facilities in respect of
which all conditions precedent had been met. Agreement has been
reached to refinance this facility with an expected revised
maturity date of November 2019.
Where available, the group operates cash pooling arrangements
whereby the net cash position across a number of accounts is
recognised for interest purposes.
20. Non-current assets held for sale
2014 2013
GBPm GBPm
------------------------------------------------ ----- -----
Net transfer from property, plant and equipment 3.6 -
------------------------------------------------ ----- -----
GBP2.8m of the transfer relates to a property held for sale in
Britvic Ireland. The sale of the property completed on 2 October
2014 and resulted in a gain on disposal of GBP0.8m.
GBP0.8m of the transfer relates to a property held for sale in
GB. An impairment loss of GBP0.7m was recognised on transfer of
this property from property, plant and equipment to non-current
assets held for sale.
21. 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 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
Shares issued 2,138,087 427,618
------------------------------------------- -------------- -----------
At 28 September 2014 247,229,115 49,445,823
------------------------------------------- -------------- -----------
Of the issued and fully paid ordinary shares, 409,725 shares
(2013: 231,547 shares) are own shares held by an employee benefit
trust. This equates to GBP81,945 (2013: GBP46,309) at GBP0.20 par
value of each ordinary share. These shares are held for the purpose
of satisfying the share schemes detailed in note 29.
An explanation of the group's capital management process and
objectives is set out in note 25.
22. Interest bearing loans and borrowings
2014 2013
GBPm GBPm
------------------------------- ------- -------
Current
Finance leases (0.1) (0.2)
Bank loans (0.8) (0.2)
Private placement notes (21.8) (92.1)
Less: unamortised issue costs 0.3 0.9
------------------------------- ------- -------
Total current (22.4) (91.6)
------------------------------- ------- -------
2014 2013
GBPm GBPm
------------------------------- -------- --------
Non-current
Finance leases (0.2) (0.3)
Bank loans (0.6) (0.8)
Private placement notes (540.1) (459.1)
Less: unamortised issue costs 1.0 1.9
------------------------------- -------- --------
Total non-current (539.9) (458.3)
------------------------------- -------- --------
Total interest bearing loans and borrowings (562.3) (549.9)
--------------------------------------------- -------- --------
The table below provides an analysis of amounts included within
current and non-current interest bearing loans and borrowings:
2014 2013
GBPm GBPm
------------------------- -------- --------
Finance leases (0.3) (0.5)
2007 Notes (180.9) (270.3)
2009 Notes (160.5) (164.8)
2010 Notes (111.7) (112.2)
2014 Notes (105.2) -
Accrued interest (3.6) (3.9)
Bank loans (1.4) (1.0)
Capitalised issue costs 1.3 2.8
------------------------- -------- --------
(562.3) (549.9)
------------------------- -------- --------
Analysis of changes in interest-bearing loans and borrowings
2014 2013
GBPm GBPm
---------------------------------------------- -------- --------
At the beginning of the period (549.9) (559.3)
Net bank loans (drawndown)/repaid (0.4) 0.6
Partial repayment of 2007 Notes 76.8 -
Issue of 2014 Notes (105.8) -
Issue costs 0.4 -
Repayment of finance leases 0.2 0.4
Amortisation of issue costs and write off of
financing fees (1.9) (0.9)
Net translation gain/fair value adjustment 18.0 8.6
Accrued interest 0.3 0.7
---------------------------------------------- -------- --------
At the end of the period (562.3) (549.9)
Derivatives hedging balance sheet debt * 38.1 56.1
---------------------------------------------- -------- --------
Debt translated at contracted rate (524.2) (493.8)
---------------------------------------------- -------- --------
* 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 (2013: December 2018).
Loans outstanding at 28 September 2014 attract interest at an
average rate of 4.21% for euro denominated loans (2013: 4.03%) and
11.00% for Indian Rupee denominated loans (2013: nil). There were
no sterling denominated bank loans outstanding at 28 September 2014
(2013: GBPnil).
Private placement notes
The group holds loan notes with coupons and maturities as shown
in the following table:
Year issued Maturity date Amount Interest terms
------------ ------------------------- -------- -------------------
2007 February 2019 GBP13m UKGBP fixed at
5.94%
2007 February 2017 - February $273m US$ fixed at 5.90%
2019 - 6.00%
2009 December 2014 - December $250m US$ fixed at 4.07%
2019 - 5.24%
2010 December 2017 GBP7.5m UKGBP fixed at
3.74%
2010 December 2017 - December $163m US$ fixed at 3.45%
2022 - 4.14%
2014 February 2021 - February GBP35m UKGBP fixed at
2024 3.40% - 3.92%
2014 February 2024 - February $114m US$ fixed at 4.09%
2026 - 4.24%
------------ ------------------------- -------- -------------------
The group entered into a number of cross-currency swap
agreements in relation to the loan notes to manage any foreign
exchange risk on interest rates or on the repayment of the
principal borrowed. These swaps expire in line with the loan notes
and are discussed in note 26.
See note 25 for an analysis of the interest rate profile and the
maturity of the borrowings and related interest rate swaps.
Partial repayment of 2007 Notes
On 20 February 2014, in line with the maturity profile of the
2007 Notes, Britvic plc repaid US$102m (equivalent to GBP51.8m) and
GBP25m of Senior Notes in the United States private placement
market (USPP) using funds received from the issuance of 2014 Notes
(see below).
Issue of 2014 Notes
On 20 February 2014, Britvic plc issued US$114m (equivalent to
GBP70.8m) and GBP35m of Senior Notes in the United States private
placement market (the '2014 Notes'). The proceeds from the 2014
Notes were principally used to repay amounts due in relation to the
maturity of certain tranches of the 2007 Notes.
Issue costs of GBP0.4m incurred in the period relate to the
issue of the 2014 Notes.
The 2014 Notes are unsecured and rank pari passu in right of
repayment with other senior unsecured indebtedness of the
group.
23. 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 into the defined benefit section of the
BPP 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 2013. No
additional employer contributions have been requested as the
funding level has improved since the 2010 actuarial valuation.
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.
In 2010/11 properties were transferred to Britvic PP at a value
of GBP28.6m and in 2011/12 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
until 2026. 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 2014 to 2017. Additional
contributions of GBP15m per annum by 31 December in the years 2018
and 2019 will be made should the formal actuarial valuation in 2016
reveal that these contributions are necessary to return the BPP to
full funding on a self-sufficiency basis by 31 March 2020. During
this year GBP20m of additional contributions were paid to the BPP,
of which GBP15m was paid by the group and GBP5.0m relates to income
received from the pension funding partnership ('PFP')
structure.
All members of the defined benefit section of the BPP may
benefit from the Enhanced Early Retirement Facility ('EERF'), which
is a non-contractual benefit that allows members to retire within
five years of reaching the normal pension age without a reduction
in their pension, and to benefit from smaller reductions in their
pension if they retire more than five years before reaching normal
pension age. The company has given notice to all Plan members that
the EERF will be withdrawn from 5 April 2016.
The amount recognised as an expense in relation to the BPP
defined contribution scheme in the consolidated income statement
for 2014 was GBP10.8m (2013: GBP10.6m).
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') is a defined
benefit pension plan which 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.
The Britvic Ireland Pension Plan ('BIPP') is a defined benefit
pension plan. Following legislative changes made in 2012 no deficit
recovery contributions are currently required. The next triennial
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 2014 was GBP0.8m (2013: GBP0.8m).
Britvic France operates two defined benefit schemes: in the
first, employees receive long-service cash payments at various
stages throughout their careers. From the second, employees receive
a lump sum at retirement. Payment amounts are dependent upon salary
and service with the company. The schemes are unfunded therefore
these benefits are paid directly as they fall due.
All group pension schemes are administered by trustees who are
independent of the group's finances, except for the Britvic France
schemes which are operated directly by the company.
The assets and liabilities of the pension schemes were valued on
an IAS 19 (Revised)basis at 28 September 2014 by Towers Watson (BPP
and the French schemes), Invesco (BIPP) and Buck (BNIPP).
Impact of IAS 19 (Revised)
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.
Other changes include the treatment of expenses paid in relation to
the plans and the narrative disclosures.
Risks
For defined contribution sections and plans, the group's
liability is limited to the requirement to pay contributions on
behalf of each employee. In these arrangements the associated risks
are borne by the members.
For defined benefit sections and plans, the group bears the
risks of operation. The main risk that the group runs in respect of
the defined benefit schemes is that additional contributions are
required to pay for the benefits if investment returns are not
sufficient. The contributions required for the schemes are in
general determined at each triennial actuarial funding valuation.
The key factors that will affect the need for additional
contributions include levels of long-term inflation and interest
rates and the assessment of how long members are expected to live,
along with the level of investment return achieved. The level of
investment return achieved is subject to a range of risks typical
of the asset classes held, in particular market risk on equities,
credit risk on corporate bonds and exposure to the property market.
The discount rates used to calculate the liabilities are set by
reference to yields on high quality corporate bonds. There is
therefore a mismatch between the assets held and the way that the
liabilities are calculated, meaning that the net balance sheet
position disclosed under IAS 19 could fluctuate.
For the BPP, the trustee holds the power to determine the
contribution rates that the group should pay, although the group
fully uses the opportunity to make representation to the trustee on
this point.
The trustee of the BPP agreed to implement a revised investment
strategy following the completion of the 31 March 2013 valuation.
The revised investment strategy will consist of a diverse range of
fixed interest and index-linked securities, which will provide a
partial hedge against inflation and interest rate risk. The removal
of equities from the investment portfolio will also reduce
investment risk.
The BPP is exposed to specific non-financial risks in respect of
the non-contractual EERF benefit available to all members of its
defined benefit section. If more members than expected choose to
exercise this option, it will serve to increase the pension
liability. An allowance for some members to exercise this option
has already been made within the liabilities and the facility will
be withdrawn from 5 April 2016, at which point this risk will be
removed.
The funding partnership mitigates the risk that additional cash
contributions will be required after 31 March 2026, as the
partnership will pay up to GBP105m to remove any funding deficit at
31 March 2026.
Principal assumptions
Financial assumptions
2014
ROI NI France GB
% % % %
Discount rate 3.00 3.90 1.86 4.00
Rate of compensation increase 2.75 3.60 1.00-4.00* n/a
Pension increases - 2.10-2.30 - 1.90-2.95
Inflation assumption 1.75 2.30 - 3.20
------------------------------- ----- ---------- ----------- ----------
2013
ROI NI France GB
% % % %
Discount rate 4.25 4.60 3.12 4.55
Rate of compensation increase 3.00 3.75 1.00-4.00* n/a
Pension increases - 1.95-2.45 - 1.95-3.05
Inflation assumption 2.00 2.45 - 3.35
------------------------------- ----- ---------- ----------- ----------
* Rate dependent on employee and business unit.
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. An allowance for
future improvements in longevity has also been included. The
following life expectancy assumptions have been used:
2014 2014 2014 2013 2013 2013
ROI NI GB ROI NI GB
Years Years Years Years Years Years
Current pensioners (at age
65) - males 20.9 22.2 21.3 22.7 22.0 22.2
Current pensioners (at age
65) - females 23.4 24.9 24.3 24.5 25.0 24.8
Future pensioners currently
aged 45 (at age 65) - males 23.3 24.0 23.1 25.6 23.3 24.4
Future pensioners currently
aged 45 (at age 65) - females 25.5 26.4 26.2 26.8 26.6 27.1
-------------------------------- ------ ------ ------ ------ ------ ------
The mortality assumptions used to calculate the GB pension
obligation were revised in 2014 following a mortality analysis
carried out as part of the actuarial valuation of the BPP at 31
March 2013.
For the French arrangements mortality follows the INSEE 2012
tables. As benefits are paid on retirement, the mortality
assumption is of much less significance for these arrangements than
for the GB and Irish arrangements.
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 Impact on Impact on Impact on Impact on
assumption ROI NI France GB
liabilities liabilities liabilities liabilities
----------- ------------ ------------- ------------- ------------- -------------
Discount Increase Decrease Decrease Decrease Decrease
rate by 0.5% by GBP8.0m by GBP3.1m by GBP0.2m by GBP54.1m
Decrease Increase Increase Increase Increase
by 0.5% by GBP9.4m by GBP3.1m by GBP0.2m by GBP63.0m
Inflation Increase Increase Increase n/a Increase
rate by 0.25%* by GBP2.1m by GBP0.8m by GBP25.2m
Decrease Decrease Decrease n/a Decrease
by 0.25%* by GBP2.0m by GBP0.8m by GBP19.4m
Longevity Increase Increase Increase n/a Increase
rates by 1 year by GBP1.2m by GBP0.9m by GBP20.3m
----------- ------------ ------------- ------------- ------------- -------------
* The sensitivity to inflation assumption includes corresponding
changes to future salary (applicable only to France) and future
pension increase assumptions.
Net benefit income/(expense)
2014
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ------ ------- ----- ------
Current service cost (0.8) (0.1) (0.1) - (1.0)
Net interest on net defined
benefit asset/(liability) (0.1) - (0.1) - (0.2)
Curtailment gain 0.4 - - - 0.4
Settlement gain - - - 1.3 1.3
Net income/(expense) (0.5) (0.1) (0.2) 1.3 0.5
----------------------------- ------ ------ ------- ----- ------
2013
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
----------------------------- ------ ------ ------- ------ ------
Current service cost (0.8) (0.2) (0.1) - (1.1)
Net interest on net defined
benefit asset/(liability) - - (0.1) (0.1) (0.2)
Settlement gain - - - 3.8 3.8
Net income/(expense) (0.8) (0.2) (0.2) 3.7 2.5
----------------------------- ------ ------ ------- ------ ------
Other than stated below, 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.
Taken to the statement of comprehensive income
2014
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------- ------ ------- ------- -------
Actual return on scheme
assets 8.5 2.8 - 48.0 59.3
Less: Return on plan assets
(excluding amounts included
in net interest expense) (2.2) (1.2) - (25.1) (28.5)
------------------------------------ ------- ------ ------- ------- -------
6.3 1.6 - 22.9 30.8
Gains/(losses) due to demographic
assumptions 4.3 (0.2) - 16.8 20.9
Losses due to financial
assumptions (12.5) (3.3) (0.4) (48.4) (64.6)
Experience gains 0.4 0.2 - - 0.6
Remeasurement losses taken
to the statement of comprehensive
income (1.5) (1.7) (0.4) (8.7) (12.3)
------------------------------------ ------- ------ ------- ------- -------
2013
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------ ------ ------- ------- -------
Actual return on scheme
assets 3.5 2.2 - 39.9 45.6
Less: Return on plan assets
(excluding amounts included
in net interest expense) (2.4) (1.2) - (23.9) (27.5)
--------------------------------- ------ ------ ------- ------- -------
1.1 1.0 - 16.0 18.1
Gains due to demographic
assumptions 4.1 - - - 4.1
Gains/(losses) due to financial
assumptions 0.6 (1.7) - (59.7) (60.8)
Experience gains (0.6) 2.5 - 4.3 6.2
Remeasurement gains/(losses)
taken to the statement
of comprehensive income 5.2 1.8 - (39.4) (32.4)
--------------------------------- ------ ------ ------- ------- -------
Net (liability)/asset
2014
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ------- -------- --------
Present value of benefit
obligation (60.5) (30.5) (2.7) (598.7) (692.4)
Fair value of plan assets 58.0 30.4 - 595.6 684.0
Net (liability)/asset (2.5) (0.1) (2.7) (3.1) (8.4)
--------------------------- ------- ------- ------- -------- --------
2013
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
--------------------------- ------- ------- ------- -------- --------
Present value of benefit
obligation (54.8) (26.6) (2.2) (562.4) (646.0)
Fair value of plan assets 53.2 26.7 0.1 546.7 626.7
Net (liability)/asset (1.6) 0.1 (2.1) (15.7) (19.3)
--------------------------- ------- ------- ------- -------- --------
Movements in present value of benefit obligation
2014
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- --------- --------- --------
At 29 September 2013 (54.8) (26.6) (2.2) (562.4) (646.0)
Exchange differences 3.7 - - - 3.7
Curtailment gain 0.4 - - - 0.4
Settlement gain - - - 1.3 1.3
Current service cost (0.8) (0.1) (0.1) - (1.0)
Member contributions (0.2) - - - (0.2)
Interest cost on benefit
obligation (2.2) (1.2) (0.1) (25.1) (28.6)
Benefits paid 1.2 0.7 0.1 19.1 21.1
Remeasurement gains/(losses) (7.8) (3.3) (0.4) (31.6) (43.1)
------------------------------ --------- --------- --------- --------- --------
At 28 September 2014 (60.5) (30.5) (2.7) (598.7) (692.4)
------------------------------ --------- --------- --------- --------- --------
Weighted average duration 23 years 20 years 14 years 22 years
of the liabilities
------------------------------ --------- --------- --------- ---------
2013
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- --------- --------- --------- --------
At 30 September 2012 (53.6) (26.8) (2.0) (503.9) (586.3)
Exchange differences (3.0) - (0.1) - (3.1)
Settlement gain - - - 3.8 3.8
Current service cost (0.8) (0.2) (0.1) - (1.1)
Member contributions (0.3) - - - (0.3)
Interest cost on benefit
obligation (2.4) (1.2) (0.1) (24.0) (27.7)
Benefits paid 1.2 0.8 0.1 17.1 19.2
Remeasurement gains/(losses) 4.1 0.8 - (55.4) (50.5)
------------------------------ --------- --------- --------- --------- --------
At 29 September 2013 (54.8) (26.6) (2.2) (562.4) (646.0)
------------------------------ --------- --------- --------- --------- --------
Weighted average duration 22 years 20 years 14 years 22 years
of the liabilities
------------------------------ --------- --------- --------- ---------
Movements in fair value of plan assets
2014
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------ ------ ------- ------- -------
At 29 September 2013 53.2 26.7 0.1 546.7 626.7
Exchange differences (3.4) - - - (3.4)
Interest income on plan assets 2.1 1.2 - 25.1 28.4
Return on scheme assets excluding
interest income 6.3 1.6 - 22.9 30.8
Employer contributions 0.8 1.6 - 20.0 22.4
Member contributions 0.2 - - - 0.2
Benefits paid (1.2) (0.7) (0.1) (19.1) (21.1)
At 28 September 2014 58.0 30.4 - 595.6 684.0
----------------------------------- ------ ------ ------- ------- -------
2013
ROI NI France GB Total
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------ ------ ------- ------- -------
At 30 September 2012 47.2 23.8 0.2 511.4 582.6
Exchange differences 2.6 - - - 2.6
Interest income on plan assets 2.4 1.2 - 23.9 27.5
Return on scheme assets excluding
interest income 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) (0.1) (17.1) (19.2)
At 29 September 2013 53.2 26.7 0.1 546.7 626.7
----------------------------------- ------ ------ ------- ------- -------
Categories of scheme assets as a percentage of the fair value of
total scheme assets
2014 2014
ROI NI France GB Total Total
GBPm GBPm GBPm GBPm GBPm %
------------------- ----- ----- ------- ------ ------ ------
UK equities 0.9 7.4 - 98.8 107.1 16
Overseas equities 23.9 7.6 - 47.5 79.0 11
Properties - - - 5.5 5.5 1
Corporate bonds - 4.6 - 196.2 200.8 29
Fixed interest
gilts 29.3 4.6 - - 33.9 5
Index linked
gilts - 6.1 - 245.7 251.8 37
Cash and other
assets 3.9 0.1 - 1.9 5.9 1
------------------- ----- ----- ------- ------ ------ ------
Total 58.0 30.4 - 595.6 684.0 100
------------------- ----- ----- ------- ------ ------ ------
2013 2013
ROI NI France GB Total Total
GBPm GBPm GBPm GBPm GBPm %
------------------- ----- ----- ------- ------ ------ ------
UK equities 1.4 6.8 - 118.6 126.8 20
Overseas equities 29.3 6.9 - 106.7 142.9 23
Properties - - - 7.6 7.6 1
Corporate bonds - 3.8 - 142.1 145.9 23
Fixed interest
gilts 21.9 3.8 - 18.0 43.7 7
Index linked
gilts - 5.0 - 150.6 155.6 25
Cash and other
assets 0.6 0.4 0.1 3.1 4.2 1
------------------- ----- ----- ------- ------ ------ ------
Total 53.2 26.7 0.1 546.7 626.7 100
------------------- ----- ----- ------- ------ ------ ------
The fair values of the above equity and debt instruments are
determined based on quoted market prices in active markets whereas
the fair values of properties are not based on quoted market
prices.
Normal contributions of GBP0.8m are expected to be paid into the
defined benefit pension schemes during the 2015 financial year.
Additional contributions of GBP21.5m are expected to be paid
into the defined benefit pension schemes during the 2015 financial
year, of which GBP16.5m is expected to be paid by the group and
GBP5.0m by the partnership.
24. Trade and other payables (current)
2014 2013
GBPm GBPm
--------------------------------- ------ ------
Trade payables 248.4 237.1
Other payables 4.5 4.9
Accruals and deferred income 81.5 99.2
Other taxes and social security 45.3 40.3
--------------------------------- ------ ------
379.7 381.5
--------------------------------- ------ ------
Trade payables are non-interest bearing and are normally settled
on 60 - 90 day terms.
25. 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 24 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 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 to hedge underlying debt obligations. At 28
September 2014 after taking into account the effect of these
instruments, approximately 75% of the group's borrowings are at a
fixed rate of interest (2013: 79%).
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 on
in profit/(loss) equity
basis points before
tax
GBPm GBPm
---------- -------------- --------------- --------
2014
Sterling 200 0.1 25.0
(200) (0.1) (29.1)
Euro 200 (0.2) 5.6
(200) 0.1 (6.5)
2013
Sterling 200 - 18.7
(200) - (22.1)
Euro 200 0.7 6.5
(200) (0.8) (7.6)
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 mainly in the currencies of US dollars and
euros. As at 28 September 2014 the group has hedged 72% (2013: 65%)
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).
Increase/ Effect Effect
(decrease) on on
in profit equity
currency before
rate tax
% GBPm GBPm
-------------------- ------------ -------- --------
2014
Sterling/euro 10 (2.1) 4.0
(10) 2.1 (4.0)
Sterling/US dollar 10 (0.4) 1.0
(10) 0.4 (1.0)
Euro/US dollar 10 (0.5) 1.9
(10) 0.5 (1.9)
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)
-------------------- ------------ -------- --------
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
in profit
share price before
tax
% GBPm
------ ------------- --------
2014 10 0.9
(10) (0.9)
2013 10 0.8
(10) (0.8)
------ ------------- --------
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 GBP0.8m of outstanding Britvic
France bank loans are secured. At 28 September 2014, GBP22.4m of
the group's debt will mature in less than one year (2013:
GBP91.6m).
The table below summarises the maturity profile of the group's
financial liabilities at 28 September 2014 based on contractual
undiscounted payments and receipts including interest:
Less 1 to > 5 Total
than 5 years
1 year years
2014 GBPm GBPm GBPm GBPm
--------------------------------------- -------- -------- -------- --------
Bank loans 0.8 0.6 - 1.4
Private placement notes 44.8 360.0 277.7 682.5
Derivatives hedging private placement
notes - payments 34.9 272.1 226.8 533.8
Derivatives hedging private placement
notes - receipts (42.0) (301.7) (241.4) (585.1)
--------------------------------------- -------- -------- -------- --------
37.7 330.4 263.1 631.2
--------------------------------------- -------- -------- -------- --------
Interest rate swap - payments 1.3 0.4 - 1.7
Interest rate swap - receipts (0.2) - - (0.2)
--------------------------------------- -------- -------- -------- --------
1.1 0.4 - 1.5
--------------------------------------- -------- -------- -------- --------
Trade and other payables (excluding
other taxes and social security) 334.4 - - 334.4
Finance leases 0.1 0.2 - 0.3
Other financial liabilities 1.6 - - 1.6
375.7 331.6 263.1 970.4
--------------------------------------- -------- -------- -------- --------
Less 1 to > 5 Total
than 5 years
1 year years
2013 GBPm GBPm GBPm GBPm
--------------------------------------- -------- -------- -------- --------
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 (excluding
other taxes and social security) 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
--------------------------------------- -------- -------- -------- --------
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
26.
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.
Assets Liabilities
2014 GBPm GBPm
------------------------------------------------------------- ------ -----------
Level 1 - -
Level 2 - Derivatives used for hedging 66.5 (9.6)
- Financial instruments at fair value through
profit or loss 2.6 (1.9)
- Fair value of fixed rate borrowings - (584.5)
Level 3 - -
------------------------------------------------------------- ------ -----------
Total 69.1 (596.0)
------------------------------------------------------------- ------ -----------
Assets Liabilities
2013 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)
- Fair value of fixed rate borrowings - (572.6)
Level 3 - -
------------------------------------------------------------- ------ -----------
Total 75.3 (584.0)
------------------------------------------------------------- ------ -----------
Fair values of financial assets and financial liabilities
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. Non-derivative financial liabilities are carried at
amortised cost.
All derivatives are valued using valuation techniques with
market observable inputs; this covers cross currency interest rate
swaps, interest rate swaps, FX forwards, FX swaps and share swaps.
The most frequently applied valuation techniques include forward
pricing and swap models using present value calculations. In
assessing the fair value of derivatives the non-performance risk of
both Britvic and its derivative trading counterparties has been
taken into consideration. Default credit risk has been measured and
the potential impact on derivatives valuations quantified. As at 28
September 2014, the potential impact from non-performance risk on
the fair value of the derivatives portfolio is not material.
As in the prior year, the carrying value of financial assets and
liabilities disclosed in notes 18, 19, 22, 24 and 26 are considered
to be reasonable approximations of their fair values, except for
fixed rate borrowings which, at 28 September 2014, have a book
value of GBP562.0m (2013: GBP540.1m) compared to a fair value
GBP584.5m (2013: GBP572.6m).
The fair value of the group's fixed rate interest-bearing
borrowings and loans are determined by using discounted cash flow
methods using discount rates that reflect the group's borrowing
rate as at the end of the reporting period. The own non-performance
risk as at 28 September 2014 was assessed to be insignificant.
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 30. 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.
26. Derivatives and hedge relationships
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.
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 EUR127.4m of
euro/sterling FX swaps were in existence at 28 September 2014
(2013: EUR82.5m).
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:
2014 2013
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) 34.4 36.9
Fair value of the 2009 USD GBP cross
currency floating interest rate swaps
(3) 15.1 20.2
Fair value of the 2009 GBP euro cross
currency floating interest rate swaps
(2) 15.1 5.4
--------------------------------------------- ------ -------
64.6 62.5
-------------------------------------------- ------ -------
Current assets: other financial assets
Fair value of the 2007 USD GBP cross
currency fixed interest rate swaps(1) - 11.4
Fair value of the 2009 USD GBP cross 0.7 -
currency floating interest rate swaps
(3)
Fair value of forward currency contracts
(1) 1.2 0.1
Fair value of share swaps 2.6 1.3
--------------------------------------------- ------ -------
4.5 12.8
-------------------------------------------- ------ -------
Current liabilities: other financial
liabilities
Fair value of forward currency contracts
(1) (1.5) (1.2)
Fair value of foreign exchange swaps (0.1) (0.1)
Fair value of interest rate swaps - (0.1)
--------------------------------------------- ------ -------
(1.6) (1.4)
-------------------------------------------- ------ -------
Non-current liabilities: other financial
liabilities
Fair value of the 2010 USD GBP cross
currency fixed interest rate swaps(1) (4.9) (4.9)
Fair value of the 2010 GBP euro cross
currency fixed interest rate swaps (2) (0.2) (1.6)
Fair value of the 2010 USD GBP cross
currency floating interest rate swaps
(3) (0.9) (0.8)
Fair value of the 2014 USD GBP cross (2.1) -
currency fixed interest rate swaps (1)
Fair value of interest rate swaps (1.8) (2.7)
--------------------------------------------- ------ -------
(9.9) (10.0)
-------------------------------------------- ------ -------
(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 28 September 2014 these hedging relationships are
categorised as follows:
Cash flow hedges
Forward currency contracts
The forward currency contracts hedge the expected future
purchases in the period to October 2015 and have been assessed as
part of effective cash flow hedge relationships as at 28 September
2014. All cash flows under forward currency contracts fall due
within one year.
Cross currency interest rate swaps
USD GBP cross currency interest rate swaps
The group has a number of cross currency interest rate swaps
relating to the 2007, 2010 and 2014 USPP Notes. These cross
currency interest rate swaps have the effect of fixing both the
value of the USD borrowings into sterling and the rate of interest
payable. The cross currency interest rate swaps are designated as
part of a cash flow hedge relationship with the Notes.
The cross currency interest rate swaps were assessed to be
highly effective hedges as at 28 September 2014.
Cash flows due under these cross currency interest rate swaps
match the interest payment dates and maturity profile of the USPP
Notes. The maturity profile of the USPP Notes can be seen in note
22.
Cash flow hedge net unrealised gains/(losses) and related
deferred tax assets/(liabilities):
2014 Net unrealised Related deferred tax
gain/(loss) within asset/(liability)
equity GBPm
GBPm
--------------------------- ------------------- --------------------
Forward currency contracts (0.3) (0.1)
2007 cross currency swaps 5.1 (1.0)
2010 cross currency swaps (1.4) 0.3
2014 cross currency swaps (1.4) 0.3
--------------------------- ------------------- --------------------
2013 Net unrealised Related deferred tax
gain/(loss) within asset/(liability)
equity GBPm
GBPm
--------------------------- ------------------- --------------------
Forward currency contracts (1.2) 0.3
2007 cross currency swaps 6.5 (1.3)
2010 cross currency swaps (1.9) 0.4
2014 cross currency swaps - -
--------------------------- ------------------- --------------------
Fair value hedges
Cross currency interest rate swaps
The group has a number of cross currency interest rate swaps in
respect of the 2009 and 2010 USPP Notes. These instruments swap the
principal and interest from fixed rate US dollar into floating rate
sterling (the '2009 and 2010 USD GBP cross currency interest rate
swaps'). The cross currency interest rate swaps are designated as
part of a fair value hedge relationship with the Notes.
The fair value movements on the 2009 and 2010 USD GBP cross
currency interest rate instruments are recorded in the consolidated
income statement, as is the fair value movement in the Notes.
The cross currency interest rate swaps were assessed to be
highly effective hedges as at 28 September 2014.
The decrease in fair value of the cross currency interest rate
swaps of GBP4.5m (2013: GBP9.3m decrease) has been recognised in
finance costs and offset with a similar gain on the borrowings. No
ineffectiveness has been recognised in the consolidated income
statement (2013: GBPnil).
Net investment hedges
2009 and 2010 GBP EUR cross currency interest rate swaps
These instruments swap sterling liabilities arising from the
2009 and 2010 USD GBP cross currency interest rate swaps into euro
liabilities and have been designated as part of effective hedges of
the net investments in Britvic France and Britvic Ireland.
The GBP EUR 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 these euro investments.
Movements in the fair value of the GBP EUR cross currency interest
rate swaps are taken to equity where they offset foreign exchange
movements on the translation of the net investments in Britvic
France and Britvic Ireland.
No ineffectiveness has been recognised in the consolidated
income statement (2013: GBPnil).
Impact of derivatives and hedge relationships on the
consolidated statement of comprehensive income
2014 2013
GBPm GBPm
------------------------------------------- ------- ------
Consolidated statement of comprehensive
income
Amounts recycled to the income statement
in respect of cash flow hedges
Forward currency contracts* (3.2) 0.6
2007 cross currency interest rate swaps** 12.5 (0.4)
2010 cross currency interest rate swaps** 0.5 (0.1)
2014 cross currency interest rate swaps** 0.7 -
------------------------------------------- ------- ------
10.5 0.1
------------------------------------------- ------- ------
Gains/(losses) in the period in respect
of cash flow hedges
Forward currency contracts 4.1 0.1
2007 cross currency interest rate swaps (14.0) (1.6)
2010 cross currency interest rate swaps - 0.1
2014 cross currency interest rate swaps (2.0) -
------------------------------------------- ------- ------
(11.9) (1.4)
------------------------------------------- ------- ------
Exchange differences on translation of
foreign operations
Movement on 2009 GBP euro cross currency
interest rate swaps 9.7 (5.7)
Movement on 2010 GBP euro cross currency
interest rate swaps 1.4 (4.0)
Exchange movements on translation of
foreign operations (15.0) 9.7
-------------------------------------------- ------- ------
(3.9) -
------------------------------------------- ------- ------
* Offsetting amounts recorded in cost
of sales.
** Offsetting amounts recorded in finance
costs.
27. Other liabilities
2014 2013
GBPm GBPm
----------------- ----- -----
Current 0.4 -
Non-current 1.5 1.9
----------------- ----- -----
Firm commitment 1.9 1.9
----------------- ----- -----
A firm commitment exists in respect of the receipt of the 2009
and 2010 Notes.
28. 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 utilised 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
Provisions made during the
year 6.7 - 6.7
Provisions utilised during
the year (10.8) (0.2) (11.0)
Unused amounts reversed (0.5) - (0.5)
Unwinding of discount - 0.1 0.1
Exchange differences - (0.1) (0.1)
----------------------------- -------------- ------ -------
At 28 September 2014 3.8 1.9 5.7
----------------------------- -------------- ------ -------
Current 3.8 0.3 4.1
Non-current - 1.6 1.6
-------------- ---- ---- ----
Total 3.8 1.9 5.7
-------------- ---- ---- ----
Restructuring provisions
Restructuring provisions at 28 September 2014 and 29 September
2013, primarily relate to contract termination costs, consultation
fees and employee termination benefits, recognised by the group
following the implementation of cost initiatives announced in May
2013.
Other provisions
Other provisions at 28 September 2014 and 29 September 2013,
primarily relate to onerous lease provisions that have arisen due
to the exit of certain group premises, and the period over which
these will be settled ranges from 2 to 9 years.
29. Share-based payments
The expense recognised for share-based payments in respect of
employee services received during the 52 weeks ended 28 September
2014, including national insurance of GBP1.8m (2013: GBP1.1m) and
dividend equivalents of GBPnil (2013: GBPnil), is GBP9.1m (2013:
GBP6.2m). 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 (2013: 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.
2014 2013
No. of shares No. of shares
----------------------------------------------- ------------- -------------
Annual free shares award - -
Matching shares award - 1 free share for every
ordinary share purchased 115,377 185,563
----------------------------------------------- ------------- -------------
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% (2013: 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 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
Granted during the period 858,126 664.5
Exercised during the period (1,249,325) 281.9
Forfeited during the period (195,906) 400.2
Lapsed during the period (1,306,732) 464.6
----------------------------------- -------------- ----------------
Outstanding at 28 September 2014 5,341,935 383.9
----------------------------------- -------------- ----------------
Exercisable at 28 September 2014 1,700,841 255.5
----------------------------------- -------------- ----------------
The weighted average share price at the date of exercise for
share options exercised during the period was 656.2p (2013:
491.1p).
The share options outstanding as at 28 September 2014 had a
weighted average remaining contractual life of 6.9 years (2013: 6.8
years) and the range of exercise prices was 221.0p - 664.5p (2013:
221.0p - 464.6p).
The weighted average fair value of options granted during the
period was 127.6p (2013: 79.8p).
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%
(2013: 25%) will vest, rising on a straight-line basis to 100%
vesting at upper quartile.
For the award granted during the 52 weeks ended 28 September
2014, the ROIC performance condition requires the company's ROIC to
be at least 23.8% (2013: 21.5%) over the three year performance
period for the award to vest in full. If ROIC is 23.4% (2013:
20.7%) over the performance period, 25% (2013: 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% (2013:
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
TSR condition EPS condition ROIC condition
------------------------------------- --------------- --------------- ---------------
Outstanding at 30 September 2012 and
29 September 2013 52,625 194,176 52,622
Lapsed during the period - (10,575) -
------------------------------------- --------------- --------------- ---------------
Outstanding at 28 September 2014 52,625 183,601 52,622
------------------------------------- --------------- --------------- ---------------
Number of Number of Number of
nil nil nil
cost options cost options cost options
subject to subject to subject to
TSR condition EPS condition ROIC condition
--------------------------------- -------------- -------------- ---------------
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
Granted during the period 191,610 516,014 191,610
Forfeited during the period (49,450) (148,530) (49,450)
Lapsed during the period (299,594) (468,851) (299,594)
--------------------------------- -------------- -------------- ---------------
Outstanding at 28 September 2014 863,623 1,852,546 863,623
--------------------------------- -------------- -------------- ---------------
There were no nil cost options exercisable at 28 September 2014
(2013: nil).
The nil cost options outstanding as at 28 September 2014 had a
weighted average remaining contracted life of 8.0 years (TSR
condition) (2013: 8.2 years), 7.8 years (EPS condition) (2013: 8.3
years) and 8.0 years (ROIC condition) (2013: 8.2 years).
The weighted average fair value of nil cost options granted
during the period was 355.9p (TSR condition) (2013: 203.1p), 624.2p
(EPS condition) (2013: 381.5p) and 624.2p (ROIC condition) (2013:
250.2p).
Key assumptions used to determine the fair value of the
options
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 28 September 2014. The comparative shows the inputs to
the model used in respect of the awards granted during the 52 weeks
ended 29 September 2013.
2014 2013
------------------------------------- ----- -----
Dividend yield (%) 4.15 4.45
Expected volatility (%) 29.8 32.2
Risk-free interest rate (%) 0.8 0.8
Expected life of option (years) 5.0 5.0
Share price at date of grant (pence) 664.0 421.0
------------------------------------- ----- -----
Exercise price (pence) 664.5 427.5
------------------------------------- ----- -----
The expected volatility reflects the assumption that the
historical volatility is indicative of future trends, which may
also not necessarily be the actual outcome.
30. Notes to the consolidated cash flow statement
Analysis of net debt
2013 Cash flows Exchange Other 2014
differences movement
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ --------- -------
Cash and cash equivalents 94.0 50.4 (0.4) - 144.0
Bank overdrafts (2.5) 1.6 0.2 - (0.7)
Debt due within one year (91.6) 76.6 11.4 (18.8) (22.4)
Debt due after more than one
year (458.3) (105.8) 6.6 17.6 (539.9)
-------------------------------- ------- ---------- ------------ --------- -------
(458.4) 22.8 17.8 (1.2) (419.0)
Derivatives hedging the balance
sheet debt * 56.1 - (18.0) - 38.1
-------------------------------- ------- ---------- ------------ --------- -------
Adjusted net debt (402.3) 22.8 (0.2) (1.2) (380.9)
-------------------------------- ------- ---------- ------------ --------- -------
2012 Cash flows Exchange Other 2013
differences movement
GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ---------- ------------ --------- -------
Cash and cash equivalents 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)
-------------------------------- ------- ---------- ------------ --------- -------
* 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.
31. Commitments and contingencies
Operating lease commitments
Future minimum lease payments under non-cancellable operating
leases are as follows:
2014
---------------------------
Land and Other Total
buildings
GBPm GBPm GBPm
---------------------------------- ----------- ------ ------
Within one year 2.3 8.6 10.9
After one year but not more than
five years 10.0 14.6 24.6
After more than five years 39.0 - 39.0
---------------------------------- ----------- ------ ------
51.3 23.2 74.5
---------------------------------- ----------- ------ ------
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
---------------------------------- ----------- ------ ------
Finance lease commitments
Future minimum lease payments under finance leases are as
follows:
2014 2013
GBPm GBPm
---------------------------------- ----- -----
Within one year 0.1 0.2
After one year but not more than
five years 0.2 0.3
More than five years - -
---------------------------------- ----- -----
0.3 0.5
---------------------------------- ----- -----
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 28 September 2014, the group has commitments of GBP3.6m
(2013: GBP8.0m) relating to the acquisition of new plant and
machinery.
Contingent liabilities
The group had no material contingent liabilities at 28 September
2014 (2013: none).
32. 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. A full
list of all subsidiaries is annexed to the annual report submitted
to Companies House.
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 of England and
Limited soft drinks Wales 100
Britvic Irish Holdings Republic
Limited Holding company of Ireland 100
Manufacture and marketing Republic
Britvic Ireland Limited of soft drinks of Ireland 100
Britvic Northern Ireland Marketing and distribution Republic
Limited of soft drinks of Ireland 100
Supply of water-coolers Republic
Aquaporte Limited and bottled water of Ireland 100
Britvic Worldwide Brands Marketing and distribution Republic
Limited of soft drinks of Ireland 100
Counterpoint Wholesale Wholesale of soft drinks Republic
(Ireland) Limited to the licensed trade of Ireland 100
Counterpoint Wholesale Wholesale of soft drinks Northern
(NI) Limited to the licensed trade Ireland 100
Britvic North America Marketing and distribution
LLC of soft drinks USA 100
Britvic France SNC Holding partnership France 100
Fruité Entreprises
SAS Holding company France 100
Manufacture and sale of
Fruité SAS soft drinks France 100
Manufacture and sale of
Bricfruit SAS soft drinks France 100
Manufacture and sale of
Unisource SAS soft drinks France 100
Manufacture and sale of
Teisseire SAS soft drinks France 100
Marketing and distribution
Teisseire Benelux SA of soft drinks France 100
Britvic Soft Drinks
PTE. Ltd Holding company Singapore 100
Britvic India Manufacturing Manufacture and sale of
Private Ltd. soft drinks India 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.
2014 2013
GBPm GBPm
------------------------------ ----- -----
Short-term employee benefits 6.7 6.6
Post-employment benefits 0.2 0.1
Share-based payments 1.5 1.1
------------------------------ ----- -----
8.4 7.8
------------------------------ ----- -----
See note 8 for details of directors' emoluments.
There were no other related party transactions requiring
disclosure in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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