Final results for the year ended 29 January 2023
28 March 2023
A.G. BARR p.l.c.
("A.G. BARR" or "the Group")
Final results for the year ended 29 January 2023
Excellent financial performance driven by strong sales growth
A.G. BARR p.l.c., a multi-beverage business with a portfolio of market-leading UK brands, including IRN-BRU, Rubicon, Funkin and Boost, today announces its final results for the year ended 29 January 2023.
Financial summary
|
|
2022/23 |
|
Versus 2021/22 |
|
|
Reported revenue |
£317.6m |
|
£268.6m |
18.2% |
|
Reported profit before tax |
£44.4m |
|
£42.2m |
5.2% |
|
Adjusted profit before tax* |
£43.5m |
|
£38.4m |
13.3% |
|
Adjusted operating margin* |
13.6% |
|
14.9% |
(1.3)pp |
|
Net cash at bank* |
£52.9m |
|
£68.4m |
(22.7)% |
|
Reported EPS (basic p/share) |
30.47p |
|
25.09p |
21.4% |
|
Dividend per share (proposed final & interim) |
13.10p |
|
12.00p |
9.2% |
Highlights
● Revenue increased by 18.2% on a reported basis and 15.9% on a like-for-like basis
● Significant progress across strategic objectives delivering strong organic growth
○ Barr Soft Drinks - Strong performance across soft drinks portfolio driven by continued focus on consumer engagement and investment in brand building
○ FUNKIN - Continued product innovation consolidates Funkin's position as the Number 1 take home cocktail brand in the fast-growing UK cocktail market
● Building a multi-beverage portfolio leveraging our scalable business model
○ Completion of the acquisition of both Boost Drinks and the remaining equity in MOMA Foods in December 2022
○ Operating in the high growth functional beverage and plant based milk categories, both businesses are exciting additions to the Group
● Adjusted profit before tax of £43.5m, an increase of 13.3%
● 13.6% adjusted operating margin reflects supply chain cost inflation plus the expected short-term impact of lower margin MOMA and Boost, alongside accelerated investment, including significant Funkin and MOMA marketing
● Strong cash generation and robust balance sheet with a net cash position of £52.9m post significant capex investment and the acquisitions of MOMA and Boost
● Full year dividend of 13.1 pence per share including final recommended dividend of 10.6 pence per share
● Delivering growth responsibly
○ Additional financial and wellbeing support provided to our teams
○ Further progress across our "No Time To Waste" environmental sustainability programme including approval of our science-based targets and net-zero commitment
Outlook
At this early stage we remain confident of delivering further revenue and profit growth in the year ahead in line with management expectations.
Roger White, Chief Executive , commented :
"Over the past 12 months we delivered an excellent financial performance and made significant progress across our strategic objectives, an achievement only made possible by our committed and hardworking teams.
Our strategy to build and develop a multi-beverage portfolio capable of significant long-term growth is progressing well. We are now in an investment phase, designed to capitalise on the strategic growth opportunities ahead. We do anticipate a short-term impact on operating margins, as a result of the combination of this investment, ongoing inflationary cost pressures, and the initial dilutive impact from the Boost acquisition. This growth and investment phase will support the rebuilding of our operating margin over the medium term and the creation of a stronger and more sustainable business."
For more information, please contact :
|
A.G. BARR |
0330 390 3900 |
Instinctif Partners |
020 7457 2010/05 |
|
Roger White, Chief Executive |
|
Justine Warren |
|
|
Stuart Lorimer, Finance Director |
|
Matthew Smallwood |
|
Next trading update - July 2023
* Items marked with an asterisk are non-GAAP measures. Definitions and relevant reconciliations are provided later in this announcement.
CHAIRMAN'S INTRODUCTION
I am incredibly proud to have taken on the role of Chair at A.G. Barr. I am delighted to report that the business has made excellent progress in pursuit of both its strategic objectives and its short-term operating performance.
Following the challenges of the global pandemic we had all hoped for a period of more stability and perhaps some return to normality, however the tragic events in Ukraine have led directly to a significant level of human suffering and we have all felt a sense of collective grief. We have also seen the rise of global economic uncertainty, rampant inflation and the resultant cost of living crisis impacting consumers and businesses.
Against this difficult backdrop the whole team across the A.G. Barr Group has delivered an excellent performance. Reported revenue grew by 18.2% year-on-year and we finished the year with adjusted profit before tax* of £43.5m, 13.3% ahead of the prior year.
Highlights during the year included:
· Strong growth across our soft drinks portfolio as consumers return to more established purchasing patterns, post pandemic
· Innovation and growth in cocktails across all channels as Funkin consolidated its position as the Number 1 cocktail brand in the UK take home market
· The strength of our balance sheet, our clear strategy and scalable business model have supported the exciting acquisition of Boost Drinks and the early completion of our planned acquisition of the remaining equity in MOMA Foods
The entire A.G. Barr team has remained focused on delivering our brand building strategy, investing for growth and creating a business we are proud of.
Dividend
The Board is pleased to maintain its progressive dividend policy and recommends a final dividend of 10.6p per share to give a proposed total dividend for the full year of 13.1p per share. The final dividend is payable on 9 June 2023 to shareholders on the Register of Members at the close of business on 12 May 2023. The ex-dividend date is 11 May 2023.
Board
In the reporting period we said a fond farewell to John Nicolson who I succeeded in the role of Chair in March 2022. It has been a pleasure to transition into the role working alongside our diverse, experienced and capable Board and management team.
Succession planning is an important Board responsibility and with that in mind I can confirm that after over 62 years with the business, Robin Barr has informed me of his intention to step down from the Board at the Annual General Meeting in 2023. Robin epitomises all that is great in UK corporate leadership - knowledge, honesty, balance, commitment and capability, not to mention experience and a great sense of humour. We will all miss Robin's counsel and camaraderie but after 58 years on the Board we can understand his decision. I am delighted to announce that Julie Barr will relinquish her Company Secretarial duties to join the Board as a Non-Executive Director. Julie, who has been with the Company for 19 years, and is a qualified corporate lawyer, will stand for election at the Annual General Meeting in May.
We will continue to seek to strengthen the capability, diversity and experience of our Board as we grow and develop the Company.
Responsibility
A.G. Barr has always put responsible behaviour at the heart of its business and the last year has seen further excellent progress across our core areas of focus.
Our environmental sustainability programme No Time To Waste has continued to drive innovative thinking and actions across a wide range of areas. We have now agreed and validated our science-based targets as we head towards our net-zero ambition. We have increased our use of more sustainable packaging and are taking a very active role in the run up to the launch of the Deposit Return Scheme (DRS) in Scotland, planned for August 2023.
People and culture
I believe that A.G. Barr has a unique and positive culture which although longstanding, is embodied, nurtured and developed by the executive leadership team. With high levels of colleague engagement across the Group, each operating business has its own unique feel, but are all connected by some shared A.G. Barr cultural characteristics - a challenger mentality, a people first approach and a drive for performance.
Whilst we have performed well as a Group, in these challenging times we recognise that many of our team are facing a period of difficulty and where possible we have taken steps to support our colleagues. Where appropriate we have tried to make our working patterns as flexible as possible. We continue to provide mental health support to those who want our help and made two special cost of living payments during the course of the year to those in our business who need it most. We are equally as proud of our values and behaviours as we are of our performance.
Prospects
There remain many headwinds to consider as we look forward, however I am confident that the brand momentum, quality and strategy of the business will continue to deliver superior returns to shareholders for many years to come.
Mark Allen OBE
CHAIR
CHIEF EXECUTIVE'S REVIEW
I am pleased to report our results for the 52 weeks ended 29 January 2023.
Over the past 12 months we delivered an excellent financial performance and made significant progress across our strategic objectives. We emerged from the pandemic period a stronger business and I would like to thank all the teams across the business, as well as our partners, suppliers and customers, for their support.
The following financial metrics quantify our strong performance:
· Reported revenue £317.6m (2022 : £268.6m)
· Adjusted profit before tax* £43.5m (2022 : £38.4m)
· Reported profit before tax £44.4m (2022 : £42.2m)
· Adjusted operating margin* 13.6% (2022 : 14.9%)
· Net cash at bank* £52.9m (2022 : £68.4m)
· Basic earnings per share 30.47p (2022 : 25.09p)
Note : 2022 reported comparatives above are for the 53 weeks ended 30 January 2022. Adjusted item information is detailed later in this announcement.
Strategic objectives
Our overarching purpose - to create value with values - remained central to A.G. Barr across the year, underpinned by our consistent strategic priorities:
· connecting with consumers
· building brands
· driving efficiency
· building trust
We continued to invest in our brands, operations and people, driving innovation and delivering strong organic growth across all our business units. We are proud to have delivered this growth responsibly.
Our organic growth ambition remains as strong as ever, as is our desire to acquire high quality brands with strong future growth potential. This was evidenced in 2022 by the completion of both the Boost Drinks Holdings Limited acquisition and the early completion of full ownership of the MOMA business. Operating in the high growth functional beverage and oat milk categories, both businesses are exciting additions to the A.G. Barr Group.
As our portfolio grows, so does our opportunity to increase our connection and engagement with consumers. By entering different markets, supporting different consumption occasions and appealing to different consumers, we are increasing the long-term growth potential for the Group as a whole.
While the economic uncertainty being felt across the UK has the potential to stifle industry and business progress, we believe that both our brand and financial strengths ensure we are well positioned to invest through the economic cycle. By driving operational efficiency from the bottom up, and by providing great brands that offer real value to consumers, we are in a strong position to accelerate our growth both organically and through further acquisition, in turn creating long-term shareholder value.
Soft drinks market
The UK's high cost inflation is reflected across the total UK soft drinks retail market, which saw value increase by 8.8% while volumes fell by 2.2%. The impact of higher prices and lower promotional activity, coupled with the associated impact on volume and general consumer caution, are mirrored across Carbonates and Stills, both of which increased in value and experienced lower volume. Taking a longer term view, and comparing to the pre-pandemic soft drinks market in 2019, soft drinks volumes have grown by 1.5%, with carbonates the key contributor, growing by 5% over the same period despite the significant headwinds created by the pandemic in particular.
At a subcategory level we continue to see some of the effects of the pandemic unwinding across the soft drinks retail market. Lemonade, Mixers, Dilutes and Fruit Juice have declined in both value and volume, reflecting the normalisation of at home consumption and the steady recovery of the on-trade hospitality sector. By contrast, Flavoured Carbonates, Sports and Energy are increasing in volume, supported by the recovery of the "drink now" channel.
Against this backdrop Barr Soft Drinks has enjoyed particularly strong market share value gains in England and Wales balanced by a more subdued performance in Scotland which did not benefit from the better summer weather experienced in much of the rest of the UK.
The Boost business, which became part of the Group in December 2022, has performed exceptionally well within the total soft drinks market across the past 12 months, with a double digit increase in its value and volume share.
(Source: IRI Marketplace Total Soft Drinks Market 52 weeks to 28 January 2023)
Cocktail market
The hospitality sector continued its recovery across the year despite experiencing significant challenges. The cocktail category in particular has proven its strength and increasing popularity, with cocktails in the on-trade now worth £686m, an increase of more than 13% versus 2019 pre-pandemic levels. With 9.6 million UK consumers now drinking cocktails out of home, 1.6 million of whom joined the category since 2019, cocktails remain a significant growth opportunity for the hospitality sector.
The growth momentum of the ready to drink (RTD) category in the off-trade has continued, with consumers increasingly seeking to replicate the bar quality experience at home. The RTD market has grown to over £500m and continues to be driven by RTD cocktails which have grown by more than 20% in value terms over the past 12 months.
Within this market we are delighted to report that Funkin remains the UK's Number 1 RTD cocktail brand, the UK's fastest growing Top 10 RTD brand and is now a Top 5 RTD Grocery brand.
(Sources: CGA Mixed Drinks Report Q3 2022 ; Nielsen Pre-Mixed Alcoholic Drinks Total Coverage Data MAT 14/01/2023)
Plant-based milk market
The value of the total plant-based milk market fell by 1.4% in the year to September 2022, driven largely by a decline in soya, nut and coconut milks. In contrast, oat milk continues to grow, up 13.3% to £166m in the same period. One in five UK households now purchases oat milk, with 750,000 more households adding it to their shopping baskets in the last 12 months.
As a challenger oat milk brand, the MOMA business has had a particularly strong year, with the MOMA business growing by 41% on a year on year basis, well ahead of the category, driven by increased sales of its ambient range and distribution gains for its new chilled range that launched in the Spring of 2022.
(Sources: Kantar UK Market 52 weeks ending 04/09/2022; Kantar UK Household Penetration 52 weeks ending 02/10/2022)
Connecting with consumers
The connection we make with consumers is central to our strategy. Over the past 12 months we have continued to invest in a wide range of consumer marketing, promotion and communication programmes across our business units and brands.
With a growing consumer base, covering a broad demographic and geographic spread, we have evolved our engagement approach considerably over recent years. Social and digital media play an increasingly important role, as does our commitment to bringing a pipeline of great tasting, innovative new products to market, in new pack formats which unlock new drinker occasions. More traditional media channels of TV, print and outdoor remain an important part of our marketing mix.
The acceleration of the investment in our portfolio demonstrates the importance we place on supporting the long-term development of our core brands. In March 2022 we launched our new IRN-BRU "Taste Debate" campaign on TV, digital and social media to ensure our biggest brand remains fun, fresh and relevant. We also invested in Funkin, which launched its biggest ever brand investment with the highly successful "It's Funkin Time" campaign which ran throughout the key trading periods of summer and Christmas. The Funkin brand has significantly increased its brand awareness to 45% within the 18-34 year old cohort (Source: Kantar January 2023).
MOMA's award-winning oat milk has high growth potential and we have invested in its first ever above the line advertising campaign, which appeared on screens at the start of September across TV, outdoor and digital/social channels. The advert highlights how MOMA is perfectly crafted for both expert and home coffee creations, as "The Barista's Choice".
Sponsorship remains an effective and exciting engagement tool and is a key focus for our Rubicon RAW Energy brand, supporting its brand positioning as "A Force of Nature" in the great outdoors. Part of a multimillion pound marketing campaign, the brand sponsored the Boardmasters Festival in Cornwall in August 2022 and we are also pleased to have announced the brand's four year partnership as the official energy drink of GB Snowsport.
Our recent addition to the brand portfolio, Boost, has fostered a strong consumer connection through its sponsorship of Leeds United Football Club. We are excited to be a part of this successful partnership and look forward to building the brand's awareness in the year ahead.
Building brands
Our brand building strategy remains focused on growing awareness, trial and loyalty through consumer engagement activity, increasing our product distribution through effective sales execution and supporting brand development through innovation.
Barr Soft Drinks has delivered a strong revenue performance across its core brands.
IRN-BRU's total revenue grew by 6% while volumes, as anticipated, fell by 4%, reflecting the short-term impact of price changes across the market. The IRN-BRU growth strategy has delivered increases in low calorie (IRN-BRU XTRA up 9%), increased innovation (IRN-BRU 1901 up 5%), development in the Energy category (IRN-BRU Energy up 15%) and increased distribution within England and Wales.
The Rubicon masterbrand performed very strongly across all variants - Sparkling (up 18%), Still (up 14%), Spring (up 27%) and Rubicon RAW Energy (up 30%). It is particularly pleasing to see the acceleration in Rubicon Spring which has been in the market for over six years and is now the UK's number 1 sparkling flavoured water brand.
Funkin benefited from the recovery of the hospitality sector and the ongoing market growth of cocktail consumption, with on-trade revenue up by 23%. The momentum in the take home RTD cocktail category was sustained with Funkin's sales in this channel up 8%, consolidating its Number 1 position. Funkin continues to innovate across product, packaging and formats and in addition has progressed its international business development, on track to launch a state specific market trial within the US in 2023.
Our drive to build a multi-beverage portfolio has made positive progress across the last year. The successful acquisition of the Boost and MOMA businesses highlight our desire to participate in high growth categories where our brand building expertise and business model can add significant value.
Driving efficiency
Our drive for continuous improvement across our assets, processes and technology remains a constant across the business. This is particularly the case in Barr Soft Drinks where we invest significantly in our asset base to drive efficiency and increase our manufacturing and logistics capacity and capability.
2022 saw us embark on the first phase of an extensive asset replacement programme at our Cumbernauld facility. Over the next 3-4 years this programme will deliver new high speed PET and can filling lines, advanced packaging and palletising capability, as well a number of associated energy and environmental sustainability benefits. Phase 1 of the programme is now well underway and we expect to have a new small format PET line and new downstream packaging machinery installed and commissioned in the next 12 months.
As a high growth and innovative business, Funkin has operated with an outsourced manufacturing business model that provides both agility and flexibility. Its recent move into RTD cocktails in cans presented an opportunity to leverage some of the benefit of being part of the wider A.G. Barr Group. Following a £9m investment at our Milton Keynes facility in 2022, we successfully installed and commissioned new slim 250ml can filling and cardboard multipack capabilities. This opens up new growth opportunities for Barr Soft Drinks, and allows us to produce Funkin's nitro-infused ready to drink cocktail cans in-house, bringing with it significant operational efficiency benefits.
Building trust
Trust is earned. We continue to work hard to retain the trust of all our employees, our wide range of stakeholders and our communities, as we have done for over 145 years.
As the cost of living crisis continues to place pressure on households and businesses across the UK, we recognise the duty of care that we have for our people. Our employees have shown huge levels of commitment over recent years and in recognition of this, and the difficult economic landscape, we made two special cost of living payments in 2022 to those colleagues who we believed would benefit the most from additional financial support. We will continue to monitor the welfare and wellbeing of our people and have plans in 2023 to offer additional financial support services, as well as maintaining our longstanding commitment to mental health support within the workplace.
Our environmental sustainability programme No Time To Waste continued to deliver clear and tangible progress throughout the year, from our first plastic bottles made of 100% recycled content, launched in April 2022, to the formal approval of our science-based targets and net-zero commitments by the Science Based Targets Initiative. We have a stretching yet achievable net-zero roadmap, coupled with a genuine drive and ambition to push further and faster. This is particularly the case for our use of recycled material, notwithstanding current challenges associated with availability and quality. We are well advanced in our DRS preparations, due to go live in Scotland in August 2023, which has the potential to increase the availability and quality of recycled material, as well as supporting our long-term circular packaging goals.
For us, a successful business also means being a sustainable business and we will continue to demonstrate our values in this respect through honest and meaningful actions.
Outlook
We anticipate a continuation of our strong brand momentum across the Group in 2023/24 as we continue to invest in the development of our business, brands and people. This is despite a backdrop of continued high inflation and the planned introduction of the Scottish DRS in August 2023, both of which have the potential to impact consumer purchasing behaviour.
We do however anticipate a short-term impact on operating margins, as a result of the combination of this investment, ongoing inflationary cost pressures, and the initial dilutive impact from the Boost acquisition.
It is our belief that our growing brand portfolio and our ongoing actions to mitigate cost inflation will support the delivery of our growth ambitions and at this early stage we remain confident of delivering further revenue and profit growth in the year ahead in line with management expectations.
Looking to the long term, it is our strategy to build and develop a multi-beverage portfolio capable of significant growth. We are now in an investment phase, designed to capitalise on the strategic growth opportunities ahead. This growth and investment phase will support the rebuilding of our operating margin over the medium term and the creation of a stronger and more sustainable business.
Roger White
CHIEF EXECUTIVE
FINANCIAL REVIEW
OVERVIEW
The business has delivered another year of impressive financial performance with top and bottom line growth during a year of high cost inflation, supply chain challenges and macroeconomic uncertainty:
|
|
2022/23 |
|
Versus 2021/22 |
|
|
Reported revenue |
£317.6m |
|
£268.6m |
+ 18.2% |
|
Reported profit before tax |
£44.4m |
|
£42.2m |
+ 5.2% |
|
Adjusted profit before tax* |
£43.5m |
|
£38.4m |
+ 13.3% |
|
Adjusted operating margin* |
13.6% |
|
14.9% |
(1.3)pp |
|
Net cash at bank* |
£52.9m |
|
£68.4m |
(22.7)% |
|
Reported EPS (basic p/share) |
30.47p |
|
25.09p |
+ 21.4% |
|
Dividend per share (proposed final & interim) |
13.10p |
|
12.00p |
+ 9.2% |
Our revenue increase was driven by a combination of brand momentum, revenue management and the incremental contribution from our MOMA and Boost Drinks acquisitions. Like-for-like revenue growth*, adjusting for MOMA and Boost new business and the extra week in the prior year, was 15.9%.
Throughout the pandemic, and the disruption that followed as the economy reopened, we worked collaboratively with our customers to ensure we recognised the impact of restrictions on the brand support and discounts we provided. This involved numerous commercial discussions, and in certain circumstances, changes to promotional terms. This has resulted in a change in estimate and recognition of £5.1m (2021/22: £4.9m) of additional variable consideration.
In a challenging cost environment our adjusted profit before tax* increased by 13.3%. While recessionary concerns, inflationary pressures and supply chain disruption were clear headwinds, we continued to invest for the future, in our brands, our people and our assets. Our operating margin was compressed as a result of supply chain cost inflation, the impact of MOMA and Boost's lower margins, and investment in marketing ahead of sales in both Funkin and MOMA.
Our cash generation remains strong having generated £35.9m of net cash from operations.
Our capital allocation principles are consistent with our strategic ambition to consistently grow our business. We prioritise the utilisation of funds to support organic growth, finance appropriate acquisition opportunities, provide shareholder income and optimise debt when appropriate. In 2022/23, in addition to increased marketing spend across our core brands, we chose to invest in long-term sustainable growth through our acquisitions and a step up in capital investment across our operating sites. Our capital programme is expected to result in investment in excess of £50m over the next three years.
Our core brand strength, our clear strategy and our engaged workforce provide a strong foundation to deliver sustainable long-term shareholder value.
ADJUSTING ITEMS
The Group reported results include a net credit of £0.9m (2021/22 : £0.7m credit) relating to pre-tax adjusting items which are excluded from adjusted profit :
· M&A - MOMA : A net credit of £1.6m relating to the re-measurement and release of the excess contingent consideration in respect of MOMA Foods Limited following the Group's acquisition of the remaining 38.2% minority interest in December 2022.
· M&A - Boost Drinks : A net charge of £2.0m relating to costs associated with the successful acquisition of Boost Drinks Holdings Limited. This comprises £1.2m of one-off acquisition fees and a further £0.8m accrual related to the potential 2024/25 payment of £10m associated to the acquisition earn-out. Both the acquisition fees and the earn-out accrual have been charged to operating expenses in the income statement.
· Asset disposal : A £1.3m one-off gain on the sale of our Newcastle distribution site which was closed in April 2022 as part of the completed Group-wide restructuring programme that was announced in 2021/22.
SEGMENTAL PERFORMANCE
There are three reportable segments in the Group:
· Soft drinks
· Cocktail solutions
· Other
Soft drinks
The soft drinks segment comprises two business units, Barr Soft Drinks and Boost Drinks, with decisions made at a business unit level. This allows agile and effective operational management and strong Group oversight.
Barr Soft Drinks
Barr Soft Drinks delivered a year of strong top line revenue growth, up 12.4% on 2021/22, driven by volume growth, disciplined pricing and promotional management as well as a small element of favourable brand and channel mix. Gross margin declined as high and sustained raw material inflation was only partially mitigated by pricing action and disciplined cost management.
IRN-BRU revenue grew by 6% with a strong performance in the out-of-home channel more than compensating for lower take home sales as the channels continue to rebalance following pandemic disruption.
Rubicon's growth was particularly pleasing, up 8% in volume and over 20% in revenue, with the brand benefiting from increased distribution, continued innovation, and a strong marketing programme. Growth was broad based across the whole Rubicon range with Sparkling, Spring, Stills and RAW Energy, all delivering double digit revenue growth. Gross margin in the second half of the financial year was impacted by high exotic fruit costs following particularly poor harvests.
Our other portfolio brands, including Barr Flavours, KA and Simply Fruity, grew in both volume and revenue terms as consumers sought value in the face of cost of living challenges.
Boost Drinks
The Boost Drinks portfolio, spanning energy, sport, iced coffee, protein and including the franchise brand, Rio, was acquired by the Group in December 2022. Our financial results include Boost's contribution for the 2 months since acquisition - c.£7m of revenue and c.£1m of gross profit. The impact to Group profit was negligible and is in line with the acquisition business case.
Cocktail solutions
Funkin delivered another year of significant growth with revenue up 16.0% and gross profit up 10.2%. The business benefited from a strong on-trade recovery, especially in the first half of the financial year, and continued distribution gains in the growing off-trade ready to drink cocktail market. Gross margin was impacted by increases in input costs, fruit in particular, and a more challenging macroeconomic environment for our on-trade customers in the second half of the year.
Other
The 'Other' segment represents our MOMA business unit, comprising oat milk drinks and other oat based products. MOMA continues to build distribution across both grocery and food service channels with revenue up over 41% versus the prior year. Cost inflation in both processing and raw materials has adversely impacted gross margin. The Group secured full ownership of the MOMA business in December 2022 and this will now allow us to invest for the long-term growth of the brand.
OPERATING MARGIN
The combination of the inflationary macroeconomic environment, the medium-term margin dilutive impact of the Boost and MOMA acquisitions and our commitment to maintaining marketing investment behind our long-term growth drivers, led to an adjusted operating margin* of 13.6% (2021/22 : 14.9%)
Our marketing spend was ahead of sales growth for the second successive year as we continued to invest behind our core brands, innovation and our acquisitions.
During the year we also provided support with the immediate cost of living challenges, through targeted one-off payments as well as longer term investment in personal skills and capabilities.
INTEREST
The Group remained net cash positive throughout 2022/23. Finance income of £0.5m relates to interest earned on cash held on rolling short-term deposits. The finance charge of £1.4m primarily relates to the non-cash MOMA acquisition accounting (£1.1m), included as an adjusting item in determining adjusted profit as explained in the adjusting items section. The remaining finance charge of £0.3m relates to banking costs associated with the Group's revolving credit facilities and lease interest costs under IFRS 16.
TAXATION
The reported tax rate for the year ended 29 January 2023 was 23.6% compared with 34.1% for the year ended 30 January 2022. The tax rate for the year is above the 19% UK corporation tax rate due to c.£2m of M&A related costs recognised in the year that are non-deductible for tax purposes. These primarily rate to c.£1m of acquisition transaction costs and £0.8m of accrued earn-out recognised in the year.
The reported tax charge for the prior year included the impact of the change in corporation tax rate from 19% to 25% on deferred tax which increased the deferred tax liability by £5.7m. Excluding the impact of the increase in rate for deferred tax, the effective tax rate for the year ended 30 January 2022 would be c.21%.
EARNINGS PER SHARE (EPS)
Adjusted basic EPS* for the year was 29.66p, an increase of 37.4% on the prior year due to higher operating profits and the adverse impact on the prior year EPS from an increase in deferred tax as detailed above. Basic reported EPS was 30.47p, an increase of 21.4% on last year. Based on a diluted weighted average of 112,178,721 shares, diluted EPS was 30.22p (2021/22: 24.95p).
DIVIDENDS
The Group resumed dividends, after the pandemic related pause, with the announcement in September 2021 of a 2.0p interim dividend and a one-off special dividend of 10.0p in recognition of the benefit from a number of one-off cash inflows that had been received but that were not part of normal trading.
The Group's dividend policy aims to deliver a progressive and sustainable dividend to shareholders that has regard to current performance trends including revenue, profit after tax and cash, and that satisfies certain guiding principles:
· Dividend cover: targeting two times cover
· Payout ratio: targeting 50% of free cash flow *
· Consistent with medium-term profit outlook
Based on this framework, and following the interim dividend of 2.50p per share paid in October 2022, the Board is recommending a final dividend for the period of 10.60p. This will bring the full year dividend to 13.10p per share (2021/2022 : 12.0p per share) which provides two times dividend cover and delivers a payout ratio of 43%. The Board believes the final dividend growth of 6.0% is sustainable. Subject to approval by shareholders at the AGM in May, the final dividend will be paid to holders of ordinary shares on the register as of 12 May 2023 with an ex-dividend date of 11 May 2023.
BALANCE SHEET AND CASH FLOW
The balance sheet as at 29 January 2023 recognises the first time inclusion of the Boost Drinks acquisition and the associated assets and liabilities of this company.
The Group remains financially strong with net cash at bank, no material trade debt issues, healthy inventory levels, a defined benefit pension surplus and a £20.6m increase in the net asset base to £268.8m.
Inventory values have increased due to the Boost Drinks acquisition, inflation and a planned stock-build to support the installation of our new PET line as part of our Cumbernauld factory refresh. Year end payables and accruals have increased, reflecting the Boost Drinks acquisition, significant capital spend accruals and the timing of our month end payment run which took place after the year end in 2022/23 but before the year end in the prior year.
Global disruptions and geo-political challenges have reinforced the importance of resilient supply chain capabilities. We remain committed to internal manufacturing when scale and capabilities permit, and recognise the value of a well-invested asset base. After a period of restricted spend associated with the pandemic, our capital programme resumed with total additions in the year of £17.0m (2021/22 : £5.8m) comprising £14.6m of cash capital expenditure and £2.4m of accruals. This reflects investment in production capacity, capability and sustainability. The commissioning of a new can filler in Milton Keynes delivers the capability and capacity for 250ml cans and alcoholic products for the first time. We have utilised these facilities to successfully bring a proportion of Funkin can requirements in-house. Our multi-year production line refresh in Cumbernauld continues to plan with an upgraded PET line scheduled for commissioning by summer 2023.
Despite the return to a more typical level of capital investment, the higher inventory levels and the inclusion of the Boost Drinks acquisition, return on capital employed remains robust at 18.0%, a modest decline from 19.9% in 2021/22.
ACQUISITIONS
In the year ended 29 January 2023, the Group completed the early full acquisition of MOMA Foods Limited and the acquisition of Boost Drinks Holdings Limited. Both acquisitions were fully funded from Group cash reserves and the Group remains net cash positive. The primary financial implications of these acquisitions were:
MOMA Foods Limited
The Company acquired an initial 62.8% equity stake in MOMA in December 2021. MOMA was consolidated as a fully owned subsidiary in the 2021/22 accounts, with a non-controlling interest reported in respect of the 38.2% not acquired at that time, alongside a put option liability that recognised a commitment (contingent consideration) to secure full A.G. Barr ownership by the end of financial year 2024/25.
In December 2022 the Company acquired the remaining 38.2% equity stake in MOMA. As A.G. Barr now owns a 100% equity stake in MOMA, the minority interest in the business and the put liability have been removed from the balance sheet. There has been no change in the year to goodwill or brand valuation and the removal of the contingent consideration has resulted in a net non-cash credit to the income statement of £1.6m. This release has been recognised within adjusting items as detailed in the adjusting items section above.
Boost Drinks Holdings Limited
In December 2022 the Group acquired 100% of Boost Drinks Holdings Limited for an initial consideration of £20m, on a cash-free debt-free basis. Boost will operate as a standalone business unit during a two year earn-out period. The financial reporting impact of the Boost acquisition is as follows :
· Initial acquisition consideration (£19.9m) recognised within the consolidated financial position as £16.9m of brand intangibles, £1.9m of goodwill intangibles and net assets of £1.1m
· Consolidated in Group results from December 2022
· Boost revenue recognised within 'Soft Drinks' segmental reporting
· The acquisition includes a potential additional consideration of up to £12m, contingent on the future performance of the Boost business over a two year period from completion. Any earn-out will be charged through the Group's income statement over the earn-out period and reported as an adjustment to reported profit. The financial statements ending 29 January 2023 included £0.8m in respect of this earn-out accrual.
FINANCIAL RISK MANAGEMENT
The Group's risk management process is owned by the Board and operates at every level within the business to support the successful delivery of our strategic objectives and financial plans. The process is based on a balance of risk and opportunity, determined through assessment of the likelihood and impact of the risk and within the context of the Group's risk appetite, as established by the Board. Risks are monitored throughout the year with consideration to internal and external factors, and updates to risks and mitigation plans are made as required. The principal risks that could potentially have a significant impact on our business have not changed since the end of the financial year.
TREASURY AND COMMODITY RISK MANAGEMENT
The treasury and commodity risks faced by the Group continue to be identified and managed by the Group Treasury and Commodity Committee whose activities are carried out in accordance with Board approved policies and subject to regular Audit and Risk Committee reviews. No transactions are entered into for speculative purposes. Key financial risks managed by this committee include exposures to foreign exchange rates and the management of the Group's debt, commodity and liquidity positions. The Group uses financial instruments to hedge against foreign currency exposures.
The Group seeks to mitigate risks in relation to the continuity of supply of key raw materials and ingredients by developing strong commercial relationships with its key suppliers. The Group manages commodity pricing risk actively and where commercially appropriate will enter into fixed price supply contracts with suppliers to reduce risk.
The Group enters into insurance arrangements to cover certain insurable risks where external insurance is considered by management to be an appropriate economic means of mitigating these risks.
As at 29 January 2023, the Group had £40m of funds held on short-term, interest earning, deposit with two relationship banks. In addition to the Group's cash position, the Group had £20m of committed and unutilised debt facilities, consisting of a revolving credit facility with our principal relationship bank. This expires in February 2026. Our funding requirements and facilities are continually reviewed to ensure they remain appropriate, providing a balance of security and optionality.
ACCOUNTING POLICIES
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards and the Listing Rules of the Financial Conduct Authority.
There have been no changes to the accounting policies applied this year. All new or amended standards that are applicable have been adopted with no material impact on the results for the current and prior reporting periods.
PENSIONS
The Group continues to operate two pension plans : the A.G. Barr p.l.c. (2005) Defined Contribution Pension Scheme and the A.G. Barr p.l.c. (2008) Pension and Life Assurance Scheme. The latter is a defined benefit scheme based on final salary, which also includes a defined contribution section for pension provision to senior managers.
The defined benefit scheme has been closed to new entrants since 5 April 2002 and closed to future accrual for members in May 2016. Existing and new employees have been invited to join the Company-wide defined contribution scheme.
The defined benefit pension scheme triennial valuation as at April 2020 identified a £7.7m deficit on a technical provisions basis as at that date, reflecting the substantial reduction in the value of the Scheme's investments which occurred at the start of the pandemic. The Company agreed with the Pension Scheme Trustee that the ongoing deficit recovery plan of a £1.0m per annum Company contribution should continue for the next three years with the intention of eliminating the deficit over the medium-term. This plan was approved by the Pension Regulator. A deficit recovery contribution of £1.0m was made by the Company under this arrangement in May 2022. At the end of September 2022 gilt yields rose rapidly in reaction to the UK Government's mini budget. As gilt yields rose, the value of liability driven investment (LDI) assets held by many defined benefit pension schemes in the UK fell sharply. Additional cash was required in order to rebalance the Company's defined benefit pension scheme's LDI portfolio and maintain the majority of the hedging that the Scheme had in place. The Trustee took a number of actions to meet these recapitalisation calls. In support, the Company made a further payment of £1.0m to the Scheme in October 2022 as a prepayment of the deficit recovery contribution due in May 2023 and also pre-paid the Central Asset Reserve (CAR) contribution payments of £1.5m due in 2023. The next triennial actuarial valuation will be as at April 2023.
On an IAS 19 valuation basis, which is determined before the benefit of the CAR funding arrangement, the deficit of £1.0m as at 30 January 2022 improved to a surplus of £2.4m as at the balance sheet date. As noted above, 2022 was an unusually volatile year for the pension industry generally and the Group scheme was impacted by this. The A.G. Barr defined benefit scheme has a long established financial risk strategy that includes pensioner buy-in policies and asset hedging. The purpose of the strategy is to provide an element of protection against pension assumption and financial market volatility. During the year 2022/23 this strategy resulted in the scheme reporting both a significant decrease in the scheme's liabilities, driven by a large increase in discount rates, and a similarly significant decrease in the value of scheme assets due to changes in financial markets, particularly the bond market. The move from deficit to surplus is attributable to these changes and to the £4.9m (2021/22 : £2.4m) Company contributions made in the year. The Company contributions comprise both agreed 2022/23 contributions of £2.4m and £2.5m of 2023/24 contributions paid in advance to support scheme liquidity.
The Group continues to work proactively with the Pension Trustee to further de-risk the pension liabilities and secure the commitments to employee benefits as part of the Group's ongoing strategic risk management.
____________
The Group has, again, delivered a strong financial performance despite the challenging economic backdrop. This performance demonstrates the consistent delivery of our strategy and a successful blend of resilience, agility, efficiency and strong commercial execution. In an environment that remains volatile and challenging, the business has a well invested asset base backed by strong financial fundamentals and is well placed to continue to invest for the future in our brands, assets and people.
Stuart Lorimer
FINANCE DIRECTOR
|
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 29 JANUARY 2023 |
||
|
|
||
|
|
2023 |
2022 |
|
|
£m |
£m |
|
Revenue |
317.6 |
268.6 |
|
Cost of sales |
(189.5) |
(150.0) |
|
Gross profit |
128.1 |
118.6 |
|
Other income |
1.3 |
0.7 |
|
Operating expenses |
(84.1) |
(76.6) |
|
Operating profit |
45.3 |
42.7 |
|
Finance income |
0.5 |
- |
|
Finance costs |
(1.4) |
(0.4) |
|
Share of after tax results of associates |
- |
(0.1) |
|
|
||
|
Profit before tax |
44.4 |
42.2 |
|
Tax on profit |
(10.5) |
(14.4) |
|
Profit for the year |
33.9 |
27.8 |
|
|
||
|
Earnings per share (pence) |
||
|
Basic earnings per share |
30.47 |
25.09 |
|
Diluted earnings per share |
30.22 |
24.95 |
|
STATEMENT OF FINANCIAL POSITION AS AT 29 JANUARY 2023 |
||
|
|
2023 |
2022 |
|
|
£m |
£m |
|
Non-current assets |
||
|
Intangible assets |
116.2 |
98.6 |
|
Property, plant and equipment |
102.5 |
93.8 |
|
Right-of-use assets |
5.4 |
4.2 |
|
Loans and receivables |
1.5 |
1.5 |
|
Investment in associates |
0.7 |
0.7 |
|
Retirement benefit surplus |
2.4 |
- |
|
|
228.7 |
198.8 |
|
Current assets |
||
|
Inventories |
34.7 |
24.2 |
|
Trade and other receivables |
60.4 |
44.3 |
|
Derivative financial instruments |
0.1 |
- |
|
Current tax asset |
- |
0.3 |
|
Short-term investments |
40.0 |
- |
|
Cash and cash equivalents |
13.6 |
68.7 |
|
|
148.8 |
137.5 |
|
|
||
|
Total assets |
377.5 |
336.3 |
|
Current liabilities |
||
|
Loans and other borrowings |
0.7 |
0.3 |
|
Trade and other payables |
72.3 |
54.0 |
|
Derivative financial instruments |
0.1 |
0.2 |
|
Lease liabilities |
1.5 |
1.3 |
|
Provisions |
0.8 |
2.0 |
|
Current tax liabilities |
0.7 |
- |
|
|
76.1 |
57.8 |
|
Non-current liabilities |
||
|
Deferred tax liabilities |
28.2 |
21.5 |
|
Lease liabilities |
3.6 |
2.8 |
|
Put liability |
- |
5.0 |
|
Contingent consideration |
0.8 |
- |
|
Retirement benefit obligations |
- |
1.0 |
|
|
32.6 |
30.3 |
|
Capital and reserves |
||
|
Share capital |
4.7 |
4.7 |
|
Share premium account |
0.9 |
0.9 |
|
Share options reserve |
3.4 |
1.6 |
|
Other reserves |
0.1 |
(5.1) |
|
Retained earnings |
259.7 |
242.4 |
|
Total shareholder equity |
268.8 |
244.5 |
|
Non-controlling interest in equity |
- |
3.7 |
|
|
268.8 |
248.2 |
|
|
||
|
Total equity and liabilities |
377.5 |
336.3 |
|
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 29 JANUARY 2023 |
||
|
|
||
|
|
2023 |
2022 |
|
|
£m |
£m |
|
Profit for the year |
33.9 |
27.8 |
|
Other comprehensive income |
||
|
Items that will not be reclassified to profit or loss |
||
|
Remeasurements on defined benefit pension plans |
(1.5) |
4.7 |
|
Deferred tax movements on items above |
0.6 |
(1.2) |
|
Deferred tax remeasurement for movement in tax rate |
- |
1.5 |
|
Items that will be or have been reclassified to profit or loss |
||
|
Cash flow hedges: |
||
|
Gains arising during the period |
0.2 |
0.1 |
|
Deferred tax movements on items above |
- |
- |
|
Other comprehensive income for the year, net of tax |
(0.7) |
5.1 |
|
|
||
|
Total comprehensive income for the year |
33.2 |
32.9 |
|
|
||
|
Attributable to: |
||
|
Equity shareholders of the parent Company |
33.2 |
33.0 |
|
Non-controlling interests |
- |
(0.1) |
|
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 29 JANUARY 2023 |
||||||||
|
|
||||||||
|
|
Share capital |
Share premium account |
Share options reserve |
Other reserves |
Retained earnings |
Total |
Non-controlling interests |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
At 30 January 2022 |
4.7 |
0.9 |
1.6 |
(5.1) |
242.4 |
244.5 |
3.7 |
248.2 |
|
Profit for the year |
- |
- |
- |
- |
33.9 |
33.9 |
- |
33.9 |
|
Other comprehensive income |
- |
- |
- |
0.2 |
(0.9) |
(0.7) |
- |
(0.7) |
|
Total comprehensive income for the year |
- |
- |
- |
0.2 |
33.0 |
33.2 |
- |
33.2 |
|
|
||||||||
|
Company shares purchased for use by employee benefit trusts |
- |
- |
- |
- |
(0.7) |
(0.7) |
- |
(0.7) |
|
Recognition of share-based payment costs |
- |
- |
2.0 |
- |
- |
2.0 |
- |
2.0 |
|
Transfer of reserve on share award |
- |
- |
(0.2) |
- |
0.2 |
- |
- |
- |
|
Deferred tax on items taken direct to reserves |
- |
- |
- |
- |
- |
- |
- |
- |
|
Derecognition of put liability |
- |
- |
- |
1.3 |
(1.3) |
- |
- |
- |
|
Recognition of liabilities with non-controlling interests |
- |
- |
- |
3.7 |
- |
3.7 |
(3.7) |
- |
|
Dividends paid |
- |
- |
- |
- |
(13.9) |
(13.9) |
- |
(13.9) |
|
At 29 January 2023 |
4.7 |
0.9 |
3.4 |
0.1 |
259.7 |
268.8 |
- |
268.8 |
|
|
||||||||
|
At 24 January 2021 |
4.7 |
0.9 |
1.8 |
(0.2) |
221.6 |
228.8 |
- |
228.8 |
|
|
||||||||
|
Profit for the year |
- |
- |
- |
- |
27.9 |
27.9 |
(0.1) |
27.8 |
|
Other comprehensive income |
- |
- |
- |
0.1 |
5.0 |
5.1 |
- |
5.1 |
|
Total comprehensive income for the year |
- |
- |
- |
0.1 |
32.9 |
33.0 |
(0.1) |
32.9 |
|
|
||||||||
|
Company shares purchased for use by employee benefit trusts |
- |
- |
- |
- |
(0.5) |
(0.5) |
- |
(0.5) |
|
Recognition of share-based payment costs |
- |
- |
1.2 |
- |
- |
1.2 |
- |
1.2 |
|
Transfer of reserve on share award |
- |
- |
(1.8) |
- |
1.8 |
- |
- |
- |
|
Deferred tax on items taken direct to reserves |
- |
- |
0.4 |
- |
- |
0.4 |
- |
0.4 |
|
Recognition of liabilities with non-controlling interests |
- |
- |
- |
(5.0) |
- |
(5.0) |
3.8 |
(1.2) |
|
Dividends paid |
- |
- |
- |
- |
(13.4) |
(13.4) |
- |
(13.4) |
|
At 30 January 2022 |
4.7 |
0.9 |
1.6 |
(5.1) |
242.4 |
244.5 |
3.7 |
248.2 |
|
Cash Flow Statements for the year ended 29 January 2023 |
||
|
|
2023 |
2022 |
|
|
£m |
£m |
|
Operating activities |
||
|
Profit before tax |
44.4 |
42.2 |
|
Adjustments for: |
||
|
Interest and dividends receivable |
(0.5) |
- |
|
Interest payable |
1.4 |
0.4 |
|
Contingent consideration |
0.8 |
- |
|
Revaluation of put liability |
(2.7) |
- |
|
Depreciation of property, plant and equipment |
9.8 |
9.9 |
|
Amortisation of intangible assets |
1.2 |
1.3 |
|
Share-based payment costs |
2.0 |
1.2 |
|
Share of results in associates |
- |
0.1 |
|
Gain on sale of property, plant and equipment and available for sale assets |
(1.0) |
(0.7) |
|
Operating cash flows before movements in working capital |
55.4 |
54.4 |
|
Increase in inventories |
(4.5) |
(4.3) |
|
Increase in receivables |
(7.6) |
(5.6) |
|
Increase in payables |
4.3 |
7.7 |
|
Difference between employer pension contributions and amounts recognised in the income statement |
(4.9) |
(2.3) |
|
Cash generated by operations |
42.7 |
49.9 |
|
Tax paid |
(6.8) |
(6.5) |
|
Net cash from operating activities |
35.9 |
43.4 |
|
Investing activities |
||
|
Acquisition of subsidiary (net of cash acquired) |
(18.6) |
(5.1) |
|
Purchase of property, plant and equipment |
(14.6) |
(5.0) |
|
Proceeds on sale of property, plant and equipment and assets held for sale |
1.6 |
1.1 |
|
Funds placed on fixed term deposit |
(40.0) |
- |
|
Interest received |
0.1 |
- |
|
Net cash used in investing activities |
(71.5) |
(9.0) |
|
Financing activities |
||
|
Acquisition of minority interest |
(3.4) |
- |
|
Loans made |
- |
(0.5) |
|
Loans repaid |
(0.3) |
- |
|
Lease payments |
(1.7) |
(1.5) |
|
Purchase of Company shares by employee benefit trusts |
(0.7) |
(0.2) |
|
Dividends paid |
(13.9) |
(13.4) |
|
Interest paid |
(0.2) |
(0.1) |
|
Net cash used in financing activities |
(20.2) |
(15.7) |
|
|
||
|
Net (decrease)/increase in cash and cash equivalents |
(55.8) |
18.7 |
|
Cash and cash equivalents at beginning of year |
68.7 |
50.0 |
|
Cash and cash equivalents at end of year |
12.9 |
68.7 |
|
|
||
|
Cash and cash equivalents per the cash flow statement above comprises cash and cash equivalents per the statement of financial position of £13.6m, net of bank overdrafts of £0.7m for the year ended 29 January 2023. |
||
1. General information
A.G. BARR p.l.c. (the "Company") and its subsidiaries (together the "Group") manufacture, distribute and sell a range of beverages. The Group has manufacturing sites in the UK and sells mainly to customers in the UK with some international sales.
The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in Scotland. The address of its registered office is Westfield House, 4 Mollins Road, Cumbernauld, G68 9HD.
The financial year represents the 52 weeks ended 29 January 2023 (prior financial year 53 weeks ended 30 January 2022).
Basis of preparation
The financial information for the year ended 29 January 2023 contained in this news release was approved by the Board on 28 March 2023. This announcement does not constitute statutory financial statements within the meaning of Section 435 of the Companies Act 2006, but is derived from those financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the UK and in conformity with the requirements of the Companies Act 2006.
This information has been prepared under the historical cost method except where other measurement bases are required to be applied under IFRS, using all standards and interpretations required for the financial period beginning 31 January 2022. No standards or interpretations have been adopted before the required implementation date. Whilst the financial information included within this announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, it does not comply with all disclosure requirements.
Statutory financial statements for the year ended 30 January 2022 have been delivered to the Registrar of Companies. Statutory financial statements for the year ended 29 January 2023, which have been prepared on the going concern basis, will be delivered to the Registrar of Companies following the Group's Annual General Meeting.
The directors have adopted the going concern basis in preparing these accounts after assessing the principal risks. This assessment was undertaken through the use of a number of reasonably possible downside scenarios that could impact the business (both individually and cumulatively).
These scenarios include adverse brand damage to the Group's largest brand (IRN-BRU), reimposition of restrictions associated with the Covid-19 pandemic, significant disruption to supply chain (including the closure of a factory), a cyber attack, and significant energy cost inflation.
The director's experience of the Covid-19 pandemic provides confidence over the resilience of our brands, and that the business can react appropriately to significant downside scenarios. Material cash preservation measures are available, including reducing discretionary spend on overheads, non-essential capital, marketing investment, and the suspension of dividends.
As at 29 January 2023, the consolidated balance sheet reflects a net asset position of £268.8m, including net cash at bank of £52.9m. The Group has £20m of committed and unutilised debt facilities, consisting of one revolving credit facility with one bank, providing the business with a secure funding platform. Throughout these severe but plausible downside scenarios, and with no cost mitigation, the Group's liquidity requirements would be satisfied within existing credit facilities, and headroom is maintained on associated covenants.
The directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 12 months from the signing date of these consolidated financial statements. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
The auditors have reported on those financial statements. Their reports were not qualified, did not include a reference to any matters which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group
A number of new or amended standards became applicable for the current reporting period and the Group had to change its accounting policies as a result of adopting the following standards:
· Property, Plant and Equipment Proceeds before Intended Use - Amendments to IAS 16;
· Onerous contracts - Cost of Fulfilling a Contract - Amendments to IAS 37;
· Annual Improvements to IFRS Standards 2018 - 2020; and
· Reference to the Conceptual Framework - Amendments to IFRS 3.
The amendments listed above do not have a material impact on the results for the current and prior reporting periods.
(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 30 January 2023 and not adopted early
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are not mandatory for 29 January 2023 reporting periods and have not been early adopted by the Group. These standards, amendments or interpretations are not expected to have a material impact on the entity in the current or future reporting periods or on foreseeable future transactions.
|
2. Segment reporting |
||||
|
The Board and senior executives have been identified as the Group's chief operating decision-makers, who review the Group's internal reporting in order to assess performance and allocate resources. |
||||
|
The performance of the operating segments is assessed by reference to their gross profit. |
||||
|
|
||||
|
|
Soft drinks |
Cocktail solutions |
Other |
Total |
|
Year ended 29 January 2023 |
£m |
£m |
£m |
£m |
|
Total revenue |
266.6 |
42.8 |
8.2 |
317.6 |
|
Gross profit |
109.6 |
16.2 |
2.3 |
128.1 |
|
|
Soft drinks |
Cocktail solutions |
Other |
Total |
|
Year ended 30 January 2022 |
£m |
£m |
£m |
£m |
|
Total revenue |
230.6 |
36.9 |
1.1 |
268.6 |
|
Gross profit |
103.5 |
14.7 |
0.4 |
118.6 |
|
There are no material intersegment sales. All revenue is in relation to product sales, which is recognised at a point in time, upon delivery to the customer. |
||||
|
All of the assets and liabilities of the Group are managed on a central basis rather than at a segment level. As a result, no reconciliation of segment assets and liabilities to the statement of financial position has been disclosed for either of the periods presented. |
||||
|
Included in revenues arising from the above segments are revenues of approximately £60.3m, which arose from sales to the Group's largest customer (2022: £51.5m). No other single customers contributed 10% or more to the Group's revenue in either 2022 or 2023. |
||||
|
All of the segments included within "Soft drinks" and "Cocktail solutions" meet the aggregation criteria set out in IFRS 8 Operating Segments. |
||||
|
Geographical information |
||||
|
The Group operates predominantly in the UK with some worldwide sales. All of the operations of the Group are based in the UK. |
||||
|
|
2023 |
2022 |
||
|
Revenue |
£m |
£m |
||
|
UK |
303.7 |
257.3 |
||
|
Rest of the world |
13.9 |
11.3 |
||
|
|
317.6 |
268.6 |
||
|
The rest of the world revenue includes sales to the Republic of Ireland and international wholesale export houses. |
||||
|
All of the assets of the Group are located in the UK. |
||||
|
3. Taxation |
||||
|
|
2023 |
2022 |
||
|
|
£m |
£m |
||
|
Charge/(credit) to the income statement |
||||
|
Current tax on profits for the year |
7.0 |
7.1 |
||
|
Adjustments in respect of prior years |
0.7 |
(0.3) |
||
|
Total current tax expense |
7.7 |
6.8 |
||
|
Deferred tax |
||||
|
Origination and reversal of: |
||||
|
Temporary differences |
3.5 |
1.3 |
||
|
Adjustment for change in corporation tax rate |
- |
5.7 |
||
|
Adjustments in respect of prior years |
(0.7) |
0.6 |
||
|
Total deferred tax expense |
2.8 |
7.6 |
||
|
Total tax expense |
10.5 |
14.4 |
||
|
|
||||
|
In addition to the above movements in deferred tax, a deferred tax debit of £0.6m (2022: credit of £0.3m) has been recognised in other comprehensive income and a debit of £0.2m (2022: credit of £0.4m) has been taken direct to reserves. In addition, a deferred tax liability of £4.3m has been recognised on the acquisition of Boost. |
||||
|
The tax on the Group's profit before tax differs from the amount that would arise using the tax rate applicable to the consolidated profits of the Group as follows: |
||||
|
|
2023 |
2023 |
2022 |
2022 |
|
|
£m |
% |
£m |
% |
|
Profit before tax |
44.4 |
|
42.2 |
|
|
|
||||
|
Tax at 19% (2022: 19.0%) |
8.4 |
19.0 |
8.0 |
19.0 |
|
Tax effects of: |
||||
|
Items that are not deductible in determining taxable profit |
2.1 |
4.6 |
0.4 |
0.9 |
|
Current tax adjustment in respect of prior years |
0.7 |
1.6 |
(0.3) |
(0.7) |
|
Deferred tax adjustment in respect of prior years |
(0.7) |
(1.6) |
0.6 |
1.4 |
|
Deferred tax adjustment in respect of change in corporation tax rates |
- |
- |
5.7 |
13.5 |
|
Total tax expense |
10.5 |
23.6 |
14.4 |
34.1 |
|
The weighted average tax rate was 23.6% (2022: 34.1%). |
||||
|
In March 2021, the UK Government announced that the corporation tax rate would increase from 19% to 25% effective from 1 April 2023, which was substantively enacted on 24 May 2021. The impact of this was a one-off increase in the deferred tax charge of £5.7m. The Finance Act 2022, which received Royal Assent on 24 February 2022, will not have any impact on the corporation tax figures. |
||||
|
4. Dividends |
||||||
|
Dividends paid in the financial year were as follows: |
||||||
|
|
2023 |
2022 |
2023 |
2022 |
||
|
|
per share |
per share |
£m |
£m |
||
|
Final dividend |
10.00 |
p |
- |
|
11.1 |
- |
|
Interim dividend |
2.50 |
p |
2.00 |
p |
2.8 |
2.2 |
|
Special dividend |
- |
p |
10.00 |
p |
- |
11.2 |
|
|
12.50 |
p |
12.00 |
p |
13.9 |
13.4 |
|
The directors have proposed a final dividend in respect of the year ended 29 January 2023 of 10.6p per share. It will be paid on 9 June 2023 to all shareholders who are on the Register of Members on 12 May 2023. |
||||||
|
In the year ended 30 January 2022, following a review of the Group's net cash position and future funding requirements, the Board approved a special dividend of 10.0p per share recognising the benefit of a number of one-off cash inflows that were outside normal trading. |
||||||
|
Dividends payable in respect of the financial year were as follows: |
||||||
|
|
2023 |
2022 |
|
|||
|
|
per share |
per share |
|
|||
|
Final dividend |
10.60 |
p |
10.00 |
p |
|
|
|
Interim dividend |
2.50 |
p |
2.00 |
p |
|
|
|
|
13.10 |
p |
12.00 |
p |
|
|
|
|
||||||
|
Special dividend |
- |
|
10.00 |
p |
|
|
|
Total dividend payable |
13.10 |
p |
22.00 |
p |
|
|
|
5. Investment in subsidiaries |
||
|
|
2023 |
2022 |
|
|
£m |
£m |
|
Opening investment in subsidiaries |
90.3 |
84.1 |
|
Investments made in the year |
23.3 |
6.2 |
|
Closing investment in subsidiaries |
113.6 |
90.3 |
|
|
||
|
On 5 December 2022, the Group acquired 100% of the shares and voting interests in Boost Drinks Holdings Limited ("Boost") granting it control. Included in the identifiable assets and liabilities of Boost are inputs (inventories, receivables and payables) and an experienced workforce with technical expertise. The Group has concluded that, together, the acquired inputs and processes are a business that will create value by generating revenue in the soft drinks category, supported by the Group's brand building capability. |
||
|
|
||
|
For the two months ended 29 January 2023, Boost contributed revenue of £7.3m and had an immaterial impact on profit. Had Boost been a subsidiary for the full financial year, it would have contributed c. £50m revenue to the Group and c.£1.0m profit. |
||
|
The value of the identifiable assets and liabilities of Boost at the date of acquisition were: |
||
|
|
£m |
|
|
Property, plant and equipment |
0.2 |
|
|
Right-of-use assets |
0.3 |
|
|
Intangible assets |
16.9 |
|
|
Inventory |
6.0 |
|
|
Trade receivables |
8.5 |
|
|
Cash and cash equivalents |
1.3 |
|
|
Trade payables |
(7.1) |
|
|
Accruals |
(2.8) |
|
|
Lease creditors |
(0.3) |
|
|
Other taxes and social security |
(0.7) |
|
|
Current tax |
(0.2) |
|
|
Deferred tax |
(4.1) |
|
|
Total identifiable net assets acquired |
18.0 |
|
|
Goodwill |
1.9 |
|
|
|
||
|
Value on acquisition |
19.9 |
|
|
|
||
|
Total consideration |
19.9 |
|
|
Represented by: |
||
|
Cash |
19.9 |
|
|
The acquisition includes a potential additional consideration of up to £12.0m payable depending on the successful delivery of future performance during an earn-out period commencing 1 December 2022 and ending 20 November 2024. |
||
|
On 20 December 2022 the Group acquired the remaining 38.2% equity stake in MOMA Foods Ltd ("MOMA") for a total cash consideration of £3.4m. |
||
|
On 6 December 2021, the Group acquired 61.8% of the shares and voting interests in MOMA granting it control. Included in the identifiable assets and liabilities of MOMA are inputs (inventories, receivables and payables and an experienced workforce with technical expertise. The Group has concluded that, together, the acquired inputs and processes are a business that will create value by generating revenue in the growing plant-based drinks category, supported by the Group's brand building capability. |
||
|
The value of the identifiable assets and liabilities of MOMA at the date of acquisition were: |
|||
|
|
£m |
||
|
Property, plant and equipment |
0.2 |
||
|
Intangible assets |
8.4 |
||
|
Inventory |
0.6 |
||
|
Trade receivables |
1.0 |
||
|
Prepayments |
0.1 |
||
|
Cash and cash equivalents |
0.4 |
||
|
Trade payables |
(0.7) |
||
|
Accruals |
(0.7) |
||
|
Loans |
(0.3) |
||
|
Total identifiable net assets acquired |
9.0 |
||
|
Goodwill |
1.0 |
||
|
|
|||
|
Value on acquisition |
10.0 |
||
|
Non-controlling interest |
(3.8) |
||
|
Total consideration |
6.2 |
||
|
Represented by: |
|||
|
Cash |
6.2 |
||
|
As part of the arrangements with non-controlling shareholders of MOMA, the Group issued put options to the sellers to sell the remaining shares and simultaneously the seller issued call options to the Group to purchase the remaining shares. At the acquisition date, the Group recognised a put liability of £8.6m recorded at a present value of £5.0m being the estimated redemption value, using forecast revenue of MOMA, discounted at a post-tax rate of 18%. |
|||
|
The put liability was derived from an internal valuation, using forecast revenue over the exercise period, discounted at a post-tax rate of 18% and assumed the option was exercised in full in the third year following the date of acquisition. As the Group now owns 100% of MOMA the put liability has been released in the year to 29 January 2023. |
|||
|
Acquisition-related costs |
|||
|
The Group incurred acquisition-related costs of £1.2m (year to 30 January 2022 £0.2m) on legal fees and due diligence costs. These costs have been included in 'Administrative expenses'. |
|||
|
The goodwill arising represents potential revenue synergies. It is anticipated that on disposal, goodwill and brand will be deductible for tax purposes. |
|||
|
The principal subsidiaries are as follows: |
|||
|
Principal subsidiary |
Principal activity |
Country of incorporation |
Country of principal operations |
|
Funkin Limited |
Distribution and selling of cocktail solutions |
England |
UK |
|
Funkin USA Limited |
Distribution and selling of cocktail solutions |
England |
UK |
|
Rubicon Drinks Limited |
Distribution of fruit based soft-drinks |
England |
UK |
|
MOMA Foods Ltd |
Distribution and selling of oat drinks and cereals |
England |
UK |
|
Boost Drinks Limited |
Distribution and selling of soft-drinks |
England |
UK |
|
A.G. BARR p.l.c. holds 100% of the equity and votes of the subsidiaries. (Year ended 30 January 2022: 100% with the exception of MOMA: 68.2%). The subsidiaries have the same year end as A.G. BARR p.l.c. and have been included in the Group consolidation. The companies listed are the trading subsidiaries. |
|||
CAUTIONARY STATEMENT
This report is addressed to the shareholder of A.G. BARR p.l.c. and has been prepared solely to provide information to them.
This report is intended to inform the shareholders of the Group's performance for the year ended 29 January 2023. This report contains forward-looking statements based on knowledge and information available to the directors as at the date the report was prepared. These statements should be treated with caution due to the inherent uncertainties underlying any forward-looking information and any statements about the future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
|
Glossary |
|
Non-GAAP measures are provided because they are tracked by management to assess the Group's operating performance and to inform financial, strategic and operating decisions. |
|
Definition of non-GAAP measures used are provided below: |
|
Adjusted earnings per shar e is a non-GAAP measure calculated by dividing adjusted profit attributable to equity holders by the weighted average number of shares in issue. |
|
Adjusted EBITD A is a non-GAAP measure and is defined as adjusted operating profit before depreciation and amortisation. |
|
Adjusted EBITDA margi n is a non-GAAP measure and is calculated as adjusted EBITDA divided by adjusted revenue. |
|
Adjusted operating margin is a non-GAAP measure calculated by dividing adjusted operating profit by adjusted revenue. |
|
Adjusted operating profit is a non-GAAP measure calculated as operating profit after adjusting items. |
|
Adjusted profit before ta x is non-GAAP measure calculated as reported profit before tax after adjusting entries as disclosed in the adjusting entries accounting policy. |
|
Adjusted revenue is a non-GAAP measure calculated as revenue after adjusting items. |
|
Capital expenditur e is a non-GAAP measure and is defined as the purchases of property, plant and equipment, and is disclosed in the property, plant and equipment note. |
|
EBITDA is a non-GAAP measure and is defined as operating profit before depreciation and amortisation. |
|
EBITDA margi n is a non-GAAP measure and is calculated as EBITDA divided by revenue. |
|
Free cash flow is a non-GAAP measure and is defined as the net cash flow as per the cash flow statement excluding the movements in borrowings, the net cash flow on the purchase and sale of shares by employee benefit trusts and dividend payments. |
|
Full year dividen d is a non-GAAP measure and is defined as the total dividends declared for the financial year excluding any special dividends. |
|
Gross margi n is a non-GAAP measure calculated by dividing gross profit by revenue. |
|
Like-for-like revenue growth is a non-GAAP measured comparing adjusted revenue in the current year to the prior year excluding MOMA and Boost revenues in each year. |
|
Market capitalisatio n is a non-GAAP measure and is defined as the closing share price at the end of a reporting period multiplied by the number of issued and fully paid shares of the Company. |
|
Net cash at bank is a non-GAAP measure and is defined as the net of cash and cash equivalents plus short-term investments less loans and other borrowings as shown in the statement of financial position. |
|
Net funds/(debt ) is a non-GAAP measure and is defined as cash and cash equivalents plus short-term investments less lease liabilities and overdrafts. |
|
Operating margi n is a non-GAAP measure calculated by dividing operating profit by revenue. |
|
Return on capital employed (ROCE) is a non-GAAP measure and is defined as reported profit before tax as a percentage of invested capital. Invested capital is a non-GAAP measure defined as period end non-current plus current assets less current liabilities excluding all balances relating to any provisions, financial instruments, interest-bearing liabilities and cash or cash equivalents. |
|
Revenue growt h is a non-GAAP measure calculated as the difference in revenue between two reporting periods divided by the revenue of the earlier reporting period. |
|
Reconciliation of Non-GAAP measures |
|||||||||||
|
Adjusted Consolidated Income Statements |
|||||||||||
|
|
Year ended 29 January 2023 |
|
Year ended 30 January 2022 |
||||||||
|
|
Reported |
MOMA acquisition impact |
Gain on sale of property |
Boost acquisition fees |
Boost earn-out |
Adjusted |
|
Reported |
Gain on sale of property |
Extra week trading |
Adjusted |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
£m |
£m |
£m |
£m |
|
Revenue |
317.6 |
- |
- |
- |
- |
317.6 |
|
268.6 |
- |
(6.8) |
261.8 |
|
Cost of sales |
(189.5) |
- |
- |
- |
- |
(189.5) |
|
(150.0) |
- |
3.7 |
(146.3) |
|
Gross profit |
128.1 |
- |
- |
- |
- |
128.1 |
|
118.6 |
- |
(3.1) |
115.5 |
|
Other income |
1.3 |
- |
(1.3) |
- |
- |
- |
|
0.7 |
(0.7) |
- |
- |
|
Operating expenses |
(84.1) |
(2.7) |
- |
1.2 |
0.8 |
(84.8) |
|
(76.6) |
- |
- |
(76.6) |
|
Operating profit |
45.3 |
(2.7) |
(1.3) |
1.2 |
0.8 |
43.3 |
|
42.7 |
(0.7) |
(3.1) |
38.9 |
|
Finance income |
0.5 |
- |
- |
- |
- |
0.5 |
|
- |
- |
- |
- |
|
Finance costs |
(1.4) |
1.1 |
- |
- |
- |
(0.3) |
|
(0.4) |
- |
- |
(0.4) |
|
Share of after tax results of associates |
- |
- |
- |
- |
- |
- |
|
(0.1) |
- |
- |
(0.1) |
|
Profit before tax |
44.4 |
(1.6) |
(1.3) |
1.2 |
0.8 |
43.5 |
|
42.2 |
(0.7) |
(3.1) |
38.4 |
|
Tax on profit |
(10.5) |
- |
- |
- |
- |
(10.5) |
|
(14.4) |
- |
- |
(14.4) |
|
Profit for the period |
33.9 |
(1.6) |
(1.3) |
1.2 |
0.8 |
33.0 |
|
27.8 |
(0.7) |
(3.1) |
24.0 |
|
Adjusting entries: |
|||||||||||
|
MOMA acquisition impac t - the remeasurement and release of the contingent consideration in respect of MOMA Foods Ltd following the Group's acquisition of the remaining 38.2% minority interest in December 2022. |
|||||||||||
|
Gain on sale of property - the gain on the disposal of the Newcastle distribution site in the year to 29 January 2023 and Sheffield distribution depot in the year to 30 January 2022. |
|||||||||||
|
Boost acquisition fees - the acquisition fees incurred on the successful acquisition of Boost Drinks Holdings Limited |
|||||||||||
|
Boost earn-out - the accrual related to the potential payment of £10m associated with the acquisition of Boost Drinks Holdings Limited earn-out. |
|||||||||||
|
Extra week trading - the 12 months to 29 January 2023 was a 52 week period and the year ended 30 January 2022 was a 53 week period. This extra week of trading is removed for comparative purposes. |
|||||||||||
|
Like-for-like revenue growth |
£m |
|
Adjusted revenue for year to 29 January 2023 |
317.6 |
|
Less Boost |
(7.3) |
|
Less MOMA revenue |
(8.2) |
|
|
302.1 |
|
Adjusted revenue for period to 30 January 2022 |
261.8 |
|
Less MOMA |
(1.1) |
|
|
260.7 |
|
Movement |
41.4 |
|
Growth |
15.9% |
|
Reconciliation of non-GAAP measures |
||
|
EBITDA |
2023 |
2022 |
|
Operating profit reported |
45.3 |
42.7 |
|
Depreciation and amortisation |
11.0 |
11.2 |
|
EBITDA |
56.3 |
53.9 |
|
|
||
|
EBITDA margin |
2023 |
2022 |
|
Revenue |
317.6 |
268.6 |
|
EBITDA |
56.3 |
53.9 |
|
EBITDA margin |
17.7% |
20.1% |
|
|
||
|
Adjusted EBITDA |
2023 |
2022 |
|
Operating profit adjusted |
43.3 |
38.9 |
|
Depreciation and amortisation |
11.0 |
11.2 |
|
Adjusted EBITDA |
54.3 |
50.1 |
|
|
||
|
Adjusted EBITDA margin |
2023 |
2022 |
|
Adjusted revenue |
317.6 |
261.8 |
|
Adjusted EBITDA |
54.3 |
50.1 |
|
Adjusted EBITDA margin |
17.1% |
19.1% |
|
|
||
|
Adjusted EPS |
2023 |
2022 |
|
Adjusted profit attributable to equity holders of the Company £m |
33.0 |
24.0 |
|
Weighted average number of shares in issue |
111,258,209 |
111,187,778 |
|
Adjusted EPS (p) |
29.66 |
21.59 |
|
|
|
|
|
Full year dividend |
2023 |
2022 |
|
Interim dividend paid |
2.5 |
2.0 |
|
Final dividend declared |
10.6 |
10.0 |
|
Full year dividend |
13.1 |
12.0 |
|
|
||
|
Gross margin reported |
2023 |
2022 |
|
Revenue |
317.6 |
268.6 |
|
Reported gross profit |
128.1 |
118.6 |
|
Gross margin reported |
40.3% |
44.2% |
|
|
|
|
|
Net cash at bank |
2023 |
2022 |
|
Cash and cash equivalents |
13.6 |
68.7 |
|
Short-term investments |
40.0 |
- |
|
Loans and other borrowings |
(0.7) |
(0.3) |
|
Net cash at bank |
52.9 |
68.4 |
|
|
||
|
Operating margin |
2023 |
2022 |
|
Revenue |
317.6 |
268.6 |
|
Reported operating profit |
45.3 |
42.7 |
|
Operating margin |
14.3% |
15.9% |
|
|
||
|
Adjusted operating margin |
2023 |
2022 |
|
Adjusted revenue |
317.6 |
261.8 |
|
Adjusted operating profit |
43.3 |
38.9 |
|
Adjusted operating margin |
13.6% |
14.9% |
|
|
||
|
ROCE |
2023 |
2022 |
|
Profit before tax |
44.4 |
42.2 |
|
|
||
|
Intangible assets |
116.2 |
98.6 |
|
Property, plant and equipment |
102.5 |
93.8 |
|
Right-of-use assets |
5.4 |
4.2 |
|
Investment in associates |
0.7 |
0.7 |
|
Inventories |
34.7 |
24.2 |
|
Trade and other receivables |
60.4 |
44.3 |
|
Current tax |
(0.7) |
0.3 |
|
Trade and other payables |
(72.3) |
(54.0) |
|
Invested capital |
246.9 |
212.1 |
|
ROCE |
18.0% |
19.9% |
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
Latest directors dealings
- 52 minutes ago Croda International
- 1 hour ago Diageo
- 1 hour ago IMI
- 2 hours ago Softcat
- 5 hours ago Tertiary Minerals