Final results for the year ended 30 January 2022
29 March 2022
A.G. BARR p.l.c.
("A. G. BARR" or "the Group")
Final results for the year ended 30 January 2022
Excellent financial performance generated by strong sales growth
A.G. BARR p.l.c., which produces and markets some of the UK's leading drinks brands, including IRN-BRU, Rubicon and Funkin, today announces its final results for the 53 weeks ended 30 January 2022.
Financial summary
|
|
53 wks to 30 Jan 2022 |
|
52 wks to 24 Jan 2021 |
vs 21/22 |
|
52 wks to 25 Jan 2020 * |
vs 21/22 |
|
Revenue |
£268.6m |
|
£227.0m |
18.3% |
|
£255.7m |
5.0% |
|
Profit before tax (before exceptional items)* |
£41.5m |
|
£32.8m |
26.5% |
|
£37.4m |
11.0% |
|
Statutory profit before tax |
£42.2m |
|
£26.0m |
62.3% |
|
£37.4m |
12.9% |
|
Operating profit margin (before exceptional items)* |
15.6% |
|
14.8% |
0.83 pp |
|
14.9% |
0.73 pp |
|
Basic EPS (before exceptional items)* |
25.09 p |
|
17.18 p |
46.1% |
|
26.50 p |
(5.3%) |
|
Net cash from operating activities |
£43.4m |
|
£50.7m |
(14.4%) |
|
£40.1m |
8.2% |
|
Net cash at bank |
£68.4m |
|
£50.0m |
36.8% |
|
£10.9m |
527.5% |
|
Dividend per share (proposed final & interim) |
12.00 p |
|
- |
- |
|
4.00 p |
200.0% |
Highlights
∙ Excellent financial performance, generated by strong sales growth, resulting in a profit performance ahead of 2019/20 pre-Covid levels
∙ Strong trading reflecting the successful execution of our growth strategy - investing in our brands, innovation, operations and people - combined with a general market recovery
∙ All brands in growth with core brands now ahead of pre-Covid levels
∙ Barr Soft Drinks : strong momentum across the soft drinks portfolio supported by continued brand investment and innovation, with a particular focus on the energy category
∙Funkin : significant progress made in further establishing Funkin as the leading consumer cocktail brand in both the take home and the hospitality sectors
∙ "No Time To Waste" environmental sustainability programme continued at pace
∙Completion of full carbon footprint assessment has enabled setting of science-based targets that will guide the Group on its net zero journey
∙ Strong cash generation and robust balance sheet continues to support capital and dividend programmes
∙ Dividend payments recommenced - interim (2p), proposed final (10p) and one-off special dividend (10p paid in October 2021)
∙ Equity investment in MOMA Foods Limited in December 2021, demonstrating the Group's continued ambition and drive to find opportunities to participate in exciting high growth categories
∙ We were pleased to welcome Mark Allen OBE and Zoe Howorth to the Board in July 2021 as independent Non-Executive Directors
Roger White, Chief Executive, commented :
"Our business and brands have once again proven their resilience in uncertain and often challenging circumstances.
"We have accelerated our revenue growth and consequently delivered a strong financial performance. In the year we have recommenced our dividend, alongside paying a one-off special dividend, and our balance sheet has continued to strengthen.
"Our focus on environmental sustainability has accelerated, as we increase our use of recycled materials, reduce our carbon footprint and ready our business for a successful deposit return scheme implementation, due to go live in Scotland in August 2023.
"We enter the new financial year with good momentum and exciting brand and sales plans. Trading in the early weeks of the new financial year has been well ahead of the prior year and in line with our expectations.
"Like most companies we are facing significant inflationary pressures but we are well placed as a Group to deal with these and will continue to seek to manage our exposure proactively through mitigating actions across revenue management, pricing, procurement and cost control.
"The growth potential of our business is underpinned by our growing brands, our highly capable people and our resilient infrastructure. We plan to invest further in all of these important areas and I remain confident in our ability to deliver continued growth in both revenue and profit in the coming year."
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 2022
* Items marked with an asterisk are non-GAAP measures. Definitions and relevant reconciliations are provided later in this announcement.
1 52 weeks to 25 January 2020 included as a pre Covid-19 comparison
2 Excludes the one-off special dividend of 10p per share paid in October 2021
Chairman's introduction
As my tenure at A.G. Barr draws to a close, I am delighted to see the business return to strong growth. I hand the Chairman's role across to Mark Allen OBE with the business in good health and with a team excited and motivated for the future. During my seven years as Chairman, the business has shown both its resilience and decisiveness in response to external factors, from a sugar tax to a global pandemic, but more importantly it has demonstrated its internal strength and drive for growth. This resolve and ambition have been as evident as ever in the past 12 months.
Revenue grew by 18.3% year-on-year and we finished the year with profit before tax and exceptional items* of £41.5m, 26.5% ahead of the prior year and ahead of our pre Covid-19 profit levels, which included the Rockstar brand.
These results are all the more pleasing taking into account the continued impact of the Covid-19 pandemic, industry-wide labour and supply chain challenges and the current inflationary backdrop. Highlights during the year included:
· strong momentum across the soft drinks portfolio, supported by continued brand investment
· significant progress made in further establishing Funkin as a leading consumer cocktail brand
· innovation success, particularly in the energy category
· the 61.8% equity investment in MOMA Foods Limited, demonstrating the Group's continued ambition and drive to find opportunities to participate in exciting new growth categories
The entire A.G. Barr team has remained focused on delivering our brand building strategy, investing for growth and creating a business to be proud of.
Dividend
We recommenced dividend payments during the financial year with both an interim and a special dividend paid in October 2021. The Group benefited from a number of one-off cash inflows that were outside normal trading and the Board concluded that a special dividend should be distributed to shareholders, recognising the one-off and non-operating nature of the cash receipts.
At the end of the full financial year, the Board is now pleased to maintain its progressive dividend policy and recommends a final dividend of 10.0p per share to give a proposed total dividend for the full year of 12.0p per share, plus the 10.0p special dividend paid in October 2021. The final dividend is payable on 10 June 2022 to shareholders on the Register of Members at the close of business on 13 May 2022. The ex-dividend date is 12 May 2022.
Board
As previously communicated, we were pleased to welcome Mark Allen OBE and Zoe Howorth to the Board in July 2021 as independent Non-Executive Directors. Both are already adding significant value to our Board discussions. Zoe also chairs the newly established Environmental, Social and Governance (ESG) Committee which has already played an important role in the development of the Group's net zero commitments.
Mark will assume the role of Chairman in April 2022 and I have every confidence that he will lead the Board very effectively, bringing his significant experience and leadership capability to the fore.
Having completed eight years as a Non-Executive Director, Pam Powell stood down from the Board at the end of June 2021 as part of the long-term Board succession plan. We would like to thank Pam for her support, insight and guidance during her term on the Board.
Responsibility
It has been a year of real progress throughout our responsibility agenda, particularly so across our "No Time To Waste" environmental sustainability programme. I would particularly highlight another year-on-year improvement in our Climate Disclosure Project (CDP) climate change questionnaire score. CDP is a globally recognised environmental disclosure system and our improved A- classification is a welcome independent and external validation of the great work being done across the business to address the impact of climate change.
People and culture
A.G. Barr has a positive, results-driven and supportive culture, developed over many years. It has been encouraging to see the progress made across a range of people matters during my time as Chairman, particularly so in the area of diversity and inclusion. One important illustration of note is the increase in female leadership, with women now making up over 40% of A.G. Barr's senior management.
Events over the past two years have been challenging for many of us, both personally and professionally, and on behalf of the Board I want to extend my thanks to the full team for the huge part they have played in overcoming the challenges faced, and delivering such a strong performance across the year. It has been more important than ever to support our people through these tough times and I have been very encouraged to learn more about the strong mental health awareness and support culture that is well established across the business.
Prospects
We have a portfolio with strong brand equity, a successful growth strategy and a team of passionate, committed and capable people across the Group. With our proven track record of delivery we are well positioned to further grow and develop our business in 2022 and beyond.
John Nicolson
CHAIRMAN
*Items marked with an asterisk are non-GAAP measures. Definitions and relevant reconciliations are provided later in this announcement.
Chief Executive's review
I am pleased to report our results for the 53 weeks ended 30 January 2022. We have delivered a strong financial performance during what was another volatile year. We successfully navigated intermittent Covid-19 restrictions and periods of significant market recovery, as well as the well documented issues associated with labour shortages, material availability challenges and the beginning of a period of higher inflation across the UK.
We have made significant progress across all our key financial metrics as follows:
· Group revenue £268.6m (2021 : £227.0m)
· Profit before tax and exceptional items* £41.5m (2021 : £32.8m)
· Profit before tax and after exceptional items £42.2m (2021 : £26.0m)
· Operating margin before exceptional items* 15.6% (2021 : 14.8%)
· Net cash at bank* of £68.4m (2021 : £50.0m)
· Basic earnings per share before exceptional items* 24.46p (2021 : 22.31p)
Note : 2021 comparatives above are for the 52 weeks ended 24 January 2021.
I would like to take this opportunity to thank the entire A.G. Barr team who have continued to demonstrate their ability to adapt to all the challenges faced. I would also like to recognise our suppliers and our customers, with whom we have worked in partnership throughout the pandemic to maintain consumer availability.
Our trading has strengthened across the year as a consequence of the successful execution of our growth strategy, investing in our brands, innovation, operations and people, combined with a general market recovery.
While there were several periods across 2021 when social restrictions were in place, impacting consumption patterns, we have also experienced periods of elevated demand, such as in Spring 2021 when the hospitality sector reopened and restocked accordingly. As restrictions eased across Summer and into Autumn 2021, we saw notable uplifts in our out of home and hospitality channels, while retaining strong take home trading, alongside strong growth in online channels. While the emergence of the Omicron variant towards the end of our financial year led to further unexpected social restrictions, and some operational challenges related to employee absence, our brand momentum was not materially impacted and we exited the year strongly.
Statutory profit before tax of £42.2m is a 62.3% year-on-year increase and sees us materially ahead of our 2019/20 (52-week) pre Covid-19 profit levels, which included the contribution from the Rockstar brand.
Soft drinks market
At the outset of the Covid-19 pandemic in March 2020 we saw significant shifts in consumer purchasing behaviour, largely in response to the social restrictions put in place by Governments across the UK. Hospitality and on-the-go consumption fell, while take home purchasing increased. This in turn led to a corresponding decline in those sub sectors more associated with impulse purchasing, such as water and sports drinks. It also led to an increase in share for sub categories such as dilutes, with more people working and schooling at home, as well as for mixers, cola and lemonade, as sales moved from the hospitality channel, largely unmeasured by retail data sets, into the home.
Over the past 12 months, particularly as lockdown restrictions have eased, these trends are gradually reversing, with both consumer behaviour and market data beginning to return to pre Covid-19 levels.
Once again, the soft drinks market has proven its resilience in volatile times with IRI Marketplace data for the 52 weeks to 29 January 2022 recording the total UK soft drinks retail market increasing in value by 8.9% and in volume by 1.7%. Carbonates grew in value by 7.3%, while stills grew 11.1%. The strong value growth across the market reflects a number of dynamics, including the recovery of the "drink now" channel and a reduction in promotional activity against a backdrop of UK cost inflation.
We have maintained our value share of the soft drinks retail market, however the category disruption, as detailed above, means our strong revenue performance is not fully reflected in the retail market data read. That said, we have seen market share value gains in England and Wales, driven by significant growth in take home multipack formats. Our share in Scotland has been impacted by strong growth in certain channels not captured in the market read.
Cocktail market
The hospitality sector remained closed at the outset of our financial year. However since the channel began to reopen in the Spring of 2021, the cocktail category has performed extremely well, benefiting from increased numbers of consumers returning to venues and increasing levels of participation in the category. Cocktails outperformed other categories and experienced 61% like-for-like growth in the 10 weeks post reopening versus the same 10 weeks in 2019. This outperformance continued, with cocktails accounting for 9.9% of total venue drink sales from April 2021 to the 23 October 2021, versus 6.0% in the same 2019 period.
While the emergence of the Omicron variant towards the end of 2021 led to both the reintroduction of some social restrictions and increased consumer caution over the festive period, the cocktail category remains a significant growth opportunity for the hospitality sector in general. GB consumers drinking cocktails out of the home have now reached 7.4m, the equivalent of 15% of the adult population, with 43% of those consumers drinking cocktails at least weekly, a 13% increase versus 2019.
Cocktail consumption at home, which accelerated dramatically during 2020, has continued its positive growth momentum notwithstanding the reopening of the hospitality sector. The total ready to drink (RTD) category is in strong growth, now worth £509m on a moving annual total basis. Within this RTD category, cocktails make up 18% (£92m) and have grown by 44% year-on-year.
(Sources : CGA Mixed Drinks Report Q1 2021 ; CGA Drinks Recovery Tracker ; CGA Mixed Drinks Report Q3 2021 ; Source: Nielsen Pre Mixed Alcoholic Drinks Total Coverage Data MAT 15/01/2022)
Strategy execution
We remain committed to our strategic priorities - connecting with consumers, building brands, driving efficiency and building trust. Within this framework we have made good progress in short-term delivery, in medium-term planning as well as in our longer-term goal setting, particularly across our environmental sustainability agenda and our net zero commitments.
Connecting with consumers
We entered the 2021/22 financial year with a large number of Covid-19 related social restrictions still in place. However, having continued to invest in our brands in 2020, we were determined to accelerate our core brand growth in 2021 through a materially higher level of brand development activity and an enhanced sales execution programme.
We developed and executed exciting marketing campaigns across our core brands, IRN-BRU, Rubicon and Funkin, with extensive activity, both above and below the line, across the year. As a result :
|
Brand |
Revenue growth versus 2020/21* |
Revenue growth versus 2019/20* (pre Covid-19) |
|
IRN-BRU |
16.8% |
5.5% |
|
Rubicon |
39.8% |
26.1% |
|
Funkin |
117.6% |
92.1% |
*52-week financial years
Building brands
We have continued to deliver on our strategic aim of building a multi-beverage portfolio of brands, with a specific focus on developing within higher growth sectors.
We have a long-standing and proven brand building capability within the energy sector, which we brought to bear within our Company-owned portfolio, initially with IRN-BRU Energy, and more recently with the creation and launch of our new Rubicon RAW Energy range. This new addition to our Rubicon portfolio is specifically aimed at the growing number of consumers entering the energy category who are looking for a more natural, juice-based energy proposition. We have successfully supported Rubicon RAW Energy with our first ever major digital only marketing campaign, utilising a range of marketing channels focused around outdoor activities and their associated communities. After a successful launch phase, we are now building on the strong rate of sale and are further developing the UK-wide distribution of this exciting addition to our portfolio.
Funkin has made particularly strong progress across the past 12 months as a market-leading consumer brand with first mover advantage within RTD cocktails. As we anticipated 12 months ago, the reopening of the hospitality sector and the outperformance of cocktails within this channel have not impacted the growth momentum of Funkin RTD cocktails in the take home channel. Funkin has grown its RTD distribution base and delivered successful product and pack innovation. This has been supported by above the line marketing investment, aimed at building Funkin brand awareness and trial in this exciting new take home category. Funkin remains the UK's number one RTD cocktail brand.
In addition to the innovation and development of our existing brand portfolio, we have further invested in growth potential with our initial 61.8% equity stake in MOMA Foods Limited. Plant-based milk is a fast-growing category and MOMA's oat milk is a premium quality product which we believe has significant potential.
MOMA's oat milk, launched in 2020, is one of the UK's leading oat milk brands and sits alongside their existing porridge and oat based products. This is a really exciting investment for A.G. Barr and a positive indication of our growth ambition. We expect to acquire the remaining 38.2% of MOMA over the next three years.
Driving efficiency
2021/22 was a year characterised by supply chain challenges, including key material availability issues and driver shortages. Against this backdrop, our focus for much of the year was on the resilience of our operations, prioritising customer service and product availability over costs.
However our drive for long-term efficiency and effectiveness continued at pace. Our value optimisation programme identified a pipeline of product optimisation and cost reduction initiatives, which are now helping to mitigate the higher inflation that began to bite at the end of 2021. This is a long-term programme which we expect to add considerable value for some time to come across a wide range of business areas, from reductions in packaging weight and usage through to minimising miles travelled and optimising our distribution network.
We have also developed and launched a new multi-year manufacturing excellence programme - "Brilliance in the Making" - investing significantly in our people and processes to drive long-term operational efficiency across our manufacturing base.
While we chose to limit our capital expenditure during the pandemic, we will now begin to accelerate our capital investment programme in both normal replacement and growth projects. In the short-term, this will see higher capital investment, before returning to more normal levels in the medium-term as we prioritise investment for growth, sustainability and efficiency.
Building trust
In another year when Covid-19 permeated much of our personal and professional lives, we continued to prioritise the safety and wellbeing of our employees, while at the same time looking beyond the pandemic, making positive changes to support our cultural development. From hybrid working and mental health support, to progressing gender balance and engaging with our communities, we are proud of the responsible actions we have taken across the year and the progress we continue to make.
It is becoming increasingly clear that corporate commitments alone are not enough, they need to be supported by honest and meaningful actions. We are proud of how our values have underpinned our behaviours and decision making over many decades, however we know that the trust we have earned from our consumers, customers and stakeholders needs to be backed up by purposeful and responsible actions, today.
We reached a major milestone in 2021 within our environmental sustainability programme, "No Time To Waste", completing an assessment of our carbon footprint across our full product life cycle and value chain. This data has now allowed us to set science-based targets that will guide us on our journey to becoming a net zero business. Mindful of the importance of balancing ambition with genuine deliverability, and using the Science Based Target Initiative's new Net Zero Standard to ensure the most credible basis of measurement, we are committing to be net zero across our own operations by 2035. We have developed a deliverable and realistic decarbonisation roadmap to underpin this commitment and we are already making good progress. We are working closely with our suppliers and partners with a commitment to become net zero across our full supply chain by 2050, if not sooner.
Outlook
Our business and brands have once again proved their resilience in uncertain and often challenging circumstances.
We have delivered an excellent financial performance, generated by strong topline sales growth, resulting in a profit performance ahead of 2019/20 pre-pandemic levels and underpinned by a very robust balance sheet with a recommencement of our progressive and sustainable dividend.
We continue to take action to improve our environmental sustainability. Much of our focus in the coming year will be on increasing our use of recycled materials, reducing our carbon footprint and readying our business for a successful deposit return scheme implementation due to go live in Scotland in August 2023.
We enter the new financial year with good momentum, exciting brand and sales plans, and have taken action to mitigate the significant inflationary pressures we face.
The growth potential of our business is underpinned by our growing brands, our highly capable people and our resilient infrastructure. We plan to invest further in all of these important areas and I remain confident in our ability to deliver continued growth in both revenue and profit in the coming year.
Roger White
CHIEF EXECUTIVE
Financial review
The following is based on results for the 53 weeks ended 30 January 2022. Comparatives, unless otherwise stated, relate to the 52 weeks ended 24 January 2021.
OVERVIEW
We have produced a strong set of financial results in 2021/22 (53-week) that returns the business to a position ahead of 2019/20 (52-week) pre Covid-19 revenue and profit levels, despite the continued backdrop of the pandemic, its impact on consumer behaviours and various supply chain challenges.
We have delivered strong growth across all key financial metrics and are on a positive trajectory:
|
|
2021/22 (53-weeks) |
Versus 2020/21 |
|
|
Revenue |
£268.6m |
+£41.6m |
+18.3% |
|
Gross margin (before exceptionals) |
44.2% |
|
+239bps |
|
Profit before tax (reported) |
£42.2m |
+£16.2m |
+62.3% |
|
Profit before tax (before exceptionals) |
£41.5m |
+£8.7m |
+26.5% |
|
Operating margin (before exceptionals) |
15.6% |
|
+83bps |
|
Net cash at bank |
£68.4m |
+£18.4m |
+36.8% |
|
EPS (basic p/share) |
25.09p |
+7.9p |
+46.1% |
|
|
|
|
|
We entered the pandemic with strong financial fundamentals and took prompt action to protect and right-size the Group in the face of both Covid-19 and the loss of the Rockstar franchise. We believe these actions have been successful and have enabled us to emerge as a stronger, more resilient business with a clear strategy for value enhancing growth.
Our revenue increase was driven by the powerful combination of volume growth, favourable mix, tight cost control and selective pricing benefits. Volume advanced across the portfolio with all our core carbonated soft drinks and Funkin cocktails in strong growth. Volume and mix were both supported, particularly in the first half, by the relaxation of Covid-19 restrictions and the reopening of the hospitality sector, and further underpinned by successful innovation and £6m of revenue from an extra week of trading (53-week year).
Throughout the pandemic, we have worked collaboratively with our customers to ensure we recognise the impact of restrictions on the brand support and discounts we provide. This involved numerous commercial discussions and, in certain cases, changes to promotional terms. This has resulted in a change in estimate and recognition of £4.9m of additional variable consideration, which has contributed to the revenue growth experienced in the year. Our brand support spend (including this additional consideration) as a percentage of revenue remained consistent year-on-year.
We were not immune from the well-publicised impact of the pandemic on supply chains and freight networks in terms of both labour availability and input costs. We face continued cost pressure and high commodity prices. Despite these headwinds, the operating leverage benefits from higher volumes, combined with gains from operational efficiency programmes and the benefits of our rolling commodity hedges, secured a 239 basis point improvement in gross margin. Operating costs increased 25% primarily driven by the impact of increased volumes, higher logistics costs, increased variable rewards and our strategy to drive long-term brand equity through enhanced marketing investment. Despite the cost pressures faced and the investments made, operating margins improved 83 basis points to 15.6% to deliver profit before tax (PBT) of £41.5m - a 26.5% improvement year-on-year.
Covid-19 UPDATE
During the 2020/21 financial year, numerous actions were implemented to mitigate the adverse impact of Covid-19 restrictions, including reduced marketing investment and discretionary spend as well as curtailing all non-essential capital expenditure. The past 12 months have seen a disciplined rebuild of investment in these areas. Previous sensitivity analysis that quantified the expected impact of Covid-19 on our business proved to be reasonable during the period of the most widespread restrictions and these have continued to be used as the basis of our scenario analysis to model different levels of impact on revenue, profit and cash. Under all the scenarios modelled, and before any mitigating actions, our forecasts indicate a high level of financial headroom and ongoing business resilience.
SEGMENTAL PERFORMANCE
We make decisions on a business unit basis which allows agile, responsive and effective operational management. The information reviewed by the Board and senior executives is based on this divisional segmentation. As a result, the financial performance discussed below is primarily focused on the performance of our two business units, Barr Soft Drinks and Funkin, as this best reflects our management of the Group. Further detail on the segmental performance is detailed in note 2 to the financial statements.
Barr Soft Drinks
Barr Soft Drinks, which represents over 85% of Group sales and gross profits, returned to revenue growth with strong volume gains across the core portfolio. This growth was driven by a resurgence in out of home consumption, as Covid-19 restrictions eased, the successful launch of Rubicon RAW Energy in February 2021, which partially mitigated the loss of the Rockstar franchise, as well as the underlying positive momentum of our core brands. Gross margin improved by 264 basis points to 44.9%, benefitting from stronger volume and improved mix.
The IRN-BRU brand grew volume, revenue and gross margin, benefitting from distribution gains in England as well as the reintroduction of IRN-BRU 1901 in Scotland. Particularly strong growth of single serve cans and smaller PET packs, along with optimisation of promotional mix and price, supported improved margins. The launch of Rubicon RAW Energy and the strong growth of Rubicon Spring were major contributors to revenue and margin growth across the Rubicon portfolio. Other portfolio brands, including Barr Flavours, KA and Simply Fruity, grew revenue and margin. The Strathmore Water brand grew volume and revenue as the hospitality sector reopened, although margin was constrained by significant inflation in glass costs.
Funkin
Funkin revenue and gross margin both grew strongly in 2021/22, benefitting from the reopening of the hospitality sector and the continued success of the take home business, which maintained momentum across the full period, building on the strong foundations laid in the prior year. Funkin revenue more than doubled the prior year up £19.9m to £36.9m, with margin up 396 basis points at 39.8%. This strong performance was delivered despite industry-wide supply chain challenges, including the shortage of cans which somewhat constrained overall growth opportunities. As previously communicated, Funkin did benefit from the restocking of the hospitality sector, particularly in the first half of the financial year.
Other
The 'Other' segment primarily represents two months of sales and contribution associated with MOMA Foods Limited following the Group's investment in a c.61.8% equity stake in December 2021.
OPERATING MARGIN
At a Group level, our marketing spend grew ahead of sales as we increased investment behind our core growth driving brands, IRN-BRU, Rubicon and Funkin. Other operating costs increased year-on-year as the business began to return to more normal working practices and as inflationary cost pressures were experienced in areas such as logistics. Our strong trading performance and cost controls more than offset these cost pressures, enabling operating margin before exceptional items to expand 83bps to 15.6%.
EXCEPTIONAL ITEMS
In the year ended 30 January 2022, we have recognised, and have separately disclosed, a £0.7m gain on the sale of our Sheffield site, which closed in 2020. Although not material in size or nature if taken in isolation, the site disposal was part of a Group-wide re-engineering programme, the costs of which were considered to be non-recurring and exceptional in nature and were reported as exceptional in 2020/21. As such, it is considered appropriate to take the associated gain as exceptional in 2021/22.
INTEREST
Net finance charges, totalling £0.4m, comprise the service fees associated with the Group's revolving credit facilities, lease interest costs under IFRS 16 and notional finance costs associated with the defined benefit pension deficit under IAS 19.
TAXATION
Our reported tax expense of £14.4m (2020/21: £6.9m) represents an effective tax rate of 34.1% (2020/21: 26.8%). This is higher than the UK statutory rate of 19.0%, primarily due to the impact of the change in corporation tax rate from 19% to 25% on deferred tax which has increased the deferred tax liability by £5.7m. Excluding the impact of the increase in rate for deferred tax, the effective tax rate would be c.21%.
The prior year tax charge and effective tax rate of 26.8% were significantly higher primarily due to a one-off revaluation of deferred tax balances, following the UK Government decision to reverse the planned reduction in UK corporation tax rate from 19% to 17% as well as non-deductible elements within our 2020/21 exceptionals items.
EARNINGS PER SHARE (EPS)
Basic EPS, before exceptionals, was 24.46p (2020/21: 22.31p), an increase of 9.7%, based on a basic weighted average of 111,187,778 shares (2020/21: 111,171,047). This reflects the strong profit performance offset by the increased tax charge as detailed above. Basic EPS post exceptionals was 25.09p (2020/21: 17.18p), an increase of 46.1%. Based on a diluted weighted average of 111,844,852 shares, diluted EPS was 24.95p (2020/21: 17.16p).
DIVIDENDS
In March 2020 the Board took the decision to temporarily suspend dividend payments, with the aim of protecting liquidity at the onset of the Covid-19 pandemic. In September 2021 the Group communicated its intention to resume dividend payments with the announcement 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 were not part of normal trading. The resumption of dividends after the Covid-19 related pause in 2020/2021 reflects the Board's confidence in the Group's financial resilience and future growth prospects.
The Group's dividend policy aims to deliver a progressive and sustainable dividend to shareholders that has regard to current performance trends including sales, profit after tax and cash, and satisfies certain guiding principles :
· Dividend cover: targeting 2 times cover
· Payout ratio: targeting 50% of free cash flow
· Consistent with medium-term profit outlook
For the period ended 30 January 2022 dividend cover was 2 times. The recommended final dividend for the period, to be put to the shareholders for approval at the Annual General Meeting is 10.0 pence. This will bring the full year dividend to 12.0 pence per share. Subject to approval by shareholders, the final dividend will be paid to holders of ordinary shares on the register as of 12 May 2022 with an ex-dividend date of 10 June 2022.
BALANCE SHEET AND CASH FLOW
We entered the pandemic with a strong balance sheet and significant liquidity, and we exit the year in a stronger financial position.
The balance sheet has further strengthened on the back of the strong trading performance with £68.4m net cash at bank* as of 30 January 2022. This is a £18.4m increase on the prior year after the payment of total shareholder dividends of £13.4m and the MOMA investment.
The total asset base has increased £34.2m to £336.3m, reflecting the MOMA investment, including the future contingent consideration, the increased cash position and higher working capital.
Working capital has increased as a result of the underlying growth in trading, an element of receivables phasing given year end timing and a conscious effort to rebuild our inventory base of both finished goods and raw materials to provide increased resilience across the supply chain. Year end payables and accruals have increased £16.7m reflecting the reintroduction of employee incentives, the consolidation of MOMA and an element for marketing and trade investment phasing.
We remain committed to a well-invested asset base and continue to invest in our manufacturing infrastructure. At £5.8m (2020/21: £5.9m), our capital additions reflect a year when we experienced both longer equipment lead times and the effect of restrictions on our operations. Our multi-year process facility replacement programme at Cumbernauld was completed on budget and is now fully operational. During the year we also took the decision to increase our canning capacity and capability in our Milton Keynes site. Equipment deposits are included in the 2021/22 capital spend with the capacity due to come on-stream in Quarter 1 2023.
The strong trading and profit performance, alongside an abnormally low capital spend and lower pension deficit resulted in a return on capital employed (ROCE), increasing from 16.0% in 2020/21 to 19.6% in 2021/22.
INVESTMENT IN MOMA FOODS LIMITED
On 6 December 2021 the Group completed a 61.8% equity investment in MOMA Foods Limited (MOMA) for a total consideration of £6.2m in cash. At the same time, the Group and the vendor entered into a put/call agreement whereby the Group and the vendor have the right to sell/buy the remaining 38.2% shareholding to the other party in three tranches over the next three years. This provides AG Barr with a path to full ownership by the end of financial year 2024/25. The call options have no value for accounting purposes. However, the put options are required to be valued and booked on the balance sheet. Accordingly a liability of £5.0m has been recognised at the period end, recorded at the present value of the estimated redemption value, using forecast revenue and earnings of MOMA. Under this basis, for the 2021/22 financial year MOMA has an investment valuation of £10.0m, contributed £1.1m to revenue and had an immaterial impact on profit. A non- controlling interest in equity of £3.8m has been recognised in respect of this acquisition.
INVESTMENT IN ASSOCIATE - ELEGANTLY SPIRITED LIMITED (STRYKK BRAND)
In June 2019, the Group made a 20% minority equity investment in Elegantly Spirited Limited (ESL), a business start-up in the emerging zero proof spirits market, and the owner of the STRYKK brand, a range of zero proof spirits products. During the financial year 2020/21 the Group exercised its right to participate in further ESL funding through a £1m convertible loan note.
The Covid-19 related challenges in the hospitality sector resulted in the STRYKK brand temporarily refocusing its strategy from the on-premise to the grocery channel. The retail market for zero proof spirits is becoming increasingly competitive however the reopening of the hospitality sector is expected to allow the STRYYK brand to develop further in the coming year.
ESL is recognised as an associate, with the investment accounted for under the equity method of accounting. The investment was originally recognised at the transaction investment price (£1.0m) and subsequently adjusted to reflect the Group's share of the loss since our investment (£0.3m). The Loan note (£1.0m) has been recognised on the balance sheet under loans and receivables. The Group has the right, but not the obligation, to participate in future equity funding initiated by ESL.
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. 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 the Group's risk appetite, and updates to risks and mitigation plans are made as required. During the year the business undertook several dynamic risk assessments to ensure rapid and appropriate responses to the evolving Covid-19 pandemic as well as the impact of supply chain disruption and inflationary pressures on our operations. 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, 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 improve certainty.
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 30 January 2022, in addition to the Group's cash position, the Group had £30m of committed and unutilised debt facilities, consisting of two revolving credit facilities with two individual banks, providing the business with a secure funding platform. These facilities are continually reviewed to ensure they remain appropriate in terms of quantum, duration and cost effectiveness. One of these facilities (£10m) expires in April 2023 and the other (£20m) expires in February 2026. The ongoing facilities provide security and optionality, should debt capacity be required to facilitate corporate opportunities.
ACCOUNTING POLICIES
The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) 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 to new executive entrants since 14 August 2003) 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 Covid-19 crisis. 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 has been submitted to the Pension Regulator for approval. A deficit reduction payment of £1.0m was made to the defined benefit pension scheme in May 2021. 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 asset back funding arrangement, the deficit reduced from £7.9m as at 24 January 2021 to £1.0m as at the balance sheet date. The reduction in the net deficit is attributable to the favourable discount rate change, due to the increase in returns from corporate bonds used to calculate the discount rates on the liabilities of the post employment plans (from 1.4% to 2.2%) and cash contributions, £2.4m, made by the company partially offset by the change in inflation rate assumptions (from 2.9% to 3.6%). Total cash contributions by the group to all post employment plans in the year ending 30 January 2022 were £4.0m.
The Group continues to work proactively with the Pension Trustee to de-risk the pension liabilities and secure the commitments to employee benefits as part of the Group's ongoing strategic risk management. The Group remains of the view that the overall pension deficit is manageable.
Having delivered a strong recovery in both top and bottom line performance, the business is in a strong financial position and well placed to build on its positive momentum.
Stuart Lorimer
FINANCE DIRECTOR
29 March 2022
Note : The Group utilises a range of financial and non-financial performance indicators to manage and report on the business. Financial metrics marked with an asterisk are non-GAAP measures. Definitions and relevant reconciliations are provided later in this announcement.
|
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JANUARY 2022 |
||||||
|
|
|
|
|
|
|
|
|
|
2022 |
2021 |
||||
|
|
Before exceptional items |
Exceptional items* |
Total |
Before exceptional items |
Exceptional items* |
Total |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
Revenue |
268.6 |
- |
268.6 |
227.0 |
- |
227.0 |
|
Cost of sales |
(150.0) |
- |
(150.0) |
(132.2) |
(1.2) |
(133.4) |
|
Gross profit |
118.6 |
- |
118.6 |
94.8 |
(1.2) |
93.6 |
|
|
|
|
|
|
|
|
|
Other income |
- |
0.7 |
0.7 |
- |
7.6 |
7.6 |
|
Operating expenses |
(76.6) |
- |
(76.6) |
(61.2) |
(13.2) |
(74.4) |
|
Operating profit |
42.0 |
0.7 |
42.7 |
33.6 |
(6.8) |
26.8 |
|
Finance costs |
(0.4) |
- |
(0.4) |
(0.7) |
- |
(0.7) |
|
Share of after tax results of associates |
(0.1) |
- |
(0.1) |
(0.1) |
- |
(0.1) |
|
|
|
|
|
|
|
|
|
Profit before tax |
41.5 |
0.7 |
42.2 |
32.8 |
(6.8) |
26.0 |
|
Tax on profit |
(14.4) |
- |
(14.4) |
(8.0) |
1.1 |
(6.9) |
|
|
|
|
|
|
|
|
|
Profit for the year |
27.1 |
0.7 |
27.8 |
24.8 |
(5.7) |
19.1 |
|
|
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
|
Equity shareholders of the Company |
27.2 |
0.7 |
27.9 |
24.8 |
(5.7) |
19.1 |
|
Non-controlling interests |
(0.1) |
- |
(0.1) |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Earnings per share (pence) |
|
|
|
|||
|
Basic earnings per share |
25.09 |
|
|
17.18 |
||
|
Diluted earnings per share |
24.95 |
|
|
17.16 |
||
|
Basic earnings per share before exceptional items |
24.46 |
|
|
22.31 |
||
STATEMENT OF FINANCIAL POSITION AS AT 30 JANUARY 2022 | ||
|
|
|
| 2022 | 2021 |
| £m | £m |
Non-current assets |
|
|
Intangible assets | 98.6 | 90.5 |
Property, plant and equipment | 93.8 | 96.4 |
Right-of-use assets | 4.2 | 2.5 |
Loans and receivables | 1.5 | 1.0 |
Investment in associates | 0.7 | 0.8 |
| 198.8 | 191.2 |
Current assets |
|
|
Inventories | 24.2 | 19.3 |
Trade and other receivables | 44.3 | 37.6 |
Assets classified as held for sale | - | 0.4 |
Current tax asset | 0.3 | 0.7 |
Cash and cash equivalents | 68.7 | 52.9 |
| 137.5 | 110.9 |
|
|
|
Total assets | 336.3 | 302.1 |
Current liabilities |
|
|
Loans and other borrowings | 0.3 | 2.9 |
Trade and other payables | 54.0 | 43.4 |
Derivative financial instruments | 0.2 | 0.1 |
Lease liabilities | 1.3 | 1.1 |
Provisions | 2.0 | 1.9 |
| 57.8 | 49.4 |
Non-current liabilities |
|
|
Deferred tax liabilities | 21.5 | 14.6 |
Lease liabilities | 2.8 | 1.4 |
Put liability | 5.0 | - |
Retirement benefit obligations | 1.0 | 7.9 |
| 30.3 | 23.9 |
Capital and reserves | ||
Share capital | 4.7 | 4.7 |
Share premium account | 0.9 | 0.9 |
Share options reserve | 1.6 | 1.8 |
Other reserves | (5.1) | (0.2) |
Retained earnings | 242.4 | 221.6 |
Total shareholders equity | 244.5 | 228.8 |
Non-controlling interest in equity | 3.7 | - |
| 248.2 | 228.8 |
|
|
|
Total equity and liabilities | 336.3 | 302.1 |
|
|
|
|
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JANUARY 2022 |
||
|
|
|
|
|
|
2022 |
2021 |
|
|
£m |
£m |
|
Profit for the year |
27.8 |
19.1 |
|
Other comprehensive income |
|
|
|
Items that will not be reclassified to profit or loss |
|
|
|
Remeasurements on defined benefit pension plans |
4.7 |
0.6 |
|
Deferred tax movements on items above |
(1.2) |
(0.1) |
|
Deferred tax remeasurement for movement in tax rate
|
1.5 |
0.5 |
|
Items that will be or have been reclassified to profit or loss |
|
|
|
Cash flow hedges: |
|
|
|
Losses arising during the period |
0.1 |
- |
|
Deferred tax movements on items above |
- |
- |
|
Other comprehensive income for the year, net of tax |
5.1 |
1.0 |
|
|
|
|
|
Total comprehensive income for the year |
32.9 |
20.1 |
|
|
|
|
|
Attributable to: |
|
|
|
Equity shareholders of the parent Company |
33.0 |
20.1 |
|
Non-controlling interests |
(0.1) |
- |
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JANUARY 2022 | ||||||||
|
|
|
|
|
|
|
|
|
| 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 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 |
|
|
|
|
|
|
|
|
|
At 25 January 2020 | 4.7 | 0.9 | 1.4 | - | 201.3 | 208.3 | - | 208.3 |
|
|
|
|
|
|
|
|
|
Profit for the year | - | - | - | - | 19.1 | 19.1 | - | 19.1 |
Other comprehensive income | - | - | - | - | 1.0 | 1.0 | - | 1.0 |
Total comprehensive income for the year | - | - | - | - | 20.1 | 20.1 | - | 20.1 |
|
|
|
|
|
|
|
|
|
Company shares purchased for use by employee benefit trusts | - | - | - | - | (0.1) | (0.1) | - | (0.1) |
Recognition of share-based payment costs | - | - | 0.7 | - | - | 0.7 | - | 0.7 |
Transfer of reserve on share award | - | - | (0.1) | - | 0.1 | - |
| - |
Deferred tax on items taken direct to reserves | - | - | (0.2) | - | - | (0.2) | - | (0.2) |
Reallocation between reserves | - | - | - | (0.2) | 0.2 | - | - | - |
At 24 January 2021 | 4.7 | 0.9 | 1.8 | (0.2) | 221.6 | 228.8 | - | 228.8 |
|
Cash Flow Statements for the year ended 30 January 2022 |
||
|
|
2022 |
2021 |
|
|
£m |
£m |
|
Operating activities |
|
|
|
Profit before tax |
42.2 |
26.0 |
|
Adjustments for: |
|
|
|
Interest payable |
0.4 |
0.7 |
|
Depreciation of property, plant and equipment |
9.9 |
11.8 |
|
Amortisation of intangible assets |
1.3 |
1.1 |
|
Share-based payment costs |
1.2 |
0.7 |
|
Share of results in associates |
0.1 |
0.1 |
|
Impairment of Strathmore brand |
- |
7.0 |
|
Impairment of Strathmore goodwill |
- |
1.9 |
|
Impairment of Strathmore property, plant and equipment |
- |
1.1 |
|
Funkin goodwill adjustment |
- |
1.3 |
|
Gain on sale of property, plant and equipment and available for sale assets |
(0.7) |
- |
|
Operating cash flows before movements in working capital |
54.4 |
51.7 |
|
|
|
|
|
Increase in inventories |
(4.3) |
(1.2) |
|
(Increase)/decrease in receivables |
(5.6) |
19.8 |
|
Increase/(decrease) in payables |
7.7 |
(7.1) |
|
Difference between employer pension contributions and amounts recognised in the income statement |
(2.3) |
(2.2) |
|
Cash generated by operations |
49.9 |
61.0 |
|
|
|
|
|
Tax paid |
(6.5) |
(10.3) |
|
Net cash from operating activities |
43.4 |
50.7 |
|
|
|
|
|
Investing activities |
|
|
|
Acquisition of subsidiary (net of cash acquired) |
(5.1) |
- |
|
Loan to associate |
- |
(1.0) |
|
Purchase of property, plant and equipment |
(5.0) |
(7.1) |
|
Proceeds on sale of property, plant and equipment and assets held for sale |
1.1 |
0.1 |
|
Net cash used in investing activities |
(9.0) |
(8.0) |
|
|
|
|
|
Financing activities |
|
|
|
New loans received |
- |
60.0 |
|
Loans receivable |
(0.5) |
- |
|
Loans repaid |
- |
(60.0) |
|
Lease payments |
(1.5) |
(3.2) |
|
Purchase of Company shares by employee benefit trusts |
(0.2) |
(0.1) |
|
Dividends paid |
(13.4) |
- |
|
Interest paid |
(0.1) |
(0.3) |
|
Net cash used in financing activities |
(15.7) |
(3.6) |
|
|
|
|
|
Net increase in cash and cash equivalents |
18.7 |
39.1 |
|
|
|
|
|
Cash and cash equivalents at beginning of year |
50.0 |
10.9 |
|
Cash and cash equivalents at end of year |
68.7 |
50.0 |
|
|
|
|
|
Cash and cash equivalents per the cash flow statement above comprises cash and cash equivalents per the statement of financial position of £52.9m, net of bank overdrafts of £2.9m for the year ended 24 January 2021. |
||
1. General information
A.G. BARR p.l.c. (the "Company") and its subsidiaries (together the "Group") manufacture, distribute and sell soft drinks and cocktail solutions. 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 53 weeks ended 30 January 2022 (prior financial year 52 weeks ended 24 January 2021).
Basis of preparation
The financial information for the year ended 30 January 2022 contained in this news release was approved by the Board on 29 March 2022. 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) 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 25 January 2021. 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 24 January 2021 have been delivered to the Registrar of Companies. Statutory financial statements for the year ended 30 January 2022, 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 severe but plausible downside scenarios that could impact the business (both individually and cumulatively). The assessment scenarios included 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. In addition, potential financial impacts from climate change were assessed, consistent with our Task Force on Climate-related Financial Disclosures.
The directors' 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 30 January 2022, the consolidated balance sheet reflects a net asset position of £248.2m, including net cash at bank of £68.4m. The Group has £30m of committed and unutilised debt facilities, consisting of two revolving credit facilities with two individual banks, providing the business with a secure funding platform. One of these facilities (£10m) expires in April 2023, with the other (£20m) expiring in February 2026. Throughout these severe but plausible downside scenarios, the Group continues to have significant liquidity headroom on existing facilities and against the revolving credit facilities financial 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:
· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
· IFRIC Agenda Paper 7 - Customer's Right to Receive Access to the Supplier's Software Hosted on the Cloud (IAS 38 Intangible Assets)
· IFRS Agenda Paper 2 - Configuration or Customisation Costs in a Cloud Computing Arrangement (IAS 38 Intangible Assets)
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 31 January 2022 and not adopted early
A number of new standards and amendments to standards and interpretations are effective for future year ends, and have not been applied in preparing these financial statements. These standards and amendments are listed in the table below:
International Accounting Standards and Interpretation
· FRS 17 Insurance contracts
· Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
· Amendments to IAS 1 Classification of Liabilities as Current or Non-current
· Amendments to IFRS 3 Reference to Conceptual Framework
· Amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use
· Amendments to IAS 37 Onerous Contracts - Costs of Fulfilling a Contract
· Annual Improvements to IFRS Standards 2018 - 2020 Cycle
· Amendments to IFRS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies
· Amendments to IAS 8 Definition of Accounting Estimates
There are no new or revised IFRS, amendments or interpretations in issue but not yet effective that are potentially material for the Group and that have not yet been applied.
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2. Segment reporting |
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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 their reference to their gross profit before exceptional items. During the year ended 30 January 2022, the Group has amended the composition of reportable segments to better reflect internal reporting. Accordingly, the Group has restated the previously reported segment information for the year ended 24 January 2021. |
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Year ended 30 January 2022 |
|||||
|
|
Soft drinks |
Cocktail solutions |
Other |
Total |
|
|
|
£m |
£m |
£m |
£m |
|
|
Total revenue |
230.6 |
36.9 |
1.1 |
268.6 |
|
|
Gross profit |
103.5 |
14.7 |
0.4 |
118.6 |
|
|
|
|
|
|
|
|
|
Year ended 24 January 2021 restated |
|||||
|
|
Soft drinks |
Cocktail solutions |
Other |
Total |
|
|
|
£m |
£m |
£m |
£m |
|
|
Total revenue |
210.0 |
17.0 |
- |
227.0 |
|
|
Gross profit |
88.7 |
6.1 |
- |
94.8 |
|
|
|
|
|
|
|
|
|
There are no material intersegment sales. All revenue is in relation to product sales, which is recognised at point in time, upon delivery to the customer. The gross profit before exceptional items from the segment reporting is reconciled to the total profit before income tax, as shown in the consolidated income statement. |
|||||
|
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 £51.5m, which arose from sales to the Group's largest customer (2021: £45.6m). No other single customers contributed 10% or more to the Group's revenue in either 2021 or 2022. |
|||||
|
|
|
|
|
|
|
|
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. |
|||||
|
|
2022 |
|
|
2021 |
|
|
Revenue |
£m |
|
|
£m |
|
|
UK |
257.3 |
|
|
219.0 |
|
|
Rest of the world |
11.3 |
|
|
8.0 |
|
|
|
268.6 |
|
|
227.0 |
|
|
|
|
|
|
|
|
|
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. |
|||||
|
|
|||||||
|
Taxation |
|||||||
|
|
|
|
|
|
|
|
|
|
|
2022 |
2021 |
|||||
|
|
Before exceptional items |
Exceptional items |
Total |
Before exceptional items |
Exceptional items |
Total |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
|
Charge / (credit) to the income statement |
|
|
|
|
|
|
|
|
Current tax on profits for the year |
7.1 |
- |
7.1 |
6.4 |
0.8 |
7.2 |
|
|
Adjustments in respect of prior years |
(0.3) |
- |
(0.3) |
(0.5) |
- |
(0.5) |
|
|
Total current tax expense |
6.8 |
- |
6.8 |
5.9 |
0.8 |
6.7 |
|
|
Deferred tax |
|
|
|
|
|
|
|
|
Origination and reversal of: |
|
|
|
|
|
|
|
|
Temporary differences |
1.3 |
- |
1.3 |
0.1 |
(1.9) |
(1.8) |
|
|
Adjustment for change in corporation tax rate |
5.7 |
- |
5.7 |
2.2 |
- |
2.2 |
|
|
Adjustments in respect of prior years |
0.6 |
- |
0.6 |
(0.2) |
- |
(0.2) |
|
|
Total deferred tax expense |
7.6 |
- |
7.6 |
2.1 |
(1.9) |
0.2 |
|
|
|
|
|
|
|
|
|
|
|
Total tax expense / (credit) |
14.4 |
- |
14.4 |
8.0 |
(1.1) |
6.9 |
|
|
|
|
|
|
|
|
|
|
|
In addition to the above movements in deferred tax, a deferred tax credit of £0.3m (2021: credit of £0.4m) has been recognised in other comprehensive income and a credit of £0.4m (2021: debit of £0.2m) has been taken direct to reserves. |
|||||||
|
|
|
|
|
|
|
|
|
|
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: |
|||||||
|
|
|
|
2022 |
2022 |
2021 |
2021 |
|
|
|
|
|
£m |
% |
£m |
% |
|
|
Profit before tax |
42.2 |
|
26.0 |
|
|||
|
|
|
|
|
|
|
|
|
|
Tax at 19.0% (2021: 19.0%) |
8.0 |
19.0 |
4.9 |
19.0 |
|||
|
Tax effects of: |
|
|
|
|
|||
|
Items that are not deductible in determining taxable profit |
0.4 |
0.9 |
0.6 |
2.3 |
|||
|
Current tax adjustment in respect of prior years |
(0.3) |
(0.7) |
(0.5) |
(1.9) |
|||
|
Deferred tax adjustment in respect of prior years |
0.6 |
1.4 |
(0.2) |
(0.8) |
|||
|
Deferred tax adjustment in respect of change in corporation tax rates |
|
|
5.7 |
13.5 |
2.2 |
8.5 |
|
|
Other differences |
- |
- |
(0.1) |
(0.3) |
|||
|
Total tax expense |
|
|
14.4 |
34.1 |
6.9 |
26.8 |
|
|
|
|
|
|
|
|
|
|
|
The weighted average tax rate was 34.1% (2021: 26.8%). |
|||||||
|
|
|
|
|
|
|
|
|
|
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. |
|||||||
Dividends | ||||||
|
|
|
|
|
|
|
In April 2020, given the unprecedented circumstances arising from Covid-19, we communicated our decision to temporarily suspend dividend payments, one of a number of important actions we took to conserve cash and maintain balance sheet flexibility. As a result, no dividends were paid or declared in the year ended 24 January 2021. | ||||||
|
|
|
|
|
|
|
As reported in the Annual Report and Accounts for the year ended 24 January 2021, the Board indicated their intention to recommence dividend payments during the course of the current year. | ||||||
|
|
|
|
|
|
|
An interim dividend of 2.0p per share was approved by the Board on 28 September 2021. In addition, 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. These dividends were paid on 29 October 2021 to shareholders on the Register of Members as of 8 October 2021. | ||||||
|
|
|
|
|
|
|
The directors have proposed a final dividend in respect of the year ended 30 January 2022 of 10.0p per share. Subject to approval by shareholders it will be paid on 10 June 2022 to shareholders on the Register of Members on 13 May 2022. | ||||||
|
|
|
|
|
|
|
Dividends paid in the financial year were as follows: | ||||||
| 2022 |
| 2021 |
| 2022 | 2021 |
| per share |
| per share |
| £m | £m |
|
|
|
|
|
|
|
Final dividend | - p |
| - |
| - | - |
Interim dividend | 2.00 p |
| - |
| 2.2 | - |
Special dividend | 10.00 p |
| - |
| 11.2 | - |
| 12.00 p |
| - |
| 13.4 | - |
|
|
|
|
|
|
|
Dividends payable in respect of the financial year were as follows: | ||||||
| 2022 |
| 2021 |
|
|
|
| per share |
| per share |
|
|
|
Interim dividend | 2.00 p |
| - |
|
|
|
Special dividend | 10.00 p |
| - |
|
|
|
Final dividend | 10.00 p |
| - |
|
|
|
| 22.00 p |
| - |
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries | |||
|
| 2022 | 2021 |
|
| £m | £m |
Opening investment in subsidiaries | 84.1 | 84.1 | |
Investments made in the year | 6.2 | - | |
|
|
|
|
Closing investment in subsidiaries | 90.3 | 84.1 | |
|
|
|
|
On 6 December 2021, the Group acquired 61.8% of the shares and voting interests in MOMA Foods Limited (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. | |||
|
|
|
|
For the two months ended 30 January 2022, MOMA contributed revenue of £1.1m and had an immaterial impact on profit. Had MOMA been a subsidiary for the full financial year, it would have contributed c. £6m revenue to the Group and it would have broadly broken even on profit. | |||
|
|
|
|
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. The put option is exercisable in June 2025 and the call options are exercisable in two tranches from 2024 to 2025. The exercise prices are derived from a multiple of future earnings. The Group has recognised non-controlling interests for the remaining shares because the interests subject to the put and call options are not deemed to have been acquired upon acquisition. Accordingly, the financial liability arising from the put option has not been included in the consideration transferred and is accounted for separately, with a corresponding entry recorded in equity. | |||
|
|
|
|
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%. | |||
|
|
|
|
Acquisition-related costs | |||
The Group incurred acquisition-related costs of £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. | |||
|
|
|
|
During the year to 24 January 2021, the following dormant subsidiary company was dissolved: | |||
|
|
|
|
Taut (UK) Limited | |||
|
|
|
|
During the year to 24 January 2021, a new subsidiary was formed in the Republic of Ireland being A.G. Barr (Ireland) Limited, in which the Company has a 1 Euro investment. | |||
|
|
|
|
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 | USA |
Rubicon Drinks Limited | Manufacture, distribution and selling of soft drinks | England | UK |
MOMA Foods Limited | Distribution and selling of plant-based milk | England | UK |
|
|
|
|
A.G. BARR p.l.c. holds 100% of the equity and votes of the subsidiaries with the exception of MOMA noted above. The subsidiaries have the same year end as A.G. Barr p.l.c. with the exception of MOMA with a 31 December 2021 year end, and have been included in the Group consolidation. The companies listed are the trading subsidiaries. | |||
|
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: |
|||||||
|
|
|
|
|
|
|
|
|
|
Capital expenditure is a non-GAAP measure and is defined as the cash purchases of property, plant and equipment, and is disclosed in the consolidated cash flow statement. |
|||||||
|
|
|
|
|
|
|
|
|
|
EBITDA is a non-GAAP measure and is defined as operating profit before exceptional items, depreciation and amortisation. |
|||||||
|
|
|
|
|
|
|
|
|
|
EBITDA margi n is a non-GAAP measure and is calculated as EBITDA divided by revenue. |
|||||||
|
|
|
|
|
|
|
|
|
|
Basic earnings per share before exceptional item s is a non-GAAP measure calculated by dividing profit attributable to equity holders before exceptional items by the weighted average number of shares in issue. |
|||||||
|
|
|
|
|
|
|
|
|
|
Expansionary capex is a non-GAAP measure and is defined as the purchase of property, plant and equipment that is not the normal replacement of property, plant and equipment that has come to the end of its useful life. Maintenance capex is a non-GAAP measure and is defined as the purchase of property, plant and equipment that is the normal replacement of property, plant and equipment that has come to the end of its useful life. Expansionary capex and maintenance capex add together to the value of purchase of property, plant and equipment that appears in the consolidated cash flow statement. |
|||||||
|
|
|
|
|
|
|
|
|
|
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, expansionary capex, the net cash flow on the purchase and sale of shares by employee benefit trusts, dividend payments and non-cash exceptional items. |
|||||||
|
|
|
|
|
|
|
|
|
|
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. |
|||||||
|
|
|
|
|
|
|
|
|
|
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 and loans and other borrowings as shown in the statement of financial position. |
|||||||
|
|
|
|
|
|
|
|
|
|
Net fun ds is a non-GAAP measure and is defined as cash and cash equivalents less lease liabilities. |
|||||||
|
|
|
|
|
|
|
|
|
|
Operating margi n is a non-GAAP measure calculated by dividing operating profit by revenue. |
|||||||
|
|
|
|
|
|
|
|
|
|
Operating margin before exceptional items is a non-GAAP measure calculated by dividing operating profit before exceptional items by revenue. |
|||||||
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional item s is a non-GAAP measure calculated as operating profit less any exceptional items. This figure appears on the income statement. |
|||||||
|
|
|
|
|
|
|
|
|
|
Profit before tax and exceptional item s is a non-GAAP measure calculated as profit before tax less any exceptional items. This figure appears on the income statement. |
|||||||
|
|
|
|
|
|
|
|
|
|
Revenue growth is a non-GAAP measure calculated as the difference in revenue between two reporting periods divided by the revenue of the earlier reporting period. |
|||||||
|
|
|
|
|
|
|
|
|
|
Return on capital employed (ROCE) is a non-GAAP measure and is defined as profit before tax and exceptional items 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. |
|||||||
|
Reconciliation of non-GAAP measures |
||
|
|
|
|
|
Gross margin |
2022 |
2021 |
|
Revenue |
268.6 |
227.0 |
|
Reported gross profit |
118.6 |
93.6 |
|
Gross margin |
44.2% |
41.2% |
|
|
|
|
|
Gross margin before exceptional items |
2022 |
2021 |
|
Revenue |
268.6 |
227.0 |
|
Gross profit before exceptional items |
118.6 |
94.8 |
|
Gross margin before exceptional items |
44.2% |
41.8% |
|
|
|
|
|
Operating margin |
2022 |
2021 |
|
Revenue |
268.6 |
227.0 |
|
Reported operating profit |
42.7 |
26.8 |
|
Operating margin |
15.9% |
11.8% |
|
|
|
|
|
Operating margin before exceptional items |
2022 |
2021 |
|
Revenue |
268.6 |
227.0 |
|
Operating profit before exceptional items |
42.0 |
33.6 |
|
Operating margin before exceptional items |
15.6% |
14.8% |
|
|
|
|
|
EBITDA |
2022 |
2021 |
|
Operating profit before exceptional items |
42.0 |
33.6 |
|
Depreciation and amortisation |
11.2 |
12.9 |
|
EBITDA |
53.2 |
46.5 |
|
|
|
|
|
EBITDA margin |
2022 |
2021 |
|
Revenue |
268.6 |
227.0 |
|
EBITDA |
53.2 |
46.5 |
|
EBITDA margin |
19.8% |
20.5% |
|
|
|
|
|
Full year dividend |
2022 |
2021 |
|
Interim dividend paid |
2.0 |
- |
|
Final dividend declared |
10.0 |
- |
|
Full year dividend |
12.0 |
- |
|
|
|
|
|
Expansionary capex |
2022 |
2021 |
|
Expansionary capex |
2.5 |
0.3 |
|
Maintenance capex |
2.7 |
6.8 |
|
Capex per cash flow statement |
5.2 |
7.1 |
|
|
|
|
|
Net cash at bank |
2022 |
2021 |
|
Cash and cash equivalents |
68.7 |
52.9 |
|
Loans and other borrowings |
(0.3) |
(2.9) |
|
Net cash at bank |
68.4 |
50.0 |
|
|
|
|
|
ROCE |
2022 |
2021 |
|
Profit before tax |
42.2 |
26.0 |
|
Exceptional items |
(0.7) |
6.8 |
|
Profit before tax and exceptional items |
41.5 |
32.8 |
|
Intangible assets |
98.6 |
90.5 |
|
Property, plant and equipment |
93.8 |
96.4 |
|
Right-of-use assets |
4.2 |
2.5 |
|
Investment in associates |
0.7 |
0.8 |
|
Inventories |
24.2 |
19.3 |
|
Trade and other receivables |
44.3 |
37.6 |
|
Asset held for sale |
- |
0.4 |
|
Current tax |
0.3 |
0.7 |
|
Trade and other payables |
(54.0) |
(43.4) |
|
Invested capital |
212.1 |
204.8 |
|
ROCE |
19.6% |
16.0% |
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