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Barr(A.G.) PLC (BAG)

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Wednesday 08 April, 2020

Barr(A.G.) PLC

Final Results

RNS Number : 1333J
Barr(A.G.) PLC
08 April 2020
 

 8 April 2020

 

 

A.G. BARR p.l.c.
 

FINAL RESULTS for the year ended 25 January 2020

 

 

 

A.G. BARR p.l.c., ("A.G. BARR" or the "Group"), which produces and markets some of the UK's leading drinks brands, including IRN-BRU, Rubicon, Strathmore and Funkin, announces its final results for the 52 weeks ended 25 January 2020.

 

Financial headlines

 


 

Operational review - year ended 25 January 2020

Strategic focus maintained against challenging prior year comparators

 

Decisive response including a business re-engineering and simplification programme

 

IRN-BRU returned to growth in the final quarter and Rubicon and Rockstar recovery plans being implemented

 

Funkin continued to perform strongly and multi-beverage strategy progressed :

○ introduction of Funkin ready-to-drink cocktails including alcohol

○ investment in the zero proof spirits sector through our 20% minority investment in Elegantly Spirited Limited, owners of the STRYYK brand

 

Further action taken to progress our responsibility and sustainability commitments including :

○ increased use of recycled PET in soft drinks portfolio

○ continued engagement with Scottish DRS project

○ new 10-year 100% renewable electricity agreement for all sites

 

Strong cash generation - £30m share repurchase programme completed during the period and a robust balance sheet

 

COVID-19


The circumstances resulting from COVID-19 are creating an unprecedented level of uncertainty for the UK and beyond.  We have been following Government guidance since the outset of the COVID-19 outbreak and will continue to do so. 

 

In response we are taking swift action across 3 priority areas:

 

safety and wellbeing

Groupoperating resilience

financial stability

 

Our primary focus is on the safety and wellbeing of our employees, suppliers, customers and consumers.  We have taken steps to protect our colleagues who are considered most vulnerable across the organisation.  In addition, those employees whose roles permit them to do so, are working from home.  For our colleagues who work in key production, warehousing and delivery roles, we have introduced strict safety, hygiene and 2 metre social distancing measures.

 

Along with our fellow food and drink manufacturers we are working closely with the Government, and DEFRA in particular, to maintain continuity of the food and drink supply chain, helping to keep shop shelves well stocked. 


Our production and logistics sites currently remain operational and we are extremely grateful to our dedicated supply chain employees and partners.

 

Following the Government's 'lock-down' measures, introduced on 23 March, which initially saw the closure of pubs, bars and other hospitality venues across the UK, we are now understandably also seeing a significant impact on the "out of home" consumption of soft drinks in general.  Sales via our "impulse" customers (c.40% of total revenue) have significantly reduced as a result.  'Take-home' purchases have remained more resilient although sales since 23 March have been more volatile than usual.  As a result, we expect there to be a material adverse impact to the Group's financial performance due to these fast changing circumstances, however at the current time the quantum of this remains uncertain.

 

The Group has a strong financial base and our balance sheet is robust, with net cash in the bank of £10.9m at the financial year end, however given the highly unusual circumstances arising from COVID-19, we believe it is important to conserve cash at this time and maintain maximum balance sheet flexibility.  We have drawn down our £60m revolving credit facilities in full.  In addition, we have now frozen all new capital projects, as well as scaling back immediate marketing and commercial activity where sensible across the Group.  In accordance with the Government's Job Retention Scheme, we have commenced the "furlough" process for a limited number of colleagues at this stage.  In addition the Board and Senior Executive team have agreed to a voluntary 20% salary reduction for a minimum of 3 months to help support the business through these difficult times.  We continue to take a prudent and vigilant approach to all working capital to minimise risk in the current climate.

The Board is not proposing a final dividend at this time, and will review the dividend position when there is greater visibility of the impact of COVID-19.


Annual General Meeting

As a result of the requirements of the UK and Scottish Governments with regard to social distancing, and in order to protect the health and safety of our shareholders and employees, the Board has decided to postpone the 2020 Annual General Meeting (AGM). The Board is hopeful that circumstances will improve and that shareholders will be able to attend the meeting at a later date if restrictions on public gathering and social distancing requirements are reduced.  Details of the date and arrangements for the AGM will be provided as soon as possible.

 

Roger White, Chief Executive , commented:



A.G. Barr is a results driven business with a motivated and resolute team, whom I wish to thank for their ongoing resilience, commitment and flexibility.

 

We exited the financial year with improved trading performance and momentum, which continued into the new year however the COVID-19 situation is now materially impacting our business.  There is no immediate certainty around the severity and duration of the impact on our business and as such the Board is unable to provide guidance for the current financial year at this time.  However, the actions we are taking to conserve cash and reduce costs, combined with our strong financial base, give us confidence in the resilience of our business for the long term.

 

We will continue to monitor developments closely, responding appropriately as required, while also ensuring that we play our part in supporting our communities through these unprecedented times. 

 

 

For more information, please contact:

 

A.G. BARR   0330 390 3900  Instinctif Partners  020 7457 2010

Roger White, Chief Executive                                                 Justine Warren

Stuart Lorimer, Finance Director                                              Matthew Smallwood

 

Next trading update - July 2020

 

1 Note : 2020 figures include the impact of IFRS 16 with details provided in the "Accounting policies" section of the Financial Review later in this announcement.  2020 EBITDA margin reflects a 129 bps benefit from the implementation of IFRS 16.  2020 Net cash from operating activities reflects a £3.3m benefit from the implementation of IFRS 16.

 

* Items marked with an asterisk are non-GAAP measures.  Definitions and relevant reconciliations are provided later in this announcement.

 

 

Chairman's introduction

 

After many years of consistent profit growth, it has been a difficult year for the business, with revenue declining 8.4% to £255.7m and profit before tax and exceptional items* falling 17.3% to £37.4m (statutory profit before tax was also £37.4m).  Despite the challenging trading environment, management responded with decisive actions and I am pleased to report that the business exited the year with renewed momentum.

 

While our Funkin business unit had another successful year, Barr Soft Drinks faced some significant headwinds across the year.  The consumer market was undoubtedly impacted by political uncertainty and the poorer weather was in sharp contrast to the prior year's record breaking summer.  Looking back, we did not fully recognise the extent to which we benefited from the hot summer of 2018.

 

Against this backdrop the business also experienced some specific brand challenges, while also implementing its strategy to realign pricing more closely with the market, following the one-off volume led strategy of 2018 when the Soft Drinks Industry Levy was implemented.

 

Despite these circumstances the business maintained its strategic focus, continuing to invest in its brands, innovation, assets, people and responsibility commitments.  Action has been taken to simplify and streamline the business, with benefits already in evidence.

 

We have a strong balance sheet, an experienced team in place and are well placed to exploit growth opportunities as and when they arise.

 

Dividend

An interim dividend, for the six months ended 27 July 2019, of 4.00p (2019: 3.90p) per ordinary share was paid on 25 October 2019.  Our usual practice at this time of the year is to propose a final ordinary dividend to be paid in June, subject to approval by shareholders at the Annual General Meeting held in May.  However, given the unprecedented circumstances arising from COVID-19, we believe it is currently important to conserve cash and maintain balance sheet flexibility.  As such, the Board is not proposing a final dividend at this time, and will review the dividend position when there is greater visibility of the impact of COVID-19.

 

People and culture

We have a positive and result-driven culture, which has held the business in good stead across a difficult year.  A wide range of initiatives have been implemented across the Group to support and foster an even stronger culture, initiatives which are being well received by employees and recognise the importance of building an even more inclusive workplace.

 

I would like to take this opportunity to thank, on behalf of the Board, the whole team across the Group for their hard work and diligence in what has been a demanding year. 

 

Board

As previously communicated, after 9 years on the Board, Martin Griffiths will stand down following completion of the 2019/20 audit cycle.  Martin will be succeeded by Nick Wharton as Audit and Risk Committee Chair while Susan Barratt has been appointed as Senior Non-Executive Independent Director and Pam Powell succeeds Susan as Non-Executive Director responsible for workforce engagement.

 

Andrew Memmott stepped down from the Board in September 2019 and will be leaving the business in April 2020 after 29 years' service, 11 of which as a Board member.  I would like to thank Martin and Andrew for their contribution and commitment to the business.

 

COVID-19

Clearly there is a huge amount of uncertainty surrounding COVID-19 at present.  The Board is working closely with the executive team to ensure the business takes appropriate action to protect its people and to maintain operational and financial stability in these unprecedented times.  With fantastic brands, talented and engaged people and well invested assets, A.G. Barr remains a great business and there is a unified determination across the Group to get through these difficult times and play our part.  The Board remains confident in both the management and the capability of the business to adapt appropriately to the current circumstances and to deliver long-term shareholder value.

 

John Nicolson

CHAIRMAN

 

 

Chief Executive's review

 

Overall the year to January 2020 was disappointing with our core soft drinks business underperforming both the market and our own expectations.  However we responded proactively to the various challenges we faced, took decisive actions across the second half of the year and maintained our strategic focus.  As a result, we ended the financial year with an encouraging trading performance which continued into the new year.

 

As communicated in September 2019 as part of our Interim Results, we experienced a variety of challenges during the year which combined to substantially impact our financial performance.  Across the full year, revenue fell 8.4%, compared to 5.6% revenue growth in the prior year.  Statutory profit before tax fell 16.0% to £37.4m, reflecting the adverse impact of the revenue decline alongside our ongoing commitment to maintain investment in our brands and business for the longer term.

 

In the second half our focus and efforts   were directed towards a number of initiatives to support our recovery - these include portfolio changes, to address some specific brand issues identified earlier in the year, along with a business re-engineering programme aimed at simplifying and supporting a return to growth across our soft drinks business.

 

Our Funkin business, operating in the cocktail market, has had another very successful year with revenue increasing by over 20%.  Over the past 12 months we have further progressed our multi-beverage strategy with the introduction of ready-to-drink cocktails including alcohol, while also investing in the zero proof spirits sector through our 20% minority investment in Elegantly Spirited Limited, owners of the STRYYK brand.

 

Our key financial metrics for the year were as follows: 

 

· Group revenue £255.7m (2019 : £279.0m)

· Profit before tax and exceptional items* £37.4m (2019 : £45.2m)

· Profit before tax and after exceptional items £37.4m (2019 : £44.5m)

· Operating margin* 14.9% (2019 : 16.2%)

· Strong balance sheet with net cash of £3.0m   (post IFRS 16)   having completed our £30m share repurchase programme

 

Statutory profit before tax of £37.4m reflects an exceptional cost of £1.8m in the year, associated with the completion of the first phase of our business re-engineering programme, offset by a £1.8m one-off exceptional gain related to the removal of a wind turbine at our Cumbernauld site. 

 

PepsiCo acquisition of Rockstar 

On 11 March 2020 PepsiCo Inc. (PepsiCo) announced its intention to acquire Rockstar Energy Beverages, owner of the Rockstar energy brand.  PepsiCo has been a distribution partner for Rockstar in North America since 2009.

 

We have been a franchise partner of Rockstar since 2007 and retain the exclusive distribution rights for the Rockstar brand in the UK, Ireland and certain European territories.  We have a long-term contract, extending for several years, for the manufacture and sale of the Rockstar energy brand, which contributes approximately 8% of the Group's sales volumes.

 

Until this transaction is completed we will continue to work alongside the Rockstar team as normal. 

 

Soft drinks market 

Possibly the biggest impact on soft drinks this year was the weather, with an average summer following on from the hottest summer on record in 2018.  Consumption levels fell across the market, with most soft drinks sub categories declining.  As measured by IRI, volume in the total UK soft drinks market declined 2.5% with value broadly flat, increasing 0.4%.  Carbonates benefited from distribution growth in low calorie variants and as a consequence grew 3.4% in value and 1.3% in volume.  Stills, driven by water and juice drinks, declined 2.8% in value and 5.8% in volume. 

 

After a difficult period during the course of the summer we have seen our market share position improve and in the final quarter on a year on year basis we have seen marginal share gains.

 

(Source : IRI Marketplace 52 weeks to 26 January 2020)

 

Cocktail market

The cocktail market continues to grow, increasing in value by 9.9% with a growth in outlets selling cocktails up 3.2%.

 

(Source : CGA Mixed Drinks Report Q3 2019)

 

Strategy execution

2018 was a year of record profit for A.G. Barr, supported by a strong soft drinks market performance.  Our intentional short-term trading strategy of placing volume performance ahead of value, in a market which experienced changing pricing dynamics as a result of the Soft Drinks Industry Levy, boosted our growth and led to a significant increase in our market share.  We also benefited from our ability to maintain service levels during industry CO2 shortages during the long hot summer. 

 

By comparison, the past twelve months were much more challenging.  The beneficial external circumstances were not replicated and the many moving parts made it difficult to read the underlying dynamics.  With hindsight, we underestimated the volume benefit we received in 2018 from both the one-off trading factors and the favourable weather, while also experiencing some specific brand challenges as outlined below.  All of these factors impacted our financial performance.

 

As planned, we returned our Barr Soft Drinks business to its long-term value driven approach across the first half of 2019, resetting our price positioning, particularly for the IRN-BRU brand, and reducing our promotional intensity to align more closely with our competitor set in the market.  While this had an expected impact on volume, it has delivered the planned increase in average realised price, re-establishing our consumer pricing position. 

 

Throughout a difficult year we have remained committed to our long-term strategy, investing for growth and focusing on our strategic priorities of connecting with consumers, building brands and trust, and driving efficiency.

 

Strategy - Connecting with consumers

The connection we make with consumers, both corporately and through our brands, 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 both our Barr Soft Drinks and Funkin business units. 

 

Advertising has evolved considerably in recent years, with social and digital media proving increasingly important, complementing the more traditional media channels of TV, print and outdoor.  In April 2019 we launched our new IRN-BRU campaign "Get Some IRN in You" on TV, digital and social media to ensure our number 1 brand remains fun, fresh and relevant to all.  The campaign was well received by a wide range of consumers and resonated particularly well with the younger 18 to 34 year old cohort. 

 

2019 was also our first year of significant above the line marketing investment for the Funkin brand, with the new range of ready-to-drink cocktails advertised across outdoor channels in selected cities throughout the UK.  This supports the strategic objective of growing Funkin beyond its traditional strong position behind the bar into a relevant consumer brand.

 

Sponsorship remains an effective and exciting engagement tool and Rubicon entered its third year as official partner of the England and Wales Cricket Board.  In a year that gave cricket fans both the World Cup and the Ashes, Rubicon's visibility and association with cricket increased, bringing the brand to significantly larger audiences than ever before.

 

Over recent years we have seen a marked consumer trend towards all things retro, with consumer brands in particular seeking to meet this fondness for nostalgia.  As a brand with over 100 years of history and heritage, IRN-BRU has always enjoyed a special relationship with its consumers.  In December 2019 we launched IRN-BRU 1901, a premium, limited edition IRN-BRU made to the very first 'old and unimproved' recipe dating back to 1901.  The response from consumers has been very positive and has given IRN-BRU fans a chance to enjoy a unique and authentic piece of Scottish history.

 

Strategy - Building brands

In a year of price realignment, particularly for the IRN-BRU brand, we experienced some sales decline as a result of adjustment to the new consumer price points.  However, now benefitting from the planned increase in average realised price, we are pleased to report that the IRN-BRU brand returned to value growth in the final quarter of the year.  Our Barr Flavours carbonates range also made progress, building on distribution gains of the prior year.

 

During the year, we experienced some very specific brand challenges with Rockstar energy and Rubicon juice drinks.  A number of factors impacted sales across these brands, including consumer acceptance of new recipes, competitor pricing and, in the case of fruit drinks, a further decline in this category.  We have taken action to address these specific brand issues, with the launch of three new Rockstar products, including a performance energy range, and improved core brand recipes.  We have significantly enhanced product quality through recipe improvement for Rubicon juice drinks and have relaunched the brand, including a new overall brand design.  It will take time for these actions to embed in the market and for the improvements we expect to be realised.

 

Our strategy to invest in bringing innovative new products to the market has delivered incremental value across the year and our innovation performance and pipeline remain strong.  Our new soft drinks product launches have included a Mango Zero Added Sugar sparkling version of Rubicon, an exciting new range of adult soft drinks, St Clement's, and a new variant from IRN-BRU, IRN-BRU Energy.  For Funkin, our ready-to-drink cocktails have furthered our move into multi-beverage and exceeded our initial expectations with strong rates of sale and a fast-growing number of listings secured across a broad range of channels, including travel operators and the important take-home grocery channel.

 

Demonstrating our flexible approach to seeking growth in new areas of the market, we completed a £1m investment in Elegantly Spirited Ltd., owners of the STRYYK brand, in June 2019.  Whilst taking a 20% minority equity share in this new venture, we also secured the UK distribution rights for STRYYK via our Funkin business unit, thereby seeking to capitalise on the growth in the emerging zero proof spirits market, at the same time as we drive revenue and bring an exciting new brand to the market.

 

Strategy - Building trust

As a long-standing UK consumer goods business we understand the privileged position we hold in our communities and the impact our actions have on a wide range of stakeholders, from our employees and consumers to our customers and suppliers.  Building trust is central to this.

 

Climate change in particular is an area of real focus for the business.  We have an important part to play in contributing towards carbon reduction and are continuing to take actions across waste, water and energy in our journey towards carbon neutral operations.

 

Some highlights of the year related to building trust include: 

 

· It is our ambition to be a diverse and inclusive business that respects and values difference and allows all of our people to perform at their best.  Our focus in this area has intensified across the past 12 months and we have implemented a range of initiatives in support of our ambition, from diversity and inclusion awareness training for all employees to introducing more flexible working arrangements.  We have also seen improvement in our mean and median gender pay gaps and further steady progress in the representation of female senior managers within the business.

 

· Our progress in introducing greater recycled content into our packaging.  Having introduced 50% recycled PET ("rPET") into our Strathmore water plastic bottles, we are now extending this further across our Rubicon Spring range.  While rPET material availability remains a key challenge for the food and drink industry as a whole, we remain committed to achieving at least 30% rPET across our full ra nge of plastic bottles by 2022.

 

· We are working closely with the Scottish Government, producers, wholesalers, retailers and other stakeholders, on planning for the creation of an effective and efficient Deposit Return Scheme (DRS) for Scotland.  Such a scheme will not only vastly improve the availability of recycled materials for re-use in drinks containers, it will also lead the way for food and drinks packaging, with drinks containers, including plastic bottles, becoming part of a truly circular economy.

 

· The signing of a new ten-year renewable electricity contract with Swedish energy group Vattenfall.  This agreement will provide fossil-free electricity to all our sites across the UK, a big step towards reducing our carbon footprint and delivering our ambitious sustainable business goals. 

 

Strategy - Driving efficiency

Our drive for greater efficiency and stronger financial returns continues to be a key area of focus.  However our commitment to investing for long-term growth through capital projects has been maintained.

 

Our £14m capital investment in a new liquid processing facility at our Cumbernauld site is nearing completion. The project delivers new ingredients handling and processing assets, along with a range of associated safety, health, efficiency and environmental improvements.  

 

We have also undertaken the first phase of our business re-engineering programme, having completed a range of initiatives to simplify how we operate.  Actions have included portfolio simplification, brand development prioritisation and reorganisation within our Commercial function.  Phase 2 will focus on right-sizing our organisational structures, operational activities and our overheads, to ensure we are appropriately scaled  and resourced to perform in the current market. 

 

COVID-19

The circumstances resulting from COVID-19 are creating an unprecedented level of uncertainty for the UK and beyond.  We have been following Government guidance since the outset of the COVID-19 outbreak and will continue to do so. 

 

In response we are taking swift action across 3 priority areas:

 

1) Safety and wellbeing 

Our primary focus is on the safety and wellbeing of our employees, suppliers, customers and consumers.  We have taken steps to protect our colleagues who are considered most vulnerable across the organisation.  In addition, those employees whose roles permit them to do so, are working from home.  For our colleagues who work in key production, warehousing and delivery roles, we have introduced strict safety, hygiene and 2 metre social distancing measures.

 

2) Group operating resilience 

Along with our fellow food and drink manufacturers we are working closely with the Government, and DEFRA in particular, to maintain continuity of the food and drink supply chain, helping to keep shop shelves well stocked. 

 

Our production and logistics sites currently remain operational and we are extremely grateful to our dedicated supply chain employees and partners. 

 

Our two main production sites Cumbernauld and Milton Keynes provide us with manufacturing capability and flexibility, and many of our formats can be produced in either location. 

 

We have taken steps to ensure that our raw material availability and stockholding is as robust as possible and as yet have experienced no difficulties.  However, in common with most food and drink manufacturers we are reliant on a number of raw materials and packaging types for which it is not possible to store more than a few days' stock locally at site.  This risk is mitigated as far as possible by healthy levels of finished goods stocks and to date we have maintained strong levels of service into our customer base. 

 

We are taking action to ensure our factories are staffed sufficiently, that our production plans optimise the capacity available at each of our sites and that we prioritise those SKUs that current consumer demand requires.

 

Following the Government's 'lock-down' measures, introduced on 23 March, which initially saw the closure of pubs, bars and other hospitality venues across the UK, we are now understandably also seeing a significant impact on the "out of home" consumption of soft drinks in general.  Sales via our "impulse" customers (c.40% of total revenue) have significantly reduced as a result.  'Take-home' purchases have remained more resilient although sales since 23 March have been more volatile than usual.  As a result, we expect there to be a material adverse impact to the Group's financial performance due to these fast changing circumstances, however at the current time the quantum of this remains uncertain.

 

It is our aim to maintain supply into our customers for as long as there is demand in the market and as long as Government guidance permits.

 

3) Financial stability

The Group has a strong financial base and our balance sheet is robust, with net cash in the bank of £10.9m at the financial year end, however given the highly unusual circumstances arising from COVID-19, we believe it is important to conserve cash at this time and maintain maximum balance sheet flexibility. 

 

We have drawn down our £60m revolving credit facilities in full.  In addition, we have now frozen all new capital projects, as well as scaling back immediate marketing and commercial activity where sensible across the Group.  In accordance with the Government's Job Retention Scheme, we have commenced the "furlough" process for a limited number of colleagues at this stage.  In addition the Board and Senior Executive team have agreed to a voluntary 20% salary reduction for a minimum of 3 months to help support the business through these difficult times.  We continue to take a prudent and vigilant approach to all working capital to minimise risk in the current climate.

 

The Board is not proposing a final dividend at this time, and will review the dividend position when there is greater visibility of the impact of COVID-19.

 

Summary

A.G. Barr is a results driven business with a motivated and resolute team, whom I wish to thank for their ongoing resilience, commitment and flexibility.

 

We exited the financial year with improved trading performance and momentum, which continued into the new year however the COVID-19 situation is now materially impacting our business.  There is no immediate certainty around the severity and duration of the impact on our business and as such the Board is unable to provide guidance for the current financial year at this time.  However, the actions we are taking to conserve cash and reduce costs, combined with our strong financial base, give us confidence in the resilience of our business for the long term.

 

We will continue to monitor developments closely, responding appropriately as required, while also ensuring that we play our part in supporting our communities through these unprecedented times.  

 

Roger White

CHIEF EXECUTIVE

 

 

 

 

 

Financial review

 

The following is based on results for the 52 weeks ended 25 January 2020.  Comparatives, unless otherwise stated, are for the 52 weeks ended 26 January 2019.

 

Performance overview

In the year ended 25 January 2020 the Group experienced a variety of challenges which adversely impacted sales and profitability.  However, significant action has been taken to address these, we exited   the year with good momentum and with the foundations and strategy in place for long-term success. 

 

Reported net sales, at £255.7m, were down 8.4% as a result of specific brand challenges within soft drinks (primarily Rubicon and Rockstar), the negative short-term impact of pricing re-alignment (principally relating to IRN-BRU), and the backdrop of strong prior year comparatives with 2018 benefitting from the exceptional summer weather and a well-managed response by the Group to the industry wide CO2 shortage.  The Funkin business had another year of strong growth.

 

Statutory profit before tax at £37.4m was down 16.0%, driven by the trading performance across the soft drinks portfolio, the largely fixed cost nature of our integrated manufacturing model in this area, and our commitment to sustained brand investment across the Group.  These challenges were only partially mitigated by strong discretionary cost control and the initial impact of our business re-engineering programme which aims to reposition the Group for sustainable future growth.

 

Net cash from operating activities continues to be strong at £40.1m (£36.8m on a pre-IFRS 16 basis - cash from operating activities has increased by £3.3m with a corresponding increase in lease payments of £3.3m within financing activities). The balance sheet remains robust, with a well-invested asset base (capital expenditure in the year was £14.8m as we continue to invest ahead of depreciation).  We ended the financial year with net cash in the bank, after completing our £30m share repurchase programme, while our strong working capital governance ensured good inventory control and minimal bad debts. 

Given the highly unusual circumstances arising from COVID-19, we believe it is currently important to conserve cash and maintain balance sheet flexibility.  As such, the Board is not proposing a final dividend at this time, and will review the dividend position when there is greater visibility of the impact of COVID-19.

 

Segmental performance

There are 3 reportable segments in our Group: 

 

1.  Carbonated soft drinks

2.  Still soft drinks and water 

3.  Funkin 

 

Carbonated soft drinks

Our carbonates segment represents over 76% of our revenue and almost 84% of gross profit.  Revenue decline of 8.4% was driven by a 9.2% fall in volumes, against a backdrop of strong volume performance in the prior year. 

 

The IRN-BRU brand reported net revenue down c.4%, with volumes down c.9%, due to a combination of the year-on-year challenging comparatives and the short-term negative volume impact as we realigned our price position.  Innovation launches in the year, IRN-BRU Energy and limited edition IRN-BRU 1901, have both performed well.  The IRN-BRU brand returned to value growth in the final quarter and exited the year on a positive footing.

 

The transition back to a value over volume strategy, combined with the disappointing spring and summer weather, most notably in our key markets of Scotland and the north of England, has had a short-term volume impact across the portfolio. However consumer acceptance of the new price and promotional positions was evident as the year progressed.

 

The franchise brand, Rockstar, had a challenging year with similarly tough prior year comparators exacerbated by intense competitor activity resulting in volumes down 27% and revenue down 29%.  In response we have launched several new product innovations towards the end of the year, and have an ongoing programme of product improvement for the core brand flavours.

 

While our Rubicon carbonated range was also impacted by the weather, the Rubicon Spring brand continued to perform well along with our Barr Flavours range, which grew both volume and net revenue, maintaining and building further upon the distribution gains of the prior year. 

 

Despite our efforts to manage costs, brand contribution in the carbonates segment declined due to cost of goods inflation, arising from modest commodity   increases, and the adverse impact of lower volumes on the largely fixed cost base within our soft drinks supply chain.

 

Stills and water

Segmental net revenue declined 18.2% driven by a 16.8% fall in volume.

 

Our Rubicon stills products operate in a juice drinks market which has experienced several years of decline.  In addition, last year was particularly challenging as a result of the tough weather driven comparatives of the prior year and exacerbated further by some product reformulation challenges.  Volumes and net sales were down c.21% in the year to 25 January 2020, however we have taken action to improve the product formulations and have launched a new and refreshed Rubicon brand identity in the last quarter of the year. 

 

Strathmore water net revenue declined 17% , in part due to weather comparators, but also related to the price competitive nature of the water segment.  While a relatively small proportion of our business, the Strathmore brand has a dedicated manufacturing operation with a largely fixed cost base, meaning lower year-on-year volumes disproportionately impact gross profit and gross profit margins.

 

Funkin cocktails

The Funkin business continued to deliver strong revenue, up more than 20%, and profit growth.   The core on-trade focused cocktail ingredients business continued to perform well supported by the launch of Funkin branded ready-to-drink cocktails, for both the on-trade and increasingly gaining distribution in the take-home market.

 

Exceptional items

In the year to 25 January 2020 we incurred, and have separately disclosed, two items considered to be non-recurring and exceptional in nature.  The net charge (pre-tax) of these items was £nil. 

 

The Board is of the opinion that the nature and materiality of these items makes it appropriate to classify these as 'exceptional' and that this provides a more useful presentation of the underlying performance of the Group. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence as well as the size and nature of an item both individually and when aggregated with similar items for example restructuring costs, product development or asset write offs. This presentation is consistent with the way that financial performance is measured and reported to the Executive Committee and to the Board, and assists in providing a meaningful analysis of our trading results. 

 

· Business re-engineering costs (£1.8m charge) : In September 2019 the Group embarked on a change programme with two key objectives:

 

To simplify our operations and reshape our internal supply chain by rationalising and reducing the complexity of our portfolio and route to market.  This element of the programme includes rationalising a number of products and formats (£0.6m) and the closure of our Sheffield sales depot in March 2020 (£0.5m).  The product rationalisation represents a major reshaping of our portfolio on a scale well in excess of our normal product review process and in a way that will enable a significant change in our ways of working

 

An organisational change programme largely within the Commercial team to refocus resources and investment towards those areas with the greatest profitable growth potential (£0.7m)

 

As a result of these activities, the Group has incurred exceptional costs relating to product write-offs and employee severance.  This is a 2-year programme with further phases of activity planned in the year ahead with further exceptional costs that are expected to be at a level similar to the year ended 25 January 2020. 

 

· Wind turbine removal (£1.8m credit) : For a number of years a wind turbine has been in operation at our Cumbernauld site.  This turbine has now been removed, with an associated compensation payment made.  The turbine's removal will facilitate the construction and operation of additional large scale wind energy projects in Scotland which are important elements supporting the achievement of Scottish climate change targets. 

 

The cash impact of the exceptional items was a £0.2m outflow with £1.6m of the wind turbine removal credit received shortly after the end of the   financial year.

 

In the prior year, an exceptional expense of £0.7m was recognised.  This reflected a past service cost in respect of the equalisation of guaranteed minimum pension ("GMP") benefits following a High Court judgement relating to Lloyds Banking Group.  The judgement has implications for many pension schemes, including the A.G. Barr defined benefit scheme.  We continue to work with our actuarial advisers to understand the implications of the judgement for this scheme and the £0.7m pre-tax cost recognised in 2019 remains the best estimate of the effect on our reported pension liabilities.

 

Interest

Net finance charges, totalling £0.6m, largely comprised notional finance costs associated with the defined benefit pension deficit (under IAS 19).  Lease interest costs (under IFRS 16) and debt facility charges remain minimal reflecting our relatively low use of leasing and our continued strong net cash position.

 

The constituent elements o f the interest charge comprised :

 

 

2020

2019

 

£m

£m

Interest related to Group borrowings

(0.2)

(0.2)

Lease Interest 

(0.1)

-  

Finance costs related to pension

(0.3)

(0.4)

Net finance costs

(0.6)

(0.6)

 

Taxation

Our reported tax expense of £7.6m (2019: £8.7m) represents an effective tax rate of 20.3% (2019: 19.5%).  This is higher than the UK statutory rate of 19.0%, primarily due to the impact of depreciation and amortisation of non-qualifying assets and certain non-allowable expenses.

 

Earnings per share

Basic EPS was 26.50p (2019: 31.51p), a decrease of 15.9%, based on a basic weighted average of   112,452,517 shares (2019: 113,626,941 shares), reflecting the impact of the challenging trading environment on reported profit.  The reduction in the basic weighted average number of shares is predominantly due to 1.9 million ordinary shares being repurchased and cancelled during the year as part of the share repurchase programme.  Based on a diluted weighted average of 112,510,448 shares, diluted EPS was 26.49p (2019: 31.47p). 


Balance sheet and cash flow

The Group balance sheet remains strong and we remain cash positive (with no bank debt) as of 25 January 2020. This provides the Group with financial resilience and the flexibility to pursue our strategic objectives. Net asset movement is a combination of a strengthening fixed asset base, a £3.0m reduction in pension liabilities under IAS 19, increased dividends paid to shareholders of £19.0m (2019: £17.9m) and £11.5m of share repurchases (2019: £10.3m). 

 

Return on capital employed ("ROCE")* decreased from 21.0% in 2019 to 16.1% in 2020 as a consequence of our operating profit decline and our   modestly larger asset base. 

 

The Group remains financially strong and highly cash generative, with net cash from operating activities of £40.1m (2019: £44.6m) and net cash balances of £10.9m.

 

EBITDA* reduced by £3.5m to £51.1m in line with the weaker trading performance, delivering an EBITDA margin* of 20.0%, marginally higher than the prior year (19.6%). We have continued to apply a disciplined approach to cash management across the Group. Working capital cash flow was a £0.8m outflow as lower receivables were only partially offset by lower inventories and payables again all related to trading performance.  Bad and overdue debts were minimal at the year end.   IFRS 16 has no overall impact on cash flow however it has improved EBITDA by £3.3m and EBITDA margin by 129bps.

 

We remain committed to a well-invested asset base and have continued to invest in line with our long-term programme of replacement and expansion.   At £14.8m,   our cash capex spend in the year was, as planned, significantly ahead of the prior year (£8.9m).  Our major project in the year was the replacement and upgrade of our liquid to line processing equipment and technology within our Cumbernauld factory. This upgrade has been a major multi-year project (£14.0m overall capital investment with £7.5m spent in 2019/20) which is now in the commissioning stage.  The project is on budget and expected to complete in 2020. During the year we also supported the ongoing investment in our logistics vehicle operation to ensure we have a safe, efficient and increasingly e nvironmentally friendly fleet.

 

We ended the year with cash in the bank and no bank debt (net funds* £3.0m post IFRS 16). Since the financial year end we have concluded the extension of certain existing banking facilities at rates in line with current facilities. Our new arrangements result in the Group maintaining three revolving credit facilities - two £20m facilities with two years remaining and one £20m facility over a five year period.  These arrangements provide flexibility to support both short-term operational variability and optionality should debt capacity be required to facilitate corporate opportunities. As a result of the increased uncertain trading environment we felt it was prudent to draw down the full £60m of these revolving credit facilities in the early stages of the COVID-19 pandemic.

 

Investment in associate - Elegantly Spirited Limited (STRYYK brand)

In June 2019, the Group made a 20% minority equity investment in Elegantly Spirited Limited ("ESL"), a new business start-up in the nascent zero proof spirits market, and the owner of the STRYYK brand, a range of zero proof spirits products.  ESL is now fully trading following the business establishment period and is performing in line with expectations.  ESL is recognised as an associate and the investment has been accounted for under the equity method of accounting, with the investment initially recognised at the transaction investment price (£1.0m) and subsequently adjusted to reflect the Group's share of the loss since our investment (£0.1m).  The Group has the right, but not the obligation, to participate in future equity funding initiated by ESL.

 

Share repurchase programme

During the financial year the Group successfully completed the £30m share repurchase programme approved by shareholders in May 2017.  Share purchases in the year to 25 January 2020 totalled 1.9m shares at a cost of £11.5m and an average cost per share of £6.06.  Over the whole £30m programme 4.7m shares were repurchased at an average cost of £6.33 per share.  All shares purchased under the programme (representing 4.1% of the issued share capital) were subsequently cancelled.

 

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 reward, determined through assessment of the likelihood and impact of the risk and within the context of the Group's risk appetite as established annually by the Board.  Both the risks and the risk appetite are regularly reviewed by the Board and the Executive Committee.  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. The principal risks that could potentially have a significant impact on our business have not changed since the end of the financial year .

 

Exit from the European Union

The Company has had a Brexit Working Group in place since shortly after the UK Referendum in 2016.  This group is chaired by the Head of Group Risk with input from external advisors and representation from relevant business areas.  This group monitors developments, reviews the implications of various exit scenarios and has taken action where it has considered this to be appropriate. The outputs of the Brexit Working Group are reviewed by the Audit and Risk Committee.  Since the UK's formal exit from the European Union on the 31 January 2020 the working group's focus has moved to planning for the lead up to, and ongoing operations after, December 2020.

 

We continue to believe that the Group's overall Brexit risk remains largely around the potential for short-term supply chain disruption and foreign exchange volatility rather than longer term commercial or consumer demand concerns.  Therefore this is considered not to be a principal risk. As part of our corporate viability evaluations we have modelled the impact of what we consider to be a severe but possible Brexit scenario.  This evaluation indicated that there was no significant viability risk to the business from the exit from the EU.

 

 

 

Treasury and commodity risk management

The treasury and commodity risks faced by the Group are identified and managed by a Group Treasury Committee whose activities are carried out in accordance with Board approved policies and subject to regular Audit and Risk Committee reviews.  No transaction is 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 and liquidity positions.  The Group uses financial instruments to hedge against foreign currency exposures.  As at 25 January 2020, in addition to the Group cash position, the Group had £60m of committed and unutilised debt facilities, consisting of 3 revolving credit facilities spread over 3 long-standing relationship banks, providing the business with a secure funding platform.  As a result of the increased uncertain trading environment we felt it was prudent to draw down the full £60m of these revolving credit facilities in the early stages of the COVID-19 pandemic.

 

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.  We have not directly entered into commodity hedge contracts.

 

In addition, the Group enters into insurance arrangements to cover certain insurable risks where external insurance is considered by management to be an economic means of mitigating these risks.

 

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. 

 

The only change to the accounting policies applied this year has been the adoption of IFRS 16, the new financial reporting standard on accounting for leases, which was adopted using the 'modified retrospective' transition approach, meaning that comparative financial information at 26 January 2019 has not been restated and the cumulative impact on prior years has been reflected by adjusting opening reserves as at 27 January 2019.  The new standard requires the majority of leases to be recognised on the balance sheet as Right of Use Assets, generating depreciation and interest charges, in place of lease expenses.  The adoption of the standard has not had a material impact on profit before tax and there is no cash impact, but it does result in a change in the way assets, liabilities and related income statement balances are presented.  As a consequence of adopting IFRS 16, the key alternative performance measure, EBITDA, has improved.  Further detail on the impact of IFRS 16 can be found in Note 1 to the financial statements.

 

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 scheme triennial actuarial valuation (as at April 2017), approved by the Pension Scheme Trustee on 8 March 2018, identified a £4.8m deficit based on an agreed range of actuarial assumptions.  Subsequent to the valuation, the Group and the Pension Scheme Trustee agreed a pension repayment plan intended to eliminate the deficit by 2021.  This plan was submitted to and accepted by the Pension Regulator.  The next triennial actuarial valuation will be in April 2020.

 

On an IAS 19 valuation basis, which is before the benefit of the asset back funding arrangement, the deficit reduced from £13.5m as at 26 January 2019 to £ 10.5m as at the balance sheet date.  The fall in the deficit is primarily due to asset returns being higher over the year than the discount rate (the "expected" return under IAS 19) as well as the benefit of contributions paid by the Company.  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.

 

Share price and market capitalisation

On 25 January 2020, the closing share price for A.G. BARR p.l.c. was £5.59, a decline of 26.6% on the closing January 2019 position.  The Group is a member of the FTSE 250, with a market capitalisation* of £626m at the financial year end. 

 

Stuart Lorimer

FINANCE DIRECTOR

 

 

 

 

 

Consolidated Income statement for the year ended 25 January 2020

 

2020

2019

 

 

 

 

 

 

 

 

Before exceptional items

Exceptional items*

Total

Before exceptional items

Exceptional items*

Total

 

 

 

 

 

 

 

 

£m

£m

£m

£m

£m

£m

Revenue

255.7

-

255.7

279.0

-

279.0

Cost of sales

(149.6)

(1.1)

(150.7)

(156.5)

-

(156.5)

Gross profit

106.1

(1.1)

105.0

122.5

-

122.5

Other income

-

1.8

1.8

-

-

-

Operating expenses

(68.0)

(0.7)

(68.7)

(76.7)

(0.7)

(77.4)

Operating profit

38.1

-

38.1

45.8

(0.7)

45.1

Finance costs

(0.6)

-

(0.6)

(0.6)

-

(0.6)

Share of after tax results of associates

(0.1)

-

(0.1)

-

-

-

 

 

 

 

 

 

 

Profit before tax

37.4

-

37.4

45.2

(0.7)

44.5

Tax on profit

(7.6)

-

(7.6)

(8.8)

0.1

(8.7)

 

 

 

 

 

 

 

Profit attributable to equity holders

29.8

-

29.8

36.4

(0.6)

35.8

 

 

 

 

 

 

 

Earnings per share (p)

 

 

 

 

 

 

Basic earnings per share

 

 

26.50

 

 

31.51

Diluted earnings per share

 

 

26.49

 

 

31.47

Basic earnings per share  before exceptional items

 

 

26.50

 

 

32.03

 

 

 

 

 

 

 

*An explanation of exceptional items is provided in Note 4.

 

Consolidated Statement of Comprehensive Income for the year ended 25 January 2020

 

 

 

 

2020

2019

 

£m

£m

Profit for the year

29.8

35.8

 

 

 

Other comprehensive income

 

 

Items that will not be reclassified to profit or loss

 

 

Remeasurements on defined benefit pension plans

1.2

0.6

Deferred tax movements on items above

(0.2)

(0.1)

Current tax movements on items above

-

(0.1)

 

 

 

Items that will be or have been reclassified to profit or loss

 

 

Cash flow hedges:

 

 

Losses arising during the period

0.3

(0.4)

Less: reclassification adjustments for gains included in profit or loss

-

0.3

Deferred tax movements on items above

(0.1)

-

Other comprehensive income for the year, net of tax

1.2

0.3

 

 

 

Total comprehensive income attributable to equity holders of the parent

31.0

36.1

 

 

 

 

Consolidated Statement of Changes in Equity for the year ended 25 January 2020

 

 

 

 

 

 

 

 

Share capital

Share premium account

Share options reserve

Other reserves

Retained earnings

Total as restated

 

£m

£m

£m

£m

£m

£m

 

 

 

 

 

 

 

At 26 January 2019

4.7

0.9

2.4

(0.2)

202.0

209.8

Impact of IFRS 16*

-

-

-

-

(0.3)

(0.3)

At 26 January 2019

4.7

0.9

2.4

(0.2)

201.7

209.5

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

29.8

29.8

Other comprehensive income

-

-

-

0.2

1.0

1.2

Total comprehensive income for the year

-

-

-

0.2

30.8

31.0

 

 

 

 

 

 

 

Company shares purchased for use by employee benefit trusts

-

-

-

-

(1.4)

(1.4)

Proceeds on disposal of shares by employee benefit trusts

-

-

-

-

0.1

0.1

Recognition of share-based payment costs

-

-

(0.2)

-

-

(0.2)

Transfer of reserve on share award

-

-

(0.6)

-

0.6

-

Deferred tax on items taken direct to reserves

-

-

(0.2)

-

-

(0.2)

Repurchase and cancellation of shares

-

-

-

-

(11.5)

(11.5)

Dividends paid

-

-

-

-

(19.0)

(19.0)

At 25 January 2020

4.7

0.9

1.4

-

201.3

208.3

 

 

 

 

 

 

 

At 27 January 2018

4.8

0.9

1.6

(0.2)

194.0

201.1

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

35.8

35.8

Other comprehensive income

-

-

-

(0.1)

0.4

0.3

Total comprehensive income for the year

-

-

-

(0.1)

36.2

36.1

 

 

 

 

 

 

 

Company shares purchased for use by employee benefit trusts

-

-

-

-

(0.5)

(0.5)

Proceeds on disposal of shares by employee benefit trusts

-

-

-

-

0.1

0.1

Recognition of share-based payment costs

-

-

1.1

-

-

1.1

Transfer of reserve on share award

-

-

(0.4)

-

0.4

-

Deferred tax on items taken direct to reserves

-

-

0.1

-

-

0.1

Repurchase and cancellation of shares

(0.1)

-

-

0.1

(10.3)

(10.3)

Dividends paid

-

-

-

-

(17.9)

(17.9)

At 26 January 2019

4.7

0.9

2.4

(0.2)

202.0

209.8

 

 

 

 

 

 

 

* Refer to Note 1

 

 

 

 

 

 

 

Consolidated Statement of Financial Position as at 25 January 2020

 

2020

2019

 

£m

£m

 

 

 

Non-current assets

 

 

Intangible assets

101.8

103.1

Property, plant and equipment

101.2

95.3

Right-of-use assets

7.6

-

Investment in associates

0.9

-

 

211.5

198.4

 

 

 

Current assets

 

 

Inventories

18.3

20.4

Trade and other receivables

57.2

57.7

Cash and cash equivalents

10.9

21.8

 

86.4

99.9

 

 

 

Total assets

297.9

298.3

 

 

 

Current liabilities

 

 

Trade and other payables

52.4

56.9

Derivative financial instruments

0.1

0.4

Lease liabilities

3.2

-

Provisions

1.2

0.4

Current tax liabilities

3.0

4.0

 

59.9

61.7

 

 

 

Non-current liabilities

 

 

Deferred tax liabilities

14.5

13.3

Lease liabilities

4.7

-

Retirement benefit obligations

10.5

13.5

 

29.7

26.8

 

 

 

Capital and reserves attributable to equity holders

 

 

Share capital

4.7

4.7

Share premium account

0.9

0.9

Share options reserve

1.4

2.4

Other reserves

-

(0.2)

Retained earnings

201.3

202.0

 

208.3

209.8

 

 

 

Total equity and liabilities

297.9

298.3

Consolidated Cash Flow Statement for the year ended 25 January 2020

 

 

 

 

2020

2019

 

£m

£m

Operating activities

 

 

Profit before tax

37.4

44.5

Adjustments for:

 

 

Interest payable

0.6

0.6

Depreciation of property, plant and equipment

11.7

7.4

Amortisation of intangible assets

1.3

1.4

Share-based payment costs

(0.2)

1.1

Share of results in associates

0.1

-

Exceptional income

(0.2)

-

Loss on sale of property, plant and equipment

-

0.1

Operating cash flows before movements in working capital

50.7

55.1

 

 

 

Decrease/(increase) in inventories

1.8

(2.4)

Decrease/(increase) in receivables

2.1

(1.5)

(Decrease)/increase in payables

(4.5)

3.1

Difference between employer pension contributions and amounts recognised in the income statement

(2.1)

(1.5)

Cash generated by operations

48.0

52.8

 

 

 

Tax paid

(7.9)

(8.2)

Net cash from operating activities

40.1

44.6

 

 

 

Investing activities

 

 

Acquisition of investment in associate

(1.0)

-

Purchase of property, plant and equipment

(14.8)

(8.9)

Proceeds on sale of property, plant and equipment

0.1

-

Net cash used in investing activities

(15.7)

(8.9)

 

 

 

Financing activities

 

 

New loans received

29.5

21.0

Loans repaid

(29.5)

(21.0)

Lease payments

(3.3)

(0.1)

Purchase of Company shares by employee benefit trusts

(1.4)

(0.5)

Proceeds from disposal of Company shares by employee benefit trusts

0.1

0.1

Repurchase of own shares

(11.5)

(10.3)

Dividends paid

(19.0)

(17.9)

Interest paid

(0.2)

(0.2)

Net cash used in financing activities

(35.3)

(28.9)

 

 

 

Net (decrease)/increase in cash and cash equivalents

(10.9)

6.8

 

 

 

Cash and cash equivalents at beginning of year

21.8

15.0

Cash and cash equivalents at end of year

10.9

21.8

 

 

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 52 weeks ended 25 January 2020 (prior financial year 52 weeks ended 26 January 2019).

 

Basis of preparation

The financial information for the year ended 25 January 2020 contained in this News Release was approved by the Board on 24 March 2020.  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 endorsed and adopted for use by the European Union.

 

 

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 financial periods beginning 27 January 2019.  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 26 January 2019 have been delivered to the Registrar of Companies.  Statutory financial statements for the year ended 25 January 2020, 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 and having considered the impact of a severe but plausible downside scenario for COVID-19. The major variables are the depth and the duration of COVID-19. The directors considered the impact of the current COVID-19 environment on the business for the next 12 months, the viability period and the longer term. Whilst the situation evolves daily, making scenario planning difficult, we have considered a number of impacts on sales, profits and cash flows.  We have assumed that our operations remain open and that we will continue to be able sell our products to customers, consistent with DEFRA guidance. Whilst the virus may impact across many functions of the business from supply chain to the ability of our customers to service consumers, it would most likely manifest itself in lost volumes and require significant action in relation to operational cost reductions. The 2 main divisions will be impacted differently, with Barr Soft Drinks operating mainly in multiple retail (take home) and convenience (out of home) outlets and Funkin mainly within the on-trade and leisure sectors. Overall, we scenario planned several out turns with volumes dropping significantly (in the range of 30-40%) and the impact lasting for a significant part of the 2020. The revenue and operational leverage impact of such a volume loss would have a major negative impact on Group profitability however the scenario modelling would indicate that the Group would remain profitable over the next 12 months and we would anticipate a recovery in the following years. 

 

Throughout this severe but plausible downside scenario, 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 to 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.

 

   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:

 

· IFRS 16 Leases

· Amendments to IFRS 9 Prepayment Features with Negative Compensation

· Amendment to IAS 28 Long-term Interests in Associates and Joint Ventures

· Annual Improvements to IFRS Standards 2015 - 2017 cycle

· Amendments to IAS 19 Employee Benefits

· IFRIC 23 Uncertainty over Income Tax Treatments

 

IFRS 16 Leases replaces IAS 17 Leases along with three interpretations (IFRIC 4 Determining whether an Arrangement Contains a Lease, SIC 5 Operating Leases - Incentives and SIC 27 Evaluating the Substance of Transactions in the Legal Form of a Lease).  The new standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the opening balance of retained earnings.  Prior periods have not been restated.

For contracts in place at the date of transition, the Group has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as leases under IAS 17 and IFRIC 4.  The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of transition.  At this date, the Group has also elected to measure the right-of-use assets as if the standard applied at lease commencement date, but discounted using the borrowing rate at the date of initial application.  Instead of performing an impairment review on the right-of-use assets for operating leases in existence at the date of transition, the Group has relied upon its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.

On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low-value assets the Group has applied the optional exemptions to not recognise the right-of-use assets but to account for the lease expense on a straight- line basis over the remaining term.

On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 1.48%.


The following is a reconciliation of total operating lease commitments at 26 January 2019 to the lease liabilities recognised at 27 January 2019:

 

£m

 

 

Total operating lease commitments disclosed at 26 January 2019

6.6

 

 

Discounted using the lessee's incremental borrowing rate at the date of initial application

(0.1)

Less: short-term leases recognised on a straight-line basis as expense

(0.1)

Add: adjustments as a result of a different treatment of extension and termination options

3.0

 

 

Total lease liability recognised under IFRS 16 at 27 January 2019

9.4

 

Under IAS 17, all lease payments on operating leases were presented as part of cash flows from operating activities. Consequently, the net cash generated by operating activities has increased by £3.3m, being the lease payments, and net cash used in financing activities has increased by the same amount.

 

The adoption of IFRS 16 did not have an impact on net cash flows.

 

Leases - Accounting policy applicable from 27 January 2019

The Group as lessee

For any new contracts entered into on or after 27 January 2019, the Group considers whether a contract is, or contains a lease.  A lease is defined as any contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.  To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:

· The contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group;

· The Group has the right to obtain substantially all of the economic benefits from use of the identified asset  throughout the period of use, considering its rights within the defined scope of the contract; and

· The Group has the right to direct the use of the identified asset throughout the period of use.  The Group assesses whether it has the right to direct the use of the identified assets through the period of use.  The Group assesses whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.

Measurement and recognition of leases as a lessee

At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.   The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).  The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the asset or the end of the lease term.  The Group also assesses the right-of-use asset for impairment where such indicators exist.

Lease payments included in the measurement of the lease liability are made up of fixed payments, variable payments based on an index or rate, amounts expected to be payable under a residual guarantee and payments arising from options reasonably certain to be exercised.  Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest.  It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.  When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients.  Instead of recognising the right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.

On the balance sheet, right-of-use assets and lease liabilities have been disclosed separately.

Leases - Accounting policy applicable before 27 January 2019

The Group as lessee

Where fixed assets are financed by leasing agreements, which give rights approximating to ownership, the assets are treated as if they had been purchased and the capital element of the leasing commitments are shown as obligations under finance leases.  Assets acquired under finance leases are initially recognised at the present value of the minimum lease payments.  The rentals payable are apportioned between interest, which is charged to the income statement, and liability, which reduce the outstanding obligations.  Costs in respect of operating leases are charged on a straight-line basis over the term of the lease in arriving at operating profit.

 The other standards noted above do not have a material impact on the results for the current and prior reporting periods.

 

Investment in associates

An associate is an entity over which the Group has significant influence that is neither a subsidiary nor an interest in a joint venture.  Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting.  The investment is recognised initially in the statement of financial position at cost and is adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the associate.  On acquisition any excess of the cost of the investments over the Group's share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment.  Any excess of the Group's share of the net fair value of identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in which the investment is acquired.

 

2. Segment reporting

 

 

 

 

 

The Group's Executive Committee has been identified as the chief operating decision maker. The Executive Committee reviews the Group's internal reporting in order to assess performance and allocate resources. The Executive Committee has determined the operating segments based on these reports.

 

 

 

 

 

 

The Executive Committee considers the business from a product perspective. This has led to the operating segments identified in the table below: there has been no change to the segments during the year (after aggregation). The performance of the operating segments is assessed by reference to their gross profit before exceptional items.

 

 

 

 

 

 

Year ended 25 January 2020

 

Carbonates & other

Still drinks and water

Funkin

Total

 

 

£m

£m

£m

£m

 

Total revenue

196.4

40.1

19.2

255.7

 

Gross profit

88.6

8.6

8.9

106.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 26 January 2019

 

Carbonates & other

Still drinks and water

Funkin

Total

 

 

£m

£m

£m

£m

 

Total revenue

214.4

49.0

15.6

279.0

 

Gross profit

99.9

14.7

7.9

122.5

 

 

 

 

 

 

 

There are no intersegment sales. All revenue is in relation to product sales, which is recognised at point in time, upon delivery to the customer.

 

 

 

 

 

 

"Carbonates & other" segment represents income from the sale of carbonates and other soft drink related items.

 

 

 

 

 

 

The gross profit from the segment reporting is stated before exceptional costs.

 

 

 

 

 

 

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 by the Executive Committee 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 Carbonates & other, Still drinks and water and Funkin are revenues of approximately £41m which arose from sales to the Group's largest customer (2019: £47m). No other single customers contributed 10 per cent or more to the Group's revenue in either 2019 or 2020.

 

 

 

 

 

 

All of the segments included within "Carbonates & other" and "Still drinks and water" 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.

 

 

 

 

 

 

 

2020

 

 

2019

 

Revenue

£m

 

 

£m

 

UK

244.1

 

 

267.6

 

Rest of the world

11.6

 

 

11.4

 

 

255.7

 

 

279.0

 

 

 

 

 

 

 

The Rest of the world revenue includes sales to the Republic of Ireland and wholesale export houses.

 

 

 

 

 

 

All of the assets of the Group are located in the UK.  

3. Other income

 

 

 

 

 

 

2020

2019

 

 

Before exceptional items

Exceptional items*

Total

Total

 

 

£m

£m

£m

£m

 

Wind turbine removal

-

1.8

1.8

-

 

*Refer to Note 4 for details of exceptional income in relation to the wind turbine removal.

 
 

 

4. Exceptional items

 

 

Exceptional items are those that in management's judgement need to be disclosed by virtue of their size and/or nature. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence as well as the size and nature of an item both individually and when aggregated with similar items, for example restructuring costs, product development or asset write offs. This presentation is consistent with the way that financial performance is measured by management and reported to the Board and the Executive Committee and assists in providing a meaningful analysis of our trading results.

 

 

 

Such items are included within the income statement caption to which they relate, and are separately disclosed in the note below. It is believed that separate disclosure of exceptional items further helps investors to understand the performance of the Group.

 

 

 

 

2020

2019

 

£m

£m

Wind turbine removal

(1.8)

-

Simplification and standardisation of operations

1.1

-

Redundancy costs for business reorganisation and restructure

0.7

-

GMP pension equalisation

-

0.7

Total exceptional net debit

-

0.7

 

 

 

 

2020

2019

 

£m

£m

Items included in cost of sales

 

 

Simplification and standardisation of operations

1.1

-

Total included in cost of sales

1.1

-

 

 

 

 

 

 

 

2020

2019

 

£m

£m

Items included in other income

 

 

Wind turbine removal

(1.8)

-

Total included in cost of sales

(1.8)

-

 

 

 

 

2020

2019

 

£m

£m

Items included in administration costs

 

 

Redundancy costs for business reorganisation and restructure

0.7

-

GMP pension equalisation

-

0.7

Total included in administration costs

0.7

0.7

 

 

 

Total exceptional net debit included in operating expenses

0.7

0.7

 

 

 

Total exceptional net debit

-

0.7

 

 

 

For a number of years a wind turbine has been in operation at our Cumbernauld site. This turbine has now been removed to facilitate the construction and operation of additional large scale wind energy projects in Scotland. Management believe that the £1.8m income received as compensation for the removal should be treated as exceptional due to the non-recurring nature and the size of the income received.

 

 

 

In September 2019 the Group embarked on a change programme with the aim of returning the soft drinks business to long term sustainable growth. The programme has two main objectives:

 

 

 

- to simplify and standardise our operations by significantly rationalising our portfolio including simplifying our core brand ranges and routes to market. This involves discontinuing certain product lines and formats at a cost of £0.6m and the closure of our Sheffield sales depot in March 2020 at a cost of £0.5m.

 

 

 

- to strategically restructure and refocus the business so that resources and investment target those areas with the greatest profitable growth opportunities. This initiative will deliver a more contribution focussed Commercial team prioritised on our core brands and a Supply Chain organisation that optimises the balance between agility, resilience and capacity. As a result the Group has incurred exceptional costs relating to employee severance of £0.7m. In certain areas the restructuring programme requires detailed planning and implementation and in these areas the activities and costs will continue in the year to 30 January 2021.

 

In the year to 26 January 2019 a charge of £0.7m has been included for the past service cost in respect of the equalisation of guaranteed minimum pensions ("GMP") benefits. On 26 October 2018, the High Court handed down a judgement involving Lloyds Banking Group's defined benefit pension schemes. The judgement concluded that the schemes should equalise pension benefits for men and women in relation to GMP benefits. The judgement has implications for many pension schemes, including the A.G. Barr defined benefit scheme. The £0.7m expense reflects the best estimate of the effect on our reported financial liabilities. Management believe that the nature of this expense, a non-routine pension cost relating to a significant legal ruling, makes it appropriate to be classified as exceptional.

 

5. Dividends

Dividends paid in the financial year were as follows:

 

2020

 

2019

 

2020

2019

 

per share

 

per share

 

£m

£m

Final dividend

12.74

p

11.84

p

14.5

13.5

Interim dividend paid

4.00

p

3.90

p

4.5

4.4

 

16.74

p

15.74

p

19.0

17.9

 

 

 

 

 

 

 

Our usual practice at this time of the year is to propose a final ordinary dividend to be paid in June, subject to approval by shareholders at the Annual General Meeting held in May. However, given the unprecedented circumstances arising from COVID-19, the Board is not proposing a final dividend at this time.

 

 

 

 

 

 

 

Dividends payable in respect of the financial year were as follows:

 

 

 

 

 

 

 

 

2020

 

2019

 

 

 

 

per share

 

per share

 

 

 

 

 

 

 

 

 

 

Final dividend

-

p

12.74

p

 

 

First interim dividend paid

4.00

p

3.90

p

 

 

 

4.00

p

16.64

p

 

 

 

6. Leases

 

 

 

 

 

 

This note provides information for leases where the Group is a lessee. The Group is not a lessor.

 

 

 

 

 

 

(i) Amounts recognised in the balance sheet

The balance sheet shows the following amounts relating to leases:

 

 

 

 

2020

2019*

Right-of-use assets

 

 

 

£m

£m

Buildings

 

 

 

1.6

-

Plant, equipment and vehicles

 

 

 

6.0

-

 

 

 

 

 

 

 

 

 

 

7.6

-

 

 

 

 

 

 

Lease liabilities

 

 

 

 

 

Current

 

 

 

3.2

-

Non-current

 

 

 

4.7

-

 

 

 

 

 

 

 

 

 

 

7.9

-

 

 

 

 

 

 

Additions to the right-of-use assets during 2019 were £1.9m for the Group.

 

 

 

 

 

 

* In the previous year, the Group only recognised lease assets and lease liabilities in relation to leases that were classified as "finance leases" under IAS 17 Leases. The assets were presented in property, plant and equipment and the liabilities as part of the Group's borrowings. For adjustments recognised on adoption of IFRS 16 on 27 January 2019, please refer to Note 1.

 

 

 

 

 

 

(ii) Amounts recognised in the income statement

 

The income statement shows the following amounts relating to leases:

 

 

 

 

 

2020

2019*

 

 

 

 

£m

£m

Depreciation charge of right-of-use assets

 

 

 

 

 

Buildings

 

 

 

0.2

-

Plant, equipment and vehicles

 

 

 

3.0

-

 

 

 

 

 

 

 

 

 

 

3.2

-

 

 

 

 

 

 

Interest expense (including finance cost)

 

 

 

0.1

-

Expense related to short-term leases (included in cost of goods sold and administrative expenses)

0.5

-

 

 

 

 

 

 

The total cash outflow for leases in 2019 was £3.3m.

 

 

 

 

 

 

 

At 25 January 2020 the Group has no commitments for short-term leases.

 

 

 

 

 

 

 

There are no expenses relation to variable lease payments not included in the measurement of the lease liabilities or income from sub-leasing right-of-use assets.

 

 

 

 

 

 

(iii) The Group's leasing activities and how these are accounted for

The Group leases various offices, warehouses, equipment and vehicles. Rental contracts are typically made for fixed periods of 12 months to 10 years, but may have extension options as described in (iv) below.

 

 

 

 

 

 

Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However for leases for real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.

 

 

 

 

 

 

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

 

 

 

 

 

 

Until the 2019 financial year, leases of property, plant and equipment were classified as either finance leases or operating leases, see Note 1 for details. From 27 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for the Group.

 

 

 

 

 

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

- fixed payments (including in-substance fixed payments), less any lease incentives receivable

- variable lease payments that are based on an index or a rate, initially measured using the index or rate as at the commencement date

- amounts expected to be payable by the Group under residual value guarantees

- the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and

- payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

 

 

 

 

 

 

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

 

 

 

 

 

 

The lease payments are discounted using the rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

 

 

 

 

 

 

To determine the incremental borrowing rate, the Group:

 

 

 

 

 

- where possible, uses recent third party financing received by the Group as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

- uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases

- makes adjustments specific to the lease, e.g. term, country, currency and security.

 

 

 

 

 

 

Lease payments are allocated between principal and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

 

 

 

 

 

 

Right-of-use assets are measured at cost comprising the following:

 

 

 

 

 

- the amount of the initial measurement of the lease liability

- any lease payments made at or before the commencement date less any lease incentives received.

- any initial direct costs, and

- restoration costs

 

 

 

 

 

 

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

 

 

 

 

 

 

Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expenses in the income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

 

 

 

 

 

 

(iv) Extension and termination options

 

 

 

 

 

Extension and termination options are included in a number of property and equipment leases across the Group. These are used to maximise operational flexibility in terms of managing the assets used in the Group's operations. The majority of extension and termination options are exercisable only by the Group and not by the respective lessor.

 

 

 

 

 

 

(v) Residual value guarantees

 

 

 

 

 

To optimise lease costs during the contract period the Group sometimes provides residual value guarantees in relation to equipment leases.

 

 

 

 

 

 

The Group initially estimates and recognises amounts expected to be paid under residual value guarantee as part of the lease liability. Typically the expected residual value at lease commencement is equal to or higher than the guaranteed amount, and so the Group does not expect to pay anything under the guarantees.

 

7. Cash and cash equivalents

 

Group

Company

 

2020

2019

2020

2019

 

£m

£m

£m

£m

 

 

 

 

 

Cash and cash equivalents

10.9

21.8

7.2

17.0

 

 

 

 

 

Cash and cash equivalents in the table above are included in the cash flow statements.

 

 

 

 

 

The credit quality of the holder of the Cash at bank is A2 rated (2019: A2 rated).

Annual General Meeting

 

The Annual General Metting will be held at 11:00am on 22nd May 2020 at the offices of Ernst & Young LLP, 5 George Square, Glasgow, G2 1DY.

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 an 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 cape x 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 flo w 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 dividend per share is a non-GAAP measure calculated as the sum of all interim dividends declared during the reporting period plus any proposed dividend payable in respect of that reporting period.

 

 

 

 

 

 

 

 

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 full paid shares of the Company.

 

 

 

 

 

 

 

 

Net cash from operating activitie s is a GAAP measure and is defined as the cash generated/(used in) the ongoing regular business activities in the year.

 

 

 

 

 

 

 

 

Net fund s 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

2020
£m

2019
£m

Revenue

255.7

279.0

Reported gross profit

105.0

122.5

Gross margin

41.1%

43.9%

 

 

 

Gross margin before exceptional items

2020
£m

2019
£m

Revenue

255.7

279.0

Gross profit before exceptional items

106.1

122.5

Gross margin before exceptional items

41.5%

43.9%

 

 

 

Operating margin

2020
£m

2019
£m

Revenue

255.7

279.0

Reported operating profit

38.1

45.1

Operating margin

14.9%

16.2%

 

 

 

Operating margin before exceptional items

2020
£m

2019
£m

Revenue

255.7

279.0

Operating profit before exceptional items

38.1

45.8

Operating margin before exceptional items

14.9%

16.4%

 

 

 

EBITDA

2020
£m

2019
£m

Operating profit before exceptional items

38.1

45.8

Depreciation and amortisation

13.0

8.8

EBITDA

51.1

54.6

 

 

 

EBITDA margin

2020
£m

2019
£m

Revenue

255.7

279.0

EBITDA

51.1

54.6

EBITDA margin

20.0%

19.6%

 

 

 

Expansionary capex

2020
£m

2019
£m

Expansionary capex

0.3

0.4

Maintenance capex

14.5

8.5

Capex per cash flow statement

14.8

8.9

 

 

 

ROCE

2020
£m

2019
£m

Profit before tax

37.4

44.5

Exceptional items

-

0.7

Profit before tax and exceptional items

37.4

45.2

 

 

 

Intangible assets

101.8

103.1

Property, plant and equipment

101.2

95.3

Right of use assets

7.6

-

Investment in associates

0.9

-

Inventories

18.3

20.4

Trade and other receivables

57.2

57.7

Current tax

(3.0)

(4.0)

Trade and other payables

(52.4)

(56.9)

Invested capital

231.6

215.6

ROCE

16.1%

21.0%

 


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