TIDMBAG
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
2020 2019 Change
Revenue GBP255.7m GBP279.0m (8.4)%
---------- ---------- --------
Profit before tax (before exceptional
items)* GBP37.4m GBP45.2m (17.3)%
---------- ---------- --------
Statutory profit before tax GBP37.4m GBP44.5m (16.0)%
---------- ---------- --------
EBITDA margin* (1) 20.0% 19.6% +41bps
---------- ---------- --------
Net cash from operating activities
(1) GBP40.1m GBP44.6m (10.1)%
---------- ---------- --------
Basic earnings per share 26.50p 31.51p (15.9)%
---------- ---------- --------
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 - GBP30m 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
-- Group operating 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 GBP10.9m 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 GBP60m 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 GBP3.3m 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
GBP255.7m and profit before tax and exceptional items* falling
17.3% to GBP37.4m (statutory profit before tax was also GBP37.4m).
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
GBP37.4m, 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 GBP255.7m (2019 : GBP279.0m)
-- Profit before tax and exceptional items* GBP37.4m (2019 : GBP45.2m)
-- Profit before tax and after exceptional items GBP37.4m (2019 : GBP44.5m)
-- Operating margin* 14.9% (2019 : 16.2%)
-- Strong balance sheet with net cash of GBP3.0m (post IFRS 16)
having completed our GBP30m share repurchase programme
Statutory profit before tax of GBP37.4m reflects an exceptional
cost of GBP1.8m in the year, associated with the completion of the
first phase of our business re-engineering programme, offset by a
GBP1.8m 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 CO(2)
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 GBP1m 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 GBP14m 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 GBP10.9m 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 GBP60m 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 GBP255.7m, 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 CO(2) shortage. The Funkin business had another year of strong
growth.
Statutory profit before tax at GBP37.4m 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
GBP40.1m (GBP36.8m on a pre-IFRS 16 basis - cash from operating
activities has increased by GBP3.3m with a corresponding increase
in lease payments of GBP3.3m within financing activities). The
balance sheet remains robust, with a well-invested asset base
(capital expenditure in the year was GBP14.8m as we continue to
invest ahead of depreciation). We ended the financial year with net
cash in the bank, after completing our GBP30m 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 GBPnil.
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 (GBP1.8m charge) : In September
2019 the Group embarked on a change programme with two key
objectives:
o 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 (GBP0.6m) and the
closure of our Sheffield sales depot in March 2020 (GBP0.5m). 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
o An organisational change programme largely within the
Commercial team to refocus resources and investment towards those
areas with the greatest profitable growth potential (GBP0.7m)
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 (GBP1.8m 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 GBP0.2m outflow
with GBP1.6m of the wind turbine removal credit
received shortly after the end of the financial year.
In the prior year, an exceptional expense of GBP0.7m 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 GBP0.7m pre-tax cost recognised in 2019
remains the best estimate of the effect on our reported pension
liabilities.
Interest
Net finance charges, totalling GBP0.6m, 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
------------------------------------- ----- -------
GBPm GBPm
----- -------
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 GBP7.6m (2019: GBP8.7m) 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 GBP3.0m reduction in pension
liabilities under IAS 19, increased dividends paid to shareholders
of GBP19.0m (2019: GBP17.9m) and GBP11.5m of share repurchases
(2019: GBP10.3m).
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 GBP40.1m (2019:
GBP44.6m) and net cash balances of GBP10.9m.
EBITDA* reduced by GBP3.5m to GBP51.1m 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 GBP0.8m 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 GBP3.3m 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 GBP14.8m, our cash capex spend in the
year was, as planned, significantly ahead of the prior year
(GBP8.9m). 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 (GBP14.0m overall capital investment with
GBP7.5m 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* GBP3.0m 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
GBP20m facilities with two years remaining and one GBP20m 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 GBP60m 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 (GBP1.0m) and
subsequently adjusted to reflect the Group's share of the loss
since our investment (GBP0.1m). 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
GBP30m 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 GBP11.5m and an average cost per share of
GBP6.06. Over the whole GBP30m programme 4.7m shares were
repurchased at an average cost of GBP6.33 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 GBP60m 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 GBP60m 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 GBP4.8m 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 GBP13.5m
as at 26 January 2019 to GBP 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 GBP5.59, 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 GBP626m at the financial year end.
Stuart Lorimer
FINANCE DIRECTOR
Consolidated Income statement for the year ended 25 January 2020
2020 2019
Before Before
exceptional Exceptional exceptional Exceptional
items items* Total items items* Total
GBPm GBPm GBPm GBPm GBPm GBPm
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
GBPm GBPm
---------------------------------------------------------------------------- ----------- -------
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
Share Share premium options Other Retained Total
capital account reserve reserves earnings as restated
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- ------------- -------- --------- --------- ------------
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
GBPm GBPm
------------------------------------------------ ------- -------
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
GBPm GBPm
------------------------------------------------------------------------------------------------- ------ ------
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:
GBPm
-------------------------------------------------------------------------------------------- -----
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 GBP3.3m, 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
GBPm GBPm GBPm GBPm
----------------------------- ------------------------- ------------------------------ -------- ------
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
GBPm GBPm GBPm GBPm
----------------------------- ------------------------- ------------------------------ -------- ------
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 GBP41m which arose from sales to the Group's largest customer (2019:
GBP47m). 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 GBPm GBPm
----------------------------- ------------------------- ------------------------------ -------- ------
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 Exceptional
items items* Total Total
GBPm GBPm GBPm GBPm
--------------------- ------------------ ----------- ----- -----
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
GBPm GBPm
------------------------------------------------------------------------------------------ -------- -----
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
GBPm GBPm
------------------------------------------------------------------------------------------ -------- -----
Items included in cost of sales
Simplification and standardisation of operations 1.1 -
------------------------------------------------------------------------------------------ -------- -----
Total included in cost of sales 1.1 -
------------------------------------------------------------------------------------------ -------- -----
2020 2019
GBPm GBPm
------------------------------------------------------------------------------------------ -------- -----
Items included in other income
Wind turbine removal (1.8) -
------------------------------------------------------------------------------------------ -------- -----
Total included in cost of sales (1.8) -
------------------------------------------------------------------------------------------ -------- -----
2020 2019
GBPm GBPm
------------------------------------------------------------------------------------------ -------- -----
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 GBP1.8m 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 GBP0.6m and the closure of our Sheffield sales
depot in March 2020 at a cost of GBP0.5m.
- 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 GBP0.7m. 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 GBP0.7m 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 GBP0.7m 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 GBPm GBPm
------------------------------------------------- ---------------- ---------------- ------- -------
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 GBPm GBPm
----------------------------------------------------------------------------------------------- ---- ---- -----
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 GBP1.9m 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*
GBPm GBPm
----------------------------------------------------------------------------------------------- ---- ---- -----
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 GBP3.3m.
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
GBPm GBPm GBPm GBPm
---------------------------------------------------------------------------------- ----------- ---- ---- -----
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 22(nd) 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
2020 2019
Gross margin GBPm GBPm
------------------------------------------ ------ ------
Revenue 255.7 279.0
Reported gross profit 105.0 122.5
------------------------------------------ ------ ------
Gross margin 41.1% 43.9%
------------------------------------------ ------ ------
2020 2019
Gross margin before exceptional items GBPm GBPm
------------------------------------------ ------ ------
Revenue 255.7 279.0
Gross profit before exceptional items 106.1 122.5
------------------------------------------ ------ ------
Gross margin before exceptional items 41.5% 43.9%
------------------------------------------ ------ ------
2020 2019
Operating margin GBPm GBPm
------------------------------------------ ------ ------
Revenue 255.7 279.0
Reported operating profit 38.1 45.1
------------------------------------------ ------ ------
Operating margin 14.9% 16.2%
------------------------------------------ ------ ------
2020 2019
Operating margin before exceptional items GBPm GBPm
------------------------------------------ ------ ------
Revenue 255.7 279.0
Operating profit before exceptional items 38.1 45.8
------------------------------------------ ------ ------
Operating margin before exceptional items 14.9% 16.4%
------------------------------------------ ------ ------
2020 2019
EBITDA GBPm GBPm
------------------------------------------ ------ ------
Operating profit before exceptional items 38.1 45.8
Depreciation and amortisation 13.0 8.8
------------------------------------------ ------ ------
EBITDA 51.1 54.6
------------------------------------------ ------ ------
2020 2019
EBITDA margin GBPm GBPm
------------------------------------------ ------ ------
Revenue 255.7 279.0
EBITDA 51.1 54.6
------------------------------------------ ------ ------
EBITDA margin 20.0% 19.6%
------------------------------------------ ------ ------
2020 2019
Expansionary capex GBPm GBPm
------------------------------------------ ------ ------
Expansionary capex 0.3 0.4
Maintenance capex 14.5 8.5
------------------------------------------ ------ ------
Capex per cash flow statement 14.8 8.9
------------------------------------------ ------ ------
2020 2019
ROCE GBPm GBPm
------------------------------------------ ------ ------
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%
------------------------------------------ ------ ------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UPURWCUPUGBM
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