REG - Britvic plc - Britvic plc Interim Results
17/05/2022 07:00
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RNS Number : 6797L Britvic plc 17 May 2022
Britvic plc Interim Results - 17 May 2022
For the six months ended 31 March 2022
Another strong performance, commencing a £75m share buyback programme
Group Financial Headlines:
· Revenue increased 18.5%(1) to £719.3m (reported +16.6%)
· Adjusted EBIT increased 20.7%(1) to £73.5m (reported +22.3%),
statutory EBIT increased 35.8%
· Adjusted EBIT margin increased 20bps(1) to 10.2% (reported +50bps)
· Profit after tax increased 48.7% to £45.8m
· Adjusted earnings per share of 19.4p, up 27.8%
· Interim dividend of 7.8p, up 20.0%
· Adjusted net debt/EBITDA of 2.2x, a reduction of 0.6x on H1 last year
Highlights:
· Double-digit revenue growth, with volume and pricing growth across
all business units
o Continued growth in At-Home channels, with Out-of-Home channels recovering
back towards pre-COVID levels
o Immediate Consumption volumes ahead of pre-COVID
· Pricing activity, promotional strategy, management of our mix and
disciplined cost control has helped to mitigate the impact of inflation
· Good progress against our strategic objectives including:
o Additional production capacity in GB and Brazil now operational
o Strong momentum across our core brands
o Exciting innovation launches with core brand extensions, new flavours and
new pack formats
o Accessing new growth spaces - Plenish relaunched and Aqua Libra flavour tap
launched
· Continuing to build investment in our people, brands and
infrastructure
· Commencing an initial share buyback programme of £75m in the next 12
months, reflecting the strength of our balance sheet and confidence in our
growth strategy
6 months ended 6 months ended % change Underlying
31 March 31 March actual exchange % change
2022 2021(2) rate (AER) constant
£m £m exchange rate(1)
Revenue 719.3 617.1 16.6% 18.5%
Adjusted EBIT 73.5 60.1 22.3% 20.7%
Adjusted EBIT margin 10.2% 9.7% 50bps 20bps
Adjusting EBIT items (3) (6.4) (10.7) 40.2%
Statutory EBIT 67.1 49.4 35.8%
Statutory EBIT margin 9.3% 8.0% 130bps
Profit after tax 45.8 30.8 48.7%
Basic EPS 17.2p 11.6p 48.3%
Adjusted EPS 19.4p 15.2p 27.8%
Interim dividend per share 7.8p 6.5p 20.0%
Adjusted net debt/EBITDA 2.2x 2.8x 0.6x
(1.) Adjusted for constant currency, and the Ireland agency brands which
ceased trading in March 2021.
(2.) Please refer to note 21 of the interim financial statements for details
of SaaS arrangements restatement.
(3)(.) Adjusting EBIT items of £6.4m are detailed on page 33.
Simon Litherland, Chief Executive Officer commented:
"I am delighted with our first half performance. We have accelerated revenue
growth across our markets and made good progress against our strategic
priorities. We have successfully executed pricing and cost actions to mitigate
significant levels of inflation, while continuing to rebuild investment to
support our near and longer-term growth ambitions. We continue to generate
strong cash flow and have increased the interim dividend by 20%. I am also
pleased that today the Board have announced our intention to commence an
initial share buyback programme of £75m in the next 12 months, reflecting the
strength of our balance sheet and confidence in our growth strategy.
The current geo-political uncertainty is likely to result in continued cost
inflation and pressure on consumer spending at least into 2023. I remain
confident however that we will continue to successfully navigate the
headwinds, thanks to our portfolio of leading brands, strong customer
relationships, smart revenue management capability and the resilience of our
supply chain and our people. This will enable us to maintain our positive
momentum, progress our key performance metrics and strategic priorities, and
continue to create value for all our stakeholders."
This announcement contains inside information related to a share buyback
programme.
The person responsible for making this announcement is Clare Thomas, Company
Secretary.
For further information please contact:
Investors:
Joanne Wilson (Chief Financial Officer) +44 (0) 121 711 1102
Steve Nightingale (Director of Investor Relations) +44 (0) 7808 097 784
Media:
Stephanie Macduff-Duncan (Head of Corporate Communications) +44 (0) 7808 097 680
Stephen Malthouse (Headland) +44 (0) 7734 956 201
There will be a webcast of the presentation given today at 09:00am by Simon
Litherland (Chief Executive Officer) and Joanne Wilson (Chief Financial
Officer). The webcast will be available at www.britvic.com/investors with a
transcript available in due course. To ask a question on the webcast, please
dial +0800 279 6877 or +44 (0) 330 165 4012 and enter the confirmation code
7088891.
Note to editors
About Britvic
Britvic is an international soft drinks business rich in history and heritage.
Founded in England in the 1930s, it has grown into a global organisation with
37 much-loved brands sold in over 100 countries.
The company combines its own leading brand portfolio including Fruit Shoot,
Robinsons, Tango, J2O, London Essence, Teisseire and MiWadi with PepsiCo
brands such as Pepsi, 7UP and Lipton Ice Tea which Britvic produces and sells
in Great Britain and Ireland under exclusive PepsiCo agreements.
Britvic is the largest supplier of branded still soft drinks in Great Britain
and the number two supplier of branded carbonated soft drinks in Great
Britain. Britvic is an industry leader in the island of Ireland with brands
such as MiWadi and Ballygowan, in France with brands such as Teisseire,
Pressade and Moulin de Valdonne and in its growth market, Brazil, with
Maguary, Bela Ischia and Dafruta. Britvic is growing its reach into other
territories through franchising, export and licensing.
Britvic is a purpose driven organisation with a clear vision and a clear set
of values. Our purpose, vision and values sit at the heart of our company,
driving us forward together to create a better tomorrow. We want to contribute
positively to the people and world around us. This means ensuring that our
sustainable business practices, which we call Healthier People, Healthier
Planet, are embedded in every element of our business strategy.
Our purpose: Enjoying life's everyday moments
Our vision: To be the most dynamic soft drinks company, creating a better
tomorrow
Our values: We care, We're courageous, Own it, Stronger together, Act with
Pace
Britvic is listed on the London Stock Exchange under the code BVIC and is a
constituent of the FTSE 250 index.
Find out more at Britvic.com (https://www.britvic.com/)
Cautionary note regarding forward-looking statements
This announcement includes statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors including the COVID-19 pandemic, which may cause the actual
results, performance, or achievements of the Group to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Except as required by the Listing Rules and
applicable law, Britvic undertakes no obligation to update or change any
forward-looking statements to reflect events occurring after the date such
statements are published.
Market data
GB take-home market data referred to in this announcement is supplied by
Nielsen and runs to 26 March 2022. ROI take-home market data referred to is
supplied by Nielsen and runs to 27 March 2022. French market data is supplied
by Nielsen and runs to 27 March 2022. Brazil is supplied by Nielsen and runs
to 31 March 2022.
Next scheduled announcement
Britvic will publish its Q3 trading statement on 21 July 2022.
Chief Executive Officer's Review
Today we report our results for the six months to 31 March 2022, during which
time we continue to build on our strong business momentum and make significant
progress against our strategic priorities. I am proud of the Britvic team, who
are at the heart of our success, and on behalf of the Board and Executive, I
would like to extend my thanks to them and their families for their continued
commitment.
Performance against all our key financial metrics in the first half of the
year was strong, reflecting both accelerated growth across our markets and
brands and the high level of Covid restrictions that were in place in the
first half of 2021. While the Omicron variant led to a temporary slow-down in
the recovery of the Out-of-Home channel part-way through the half, trading in
the Out-of-Home channel has since recovered back towards 2019 levels. Since
the pandemic, the geo-political environment has increasingly impacted the
global economy, leading to cost pressures at levels not seen for many years.
As a business we have risen to the challenge, implementing both revenue
management and cost efficiency initiatives across all our markets.
This has resulted in first half growth in underlying revenue of 18.5%,
adjusted EBIT of 20.7%, and underlying margin improvement of 20bps. Our
revenue growth has accelerated, in Q1, revenue was +16.5% and in Q2 +20.8%.
Our momentum is demonstrated by underlying group revenue increasing 13.6%
versus the comparable period of H1 2020 (before the pandemic began to
significantly impact performance). Our focus and discipline on cash enabled us
to generate free cash flow despite the peak working capital outflow we
typically see in our first half, and our half-year leverage ratio is now at
its lowest since 2016, with £130m repayment of debt since 2020. The
strength of our balance sheet and cash generative business supports our growth
aspirations as well as presenting an opportunity for increased returns to
shareholders through dividends and the share buyback programme announced
today.
We have also made good progress on our Healthier People, Healthier Planet
programme. Our employee engagement score remains top quartile, our calories
per serve remain well below our 30 calories target, we saw a further reduction
in our carbon scope 1 and 2 emissions, and we have achieved 36% rPET across
the portfolio in GB and Ireland.
A growth strategy
Before the pandemic, we took the opportunity to evolve our strategy, to ensure
we are best positioned to access growth opportunities in the changing consumer
and retail landscape across our markets. With a portfolio of market-leading
brands, multi-channel routes to market, collaborative customer relationships
and a well-invested supply chain, we set out our strategic framework as
follows:
Our future focus remains on four key strategic priorities:
· Build local favourites and global premium brands
· Flavour billions of water occasions
· Healthier People, Healthier Planet
· Access new growth spaces
Each of our markets has a defined role to play:
· GB - to lead market growth
· Brazil - to accelerate growth and expand our presence
· Other International - to globalise premium brands and improve
profitability in Western Europe
Underpinning this strategy are three critical enablers:
· Generate fuel for growth through efficiency
· Transform organisational capability and culture
· Selective M&A to accelerate growth
Market review
GB
Our performance in GB has been strong, with revenue growth in the second
quarter accelerating at +21.8% compared to last year. Growth was led by the
Out-of-Home channel, with revenue significantly ahead of 2021 and the
comparable period (pre-COVID) to the end of March 2020, reflecting an increase
in socialising and mobility as people spent less time at home. Our performance
in the At-Home channel was also robust, with revenue continuing to grow
compared to last year. According to Nielsen, the At-Home channel retail sales
value is now £9.8bn, increasing £1.1bn over the previous two years.
Encouragingly, our At-Home market share remains ahead of pre-COVID levels.
Across the market, our brands have shown momentum, with revenue increasing not
only versus last year but also 13.6% ahead of 2020. All of Pepsi, Tango, 7UP,
R Whites, J20, Lipton and Fruit Shoot delivered double-digit revenue growth.
Robinsons volumes were softer, especially in Q2, reflecting strong demand last
year and a reduction in promotional activity this year to grow margin.
During the first half, we implemented significant pricing activity, including
changes to promotional price points and careful management of our mix, which
has helped to mitigate the impact of inflation. Price increases were
implemented early in Q2 and hence we have seen a lag effect on inflation
mitigation in the GB brand contribution rate in the first half.
We have continued to invest in our brands, with highly relevant and effective
marketing activation, alongside innovation to broaden our appeal. Pepsi MAX
was highly visible to consumers through its continued sponsorship of the UEFA
Champions League. J20 launched an on-pack promotion for Christmas, while Fruit
Shoot returned with its 'Merrylicious' festive flavour. Both brands are
benefiting from an increase in consumer socialising. We launched a new Tango
flavour, Berry Peachy, adding another sugar-free option to the range, as did
Aqua Libra with Blood Orange & Mango.
Alongside the growth momentum of our core brands, we have also continued to
invest in accessing future growth spaces. Following our acquisition of Plenish
last year, the brand has been able to leverage our strong customer
relationships and brand marketing expertise. Plenish was relaunched in late Q2
with new packaging, highlighting its premium, natural credentials, and secured
significant additional distribution for the plant-based milks and shots
ranges. The Aqua Libra Company, which we launched last year following the
acquisition of The Boiling Tap Company in 2020, has used our flavour
concentrates expertise to develop a unique tap proposition that offers
flavoured water alongside still, sparkling and hot, and has been building a
pipeline of opportunities in both the workplace and retail channels. Our
premium tonic, London Essence, has gained share in the retail channel and
increased distribution in pubs, bars and restaurants of both packaged product
and our dispense offering, Freshly Infused.
We also continue to enhance our business capability. Our new can line is now
operational at our Rugby factory, adding approximately 150m litres of capacity
and demonstrating our confidence in future growth. Our commercial
transformation programme went live as planned in Q2, implementing the Kantar
commercial system to optimise the efficiency and effectiveness of our
promotions and customer investment. It also simplifies our ways of working and
enhances collaboration between teams to improve our commercial plans. We also
continue to enhance our digital capability with the launch of an in-house
digital studio, which will improve the quality and speed our brands interact
with consumers by creating a range of highly relevant real-time content,
including videos and animations.
Brazil
Brazil's revenue growth has continued at double-digit levels, with growth
accelerating in the second quarter. Our focus has remained on building scale
to deliver sustainable growth. Since the acquisition of EBBA in 2015, we have
gained significant market share in the core categories of concentrates and
juice drinks and successfully expanded to create strong footholds in new
market segments.
Launching Fruit Shoot in Brazil and growing the range and pack formats for the
local market has enabled us to achieve an 18% volume share of the kids' drinks
market. We now have a credible, scale coconut water brand in Puro Coco, with a
17% volume share of the category, while our grape offering, Seleção, has an
11% volume market share. As well as great innovation in both core and new
categories, a key element of our success has been the quality of our in-store
execution, with improved shelf presence and excellent feature & display,
attracting consumers to buy our brands.
Our business in Brazil has experienced another year of significant cost
inflation, in common with other FMCG companies. While our focus is to build
scale market share across the categories in which we operate, we have
implemented multiple price increases as part of our strategy to partially
mitigate the adverse inflationary impact on trading contribution.
We believe that the Brazil business offers a long-term opportunity to grow. We
have recently leased a new manufacturing facility in Rio Grande do Sul, in
Southern Brazil. This will enable us to continue our vertical integration by
increasing grape processing closer to its source and thereby reduce logistics
costs and road miles. Recently we also installed a new biomass boiler, our
third, as part of a decarbonisation strategy.
Over the last few years, we have been building a premium, higher-margin
portfolio. As well as introducing Britvic brands such as Mathieu Teisseire,
London Essence, and Britvic mixers, we have launched local brands, including
Nuts, a plant-based milk, and Natural Tea. Both Britvic mixers and London
Essence have been building awareness with the trade through event activation,
social media influencers and trade shows. Recently we moved production to the
local market for London Essence and introduced two unique flavours of Britvic
mixers to appeal to local consumers.
Other International
Other International combines our full-service operations in Ireland and France
with markets where we have a commercial presence, such as Benelux and the
travel sector, and our global premium brands, London Essence and Mathieu
Teisseire.
Our performance in Ireland has been strong, with underlying revenue increasing
23% and both the Out-of-Home and At-Home channels recording double-digit
growth. Encouragingly all our core brands were in strong growth. We
implemented actions early in Q1 to mitigate inflationary pressures, including
price increases, mix management and promotional optimisation.
We have continued to leverage the strength of our brand portfolio with
innovations such as Ballygowan 'Hint of Fruit' flavoured water and entered the
energy category with the launch of Rockstar last year and more recently, Club
'Loaded'. Through a combination of mix management and simplifying the
operating model with the closure of Counterpoint last year, the Irish business
has delivered a significant improvement in operating margin, in line with our
strategy.
In France, all brands were in solid growth, with revenue +11.8% compared to
last year. Our brands also gained market share within the categories we
participate. The trading environment in France continues to be particularly
challenging, and our pricing activity has only partially mitigated the
inflationary cost pressure we face.
Our strategy also seeks to grow our global premium portfolio such as Mathieu
Teisseire. The heartland of the Mathieu Teisseire opportunity is in the
Out-of-Home channel, and the lifting of restrictions has resulted in the brand
regaining momentum. To support its expansion, we have secured a co-packing
agreement in France to complement the current production at our factory in
Crolles. We have also secured new distribution agreements in key markets, such
as working with partners with the scale and presence to enable us to realise
the brand's full potential. We have also expanded our capability with a new
studio in the Middle East and one soon to open in Paris, trade event
promotional opportunities and deploying brand ambassadors in our focus
markets.
Similarly, London Essence also benefited from lifting restrictions, delivering
strong growth globally. We have secured key new distributors in Italy, Belgium
and Australia and expanded the range of tonics and sodas to support the
premium category position. We have also secured our first multi-market listing
for both brands with the Marriott Hotel group.
Outlook
Strong revenue momentum has continued in April, with double-digit revenue
growth year-on-year, in line with our expectations. In the second half we have
clear priorities including activating highly relevant marketing programmes,
expanding our core brands through extension and innovation and developing our
presence in new growth spaces.
We are confident that the strength of our portfolio, combined with the agility
and resilience of our well-invested business, puts us in a strong position to
continue to successfully navigate through the current macro uncertainties and
inflationary environment.
While soft drinks are not immune to changes in consumer spending, both the
category and Britvic's leading family favourite brands have historically shown
themselves to be resilient and low elasticity through a downturn and we are
confident we will continue to navigate short-term uncertainties. The
long-term prospects and growth opportunities for Britvic also remain robust,
and we are confident in our ability to create sustainable returns for all our
stakeholders.
Chief Financial Officer's Review
Overview
We have delivered a strong performance in the first half of the year, building
on the momentum we saw as we exited 2021 and with all key financial metrics on
a positive trajectory. Underlying Group revenue increased 18.5% year-on-year
on a constant currency basis, and we saw a sequential improvement through the
year, with second-quarter revenue increasing 20.8% year-on-year as we lapped
lockdown restrictions in our markets in the prior year. Revenue was 13.6%
ahead of the same period in 2020.
We have successfully executed pricing plans in each of our markets through the
first half. There has however been a time lag between inflation hitting our
P&L and the implementation of price increases which has impacted Brand
Contribution Margin. In addition to price, we have used other levers to help
mitigate inflationary pressure, including mix, promo optimisation,
productivity initiatives and disciplined cost management. Consequently,
brand contribution is adverse across the business units while group adjusted
EBIT margin is ahead. We will realise the full benefits of the price increases
in the second half of the year.
Adjusted EBIT increased 20.7% to £73.5m, resulting in an adjusted EBIT margin
of 10.2%, a 20bps improvement year-on-year. The increase in EBIT margin
reflects a positive channel mix as Out-of-Home volumes recovered and improved
operating leverage. This was achieved while increasing our investment, most
notably in A&P, our digital capabilities, operational capacity, and
sustainability-related activities.
Adjusted EPS increased 27.8% year-on-year. The interim dividend equates to
7.8p per share, a year-on-year increase of 20.0%.
Our cash performance continued to be strong with a positive free cash flow in
the half, driven by a relentless focus on day-to-day cash management. Since 31
March 2021, we have delivered a reduction in leverage with an adjusted net
debt/EBITDA ratio of 2.2x at 31 March 2022, a 0.6x reduction from this time
last year.
Our confidence in the continued downward trajectory of our leverage ratio has
resulted in the Board's decision to commence an initial share buyback
programme.
Below is a summary of the segmental performance and explanatory notes related
to items, including taxation, interest, and free cash flow generation.
GB 6 months ended 6 months ended % change
31 March 2022 31 March 2021 actual
£m £m exchange rate
Volume (million litres) 827.1 746.7 10.8%
ARP per litre 59.6p 55.3p 7.8%
Revenue 493.0 413.2 19.3%
Brand contribution 187.8 165.3 13.6%
Brand contribution margin 38.1% 40.0% (190) bps
In GB, we have seen accelerated growth with revenue increasing 19.3%
year-on-year (+13.6% versus H1 FY20) and brand contribution up by 13.6%.
Out-of-Home revenue increased by 59.0%, as we lapped prior year trading
restrictions and the channel continued its recovery back to 2019 levels, and
At-Home continued to grow increasing +4.4% year-on-year.
ARP growth of 7.8% was driven by an improved mix and the benefit of price and
promotion actions implemented during the half. Socialising brands, including
J20 and Fruit Shoot, and immediate consumption pack formats benefited from the
lifting of restrictions and increased mobility. The immediate consumption
improvement was seen across our brand portfolio, including Pepsi, 7UP, Tango,
Robinsons RTD and Lipton. A&P increased year-on-year by £5.2m as the
rebuild of brand investment continued. This resulted in 70bps decline in brand
contribution margin with the balance of the 190bps decline due to input cost
inflation. Cost inflation was only partially mitigated in the first half as
price increases were implemented in early Q2.
Brazil 6 months ended 6 months ended % change % change
31 March 2022 31 March 2021 actual like-for-like
£m £m exchange rate at constant
exchange rate
Volume (million litres) 154.8 146.2 5.9% 5.9%
ARP per litre 41.8p 38.3p 9.1% 8.9%
Revenue 64.7 56.0 15.5% 15.3%
Brand contribution 9.3 11.5 (19.3)% (19.3)%
Brand contribution margin 14.3% 20.5% (620)bps (620)bps
In Brazil, we saw a continuation of double-digit revenue growth with revenue
at constant currency up 15.3% which, after adjusting for PIS/COFINS tax
benefits, translates to underlying revenue growth of 18.4%. This was driven
by both volume and ARP growth of 5.9% and 8.9% respectively.
The drivers of growth were RTD juice, Kids range and grape. Concentrates
revenue was broadly flat while Puro Coco declined due to a shortage of coconut
supply in the period. Brand contribution declined over 19% due to continued
input cost inflation, product mix and lower PIS/COFINS tax rebates, the latter
accounting for 215bps of the brand contribution decline. Multiple price
increases were implemented during the half which, together with cost actions,
helped mitigate some of the inflationary pressures we are experiencing.
Other International 6 months ended 6 months ended % change % change
31 March 2022 31 March 2021 actual like-for-like
£m £m exchange rate at constant
exchange rate
Volume (million litres) 193.7 169.2 14.5% 14.5%
ARP per litre 83.4p 85.1p (2.0)% 2.6%
Revenue 161.6 147.9 9.3% 17.4%
Brand contribution 48.0 46.0 4.3% 8.4%
Brand contribution margin 29.7% 31.1% (140)bps (240)bps
Note: Other International consists of France, Ireland and other international
markets. Concentrate sales are included in both revenue and ARP but do not
have any associated volume. % like-for-like excludes Counterpoint agency
brands.
Across Other International, underlying volume grew 14.5%, ARP increased 2.6%
and revenue increased 17.4%. The strong recovery in Ireland continued, with
revenue growing 23.0%. France's revenue grew 11.8%, with all brands in
growth and taking share. The rest of international also saw double-digit
growth, led by the recovery of the travel channel, sales in Europe and the
Middle East. Inflationary cost pressures impacted brand contribution,
resulting in a 240bps margin decline.
Fixed costs - pre-adjusting items 6 months ended 6 months ended % change % change
31 March 2022 31 March 2021 actual like-for-like
£m £m exchange rate at constant
exchange rate
Non-brand A&P (5.2) (4.3) (20.9)% (20.9)%
Fixed supply chain (64.2) (62.6) (2.5)% (3.7)%
Selling costs (37.9) (36.0) (5.3)% (6.5)%
Overheads and other (64.3) (59.8) (7.5)% (9.7)%
Total (171.6) (162.7) (5.5)% (6.9)%
Total A&P investment (25.7) (19.6)
A&P as a % of own brand revenue 3.6% 3.2%
Overall, our fixed cost base increased 6.9% on a like-for-like basis which
reflects selective investment in key areas and a continued discipline on our
discretionary spend.
Total A&P was £6.1m higher year-on-year which reflects the continued
rebuild of investment in our brand portfolio. Fixed supply chain costs
increased 3.7% primarily driven by utilities inflation across all our sites.
During the period we increased production capacity in Brazil and a new can
line became operational in GB in early Q2.
Selling costs increased 6.5% in part driven by the acquisition of Plenish in
the second half of 2021 and increased discretionary spend as costs including
travel partially normalised.
Overheads and other costs increased 9.7% driven by selective investment in our
capability and a year-on-year adverse movement of £2.1m FX-related hedging
losses offset by reduced costs following the closure of the Counterpoint
business.
Interest
The net finance charge for the period ended 31 March 2022 was £7.8m, compared
with £9.6m in the comparative period due to lower average debt levels through
the period.
Adjusting items - pre-tax
In the period, the Group incurred, and has separately disclosed, a net charge
of £6.4m (2021 restated: £10.7m) of pre-tax adjusting items. Adjusting items
comprises:
· Implementation of an accounting policy change following an IFRIC
agenda decision in relation to customisation and configuration costs of
Software-as-a-Service (SaaS) arrangements which are now expensed as incurred
rather than capitalised. This resulted in charges in the first half of £3.2m
relating to IT projects (see notes 4 and 21 to the Interim Financial
Statements for more detail),
· Strategic M&A credit of £1.2m in relation to the remeasurement
and utilisation of historic provisions, and
· Acquisition-related amortisation of £4.3m and other costs of £0.1m.
Taxation
The adjusted tax charge for the period was £13.8m (6 months ended 31 March
2021: £10.2m), which equates to an adjusted effective tax rate of 22.4% (6
months ended 31 March 2021: 21.8%). This increase is mainly due to movements
in deferred tax and a small prior year adjustment. The reported net tax charge
was £13.4m (6 months ended 31 March 2021: £8.9m), which equates to an
effective tax rate of 22.7% (6 months ended 31 March 2021: 22.4%).
Earnings per share (EPS)
Adjusted basic EPS for the period was 19.4 pence, an increase of 27.8% (at
actual exchange rates) on the prior year due to higher operating profits and a
lower interest charge. Adjusted diluted EPS improved 28.5%. Basic EPS for
the period was 17.2 pence, an increase of 48.3% on last year.
Dividends
The Board is declaring an interim dividend of 7.8p per share with a total
value of £20.9m. The interim dividend for 2022 will be paid on 6 July 2022 to
shareholders on record as of 27 May 2022. The ex-dividend date is 26 May 2022.
Share buyback programme
We have a disciplined approach to capital allocation and, as the impact of
COVID-19 has declined, have continued to rebuild the balance sheet, while
investing in future growth, with adjusted net debt leverage on 31 March 2022
of 2.2x. Going forward, excluding seasonal movements, leverage is expected
to decline further and strong cash generation to continue. Britvic's
long-term policy for leverage is to maintain a range of 1.5x to 2.5x, and we
are currently trading well within that range. In the context of Britvic's
expected free cash flow and its capital requirements over the next three
years, the Board believes it is appropriate to commence an initial £75m share
repurchase programme, to be executed within the next 12 months. Britvic will
continue to review its balance sheet on an annual basis to assess the strength
of the balance sheet, in the context of its growth ambitions. The dividend
policy remains unchanged.
Free cash flow
Free cash flow (defined as cash generated from operating activities, plus
proceeds from sale of property, plant and equipment, less capital expenditure,
interest and repayment of lease liabilities) was an inflow of £2.0m, compared
with an inflow of £1.9m in the 6 months ended 31 March 2021.
Cash generated from operating activities before changes in working capital and
income tax paid was £95.2m compared with £82.7m in the comparative period,
reflecting an improved operating performance and continued tight cash
management during the half year.
This half year there was a working capital outflow of £47.6m (6 months ended
31 March 2021: £39.4m outflow), comprising an outflow from increases in
inventory of £36.2m (6 months ended 31 March 2021: £17.5m outflow), an
outflow from increases in trade and other receivables of £2.8m (6 months
ended 31 March 2021: £34.6m inflow), an outflow from decreases in trade and
other payables of £5.7m (6 months ended 31 March 2021: £43.5m outflow), an
outflow from decreases in provisions of £2.9m (6 months ended 31 March 2021:
£3.0m outflow) and no change in other current assets (6 months ended 31 March
2021: £10.0m outflow).
The increased inventory levels since year-end were due to inflation, an
increased level of both raw materials and finished goods stock to protect our
customer service levels across the Group and further vertical integration of
fruit processing in Brazil. Brazil comprised £20m of the total increase in
stock holdings.
Net income taxes paid were £9.2m (6 months ended 31 March 2021: £3.8m which
benefited from a cash tax rebate in France of £7.0m following the disposal of
the juice business).
Cash capital expenditure increased slightly from £23.4m during the 6 months
ended 31 March 2021 to £24.6m for the current half year. Lease payments
decreased from £6.1m to £4.7m.
Treasury management
The financial risks faced by the Group are identified and managed by a central
treasury department, whose activities are carried out in accordance with Board
approved policies and subject to regular Audit and Treasury Committee reviews.
The department does not operate as a profit centre and no transaction is
entered into for trading or speculative purposes. Key financial risks managed
by the treasury department include exposures to movements in interest rates,
foreign exchange rates and commodities, while managing the Group's debt and
liquidity profile. The Group uses financial instruments to hedge against
interest rate and foreign currency exposures as well as commodity exposures,
including aluminium, sugar, gas, power and diesel. During the period we
extended our hedging activities to include certain resin components.
On 31 March 2022, the Group had £957.9m of committed debt facilities,
consisting of a £400.0m bank facility and a series of private placement
notes, with maturities between December 2022 and May 2035. The bank facility
was undrawn on 31 March 2022. A one-year extension to the maturity of the
Group's £400.0m bank facility was approved by six of the seven lenders in
February 2022 extending the maturity of £366.7m of this facility to February
2027. The remaining £33.3m will mature in February 2025.
On 31 March 2022, the Group's adjusted net debt, including the impact of
interest rate currency swaps hedging the balance sheet value of the private
placement notes, was £533.8m, which compares with £488.5m at 30 September
2021. Reported net debt of £556.0m (excluding derivative hedges) comprised
£580.1m of private placement notes and £2.8m of accrued interest, offset by
net cash and cash equivalents of £24.0m and unamortised debt issue costs of
£2.9m.
Pensions
At 31 March 2022, the Group had IAS 19 pension surpluses in Great Britain,
Northern Ireland and Ireland totalling £164.0m and an IAS 19 pension deficit
in France of £1.9m, resulting in a net pension surplus of £162.1m (30
September 2021: net surplus of £131.6m).
The defined benefit section of the GB plan was closed to new members on 1
August 2002 and closed to future accrual for active members from 1 April 2011,
with new employees being invited to join the defined contribution scheme. The
Northern Ireland scheme was closed to new members on 28 February 2006 and
future accrual from 31 December 2018, and new employees are eligible to join
the defined contribution scheme. All new employees in Ireland join the defined
contribution plan.
Contributions are paid into the defined benefit section of the GB plan as
determined by the Trustee, agreed by the Company and certified by an
independent actuary in the schedule of contributions. No further deficit
funding payments are due to be paid except for the £5.0m annual partnership
payment which will continue until 2025. This will be reviewed as part of the
next triennial valuation as of 31 March 2022, which is currently in progress.
Non-Executive Directors
As announced in December 2021, Ian McHoul stepped down from his position on
the Britvic Board, as of 11 May 2022. Emer Finnan joined as an independent
Non-Executive Director on 1 January 2022 and has now taken on the role of
Audit Committee Chair, following Ian's retirement from the Board.
Risk management process
As with any business, we face risks and uncertainties. We believe that
effective risk management supports the successful delivery of our strategic
objectives. The management of these risks is based on a balance of risk and
reward, determined through assessment of the likelihood and impact, as well as
the Group's risk appetite. The Executive team performs a formal robust
assessment of the principal risks facing the Group bi-annually, which is
reviewed by the Board. Similarly, all business units and functions perform
formal risk assessments that consider the Group's principal risks and specific
local risks relevant to the market in which they operate.
Risks are monitored throughout the year with consideration given to internal
and external factors and the Group's risk appetite. We continue to further
refine and embed our risk management approach across the breadth of the
organisation, focussing on driving the effectiveness of the risk management
framework across the organisation. Updates to risks and mitigation plans are
managed agilely, with changes made as required. In response to the volatile
and uncertain external environment, the risk team has continued to support
each of our markets and functions in identifying and managing existing and
emerging risks to the organisation.
Glossary
A&P is a measure of marketing spend including marketing, research and
advertising.
Adjusted earnings per share is a non-GAAP measure calculated by dividing
adjusted earnings by the average number of shares during the year. Adjusted
earnings is defined as the profit/(loss) attributable to ordinary equity
shareholders before adjusting items. Average number of shares during the year
is defined as the weighted average number of ordinary shares outstanding
during the period excluding any own shares held by Britvic that are used to
satisfy various employee share-based incentive programmes.
Adjusted EBIT is a non-GAAP measure and is defined as operating profit before
adjusting items. EBIT margin is EBIT as a proportion of Group revenue.
Adjusted EBITDA is a non-GAAP measure calculated by taking Adjusted EBIT and
adding back depreciation, amortisation and loss on disposal of property, plant
and equipment and deducting payments of lease liabilities as an estimate for
pre-IFRS16 rental charges.
Adjusted net debt is a non-GAAP measure and is defined as net debt, adding
back the impact of derivatives hedging the balance sheet debt.
Adjusted profit after tax is a non-GAAP measure and is defined as profit after
tax before adjusting items, with the exception of acquisition related
amortisation.
Adjusted profit before tax and acquisition related amortisation is a non-GAAP
measure and is defined as profit before tax and adjusting items, with the
exception of acquisition related amortisation.
Aqua Libra Co is Britvic Aqua Libra Co Limited, previously known as The
Boiling Tap Company Limited.
ARP is defined as average revenue per litre sold, excluding factored brands
and concentrate sales.
BPS is basis points and is a measure used to describe the percentage change in
a value. One basis point is equivalent to 0.01%.
Brand contribution is a non-GAAP measure and is defined as revenue, less
material costs and all other marginal costs that management considers to be
directly attributable to the sale of a given product. Such costs include brand
specific advertising and promotion costs, raw materials and marginal
production and distribution costs.
Brand contribution margin is a non-GAAP measure and is a percentage measure
calculated as brand contribution divided by revenue. Each business unit's
performance is reported down to the brand contribution level.
Constant exchange rate is a non-GAAP measure of performance in the underlying
currency to eliminate the impact of foreign exchange movements.
EBBA is Empresa Brasileira de Bebidas e Alimentos SA.
EBIT is earnings before interest and taxation.
EBITDA is earnings before interest, taxation, depreciation, and amortisation.
EPS is Earnings Per Share.
FMCG is Fast Moving Consumer Goods.
Free cash flow is defined as cash generated from operating activities, plus
proceeds from the sale of property, plant and equipment, less capital
expenditure, interest and repayment of lease liabilities.
GB is Great Britain.
Group is Britvic plc, together with its subsidiaries.
Immediate Consumption is defined as pack formats to be consumed on purchase,
rather than deferred packs which are purchased and consumed later.
Innovation is defined as new launches over the last five years, excluding new
flavours and pack sizes of established brands.
M&A is mergers and acquisitions.
NI is Northern Ireland.
Non-GAAP measures are provided because they are closely tracked by management
to evaluate Britvic's operating performance and to make financial, strategic
and operating decisions.
Plenish is Plenish Cleanse Ltd, a company acquired on 1 May 2021.
RCF is revolving credit facility.
Revenue is defined as sales achieved by the Group net of price promotional
investment and retailer discounts.
ROI is Republic of Ireland.
rPET is recycled polyethylene terephthalate plastic.
Volume is defined as number of litres sold, excluding factored brands sold by
Counterpoint in Ireland. No volume is recorded in respect of international
concentrate sales.
BRITVIC PLC
RESPONSIBILITY AND CAUTIONARY STATEMENTS
Company number: 5604923
RESPONSIBILITY STATEMENT
The directors confirm that to the best of their knowledge, this unaudited
condensed set of consolidated interim financial statements has been prepared
in accordance with United Kingdom adopted International Accounting Standard 34
'Interim Financial Reporting' and that the interim management report herein
includes a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R.
CAUTIONARY STATEMENT
This report is addressed to the shareholders of Britvic plc and has been
prepared solely to provide information to them.
This report is intended to inform the shareholders of the Group's performance
during the 6 months to 31 March 2022. This report contains forward-looking
statements based on knowledge and information available to the directors at
the date the report was prepared. These statements should be treated with
caution due to the inherent uncertainties underlying any such forward-looking
information, including as a consequence of the COVID-19 pandemic, and any
statements about the future outlook may be influenced by factors that could
cause actual outcomes and results to be materially different.
DIRECTORS
The directors of Britvic plc are:
John Daly
Simon Litherland
Joanne Wilson
Sue Clark
Euan Sutherland
William Eccleshare
Emer Finnan
By order of the Board,
Simon Litherland
Chief Executive Officer
Date: 16 May 2022
Joanne Wilson
Chief Financial Officer
Date: 16 May 2022
INDEPENDENT REVIEW REPORT TO BRITVIC PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
March 2022 which comprises the condensed consolidated income statement,
condensed consolidated statement of comprehensive income/(expense), condensed
consolidated balance sheet, condensed consolidated statement of cash flows,
condensed consolidated statement of changes in equity and the related notes 1
to 21. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 March 2022 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the group will be
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion is based on procedures that are
less extensive than audit procedures, as described in the Basis for conclusion
paragraph of this report.
Use of our report
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK and
Ireland) "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our work, for this report, or for the conclusions
we have formed.
Ernst & Young LLP
Leeds
16 May 2022
BRITVIC PLC
CONDENSED consolidated income statement
For the 6 months ended 31 March 2022
Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Revenue 6 719.3 617.1 1,405.1
Cost of sales (427.4) (371.6) (822.1)
Gross profit 291.9 245.5 583.0
Selling and distribution expenses (128.4) (106.1) (222.1)
Administration expenses (96.4) (90.0) (208.5)
Operating profit 67.1 49.4 152.4
Finance income 0.4 0.6 0.9
Finance costs (8.2) (10.2) (18.7)
Profit before tax 59.3 39.8 134.6
Taxation 7 (13.4) (8.9) (38.1)
Profit for the period attributable to the equity shareholders 45.9 30.9 96.5
Earnings per share
Basic earnings per share 8 17.2p 11.6p 36.2p
Diluted earnings per share 8 17.1p 11.6p 36.1p
All activities relate to continuing operations.
* Please refer to note 21 for details of SaaS arrangements restatement.
BRITVIC PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME/(EXPENSE)
For the 6 months ended 31 March 2022
Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Profit for the period attributable to the equity shareholders 45.9 30.9 96.5
Items that will not be reclassified to profit or loss
Remeasurement gains/(losses) on defined benefit pension schemes 15 24.1 (14.2) 34.1
Deferred tax on defined benefit pension schemes (5.3) 2.8 (12.0)
Deferred tax on other temporary differences - (0.1) -
18.8 (11.5) 22.1
Items that may be subsequently reclassified to profit or loss
Gains/(losses) in the period in respect of cash flow hedges 18 18.5 (10.0) 0.1
Amounts reclassified to the income statement in respect of cash flow hedges 18 (2.1) 7.2 6.3
Current tax in respect of cash flow hedges accounted for in the - - 0.2
hedging reserve
Deferred tax in respect of cash flow hedges accounted for in the hedging 18 (2.7) 0.6 (1.1)
reserve
Exchange differences on translation of foreign operations 18 15.7 (16.8) (9.7)
Tax on exchange differences accounted for in the translation reserve 18 (0.3) (1.7) (0.6)
29.1 (20.7) (4.8)
Other comprehensive income/(expense) for the period, net of tax 47.9 (32.2) 17.3
Total comprehensive income/(expense) for the period attributable to the equity 93.8 (1.3) 113.8
shareholders
* Please refer to note 21 for details of SaaS arrangements restatement.
BRITVIC PLC
CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 March 2022
Restated* Restated*
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Non-current assets
Property, plant and equipment 9 479.1 454.2 472.4
Right-of-use assets 70.2 74.2 71.7
Intangible assets 9 403.9 378.3 406.5
Other receivables 7.3 6.0 5.8
Derivative financial instruments 13 23.3 16.1 22.2
Deferred tax assets 3.5 3.6 4.0
Pension assets 15 164.0 91.3 141.2
1,151.3 1,023.7 1,123.8
Current assets
Inventories 179.7 134.4 135.0
Trade and other receivables 384.9 292.6 376.1
Current income tax receivables 12.2 8.0 7.2
Derivative financial instruments 13 22.3 1.9 4.0
Cash and cash equivalents 24.0 40.9 71.1
Other current assets - 20.0 -
623.1 497.8 593.4
Assets held for sale 19 16.8 16.8 16.8
639.9 514.6 610.2
Total assets 1,791.2 1,538.3 1,734.0
Current liabilities
Trade and other payables (425.6) (335.4) (417.8)
Commercial rebate liabilities (121.1) (80.0) (122.3)
Lease liabilities (10.2) (8.6) (8.9)
Interest-bearing loans and borrowings 10 (36.1) (55.1) (2.2)
Derivative financial instruments 13 (1.5) (2.3) (1.4)
Current income tax payables (2.1) (1.5) (1.4)
Provisions 16 (2.3) (10.4) (5.3)
Other current liabilities (10.2) (12.0) (5.5)
(609.1) (505.3) (564.8)
Non-current liabilities
Lease liabilities (65.0) (67.6) (66.2)
Interest-bearing loans and borrowings 10 (543.9) (573.1) (576.9)
Deferred tax liabilities (114.4) (65.6) (98.5)
Pension liabilities 15 (1.9) (8.8) (9.6)
Derivative financial instruments 13 - (1.0) (0.6)
Provisions 16 (0.6) (0.6) (0.5)
Other non-current liabilities (5.7) (0.4) (6.2)
(731.5) (717.1) (758.5)
Total liabilities (1,340.6) (1,222.4) (1,323.3)
Net assets 450.6 315.9 410.7
Capital and reserves
Issued share capital 11 53.5 53.4 53.5
Share premium account 157.2 155.0 156.2
Own shares reserve (0.9) (2.6) (1.5)
Other reserves 18 81.3 39.1 53.7
Retained earnings 159.5 71.0 148.8
Total equity 450.6 315.9 410.7
* Please refer to note 21 for details of SaaS arrangements restatement.
BRITVIC PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the 6 months ended 31 March 2022
Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Note £m £m £m
Cash flows from operating activities
Profit before tax 59.3 39.8 134.6
Net finance costs 7.8 9.6 17.8
Other financial instruments (1.7) - 0.6
Depreciation of property, plant and equipment 20.1 22.2 42.7
Depreciation of right-of-use assets 5.2 5.4 10.5
Loss on disposal of property, plant and equipment and intangible assets 0.3 1.3 2.8
Amortisation 7.6 6.9 14.8
Share-based payments charge, net of cash settlements 2.9 1.9 3.8
Net pension charge less contributions (6.3) (5.0) (5.4)
Net foreign exchange differences - 0.9 0.7
Other non-cash items - (0.3) -
Increase in inventory (36.2) (17.5) (15.4)
(Increase)/decrease in trade and other receivables (2.8) 34.6 (44.2)
(Increase)/decrease in other current assets - (10.0) 10.0
(Decrease)/increase in trade and other payables and commercial rebate (5.7) (43.5) 74.2
liabilities
Decrease in provisions (2.9) (3.0) (8.5)
Other adjustments for which cash effects are investing cash flows - - 0.4
Income tax paid (9.2) (3.8) (15.4)
Net cash flows from operating activities 38.4 39.5 224.0
Cash flows from investing activities
Proceeds from sale of property, plant and equipment - - 0.1
Purchases of property, plant and equipment (21.8) (19.4) (56.4)
Purchases of intangible assets (2.8) (4.0) (9.0)
Interest received 0.1 0.5 0.6
Acquisition of subsidiaries, net of cash acquired - - (31.2)
Net cash flows used in investing activities (24.5) (22.9) (95.9)
Cash flows from financing activities
Interest paid, net of derivative financial instruments (7.1) (8.1) (15.4)
Net movement on revolving credit facility 10 - 53.0 -
Other loans repaid 10 - - (0.1)
Payment of principal portion of lease payments (3.8) (5.1) (8.7)
Payment of interest portion of lease payments (0.9) (1.0) (1.9)
Repayment of private placement notes, net of derivative financial instruments 10 - (65.4) (65.4)
Other derivative cash receipts 0.9 1.1 1.3
Issue costs paid 10 (0.3) (0.3) (0.3)
Issue of shares relating to incentive schemes for employees 0.9 0.9 2.2
Purchase of own shares (3.3) - -
Dividends paid to equity shareholders 12 (47.2) (57.5) (74.8)
Net cash flows from financing activities (60.8) (82.4) (163.1)
Net decrease in cash and cash equivalents (46.9) (65.8) (35.0)
Cash and cash equivalents at the beginning of the period 71.1 109.2 109.2
Net foreign exchange differences on cash and cash equivalents (0.2) (2.5) (3.1)
Cash and cash equivalents at the end of the period 24.0 40.9 71.1
* Please refer to note 21 for details of SaaS arrangements restatement.
BRITVIC PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the 6 months ended 31 March 2022
For the 6 months ended 31 March 2022 (unaudited)
Other reserves
Issued Share Own Hedging reserve Translation reserve Merger reserve Retained Total
share premium shares earnings
capital account reserve
£m £m £m £m £m £m £m £m
At 1 October 2021 53.5 156.2 (1.5) 4.5 (38.1) 87.3 148.8 410.7
Profit for the period - - - - - - 45.9 45.9
Other comprehensive income - - - 13.7 15.4 - 18.8 47.9
Total comprehensive income - - - 13.7 15.4 - 64.7 93.8
Issue of shares - 1.0 (1.0) - - - - -
Own shares purchased for share schemes - - (3.2) - - - 3.2 -
Own shares utilised for share schemes - - 4.8 - - - (12.0) (7.2)
Movement in share-based schemes - - - - - - 2.8 2.8
Current tax on share-based payments - - - - - - 0.2 0.2
Deferred tax on share-based payments - - - - - - (1.0) (1.0)
Transfer of cash flow hedge reserve to inventories - - - (1.5) - - - (1.5)
Payment of dividend - - - - - - (47.2) (47.2)
At 31 March 2022 53.5 157.2 (0.9) 16.7 (22.7) 87.3 159.5 450.6
For the 6 months ended 31 March 2021 (unaudited)
Other reserves
Issued Share Own Hedging reserve Translation reserve Merger reserve Restated* Restated*
share premium shares retained total
capital account reserve earnings
£m £m £m £m £m £m £m £m
At 1 October 2020 53.4 154.1 (3.7) 0.3 (27.8) 87.3 111.9 375.5
Adjustment on change of accounting policy* - - - - - - (2.9) (2.9)
At 1 October 2020 (restated) 53.4 154.1 (3.7) 0.3 (27.8) 87.3 109.0 372.6
Profit for the period - - - - - - 30.9 30.9
Other comprehensive expense - - - (2.2) (18.5) - (11.5) (32.2)
Total comprehensive (expense)/income - - - (2.2) (18.5) - 19.4 (1.3)
Issue of shares - 0.9 (0.8) - - - - 0.1
Own shares utilised for share schemes - - 1.9 - - - (1.1) 0.8
Movement in share-based schemes - - - - - - 1.7 1.7
Current tax on share-based payments - - - - - - 0.1 0.1
Deferred tax on share-based payments - - - - - - (0.6) (0.6)
Payment of dividend - - - - - - (57.5) (57.5)
At 31 March 2021 53.4 155.0 (2.6) (1.9) (46.3) 87.3 71.0 315.9
* Please refer to note 21 for details of SaaS arrangements restatement.
BRITVIC PLC
notes to the financial information
For the 6 months ended 31 March 2022
1. General information
Britvic plc (the 'Company', together with its subsidiaries, the 'Group') is a
public limited company, incorporated and domiciled in the United Kingdom. The
address of the registered office is Britvic plc, Breakspear Park, Breakspear
Way, Hemel Hempstead, Hertfordshire, HP2 4TZ.
The Company is listed on the London Stock Exchange.
These interim condensed financial statements do not constitute statutory
accounts as defined by Section 434 of the Companies Act 2006. They have been
reviewed but not audited by the Group's auditor. The statutory accounts for
Britvic plc for the year ended 30 September 2021 have been delivered to the
Registrar of Companies. The auditor's opinion on those accounts was
unqualified, did not draw attention to any matters by way of emphasis and did
not contain a statement made under section 498 (2) or (3) of the Companies Act
2006.
The interim financial statements were authorised for issue by the board of
directors on 16 May 2022.
2. Basis of preparation
The annual financial statements of the Group will be prepared in accordance
with United Kingdom adopted International Financial Reporting Standards. The
condensed set of financial statements included in this interim financial
report has been prepared in accordance with the Disclosure and Transparency
Rules of the Financial Conduct Authority and with the United Kingdom adopted
International Accounting Standard (IAS) 34 'Interim Financial Reporting'. The
interim condensed financial statements comprise the condensed consolidated
balance sheet as at 31 March 2022 and the condensed consolidated income
statement, condensed consolidated statement of cash flows, condensed
consolidated statement of comprehensive income/(expense), condensed
consolidated statement of changes in equity and the related notes 1 to 21 for
the 6 months then ended of Britvic plc (the 'financial information').
3. Going concern
As part of the directors' consideration of the appropriateness of adopting the
going concern basis in preparing the interim report and financial statements,
a range of scenarios, including a view on a prolonged period of inflationary
pressure, have been reviewed. The assumptions modelled are based on the
estimated potential impact of prolonged high inflation over the course of the
period to September 2023.
Following the outbreak of COVID-19 in early 2020, the subsequent global
pandemic and implementation of government restrictions on commercial activity
and social movement, Britvic implemented a wide range of measures to ensure
the ongoing stability and going concern status of the Company.
Britvic has proved resilient and is now performing at almost pre-COVID-19
levels. On 21 February 2022, the UK Prime Minister Boris Johnson made a
statement in the House of Commons on the government's strategy for living with
COVID-19 and almost all restrictions have been lifted in all countries that
Britvic operates and the Group's strategy has been built on the plan of living
with COVID-19 and no restrictions going forward.
Since the pandemic, the investments the business has made have resulted in a
more agile production and sales capability and we are more able to respond to
changed buying and selling patterns as required. The major challenge for
financial years 2022 and 2023 is increased levels of inflation. Rather than
high inflation being a one-off in 2022, the business in its strategic plan and
stress tests has considered a prolonged period of inflationary pressure that
in return may require greater levels of price increases.
As part of the going concern assessment, inflation scenarios have been
combined with the potential impact of key risks that could reasonably arise in
the period, including reduction in supply and increased regulation, to assess
the extent to which further mitigating actions would be required, and confirm
that they are within management control. Mitigating actions can be initiated
as they relate to discretionary spend, and do not impact the ability to meet
demand.
As of 31 March 2022, the consolidated balance sheet reflects a net asset
position of £450.6m and the liquidity of the Group remains strong. In H1 of
2022, the Group successfully secured a one-year extension of its £400.0m
revolving credit facility with 6 of the 7 participating banks. As a result of
this, £367.7m of this facility now matures in February 2027, with £33.3m
maturing in February 2025. The revolving credit facility remains committed and
undrawn at 31 March 2022. The Group's next debt maturity is in December 2022
when £27.8m equivalent of private placement notes mature. Both the Group's
revolving credit facility and private placement notes have a net debt/EBITDA
covenant limit of 3.5x, excluding IFRS 16 impact. Based on the half year
adjusted net debt of £533.8m and adjusted EBITDA of £240.3m, the net
debt/EBITDA ratio was 2.2x and well within the covenant limit.
Under all the scenarios modelled, including the impact of the proposed share
buyback programme, and after taking mitigating actions available, our
forecasts did not indicate a covenant breach or any liquidity shortages.
On the basis of these reviews, the directors consider it is appropriate for
the going concern basis to be adopted in preparing the interim report and
financial statements.
4. Accounting policies
Except as described below, the accounting policies applied by the Group in
these interim financial statements are consistent with those applied by the
Group in its financial statements for the year ended 30 September 2021.
Implementation of IFRIC agenda decision and new accounting policy
During the year, the Company revised its accounting policy in relation to
upfront configuration and customisation costs incurred in implementing
Software-as-a-Service (SaaS) arrangements in response to the IFRIC agenda
decision clarifying its interpretation of how current accounting standards
apply to these types of arrangements. The new accounting policy is presented
below. This change in accounting policy has resulted in costs of £3.2m being
expensed to administration expenses during the 6 months ended 31 March 2022
that would previously have been capitalised as intangible assets under the
former policy. In the statement of cash flows for the 6 months ended 31 March
2022, £3.2m has been presented within net cash flows from operating
activities that would previously have been presented within net cash flows
used in investing activities under the former policy. Historical financial
information has been restated to account for the impact of the change - refer
to note 21.
Policy for Software-as-a-Service (SaaS) arrangements
SaaS arrangements are service contracts providing the Company with the right
to access the cloud provider's application software over the contract period.
Costs incurred to configure or customise, and the ongoing fees to obtain
access to the cloud provider's application software, are recognised as
operating expenses when the services are received. In a contract where the
cloud provider provides both the SaaS configuration and customisation, and the
SaaS access over the contract term, the Company determines whether these
services are distinct from each other or not, and therefore, whether
configuration and customisations incurred are expensed as the software is
configured or customised (i.e. upfront), or over the SaaS contract term.
Specifically, where the configuration and customisation activities
significantly modify or customise the cloud software, these activities will
not be distinct from the access to the cloud software and are therefore
expensed over the SaaS contract term.
When implementing SaaS arrangements, costs incurred may include those that
relate to the development of software code that enhances or modifies, or
creates additional capability to, existing on-premise systems and meet the
definition of and recognition criteria for an intangible asset. These costs
are recognised as intangible software assets and amortised over the useful
life of the software on a straight-line basis. The useful lives of these
assets are reviewed at least annually and any change accounted for
prospectively as a change in accounting estimate.
Other policy changes
The following amendments and interpretations apply for the first time from 1
October 2021, none of which have had a material impact on the interim
condensed consolidated financial statements of the Group:
· Interest Rate Benchmark Reform - Phase 2, Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16
· Amendments to IFRS 16 'Leases', Covid-19 Related Rent Concessions
beyond 30 June 2021
5. Seasonality of operations
Due to the seasonal nature of the business, higher operating profits are
usually expected in the second half of the year than in the first half.
6. Segmental reporting
Operating segments are reported in a manner consistent with internal reporting
provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the plc
Executive team and Board of Directors of the Company.
For management purposes, the Group is organised into business units and has
five reportable segments:
· GB (United Kingdom excluding Northern Ireland)
· Brazil
· Ireland (Republic of Ireland and Northern Ireland)
· France
· International
These business units sell soft drinks into their respective geographical
markets. Management monitors the operating results of its business units
separately for the purpose of making decisions about resource allocation and
performance assessment. Segment performance is evaluated based on brand
contribution. This is defined as revenue less material costs and all other
marginal costs that management considers to be directly attributable to the
sale of a given product. Such costs include brand specific advertising and
promotion costs, raw materials and marginal production and distribution costs.
All other costs, including net finance costs and income taxes, are managed on
a centralised basis and are not allocated to reportable segments.
The 'Other International' subtotal comprising the Ireland, France and
International reportable segments has been presented to provide linkage to the
Chief Financial Officers Review section of the interim results.
Other international
6 months ended 31 March 2022 GB Brazil Ireland France International Subtotal Total
£m £m £m £m £m £m £m
Revenue from external customers 493.0 64.7 63.7 76.1 21.8 161.6 719.3
Brand contribution 187.8 9.3 21.1 21.2 5.7 48.0 245.1
Non-brand advertising & promotion* (5.2)
Fixed supply chain** (64.2)
Selling costs** (37.9)
Overheads and other costs* (64.3)
Adjusted EBIT 73.5
Net finance costs pre-adjusting items (7.8)
Adjusting items*** (6.4)
Profit before tax 59.3
Other International
6 months ended 31 March 2021 GB Brazil Ireland France International Subtotal Restated
£m £m £m £m £m £m Total
£m
Revenue from external customers 413.2 56.0 57.7 71.8 18.4 147.9 617.1
Brand contribution 165.3 11.5 18.9 22.7 4.4 46.0 222.8
Non-brand advertising & promotion* (4.3)
Fixed supply chain** (62.6)
Selling costs** (36.0)
Overheads and other costs* (59.8)
Adjusted EBIT 60.1
Net finance costs pre-adjusting items (9.4)
Adjusting items*** (10.9)
Profit before tax 39.8
Other International
12 months ended 30 September 2021 GB Brazil Ireland France International Subtotal Restated
£m £m £m £m £m £m Total
£m
Revenue from external customers 956.1 114.1 128.3 164.9 41.7 334.9 1,405.1
Brand contribution 381.0 21.1 46.2 49.7 10.5 106.4 508.5
Non-brand advertising & promotion* (8.3)
Fixed supply chain** (122.1)
Selling costs** (75.1)
Overheads and other costs* (126.5)
Adjusted EBIT 176.5
Net finance costs pre-adjusting items (17.7)
Adjusting items*** (24.2)
Profit before tax 134.6
* Included within 'administration expenses' in the condensed
consolidated income statement. 'Overheads and other costs' relate to central
expenses including salaries, IT maintenance, depreciation, and non-acquisition
amortisation.
** Included within 'selling and distribution expenses' in the
condensed consolidated income statement.
*** See appendix 1 for further details on adjusting items.
7. Taxation
The total tax charge for the period is £13.4m (restated 6 months ended 31
March 2021: £8.9m) which equates to an effective tax rate of 22.7% (restated
6 months ended 31 March 2021: 22.4%).
Tax charge by region Restated Restated
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
£m £m £m
UK 10.7 7.1 31.9
Foreign 2.7 1.8 6.2
Total tax charge in the condensed consolidated income statement 13.4 8.9 38.1
Analysis of tax charge Restated Restated
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
£m £m £m
Current income tax charge 4.8 6.3 20.3
Deferred income tax charge 8.6 2.6 17.8
Total tax charge in the condensed consolidated income statement 13.4 8.9 38.1
The effective tax rate for the 6 months ended 31 March 2022 has slightly
increased compared to the effective tax rate for the 6 months ended 31 March
2021. This is mainly due to movements in deferred tax and a small prior year
adjustment.
The deferred tax charge has increased compared to the 6 months ended 31 March
2021. This primarily relates to higher temporary differences on fixed assets
because of a tax rate increase in the UK and a restatement following an
accounting policy change (see note 21). This is reflected in the increase in
deferred tax liabilities along with increases in deferred tax on derivatives
and pensions.
8. Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit for
the period attributable to the equity shareholders of the parent by the
weighted average number of ordinary shares in issue during the period.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to the equity shareholders of the parent by the weighted average
number of ordinary shares outstanding during the period plus the weighted
average number of ordinary shares that are potentially issuable in connection
with employee share-based payment plans.
The following table reflects the income and share data used in the basic and
diluted earnings per share computations:
Restated Restated
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
Basic earnings per share
Profit for the period attributable to the equity shareholders (£m) 45.9 30.9 96.5
Weighted average number of ordinary shares in issue for basic earnings per 267.4 266.7 266.8
share (millions)
Basic earnings per share (pence) 17.2p 11.6p 36.2p
Diluted earnings per share
Profit for the period attributable to the equity shareholders (£m) 45.9 30.9 96.5
Effect of number of dilutive potential ordinary shares - share schemes 0.6 0.7 0.6
(millions)
Weighted average number of ordinary shares in issue for diluted earnings per 268.0 267.4 267.4
share (millions)
Diluted earnings per share (pence) 17.1p 11.6p 36.1p
9. Property, plant and equipment and intangible assets
Property, plant and equipment
During the 6 months ended 31 March 2022 the Group:
· capitalised property, plant and equipment additions at a cost of
£22.5m (6 months ended 31 March 2021: £19.8m); and
· disposed of property, plant and equipment with a net book value
of £0.3m (6 months ended 31 March 2021: £1.3m) resulting in a loss on
disposal of £0.3m (6 months ended 31 March 2021: loss on disposal £1.3m).
There were no impairments or reversals of impairments recognised during the 6
months ended 31 March 2022 (6 months ended 31 March 2021: nil).
See note 17 for details of the Group's capital commitments.
Intangible assets
During the 6 months ended 31 March 2022, the Group capitalised £2.8m of
software additions (6 months ended 31 March 2021: £4.1m, restated).
The Group performed its last annual impairment test for goodwill and
intangible assets with indefinite lives in September 2021. The key assumptions
used to determine the recoverable amount for the different cash generating
units were disclosed in the Group's Annual Report and Accounts 2021.
Since the last annual impairment test, management have evaluated whether there
are any indicators that the Group's assets may be impaired. This evaluation
included a review of business performance for the 6 months ended 31 March 2022
and latest forecasts for the full year ending 30 September 2022 against the
budgets used in the last impairment test. Changes in the applicable discount
rates to determine value-in-use were also considered.
Britvic Brazil is seen as a growth market where maturity is not expected for a
number of years. Sensitivity analysis was performed to assess the impact of a
reasonable change in key assumptions to the impairment headroom of £78.2m. A
9.8% increase in the pre-tax discount rate to 24.7% or an 11.3% reduction in
the sales volume annual growth rate between 2023 and 2026 to 3.7% would
eliminate the headroom.
No impairment charges have been recognised during the 6 months ended 31 March
2022 (6 months ended 31 March 2021: no impairment charges).
Other than the goodwill held in Britvic Brazil, the directors do not consider
that a reasonable possible change in the assumptions used to calculate
recoverable amounts could result in any impairment.
10. Interest-bearing loans and borrowings
Components of interest-bearing loans and borrowings:
31 March 2022 31 March 2021 30 September 2021
£m £m £m
2010 Notes (34.0) (32.9) (33.5)
2014 Notes (101.8) (97.7) (99.6)
2017 Notes (175.0) (175.0) (175.0)
2018 Notes (118.7) (119.0) (119.4)
2020 Notes (150.6) (151.1) (151.7)
Accrued interest (2.8) (2.7) (2.8)
Bank loans - (53.0) -
Unamortised issue costs 2.9 3.2 2.9
Total interest-bearing loans and borrowings (580.0) (628.2) (579.1)
Current (36.1) (55.1) (2.2)
Non-current (543.9) (573.1) (576.9)
Total interest-bearing loans and borrowings (580.0) (628.2) (579.1)
Britvic has a committed £400.0m multi-currency revolving credit facility. A
one-year extension to the maturity of the facility was approved by six of the
seven lenders in February 2022 extending the maturity of £366.7m of this
facility to February 2027. The remaining £33.3m will mature in February 2025.
Borrowings drawn against the facility incur interest at a market reference
rate plus a margin based upon a financial covenant ratio. Amounts drawn can be
repaid and redrawn during the term of the facility.
Analysis of changes in interest-bearing loans and borrowings:
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
2021 £m £m £m
At the beginning of the period (579.1) (664.7) (664.7)
Net movement on revolving credit facility - (53.0) -
Other loans repaid - - 0.1
Repayment of private placement notes* - 74.1 74.1
Issue costs 0.3 0.3 0.3
Amortisation of issue costs and write-off of financing fees (0.3) (0.3) (0.6)
Net translation gain and fair value adjustment (0.9) 14.7 11.1
Accrued interest - 0.7 0.6
At the end of the period (580.0) (628.2) (579.1)
Derivatives hedging balance sheet debt** 22.2 17.1 19.5
Debt translated at contracted rate (557.8) (611.1) (559.6)
* During the 6 months ended 31 March 2021, the Group repaid £74.1m of private
placement notes, comprising £54.1m related to the 2010 Notes and £20.0m
related to the 2014 Notes. £7.1m was also received on maturity of derivatives
hedging the 2010 Notes and £1.6m was received in respect of the firm
commitment for the 2010 Notes, resulting in net cash outflows presented in the
consolidated statement of cash flows of £65.4m.
** Represents the element of the fair value of cross-currency interest rate
swaps hedging the balance sheet value of the notes. This amount has been
disclosed separately to demonstrate the impact of foreign exchange movements
which are included in interest-bearing loans and borrowings.
Interest rate benchmark reform
In advance of LIBOR cessation, the Group has amended its revolving credit
facility agreement to reference Sterling Overnight Interbank Average (SONIA)
rates in all future sterling drawdowns from 1 December 2021 onwards. A similar
amendment process has been followed with regards to the Group's US private
placement notes. The rebasing of derivatives to risk-free rates is not
expected to impact upon hedge effectiveness or produce any material
financial impact.
11. Issued share capital
The issued share capital is wholly comprised of ordinary shares carrying one
voting right each. The nominal value of each ordinary share is £0.20. There
are no restrictions placed on the distribution of dividends, or the return of
capital on a winding up or otherwise.
Issued, called up and fully paid ordinary shares No. of shares Value
£
At 1 October 2020 266,916,062 53,383,212
Shares issued 398,575 79,715
At 30 September 2021 267,314,637 53,462,927
Shares issued 428,785 85,757
At 31 March 2022 267,743,422 53,548,684
Of the issued and fully paid ordinary shares, 99,306 shares (30 September
2021: 129,455 shares) are own shares held by an employee benefit trust. This
equates to £19,861 (30 September 2021: £25,891) at £0.20 par value of each
ordinary share. These shares are held for the purpose of satisfying the
Group's share schemes.
12. Dividends paid and proposed
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
Declared and paid in the period
Dividends per share (pence) 17.7p 21.6p 28.1p
Total dividend (£m) 47.2 57.5 74.8
Proposed after the balance sheet date
Dividend per share (pence) 7.8p 6.5p 17.7p
Total dividend (£m) 20.9 17.4 47.3
13. Derivatives and hedge relationships
The Group's outstanding derivatives were as follows:
31 March 2022 31 March 2021 30 September 2021
£m £m £m
Consolidated balance sheet
Non-current assets: derivative financial instruments
Fair value of USD GBP cross-currency fixed interest rate swaps ¹ 15.3 14.3 17.7
Fair value of USD GBP cross-currency floating interest rate swaps ³ - 1.8 1.9
Fair value of foreign currency contracts ¹ 0.1 - 0.1
Fair value of commodity contracts ¹ 6.6 - 2.4
Fair value of interest rate swaps ¹ 1.3 - 0.1
23.3 16.1 22.2
Current assets: derivative financial instruments
Fair value of USD GBP cross-currency fixed interest rate swaps ¹ 3.6 0.6 0.6
Fair value of USD GBP cross-currency floating interest rate swaps ³ 2.3 0.3 0.3
Fair value of foreign currency contracts ¹ 0.6 - 0.4
Fair value of foreign currency contracts (4) 1.5 0.4 -
Fair value of commodity contracts ¹ 14.3 0.6 2.7
22.3 1.9 4.0
Current liabilities: derivative financial instruments
Fair value of foreign currency contracts ¹ (1.0) (2.2) (1.1)
Fair value of foreign currency contracts (4) - (0.1) (0.2)
Fair value of GBP euro cross-currency floating interest rate swaps ² (0.4) - -
Fair value of commodity contracts ¹ (0.1) - (0.1)
(1.5) (2.3) (1.4)
Non-current liabilities: derivative financial instruments
Fair value of GBP euro cross-currency fixed interest rate swaps (2) - (0.5) (0.6)
Fair value of foreign currency contracts ¹ - (0.3) -
Fair value of interest rate swaps ¹ - (0.2) -
- (1.0) (0.6)
Total net derivative financial assets 44.1 14.7 24.2
¹ Instruments designated as part of a cash flow hedge relationship
² Instruments designated as part of a net investment hedge relationship
³ Instruments designated as part of a fair value hedge relationship
(4) Instruments not designated in a hedging relationship
The above derivatives and associated hedge relationships are described in
further detail on pages 169 to 171 of the Group's Annual Report and Accounts
2021. At 31 March 2022, the Group is party to a range of commodity derivatives
to hedge price risk associated with aluminium (cans), diesel (logistics),
sugar, natural gas, power and paraxylene (PET plastic) and has designated
these derivatives as cash flow hedges. Increases in market prices for these
commodities since the inception of these hedges have resulted in an increase
in the fair value of commodity derivatives during the six months ended 31
March 2022.
14. Fair value
Hierarchy
The Group uses the following valuation hierarchy to determine the carrying
value of financial instruments that are measured at fair value:
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities.
Level 2: other techniques for which all inputs which have a significant effect
on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the
recorded fair value that are not based on observable market data.
Unless otherwise stated, the valuation basis used to calculate fair value is
level 2.
Fair values of financial assets and financial liabilities
All derivatives are valued using valuation techniques with market observable
inputs; this covers cross-currency interest rate swaps, interest rate swaps,
foreign exchange forwards, foreign exchange swaps and commodity swaps. The
most frequently applied valuation techniques include forward pricing and swap
models using present value calculations. In assessing the fair value of
derivatives, the non-performance risk of both the Group and its derivative
trading counterparties has been taken into consideration. Default credit risk
has been measured and the potential impact on derivatives valuations
quantified. As at 31 March 2022, the potential impact from non-performance
risk on the fair value of the derivatives portfolio is not material.
As in the prior year, the carrying value of financial assets and liabilities
(trade and other receivables, cash and cash equivalents, interest-bearing
loans and borrowings and trade and other payables) are considered to be
reasonable approximations of their fair values, except for fixed rate
borrowings, which have a book value of £420.3m and a fair value of £403.2m
at 31 March 2022 (30 September 2021: £418.2m book value compared to a fair
value £424.8m).
The fair value of the Group's fixed rate interest-bearing borrowings and loans
are determined by using discounted cash flow methods using discount rates that
reflect the Group's borrowing rate as at the end of the reporting period. The
own non-performance risk as at 31 March 2022 was assessed to be insignificant.
15. Pensions
At 31 March 2022, Britvic plc had IAS 19 pension surpluses in GB, ROI and NI
totalling £164.0m and an IAS 19 pension deficit in France of £1.9m (30
September 2021: pension surpluses of £141.2m and pension deficits of £9.6m).
The increase in the net pension asset is primarily attributable to a net
remeasurement gain of £24.1m, of which £14.6m relates to the GB scheme.
The net income for defined benefit schemes recognised in the income statement
for the 6 months ended 31 March 2022 was £0.7m (6 months ended 31 March 2021:
net expense of £0.5m).
The defined benefit section of the GB plan was closed to new members on 1
August 2002 and closed to future accrual for active members from 1 April 2011,
with new employees being invited to join the defined contribution scheme. The
Northern Ireland scheme was closed to new members on 28 February 2006 and
future accrual from 31 December 2018, and new employees are eligible to join
the defined contribution scheme. All new employees in Ireland join the defined
contribution plan.
Contributions are paid into the defined benefit section of the GB plan as
determined by the Trustee, agreed by the Company and certified by an
independent actuary in the schedule of contributions. As noted in the Group's
Annual Report and Accounts 2021, no further deficit funding payments are due
to be paid except for the £5.0m annual partnership payment which will
continue until 2025. This will be reviewed as part of the next triennial
valuation as of 31 March 2022, which was in progress as at the date of this
interim financial report.
Guaranteed Minimum Pension (GMP)
Following the Lloyds GMP equalisation case in October 2018, which ruled that
treatment of men and women be brought in line for schemes with a guaranteed
minimum pension, the Group previously recognised a charge of £6.2m in its
2019 financial statements to provide for the impact of GMP equalisation. In
November 2020, a further ruling on the Lloyds case took place requiring that
individual transfer payments made since 17 May 1990 would also need to be
equalised for the effects of GMP and therefore the Group recorded a charge of
£0.7m as part of adjusting items for the estimated cost of GMP equalisation
arising from this latest judgement in 2021.
16. Provisions
The movement in the Group's provisions during the 6 months ended 31 March 2022
was as follows:
Restructuring Other Total
£m £m £m
At 1 October 2021 5.3 0.5 5.8
Provisions utilised during the year (2.0) - (2.0)
Unused amounts reversed (0.9) - (0.9)
Exchange differences (0.1) 0.1 -
At 31 March 2022 2.3 0.6 2.9
Restructuring provisions at 31 March 2022 primarily relate to the
implementation of historic group-wide strategic restructuring and provisions
related to the closure of the Group's Norwich site.
Other provisions at 31 March 2022 relate to certain provisions recognised on
acquisition of subsidiaries in Brazil, including regulatory and legal claims.
The movement in the Group's provisions during the 6 months ended 31 March 2021
was as follows:
Restructuring Other Total
£m £m £m
At 1 October 2020 11.0 3.7 14.7
Provisions made during the year 2.4 - 2.4
Provisions utilised during the year (4.6) - (4.6)
Unused amounts reversed (0.4) (0.4) (0.8)
Exchange differences (0.4) (0.3) (0.7)
At 31 March 2021 8.0 3.0 11.0
17. Capital commitments
At 31 March 2022, the Group has capital commitments of £14.6m (30 September
2021: £10.8m) relating to the acquisition of property, plant and equipment.
The increase in capital commitments since 30 September 2021 relates primarily
to a new can line at the Rugby plant, which is expected to be brought into use
during calendar year 2022.
18. Other reserves
The movement in the Group's other reserves was as follows:
Hedging reserve Translation reserve Merger reserve Total
£m £m £m £m
At 1 October 2021 4.5 (38.1) 87.3 53.7
Gains in the period in respect of cash flow hedges 18.5 - - 18.5
Amounts reclassified to the income statement in respect of cash flow hedges (2.1) - - (2.1)
Deferred tax in respect of cash flow hedges (2.7) - - (2.7)
Exchange differences on translation of foreign operations - 15.7 - 15.7
Tax on exchange differences - (0.3) - (0.3)
Movements included within other comprehensive income 13.7 15.4 - 29.1
Transfer of cash flow hedge reserve to inventories (1.5) - - (1.5)
At 31 March 2022 16.7 (22.7) 87.3 81.3
Hedging reserve Translation reserve Merger reserve Total
£m £m £m £m
At 1 October 2020 0.3 (27.8) 87.3 59.8
Losses in the period in respect of cash flow hedges (10.0) - - (10.0)
Amounts reclassified to the income statement in respect of cash flow hedges 7.2 - - 7.2
Deferred tax in respect of cash flow hedges 0.6 - - 0.6
Exchange differences on translation of foreign operations - (16.8) - (16.8)
Tax on exchange differences - (1.7) - (1.7)
At 31 March 2021 (1.9) (46.3) 87.3 39.1
Hedging reserve
The hedging reserve records the effective portion of movements in the fair
value of commodity swaps, forward exchange contracts, interest rate and
cross-currency swaps that have been designated as part of a cash flow hedge
relationship.
Translation reserve
The translation reserve includes cumulative net exchange differences on
translation into the presentational currency of items recorded in Group
entities with a non-sterling functional currency net of amounts recognised in
respect of net investment hedges.
Merger reserve
The merger reserve arose as a result of the non-pre-emptive share placement
which took place on 21 May 2010. It was executed using a structure which
created a merger reserve under Section 612-613 of the Companies Act 2006.
19. Assets held for sale
As previously reported, on 8 October 2020, contracts were exchanged for the
sale of the Britvic Norwich production site (jointly owned with Unilever).
The sale of the Norwich land and buildings (which form part of the Group's GB
operating segment) is subject to conditions precedent, including certain
planning consents being obtained by the buyer. On 1 February 2022, the Company
signed a variation agreement to allow the buyer additional time to obtain the
necessary consents as certain planning processes have taken longer than
initially anticipated. Accordingly, the sale may now take up until October
2024 to complete. The assets continue to be classified as assets held for sale
under IFRS 5 as the assets are available for sale in their present condition
and the sale is highly probable. In line with IFRS 5, assets held for sale are
measured at the lower of carrying value and fair value less costs to sell. The
carrying value of the Norwich land and buildings is £16.8m (30 September
2021: £16.8m).
20. Related party transactions
As disclosed in the Group's Annual Report and Accounts 2021, certain past
dividends were paid otherwise than in accordance with the Companies Act 2006.
During the six months ended 31 March 2021, the Group entered into deeds of
release with its Directors in respect of past dividends paid otherwise than in
accordance with the Companies Act 2006 (see note 12 to the parent company
financial statements within the Annual Report and Accounts 2021). The
Directors are related parties of the Company and therefore the entry by the
Company into a deed of release in favour of the Directors constituted a
related party transaction for the purposes of the Listing Rules.
21. Retrospective restatements
(i) Software-as-a-Service (SaaS) arrangements
As disclosed in note 4, the Group revised its accounting policy in relation to
upfront configuration and customisation costs incurred in implementing SaaS
arrangements. This is in response to the IFRS Interpretations Committee
(IFRIC) agenda decision clarifying its interpretation of how current
accounting standards apply to these types of arrangements.
The Group's accounting policy has historically been to capitalise costs
directly attributable to the configuration and customisation of SaaS
arrangements as intangible assets in the balance sheet, irrespective of
whether the services were performed by the SaaS supplier or a third party.
Following the adoption of the IFRIC guidance, SaaS arrangements were
identified and assessed to determine if the Group has control of the software
with ongoing rights to access the cloud provider's application software beyond
the contract period. For those arrangements where the Group does not have
control of the software, the Group derecognised the intangible asset
previously capitalised and recognised the costs to configure or customise and
the ongoing fees to obtain access to the cloud provider's application software
as operating expenses when the services were received.
The implementation of the updated accounting policy gave rise to a restatement
of historical financial information in accordance with IAS 8 as set out below.
This change led to an £11.8m reduction in intangible assets at 30 September
2021 (£6.4m at 31 March 2021) and an £8.3m reduction in profit before tax in
the year ended 30 September 2021 (£2.9m for 6 months ended 31 March 2021).
Substantially all of the SaaS implementation costs that have been expensed
relate to systems that were in the process of being implemented at the
comparative balance sheet dates and therefore the impact of reversing
amortisation has not been material to the comparative income statements. The
taxation charge and associated deferred tax balances have also been restated
by the amounts shown below.
Impact of restatement on the balance sheet
30 September 2021 31 March 2021 1 October 2020
£m £m £m
Intangible assets (11.8) (6.4) (3.5)
Total assets (11.8) (6.4) (3.5)
Deferred tax liabilities 2.2 1.2 0.6
Total liabilities 2.2 1.2 0.6
Net assets (9.6) (5.2) (2.9)
Retained earnings (9.6) (5.2) (2.9)
Total equity (9.6) (5.2) (2.9)
Impact of restatement on the income statement
12 months ended 6 months ended
30 September 2021 31 March 2021
£m £m
Administration expenses (8.3) (2.9)
Profit before tax (8.3) (2.9)
Taxation 1.6 0.6
Profit for the period attributable to equity shareholders (6.7) (2.3)
Basic earnings per share (2.5)p (0.9)p
Diluted earnings per share (2.5)p (0.8)p
Impact of restatement on the statement of cash flows
12 months ended 6 months ended
30 September 2021 31 March 2021
£m £m
Cash flows from operating activities
Profit before tax (8.3) (2.9)
Net cash flows from operating activities (8.3) (2.9)
Cash flows from investing activities
Purchases of intangible assets 8.3 2.9
Net cash flows used in investing activities 8.3 2.9
Net increase/(decrease) in cash and cash equivalents - -
(ii) Finalisation of Aqua Libra Co acquisition accounting
On 6 June 2020, the Group acquired 100% of the issued share capital of The
Boiling Tap Company Limited (subsequently renamed Britvic Aqua Libra Co
Limited, 'Aqua Libra Co'), an integrated tap system business that supplies
high-quality taps primarily to commercial customers across GB, offering hot,
cold and sparkling water.
The initial accounting for the acquisition was provisional at 30 September
2020 and 31 March 2021 due to the significant uncertainties posed by COVID-19
on the valuation of intangible assets and contingent consideration. During the
year following acquisition, the Group identified that COVID-19 has had a much
more significant impact on Aqua Libra Co than was previously anticipated at
the acquisition date. In particular, COVID-19 resulted in temporary closures
and restrictions on the offices and workplaces that form a key part of Aqua
Libra Co's customer base. Since restrictions have been lifted, the business
has shown continuous growth and management remain confident about its
long-term prospects. COVID-19 has however had an adverse impact on the cash
flows expected to be generated in the short-term following acquisition and as
a result the performance conditions for the contingent consideration are not
expected to be met. In accordance with the measurement period requirements of
IFRS 3, the Group has retrospectively adjusted the provisional amounts
recognised at the acquisition date to reflect more information about the
impact of COVID-19 on the business. This has resulted in a decrease in the
fair values of intangible assets acquired, a decrease in the deferred tax
liability associated with the intangible assets and a decrease in the fair
value of contingent consideration payable. The comparative balance sheet at 31
March 2021 has been revised as if the adjustments had been made at the
acquisition date. The effect of this restatement is set out below. The
finalisation of the acquisition accounting has had no impact on the income
statement for the six months ended 31 March 2021.
Impact of restatement on the balance sheet
31 March 2021 1 October 2020
£m £m
Intangible assets (5.9) (5.9)
Non-current assets / total assets (5.9) (5.9)
Deferred tax liability 0.7 0.7
Other non-current liabilities 5.2 5.2
Non-current liabilities / total liabilities 5.9 5.9
Net assets - -
Appendix 1
NON-GAAP RECONCILIATIONS
Adjusting items
The Group excludes adjusting items from its non-GAAP measures because of their
size, frequency and nature to allow shareholders to understand better the
elements of financial performance in the year, so as to facilitate comparison
with prior periods and to assess trends in financial performance more readily.
These items primarily relate to strategic restructuring, impairment of assets,
acquisitions and disposals. In addition, the amortisation of
acquisition-related intangibles and the expense associated with the change in
accounting policy for SaaS arrangements are considered to be adjusting items.
Adjusted KPIs are used to measure the underlying profitability of the Group
and enable comparison of performance against peers. They are also used in the
calculation of short and long-term reward schemes.
Note Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
£m £m £m
Implementation of SaaS accounting guidance (a) (3.2) (2.9) (8.3)
Strategic restructuring - business capability programme (b) (0.3) (0.5) (1.0)
Strategic restructuring - organisational capability transformation (c) - (3.5) (5.7)
Credits in relation to the acquisition and integration of subsidiaries (d) 0.2 0.5 0.7
Strategic M&A activity (e) 1.2 0.3 (0.9)
Past service cost on pension schemes (f) - (0.7) (0.7)
Acquisition-related amortisation (g) (4.3) (3.9) (8.2)
Total included in operating profit (6.4) (10.7) (24.1)
Unwind of discount on consideration payable for acquisitions (h) - (0.2) (0.1)
Total included in finance costs - (0.2) (0.1)
Tax on adjusting items included in profit before tax 0.4 1.3 2.6
Total included in taxation 0.4 1.3 2.6
Net adjusting items (6.0) (9.6) (21.6)
* Please refer to note 21 for details of SaaS arrangements restatement.
a. Implementation of change in accounting policy in relation to
customisation and configuration costs of SaaS expensed as incurred of £3.2m
(see note 4).
b. 'Strategic restructuring - business capability programme' relates to
a restructuring of supply chain and the operating model across the Group,
initiated in 2016. Costs in the period of £0.3m relate to the closure of the
Norwich site and are primarily site running costs. Costs in the 6 months ended
31 March 2021 were of a similar nature.
c. 'Strategic restructuring - organisational capability transformation'
in the prior period relates to contract termination costs in relation to the
closure of the Counterpoint business.
d. Relates to the release of provisions for Bela Ischia Alimentos Ltda
(Bela Ischia) and Empresa Brasileira de Bebidas e Alimentos SA (Ebba).
e. Strategic M&A credit of £1.2m in relation to remeasurement of
historic provisions.
f. During the 6 months ended 31 March 2021, a charge of £0.7m for past
service costs was recognised resulting from the equalisation of Guaranteed
Minimum Pensions (GMP) for the GB defined benefit scheme (see note 15).
g. Acquisition-related amortisation relates to the amortisation of
intangibles recognised on acquisitions in Britvic Ireland, Britvic France,
Britvic Brazil, Aqua Libra Co and Plenish.
h. The unwind of discount on consideration payable for acquisitions
relates to the change in fair value of the deferred consideration payable for
Aqua Libra Co.
Adjusted profit
Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
£m £m £m
Operating profit as reported 67.1 49.4 152.4
Add back adjusting items in operating profit 6.4 10.7 24.1
Adjusted EBIT 73.5 60.1 176.5
Net finance costs (7.8) (9.6) (17.8)
Add back adjusting items in net finance costs - 0.2 0.1
Adjusted profit before tax and acquisition-related amortisation 65.7 50.7 158.8
Acquisition-related amortisation (4.3) (3.9) (8.2)
Adjusted profit before tax 61.4 46.8 150.6
Taxation (13.4) (8.9) (38.1)
Less adjusting tax credit (0.4) (1.3) (2.6)
Adjusted profit after tax 47.6 36.6 109.9
Adjusted effective tax rate 22.4% 21.8% 27.0%
* Please refer to note 21 for details of SaaS arrangements restatement.
Adjusted earnings per share
Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
Adjusted basic earnings per share
Profit for the period attributable to equity shareholders (£m) 45.9 30.9 96.5
Add: net impact of adjusting items (£m) 6.0 9.6 21.6
Adjusted earnings (£m) 51.9 40.5 118.1
Weighted average number of ordinary shares in issue for basic earnings per 267.4 266.7 266.8
share (millions)
Adjusted basic earnings per share (pence) 19.4p 15.2p 44.3p
Adjusted diluted earnings per share
Adjusted earnings (£m) 51.9 40.5 118.1
Effect of dilutive potential ordinary shares - share schemes (millions) 0.6 0.7 0.6
Weighted average number of ordinary shares in issue for diluted earnings per 268.0 267.4 267.4
share (millions)
Adjusted diluted earnings per share (pence) 19.4p 15.1p 44.2p
* Please refer to note 21 for details of SaaS arrangements restatement.
Free cash flow
Restated* Restated*
6 months ended 6 months ended 12 months ended
31 March 2022 31 March 2021 30 September 2021
£m £m £m
Net cash flows from operating activities 38.4 39.5 224.0
Purchases of property, plant and equipment (21.8) (19.4) (56.4)
Purchases of intangible assets (2.8) (4.0) (9.0)
Proceeds from sale of property, plant and equipment - - 0.1
Interest paid, net of derivative financial instruments (7.1) (8.1) (15.4)
Repayment of principal portion of lease liabilities (3.8) (5.1) (8.7)
Repayment of interest portion of lease liabilities (0.9) (1.0) (1.9)
Free cash flow 2.0 1.9 132.7
* Please refer to note 21 for details of SaaS arrangements restatement.
Adjusted net debt
31 March 2022 31 March 2021 30 September 2021
Note £m £m £m
Cash and cash equivalents (24.0) (40.9) (71.1)
Derivatives hedging balance sheet debt 10 (22.2) (17.1) (19.5)
Interest-bearing loans and borrowings 10 580.0 628.2 579.1
Adjusted net debt 533.8 570.2 488.5
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