REG - Coca-Cola EP PLC - Results for the six months ended 1 July 2022
04/08/2022 07:15
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RNS Number : 8535U Coca-Cola Europacific Partners plc 04 August 2022
COCA-COLA EUROPACIFIC PARTNERS
Results for the six months ended 1 July 2022
Raising FY guidance, reflecting great first-half
H1 2022 Metric( 1 ) As Reported Comparable ( 1 ) Change vs H1 2021 Change vs H1 2021
As Reported Comparable Comparable FXN ( 1 ) Pro forma Comparable ( 3 ) Pro forma Comparable FXN( 3 )
( 1 )
Total CCEP Volume (M UC)( 2 ) 1,618 1,618 32.0 % 32.5 % 13.0 %
Revenue (€M) 8,280 8,280 40.0 % 40.0 % 38.0 % 18.5 % 17.0 %
Cost of sales (€M) 5,288 5,300 37.5 % 40.0 % 38.0 % 20.0 % 18.5 %
Operating expenses (€M) 2,025 1,929 30.0 % 34.5 % 32.5 % 9.5% 8.0%
Operating profit (€M) 967 1,051 86.0 % 52.0 % 50.0 % 31.0 % 29.0 %
Profit after taxes (€M) 675 743 174.5% 48.5% 46.5%
Diluted EPS (€) 1.46 1.61 175.5% 48.0% 45.5%
Revenue per UC (€) 5.05 4.5% 4.5%
Cost of sales per UC (€) 3.23 4.5% 5.5%
H1 Interim dividend per share( 4 ) (€) 0.56
Europe Volume (M UC)( 2 ) 1,276 1,276 14.0 % 14.5 % 14.5 %
Revenue (€M) 6,451 6,451 20.0 % 20.0 % 19.0 % 20.0 % 19.0 %
Operating profit (€M) 741 825 46.5 % 30.5 % 30.0 % 30.5 % 30.0 %
Revenue per UC (€) 5.03 4.5% 4.5%
API Volume (M UC)( 2 ) 342 342 222.5% 222.5% 7.5%
Revenue (€M) 1,829 1,829 243.0% 243.0% 229.0% 15.0% 10.5 %
Operating profit (€M) 226 226 1,406.5% 276.5% 260.0% 32.0% 26.5 %
Revenue per UC (€) 5.12 2.0% 3.5%
DAMIAN GAMMELL, CHIEF EXECUTIVE OFFICER, SAID:
"We are pleased to have delivered a great first-half. We achieved strong top
and bottom-line growth, gained value share and generated solid free cash flow.
Key to this was the continued recovery of restaurants, pubs, cafes and bars, a
return to travel and tourism for many consumers and a resilient home channel.
All underpinned by robust categories and the strength of our customer
relationships.
"Our focus on core brands, leading in-market execution and headline price and
mix delivered volume and revenue ahead of 2019. We shared in this success with
our retail customers, having delivered more revenue growth for them than any
of our peers. And we continued to make progress against our sustainability
commitments - using more recycled plastic in our bottles and reducing carbon
emissions from our supply chain.
"We remain confident in the resilience of our categories, despite a more
uncertain outlook, given macroeconomic and geopolitical volatility and higher
inflation. We continue to actively manage key levers of pricing and
promotional spend across our broad pack offering, alongside our focus on
efficiency. However, given our strong first-half, we are raising revenue,
operating profit and free cash flow guidance for FY22. This demonstrates the
strength of our business and ability to deliver continued shareholder value."
___________________________
Note: All footnotes included after the 'About CCEP' section
Q2 & H1 HIGHLIGHTS( 1 , 3 )
Revenue
Q2 Reported +26.0%; Q2 Pro forma +16.0%( 5 )
• Reported growth, in addition to the drivers below, reflects
the acquisition of Coca-Cola Amatil (completed 10 May 2021)
• Pro forma comparable volume +10.5%( 8 ) (+5.0% vs 2019) driven
by the continued recovery of the Away from Home (AFH) channel, further
supported by the return of tourism in Europe, alongside favourable weather
◦ Strong AFH pro forma comparable volume: +20.0% (+1.5% vs 2019)
reflecting increased mobility & the recovery of immediate consumption (IC)
packs (+30.5%( 9 ) vs 2021; +5.0%( 9 ) vs 2019)
◦ Resilient Home pro forma comparable volume: +4.5% (+7.5% vs 2019)
driven by solid in-market execution, supported by the recovery of IC packs
& sustained growth in future consumption (FC) packs (e.g. multipack cans
+4.5%( 9 ) vs 2021; +26.0%( 9 ) vs 2019)
• Pro forma revenue per unit case +5.0%( 2 , 5 ) (+7.0%( 10 ) vs
2019) driven by favourable underlying price & promotional optimisation,
alongside positive pack & channel mix led by the recovery of AFH
H1 Reported +40.0%; H1 Pro forma +17.0%( 5 )
• Reported growth, in addition to the drivers below, reflects
the acquisition of Coca-Cola Amatil
• NARTD value share gains across measured channels both
in-store( 6 ) (+30bps) including sparkling (+90bps) & online( 6 ) (+30bps)
• Delivered more revenue growth for our retail customers than
any of our FMCG peers in Europe( 7 ) & our NARTD peers in API( 7 )
• Pro forma comparable volume +13.0%( 8 ) (+4.5% vs 2019) driven
by the solid recovery of AFH, further supported by the return of tourism in
Europe, sustained growth in the Home channel & strong trading during the
festive Ramadan period in Indonesia
◦ Comparable volume by channel: AFH +28.5% (flat vs 2019); Home
+4.5% (+7.5% vs 2019)
• Pro forma revenue per unit case +4.5%( 2 , 5 ) (+6.0%( 10 ) vs
2019) driven by favourable underlying price & promotional optimisation,
alongside positive pack & channel mix led by the recovery of AFH
H1 Operating profit
Reported +86.0%; Pro forma comparable
+29.0%( 5 )
• Reported growth, in addition to the drivers below, reflects
the acquisition of Coca-Cola Amatil
• Pro forma comparable cost of sales per unit case
+5.5%( 2 , 5 ) reflecting increased revenue per unit case driving higher
concentrate costs, commodity inflation & adverse mix, partially offset by
the favourable recovery of fixed manufacturing costs as a result of higher
volumes
• Comparable operating profit of €1,051m, +29.0%( 3 , 5 )
reflecting the increased revenue, the benefit of on-going efficiency
programmes & continuous efforts on discretionary spend optimisation
• Comparable diluted EPS of €1.61 (reported +175.5%)
Dividend
• First-half interim dividend per share of €0.56 (declared at Q1
& paid in May), calculated as 40% of the FY21 dividend, with the
second-half interim dividend to be paid with reference to the current year
annualised total dividend payout ratio of approximately 50%
Other
• Generated strong free cash flow of €1,281m (net cashflows
from operating activities of €1,653m) driven by strong first-half
performance & working capital initiatives. Continued focus on returning to
our target leverage range (Net debt/Adjusted EBITDA of 2.5x-3x) by FY24
• Reorientation of the API portfolio to maximise system value
creation to enable greater focus on NARTD, RTD alcohol & spirits well
advanced:
◦ Sale of NARTD own brands to The Coca-Cola Company for A$275m
substantially complete; annualised EBIT impact of ~A$25m
◦ Previously announced plans to exit production, sale &
distribution of Australia beer & apple cider products completed( 11 );
minimal EBIT impact
SUSTAINABILITY
• Recognised, for the second time, in the Financial
Times-Statista list of Europe's Climate Leaders & 2022 Bloomberg Gender
Equality Index
• Third manufacturing site certified carbon neutral (Belgium)
• GB launched new attached caps to PET bottles, thereby
improving recyclability
• France to become first supplier of non-alcoholic beverages to
distribute 100% of its beverages to hotels, restaurants & cafes using
returnable, refillable glass bottles by end of 2022
• New lighter weight PET bottle necks in Europe, saving c.7,000
tonnes of plastic annually by 2024
FY22 GUIDANCE & OUTLOOK( 1 , 3 )
The outlook for FY22 reflects current market conditions. Guidance is on a pro
forma comparable & Fx-neutral basis.
Revenue: pro forma comparable growth of 11-13% (previously 8-10%)
• Weighted towards volume growth over price/mix reflecting
continued recovery of the AFH channel, further supported by the return of
tourism
• Positive mix led by the continued recovery of the AFH channel
• Additional headline pricing & promotional optimisation
Cost of sales per unit case: pro forma comparable growth of ~7.5% (previously
~7%)
• Higher concentrate costs reflecting increased revenue per unit
case
• High teen commodity inflation, weighted to the second-half
• FY22 hedge coverage at ~90%
• FY23 high single-digit commodity inflation expected
Operating profit: pro forma comparable growth of 9-11% (previously 6-9%)
• Remain on track to deliver our previously announced efficiency
savings & API combination benefits (multi-year programmes amounting to
€350 to €395m in total (vs 2019))
Comparable effective tax rate: c.22-23% (unchanged)
Dividend payout ratio: c.50%( 12 ) (unchanged)
Free cash flow: at least €1.6bn (previously at least €1.5bn)
SECOND-QUARTER & FIRST-HALF REVENUE PERFORMANCE BY GEOGRAPHY( 1 )
All values are unaudited, changes versus equivalent 2021 period
Second-quarter First-half
Fx-Neutral Fx-Neutral
€ million % change % change € million % change % change
Great Britain 805 16.0 % 14.5 % 1,463 22.5 % 19.5 %
France( 14 ) 554 14.0 % 14.0 % 1,017 13.5 % 13.5 %
Germany 736 18.0 % 18.0 % 1,296 19.0 % 19.0 %
Iberia( 15 ) 828 27.5 % 27.5 % 1,371 28.5 % 28.5 %
Northern Europe( 16 ) 723 13.0 % 13.5 % 1,304 14.5 % 15.0 %
Total Europe 3,646 18.0 % 17.5 % 6,451 20.0 % 19.0 %
API( 13 ) (Pro forma)( 3 ) 925 17.0 % 10.0 % 1,829 15.0 % 10.5 %
Total CCEP (Pro forma)( 3 ) 4,571 17.5 % 16.0 % 8,280 18.5 % 17.0 %
API
• Q2 volume growth reflects strong trading during the festive Ramadan
period in Indonesia & continued momentum in Australia & New Zealand.
H1 volume ahead of 2019.
• Coca-Cola No Sugar outperformed in Australia & biggest ever
Ramadan activation in Indonesia drove H1 Sparkling volume ahead of 2019.
Monster continued to grow in all markets.
• Revenue/UC( 17 ) growth driven by lower promotions & positive
pack mix led by growth in smaller packs in Australia & favourable
underlying price in all markets.
France
• Q2 volume growth reflects the recovery of the AFH channel, supported
by increased tourism & favourable weather. Resilient demand in the Home
channel supported Q2 & H1 volume ahead of 2019.
• Coca-Cola Original Taste & Zero Sugar, Monster & Fuze Tea
all outperformed.
• Revenue/UC( 17 ) growth supported by positive brand & pack mix
e.g. small glass +93.0% led by the recovery of the AFH channel, as well as
favourable underlying price.
Germany
• Q2 volume growth reflects the on-going recovery of the AFH channel
& tourism. Later removal of restrictions slowed the overall recovery of
the AFH channel. Continued demand in the Home channel & the border trade
business supported Q2 & H1 volume ahead of 2019.
• Coca-Cola Original Taste, Zero Sugar, Fanta & Monster all
outperformed.
• Revenue/UC( 17 ) growth driven by favourable underlying price, as
well as positive brand (e.g. Monster volume +23.5%), pack & channel mix.
Great Britain
• Q2 volume growth reflects the strong recovery of the AFH channel
& favourable weather. Resilient demand in the Home channel further
supported overall volume growth, with both Q2 & H1 volume in double-digit
growth versus 2019.
• Coca-Cola Original Taste & Zero Sugar, Fanta & Monster all
outperformed.
• Revenue/UC( 17 ) growth driven by favourable underlying price &
promotional optimisation, as well as positive pack mix led by increased
mobility & the recovery of the AFH channel e.g. small PET +26.5%; small
glass +66.5%.
Iberia
• Q2 volume growth reflects the strong recovery of the AFH channel,
particularly in Spain which over-indexes in its exposure to HoReCa( 18 ),
supported by the return of tourism & favourable weather. Improved trading
in the Home channel, after the impact of the increased Spanish VAT rate last
year, also supported Q2 volume ahead of 2019.
• Coca-Cola Zero Sugar & Monster both outperformed.
• Revenue/UC( 17 ) growth driven by positive channel & pack mix
e.g. small glass +66.0% led by the recovery of the AFH channel &
favourable underlying price.
Northern Europe
• Q2 volume growth reflects the on-going recovery of the AFH channel
with good momentum following the removal of restrictions towards the end of
Q1. Resilient demand in the Home channel supported Q2 & H1 volume ahead of
2019.
• Coca-Cola Zero Sugar, Fanta & Monster all outperformed.
• Revenue/UC( 17 ) growth driven by favourable underlying price
alongside positive pack (e.g. small glass +118.0%), channel & brand mix
led by increased mobility & the recovery of the AFH channel.
___________________________
Note: All values are unaudited and all references to volumes are on a
comparable basis
SECOND-QUARTER & FIRST-HALF PRO FORMA VOLUME PERFORMANCE BY
CATEGORY( 1 , 3 , 8 )
Comparable volumes, changes versus equivalent 2021 period.
Second-quarter First-half
% of Total % Change % of Total % Change( 5 )
Sparkling 84.5 % 10.0 % 84.5 % 12.5 %
Coca-Cola(TM) 58.0 % 9.5 % 58.0 % 11.0 %
Flavours, Mixers & Energy 26.5 % 11.5 % 26.5 % 15.5 %
Stills 15.5 % 12.5 % 15.5 % 16.0 %
Hydration 8.0% 18.5 % 8.0% 19.0 %
RTD Tea, RTD Coffee, Juices & Other( 19 ) 7.5% 7.0% 7.5% 12.5 %
Total 100.0% 10.5% 100.0% 13.0%
Coca-Cola(TM)
• Original Taste H1 +12.5%; Lights H1 +9.0% reflecting the continued
recovery of the AFH channel & tourism
• Continued outperformance of Zero Sugar also contributed to the
volume growth (H1 +24.0% vs 2019)
• Zero Sugar gained value share( 6 ) of Total Cola +60bps
Flavours, Mixers & Energy
• Fanta Q2 +15.0%; H1 +20.0% Sprite Q2 +9.0%; H1 +16.5% driven by the
continued recovery of the AFH channel & strong trading during Ramadan in
Indonesia
• Energy Q2 +16.5%; H1 +17.5% led by Monster. Innovation &
distribution supported by solid in-market execution continued to support
volume growth (Q2 +61.0% vs 2019; H1 +67.5% vs 2019)
Hydration
• Water Q2 +16.5%; H1 +17.0% driven by the continued recovery of IC
reflecting increased mobility
• Water in decline vs 2019 (Q2 -22.0%; H1 -24.5%), partially offset by
Sports (Q2 +24.0%; H1 +17.5%)
RTD Tea, RTD Coffee, Juices & Other( 19 )
• Juice drinks H1 +7.0% reflecting increased mobility & the
recovery of the AFH channel. Solid growth in Capri-Sun (Q2 +20.0% vs 2019; H1
+20.0% vs 2019)
• RTD Tea/Coffee H1 +20.0% with strong growth in Fuze Tea (Q2
+43.5%( 9 ) vs 2019; H1 +43.0%( 9 ) vs 2019). Fuze Tea also continuing to grow
value share( 6 , 9 )
• Alcohol continued to deliver strong growth in Australia led by
Spirits & RTD (Q2 16.5% vs 2019; H1 +19.0% vs 2019)
___________________________
Note: All references to volumes are on a comparable basis
Conference Call (with presentation)
• 4 August 2022 at 12:00 BST, 13:00 CEST & 7:00 a.m. EDT;
via www.cocacolaep.com
• Replay & transcript will be available at
www.cocacolaep.com as soon as possible
Financial Calendar
• Combined third-quarter 2022 trading update & investor
event: 2-3 November 2022
• Financial calendar available here:
https://ir.cocacolaep.com/financial-calendar/
Contacts
Investor Relations
Sarah
Willett
Claire
Michael
Claire Copps
+44 7970 145 218
+44 7528 251 033
+44 7980 775 889
Media Relations
Shanna
Wendt
Nick
Carter
+44 7976 595 168
+44 7976 595 275
About CCEP
Coca-Cola Europacific Partners is one of the world's leading consumer goods
companies. We make, move and sell some of the world's most loved brands -
serving 600 million consumers and helping 1.75 million customers across 29
countries grow.
We combine the strength and scale of a large, multi-national business with an
expert, local knowledge of the customers we serve and communities we support.
The Company is currently listed on Euronext Amsterdam, the NASDAQ Global
Select Market, London Stock Exchange and on the Spanish Stock Exchanges,
trading under the symbol CCEP.
For more information about CCEP, please visit www.cocacolaep.com & follow
CCEP on Twitter at @CocaColaEP.
___________________________
1. Refer to 'Note Regarding the Presentation of Pro forma financial
information and Alternative Performance Measures' for further details and to
'Supplementary Financial Information' for a reconciliation of reported to
comparable and reported to pro forma comparable results; Change percentages
against prior year equivalent period unless stated otherwise
2. A unit case equals approximately 5.678 litres or 24 8-ounce
servings
3. Comparative pro forma figures as if the acquisition of Coca-Cola
Amatil Limited occurred at 1 January 2021 presented for illustrative purposes
only, it is not intended to estimate or predict future financial performance
or what actual results would have been. Acquisition completed on 10 May 2021.
Prepared on a basis consistent with CCEP accounting policies for the period 1
January to 10 May 2021. Refer to 'Note Regarding the Presentation of Pro forma
financial information and Alternative Performance Measures' for further
details
4. 27 April 2022 declared €0.56 interim dividend per share, paid 26
May 2022
5. Comparable & Fx-neutral
6. In-store: NielsenIQ Global Track YTD Data; Countries: NZ data to
w/e 17.07.22; ES, DE, FR, BE, NL, SE, PT & NO data to w/e 03.07.22; GB
data to w/e 02.07.22; IND data to w/e 12.06.22: IRI YTD Data; AUS data to w/e
03.07.22
Online: NielsenIQ Global Track YTD Data; Countries: ES, NL, SE & PT data
to w/e 03.07.22; NielsenIQ & Retailer data; GB data to w/e 02.07.22:
Retailer data; AUS data to w/e 03.07.22
7. Europe: NielsenIQ Strategic Planner YTD data: Countries: GB, BE,
DE, ES, FR, NL, NO, PT & SE data to 16.06.22
API: NielsenIQ Global Track YTD Data; Countries: NZ & IND data to
31.03.22; IRI YTD data: Country; AUS data to P3 2022
8. Adjusted for 1 less selling day in Q1; No selling day shift in Q2;
CCEP H1 pro forma volume +12.0%
9. Europe only
10. Management's best estimate
11. As previously announced (Q1 2022 Trading update on 27 April 2022),
CCEP will retain ownership of Feral craft brewery
12. Dividends subject to Board approval
13. Includes Australia, New Zealand & the Pacific Islands, Indonesia
& Papua New Guinea
14. Includes France & Monaco
15. Includes Spain, Portugal & Andorra
16. Includes Belgium, Luxembourg, the Netherlands, Norway, Sweden &
Iceland
17. Revenue per unit case
18. HoReCa = Hotels, Restaurants & Cafes
19. RTD refers to Ready to Drink; Other includes Alcohol & Coffee
Forward-Looking Statements
This document contains statements, estimates or projections that constitute
"forward-looking statements" concerning the financial condition, performance,
results, strategy and objectives of Coca-Cola Europacific Partners plc and its
subsidiaries (together CCEP or the Group). Generally, the words "ambition",
"target", "aim", "believe", "expect", "intend", "estimate", "anticipate",
"project", "plan", "seek", "may", "could", "would", "should", "might", "will",
"forecast", "outlook", "guidance", "possible", "potential", "predict",
"objective" and similar expressions identify forward-looking statements, which
generally are not historical in nature.
Forward-looking statements are subject to certain risks that could cause
actual results to differ materially from CCEP's historical experience and
present expectations or projections, including with respect to the acquisition
of Coca-Cola Amatil Limited and its subsidiaries (together "CCL" or "API")
completed on 10 May 2021 (the "Acquisition"). As a result, undue reliance
should not be placed on forward-looking statements, which speak only as of the
date on which they are made. These risks include but are not limited to:
1. those set forth in the "Risk Factors" section of CCEP's 2021 Annual Report
on Form 20-F filed with the SEC on 15 March 2022 and as updated and
supplemented with the additional information set forth in the "Principal Risks
and Risk Factors" section of this document;
2. risks and uncertainties relating to the Acquisition, including the risk
that the businesses will not be integrated successfully or such integration
may be more difficult, time consuming or costly than expected, which could
result in additional demands on CCEP's resources, systems, procedures and
controls, disruption of its ongoing business and diversion of management's
attention from other business concerns;
3. the extent to which COVID-19 will continue to affect CCEP and the results
of its operations, financial condition and cash flows will depend on future
developments that are highly uncertain and cannot be predicted, including the
scope and duration of the pandemic and actions taken by governmental
authorities and other third parties in response to the pandemic;
4. risks and uncertainties relating to the global supply chain, including
impact from war in Ukraine, such as the risk that the business will not be
able to guarantee sufficient supply of raw materials, supplies, finished
goods, natural gas and oil and increased state-sponsored cyber risks;
5. risks and uncertainties relating to the global economy and/or a potential
recession in one or more countries, including risks from elevated inflation,
price increases, price elasticity, disposable income of consumers and
employees, pressure on and from suppliers, increased fraud, and the perception
or manifestation of a global economic downturn; and
6. risks and uncertainties relating to potential global energy crisis, with
potential interruptions and shortages in the global energy supply,
specifically the natural gas supply in our territories. Energy shortages at
our sites, our suppliers and customers could cause interruptions to our supply
chain and capability to meet our production and distribution targets. The
impacts, including potential increases in energy prices, are expected to be
exacerbated during the approaching colder months of the year.
Due to these risks, CCEP's actual future results, dividend payments, capital
and leverage ratios, growth, including growth in revenue, cost of sales per
unit case and operating profit, free cash flow, market share, tax rate,
efficiency savings, achievement of sustainability goals, including net zero
emissions, and the results of the integration of the businesses following the
Acquisition, including expected efficiency and combination savings, may differ
materially from the plans, goals, expectations and guidance set out in
forward-looking statements (including those issued by CCL prior to the
Acquisition). These risks may also adversely affect CCEP's share price.
Additional risks that may impact CCEP's future financial condition and
performance are identified in filings with the SEC which are available on the
SEC's website at www.sec.gov. CCEP does not undertake any obligation to
publicly update or revise any forward-looking statements, whether as a result
of new information, future events, or otherwise, except as required under
applicable rules, laws and regulations. Furthermore, CCEP assumes no
responsibility for the accuracy and completeness of any forward-looking
statements. Any or all of the forward-looking statements contained in this
filing and in any other of CCEP's or CCL's public statements (whether prior or
subsequent to the Acquisition) may prove to be incorrect.
Note Regarding the Presentation of Pro forma financial information and
Alternative Performance Measures
Pro forma financial information
Pro forma financial information has been provided in order to illustrate the
effects of the acquisition of Coca-Cola Amatil Limited (referred to as CCL pre
acquisition, API post acquisition) on the results of operations of CCEP in
2021 and allow for greater comparability of the results of the combined group
between periods. The pro forma financial information for 2021 has been
prepared for illustrative purposes only and because of its nature, addresses a
hypothetical situation. It is based on information and assumptions that CCEP
believes are reasonable, including assumptions as at 1 January 2021 relating
to acquisition accounting provisional fair values of API assets and
liabilities which are assumed to be equivalent to those that have been
provisionally determined as of the acquisition date and included in the
financial statements for the year ended 31 December 2021, on a constant
currency basis. The pro forma information for 2021 also assumes the interest
impact of additional debt financing reflecting the actual weighted average
interest rate for acquisition financing of c.0.40% for 2021.
The pro forma financial information does not intend to represent what CCEP's
results of operations actually would have been if the acquisition had been
completed on the dates indicated, nor does it intend to represent, predict or
estimate the results of operations for any future period or financial position
at any future date. In addition, it does not reflect ongoing cost savings that
CCEP expects to achieve as a result of the acquisition or the costs necessary
to achieve these cost savings or synergies. As pro forma information is
prepared to illustrate retrospectively the effects of future transactions,
there are limitations that are inherent to the nature of pro forma
information. As such, had the acquisition taken place on the dates assumed,
the actual effects would not necessarily have been the same as those presented
in the Pro Forma financial information contained herein.
Alternative Performance Measures
We use certain alternative performance measures (non-GAAP performance
measures) to make financial, operating and planning decisions and to evaluate
and report performance. We believe these measures provide useful information
to investors and as such, where clearly identified, we have included certain
alternative performance measures in this document to allow investors to better
analyse our business performance and allow for greater comparability. To do
so, we have excluded items affecting the comparability of period-over-period
financial performance as described below. The alternative performance measures
included herein should be read in conjunction with and do not replace the
directly reconcilable GAAP measures.
For purposes of this document, the following terms are defined:
''As reported'' are results extracted from our consolidated financial
statements.
''Pro forma'' includes the results of CCEP and API as if the Acquisition had
occurred at the beginning of 2021, including acquisition accounting
adjustments relating to provisional fair values. Pro forma also includes
impact of the additional debt financing costs incurred by CCEP in connection
with the Acquisition for all periods presented.
"Comparable'' is defined as results excluding items impacting comparability,
which include restructuring charges, acquisition and integration related
costs, inventory fair value step up related to acquisition accounting, the
impact of the closure of the GB defined benefit pension scheme, net impact
related to European flooding and net tax items relating to rate and law
changes. Comparable volume is also adjusted for selling days.
''Pro forma Comparable'' is defined as the pro forma results excluding items
impacting comparability, as described above.
''Fx-neutral'' is defined as period results excluding the impact of foreign
exchange rate changes. Foreign exchange impact is calculated by recasting
current year results at prior year exchange rates.
''Capex'' or "Capital expenditures'' is defined as purchases of property,
plant and equipment and capitalised software, plus payments of principal on
lease obligations, less proceeds from disposals of property, plant and
equipment. Capex is used as a measure to ensure that cash spending on capital
investment is in line with the Group's overall strategy for the use of cash.
''Free cash flow'' is defined as net cash flows from operating activities less
capital expenditures (as defined above) and interest paid. Free cash flow is
used as a measure of the Group's cash generation from operating activities,
taking into account investments in property, plant and equipment and
non-discretionary lease and interest payments. Free cash flow is not intended
to represent residual cash flow available for discretionary expenditures.
''Adjusted EBITDA'' is calculated as Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA), after adding back items impacting the
comparability of period over period financial performance. Adjusted EBITDA
does not reflect cash expenditures, or future requirements for capital
expenditures or contractual commitments. Further, adjusted EBITDA does not
reflect changes in, or cash requirements for, working capital needs, and
although depreciation and amortisation are non-cash charges, the assets being
depreciated and amortised are likely to be replaced in the future and adjusted
EBITDA does not reflect cash requirements for such replacements.
''Net Debt'' is defined as the net of cash and cash equivalents less
borrowings and adjusted for the fair value of hedging instruments related to
borrowings and other financial assets/liabilities related to borrowings. We
believe that reporting net debt is useful as it reflects a metric used by the
Group to assess cash management and leverage. In addition, the ratio of net
debt to adjusted EBITDA is used by investors, analysts and credit rating
agencies to analyse our operating performance in the context of targeted
financial leverage.
''Dividend payout ratio'' is defined as dividends as a proportion of
comparable profit after tax.
Additionally, within this document, we provide certain forward-looking
non-GAAP financial Information, which management uses for planning and
measuring performance. We are not able to reconcile forward-looking non-GAAP
measures to reported measures without unreasonable efforts because it is not
possible to predict with a reasonable degree of certainty the actual impact or
exact timing of items that may impact comparability throughout year.
Unless otherwise stated, percent amounts are rounded to the nearest 0.5%.
Supplementary Financial Information - Income Statement - Reported to
Comparable
The following provides a summary reconciliation of CCEP's reported and
comparable results for the first six months ended 1 July 2022 and 2 July 2021:
First Six Months 2022 As Reported Items impacting Comparability Comparable
Unaudited, in millions of € except per share data which is calculated prior CCEP Restructuring Charges ( 1 ) Acquisition and Integration related costs ( 3 ) European flooding( 5 ) CCEP
to rounding
Revenue 8,280 - - - 8,280
Cost of sales 5,288 - - 12 5,300
Gross profit 2,992 - - (12) 2,980
Operating expenses 2,025 (95) (1) - 1,929
Operating profit 967 95 1 (12) 1,051
Total finance costs, net 63 - - - 63
Non-operating items 6 - - - 6
Profit before taxes 898 95 1 (12) 982
Taxes 223 19 - (3) 239
Profit after taxes 675 76 1 (9) 743
Attributable to:
Shareholders 667 76 1 (9) 735
Non-controlling interest 8 - - - 8
Profit after taxes 675 76 1 (9) 743
Diluted earnings per share (€) 1.46 0.17 - (0.02) 1.61
First Six Months 2021 As Reported Items impacting Comparability Comparable
Unaudited, in millions of € except per share data which is calculated prior CCEP Restructuring Charges ( 1 ) Defined benefit plan closure( 2 ) Acquisition and Integration related costs ( 3 ) Inventory step up costs( 4 ) Net Tax ( 6 ) CCEP
to rounding
Revenue 5,918 - - - - - 5,918
Cost of sales 3,840 (4) 3 - (48) - 3,791
Gross profit 2,078 4 (3) - 48 - 2,127
Operating expenses 1,558 (88) 6 (40) - - 1,436
Operating profit 520 92 (9) 40 48 - 691
Total finance costs, net 64 - - (3) - - 61
Non-operating items 1 - - - - - 1
Profit before taxes 455 92 (9) 43 48 - 629
Taxes 209 28 4 1 5 (118) 129
Profit after taxes 246 64 (13) 42 43 118 500
Attributable to:
Shareholders 244 64 (13) 42 42 118 497
Non-controlling interest 2 - - - 1 - 3
Profit after taxes 246 64 (13) 42 43 118 500
Diluted earnings per share (€) 0.53 0.14 (0.03) 0.10 0.09 0.26 1.09
__________________________
( 1 ) Amounts represent restructuring charges related to business
transformation activities.
( 2 ) Amounts represent the impact of the closure of the GB defined benefit
pension scheme to future benefits accrual on 31 March 2021.
( 3 ) Amounts represent cost associated with the acquisition and integration
of CCL.
( 4 ) Amounts represent the non-recurring impact of provisional fair value
step-up of API finished goods.
( 5 ) Amounts represent the incremental expense incurred offset by the
insurance recoveries collected as a result of the July 2021 flooding events,
which impacted the operations of our manufacturing facilities in
Chaudfontaine and Bad Neuenahr.
( 6 ) Amounts include the deferred tax impact related to income tax rate and
law changes.
Supplementary Financial Information - Income Statement - Reported to Pro forma
Comparable
The following provides a summary reconciliation of CCEP's reported and pro
forma comparable results for the first six months ended 2 July 2021:
First Six Months 2021 As Reported Pro forma adjustments API ( A ) Transaction accounting adjustments ( B ) Pro forma Combined Items impacting Comparability ( C ) Pro forma Comparable
Unaudited, in millions of € except share data which is calculated prior to CCEP CCEP CCEP
rounding
Revenue 5,918 1,056 - 6,974 - 6,974
Cost of sales 3,840 616 2 4,458 (49) 4,409
Gross profit 2,078 440 (2) 2,516 49 2,565
Operating expenses 1,558 323 68 1,949 (186) 1,763
Operating profit 520 117 (70) 567 235 802
Total finance costs, net 64 12 13 89 (3) 86
Non-operating items 1 (1) - - - -
Profit before taxes 455 106 (83) 478 238 716
Taxes 209 28 (23) 214 (61) 153
Profit after taxes 246 78 (60) 264 299 563
Attributable to:
Shareholders 244 75 (61) 258 298 556
Non-controlling interest 2 3 1 6 1 7
Profit after taxes 246 78 (60) 264 299 563
Diluted earnings per share (€) 0.53 0.16 (0.13) 0.56 0.66 1.22
__________________________
( A ) Amounts represent adjustments to include API financial results prepared
on a basis consistent with CCEP accounting policies, as if the Acquisition had
occurred on 1 January 2021 and excludes API acquisition and integration
related costs.
( B ) Amounts represent transaction accounting adjustments for the period 1
January to 10 May as if the Acquisition had occurred on 1 January 2021. These
include the depreciation and amortisation impact relating to provisional fair
values for intangibles and property plant and equipment, the interest impact
of additional debt financing reflecting the actual weighted average interest
rate for Acquisition financing of c.0.40% and the inclusion of acquisition and
integration related costs incurred by API prior to the Acquisition.
( C ) Items impacting comparability represents amounts included within Pro
forma Combined CCEP affecting the comparability of CCEP's year-over-year
financial performance and are set out in the corresponding table below:
First Six Months 2021 Items impacting Comparability
Unaudited, in millions of € except share data which is calculated prior to Restructuring Charges ( 1 ) Defined benefit plan closure( 2 ) Acquisition and Integration related costs ( 3 ) Inventory step up costs ( 4 ) Net Tax ( 5 ) Other ( 6 ) Total items impacting Comparability
rounding
Revenue - - - - - - -
Cost of sales (4) 3 - (48) - - (49)
Gross profit 4 (3) - 48 - - 49
Operating expenses (88) 6 (100) - - (4) (186)
Operating profit 92 (9) 100 48 - 4 235
Total finance costs, net - - (3) - - - (3)
Non-operating items - - - - - - -
Profit before taxes 92 (9) 103 48 - 4 238
Taxes 28 4 19 5 (118) 1 (61)
Profit after taxes 64 (13) 84 43 118 3 299
Attributable to:
Shareholders 64 (13) 84 42 118 3 298
Non-controlling interest - - - 1 - - 1
Profit after taxes 64 (13) 84 43 118 3 299
Diluted earnings per share (€) 0.14 (0.03) 0.19 0.09 0.26 0.01 0.66
__________________________
( 1 ) Amounts represent restructuring charges related to business
transformation activities.
( 2 ) Amounts represent the impact of the closure of the GB defined benefit
pension scheme to future benefits accrual on 31 March 2021.
( 3 ) Amounts represent cost associated with the acquisition and integration
of CCL.
( 4 ) Amounts represent the non-recurring impact of the provisional fair value
step-up of API finished goods.
( 5 ) Amounts include the deferred tax impact related to income tax rate and
law changes.
( 6 ) Amounts represent charges incurred prior to Acquisition classified as
non-trading items by API which are not expected to recur.
( )
(
)
Supplemental Financial Information - Operating Profit - Reported to Comparable
Revenue
Revenue CCEP Second-Quarter Ended Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
As reported 4,571 3,625 26.0 % 8,280 5,918 40.0 %
Adjust: Impact of fx changes (65) n/a n/a (114) n/a n/a
Fx-neutral 4,506 3,625 24.5 % 8,166 5,918 38.0 %
Revenue per unit case 5.13 4.91 4.5% 5.05 4.82 4.5%
Revenue Europe Second-Quarter Ended Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
As reported 3,646 3,092 18.0 % 6,451 5,385 20.0 %
Adjust: Impact of fx changes (10) n/a n/a (38) n/a n/a
Fx-neutral 3,636 3,092 17.5 % 6,413 5,385 19.0 %
Revenue per unit case 5.10 4.89 4.5% 5.03 4.80 4.5%
Revenue API Second-Quarter Ended Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
As reported 925 533 73.5 % 1,829 533 243.0%
Adjust: Impact of fx changes (55) n/a n/a (76) n/a n/a
Fx-neutral 870 533 63.0 % 1,753 533 229.0%
Revenue per unit case 5.28 5.02 5.5% 5.12 5.02 2.0%
Revenue by Geography Six Months Ended 1 July 2022
In millions of €
As reported Reported Fx-Neutral
% change % change
Great Britain 1,463 22.5 % 19.5 %
Germany 1,296 19.0 % 19.0 %
Iberia( 1 ) 1,371 28.5 % 28.5 %
France( 2 ) 1,017 13.5 % 13.5 %
Belgium/Luxembourg 511 12.5 % 12.5 %
Netherlands 329 23.5 % 23.5 %
Norway 208 4.0% 2.0%
Sweden 213 19.0 % 23.5 %
Iceland 43 13.0 % 5.5%
Total Europe 6,451 20.0 % 19.0 %
Australia 1,102 236.0% 226.0%
New Zealand and Pacific Islands 302 255.5% 247.0%
Indonesia and Papua New Guinea 425 254.0% 224.0%
Total API 1,829 243.0% 229.0%
Total CCEP 8,280 40.0% 38.0%
________________________
( 1 ) Iberia refers to Spain, Portugal & Andorra.
( 2 ) France refers to continental France & Monaco.
( )
Volume
Comparable Volume - Selling Day Shift CCEP Second-Quarter Ended Six Months Ended
In millions of unit cases, prior period volume recast using current year
selling days
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
Volume 878 738 19.0 % 1,618 1,227 32.0 %
Impact of selling day shift n/a - n/a n/a (7) n/a
Comparable volume - Selling Day Shift adjusted 878 738 19.0 % 1,618 1,220 32.5 %
Comparable Volume - Selling Day Shift Europe Second-Quarter Ended Six Months Ended
In millions of unit cases, prior period volume recast using current year
selling days
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
Volume 714 632 13.0 % 1,276 1,121 14.0 %
Impact of selling day shift n/a - n/a n/a (7) n/a
Comparable volume - Selling Day Shift adjusted 714 632 13.0 % 1,276 1,114 14.5 %
Comparable Volume - Selling Day Shift API Second-Quarter Ended Six Months Ended
In millions of unit cases, prior period volume recast using current year
selling days
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
Volume 164 106 54.5 % 342 106 222.5%
Impact of selling day shift n/a - n/a n/a - n/a
Comparable volume - Selling Day Shift adjusted 164 106 54.5 % 342 106 222.5%
Cost of Sales
Cost of Sales Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change
As reported 5,288 3,840 37.5 %
Adjust: Total items impacting comparability 12 (49) n/a
Comparable 5,300 3,791 40.0 %
Adjust: Impact of fx changes (72) n/a n/a
Comparable & fx-neutral 5,228 3,791 38.0 %
Cost of sales per unit case 3.23 3.09 4.5%
For the six months ending 1 July 2022, reported cost of sales were €5,288
million, up 37.5% versus 2021, reflecting the acquisition of Coca-Cola Amatil
on 10 May 2021.
Comparable cost of sales for the same period were €5,300 million, up 40.0%
versus 2021. Cost of sales per unit case increased by 4.5% on a comparable and
fx-neutral basis, reflecting increased revenue per unit case driving higher
concentrate costs, commodity inflation & adverse mix, partially offset by
the favourable recovery of fixed manufacturing costs as a result of higher
volumes.
Operating expenses
Operating Expenses Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 2,025 1,558 30.0 %
Adjust: Total items impacting comparability (96) (122) n/a
Comparable 1,929 1,436 34.5 %
Adjust: Impact of fx changes (27) n/a n/a
Comparable & fx-neutral 1,902 1,436 32.5 %
For the six months ending 1 July 2022, reported operating expenses were
€2,025 million, up 30.0% versus 2021.
Comparable operating expenses were €1,929 million for the same period, up
34.5% versus 2021, reflecting the impact of the API operations acquired in
2021, higher volumes and inflation, partially offset by the benefit of ongoing
efficiency programmes and our continuous efforts on discretionary spend
optimisation.
Restructuring charges of €95 million were incurred in the six month period
ending 1 July 2022, which are primarily attributable to €81 million of
expense recognised in connection with the transformation of the full service
vending operations and related initiatives in Germany. This compares to
restructuring charges of €92 million incurred in the six month period ending
2 July 2021, primarily related to productivity initiatives announced in Iberia
for which €50 million of severance costs have been recorded.
Operating profit
Operating Profit CCEP Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 967 520 86.0 %
Adjust: Total items impacting comparability 84 171 n/a
Comparable 1,051 691 52.0 %
Adjust: Impact of fx changes (15) n/a n/a
Comparable & fx-neutral 1,036 691 50.0 %
Operating Profit Europe Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 741 505 46.5 %
Adjust: Total items impacting comparability 84 126 n/a
Comparable 825 631 30.5 %
Adjust: Impact of fx changes (5) n/a n/a
Comparable & fx-neutral 820 631 30.0 %
Operating Profit API Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 226 15 1,406.5%
Adjust: Total items impacting comparability - 45 n/a
Comparable 226 60 276.5%
Adjust: Impact of fx changes (10) n/a n/a
Comparable & fx-neutral 216 60 260.0%
Supplemental Financial Information - Operating Profit - Reported to Pro forma
Comparable
All pro forma measures presented below relate only to 2021 periods.
Revenue
Pro forma Revenue CCEP Second-Quarter Ended Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
As reported and comparable 4,571 3,625 26.0 % 8,280 5,918 40.0 %
Add: Pro forma adjustments n/a 259 n/a n/a 1,056 n/a
Pro forma Comparable 4,571 3,884 17.5 % 8,280 6,974 18.5 %
Adjust: Impact of fx changes (65) n/a n/a (114) n/a n/a
Pro forma Comparable and fx-neutral 4,506 3,884 16.0 % 8,166 6,974 17.0 %
Pro forma Revenue per unit case 5.13 4.90 5.0% 5.05 4.84 4.5%
Pro forma Revenue API Second-Quarter Ended Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
As reported and comparable 925 533 73.5 % 1,829 533 243.0%
Add: Pro forma adjustments n/a 259 n/a n/a 1,056 n/a
Pro forma Comparable 925 792 17.0 % 1,829 1,589 15.0 %
Adjust: Impact of fx changes (55) n/a n/a (76) n/a n/a
Pro forma Comparable and fx-neutral 870 792 10.0 % 1,753 1,589 10.5 %
Pro forma Revenue per unit case 5.28 4.90 8.0% 5.12 4.95 3.5%
Pro forma revenue by Geography Second-Quarter Ended 1 July 2022 Six Months Ended 1 July 2022
In millions of €
Pro forma comparable Pro forma comparable % change Pro forma Fx-Neutral Pro forma comparable Pro forma comparable % change Pro forma Fx-Neutral
% change % change
Europe 3,646 18.0 % 17.5 % 6,451 20.0 % 19.0 %
Australia 550 14.5 % 8.5% 1,102 10.5 % 7.0%
New Zealand and Pacific Islands 154 24.0 % 20.0 % 302 15.0 % 12.0 %
Indonesia and Papua New Guinea 221 18.0 % 6.0% 425 29.0 % 18.0 %
Total API 925 17.0 % 10.0 % 1,829 15.0 % 10.5 %
Total CCEP 4,571 17.5 % 16.0 % 8,280 18.5 % 17.0 %
Volume
Comparable Volume - Selling Day Shift CCEP Second-Quarter Ended Six Months Ended
In millions of unit cases, prior period volume recast using current year
selling days
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
Volume 878 738 19.0 % 1,618 1,227 32.0 %
Impact of selling day shift n/a - n/a n/a (7) n/a
Comparable volume - Selling Day Shift adjusted 878 738 19.0 % 1,618 1,220 32.5 %
Pro forma impact( 1 ) n/a 55 n/a n/a 212 n/a
Pro forma comparable volume 878 793 10.5 % 1,618 1,432 13.0 %
Comparable Volume - Selling Day Shift API Second-Quarter Ended Six Months Ended
In millions of unit cases, prior period volume recast using current year
selling days
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
Volume 164 106 54.5 % 342 106 222.5%
Impact of selling day shift n/a - n/a n/a - n/a
Comparable volume - Selling Day Shift adjusted 164 106 54.5 % 342 106 222.5%
Pro forma impact( 1 ) n/a 55 n/a n/a 212 n/a
Pro forma comparable volume 164 161 2.0% 342 318 7.5%
___________________________
1 Pro forma API volume for the six months ended 2 July 2021 is 321 million
unit cases. Including the impact of the Q1 selling day shift (3 million unit
cases), pro forma comparable API volume is 318 million unit cases.
Pro forma Comparable Volume by Brand Category CCEP Second-Quarter Ended Six Months Ended
Adjusted for selling day shift
1 July 2022 2 July 2021 % Change 1 July 2022 2 July 2021 % Change
% of Total % of Total % of Total % of Total
Sparkling 84.5 % 84.5 % 10.0 % 84.5 % 84.5 % 12.5 %
Coca-Cola(TM) 58.0 % 58.5 % 9.5 % 58.0 % 59.0 % 11.0 %
Flavours, Mixers & Energy 26.5 % 26.0 % 11.5 % 26.5 % 25.5 % 15.5 %
Stills 15.5 % 15.5 % 12.5 % 15.5 % 15.5 % 16.0 %
Hydration 8.0% 7.5% 18.5% 8.0% 7.5% 19.0%
RTD Tea, RTD Coffee, Juices & Other( 1 ) 7.5% 8.0% 7.0% 7.5% 8.0% 12.5%
Total 100.0% 100.0% 10.5 % 100.0% 100.0% 13.0%
________________________
1 RTD refers to Ready to Drink; Other includes Alcohol & Coffee
Cost of Sales
Pro forma Cost of Sales Six Months Ended
In millions of €, except per case data which is calculated prior to
rounding. FX impact calculated by recasting current year results at prior year
rates.
1 July 2022 2 July 2021 % Change
As reported 5,288 3,840 37.5 %
Add: Pro forma adjustments n/a 616 n/a
Adjust: Acquisition accounting n/a 2
Adjust: Total items impacting comparability 12 (49)
Pro forma Comparable 5,300 4,409 20.0%
Adjust: Impact of fx changes (72) n/a n/a
Pro forma Comparable & fx-neutral 5,228 4,409 18.5%
Cost of sales per unit case 3.23 3.06 5.5%
Comparable cost of sales for the six months ending 1 July 2022 were €5,300
million, up 20.0% versus 2021 on a pro forma comparable basis. Cost of sales
per unit case increased by 5.5% on a pro forma comparable and fx-neutral
basis, driven by an increase in concentrate in line with our incidence model
reflecting the improvement in revenue per unit case. There was also upward
pressure on commodities and adverse mix, partially offset by the favourable
recovery of fixed manufacturing costs given higher volumes.
Operating Expenses
Pro forma Operating Expenses Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 2,025 1,558 30.0 %
Add: Pro forma adjustments n/a 323 n/a
Adjust: Acquisition accounting n/a 68
Adjust: Total items impacting comparability (96) (186)
Pro forma Comparable 1,929 1,763 9.5%
Adjust: Impact of fx changes (27) n/a n/a
Pro forma Comparable & fx-neutral 1,902 1,763 8.0%
Comparable operating expenses for the six months ending 1 July 2022 were
€1,929 million, up 9.5% versus 2021 on a pro forma comparable basis,
reflecting higher volumes and inflation, partially offset by the benefit of
on-going efficiency programmes and our continuous efforts on discretionary
spend optimisation in areas such as trade marketing, travel and meetings.
Operating Profit
Pro forma Operating Profit CCEP Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 967 520 86.0 %
Add: Pro forma adjustments n/а 117 n/a
Adjust: Acquisition accounting n/а (70)
Adjust: Total items impacting comparability 84 235
Pro forma Comparable 1,051 802 31.0 %
Adjust: Impact of fx changes (15) n/a n/a
Pro forma Comparable & fx-neutral 1,036 802 29.0 %
Pro forma Operating Profit API Six Months Ended
In millions of €. FX impact calculated by recasting current year results at
prior year rates.
1 July 2022 2 July 2021 % Change
As reported 226 15 1,406.5%
Add: Pro forma adjustments n/a 117 n/a
Adjust: Acquisition accounting n/a (70)
Adjust: Total items impacting comparability - 109
Pro forma Comparable 226 171 32.0 %
Adjust: Impact of fx changes (10) n/a n/a
Pro forma Comparable & fx-neutral 216 171 26.5 %
Supplemental Financial Information - Effective Tax Rate
The effective tax rate was 25% and 46% for the six months ended 1 July 2022
and 2 July 2021, respectively, and 29% for the years ended 31 December 2021.
For the six months ending 1 July 2022, the effective tax rate reflects the
impact of having operations outside the UK which are taxed at rates other than
the statutory UK rate of 19%.
We expect our full year 2022 comparable effective tax rate to be between 22%
and 23%.
Supplemental Financial Information - Free Cash Flow
Free Cash Flow Six Months Ended
In millions of €
1 July 2022 2 July 2021
Net cash flows from operating activities 1,653 908
Less: Purchases of property, plant and equipment (178) (115)
Less: Purchases of capitalised software (22) (42)
Add: Proceeds from sales of property, plant and equipment 6 20
Less: Payments of principal on lease obligations (80) (65)
Less: Interest paid, net (98) (58)
Free Cash Flow 1,281 648
Supplemental Financial Information - Borrowings
Net Debt As at Credit Ratings
In millions of € As of 3 August 2022
1 July 2022 31 December 2021 Moody's Fitch Ratings
Total borrowings 12,642 13,140 Long-term rating Baa1 BBB+
Fair value of hedges related to borrowings( 1 ) (164) (110) Outlook Stable Stable
Other financial assets/liabilities( 1 ) 30 42 Note: Our credit ratings can be materially influenced by a number of factors
including, but not limited to, acquisitions, investment decisions and working
capital management activities of TCCC and/or changes in the credit rating of
TCCC. A credit rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time.
Adjusted total borrowings 12,508 13,072
Less: cash and cash equivalents( 2 ) (1,819) (1,407)
Less: short term (239) (58)
investments( 3 )
Net debt 10,450 11,607
______________________
( 1 ) Net Debt includes adjustments for the fair value of derivative
instruments used to hedge both currency and interest rate risk on the Group's
borrowings. In addition, Net Debt also includes other financial
assets/liabilities relating to cash collateral pledged by/to external parties
on hedging instruments related to borrowings.
( 2 ) Cash and cash equivalents as at 1 July 2022 and 31 December 2021 include
€75 million and €45 million of cash in Papua New Guinea Kina respectively.
Presently, there are government-imposed currency controls which impact the
extent to which the cash held in Papua New Guinea can be converted into
foreign currency and remitted for use elsewhere in the Group.
( 3 ) Short term investments are term cash deposits held in API with maturity
dates when acquired of greater than three months and less than one year. These
short term investments are held with counterparties that are continually
assessed with a focus on preservation of capital and liquidity. Short term
term investments as at 1 July 2022 and 31 December 2021 include €40
million and €44 million of assets in Papua New Guinea Kina respectively,
subject to the same currency controls outlined above.
Supplemental Financial Information - Adjusted EBITDA
Adjusted EBITDA Six Months Ended
In millions of €
1 July 2022 2 July 2021
Reported profit after tax 675 246
Taxes 223 209
Finance costs, net 63 64
Non-operating items 6 1
Reported operating profit 967 520
Depreciation and amortisation( 1 ) 386 342
Reported EBITDA 1,353 862
Items impacting comparability
Restructuring charges( 2 ) 94 71
Defined benefit plan closure( 3 ) - (9)
Acquisition and Integration related costs( 4 ) 1 40
European flooding( 5 ) (12) -
Inventory step up costs( 6 ) - 48
Adjusted EBITDA 1,436 1,012
______________________
( 1 ) Includes the depreciation and amortisation impact relating to
provisional fair values for intangibles and property plant and equipment as at
2 July 2021.
( 2 ) Amounts represent restructuring charges related to business
transformation activities, excluding accelerated depreciation included in the
depreciation and amortisation line.
( 3 ) Amounts represent the impact of the closure of the GB defined benefit
pension scheme to future benefits accrual on 31 March 2021.
( 4 ) Amounts represent cost associated with the acquisition and integration
of CCL.
( 5 ) Amounts represent the incremental expense incurred offset by the
insurance recoveries collected as a result of the July 2021 flooding events,
which impacted the operations of our manufacturing facilities in
Chaudfontaine and Bad Neuenahr.
( 6 ) Amounts represent the non-recurring impact of the provisional fair value
step-up of API finished goods.
Pro forma measures presented below relate only to 2021.
Pro forma Adjusted EBITDA Six Months Ended
In millions of €
1 July 2022 2 July 2021
Reported profit after tax 675 246
Taxes 223 209
Finance costs, net 63 64
Non-operating items 6 1
Reported operating profit 967 520
Pro forma adjustments CCL( 1 ) - 117
Transaction accounting adjustments( 2 ) - (70)
Pro forma Combined operating profit 967 567
Depreciation and amortisation( 3 ) 386 418
Pro forma EBITDA 1,353 985
Items impacting comparability
Restructuring charges( 4 ) 94 71
Defined benefit plan closure ( 5 ) - (9)
Acquisition and Integration related costs( 6 ) 1 100
Inventory step up costs( 7 ) - 48
European flooding( 8 ) (12) -
Other( 9 ) - 4
Pro forma adjusted EBITDA 1,436 1,199
______________________
( 1 ) Amounts represent adjustments to include CCL financial results prepared
on a basis consistent with CCEP accounting policies, as if the Acquisition had
occurred on 1 January 2021 and excludes CCL acquisition and integration
related costs.
( 2 ) Amounts represent transaction accounting adjustments for the period 1
January to 10 May 2021 as if the Acquisition had occurred on 1 January 2021.
( 3 ) Includes the depreciation and amortisation impact relating to
provisional fair values for intangibles and property plant and equipment as if
the Acquisition had occurred on 1 January 2021.
( 4 ) Amounts represent restructuring charges related to business
transformation activities, excluding accelerated depreciation included in the
depreciation and amortisation line.
( 5 ) Amounts represent the impact of the closure of the GB defined benefit
pension scheme to future benefits accrual on 31 March 2021.
( 6 ) Amounts represent costs associated with the acquisition and integration
of CCL.
( 7 ) Amounts represent the non-recurring impact of the provisional fair value
step-up of API finished goods.
( 8 ) Amounts represent the incremental expense incurred offset by the
insurance recoveries collected as a result of the July 2021 flooding events,
which impacted the operations of our manufacturing facilities in
Chaudfontaine and Bad Neuenahr.
( 9 ) Amounts represent charges incurred prior to Acquisition classified as
non-trading items by API which are not expected to recur.
(
)
Principal Risks and Risk Factors
The principal risks and risk factors in our 2021 Integrated Report on Form
20-F for the year ended 31 December 2021 ('2021 Integrated Report') (pages 42
to 47 and 195 to 202 respectively) continue to represent our risks.
We recognize significant volatility as a result of the current geopolitical
and economic situation and see an upward trend for the Geodemographic
principal risk. Absent other material changes, for example geographic
expansion of the war in Ukraine, it is not deemed necessary to change any of
the other principal risk ratings included in our 2021 Integrated Report.
Our current assessment takes into account additional mitigation put in place
to address increased risk levels due primarily to:
• the war in Ukraine, which has impacted supply of raw
materials, supplies, finished goods, gas/oil/energy and increased cyber risks;
• economic impacts, including inflation, price increases,
price elasticity, disposable income of consumers and employees, pressure on
and from suppliers, increased fraud, and the perception or manifestation of a
global economic downturn;
• political developments, including strikes, unrest, interest
rates, ESG and other regulation; and
• the continuing and evolving worldwide COVID-19 pandemic.
Accordingly, changes in the risk levels and the respective mitigations put in
place to our principal risks and risk factors are provided below and
supplement the Principal Risks and Risk Factors in our 2021 Integrated Report.
Any or all of the Principal Risks and Risk Factors contained therein may be
exacerbated by unpredictable developments in the factors identified above and
in our Forward-Looking Statements set out on page 7 of this Half Year 2022
Interim Report.
The risks described in this report and in our 2021 Integrated Report are not
the only risks facing the Group. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial may also
materially adversely affect our business, financial condition or future
results.
Potential risk from global economic downturn
We recognize the increased likelihood of a global economic downturn (e.g. a
recession) and have evaluated the impact on our business. While such a
fundamental development could impact our entire risk profile, we expect the
following principal risks to be primarily impacted (a discussion of our
respective mitigations is incorporated in the Principal Risk table below):
• Geodemographic
A prolonged war in Ukraine and an extension of the war zone to other countries
could exacerbate the risk of a global (raw) material, energy and gas crisis
and increase the risk of cyber-attacks, including state-sponsored attacks.
With the approaching autumn and winter season, COVID-19 cases could increase
across our territories and trigger governmental and societal counter measures,
including shutdowns, with additional negative impact on the affected countries
and their economic state.
• Economic and political conditions
Central banks across the world are looking to manage elevated levels of
inflation through increasing interest rates, which negatively impacts
investment and debt financing activities.
Disagreement with governmental actions to mitigate the effects of a recession
might lead to social unrest.
Elevated supply chain cost and continuously increasing prices with high
volatilities and deteriorating availability of goods and materials could put
the viability of some of our suppliers (and sub-suppliers) at risk.
• Market
The general economic environment might:
- require us to absorb supply cost increases without being able to
implement offsetting customer price increases,
- put the viability and independence of our existing customers at risk,
- lead our customers to promote and give preference to private label
versus our products,
- lead consumers with decreasing disposable income to divert to private
label and value packs and from the away-from-home to the home channel.
• People and Wellbeing
Our employees are impacted by inflation and increasing cost of living (e.g.
energy prices, basic food) which could lead to decreasing motivation, higher
absenteeism or strikes.
Potential risk from energy crisis
One of the global consequences of the war in Ukraine is potential
interruptions and shortages in the global energy supply, specifically the
natural gas supply in our territories. The impacts, including potential
increases in energy prices, are expected to be exacerbated during the
approaching colder seasons of the year in Europe. While an energy crisis could
impact our entire risk profile we expect the principal risks 'Economic and
political conditions' and 'Geodemographic' to be most impacted.
We are working to strengthen our resilience to manage this risk across our
territories. This work includes but is not limited to:
• Limiting our dependence on natural gas (from Russia) through
conversion to oil at selected sites which provides more supply options for
CCEP;
• Proactively managing supplier risks for gas in Germany,
Recycled/Virgin-PET, CO2, sugar, glass, cans and other critical supplies; and
• Reviewing and building up our contingency to ensure product
(SKU) supply, including through assessing different scenarios of gas rationing
across the EU.
SUMMARY OF OUR PRINCIPAL RISKS
The following is a summary of the Group's updated Principal Risks in
alphabetical order:
Risk change legend: ↑ Increased ↓ Decreased → Stayed the same
Principal Risk Definition and impact Key Mitigation Change vs 2021 Integrated Report
Climate change and water Scientific consensus indicates that increased concentrations of carbon dioxide • Set science based carbon reduction targets for our core →
and other GHGs are causing climate change and exacerbating water scarcity. business operations and our value chain
Such GHG emissions occur across our entire value chain including our
production facilities, cold drink equipment and transportation. GHG emissions • Carbon reduction plans for our production facilities,
also occur as a result of the packaging we use and ingredients we rely on. distribution and CDE
Governmental, international, and private sector organizations are increasingly
imposing pressure to reduce GHGs and to disclosure more information regarding • Supplier carbon footprint reduction programme launched in
GHGs, which could impose financial and reputational costs on our business. Our support of CCEP's 2040 net zero ambition with focus on suppliers setting SBTi
ingredients and production facilities also rely heavily on the availability of targets and using 100% renewable electricity
water. This exposes us to the risk of negative impacts related to our ability
to produce or distribute our products, or the availability and price of • Transition to 100% renewable electricity across our own
agricultural ingredients and raw materials as a result of increased water operation
scarcity. Failure to address these risks may cause damage to our corporate
reputation or investor confidence, a reduction in consumer acceptance of our • External policy leadership and advocacy to support a
products and potential disruption to our operations. transition to a low-carbon economy
• Life cycle analysis to assess carbon footprint of packaging
formats
• Use of recycled materials for our packaging, which have a
lower carbon footprint
• SVAs to protect future sustainability of local water sources
and FAWVA and water management plans
• Supplier engagement on carbon reduction and sustainable water
use
• Assessment on climate-related risks (both physical and
transition risks) and future climate scenario planning
• Comprehensive disclosure of GHG emissions across our value
chain in line with GHG Protocol
• Water scarcity simulation test and exercise of IMTs to ensure
an appropriate response to water related incidents
Competitiveness business transformation and integration We are continuing our strategy of continuous improvement, which should enable • Regular competitiveness reviews ensuring effective steering, →
us to remain competitive in the future. This includes technology high visibility and quick decision making
transformation, supporting home working, improvements in our supply chain and
in the way we work with our partners and franchisors, and our Acquisition of • Dedicated programme management office and effective project
CCL and ongoing integration activities. This exposes us to the risk of management methodology
ineffective coordination between BUs and central functions, change fatigue
among our people and social unrest. As a result, we may not create the • Continuation of strong governance routines
expected value from these initiatives or execute our business plans
effectively. We may also experience damage to our reputation, a decline in our • Regular ELT and Board reviews and approvals of progress and
share price, industrial action and disruption of operations. issue resolution
• Analysis and review of acquisition related activities such as
integration and business performance risk indicators and capital allocation
risk reviews
• Building a performant and resilient workforce with priority
focus on health and safety and mental wellbeing initiatives especially in the
front lines roles
Cyber and social engineering attacks and IT infrastructure We rely on a complex IT landscape, using both internal and external systems, • Proactive monitoring of cyber threats and implementing →
including some systems that are outside our direct control where employees preventive measures
work from home. These systems are potentially vulnerable to adversarial and
accidental security and cyber threats, and user behaviour. This threat profile • Business awareness and training on information security and
is dynamically changing, including as a result of the COVID-19 pandemic and data privacy
the war in Ukraine, as potential attackers' skills and tools advance. This
exposes us to the risk of unauthorised data access, compromised data accuracy • Business continuity and disaster recovery programmes
and confidentiality, the loss of system operation or fraud. As a result, we
could experience disruption to operations, financial loss, regulatory • A programme to identify and resolve vulnerabilities
intervention, or damage to our reputation.
• Third party risk assessments
• Corporate security business intelligence
• Appropriate investment in updating systems
• Hardware lifecycle process in place
• Regular internal and external testing of our security controls
(red teaming, pentesting)
• Global Security Operations Centre, operated 24/7
Additional or enforced mitigation since IR 2021:
Cyber Risk
• Executive Team and Board of Directors are actively engaged in
the cyber strategy process
• Introduced additional technical and organizational measures to
manage Phishing
• Actively looking for weaknesses and proactive mitigation of
cyber risks
• Continuing structural risk reduction in IT and OT
Corporate Security Risk
• Horizon scanning, exchange with peers and organizations (e.g.
OSAC)
• Employee extraction process reviewed and executed
Economic and political conditions Our industry is sensitive to economic conditions such as commodity and • Diversified product portfolio and the geographic diversity of →
currency price volatility, short-term interest rate volatility and inflation our operations assist in mitigating our exposure to any localised economic
changes and expectations, political instability, low consumer confidence, lack risk
of liquidity and funding resources, widening of credit risk premiums,
unemployment and the impact of war, the widespread outbreak of infectious • Our flexible business model allows us to adapt our portfolio
disease such as COVID-19. This exposes us to the risk of an adverse impact on to suit our customers' changing needs during economic downturns
CCEP and our consumers, driving a reduction of spend within our category or a
change in consumption channels and packs. As a result, we could experience • We regularly review our business results and cash flows and,
reduced demand for our products, fail to meet our growth priorities and our where necessary, rebalance capital investments - Macro economic and political
reputation could be adversely impacted. Adverse economic conditions could also developments continue to be closely monitored to ensure that business is
lead to increased volatility, inflation, energy and commodity cost, customer prepared to manage emerging situations
and supplier delinquencies and bankruptcies, while restrictions on the
movement of goods in response to economic, political or other conditions, such • Monitoring of societal developments
as COVID-19 and the war in Ukraine, could affect our supply chain.
• We have a very robust and forward-looking hedging policy for
managing the financial risks like foreign exchange, commodity and interest
rate risks
Additional or enforced mitigation since IR 2021:
Corporate Security
• Active monitoring of societal developments,
local security protocols in place
Supply Chain
• Increased hedge coverage of key commodities for 2022 and 2023
• Working with suppliers to manage non-commodity contract risk
• Minimizing disruption to supply by securing contingency supply
for directly impacted goods, i.e., glass, cans, coolers
Geodemographic Our business is vulnerable to a range of risks that may materialise and cause • Continually updating our response to the situation and our ↑
disruption. These include threats and risks such as impacts of war, physical people's needs
attacks (e.g. terrorism), cyber terrorism and attacks on third parties, and
supplier failure as well as natural hazards such as fire, flood, severe • Customers: working closely with suppliers, partners and TCCC
weather including heat waves and severe storms, and pandemics. Working with to ensure we best serve our customers and respond to their needs
teams across the business, we develop business continuity plans and resilience
arrangements to ensure the delivery of our products and services no matter • Communities: working closely with TCCC to support our
what the cause of disruption. This is to protect our people, our environment, communities
our reputation and our overall financial condition. In some cases, such as the
current COVID-19 pandemic, health, economic and legal effects could have a • Governance: strong frameworks, business continuity plans,
direct or indirect impact on our ability to operate. incident management teams, strategic business continuity scenario testing,
risk reassessments used in business planning, increased frequency of reviews
with country leadership teams. Board and TCCC incorporating learnings from the
Coca-Cola system - Effective management of liquidity, costs and discretionary
spend
• Operational, technology and strategic resilience towers
developed as part of our newly created business continuity and resilience
strategy to enable further resilience and risk mitigation for CCEP
• Training and awareness to build BCR capabilities throughout
CCEP to improve buy in and skills when it comes to preparing for and
responding to incidents
• Business impact analysis (BIA) to analyse and identify
critical people (roles), property, technology, equipment and suppliers (value
chain) across CCEP and their associated maximum acceptable outages, recovery
time objectives and recovery point objectives
• Scenario planning exercise with stakeholders across facilities
and functions to determine scenarios that could lead to the unavailability of
critical dependencies identified in the BIA and the associated impacts if the
scenarios were to occur
• BCP development with colleagues across the business to
mitigate risks identified during the BIA, scenario planning and risk
assessment and having them available to use in following waves
• Risk assessments to identify the likelihood and impact of
identified scenarios occurring, enabling BCPs to be developed in a targeted,
meaningful way
• Testing and exercising to validate BCPs are effective, giving
teams capabilities to respond to incidents that may occur, through table top
and live simulated exercises with stakeholders across CCEP, within sites and
functions
Additional or enforced mitigation since IR 2021:
COVID-19
MonMonitoring evolution in each country and adhering with with governmental
recommendations and regulations
Supply chain
Implemented business contingency plans for our infrastructure regarding gas
supply disruption, e.g., in Germany
Legal, regulatory and tax change Our daily operations are subject to a broad range of regulations at EU and • Continuous monitoring of new or changing regulations and →
national level. These include regulations covering manufacturing, the use of appropriate implementation
certain ingredients, packaging, labelling requirements, and the distribution
and sale of our products. This exposes us to the risk of legal, regulatory or • Dialogue with government representatives and input to public
tax changes that may adversely impact our business. As a result, we could face consultations on new or changing regulations
new or higher taxes, higher labour and other costs, stricter sales and
marketing controls, or punitive or other actions from regulators or • Effective compliance programmes and training for employees
legislative bodies that negatively impact our financial results, business
performance or licence to operate. COVID-19 has resulted in both short-term • Measures set out elsewhere in this table in relation to legal,
and long-term changes to legislation and regulation. It may also lead to regulatory and tax changes with respect to any of the other principal risks,
future increases in taxes to finance the cost of government responses to and in particular in relation to packaging, perceived health impact of our
COVID-19. In addition to the changes that took immediate effect from 11pm GMT beverages and ingredients, and changing consumer preferences
on 31 December 2020, we expect Brexit could, over time, lead to increased
diversity of regulation and consequent costs of compliance including inability • Increasing recycled content level in specific countries to
to or difficulties in standardising product and process between the UK and mitigate tax impact
CCEP's other markets.
Market Our success in the market depends on a number of factors. These include • Shopper insights and price elasticity assessments →
actions taken by our competitors, route to market, our ability to build strong
customer relationships and create value together (which could be affected by • Pack and product innovation
customer consolidation, buying groups, and the changing customer landscape)
and government actions, including those introduced as a result of COVID-19 • Promotional strategy
such as social distancing, the forced closure of some of our customer
channels, restricted tourism and restrictions on large gatherings. We are also • Commercial policy
subject to risks from the impact of price increases on foods and commodities
on the competitive environment in which we operate. This exposes us to the • Collaborative category planning with customers
risk that market forces may limit our ability to execute our business plans
effectively. As a result, it may be more challenging to expand margins, • Growth centric customer investment policies
increase market share, or negotiate with customers effectively, and COVID-19
may also further adversely impact the market in previously unforeseen ways. • Business development plans aligned with our customers
• Diversification of portfolio and customer base
• Realistic budgeting routines and targets
• Investment in key account development and category planning
• Continuous evaluation and updating of mitigation plans
• Responded to COVID-19 by developing and investing in routes to
market, for example, online channel, so our products remain available to
consumers
Additional or enforced mitigation since IR 2021:
• Monitoring pricing strategy and implementing additional price
increases with customers
Packaging The packaging of our products is under increasing scrutiny, especially • Continued sustainability action plan focused on packaging, →
plastics, from a regulatory, tax, consumer and customer perspective, and including our commitments to:
NGO's, non-compliance with new regulations, reputational impact, sourcing and
logistical challenges. API territories have increased this scrutiny. As a ◦ ensure that 100% of our primary packaging is recyclable or
result, we must challenge our growth model relying on SUP growth towards a refillable
more environmentally sustainable growth model that makes it sustainable in
time, changing our packaging strategy in a short time frame, increasing ◦ drive higher collection rates, aiming to ensure that 100% of
collection rates at a high speed ,developing our reusable and packageless our packaging is collected for reuse or recycling
options and reducing virgin materials and plastics in our secondary packaging.
Protecting our future license to operate depends on our understanding and ◦ ensure that by 2023 at least half of the material we use for
acceptance of both the need to reduce our use of virgin plastic and to our PET bottles comes from recycled plastic, achieving 100% by 2030
de-couple our growth from a continued growth in the use of single use plastic.
Additionally, our packaging future mix will determine our path towards a • Work with TCCC to explore alternative sources of rPET and
neutral carbon Company in 2040 and our 30% GHG emissions reduction in 2030. innovative new packaging materials
• Work with TCCC to encourage consumers to recycle their
packaging using existing collection infrastructure
• Cross functional Sustainable Packaging Office (SPO) with a
dedicated focus on packaging collection and to ensure all sustainable
packaging strategies are implemented on time
• Support for well-designed Deposit Return Scheme (DRS) across
our markets as a route to 100% collection and increased availability of rPET
• Work to expand delivery mechanisms that do not rely on single
use packaging, for example refillable packaging and dispensed delivery
• Investment in enhanced recycling technology
• We continue to develop the business models for packaging-less
solutions (such as Freestyle) to provide an alternative offering for customers
who do not want to use packaging
• We also continue to develop the business models for refillable
packaging to provide an alternative offering for customers who want fully
circular alternatives to single use packaging
• Increase use of recycled content in films
• Moving from hard to recycle plastic shrink to sustainable
board for multi packs
People and wellbeing The advent of the COVID-19 pandemic has resulted and is likely to continue • CCEP CoC →
causing a higher degree of mental health issues and higher absence rates for
employees. There is growing awareness of stress related illness due to more • CCEP wide wellbeing network
demand and responsibility on employees, especially where restructuring takes
place, which exposes us to the risk of long-term absence and a loss of • Regular communication
production.
• External EAP support and internal wellbeing (mental health)
Our response to these topics, the change in working conditions and the first aiders
upcoming importance of "future of work" and "working flexibly" will affect the
perception of CCEP as an employer and our ability to attract, retain and • Flexible working
motivate existing and future employees. This exposes us to the risk of not
having the right talent with the required technical skillset. As a result, we • Working from home
could fail to achieve our strategic objectives and could experience a decline
in employee engagement, industrial action, suffer from reputational damage or • Safety measures
litigation.
• Appropriate incentivisation
• Talent reviews
• Tools for employees to take ownership of careers
• People related training and reskilling, risk assessments,
action plans and compliance
• Manager and employee wellbeing training
• Wellbeing material available to managers and employees via
CCEP platforms to support our employees
• Human Rights Policy
Additional or enforced mitigation since IR 2021:
• Monitoring and managing wage increases and closely following
government strategies in our territories that try to mitigate wage inflation
impact
• Monitoring strike risk
Perceived health impact of our beverages and ingredients, and changing We make and distribute products containing sugar and alternative sweeteners. • Reducing the sugar content of our soft drinks, through product →
consumer buying trends Healthy lifestyle campaigns, increased media scrutiny and social media have and pack innovation and reformulation managing our product mix to increase low
led to an increasingly negative perception of these ingredients among and no calorie products
consumers. This exposes us to the risk that we will be unable to evolve our
product and packaging choices quickly enough to satisfy changes in consumer • Making it easier for consumers to cut down on sugar by
preferences. We will also face new pressure from the EU Commission with the providing straightforward product information and smaller pack sizes
Farm to Fork Strategy, at the heart of the European Green Deal, aiming to make
food systems fair, healthy and environmentally friendly. As a result, we could • EU wide soft drink industry calorie reduction commitment with
experience sustained decline in sales volume, which could impact our financial the Union of European Soft Drinks Associations (UNESDA)
results and business performance.
• Adopting calorie and sugar reduction commitments at country
level
• Dialogue with government representatives, NGOs, local
communities and customers
• Employee communication and education
• Responsible sales and marketing codes
• Proactive introduction of colour coded front of pack guideline
daily amount labelling as a fact based and non-discriminatory way of informing
consumers in an understandable way
• Encourage the European Commission to evaluate and develop EU
harmonised guidance for nutritional labelling, to address potential unfair
targeting of the sparkling soft drinks industry
• Work with International Sweeteners Association to promote and
protect the reputation of alternative sweeteners and, through UNESDA, working
with the European food safety authority on their opinions that will inform EU
and national government action
Product quality We produce a wide range of products, all of which must adhere to strict food • TCCC standards and audits →
safety requirements. This exposes us to the risk of failing to meet, or being
perceived as failing to meet, the necessary standards, which could lead to • Hygiene regimes at production facilities
compromised product quality. As a result, our brand reputation could be
damaged and our products could become less popular with consumers. • Total quality management programme
• Robust management systems
• ISO certification
• Internal governance audits
• Quality monitoring programme
• Customer and consumer monitoring and feedback
• Incident management and crisis resolution
• Every CCEP production facility has:
◦ a hazard analysis critical control points assessment and
mitigation plan in place
◦ a quality monitoring plan based on risk and requirements
◦ a food fraud vulnerability assessment and mitigation plan based on
risk and requirements
• a food defense threat assessment and mitigation plan based on
risk and requirements
Relationships with TCCC and other franchisors We conduct our business primarily under agreements with TCCC and other • Clear agreements govern the relationships →
franchisors. This exposes us to the risk of misaligned incentives or strategy,
particularly during periods of low category growth or crisis, such as • Incidence pricing agreement with TCCC
COVID-19. As a result, TCCC or other franchisors could act adversely to our
interests with respect to our business relationship. • Aligned long range planning and annual business planning
processes
• Ongoing pan-European and local routines between CCEP and
franchise partners
• Increased frequency of meetings and maintenance of positive
relationships at all levels
• Regular contact and best practice sharing across the Coca-Cola
system
• Improve visibility and ways of working with TCCC
*Change vs 2021 Integrated Report may be as a result of a change in likelihood
or impact.
Related Parties
Related party disclosures are presented in Note 10 of the Notes to the
condensed consolidated interim financial statements contained in this interim
management report.
Going Concern
As part of the Directors' consideration of the appropriateness of adopting the
going concern basis in preparing the condensed consolidated interim financial
statements, the Directors have considered the Group's financial performance in
the period and have taken into account its current cash position and its
access to a €1.95 billion undrawn committed credit facility. Further, the
Directors have considered the current cash flow forecast, including a downside
stress test, which supports the Group's ability to continue to generate cash
flows during the next 12 months.
On this basis, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for a period of 12
months from the date of signing these financial statements. Accordingly, the
condensed consolidated interim financial statements have been prepared on a
going concern basis and the Directors do not believe there are any material
uncertainties to disclose in relation to the Group's ability to continue as a
going concern.
Responsibility Statement
The Directors of the Company confirm that to the best of their knowledge:
• The condensed consolidated interim financial statements for
the six months ended 1 July 2022 have been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting", as issued
by the International Accounting Standards Board, UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority (DTR).
• The interim management report includes a fair review of the
information required by the DTR 4.2.7 R and DTR 4.2.8 R as follows:
• DTR 4.2.7 R: (1) an indication of important events that have
occurred during the first six months of the financial year, and their impact
on the condensed set of financial statements, and (2) a description of the
principal risks and uncertainties for the remaining six months of the
financial year; and
• DTR 4.2.8 R: (1) related parties transactions that have taken
place in the first six months of the current financial year and that have
materially affected the financial position or the performance of the Group
during that period, and (2) any changes in the related parties transactions
described in the last annual report that could have a material effect on the
financial position or performance of the Group in the first six months of the
current financial year.
The Directors of the Company are shown on pages 67-71 in the 2021 Integrated
Report and Form 20-F for the year ended 31 December 2021.
A list of current directors is maintained on CCEP's website:
www.cocacolaep.com/about-us/governance/board-of-directors/.
On behalf of the Board
Damian Gammell Manik Jhangiani
Chief Executive Officer Chief Financial Officer
4 August 2022
Independent Review Report to Coca-Cola Europacific Partners 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 1 July
2022 which comprises the condensed Consolidated Interim Income Statement,
Condensed Consolidated Interim Statement of Comprehensive Income, Condensed
Consolidated Interim Statement of Financial Position, Condensed Consolidated
Interim Statement of Cash Flows, Condensed Consolidated Interim Statement of
Changes in Equity and the related explanatory notes 1 - 13. 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 1 July 2022 is not prepared, in all
material respects, in accordance with International Accounting Standard 34,
"Interim Financial Reporting", as issued by the International Accounting
Standards Board, U.K. adopted International Accounting Standard 34, "Interim
Financial Reporting" 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) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council. 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 1, the annual financial statements of the Group are
prepared in accordance with U.K. adopted International Accounting Standards,
International Financial Reporting Standards ("IFRS") as adopted by the
European Union and International Financial Reporting Standards as issued by
the International Accounting Standards Board ("IASB"). The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34, "Interim
Financial Reporting", as issued by the International Accounting Standards
Board and U.K. adopted International Accounting Standard 34, "Interim
Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
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.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
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, including our Conclusions
Relating to Going Concern, are 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) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. 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
London
4 August 2022
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Income Statement (Unaudited)
Six Months Ended
1 July 2022 2 July 2021
Note € million € million
Revenue 3 8,280 5,918
Cost of sales (5,288) (3,840)
Gross profit 2,992 2,078
Selling and distribution expenses (1,410) (1,033)
Administrative expenses (615) (525)
Operating profit 967 520
Finance income 30 14
Finance costs (93) (78)
Total finance costs, net (63) (64)
Non-operating items (6) (1)
Profit before taxes 898 455
Taxes 11 (223) (209)
Profit after taxes 675 246
Profit attributable to shareholders 667 244
Profit attributable to non-controlling interests 8 2
Profit after taxes 675 246
Basic earnings per share (€) 4 1.46 0.54
Diluted earnings per share (€) 4 1.46 0.53
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Comprehensive Income (Unaudited)
Six Months Ended
1 July 2022 2 July 2021
€ million € million
Profit after taxes 675 246
Components of other comprehensive income/(loss):
Items that may be subsequently reclassified to the income statement:
Foreign currency translations:
Pretax activity, net 98 58
Tax effect - -
Foreign currency translation, net of tax 98 58
Cash flow hedges:
Pretax activity, net 8 223
Tax effect (3) (48)
Cash flow hedges, net of tax 5 175
Other reserves:
Pretax activity, net (2) 6
Tax effect - (1)
Other reserves, net of tax (2) 5
101 238
Items that will not be subsequently reclassified to the income statement:
Pension plan remeasurements:
Pretax activity, net 53 149
Tax effect (16) (24)
Pension plan adjustments, net of tax 37 125
37 125
Other comprehensive income/(loss) for the period, net of tax 138 363
Comprehensive income for the period 813 609
Comprehensive income attributable to shareholders 798 604
Comprehensive income attributable to non-controlling interests 15 5
Comprehensive income for the period 813 609
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Financial Position (Unaudited)
1 July 2022 31 December 2021
Note € million € million
ASSETS
Non-current:
Intangible assets 5 12,677 12,639
Goodwill 5 4,668 4,623
Property, plant and equipment 6 5,164 5,248
Non-current derivative assets 265 226
Deferred tax assets 26 60
Other non-current assets 576 534
Total non-current assets 23,376 23,330
Current:
Current derivative assets 308 150
Current tax assets 31 46
Inventories 1,410 1,157
Amounts receivable from related parties 10 77 143
Trade accounts receivable 2,753 2,305
Other current assets 275 271
Assets held for sale 66 223
Short term investments 239 58
Cash and cash equivalents 1,819 1,407
Total current assets 6,978 5,760
Total assets 30,354 29,090
LIABILITIES
Non-current:
Borrowings, less current portion 8 11,065 11,790
Employee benefit liabilities 122 138
Non-current provisions 12 86 48
Non-current derivative liabilities 134 47
Deferred tax liabilities 3,604 3,617
Non-current tax liabilities 106 110
Other non-current liabilities 38 37
Total non-current liabilities 15,155 15,787
Current:
Current portion of borrowings 8 1,577 1,350
Current portion of employee benefit liabilities 9 10
Current provisions 12 106 86
Current derivative liabilities 68 19
Current tax liabilities 242 181
Amounts payable to related parties 10 339 210
Trade and other payables 5,075 4,237
Total current liabilities 7,416 6,093
Total liabilities 22,571 21,880
EQUITY
Share capital 5 5
Share premium 225 220
Merger reserves 287 287
Other reserves (62) (156)
Retained earnings 7,136 6,677
Equity attributable to shareholders 7,591 7,033
Non-controlling interest 9 192 177
Total equity 7,783 7,210
Total equity and liabilities 30,354 29,090
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Cash Flows (Unaudited)
Six Months Ended
1 July 2022 2 July 2021*
Note € million € million
Cash flows from operating activities:
Profit before taxes 898 455
Adjustments to reconcile profit before tax to net cash flows from operating
activities:
Depreciation 6 336 300
Amortisation of intangible assets 5 50 42
Share-based payment expense 12 4
Finance costs, net 63 64
Income taxes paid (162) (58)
Changes in assets and liabilities, net of acquisition amounts:
(Increase) in trade and other receivables (429) (384)
(Increase) in inventories (245) (144)
Increase in trade and other payables 936 503
Increase in net payable receivable from related parties 180 121
Increase/(decrease) in provisions 59 (23)
Change in other operating assets and liabilities (45) 28
Net cash flows from operating activities 1,653 908
Cash flows from investing activities:
Acquisition of bottling operations, net of cash acquired* - (5,401)
Purchases of property, plant and equipment (178) (115)
Purchases of capitalised software (22) (42)
Proceeds from sales of property, plant and equipment 6 20
Proceeds from sales of intangible assets 143 -
Investments in equity instruments (2) -
Proceeds from the sale of equity instruments 13 -
Net proceeds/(payments) of short term investments* (181) 118
Other investing activity, net (1) 16
Net cash flows used in investing activities* (222) (5,404)
Cash flows from financing activities:
Proceeds from borrowings, net 8 - 4,877
Changes in short-term borrowings 8 237 305
Repayments on third party borrowings 8 (834) (468)
Payments of principal on lease obligations (80) (65)
Interest paid, net (98) (58)
Dividends paid 9 (256) -
Exercise of employee share options 5 18
Other financing activities, net (8) 4
Net cash flows (used in)/from financing activities (1,034) 4,613
Net change in cash and cash equivalents* 397 117
Net effect of currency exchange rate changes on cash and cash equivalents 15 46
Cash and cash equivalents at beginning of period 1,407 1,523
Cash and cash equivalents at end of period* 1,819 1,686
*Comparative information has been reclassified in connection with the
acquisition of CCL. Refer to Note 1.
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Changes in Equity (Unaudited)
Share capital Share premium Merger reserves Other reserves Retained earnings Total Non-controlling interest Total equity
Note € million € million € million € million € million € million € million € million
Balance as at 31 December 2020 5 192 287 (537) 6,078 6,025 - 6,025
Profit after taxes - - - - 244 244 2 246
Other comprehensive income - - - 235 125 360 3 363
Total comprehensive income - - - 235 369 604 5 609
Non-controlling interests recognised relating to business combination - - - - - - 220 220
Cash flow hedge gains transferred to goodwill relating to business combination - - - (84) - (84) - (84)
Issue of shares during the period - 18 - - - 18 - 18
Equity-settled share-based payment expense - - - - 4 4 - 4
Share-based payment tax effects - - - - 3 3 - 3
Balance as at 2 July 2021 5 210 287 (386) 6,454 6,570 225 6,795
Balance as at 31 December 2021 5 220 287 (156) 6,677 7,033 177 7,210
Profit after taxes - - - - 667 667 8 675
Other comprehensive income - - - 94 37 131 7 138
Total comprehensive income - - - 94 704 798 15 813
Issue of shares during the period - 5 - - - 5 - 5
Equity-settled share-based payment expense - - - - 12 12 - 12
Dividends 9 - - - - (257) (257) - (257)
Balance as at 1 July 2022 5 225 287 (62) 7,136 7,591 192 7,783
The accompanying notes are an integral part of these condensed consolidated
interim financial statements.
Notes to the Condensed Consolidated Interim Financial Statements
Note 1
GENERAL INFORMATION AND BASIS OF PREPARATION
Coca-Cola Europacific Partners plc (the Company) and its subsidiaries
(together CCEP, or the Group) are a leading consumer goods group in Western
Europe and the Asia Pacific region, making, selling and distributing an
extensive range of primarily non-alcoholic ready to drink beverages.
The Company has ordinary shares with a nominal value of €0.01 per share
(Shares). CCEP is a public company limited by shares, incorporated under the
laws of England and Wales with the registered number in England of 09717350.
The Group's Shares are listed and traded on Euronext Amsterdam, the NASDAQ
Global Select Market, London Stock Exchange and on the Spanish Stock
Exchanges. The address of the Company's registered office is Pemberton House,
Bakers Road, Uxbridge, UB8 1EZ, United Kingdom.
These condensed consolidated interim 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 the Company for the year ended 31 December 2021, which were
prepared in accordance with U.K. adopted International Accounting Standards,
International Financial Reporting Standards (IFRS) as adopted by the European
Union and International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB), have been delivered to the
Registrar of Companies. The auditor's opinion on those accounts was
unqualified and did not contain a statement made under section 498 (2) or (3)
of the Companies Act 2006.
Basis of Preparation and Accounting Policies
The condensed consolidated interim financial statements of the Group have been
prepared in accordance with International Accounting Standard 34, "Interim
Financial Reporting", as issued by the International Accounting Standards
Board, the U.K. adopted International Accounting Standard 34, "Interim
Financial Reporting" and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority and should be read in conjunction
with our 2021 consolidated financial statements. The annual financial
statements of the Group for the year-ended 31 December 2022 will be prepared
in accordance with U.K. adopted International Accounting Standards,
International Financial Reporting Standards (IFRS) as adopted by the European
Union and International Financial Reporting Standards as issued by the
International Accounting Standards Board (IASB).
The accounting policies applied in these interim condensed consolidated
financial statements are consistent with those followed in the preparation of
the Group's consolidated financial statements as at and for the year ended 31
December 2021. The policy for recognising income taxes in the interim period
is consistent with that applied in previous interim periods and is described
in Note 11.
Several amendments and interpretations apply for the first time in 2022, but
do not have a material impact on the condensed consolidated interim financial
statements of the Group.
As disclosed in the notes to the Group's consolidated financial statements as
at and for the year ended 31 December 2021 (refer to Note 4 "Business
combinations"), short term time deposits and treasury bills with maturities of
greater than three months and less than one year acquired as part of the CCL
acquisition have been reclassified and presented as short term investments.
The impact on the comparative condensed consolidated interim statement of cash
flows for the six months ended 2 July 2021 was a net reduction in cash flows
from investing activities of €138 million (including net proceeds from short
term investments of €118 million) and a reduction in cash and cash
equivalents of €138 million. There was a corresponding increase in short
term investments of €138 million as at 2 July 2021.
Reporting periods
Results are presented for the interim period from 1 January 2022 to 1 July
2022.
The Group's financial year ends on 31 December. For half-yearly reporting
convenience, the first six month period closes on the Friday closest to the
end of the interim calendar period. There was one less selling day in the six
months ended 1 July 2022 versus the six months ended 2 July 2021, and there
will be equal selling days in the second six months of 2022 versus the second
six months of 2021 (based upon a standard five-day selling week).
The following table summarises the number of selling days, for the years ended
31 December 2022 and 31 December 2021 (based on a standard five-day selling
week):
Half year Full year
2022 130 260
2021 131 261
Change -1 -1
Comparability
The COVID-19 pandemic and related response measures have had and may continue
to have an adverse effect on global economic conditions, as well as our
business, results of operations, cash flows and financial condition. At this
time, we cannot predict the degree to which, or the time period over which,
our business will continue to be affected by COVID-19 and the related response
measures. These impacts limit the comparability of these condensed
consolidated interim financial statements with prior periods.
In addition, operating results for the first half of 2022 may not be
indicative of the results expected for the year ended 31 December 2022 as
sales of the Group's products are seasonal. In Europe, the second and third
quarters typically account for higher unit sales of the Group's products than
the first and fourth quarters. In the Group's Asia Pacific territories, the
fourth quarter would typically reflect higher sales volumes in the year. The
seasonality of the Group's sales volume, combined with the accounting for
fixed costs such as depreciation, amortisation, rent and interest expense,
impacts the Group's results for the first half of the year. Additionally,
year-over-year shifts in holidays, selling days and weather patterns can
impact the Group's results on an annual or half-yearly basis.
Exchange rates
The Group's reporting currency is the Euro. CCEP translates the income
statements of non-Euro functional currency subsidiary operations to the Euro
at average exchange rates and the balance sheets at the closing exchange rate
as at the end of the period.
The principal exchange rates used for translation purposes in respect of one
Euro were:
Average for the six month period ended Closing as at
1 July 2022 2 July 2021( 1 ) 1 July 2022 31 December 2021
UK Sterling 1.19 1.15 1.17 1.19
US Dollar 0.91 0.83 0.96 0.88
Norwegian Krone 0.10 0.10 0.10 0.10
Swedish Krone 0.10 0.10 0.09 0.10
Icelandic Krone 0.01 0.01 0.01 0.01
Australian Dollar 0.66 0.64 0.66 0.64
Indonesian Rupiah( 2 ) 0.06 0.06 0.06 0.06
New Zealand Dollar 0.61 0.59 0.60 0.60
Papua New Guinean Kina 0.26 0.24 0.27 0.25
( 1 ) For the previous year period Asia Pacific rates are calculated as
average for the period from 10 May 2021 to 2 July 2021.
( 2 ) Indonesian Rupiah is shown as 1000 IDR versus 1 EUR.
Note 2
BUSINESS COMBINATIONS
On 10 May 2021, the Company acquired 100% of the issued and outstanding shares
of API (the Acquisition). API was one of the largest bottlers and
distributors of ready to drink non-alcoholic and alcoholic beverages and
coffee in the Asia Pacific region and was the authorised bottler and
distributor of The Coca-Cola Company's (TCCC) beverage brands in Australia,
New Zealand and Pacific Islands, Indonesia and Papua New Guinea. Details
surrounding this business combination transaction, including the provisional
fair values of assets and liabilities acquired, were disclosed in Note 4 of
the Group's annual consolidated financial statements for the year ended 31
December 2021. The valuation exercise was completed during the first half of
2022. Subsequent changes to the provisional amounts previously disclosed are
immaterial.
Note 3
OPERATING SEGMENTS
Description of segments and principal activities
The Group derives its revenues through a single business activity, which is
making, selling and distributing an extensive range of primarily non-alcoholic
ready to drink beverages. The Group's Board continues to be its Chief
Operating Decision Maker (CODM), which allocates resources and evaluates
performance of its operating segments based on volume, revenue and comparable
operating profit. Comparable operating profit excludes items impacting the
comparability of period over period financial performance.
Six Months Ended 1 July 2022 Six Months Ended 2 July 2021
Europe API Total Europe API Total
€ million € million € million € million € million € million
Revenue 6,451 1,829 8,280 5,385 533 5,918
Comparable operating profit( 1 ) 825 226 1,051 631 60 691
Items impacting comparability( 2 ) (84) (171)
Reported operating profit 967 520
Total finance costs, net (63) (64)
Non-operating items (6) (1)
Reported profit before tax 898 455
( 1 ) Comparable operating profit includes comparable depreciation and
amortisation of €273 million and €114 million for Europe and API
respectively, for the six months ended 1 July 2022. Comparable depreciation
and amortisation charges for the six months ended 2 July 2021 totalled
€285 million and €36 million, for Europe and API respectively.
( 2 ) Items impacting the comparability of period-over-period financial
performance for 2022 primarily include restructuring charges of €95 million,
partially offset by net insurance recoveries received of €12 million arising
from the July 2021 flooding events. Items impacting the comparability for 2021
included restructuring charges of €92 million, acquisition and integration
related costs of €40 million, inventory fair value step up related to
acquisition accounting of €48 million and a positive impact of the closure
of the GB defined benefit pension scheme of €9 million.
( )
No single customer accounted for more than 10% of the Group's revenue during
the six months ended 1 July 2022 and 2 July 2021.
Revenue by geography
The following table summarises revenue from external customers by geography,
which is based on the origin of the sale:
Six Months Ended
1 July 2022 2 July 2021
Revenue € million € million
Great Britain 1,463 1,192
Germany 1,296 1,091
Iberia( 1 ) 1,371 1,069
France( 2 ) 1,017 896
Belgium/Luxembourg 511 454
Netherlands 329 266
Norway 208 200
Sweden 213 179
Iceland 43 38
Total Europe 6,451 5,385
Australia 1,102 328
New Zealand and Pacific Islands 302 85
Indonesia and Papua New Guinea 425 120
Total API 1,829 533
Total CCEP 8,280 5,918
( 1 ) Iberia refers to Spain, Portugal & Andorra.
( 2 ) France refers to continental France & Monaco.
(
)
Note 4
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing profit after taxes by the
weighted average number of Shares in issue and outstanding during the period.
Diluted earnings per share is calculated in a similar manner, but includes the
effect of dilutive securities, principally share options, restricted stock
units and performance share units. Share-based payment awards that are
contingently issuable upon the achievement of specified market and/or
performance conditions are included in the diluted earnings per share
calculation based on the number of Shares that would be issuable if the end of
the period was the end of the contingency period.
The following table summarises basic and diluted earnings per share
calculations for the periods presented:
Six Months Ended
1 July 2022 2 July 2021
Profit after taxes attributable to equity shareholders (€ million) 667 244
Basic weighted average number of Shares in issue( 1 ) (million) 457 455
Effect of dilutive potential Shares( 2 ) (million) 1 2
Diluted weighted average number of Shares in issue( 1 ) (million) 458 457
Basic earnings per share (€) 1.46 0.54
Diluted earnings per share (€) 1.46 0.53
( 1 ) As at 1 July 2022 and 2 July 2021, the Group had 456,789,240 and
455,853,051 Shares, respectively, in issue and outstanding.
( 2 ) For the six months ended 1 July 2022 and 2 July 2021, there were no
outstanding options to purchase Shares excluded from the diluted earnings per
share calculation. The dilutive impact of the remaining options outstanding,
unvested restricted stock units and unvested performance share units was
included in the effect of dilutive securities.
(
)
Note 5
INTANGIBLE ASSETS AND GOODWILL
The following table summarises the movement in net book value for intangible
assets and goodwill during the six months ended 1 July 2022:
Intangible assets Goodwill
€ million € million
Net book value as at 31 December 2021 12,639 4,623
Additions 22 -
Amortisation expense (50) -
Disposals (1) -
Transfers and reclassifications 14 (1)
Currency translation adjustments 53 46
Net book value as at 1 July 2022 12,677 4,668
Note 6
PROPERTY, PLANT AND EQUIPMENT
The following table summarises the movement in net book value for property,
plant and equipment during the six months ended 1 July 2022:
Total
€ million
Net book value as at 31 December 2021 5,248
Additions 251
Disposals (9)
Depreciation expense (336)
Transfers and reclassifications (19)
Currency translation adjustments 29
Net book value as at 1 July 2022( 1 ) 5,164
( 1 ) The net book value of property, plant and equipment includes right of
use assets of €663 million.
(
)
Note 7
FAIR VALUES AND FINANCIAL RISK MANAGEMENT
Fair Value Measurements
All assets and liabilities for which fair value is measured or disclosed in
the condensed consolidated interim financial statements are categorised in the
fair value hierarchy as described in our 2021 consolidated financial
statements.
The fair values of the Group's cash and cash equivalents, short term
investments, trade accounts receivable, amounts receivable from related
parties, trade and other payables, and amounts payable to related parties
approximate their carrying amounts due to their short-term nature.
The fair values of the Group's borrowings are estimated based on borrowings
with similar maturities and credit quality and current market interest rates.
These are categorised in Level 2 of the fair value hierarchy as the Group uses
certain pricing models and quoted prices for similar liabilities in active
markets in assessing their fair values. The total fair value of borrowings as
at 1 July 2022 and 31 December 2021, was €11.6 billion and €13.3 billion,
respectively. This compared to the carrying value of total borrowings as at 1
July 2022 and 31 December 2021 of €12.6 billion and €13.1 billion,
respectively. Refer to Note 8 for further details regarding the Group's
borrowings.
The Group's derivative assets and liabilities are carried at fair value, which
is determined using a variety of valuation techniques, depending on the
specific characteristics of the hedging instrument taking into account credit
risk. The fair value of our derivative contracts (including forwards, options,
cross-currency swaps and interest rate swaps) are determined using standard
valuation models. The significant inputs used in these models are readily
available in public markets or can be derived from observable market
transactions and, therefore, the derivative contracts have been classified as
Level 2. Inputs used in these standard valuation models include the applicable
spot, forward, and discount rates. The standard valuation model for the option
contracts also includes implied volatility, which is specific to individual
options and is based on rates quoted from a widely used third-party resource.
As at 1 July 2022 and 31 December 2021, the total value of derivative assets
was €573 million and €376 million, respectively. As at 1 July 2022 and 31
December 2021, the total value of derivative liabilities was €202 million
and €66 million, respectively. During the period, €8 million of gains have
been recorded within Other Comprehensive Income, primarily related to
increases in fair value on commodity related hedging instruments.
For assets and liabilities that are recognised in the condensed consolidated
interim financial statements on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation at the end of each reporting period. There have
been no transfers between levels during the periods presented.
Financial Instruments Risk Management Objectives and Policies
The Group's activities expose it to several financial risks including market
risk, credit risk, and liquidity risk. Financial risk activities are governed
by appropriate policies and procedures to minimise the uncertainties these
risks create over the Group's future cash flows. Such policies are developed
and approved by the Group's Treasury and Commodities Risk Committee through
the authority provided to it by the Group's Board of Directors. There have
been no changes in the risk management policies since the year end.
Note 8
BORROWINGS AND LEASES
Borrowings Outstanding
The following table summarises the carrying value of the Group's borrowings as
at the dates presented:
1 July 2022 31 December 2021
€ million € million
Non-current:
Euro denominated bonds 8,572 8,646
Foreign currency bonds (swapped into Euro)( 1 ) 1,103 1,757
Australian dollar denominated bonds 442 432
Foreign currency bonds (swapped into Australian Dollar or New Zealand 428 446
Dollar)( 1 )
Lease obligations 520 509
Total non-current borrowings 11,065 11,790
Current:
Euro denominated bonds( 2 ) - 700
Foreign currency bonds (swapped into Euro)( 1 ) 817 -
Australian dollar denominated bonds( 3 ) 103 230
Euro commercial paper 522 285
Bank overdrafts - 1
Lease obligations 135 134
Total current borrowings 1,577 1,350
( 1 ) Cross currency swaps are used by the Group to swap foreign currency
bonds into the required local currency.
( 2 ) In January 2022 the Group repaid prior to maturity €700 million of
outstanding Euro denominated bonds (€700 million 0.75% Notes 2022) due in
February 2022.
( 3 ) In March 2022, the Group repaid on maturity €134 million of
outstanding Australian dollar denominated bonds (A$200 million 3.3750% Notes
2022). These were acquired as part of the API acquisition.
During the 6 month period ending 1 July 2022, the Group entered into interest
rate swaps with notional value of €1 billion, which were designated in a
fair value hedge relationship with Euro denominated bonds. As at 1 July 2022,
fair value adjustments of €77 million are included within non current
borrowings in relation to these hedges.
Note 9
EQUITY
Share Capital
As at 1 July 2022, the Company had issued and fully paid 456,789,240 Shares.
Shares in issue have one voting right each and no restrictions related to
dividends or return of capital. The share capital increased during the six
months ended 1 July 2022 from the issue of 554,208 Shares, following the
exercise of share-based payment awards.
Dividends
During the first six months of 2022, the Board declared a first half dividend
of €0.56 per share, which was paid on 26 May 2022. No dividends were
declared or paid in the first six months of 2021.
Non-controlling interests
Equity attributable to non-controlling interest was €192 million and
€177 million as at 1 July 2022 and 31 December 2021, respectively,
representing 29.4% of PT Coca-Cola Bottling Indonesia held by TCCC and 6.1% of
Samoa Breweries Limited held by numerous investors.
Note 10
RELATED PARTY TRANSACTIONS
For the purpose of these condensed consolidated interim financial statements,
transactions with related parties mainly comprise transactions between
subsidiaries of the Group and the related parties of the Group.
Transactions with The Coca-Cola Company (TCCC)
The principal transactions with TCCC are for the purchase of concentrate,
syrup and finished goods. The following table summarises the transactions with
TCCC that directly impacted the condensed consolidated interim income
statement for the periods presented:
Six Months Ended
1 July 2022 2 July 2021
€ million € million
Amounts affecting revenue( 1 ) 51 22
Amounts affecting cost of sales( 2 ) (1,910) (1,438)
Amounts affecting operating expenses( 3 ) 1 4
Total net amount affecting the consolidated income statement (1,858) (1,412)
( 1 ) Amounts principally relate to fountain syrup and packaged product sales.
( 2 ) Amounts principally relate to the purchase of concentrate, syrup,
mineral water and juice as well as funding for marketing programmes.
( 3 ) Amounts principally relate to costs associated with new product
development initiatives and support funding.
( )
The following table summarises the transactions with TCCC that impacted the
consolidated statement of financial position as at the dates presented:
1 July 2022 31 December 2021
€ million € million
Amount due from TCCC 68 135
Amount payable to TCCC 305 189
In February 2022, the Group entered into asset sale arrangements with TCCC
pursuant to which, the Group agreed to sell certain non-alcoholic ready to
drink beverage brands, predominantly available in Australia and New Zealand,
which were acquired as part of the business combination transaction
consummated on 10 May 2021, for a total consideration approximating €182
million. The sale price approximated the fair value of the brands assessed at
the acquisition date. These brands were classified as assets held for sale in
our consolidated statement of financial position as at 31 December 2021.
During the first half of 2022, the Group partially completed the asset sale
transaction and expects to finalize the remaining portion during the second
half of the year. The Group has also entered into commercial agreements with
TCCC to facilitate ongoing manufacturing, distributing and/or selling
activities pertaining to these brands. The brands which are yet to be sold to
TCCC, amount to €40 million and are classified as assets held for sale in
our condensed consolidated interim statement of financial position as at 1
July 2022.
Transactions with Cobega companies
The principal transactions with Cobega are for the purchase of juice
concentrate and packaging materials. The following table summarises the
transactions with Cobega that directly impacted the condensed consolidated
interim income statement for the periods presented:
Six Months Ended
1 July 2022 2 July 2021
€ million € million
Amounts affecting revenues( 1 ) 2 -
Amounts affecting cost of sales( 2 ) (32) (21)
Amounts affecting operating expenses( 3 ) (8) (5)
Total net amount affecting the consolidated income statement (38) (26)
( 1 ) Amounts principally relate to packaged product sales.
( 2 ) Amounts principally relate to the purchase of packaging materials.
( 3 ) Amounts principally relate to certain costs associated with maintenance,
repair services and rent
The following table summarises the transactions with Cobega that impacted the
consolidated statement of financial position as at the dates presented:
1 July 2022 31 December 2021
€ million € million
Amount due from Cobega 5 2
Amount payable to Cobega 27 19
Transactions with Other Related Parties
For the six months ended 1 July 2022 and 2 July 2021 the Group recognised
charges in cost of sales of €83 million and €28 million, respectively,
in connection with transactions that have been entered into with joint
ventures, associates and other related parties predominantly for the purchase
of finished products as well as container deposit scheme charges in Australia.
Transactions with joint ventures, associates and other related parties that
impacted the condensed consolidated interim statement of financial position as
at 1 July 2022 include €4 million in amounts receivable from related
parties and €7 million in amounts payable to related parties respectively.
As at 31 December 2021 amounts receivable from related parties and amounts
payable to related parties included €6 million and €2 million respectively
related to transactions with joint ventures, associates and other related
parties.
Note 11
TAXES
Taxes on income in interim periods are accrued using the tax rate that would
be applicable to the expected total annual profit or loss.
The effective tax rate (ETR) was 25% and 46% for the six months ended 1 July
2022 and 2 July 2021, respectively, and 29% for the year ended 31 December
2021. The ETR has been calculated by applying the weighted average annual ETR,
excluding discrete items, of 25% and 22% to the profit before tax for the six
months ended 1 July 2022 and 2 July 2021, respectively.
The ETR of 25% which is higher than statutory UK rate reflects the impact of
having operations outside the UK which are taxed at rates other than the
statutory UK rate of 19%.
The following table summarises the major components of income tax expense for
the periods presented:
1 July 2022 2 July 2021
€ million € million
Current income tax:
Current income tax charge 228 125
Adjustment in respect of current income tax from prior periods 8 (13)
Total current tax 236 112
Deferred tax:
Relating to the origination and reversal of temporary differences (4) (25)
Adjustment in respect of deferred income tax from prior periods (9) 4
Relating to changes in tax rates or the imposition of new taxes - 118
Total deferred tax (13) 97
Income tax charge per the consolidated income statement 223 209
Tax Provisions
The Group is routinely under audit by taxing authorities in the ordinary
course of business. Due to their nature, such proceedings and tax matters
involve inherent uncertainties including, but not limited to, court rulings,
settlements between affected parties and/or governmental actions. The
probability of outcome is assessed and accrued as a liability and/or
disclosed, as appropriate. The Group maintains provisions for uncertainty
related to these tax matters that it believes appropriately reflect its risk.
As at 1 July 2022, €154 million of these provisions is included in current
tax liabilities and the remainder is included in non-current tax liabilities.
There has been no material change in tax provisions since 31 December 2021.
The Group reviews the adequacy of these provisions at the end of each
reporting period and adjusts them based on changing facts and circumstances.
Due to the uncertainty associated with tax matters, it is possible that at
some future date, liabilities resulting from audits or litigation could vary
significantly from the Group's provisions. When an uncertain tax liability is
regarded as probable, it is measured on the basis of the Group's best
estimate.
The Group has received tax assessments in certain jurisdictions for potential
tax related to the Group's purchases of concentrate. The value of the Group's
concentrate purchases is significant, and therefore, the tax assessments are
substantial. The Group strongly believes the application of tax has no
technical merit based on applicable tax law, and its tax position would be
sustained. Accordingly, the Group has not recorded a tax liability for these
assessments and is vigorously defending its position against these
assessments.
Note 12
PROVISIONS, COMMITMENTS AND CONTINGENCIES
The following table summarises the movement of provisions for the periods
presented:
Restructuring Provision Other Provisions( 1 ) Total
€ million € million € million
Balance as at 31 December 2021 103 31 134
Charged/(credited) to profit or loss:
Additional provisions recognised 97 3 100
Unused amounts reversed (4) (2) (6)
Utilised during the period (36) - (36)
Balance as at 1 July 2022 160 32 192
______________________
( 1 ) Other provisions primarily relate to decommissioning provisions,
property tax assessment provisions and legal reserves.
As part of the Accelerate Competitiveness programme, the Group announced
further proposals during the first half of 2022, including the transformation
of the full service vending operations and related initiatives in Germany.
Restructuring charges of approximately €81 million associated with these
initiatives have been recorded during the six months ended 1 July 2022
primarily related to expected severance costs.
Commitments
There have been no significant changes in the commitments of the Group since
31 December 2021. Refer to Note 23 of the 2021 consolidated financial
statements for further details about the Group's commitments.
Contingencies
There have been no significant changes in contingencies since 31 December
2021. Refer to Note 23 of the 2021 consolidated financial statements for
further details about the Group's contingencies.
On 24 July 2020, a CCEP subsidiary 'Associated Products & Distribution
Proprietary Limited' (APD), was joined to proceedings in the Supreme Court of
Queensland between a Glencore joint venture and the State of Queensland,
whereby APD's entitlement to royalties, from its sub-surface strata and
associated mineral rights, has been challenged by the State of Queensland.
Since 2014 and through to 24 July 2020, CCEP has received and recognised
approximately €50 million in royalties. Effective the commencement of the
proceedings, royalties have been paid directly to court and/or state
government, which amounted to approximately €33 million as at 1 July 2022
and have not been recognised by the Group. If the Group is able to
successfully defend the claim, it will be entitled to the past and future
royalty payments arising from the ownership of the mineral rights. The
proceedings remain ongoing and the Group intends to defend the matter
robustly.
Note 13
EVENTS AFTER THE REPORTING PERIOD
In connection with the ongoing dispute in Spain regarding the refund of
historical VAT amounts, €218 million of VAT receivable and related interest
is classified within Other non-current assets as at 1 July 2022. On 29 July
2022, the Arbitration Board provided a ruling which, based on our current
interpretation, indicates the regional tax authorities of Bizkaia (Basque
Region) as responsible for refunding CCEP. As at the time of issuance of
these condensed consolidated interim financial statements, there is
uncertainty on the timing of the refund and we consider that the non-current
classification remains appropriate. We believe it remains a certainty that
the amount due will be refunded to CCEP.
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