Annual Report and Accounts and Notice of AGM

RNS Number : 6019D

Barr(A.G.) PLC

27 April 2017

 

A.G. BARR p.l.c. (the "Company")

27 April 2017

Annual Report and Accounts and Notice of Annual General Meeting

Following the release on 28 March 2017 of the Company's financial results for the year ended 28 January 2017 (the "Final Results Announcement"), the Company announces it has today published its annual report and accounts for the year ended 28 January 2017 (the "Annual Report and Accounts").

The Annual Report and Accounts contains the notice convening the Company's one hundred and thirteenth annual general meeting (the "AGM") (the "Notice of AGM"). The AGM will be held at the offices of Deloitte LLP, 110 Queen Street, Glasgow, G1 3BX on Wednesday, 31 May 2017 at 11.00 a.m.

A copy of the Annual Report and Accounts, which includes the Notice of AGM, is available to view on the Company's website: www.agbarr.co.uk

In accordance with Disclosure and Transparency Rule 6.3.5(2)(b), additional information is set out in the appendices to this announcement.

The Final Results Announcement included a set of condensed financial statements and a fair view of the development and performance of the business and the position of the Company.

A copy of the Annual Report and Accounts, including the Notice of AGM, together with a copy of the proxy form in relation to the AGM will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/nsm 

Appendices

Where used in the following appendices, the term "Group" means the Company together with its subsidiaries.

Appendix A: Directors' responsibility statement

The following directors' responsibility statement is extracted from the Annual Report and Accounts (page 77):

Directors' statement pursuant to the disclosure and transparency rules

Each of the directors, whose names and functions are set out on pages 36 to 37 of this report, confirm that, to the best of their knowledge:

·      the financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities and financial position of the Group and parent Company and of the consolidated profit;

·      the Annual Report and Accounts includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties faced by the Group; and

·      they consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Appendix B: A description of the principal risks and uncertainties that the Company faces

The following description of the principal risks and uncertainties that the Company faces is extracted from the Annual Report and Accounts (pages 31 - 35):

Risk management approach

The Board is responsible for the Group's risk management and internal control systems and for reviewing their effectiveness, supported by the Audit Committee and the Risk Committee. A risk management framework is in place which sets out the ongoing processes for the identification, assessment and management of risks, and for their ongoing monitoring and review. The Board has defined its risk appetite in a number of key areas for the business - this sets out the relative level of risk that the Group is prepared to seek or accept in the pursuit of its strategic objectives. The aim is to ensure that the risks taken by the Group fall within its defined risk appetite.

Effective risk management is essential to enable us to achieve our operational and strategic objectives and deliver long-term value creation. During the reporting period we have continued to focus on embedding a culture of risk management throughout the organisation which will contribute towards successful strategy execution.

Robust risk assessment

The risk management framework sets out a systematic approach to risk management which is designed to identify risks to the business, regardless of source. Once identified, risks are assessed according to the likelihood and impact of the risk occurring and an appropriate risk response is determined in line with the Group's risk appetite. Risks are re-assessed based on the strength of the mitigating controls implemented. The implementation of risk mitigation plans is subject to ongoing monitoring and review. A risk scoring matrix is used to ensure that a consistent approach is taken across the business at both a corporate and functional level. This risk assessment and review process is documented in the appropriate risk register. Risks are constantly reviewed on an ongoing basis; the Group's risk register is formally reviewed by the Risk Committee quarterly and by the Board and the Audit Committee twice each year.

Risk control assurance

Internal audit work is undertaken by an independent organisation which develops an annual internal audit plan having reviewed the Group's risk register and following discussions with the external auditors, management and members of the Audit Committee.

During the year the Audit Committee has reviewed reports covering the internal audit work. This has included assessment of the general control environment, identification of any control weaknesses and quantification of any associated risk, together with a review of the status of mitigating actions. The Audit Committee has also received reports from management in relation to specific risk items together with reports from external auditors, who consider controls to the extent necessary to form an opinion as to the truth and fairness of the financial statements.

The Group's internal control and risk management systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable but not absolute assurance against material misstatement or loss.

The report of the Audit Committee can be found on page 48.

Principal risks and uncertainties

The Board has carried out a robust, systematic assessment of the principal risks facing the Group during the period, including those which would threaten its business model, future performance, solvency or liquidity. The principal risks as determined by the Board are listed in the table below, together with corresponding mitigating actions. This is not intended to be an exhaustive list of all risks and uncertainties that may arise.

The UK's decision to leave the European Union has created a volatile and uncertain economic environment. Like many other businesses, we are closely following developments in this area. We believe that it is still too early to quantify or determine with any certainty the impact on the Group of the UK leaving the European Union. However, given that the Group is a UK based group whose sales are predominantly made in the UK, our current assessment is that Brexit will not have a significant impact on the Group, other than through its effect on foreign exchange rates to which it is exposed through the purchase of certain commodities. We will continue to monitor developments and adapt our strategy as the impact of the UK exit from the European Union becomes clear.

Principal risks and uncertainties

Risks relating to the Group

Risk	Impact	Mitigating actions
Changes in consumer preferences, perception or purchasing behaviour	Consumers may decide to purchase and consume alternative brands or spend less on soft drinks.	The Group offers a broad range of branded products across a range of flavours, subcategories and markets which offer choice to the end consumer. Changing consumer attitudes and behaviours are monitored on an ongoing basis and inform our brand plans and new product development.
Changing consumer attitudes towards sugar/further government intervention on sugar	Consumers may decide to purchase and consume alternative brands or spend less on sugared soft drinks.	The Group offers a broad range of branded products, many of which are low sugar or sugar free. We announced on 1 March 2017 that we will accelerate our long-standing sugar reduction programme so that over 90% of our Company owned soft drinks portfolio by volume will contain less than 5g of total sugars per 100ml by the autumn of 2017. Our new product development activity is focused on development of lower calorie products and our marketing programmes incorporate our lower calorie choices. We are working constructively with the government in relation to the proposed sugar tax, with the aim of ensuring the optimal outcome for the Group.
Adverse publicity in relation to the soft drinks industry, the Group or its brands	Adverse publicity in relation to the soft drinks industry, the Group or its brands could have an adverse impact on the Group's reputation, consumer consumption patterns, sales  and operating profits.	Our risk management process is designed to identify and monitor events that may impact the Group as a result of adverse publicity and to ensure that controls are in place to manage these risks. We liaise with relevant industry bodies who work with government and policy makers. Nutritional information is shown on all of our products and we have signed up to the UK Government's voluntary front-of-pack nutritional labelling scheme. Processes are in place to ensure compliance with health and safety legislation and ethical working standards and these are regularly reviewed by the Board and management committee. Quality standards are well defined, implemented and monitored. A Corporate Social Responsibility Committee is in place, with a clearly defined and communicated Corporate Social Responsibility Policy. The Group maintains and develops ISO 9001 and 14001 systems and BRC standards which are subject to annual external audits, with any non-conformances addressed in a timely manner.
Failure to maintain customer relationships or take account of changing market dynamics	Failure to maintain appropriate customer relationships or a reduction in the customer base could have an adverse impact on the Group's sales and operating profits.	The Group offers a broad range of brands that it manufactures and distributes through a variety of trade channels and customers. Performance is monitored closely by the Board and management committee by trade channel and customer as appropriate. This includes monitoring of metrics which review brand equity strength, financial and operational performance. The Group focuses on delivering high quality products and invests heavily in building brand equity. We work closely in partnership with our customers on an ongoing basis. Members of the senior management team meet with key customers throughout the year.
Inability to protect the Group's intellectual property rights	Failure to protect the Group's intellectual property rights could result in a loss of brand value.	The Group invests considerable effort in proactively protecting its intellectual property rights, for example through trademark and design registrations and vigorous legal enforcement as and when required.
Failure of the Group's operational infrastructure	A catastrophic failure of the Group's major production or distribution facilities could lead to a sustained loss in capacity or capability.	Assets within the Group are proactively managed and maintained. Risk assessments are carried out on a regular basis and appropriate actions taken. Robust business continuity plans are in place and are regularly tested.
Loss of continuity of supply of major raw materials	The loss of continuity of supply of major raw material ingredients and/or packaging materials could impact our ability to manufacture, with an adverse impact on the Group's sales and operating profits.	There is a robust supplier selection process in place. Supplier performance is monitored on an ongoing basis and audits are undertaken for major suppliers. Multiple sources of supply are sourced wherever possible. Commodity risks are managed by the procurement team and reviewed by the Treasury and Commodity Committee. Contingency measures are in place and are tested regularly.
Loss of product integrity	A loss of product integrity in the manufacturing supply chain could lead to a product withdrawal or recall.	Appropriate risk assessments are carried out on a regular basis and robust quality controls and processes are in place to maintain the high quality of our products. Product recall procedures are tested regularly.
Failure of critical IT systems	A failure of critical IT systems could result in a loss of key systems, business interruption, lost sales or lost production.	IT assets within the Group are proactively managed and procedures exist that support rapid and clean recovery. Robust business continuity plans and contingency measures are in place and are regularly tested.
Financial risks	The Group's activities expose it  to a variety of financial risks which include market risk (including medium term movements in exchange rates, interest rate risk and commodity price risk), credit risk and liquidity risk.	Our underlying objective is to secure budgeted exchange rates and thereby reduce the volatility through our cost of goods. Financial risks are reviewed and managed by the Treasury and Commodity Committee, which seeks to minimise adverse effects on the Group's financial performance through hedging known currency exposures throughout the year. The Group's finance team reviews cash flow forecasts throughout the year, with headroom against banking covenants assessed regularly. The finance team uses external tools to assess credit limits offered to customers, manages trade receivable balances vigilantly and takes prompt action on overdue accounts. The Group's financial control environment is subject to review by both internal and external audit. Internal audit's focus is to work with and challenge management to ensure an appropriate control environment is maintained.

Viability statement

In accordance with provision C.2.2 of the UK Corporate Governance Code 2014, the directors have assessed the viability of the Company over a three year period to January 2020, taking account of the Group's current position and the Group's principal risks, as detailed in the Strategic Report. Based on this assessment, the directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to January 2020.

In making this statement, the directors have considered the resilience of the Group in severe but plausible scenarios, taking account of its current position and prospects, the principal risks facing the business and how these are managed. This assessment has considered the potential impact of these risks on the Company's business model, future performance, solvency and liquidity over the three year period. The following four principal risks were selected for enhanced stress testing: changing consumer preferences, loss of product integrity, major raw material supply disruption and the sugar tax. These are the principal risks assessed to have the highest probability of occurrence or the most severe impact; they were stress tested both individually and in combination, taking account of the Group's current position, the Group's experience of managing adverse conditions in the past and the mitigating actions available to the business. A reverse stress test was also performed, allowing the Board to assess scenarios and circumstances that would render its business model unviable and enabling the identification of potential business vulnerabilities and the development of appropriate mitigating actions.

The Board selected the period of three years as an appropriate period for the Company's viability statement for the following reasons:

·      the Company operates on a three year business cycle; and

·      management currently use three year forecasts as part of the business planning process and capital investment cycle.

Appendix C: Related party transactions

The following related party transactions are extracted from the Annual Report and Accounts (pages 126-127):

Related party transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation. Details of transactions between the Company and related parties are as follows:

	Sales of goods and services		Purchase of goods and services
	2017 £m	2016 £m	2017 £m	2016 £m
Rubicon Drinks Limited	41.1	40.3	53.4	52.4
Funkin Limited	-	0.5	-	-

The amounts disclosed in the table below are the amounts owed to and due from subsidiary companies that are trading subsidiaries. The difference between the total of these balances and the amounts disclosed as amounts due by (note 20) and to subsidiary companies (note 22) are balances due by and due to dormant subsidiary companies.

	Amounts owed by related parties		Amounts due to related parties
	2017 £m	2016 £m	2017 £m	2016 £m
Rubicon Drinks Limited	-	-	72.0	62.2
Funkin Limited	0.5	0.5	-	-
Findlay's Limited	-	-	2.9	2.9

Compensation of key management personnel

The remuneration of the executive directors and other members of key management (the management committee) during the year was as follows:

	2017 £m	2016 £m
Salaries and short term benefits	3.2	3.3
Pension and other costs	0.5	0.5
Share-based payments	-	0.1
	3.7	3.9

The Directors' Remuneration Report can be found on pages 51 to 76.

Retirement benefit plans

The Group's retirement benefit plans are administered by an independent third party service provider. During the year the service provider charged the Group £0.4m (2016: £0.3m) for administration services in respect of the retirement benefit plans. At the year end £nil (2016: £nil) was outstanding to the service provider on behalf of the retirement benefit plans.

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