Annual Report & Notice of AGM

RNS Number : 0520L

Barr(A.G.) PLC

23 April 2015

 

23 April 2015

A.G. BARR p.l.c.

(the "Company")

Annual Report and Accounts and Notice of Annual General Meeting

Following the release on 24 March 2015 of the Company's financial results for the year ended 25 January 2015 (the "Final Results Announcement"), the Company announces it has today published its annual report and accounts for the year ended 25 January 2015 (the "Annual Report and Accounts").

The Annual Report and Accounts contains the notice convening the Company's one hundred and eleventh annual general meeting (the "AGM") (the "Notice of AGM"). The AGM will be held at the offices of KPMG LLP, 191 West George Street, Glasgow G2 2LJ on Wednesday, 27 May 2015 at 9.30 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 78):

Directors' statement pursuant to the Disclosure and Transparency Rules

Each of the directors, whose names and functions are set out on pages 38 to 39 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

·      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 26 - 29):

Principal Risks and Uncertainties

The responsibility for risk management across the Group resides with the Board. The Board uses a risk framework which is designed to support the process for identifying, evaluating and managing both financial and non-financial risks.

There is an ongoing process in place for identifying, evaluating and managing the significant risks faced by the Group, which has operated throughout the year. The Group's risk management framework is designed to support this process, giving visibility and control of both financial and non-financial risks. This process involves review of the Group's risk register by the Audit Committee. In line with best practice, the register includes an assessment of the impact and likelihood of each risk together with the controls in place to mitigate the risk.

Internal audit work is undertaken by an independent organisation who develop an annual internal audit plan having reviewed the Group's risk register and following discussions with 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 control weaknesses and quantification of any associated risk together with a review of the status of actions to mitigate these risks.

The Audit Committee has also received reports from management in relation to specific risk items together with reports from external auditors, who consider controls only to the extent necessary to form an opinion as to the truth and fairness of the financial statements. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and it must be recognised that it can only provide reasonable and not absolute assurance against material misstatement or loss.

The directors confirm that they have carried out a robust assessment of the principal risks facing the company, including those that would threaten its business model, future performance, solvency or liquidity.

The risks and corresponding mitigation set out below represent the principal uncertainties that the Board believes may impact the Group's ability to deliver effectively its strategy.

Risks Relating to the Group

Risk	Impact	Mitigating Actions
Adverse publicity in relation to the Group or its brands.	Adverse publicity in relation to the Group or its brands could have an adverse impact on the Group's reputation, consumer consumption patterns, sales and operating profits.	It remains the Group's policy to ensure that we operate within the boundaries of compliance in the areas of legislation, health and safety and ethical working standards and these are regularly reviewed by the Board and management committee. The Group maintains and develops ISO 9001 and 14001 systems which are subject to annual external audits with any non-conformances actioned in a timely manner. Within the Group there is a clearly defined and communicated Corporate Social Responsibility Policy. Quality standards are well defined, implemented and measured. The Group offers a range of branded products many of which are low calorie or sugar free. Nutritional information is shown on all of our products and we have signed up to the U.K. Government's package labelling arrangements.
Failure or non-availability of the Group's operational infrastructure.	The Group would be affected if there was a catastrophic failure of its major production or distribution facilities which led to a sustained loss in capacity or capability.	Assets within the Group are proactively managed whether this be intangible brand assets, plant and equipment, people or IT systems. Robust disaster recovery and incident management plans exist and are formally tested. Contingency measures are in place and are regularly tested.
Failure of the Group's Information Technology systems.	The maintenance and development of Information Technology systems may result in systems failures, including cyber security breaches which may adversely impact the Group's ability to operate.	IT assets within the Group are proactively managed and procedures exist that support rapid and clean recovery. Robust disaster recovery and incident management plans exist and are formally tested. Contingency measures are in place and are regularly tested.
Inability to protect the intellectual property rights associated with current and future brands.	Failure to maintain the Group's intellectual property rights could result in the value of our brands being eroded.	The Group invests considerable effort in proactively protecting the intellectual property rights associated with its current and future brands, through trademark registration and vigorous legal enforcement as and when required.
Interruption to, or significant change in the terms of, the Group's supply of packaging and raw materials.	The packaging and raw material components that the Group uses for the production of its soft drink products are largely commodities that are subject to price and supply volatility that could have an adverse impact on the Group's sales and operating profits.	The Group adopts centralised purchasing arrangements to ensure the best possible terms are negotiated. Contingency measures exist and are tested regularly. Supplier performance is reviewed on a monthly basis and audits are undertaken for major suppliers. Overall commodity risks are reviewed and managed by the purchasing and operations teams and reviewed by the Treasury Committee whose remit and authority levels are set by the Board. Together with the operations team, the Treasury Committee's remit focuses on the unpredictability of the cost of supply and seeks to minimise potential related adverse effects on the Group's financial performance through either forward purchasing or hedging known commodity requirements.
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 Committee whose remit and authority levels are set by the Board. The Treasury Committee seeks to minimise adverse effects on the Group's financial performance through hedging known currency exposures whilst reviewing the appropriateness of the interest rate hedging policy 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.
Change programmes may not deliver the benefits intended.	A number of change programmes designed to improve the effectiveness and efficiency of the end to end operating, administrative and financial systems and processes continue to be undertaken. There is a risk that these programmes will not fully deliver the expected operational benefits within the timescales expected. There is also the risk that the change programmes lead to disruption to production, administrative and financial processes and could impact customer service and/or operating margins.	Appropriate governance structures are put in place to provide the required frameworks to supervise, monitor, control, direct and manage change programmes. These structures review the scope of change programmes and related project plans and project resources, monitoring progress against set deliverables. External support is utilised when the Group is unable to support the project solely from internal resources.
Increasing funding needs or obligations in respect of the Group's pension scheme arrangements.	The triennial valuation of the Group's defined benefit pension scheme may highlight a worsening funding position that requires the Group to invest additional cash contributions or provide further assurance to cover future liabilities.	The Group's finance team works closely with the Pension Scheme Investment Sub Committee and the Pension Trustees to ensure that an appropriate Investment Strategy is in place to fund future pension requirements at acceptable levels of risk.
RISKS RELATING TO THE MARKET
Acquisition strategy fails to deliver expected returns via either market performance or under attainment of targeted synergies.	Failure to deliver expected return could affect overall performance, net debt level, share price, management credibility and/or shareholder appetite for future acquisitions.	A robust initial evaluation and diligence process exists which clearly outlines expectations relative to agreed rates of return and clearly identifies deliverables. Sensitivity analysis of the key value drivers is also undertaken. A dedicated integration and project management team is established pre-completion and a 100 day plan established against which progress is actively monitored. Finally, a six monthly review of performance relative to the acquisition model is undertaken.
Failure to take account of changing market dynamics.	A decline in sales of key brands or a failure to renew trading agreements on favourable terms or reduction in the customer base could have an adverse impact on the Group's sales and operating profits.	The Group offers a range of brands that it manufactures and distributes through a cross section of trade channels and retailers. Performance is monitored closely by the Board and management committee. This includes monitoring and tracking of metrics which review brand equity strength, together with monitoring of financial and operational performance. The Group focuses on delivering high quality products and invests heavily in building brand equity. Contact is maintained with all of the Group's major customers through regular sales force interaction and members of the senior management team meet with key customers throughout the year.
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 range of branded products across a range of flavours, subcategories and geographies which offer choice to the end consumer. Changing consumer preferences are reviewed annually by the Board with reference to qualitative and quantitative research. Spontaneous and prompted brand awareness levels are monitored in order to measure any changes in consumer knowledge of brands and/or changes in brand equity strength.
Changes in regulatory requirements.	Changing legislation may impact our ability to market or sell certain products or could cause the Group to incur additional costs or liabilities that could adversely affect its business.	The Group proactively engages with the relevant authorities, including the British Soft Drinks Association, The Food Standards Agency and the General Counsel of Scotland to ensure full participation in the future development of and compliance with relevant legislation. It remains the Group's policy to ensure that employees are aware of their responsibilities and all applicable regulatory requirements. Formal training sessions are undertaken throughout the year. An audit against changing legislative requirements is undertaken annually by the in house legal team.
Potential impact of taxation changes.	Changes to legislation may vary the taxation levels associated with the sale or consumption of soft drinks which could impact sales and operating profits.	The impact of changes to the taxation legislation is reviewed regularly. The Group will seek to remain commercially competitive by passing on any resulting cost differential through price amendments to customers.

Appendix C: Related party transactions

The following related party transactions are extracted from the Annual Report and Accounts (pages 124 - 125):

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
	2015 £000	2014 £000	2015 £000	2014 £000
Rubicon Drinks Limited	40,095	37,268	52,349	52,692
Findlays Limited	-	-	128	148

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 19) and to subsidiary companies (Note 21) are balances due by and due to dormant subsidiary companies.

	Amounts owed by related parties		Amounts due to related parties
	2015 £000	2014 £000	2015 £000	2014 £000
Rubicon Drinks Limited	-	-	51,074	40,948
Findlays Limited	-	-	2,962	2,476

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:

	2015 £000	2014 £000
Salaries and short term benefits	3,356	2,601
Pension and other costs	347	339
Share-based payments	19	30
	3,722	2,970

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 £503,756 (2014: £393,886) for administration services in respect of the retirement benefit plans. At the year end £nil (2014: £nil) was outstanding to the service provider on behalf of the retirement benefit plans.

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