Final Results

RNS Number : 2459I

Barr(A.G.) PLC

24 March 2015

 

24 March 2015

A.G. BARR p.l.c.

FINAL RESULTS for the year ended 25 January 2015

A.G. BARR p.l.c. ("A.G. BARR"), which produces and markets some of the U.K.'s leading brands, including IRN-BRU, Rubicon and Strathmore water, announces its final results for the 12 months to 25 January 2015.

Key Points

●    Profit on ordinary activities, before tax and exceptional items, increased by 10.0% to £41.9m (2014: £38.1m)

●    Total turnover increased by 2.7% to £260.9m (2014: £254.1m); stripping out the impact of the loss of the Orangina brand, turnover increased by 3.3%

●    All core brands - IRN-BRU, Barr, Rubicon and Strathmore - grew, outperforming the market, with particularly strong growth coming from the stills segment driven by Strathmore water.

●    Robust financial position

○    *ROCE increased to 24.0%

○    Substantial *underlying free cash flow of £40.6m

○    Net cash position at period end (2014: £2.1m net debt)

○    *Underlying earnings per share increased by 4.6% to 28.25p (2014: 27.02p)

●    Investment in assets, infrastructure and systems across the Group progressing well

●    Acquisition of Funkin Limited completed in February 2015, providing entry point to new growth category

●    Proposed final dividend of 9.01p per share (2014: 8.19p) to give a proposed total dividend for the year of 12.12p per share, an increase of 10.0% over the prior year

Roger White, Chief Executive, commented:

"We have delivered an excellent financial performance in difficult market conditions over the past 12 months, whilst continuing to build the platform required for sustained and profitable long-term growth.  Looking forward we will continue our approach of tight cost control, rigorous cash management and focus on execution whilst continuing to invest for the long-term in our brands, assets and people.

Overall market conditions are expected to remain challenging. The U.K. soft drinks market is currently experiencing a period of price deflation which will, if sustained, make it more difficult for many businesses to deliver the top line growth of recent years. Whilst our year has started slowly, reflecting tough comparative trading and promotional phasing, we are confident that our management actions, combined with our proven business model, will enable us to further unlock the significant potential that A.G. BARR offers its shareholders this year and into the future."

For more information, please contact:

A.G. BARR	01236 852400	Instinctif Partners	020 7457 2020
	Roger White, Chief Executive		Justine Warren
	Stuart Lorimer, Finance Director		Matthew Smallwood

*Definitions

Underlying Earnings Per Share

The term "underlying" is not defined in IFRS and therefore may not be comparable with similarly titled measures reported by other companies.  Underlying measures are not intended as a substitute for, or a superior measure to, IFRS measures.

Underlying earnings per share exclude the effect of exceptional items after tax on the basic earnings per share calculation.  In the year to 25 January 2015 these exceptional items after tax represented a charge of £2,599,000 (2014: a charge of £2,991,000).

Reconciliations of underlying measures to IFRS measures for earnings per share in respect of each period are provided in the earnings per share note.

Net Margin

Operating profit before exceptional items and before the deduction of taxation, divided by revenue.

Return on Capital Employed

Operating profit before exceptional items as a percentage of invested capital. Invested capital is defined as period end non-current plus current assets less current liabilities excluding all balances relating to any provisions, financial instruments, interest-bearing liabilities and cash or cash equivalents.

Free Cash Flow

Net cash flow excluding the movements in borrowings, shares, dividend payments and non cash exceptional items.

Chairman's Statement

In my first statement as Chairman I am pleased to report a further year of excellent business performance, with double digit, before tax, profit growth and sales revenue growth well ahead of the total soft drinks market performance.  These results reflect the benefits of a clear strategy, excellent execution, differentiated brands and a committed and talented management team.

Over the course of the last 12 months, the business has continued to make significant progress.  As you can see from the financial highlights the business has had a strong year, driving growth through its well supported brands, improving margins and building assets, while improving systems and processes to ensure long-term success.  In addition, we have developed our portfolio into areas where we believe there is real long-term strategic value, such as our move into the cocktail mixer sector with the recent acquisition of Funkin Limited and our newly forged Snapple brand partnership with Dr Pepper Snapple Group.

There continues to be a considerable amount of change and improvement across the business as we strive to stay ahead in what has been, and continues to be, a fiercely competitive marketplace.

Dividend

The Board is pleased to recommend a final dividend of 9.01p per share to give a total dividend for the year of 12.12p per share, a full year increase of 10.0% on the prior year.

Board

Ronnie Hanna stepped down on 31 December 2014 after serving 11 years on the Board, with over 5 years as Chairman.  I would like to take this opportunity to record our sincere thanks to Ronnie for his stewardship of the Board over this period of significant progress and success.

I am pleased to confirm that David Ritchie, CEO of Bovis Homes plc, will join the Board from April 2015.  David is an experienced and successful CEO who will bring a new and valuable perspective to our already strong Board.  We will continue to strengthen our Board over the course of the next 12 months and expect to bring further capability, competence and experience to our Boardroom.

In addition, I would like to recognise the commitment and contribution from all our employees, and thank them on behalf of the Board for delivering such a strong set of financial results.

Prospects

Whilst we continue to operate in a challenging environment, I am confident that we have the strategy and the executional ability to continue to deliver long-term sustainable shareholder value and I look forward to reporting on our Company's progress to our shareholders and wider stakeholder group.

John R. Nicolson

CHAIRMAN

Chief Executive's Operational Review

Over the past 12 months we have successfully executed our proven strategy and business model, delivering against our consistent objective of creating sustainable shareholder value.

Our revenue growth in the 12 months to 25 January 2015 was 2.7%, comfortably out-performing a more lacklustre total soft drinks market.

Pre-tax profit, before exceptional items, increased by 10.0% with enhanced operating margins as we benefited from the structural operating improvements which we have made in our supply chain and further overhead cost control, as well as a more benign cost of goods environment.  Alongside our cost control actions, we have continued to invest in our long term success with significant capital investments in our operating infrastructure and continued high levels of investment in our core brand equities, innovation and executional capability.

Market Performance

The U.K. soft drinks market, as measured by Nielsen, entered a deflationary phase towards the end of the year, however across our full reporting period the market experienced 0.2% volume decline and 0.4% value growth.  The market has seen a number of important developments over the past 12 months, with year-on-year comparative figures impacted, in part, by exceptionally warm weather in the prior year.  In volume terms, carbonates declined by 1.3% following strong growth in the previous year, however carbonates grew value by 1.0%.  The still category experienced volume growth of 0.8% with marginal decline in value of 0.2%.

Once again the overall market was driven by the performance of the water category which has overtaken cola to become the largest single category by volume for the first time. The energy sub-category continued to grow value at 4.1% and the fruit drinks category also grew, however significant declines continued in fruit juice, dilutes and sports drinks categories.

There is no doubt that consumer preferences are changing within the total soft drinks category.  Areas where traditional growth has been available are now proving more difficult to generate growth making differentiated brands and appealing to consumers more important than ever.

Against this market backdrop, we are pleased to report that all of our core brands have grown in the period.  The still category has delivered a particularly strong performance with growth of 5.7%, driven by over 20% growth in the Strathmore brand and Snapple which, although relatively small in total revenue terms, grew by 35%.  Our carbonates performance was robust, with growth well ahead of the market in IRN-BRU Sugar Free, Rubicon and Barr.  This year Rockstar grew more in line with the energy market at 5.2%, following the very significant growth of 60% in the prior year.

Our Strategy

We have further developed our strategy during the period, focusing on growth opportunities within the market, however our business model remains firmly underpinned by our overriding objective to create value for shareholders.  Our key areas of strategic focus remain:

●    Core brands and markets;

●    Brand portfolio;

●    Route to market;

●    Partnerships;

●    Efficient operations;

●    People development; and

●    Sustainability and responsibility

During the year we have continued to develop our internal "Fit for the Future" programme with the clear aim of supporting our overall growth ambitions through the prioritisation and execution of key business improvement and development projects.  Multiple initiatives and projects have been successfully delivered over the past 12 months across our areas of strategic focus and there is now significant momentum in terms of change across all areas of the business as we continue this targeted development activity.

Core Brands, Markets and Innovation

Our portfolio performance was well balanced last year, with growth across all of our core brands.  This balanced performance continued across our geographical development platform, with growth across all of our core operating markets - Scotland, the "rest of the U.K." and internationally.  Sales in England and Wales, which now account for almost 60% of our business's total revenues, grew by 3.5% and international sales grew by 7.9%.  Our position in Scotland remains extremely strong and we grew sales by 1.2%, however our significant future growth potential lies in the "rest of the U.K." and increasingly in the high potential international segment of our business.

IRN-BRU

Total IRN-BRU invoiced sales grew by 1.6% (including frozen) with Sugar Free contributing strongly to this growth.  The IRN-BRU brand benefited significantly from our successful sponsorship of the Glasgow 2014 Commonwealth Games, where we directed much of our brand activity, promotion and consumer communication.  The Games activity created very positive consumer engagement, with the role of social media and consumer-driven contact playing an increasingly important part in the ongoing development of our brand equity.

In the period, we sold just under £1m of IRN-BRU ice cream, further strengthening the link between the brand and core consumers.

Of particular note was the performance of IRN-BRU in England and Wales, specifically in the North East, Lancashire and Yorkshire regions.  Sales across England and Wales in total increased by 5.6%, with Sugar Free growing by over 20% in this market.  We have been successful in our strategy to develop IRN-BRU in the north of England and now plan to target increased levels of distribution and brand awareness further into England and Wales in 2015.

We set out in 2014 to grow our Sugar Free brands ahead of our total growth and we have successfully delivered against this objective.  In addition, we have reduced the total sugar content per 100ml of our Company-owned brands at a rate in excess of our Government Responsibility Deal pledge.  We will continue to drive our innovation, product and portfolio development plans such that we continue to deliver against our Responsibility Deal targets going forward.

Exotics - Rubicon and KA

The market performance of fruit juice has been poor across the last 12 months, with significant declines in the biggest brands leading to intense promotional activity and pricing.

Within this context Rubicon has delivered a further solid performance in the year with growth of 3.4%. Across the Rubicon portfolio, carbonates have delivered a more robust performance, growing by 8.1%, with a 1.5% growth in stills reflecting the challenges of the total juice market.  Rubicon has benefited from increased brand investment as we continue to drive the brand into mainstream consumer repertoires.  Innovation is also a key platform for Rubicon's long-term growth potential - in the period we launched Coconut Water, which continues to develop as a sub-category / flavour, and in January 2015 we launched the Rubicon brand into the chilled category.  This move into chilled broadens our Rubicon brand appeal into wider shopping occasions and attracts new consumers, some of whom only drink chilled juice and juice drinks.  Our chilled Rubicon offering is available in Mango, Guava and Lychee and will be supported by specific brand and market facing consumer activity.

Barr and Strathmore

The Barr range of flavoured carbonates continues to grow steadily year-on-year, driven by a combination of innovation, quality and value for money.  With sales growth of over 6%, it remains comfortably ahead of the carbonates market growth.  In the period, the successful launch of Xtra Cola, and the further development of new flavours and formats, all helped to underpin a strong performance.

Strathmore had an outstanding year with growth of over 20%.  The development of the brand was supported by the huge level of awareness driven by our Glasgow 2014 Commonwealth Games sponsorship, in particular the availability of Strathmore in the "field of play", with athletes from around the Commonwealth enjoying and interacting with the brand across the whole event.  Subsequently, we have strengthened the Strathmore brand's association with sport through our new partnership with Scottish Rugby, driving even greater brand awareness.  In combination with this, we successfully launched Strathmore Twist into the growing flavoured water category and expect this element of the brand mix to show strong future growth.

Partnerships

During the last year we have further developed and enhanced our partnerships.  Rockstar continued to grow in line with the market following the prior year's outstanding growth performance.  Innovation remains the lifeblood of growth in this fast moving and fashion-conscious category.  Rockstar continues to lead the way with new concepts, such as the recently launched Rockstar Energy Waters, combining the two key growth categories of flavoured water and energy.  We have also recently extended our partnership with Rockstar on a territory basis into Scandinavia.  We will combine our brands with Rockstar in these smaller, high potential markets, applying our successful partnership approach to build this portfolio.

As previously reported, the Orangina brand exited our brand portfolio in July 2014.

In September 2014, we were delighted to announce a new partnership with Dr Pepper Snapple Group (DPSG) to develop the Snapple brand in the U.K. and on a wider European basis.  The brand management transferred to A.G. BARR in January 2015 and we are very positive regarding its potential.  Last year, A.G. BARR's Snapple sales in the U.K. grew by 35%, albeit from a small base.  The Snapple brand represents an opportunity to drive profitable growth across a number of markets and this, combined with our existing portfolio of brands focussed outside the U.K., provides us with exciting opportunities for new growth.

Route to Market

The U.K. retail market is going through significant change, with competition between outlets and channels growing and increasingly overlapping.  We have focused on driving our "go to market" strategy across a wide platform and we continue to develop our capability and competence to ensure we can manage multiple channels and the increasingly diverse routes to market required to be successful in our marketplace.  We are investing in flexibility, technology, assets and people to allow us to compete successfully on as broad a front as possible.  We continue to believe that, above all, in-market execution is vitally important in ensuring we deliver sustainable growth.

Efficient Operations

It has been an exciting and challenging year for A.G. BARR, with significant internal change to manage.  The investment in carton packaging facilities at our Milton Keynes site, and the consequential impact on our Tredegar site, have been well handled.  Our new carton facilities at Milton Keynes are well into the commissioning phase and the project has been delivered on time and to budget.  As a result, the Tredegar site closed in the first week of February 2015.  The team at Tredegar performed exceptionally well over the last few months of 2014/15, delivering strong operating performance right up to the closure date.  We are very grateful to the entire Tredegar team for their efforts during this difficult period.  Milton Keynes is now growing strongly, with a combination of packaging formats and processes combining with an expanding team to give us an efficient platform for future growth.  The Milton Keynes facility, in combination with the strong operating performance of our other sites, will allow us to improve our overall operating cost base and efficiency even further.

It is also worth noting that we exited our non-core water cooler business in the second half of the year, which was sold to Eden Springs UK Ltd, realising a small gain on the sale of the business.  We have subsequently exited the Findlays bottling site at Pitcox, East Lothian.

We have continued to drive improvement in our core supply chain, with the recent relocation and redevelopment of our supply chain planning team to our Cumbernauld site, and we expect to see further inventory and service improvements in the coming year.

Our net capital investment expenditure in the period was £18.0m and we expect to continue to invest in growth related capital projects to support our existing business development plans.

People, Sustainability and Responsibility

The entire team at A.G. BARR has responded positively to the challenges of our dynamic marketplace.  We continue to invest in development across our organisation, promoting from within where possible, as well as building competence with new team members from outside the business to ensure we are fit to meet the challenges of the future.

A significant amount of our internal management effort has been focused on our Business Process Redesign (BPR) project.  This will provide a system and process platform to allow the business to efficiently and sustainably grow for the long-term.  This project has involved many key individuals seconded to the project for 12 to 18 months and we are now reaching the important delivery phase with a June 2015 go-live plan.  Providing a quality solution is paramount but de-risking is fundamental to the project's success and, as we enter the next phase of this important project, we will ensure risk minimisation is at the forefront of our plans.

Safety remains at the heart of all of our operations and we have made significant progress in improving our overall management reporting and the direction of our longer term safety planning and performance within the Group.  We have integrated the management of safety, quality and environment under one team to ensure higher levels of management control and support across our operations in the future.

As previously mentioned, we have made excellent progress across 2014/15 towards our Responsibility Deal goals. In addition we have now moved to the non-mandatory traffic light front of pack labelling system to ensure consumers are provided with the clearest possible guidance as to the nutritional content of our drinks. We believe in being responsible across all fronts of our business and will continue our development with this at the heart of all of our plans.

Funkin Acquisition

We announced the acquisition of Funkin Limited on 2 February 2015 for an initial cash consideration of £16.5 million plus up to a further £4.5 million subject to the achievement of certain financial performance targets.  The Funkin acquisition broadens and strengthens the A.G. BARR brand portfolio and moves the Group into a new segment of cocktail mixers. This is a small but significant step into a new, high growth sub-category of the drinks sector.  It also provides further incremental growth potential for the Group, both in the U.K. and internationally, as well as the opportunity to enhance our position in the on-trade and hotel, restaurant and café hospitality market segments.

Summary

We have delivered an excellent financial performance in difficult market conditions over the past 12 months, whilst continuing to build the platform required for sustained and profitable long-term growth.  Looking forward, we will continue our dual track approach of tight cost control, rigorous cash management and focus on execution at the same time as we invest for the long-term in our brands, assets and people.

Overall market conditions are expected to remain challenging. The U.K. soft drinks market is currently experiencing a period of price deflation which will, if sustained, make it more difficult for many businesses to deliver the top line growth of recent years. Whilst our year has started slowly, reflecting tough comparative trading and promotional phasing, we are confident that our management actions, combined with our proven business model, will enable us to further unlock the significant potential that A.G. BARR offers its shareholders this year and into the future.

Roger A. White

CHIEF EXECUTIVE

Financial Review

The Group's track record of performance delivery and reputation for strong financial governance continues, with all key financial measures reporting improvement relative to the prior year:

·      Revenue increased 2.7% to £260.9m

·      Net margin up 100bp to 16.1%

·      Profit before tax (pre-exceptional items) up 10.0% to £41.9m

·      Free cash flow up £2.9m to £40.6m 

·      Return on assets up 155bp to 24%

·      Underlying Earnings per Share (EPS) increasing to 28.25p

The year to 25 January 2015 was an eventful one in which a well-executed Glasgow 2014 Commonwealth Games campaign delivered brand equity gains and enabled us to lap the performance of the hot summer in the prior year. The Group has now achieved 12 consecutive years of profit growth and five year top and bottom line compound annual growth of 6.5% (turnover) and 8.4% (profit before tax).

These results demonstrate a well executed simple business model - we aim to sell more, for more, while making it for less, resulting in strong, sustainable financial results.           

Segment Performance

The Group's strategy remains unchanged - to drive distribution and market share growth across all segments of the business. The success of this strategy in the year has resulted in volume increases (up 2.1% to over 53m cases) and an overall £6.8m increase in total turnover. 

In a highly competitive market, our overall carbonates segment delivered modest year-on-year turnover growth of 0.2% (£0.4m), with volume growing by 0.4% and value decreasing by 0.2%. All of the A.G. BARR core brands grew volume, however our portfolio brands (Orangina, KA, D&B) did experience some declines. Removing the impact of the Orangina contract, our carbonates grew 0.8% in volume, 2.3% in revenue and delivered strong gross margin gains supported by lower material costs and supply chain efficiencies.

The stills (still drinks and water) segment delivered year-on-year turnover growth of 5.7%, with volume growing by 8%. Value decreased by 2.2%, a combination of market pricing pressure and adverse category/product mix (water growing faster than stills and PET growing faster than glass). In absolute terms, the increase in stills equated to additional turnover of £3.1m.

The others segment is distorted this year with the inclusion of Orangina contract packaging.

All subsequent comparisons exclude the effect of exceptional items.

Margins

We continue to offset intense competitor promotional activity by the combination of operational gains, tight cost control, capital investment driven efficiency and favourable commodity markets.

Carbonates gross margins improved by 1.5pp to 51.6% as the benefits of mix and lower input costs came through, with cash margins increasing by 2.7%.  Within stills, the benefits were more modest, with gross margins broadly flat at 29.8% (prior year 29.7%).  Overall gross profit increased by £7.2m (6.2%) versus 2013/14 and by £7.4m on a like-for-like basis (excluding Orangina), delivering an impressive 1.6pp increase in gross margins to 47.3%.

As we look ahead, we consistently review the outlook on commodity costs, locking in pricing when we consider it optimal. 

Below gross profit, administration and distribution costs increased by £4.3m (5.5%), reflecting our commitment to marketing investment, increased auto enrolment and other pension associated expenditure and higher employee related costs as our business has grown.

Profit improved at every level.  EBITDA of £49.1m (up 8.7%) was generated in the period, representing an EBITDA margin of 18.8% while operating profit of £42.1m represented an increase of 9.5% on the prior year.  Operating margins increased from 15.1% to 16.1%.  Profit before tax increased by £3.8m, reflecting slightly lower average borrowing costs associated with the transition from a net debt to net cash position.

Interest

Net finance charges, which amounted to £0.2m, were £0.2m lower than in the prior year as operating net debt was eliminated.  The constituent elements of the charge comprised:

	£000
Finance income	59
Finance costs	(322)
Interest related to Group borrowings	(263)
Finance income related to pension plans	44
Net finance costs	(219)

Taxation

The tax charge of £8.6m, after exceptional items, is £2.5m higher than the prior year and represents an effective tax rate of 22.3%. This is an increase of 4.5pp from the prior year and reflects the absence of adjustments in relation to deferred tax rates that benefited prior years.

Earnings Per Share (EPS)

Underlying EPS, at 28.25p, improved by 4.6% as the strong operational performance (PBIT up 9.5%) was diluted by the impact of the increased tax charge in relation to deferred tax as previously described.

Balance Sheet

The Group's balance sheet strengthened marginally over the 12 month period to 25 January 2015 with overall net assets growth of 1% to £156.5m. Significant expansionary capital expenditure was offset by the recognition of an IAS19 pension adjustment.

The key balance sheet highlights can be summarised as:

·      ROCE increased to 24.0%, an increase of 155bp relative to the prior year

·      Non-current assets increased by £10m as we near completion of both Milton Keynes Phase II and the implementation of our new ERP system

·      Inventory increased by 4.5%, with average inventory days increasing from 42.5 to 44.5 in advance of the Tredegar site closure

·      Trade receivable days increased by 4 days to 69 days

·      Trade payable days increased from 25 to 47, distorted by large capital creditors related to the  installation of our new Tetrapak line at Milton Keynes

·      Total capital investment of £18.0m at 6.9% of revenue

·      Recognition of the triennial pension valuation - a £18.5m deficit reflecting the impact of historically low bond yields

·      A net cash position at year-end

In the year ahead, expansion related capital expenditure is anticipated to continue, with the focus being on the further investment at Milton Keynes and the implementation of our new ERP system in June 2015 as well as the continued development of our asset base.

The post year-end acquisition of Funkin Limited was financed from an extension of existing bank facilities.  We are well financed with significant facility headroom.

Cash Flow

We generated £40.6m of free cash in 2014/15 - up nearly £3m on the prior period, which itself was a record year. The increase was primarily attributable to the strong underlying EBITDA and lower exceptional cash outflows.

Inventories increased marginally due to increased sales and the decision to build stocks to mitigate risk ahead of the Tredegar site closure.  Phasing of promotions and the success of the new IRN-BRU Tartan pack promotion contributed to a strong trading position at the end of the financial year and an unusually high trade debt and debtor days - aged debt is low.  This increase in receivables was more than compensated for by the large increase in trade creditors driven by significant capital expenditure in the final quarter.

Free Cash flow Statement		Year		Year to
		25 Jan 15		26 Jan 14
		£000		£000
Operating profit		42,133		38,481
Depreciation		6,739		6,445
Amortisation		253		253
EBITDA		49,125		45,179
(Increase) / decrease in inventories		(715)		4,766
(Increase) / decrease in receivables		(4,424)		323
Increase in payables		9,596		3,924
Movement in pension liability		(845)		(172)
Share options costs		893		595
Exceptional cash items		(1,714)		(5,045)
Gain on sale of property, plant and equipment		(119)		(86)
Net operating cash flow		51,797		49,484
Net interest		(223)		(417)
Taxation		(7,031)		(7,696)
Cash flow from Operations		44,543		41,371
Maintenance capex		(3,928)		(3,646)
Free cash flow		40,615		37,725
Expansionary capex		(6,980)		(9,635)
Dividends		(13,051)		(3,304)
Acquisition of intangible assets		(7,063)		-
Net purchases of shares held in trust		(1,009)		(1,211)
Loans repaid (including arrangement fees)		(80)		(10,040)
Cash flow absorbed by financing		(28,183)		(24,190)
Increase in cash		12,432		13,535
Opening cash and cash equivalents		12,932		(603)
Closing cash and cash equivalents		25,364		12,932
Borrowings		(15,000)		(15,000)
Closing net surplus / (debt)		10,364		(2,068)

The Group utilises its cash appropriately and with care - more than £14m was invested in long-term assets (both infrastructure investment and the new ERP system) and £13m was distributed in dividends to our shareholders.  The dividend paid in the prior year was significantly lower than the current year due to a £8.5m early distribution in 2012, paid in lieu of the final dividend.  On a normalised basis the dividend payment was up 10%.

Shares with a net value of £1m were purchased on behalf of various employee benefit trusts to satisfy the ongoing requirements of the Group's employee share schemes.

The Group closed the year with a net cash balance of £10.4m - £25.4m of cash offset by £15.1m of bank borrowings including overdrafts. The Group has sufficient banking facilities at its disposal to meet the expected future needs of the Group, including the post balance sheet acquisition of Funkin Limited.

During the period, the Group has not undertaken any interest rate hedging activity given the current net cash position, expectations on short term interest rates and future free cash generation.

Exceptional Items

The Group incurred £3.3m of exceptional net charges before tax during the period.  The majority relates to the reorganisation costs and asset impairment charges for the transfer of carton production to our new Milton Keynes site and the closure of our Tredegar operations.  In addition, these charges include a number of smaller reorganisational projects implemented during the year.

Pensions

The Group continues to operate two pension plans, being the A.G. BARR p.l.c. (2005) Defined Contribution Pension Scheme and the A.G. BARR p.l.c. (2008) Pension and Life Assurance Scheme. The latter is a defined benefit scheme based on final salary, which also includes a defined contribution section for pension provision to senior managers.

The defined benefit scheme is closed to new entrants but remains open to future accrual.  As at the end of January 2015 the IAS 19 deficit was valued at £18.5m, an £18.4m adverse movement from the prior year.  The deficit has arisen from a significant increase in liabilities (£33.7m), more than offsetting continued growth in the asset base (£15.4m).  The increase in liabilities is a result of a lower net discount rate being applied and an updating of demographic assumptions.  The pension scheme commitments and risk position are under continual review as part of the Group's ongoing strategic risk management framework and the Group believes that the overall pension deficit is supportable  given the historically low gilt yields which underlie the liabilities valuation.

Summary

A robust financial performance with increased distribution and market share gains delivering growth in all our key financial metrics during the period and further cementing an already strong balance sheet.  A net cash surplus and a strong free cash flow enabled us to continue our investment plans and at the same time increase dividends by 10%.

Share Price and Market Capitalisation

At 25 January 2015 the closing share price for A.G. BARR p.l.c. was £6.25, an increase of 3% on the closing January 2014 position.  The Group is a member of the FTSE250, with a market capitalisation of £730m at the year end. 

Stuart Lorimer

FINANCE DIRECTOR

A.G. BARR p.l.c. Consolidated Income Statement for the year ended 25 January 2015 The following are the final results for the year ended 25 January 2015
	2015				2014
	Before exceptional items		Exceptional items	Total	Before exceptional items	Exceptional items	Total
	£000		£000	£000	£000	£000	£000
Revenue	260,895		-	260,895	254,085	-	254,085
Cost of sales	(137,582)		(2,910)	(140,492)	(137,929)	(1,039)	(138,968)
Gross profit	123,313		(2,910)	120,403	116,156	(1,039)	115,117
Other income	747		-	747	-	-	-
Operating expenses	(81,927)		(376)	(82,303)	(77,675)	(2,762)	(80,437)
Operating profit	42,133		(3,286)	38,847	38,481	(3,801)	34,680
Finance income	103		-	103	159	-	159
Finance costs	(322)		-	(322)	(545)	-	(545)
Profit before tax	41,914		(3,286)	38,628	38,095	(3,801)	34,294
Tax on profit	(9,318)		687	(8,631)	(6,925)	810	(6,115)
Profit attributable to equity holders	32,596		(2,599)	29,997	31,170	(2,991)	28,179
Earnings per share (p)
Basic earnings per share				26.00			24.43
Diluted earnings per share				25.86			24.34

A.G. BARR p.l.c. Consolidated Statement of Comprehensive Income for the year ended 25 January 2015
	2015	2014
	£000	£000
Profit after tax	29,997	28,179
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements on defined benefit pension plans	(19,770)	3,002
Deferred tax movements on items above	2,934	(2,368)
Current tax movements on items above	1,121	1,181
Items that will be or have been reclassified to profit or loss
Effective portion of changes in fair value of cash flow hedges	67	(2,130)
Deferred tax movements on items above	(14)	469
Other comprehensive income for the year, net of tax	(15,662)	154
Total comprehensive income attributable to equity holders of the parent	14,335	28,333

A.G. BARR p.l.c. Statement of Changes in Equity for the year ended 25 January 2015
	Share capital	Share premium account	Share options reserve	Cash flow hedge reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
At 26 January 2014	4,865	905	1,826	(534)	148,174	155,236
Profit for the year	-	-	-	-	29,997	29,997
Other comprehensive income	-	-	-	53	(15,715)	(15,662)
Total comprehensive income for the year	-	-	-	53	14,282	14,335
Company shares purchased for use by employee benefit trusts	-	-	-	-	(2,310)	(2,310)
Proceeds on disposal of shares by employee benefit trusts	-	-	-	-	1,301	1,301
Recognition of share-based payment costs	-	-	893	-	-	893
Transfer of reserve on share award	-	-	(534)	-	534	-
Deferred tax on items taken direct to reserves	-	-	133	-	-	133
Dividends paid	-	-	-	-	(13,051)	(13,051)
At 25 January 2015	4,865	905	2,318	(481)	148,930	156,537
At 26 January 2013	4,865	905	1,861	1,127	121,890	130,648
Profit for the year	-	-	-	-	28,179	28,179
Other comprehensive income	-	-	-	(1,661)	1,815	154
Total comprehensive income for the year	-	-	-	(1,661)	29,994	28,333
Company shares purchased for use by employee benefit trusts	-	-	-	-	(2,290)	(2,290)
Proceeds on disposal of shares by employee benefit trusts	-	-	-	-	1,079	1,079
Recognition of share-based payment costs	-	-	595	-	-	595
Transfer of reserve on share award	-	-	(687)	-	687	-
Deferred tax on items taken direct to reserves	-	-	57	-	-	57
Current tax on items taken direct to reserves	-	-	-	-	118	118
Dividends paid	-	-	-	-	(3,304)	(3,304)
At 26 January 2014	4,865	905	1,826	(534)	148,174	155,236

A.G. BARR p.l.c. Consolidated Statement of Financial Position as at 25 January 2015
	2015	2014
	£000	£000
Non-current assets
Intangible assets	80,917	74,107
Property, plant and equipment	79,663	76,314
	160,580	150,421
Current assets
Inventories	16,761	16,046
Trade and other receivables	51,899	47,475
Derivative financial instruments	66	-
Cash and cash equivalents	25,437	12,932
	94,163	76,453
Total assets	254,743	226,874
Current liabilities
Loans and other borrowings	73	-
Trade and other payables	51,119	40,964
Derivative financial instruments	666	667
Provisions	1,009	396
Current tax liabilities	3,314	3,122
	56,181	45,149
Non-current liabilities
Loans and other borrowings	14,944	15,000
Deferred tax liabilities	8,612	11,378
Retirement benefit obligations	18,469	111
	42,025	26,489
Capital and reserves attributable to equity holders
Share capital	4,865	4,865
Share premium account	905	905
Share options reserve	2,318	1,826
Cash flow hedge reserve	(481)	(534)
Retained earnings	148,930	148,174
	156,537	155,236
Total equity and liabilities	254,743	226,874

A.G. BARR p.l.c. Consolidated Cash Flow Statement for the year ended 25 January 2015
	2015	2014
	£000	£000
Operating activities
Profit before tax	38,628	34,294
Adjustments for:
Interest receivable	(103)	(159)
Interest payable	322	545
Depreciation of property, plant and equipment	6,739	6,445
Impairment of property, plant and equipment	1,483	-
Amortisation of intangible assets	253	253
Share-based payment costs	893	595
Gain on sale of property, plant and equipment	(119)	(86)
Operating cash flows before movements in working capital	48,096	41,887
(Increase) / decrease in inventories	(715)	4,766
(Increase) / decrease in receivables	(4,424)	323
Increase in payables	10,208	2,680
Difference between employer pension contributions and amounts recognised in the income statement	(1,368)	(172)
Cash generated by operations	51,797	49,484
Tax on profit paid	(7,031)	(7,696)
Net cash from operating activities	44,766	41,788
Investing activities
Purchase of intangible assets	(7,063)	-
Purchase of property, plant and equipment	(11,493)	(13,423)
Proceeds on sale of property, plant and equipment	585	142
Interest received	60	44
Net cash used in investing activities	(17,911)	(13,237)
Financing activities
New loans received	15,000	10,000
Loans repaid	(15,000)	(20,000)
Bank arrangement fees paid	(80)	(40)
Purchase of Company shares by employee benefit trusts	(2,310)	(2,290)
Proceeds from disposal of Company shares by employee benefit trusts	1,301	1,079
Dividends paid	(13,051)	(3,304)
Interest paid	(283)	(461)
Net cash used in financing activities	(14,423)	(15,016)
Net increase in cash and cash equivalents	12,432	13,535
Cash and cash equivalents at beginning of year	12,932	(603)
Cash and cash equivalents at end of year	25,364	12,932

A.G. BARR p.l.c.

1. General information

A.G. BARR p.l.c. ('the Company') and its subsidiaries (together 'the Group') manufacture, distribute and sell soft drinks. The Group has manufacturing sites in the U.K. and sells mainly to customers in the U.K. with some international sales.

The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in Scotland. The address of its registered office is Westfield House, 4 Mollins Road, Cumbernauld, G68 9HD.

Basis of preparation

The consolidated and parent Company financial statements of A.G. BARR p.l.c. have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. They have been prepared under the historical cost accounting rules except for the derivative financial instruments and the assets of the Group pension scheme which are stated at fair value and the liabilities of the Group pension scheme which are valued using the projected unit credit method.

2. Segment reporting

The Group's management committee has been identified as the chief operating decision maker.  The management committee reviews the Group's internal reporting in order to assess performance and allocate resources.  The management committee has determined the operating segments based on these reports.

The management committee considers the business from a product perspective. This has led to the operating segments identified in the table below: there has been no change to the segments during the year (after aggregation).  The performance of the operating segments is assessed by reference to their gross profit before exceptional items.

Year ended 25 January 2015
	Carbonates	Still drinks and water	Other (including ice-cream)	Total
	£000	£000	£000	£000
Total revenue	198,249	58,218	4,428	260,895
Gross profit before exceptional items	102,235	17,349	3,729	123,313
Year ended 26 January 2014
	Carbonates	Still drinks and water	Other (including ice-cream)	Total
	£000	£000	£000	£000
Total revenue	197,868	55,097	1,120	254,085
Gross profit before exceptional items	99,153	16,363	640	116,156

There are no intersegment sales.  All revenue is from external customers.

Other segments represent income from water coolers for the Findlays 19 litre water business, rental income for vending machines, the sale of IRN-BRU and Rubicon ice-cream and other soft drink related items such as water cups.

The gross profit from the segment reporting is stated before exceptional costs as the Tredegar related exceptional costs allocated to cost of sales in the consolidated income statement relate to Stills only and in 2014, Milton Keynes exceptional costs related to carbonates only.

The gross profit from the segment reporting is reconciled to the total profit before income tax, as shown in the consolidated income statement.

All of the assets and liabilities of the Group are managed by the management committee on a central basis rather than at a segment level.  As a result no reconciliation of segment assets and liabilities to the statement of financial position has been disclosed for either of the periods presented.

All of the segments included within Carbonates and Still drinks and water meet the aggregation criteria set out in IFRS 8 Operating Segments.

Geographical information
The Group operates predominately in the U.K. with some worldwide sales.  All of the operations  of  the Group are based in the U.K.
			2015		2014
Revenue			£000		£000
U.K.			253,715		247,433
Rest of the world			7,180		6,652
			260,895		254,085

The Rest of the world revenue includes sales to Ireland and wholesale export houses. 

All of the assets of the Group are located in the U.K.

Major customers

No single customer accounted for 10% or more of the Group's revenue in either of the years presented. 

3. Exceptional items
	2015	2014
	£000	£000
Redundancy costs relating to the closure of the Tredegar manufacturing site	1,427	-
Impairment charges relating to the closure of the Tredegar manufacturing site	1,483	-
Milton Keynes development	-	1,039
Total cost of sales	2,910	1,039
Merger related costs	-	2,098
Pension curtailment	(523)	-
Redundancy costs for finance, telesales, distribution, demand and supply planning reorganisation	899	664
Total operating costs	376	2,762
Total exceptional costs	3,286	3,801

During the year to 25 January 2015 A.G. BARR p.l.c. announced the closure of its manufacturing site at Tredegar. This has resulted in an impairment charge of £1,483,000 in respect of buildings and plant at the site which have been written down to the recoverable amounts calculated by reference to fair value less costs of disposal (valued by reference to an independent valuation and categorised as a level 2 fair value measurement).  £485,000 of redundancy related costs were incurred in the year to 25 January 2015. A further £942,000 of redundancy costs have been provided for.

Redundancy, recruitment and training costs in relation to the re-organisation of the finance, telesales, distribution, demand and supply planning operations were incurred during the year and these have been presented and treated as exceptional.

As a result of the finance, telesales, distribution, demand and supply planning reorganisation, a curtailment in the Group's retirement pension plan has arisen. This has resulted in an exceptional credit arising from the reduction in the retirement benefit obligation following a reduction in the number of employees remaining with the scheme. The value of this credit is £523,000.

A tax credit of £687,000 (2014: £810,000) has been recognised as a result of the total exceptional costs.

Construction of a new production site in Milton Keynes commenced in July 2012 with plant commissioning and associated training costs treated as exceptional items in the year to 26 January 2014.  The site commenced manufacturing in July 2013.

During the year to 26 January 2013, A.G. BARR p.l.c. and Britvic plc worked together on a proposed all-share merger which was subsequently referred to the Competition Commission and following clearance, aborted.  Professional, legal fees and certain employee related costs incurred in relation to the proposed merger and related Competition Commission enquiry have been treated as exceptional for the year to 26 January 2014.

4. Earnings per share
Basic earnings per share have been calculated by dividing the earnings attributable to equity holders of the parent by the weighted average number of shares in issue during the year, excluding shares held by the employee share scheme trusts.
	2015	2014
Profit attributable to equity holders of the Company (£000)	29,997	28,179
Weighted average number of ordinary shares in issue	115,377,541	115,351,493
Basic earnings per share (pence)	26.00	24.43
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
	2015	2014
Profit attributable to equity holders of the Company (£000)	29,997	28,179
Weighted average number of ordinary shares in issue	115,377,541	115,351,493
Adjustment for dilutive effect of share options	623,962	399,418
Diluted weighted average number of ordinary shares in issue	116,001,503	115,750,911
Diluted earnings per share (pence)	25.86	24.34
The underlying EPS figure is calculated by using Profit attributable to equity holders  before exceptional items:
	2015	2014
Profit attributable to equity holders of the Company before exceptional items (£000)	32,596	31,170
Weighted average number of ordinary shares in issue	115,377,541	115,351,493
Underlying earnings per share (pence)	28.25	27.02
This measure has been included in the financial statements as it provides a closer guide to the underlying financial performance as the calculation excludes the effect of exceptional items.

5. Dividends
				2015			2014			2015		2014
				per share			per share			£000		£000
Paid first interim dividend				3.11		p	2.83		p	3,596		3,304
Paid second interim dividend				8.19		p	-		p	9,455		-
				11.30		p	2.83		p	13,051		3,304
The directors have proposed a final dividend in respect of the year ended 25 January 2015 of 9.01p per share, amounting to a dividend of £10,521,000.  It will be paid on 5 June 2015 to all shareholders who are on the Register of Members on 8 May 2015.
The notice of Annual General Meeting for the year ended 26 January 2014 omitted the resolution seeking shareholder approval for the payment of a final dividend of 8.19p per ordinary share. Accordingly, the Board declared a second interim dividend for the year ended 26 January 2014 in place of the proposed final dividend. The interim dividend did not require the approval of shareholders. The amount of this interim dividend was 8.19p per ordinary share. This dividend was paid on 6 June 2014 to all shareholders who were on the Register of Members on 9 May 2014.

6. Cash and cash equivalents
	2015	2014
	£000	£000
Cash and cash equivalents	25,437	12,932
Cash and cash equivalents include the following for the purposes of the cash flow statement:
	2015	2014
	£000	£000
Cash and cash equivalents	25,437	12,932
Bank overdrafts	(73)	-
	25,364	12,932

Annual General Meeting

The Annual General Meeting will be held at 9.30am on 27 May 2015 at the offices of KPMG, 191 West George Street, Glasgow, G2 2LJ.

Statutory Accounts

The financial information set out above does not constitute the Company's statutory accounts for the years ended 25 January 2015 or 26 January 2014 but is derived from the 2015 accounts. Statutory accounts for 2014 have been delivered to the registrar of companies, and those for 2015 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified and (ii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

END

 

 

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