Interim Results

Barr(A.G.) PLC 26 September 2006 For Immediate Release 26 September 2006 A.G.BARR p.l.c. INTERIM RESULTS A.G.BARR p.l.c. the soft drinks group announces its interim results today for the 6 months ended 29th July 2006. Key Points • Profit on ordinary activities before tax and exceptional items increased by 8.2% to £9.4 million (2005 - £8.7 million). • Total turnover versus the comparable period was up 8.9% at £72.2 million (2005 - £66.3). • Strathmore water business acquired on 1st June 2006 has been successfully integrated into the Barr business. • Total IRN-BRU brand revenue increases by 3%. • Interim dividend increased by 0.50p to 10.25p per share (2005 - 9.75p). • Initial warehouse operations now commenced at Cumbernauld. Commenting on the results Chief Executive, Roger White, said: 'The sustained drive to develop and broaden our portfolio alongside the above average summer weather has delivered improved top line performance despite continued competitive market conditions. Operationally we are now nearing completion of our major capital investment programme at Cumbernauld and additionally we have successfully integrated the Strathmore business into our operating structure. Trading is forecast to remain competitive; however our underlying business performance remains strong and we anticipate meeting our expectations for the full year' For more information, please contact: A.G.Barr Tel: 0141 554 1899 Buchanan Communications Tel: 020 7466 5000 Roger White, Chief Executive Tim Thomson / Nicola Cronk Iain Greenock, Finance Director Notes to Editors: A.G.Barr p.l.c. A.G.BARR p.l.c. is a long established national soft drinks business with its head office in Glasgow. As a broad based specialist soft drinks business, the company manages a wide portfolio of soft drinks, including Irn-Bru, Diet Irn-Bru, Irn-Bru 32, Findlays Water, Orangina, Tizer, D&B and the Simply Range. The latest acquisition is the Strathmore Mineral Water Company one of the UK's leading bottled water brands, which manufactures still, sparkling and flavoured spring water products. Strathmore has a market leading position in the 'on-trade'. Interim Statement Profit on ordinary activities before taxation for the six months to 29th July, 2006 was, excluding exceptional items, up 8.2% at £9.4m. Turnover versus the same period last year increased by 8.9% to £72.2m, including £3.2m of sales revenue from the Strathmore water business purchased on 1st June, 2006. Underlying sales, excluding Strathmore, increased by 4.1% in the period. The exceptional item in the period relates to the forecast net gains associated with the completion of the re-organisation in our Scottish sales and logistics operations. Exceptional charges are expected to arise in the second half relating to costs associated with the planned closure of our Atherton site. The business continues to make good progress towards delivering its operational and financial goals. The overall soft drinks market in the period grew in value terms by 9% (as measured by Nielsen) assisted by better than average weather, especially in July. Total carbonates performance continued to be sluggish with value growth of 1% and volume decline of 3%. This total carbonates position masked some significant competitor carbonate brand declines which has led to a further increase in competition in the market place. We have continued to successfully follow our value based strategy albeit in the face of increased promotional activity and cost particularly in the multiple retailer channel. Total IRN-BRU brand sales revenue for the period was up by 3% assisted by the successful launch of IRN-BRU 32, aimed at the energy drinks sector. Sales of IRN-BRU 32, launched in March 2006, have exceeded initial expectations with over 5 million cans sold by July 2006. Core IRN-BRU and Diet IRN-BRU also performed solidly recording important market share gains in England and Wales. Product innovation has played an important role in further developing our portfolio and improving our revenue performance so far this year. IRN-BRU 32 has moved IRN-BRU into the fast growing but competitive energy sector; St Clements Fruits - still fruit drinks - have helped the St Clements brand to grow by 250% in the period and in conjunction with our Simply brand should deliver full year brand revenue of £5.0m. Orangina, following its re-launch earlier this year and further investment in marketing, has grown by 14% in value in the six months. Continued innovation has been necessary to keep pace with changes in legislation related to soft drinks supply to schools. An updated schools' range has been developed to meet legislative changes in England and was launched early in September. The acquisition of the Strathmore water business from Constellation Brands meets two strategic priorities. First to strengthen our position in the water category and secondly to help our development in the on-trade sector where the brand holds a market leading position. Integration of the Strathmore business into our operating and commercial structures has now been successfully completed. Sales of Strathmore products through our impulse route to market will commence shortly. Across the business, rising input costs, particularly utilities, continue to put pressure on gross margins. However, current gross margins have been protected by a combination of increases in sales prices and sustained on-going cost reduction actions. Further input cost increases are anticipated in the second half but actions taken in tandem with our purchasing position should see gross margins held through the balance of the financial year. We are nearing completion of our logistics and sales infrastructure project in Scotland. Progress towards our completion date has, however, been hampered by the unexpected loss of our main contractor who went into receivership in mid May. Whilst we have recovered the position well and are planning to have the project completed by December 2006, we have lost some eight weeks as a consequence and may incur additional one off double running costs of up to £0.5m. Projected annual operating savings on completion remain as previously forecast at £2.5m. Good progress has been made in relation to the planned closure of our Atherton site in spring 2007. The triennial valuation of our defined benefit pension schemes at 1st November, 2005 has now been completed and shows a gross deficit of £19.8m. Following receipt of this valuation, consultation was carried out with active members of the schemes on both future benefits and appropriate contribution rates. The results of this exercise are currently being assessed and your directors will subsequently agree with the trustees of the schemes the total level of contribution calculated to achieve full funding within the next ten years. Given the increase in underlying profit and the continued satisfactory financial position of the company your directors have declared an interim dividend of 10.25p per share, payable on 27th October, 2006. This is a 5.1% increase on the interim dividend paid last year. Turnover to date during the second half of the year is in line with our business plan. The second half will be a period of intense operational change with all the encumbent risks associated therewith. Market conditions are also expected to remain highly competitive across the soft drinks category. Despite these challenges we remain confident that, in the period, our plans and actions should allow us to meet our expectations for the full year. Robin Barr CHAIRMAN Roger White CHIEF EXECUTIVE 26th September, 2006 A.G.BARR p.l.c. Consolidated Income Statement 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 Notes £000 £000 £000 ------- ------- ------- Revenue 72,184 66,290 128,760 Cost of sales 33,584 31,130 63,398 ------- ------- ------- Gross profit 38,600 35,160 65,362 Net operating expenses 29,736 26,998 48,422 ------- ------- ------- Operating profit before exceptional item 8,864 8,162 16,940 Exceptional item 4 (819) 677 533 ------- ------- ------- Operating profit 9,683 7,485 16,407 Finance income 669 797 1,557 Finance costs (154) (291) (583) ------- ------- ------- Profit on ordinary activities before tax 10,198 7,991 17,381 Tax on profit on ordinary activities 5 3,059 2,359 5,128 ------- ------- ------- Profit attributable to equity shareholders 7,139 5,632 12,253 ------- ------- ------- Basic earnings per share 37.70 p 30.22 p 65.06 p ------- ------- ------- Fully diluted earnings per share 36.68 p 28.72 p 63.87 p ------- ------- ------- Dividend per share paid 22.00 p 19.50 p 29.25 p ------- ------- ------- Dividend paid (£'000) 4,143 3,795 5,628 ------- ------- ------- Dividend per share proposed 10 10.25 p 9.75 p 22.00 p ------- ------- ------- Dividend proposed (£'000) 10 1,995 1,897 4,282 ------- ------- ------- A.G.BARR p.l.c. Consolidated Statement of Recognised Income and Expense 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 ------- ------- ------- Actuarial cost recognised on defined benefit pension plans - - (2,235) Deferred tax relating to defined benefit pension plans - - 671 ------- ------- ------- Net income recognised directly in equity - - (1,564) Profit for the period 7,139 5,632 12,253 ------- ------- ------- Total recognised income and expense for the period 7,139 5,632 10,689 ------- ------- ------- Attributable to equity shareholders 7,139 5,632 10,689 ------- ------- ------- A.G.BARR p.l.c. Consolidated Balance Sheet Restated Restated As at As at As at 29.07.06 30.07.05 28.01.06 Notes £000 £000 £000 -------- ------- ------- Non-current assets Intangible assets 6 9,951 - - Property, plant and equipment 7 46,373 38,326 42,335 Deferred tax assets 5,873 5,852 5,777 -------- ------- ------- 62,197 44,178 48,112 -------- ------- ------- Current assets Inventories 9,521 8,414 8,274 Trade and other receivables 34,912 28,682 22,143 Cash at bank 23,079 33,845 31,412 Assets available for sale - - 937 -------- ------- ------- 67,512 70,941 62,766 -------- ------- ------- Total assets 129,709 115,119 110,878 -------- ------- ------- Current liabilities Trade and other payables 37,146 28,041 22,083 Current tax 2,912 2,707 1,962 -------- ------- ------- 40,058 30,748 24,045 -------- ------- ------- Non-current liabilities Deferred income 74 615 611 Deferred tax liabilities 5,216 4,850 5,030 Retirement benefit obligations 16,025 17,044 16,248 -------- ------- ------- 21,315 22,509 21,889 -------- ------- ------- Capital and reserves attributable to equity shareholders Called up share capital 4,865 4,865 4,865 Share premium account 905 905 905 Own shares held 8 (3,976) (4,010) (4,298) Share options reserve 1,645 1,147 1,416 Retained earnings 64,897 58,955 62,056 -------- ------- ------- 68,336 61,862 64,944 -------- ------- ------- Total equity and liabilities 129,709 115,119 110,878 -------- ------- ------- A.G.BARR p.l.c. Consolidated Cash Flow Statement Restated 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 -------- ------- ------- Operating activities Profit on ordinary activities before tax 10,198 7,991 17,381 Interest receivable (669) (797) (1,557) Interest payable 154 291 583 Depreciation of property, plant and equipment 2,705 2,901 5,756 Share options costs 181 115 299 Gain on sale of property, plant and equipment (1,761) (7) (215) Government grants written back (537) (4) (8) -------- ------- ------- Operating cash flows before movements in working capital 10,271 10,490 22,239 (Increase) / decrease in inventories (1,247) 758 898 Increase in receivables (12,769) (8,012) (1,473) Increase in payables 14,540 5,805 255 Decrease in retirement benefit obligations (223) - (3,031) -------- ------- ------- Cash generated by operations 10,572 9,041 18,888 Tax on profit paid (1,667) (2,373) (4,876) -------- ------- ------- Net cash from operating activities 8,905 6,668 14,012 -------- ------- ------- Investing activities Acquisition of Strathmore (15,347) - - Proceeds on sale of property, plant and equipment 6,597 81 514 Purchase of property, plant and equipment (4,865) (3,595) (12,029) Interest received 669 797 1,557 Interest paid (154) (291) (583) -------- ------- ------- Net cash used in investing activities (13,100) (3,008) (10,541) -------- ------- ------- Financing activities Purchase of own shares (523) (2,718) (3,149) Sale of own shares 528 1,740 1,760 Dividends paid (4,143) (3,795) (5,628) -------- ------- ------- Net cash used in financing activities (4,138) (4,773) (7,017) -------- ------- ------- Net decrease in cash and cash equivalents (8,333) (1,113) (3,546) -------- ------- ------- Cash and cash equivalents at beginning of period 31,412 34,958 34,958 Cash and cash equivalents at end of period 23,079 33,845 31,412 -------- ------- ------- Notes to the Accounts 1. Basis of preparation These interim financial statements do not constitute statutory accounts and are unaudited. A copy of this report is distributed to all registered shareholders of the company and is available for members of the public upon application to the Company Secretary at 1306 Gallowgate, Glasgow G31 4DS and on our corporate website at www.agbarr.co.uk. 2. Accounting policies The interim financial statements have been prepared under the historical cost convention. The accounting policies adopted are consistent with those followed in the preparation of the group's annual financial statements for the year ended 28th January, 2006 with the exception noted below. The statutory financial statements for the year to 28th January, 2006 have been filed with the Registrar of Companies and a copy may be obtained from Companies House. These have been audited and contain an unqualified audit opinion and did not contain a statement under Section 237(2) or Section 237(3) of the Companies Act 1985. Change of accounting policy In the six months to 29th July, 2006 the group changed its accounting policy for assets under construction. Previously the policy was to include assets under construction as capital work in progress included within trade and other receivables. The cost is now included within property, plant and equipment. The impact on the balance sheet has been as follows: July 2005 January 2006 £000 £000 Increase to property, plant and equipment 1,252 7,403 Reduction in trade and other receivables (1,252) (7,403) This change in policy has had no impact on the income statement. 3. Segment information The group's primary basis of segmentation is by geography. For management purposes, the group is currently organised into one business segment being the manufacture, sale and distribution of soft drinks. The group operates predominantly in the U.K., with some worldwide operations. The directors are of the opinion that the group has two reportable geographic segments as defined by IAS 14 Segment Reporting. Geographic segments Total revenue Inter-segment External Profit revenue revenue attributable to equity shareholders £000 £000 £000 £000 £000 £000 ------- ------- -------- ------- -------- ------- 29th July, 2006 U.K. 71,854 153 71,701 14,092 - - Worldwide 483 - 483 124 - - ------- ------- -------- ------- -------- ------- Consolidated 72,337 153 72,184 14,216 - - ------- ------- -------- ------- -------- ------- 30th July, 2005 U.K. 66,044 124 65,920 - 13,704 - Worldwide 370 - 370 - 85 - ------- ------- -------- ------- -------- ------- Consolidated 66,414 124 66,290 - 13,789 - ------- ------- -------- ------- -------- ------- 28th January, 2006 U.K. 128,373 235 128,138 - - 27,953 Worldwide 622 - 622 - - 99 ------- ------- -------- ------- -------- ------- Consolidated 128,995 235 128,760 - - 28,052 ------- ------- -------- ------- -------- ------- Result 14,216 13,789 28,052 Unallocated corporate expenses 5,352 5,627 11,112 Exceptional item (819) 677 533 ------- ------- -------- ------- -------- ------- Operating profit 9,683 7,485 16,407 Finance income 669 797 1,557 Finance costs (154) (291) (583) ------- ------- -------- ------- -------- ------- Profit before tax 10,198 7,991 17,381 Tax 3,059 2,359 5,128 ------- ------- -------- ------- -------- ------- Profit for the period 7,139 5,632 12,253 ------- ------- -------- ------- -------- ------- 4. Exceptional item During the period the group continued with the re-organisation of its sales and logistics facilities in Scotland which will ultimately lead to a consolidated facility at its existing Cumbernauld factory site. This has led to exceptional gains and costs arising in the six months to July 2006. The sale of the Scottish distribution sites resulted in a gain of £1,738,000 which included property at Irvine and Wishaw. These two properties were classed as assets available for sale in the financial statements for the year to 28th January, 2006. Government grants received at the time of the initial property purchases by the group have now been released to the income statement with £536,000 of a credit being recognised as an exceptional item. Previously the grants were released over the expected lifetime of the properties. Reducing the above are redundancy costs of £1,455,000 relating to the site closures and re-organisation of the sales and logistics facilities. 5. Tax charge The interim period tax charge is accrued based on the estimated average annual effective income tax rate of 30% (6 months ended 30th July, 2005: 30%). 6. Acquisition of Strathmore On 1st June, 2006 the group acquired for cash the trade and assets of the Strathmore mineral water business which bottles, distributes and sells spring water and flavoured water products. In the two months to 29th July, 2006 the business contributed operating profit of 0.5m. If the acquisition had occurred on 29th January, 2006, the board estimates that group revenue would have been £76.9m and operating profit thereon before the exceptional item would have been £9.1m for the six months ended 29th July, 2006. The net assets acquired in the transaction and the goodwill arising are as follows: Recognised Fair value Fair value values on acquisition adjustments £000 £000 £000 ----------- -------- -------- Property, plant and equipment 4,993 262 5,255 Intangible assets - 8,000 8,000 Inventories 1,222 - 1,222 Trade receivables 1,370 - 1,370 Trade and other payables (2,264) - (2,264) ----------- -------- -------- 5,321 8,262 13,583 Goodwill arising on acquisition 1,951 ----------- -------- -------- Total consideration, satisfied by cash 15,534 ----------- -------- -------- The consideration included £351,000 of fees relating to the acquisition. The intangible assets recognised are the Strathmore brand with a value of £7.0m and the Strathmore customer relationship valued at £1.0m. The goodwill arising on the acquisition of the business is attributable to the anticipated profitability through the distribution of the products in new markets. Due to the short time between the acquisition and the preparation of these financial statements the figures relating to the fair value adjustments and related goodwill are provisional. 7. Property, plant and equipment Restated Restated 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 -------- ------- ------- At 28th January, 2006 42,335 37,636 37,636 Additions 5,388 3,665 11,691 Assets acquired through acquisition 5,255 - - Transfers to non-current assets held for sale - - (937) Disposals (3,900) (74) (299) Depreciation (2,705) (2,901) (5,756) -------- ------- ------- At 29th July, 2006 46,373 38,326 42,335 -------- ------- ------- The closing balance includes £11,359,000 (July 2005: £1,252,000 ; January 2006: £7,403,000) of assets under construction. 8. Own shares held 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 --------- -------- -------- At 28th January, 2006 4,298 3,100 3,100 Shares purchased 523 2,718 3,149 Proceeds of options exercised (528) (1,740) (1,760) Transfer to retained earnings on option exercise (317) (68) (191) --------- -------- -------- At 29th July, 2006 3,976 4,010 4,298 --------- -------- -------- The shares held in the company were purchased to meet future requirements of the company's employee share schemes. These shares are held at cost. 9. Contingencies and commitments As at As at As at 29.07.06 30.07.05 28.01.06 £000 £000 £000 --------- -------- -------- Commitments for the acquisition of property, plant and equipment 5,155 12,643 5,930 --------- -------- -------- 10. Post balance sheet events The interim dividend of 10.25p per share was approved by the board on 26th September, 2006 and will be paid to shareholders on 27th October, 2006. The ex-div and record dates will be 4th October, 2006 and 6th October, 2006 respectively. 11. Related party disclosures Transactions between the company and its subsidiaries, which are related companies, have been eliminated on consolidation. INDEPENDENT REVIEW REPORT Introduction We have been instructed by the company to review the financial information for the six months ended 29th July, 2006 which comprises consolidated income statement, consolidated balance sheet, consolidated cash flow statement and consolidated statement of recognised income and expense. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing Rules of the Financial Services Authority and for no other purpose. We do not, therefore in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. The accounting policies are consistent with those that the directors intend to use in the next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the U.K.. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 29th July, 2006. Baker Tilly Chartered Accountants Breckenridge House 274 Sauchiehall Street Glasgow G2 3EH 21st September, 2006 This information is provided by RNS The company news service from the London Stock Exchange

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