Interim Results

RNS Number : 9558O

Barr(A.G.) PLC

27 September 2011

 



A.G. BARR p.l.c.

INTERIM RESULTS

A.G. BARR p.l.c., the soft drinks Group which produces and markets some of the U.K.'s leading brands, including IRN-BRU, Rubicon and Strathmore water, announces its interim results for the 6 months ended 30 July 2011.

Key Points

·    Total turnover increased by 4% to £124.0m (2010: £119.2m); quarter two revenue increasing by 5.1%

·    Profit on ordinary activities before tax, excluding exceptional items, was marginally ahead of prior year at £16.2m (2010: £16.0m)

·    Basic earnings per share, excluding exceptional items, increased by 6.9% to 32.44p (2010:30.35p)

·    Free cash flow in the period was £9.7m

·    Net debt reduced to £15.2m; annualised net debt/EBITDA <0.4 times

·    Key brands IRN-BRU, Barr, Rubicon and KA collectively grew 6.0%

·    Intention to invest in increased production capacity in the south of the U.K.

·    Interim dividend of 7.30p per share (2010: 6.75p), an increase of 8.1% on the prior year

Commenting on the results, Chief Executive Roger White said:

"We are pleased to have delivered financial performance in line with our expectations.  This is a particularly positive result given the challenging comparatives we faced in the first half of the year, the relatively poor summer weather, which has impacted the soft drinks market and a competitive market backdrop.

Whilst we remain cautious regarding the second half, given the market context, we are confident that we have a strong programme of activity including further innovation, which should help maintain our growth momentum.

The combination of less demanding comparatives, better cost visibility, a strong programme of brand activity and good sales momentum gives us confidence that, assuming no significant adverse changes in the marketplace, we will meet our expectations for the full year."

27 September 2011

For more information, please contact:

A.G. BARR	Tel: [phone]
Roger White, Chief Executive
Alex Short, Finance Director
College Hill	Tel: [phone]
Justine Warren
Matthew Smallwood

Interim Statement

We are pleased to report solid growth in sales revenue and volume for the 6 months to 30 July 2011.  This growth was achieved in a highly competitive market place and against very demanding prior year comparative sales growth of almost 14%.  Against this backdrop, trading remains in line with market expectations and we remain cautiously optimistic for the second half.

Trading

Total revenue in the 26 week period increased by 4.0% to £124m, with volume growing by 1.4%.  This performance was driven by revenue increases of 2.3% in carbonates and 9.8% in our still brands.

The total take home soft drinks market grew in the 6 month period by 5% in value terms but was flat in volume terms.  Within this performance, carbonates grew volume by 3% and stills volume declined by 3%.  After a strong start to the year, the market weakened in June and the relatively poor weather experienced across the summer months has had a negative impact as we indicated in our trading statement in July.

A.G. BARR's operating margins have been resilient given the impact of increased raw material costs, sales mix and manufacturing inefficiencies in the period.  Although margins are 50 basis points below the same period last year, they are in line with our expectations, reflecting both our actions to manage costs and further investment in brands and sales execution in the period.  Profit before tax, excluding exceptional items, is marginally ahead versus last year at £16.2m (2010: £16.0m), reflecting our forecast performance.

Within the overall market, the level of promotional intensity increased in the period, as brand owners and retailers sought to pass on price increases on the one hand but increased promotional activity to maintain market share on the other.  Our pricing strategy has been designed to minimise cost increases to consumers where possible and to ensure our brands remain good value for money without having to increase our level of price promotion.

Our core brands of IRN-BRU, Rubicon and Barr continue to support and drive our business.

IRN-BRU sales in the same period in the prior year increased by 8%, making comparative growth more of a challenge.  Overall, IRN-BRU sales declined by 1.2% in the 6 month period.  However in the second quarter, sales regained positive momentum and finished that quarter ahead of the prior year.  IRN-BRU sales in the second half are expected to build on this second quarter performance, with strong execution behind our BRU JET promotional mechanic, some exciting new brand innovation and a strong in-store support programme planned.

Our strategy for supporting growth of IRN-BRU, specifically in the north of England, continues to pay dividends, with this geographical area continuing to grow faster than the rest of the market as IRN-BRU establishes itself as a key part of consumers' soft drinks repertoire.

The second year of substantial cricket sponsorship by Rubicon has delivered increased levels of brand awareness and has given us significant opportunities to widen the appeal of the Rubicon brand both to its core consumer base and to a wider general consumer audience.

Sales growth across the Rubicon range remained strong, with 8.8% of revenue growth.  Increases in fruit prices were fully recovered in the period through price increases implemented in the final quarter of 2010.  These pricing changes initiated, in turn, some significant increases in retail pricing which impacted sales growth in some outlets in the first quarter.  However, strong sales execution around our cricket activity helped to regain good growth momentum thereafter.

Within our portfolio, the most impressive performance has once again been our Caribbean brand KA.  The combination of further distribution growth and successful innovation with the launch of KA stills drove growth of 72%, making KA now 4 times the size of Tizer in revenue terms.

Within our carbonates portfolio, the Barr brand continued to drive solid growth, capitalising on growing distribution and a consumer proposition aimed at giving good value for money.  Sales increased by over 10% in the period, with growth biased towards the north of England.

We plan to maintain this focus on our core brands and will continue to invest in the development of our sales execution and brand equity across the second half of the financial year.

We started the 2011/12 financial year well from an operational perspective, with the successful closure, clearance and sale of the Mansfield site, further progress in the investment in manufacturing capacity at Cumbernauld and our supply chain changes of 2010 all fully bedded in.  However as highlighted previously, the late delivery of the final stage of our manufacturing investment at Cumbernauld and challenging customer demand profiles, presented us with some issues from a manufacturing and consequential customer service perspective.  We have worked hard to rectify this and have chosen to source some products from external third party manufacturers; consequentially our operating efficiencies were impacted in the period.  We are now over the most difficult of our challenges but to ensure we return to a high level of customer service we will externally source further, smaller volumes as required.

Capacity Planning and Investment

The business has grown strongly over the past two years bringing forward the need to plan future investments in production capacity to meet specific format demand forecasts and our general growth ambitions.  The board believes that investment in a new production site in the south of the U.K. is now a viable and important next step in our future development.  As such, we will confirm our specific plans in due course but anticipate investing in a new site with canning capacity along with the potential for additional PET capacity.  It is anticipated that this additional facility would come on stream over the course of 2012/13.

Balance Sheet

In the 12 month period our net assets have increased by over 14% from £103.9m to £118.6m.  This was driven by a significant turnaround of our retirement benefit position, moving from a deficit of £7.1m to a "temporary" surplus of £0.8m.  The Group also benefited from the expiry of an interest rate hedge taken out at the time of the Rubicon acquisition and a reduction in the level of borrowing by £10m, despite increased working capital requirements in the form of higher inventory holdings.

Free cash flow of £9.7m was generated in the 6 month period and at the end of July the Group's net debt position has reduced to £15.2m, equating to an annualised net debt/EBITDA position of just 0.38 times.  Leverage and interest cover are very comfortably within covenant levels.

Inventories, although higher than the same time last year, are 8% (£1.6m) lower than the January year end position.  Inventory levels remain relatively high in order to satisfy ongoing customer requirements and a growing turnover base.  The Group has also purchased forward certain commodities in order to secure improved pricing arrangements.  Our inventory holding period is marginally ahead of the same time last year, increasing from an average 56.5 to 56.8 days.

Capital expenditure in the 6 month period amounted to £3.1m.  We are now into the final commissioning stages of the Cumbernauld investment programme, having completed installation of pasteurising equipment and we are now focussing on the final stages of packing and automated pallet building equipment.  The level of capital expenditure is broadly flat on the same period last year and reflects a blend of normal replacement, project, information technology and commercial asset spend.

Overall, our annualised Return on Capital Employed has increased from 20.7% to 21.5%.

Dividend

The continued consistent performance and satisfactory financial position of the Group has given the board confidence to declare an interim dividend of 7.30 pence per share, payable on 21 October 2011.  This is an increase of 8.1% on the prior year.

Current Trading and Outlook

The uncertain economic outlook and the mixed weather have contributed to a difficult summer in both U.K. retailing and consumer goods.  To date, the soft drinks market has continued to grow, despite the economic headwinds but the summer weather has had a negative impact.  Whilst we expect general trading to remain challenging over the coming months, we do however believe A.G. BARR can continue to trade well throughout this period, benefiting from significantly less strenuous second half comparatives, strong cost control, excellent innovation and a full programme of sales activity across the second half.

Sales in the first few weeks of the second half are in line with our plans and give us confidence that we will meet our full year expectations assuming no significant adverse changes in the market.

Ronald G. Hanna         Roger A. White

CHAIRMAN              CHIEF EXECUTIVE

27 September 2011

Principal Risks and Uncertainties

There is an ongoing process in place for identifying, evaluating and managing the significant risks faced by the Group, which has operated throughout the financial period. This process involves regular assessments 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 manage the risk.

The Group's risk management framework is designed to support this process and is the responsibility of the Finance Director. This framework governs the management and control of both financial and non-financial risks.

Internal audit is undertaken by an independent firm of chartered accountants 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 period the Audit Committee has reviewed reports covering the work undertaken as part of the annual internal audit plan. This has included assessment of the general control environment, identification of control weaknesses, quantification of any associated risk together with a review of the status of actions to address weaknesses and 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.

A.G. BARR 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 performance. Changing consumer preferences are reviewed annually by the board with reference to external research.

Within the Group there is a clearly defined and communicated Corporate Social Responsibility Policy. Quality standards, both at our sites and those of suppliers, are well defined, implemented and measured.

The Group operates 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 proactively engages with the relevant authorities including the British Soft Drinks Association and the General Counsel of Scotland to ensure it fully participates in the future development of and compliance with legislation.

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. Intellectual property rights associated with current and future brands are proactively protected by our legal team, through trademark registration and legal enforcement when required.

The Group's activities also expose it to a variety of financial risks which include market risk (including foreign exchange risk, interest rate risk and commodity price risk), credit risk and liquidity risk. Financial risks are reviewed and managed by the Treasury Committee whose remit and authority levels are set by the board.

The Treasury Committee's remit focuses on the unpredictability of financial markets and seeks to minimise potential related adverse effects on the Group's financial performance.

In addition to financial risks the Group's results could be materially affected by:

·       A decline in the sales of certain key brands

·       Adverse publicity in relation to the Group or its brands

·       Consolidation or reduction of the customer base

·       Failure or unavailability of the Group's operational infrastructure

·       Interruption in, or change in the terms of, the Group's supply of packaging and raw materials

·       Failure in IT systems

·       Inability to protect the intellectual property rights associated with current and future brands

·       Litigation or changes in legislation including changes in accounting principles and standards

·       Changes in consumer preferences, perception or purchasing behaviour

·       Adverse economic conditions

·       Adverse weather conditions

·       Changes in regulatory requirements

·       Actions taken by customers

·       Actions taken by competitors

Consolidated Condensed Income Statement

	6 months ended 30 July 2011			6 months ended 31 July 2010
	Before exceptional items	Exceptional items	Total	Before exceptional items	Exceptional items	Total
	£000	£000	£000	£000	£000	£000
Revenue	123,953	-	123,953	119,207	-	119,207
Cost of sales	(61,647)	(522)	(62,169)	(58,106)	-	(58,106)
Gross profit	62,306	(522)	61,784	61,101	-	61,101
Net operating expenses	(45,601)	619	(44,982)	(44,349)	(590)	(44,939)
Operating profit	16,705	97	16,802	16,752	(590)	16,162
Finance income	42	-	42	26	-	26
Finance costs	(551)	-	(551)	(781)	-	(781)
Profit before tax	16,196	97	16,293	15,997	(590)	15,407
Tax on profit	(3,754)	(26)	(3,780)	(4,371)	165	(4,206)
Profit attributable to equity holders	12,442	71	12,513	11,626	(425)	11,201
Earnings per share
Basic earnings per share	32.44p	0.18p	32.62p	30.35p	(1.11)p	29.24p
Diluted earnings per share	32.25p	0.18p	32.43p	30.10p	(1.10)p	29.00p

Ex Div date: 5/10/11

Record Date: 7/10/11

Consolidated Condensed Income statement

	Year ended 29 January 2011
	Before exceptional items	Exceptional items	Total
	£000	£000	£000
Revenue	222,366	-	222,366
Cost of sales	(107,656)	(331)	(107,987)
Gross profit	114,710	(331)	114,379
Net operating expenses	(82,016)	(825)	(82,841)
Operating profit	32,694	(1,156)	31,538
Finance income	321	-	321
Finance costs	(1,423)	-	(1,423)
Profit before tax	31,592	(1,156)	30,436
Tax on profit	(8,084)	233	(7,851)
Profit attributable to equity holders	23,508	(923)	22,585
Earnings per share
Basic earnings per share	61.24p	(2.40)p	58.84p
Diluted earnings per share	60.90p	(2.39)p	58.51p

Consolidated Condensed Statement of Comprehensive Income

		6 months ended 30 July 2011		6 months ended 31 July 2010		Year ended 29 January 2011
		£000		£000		£000
Profit after tax		12,513		11,201		22,585
Other comprehensive income
Actuarial (loss)/gain recognised on defined benefit pension plans		(3,641)		(2,400)		4,598
Effective portion of changes in fair value of cash flow hedges		382		388		573
Deferred tax movements on items taken direct to equity		754		1,044		(1,350)
Other comprehensive income for the period, net of tax		(2,505)		(968)		3,821
Total comprehensive income attributable to equity holders of the parent		10,008		10,233		26,406

Consolidated Condensed Statement of Changes in Equity

	Share capital	Share premium account	Share options reserve	Cash flow hedge reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
At 29 January 2011	4,865	905	1,981	(382)	109,338	116,707
Cash flow hedge - recognition of fair value	-	-	-	382	-	382
Actuarial loss on defined benefit pension plans	-	-	-	-	(3,641)	(3,641)
Deferred tax on items taken direct to equity	-	-	(47)	-	801	754
Profit for the period	-	-	-	-	12,513	12,513
Total comprehensive income for the period	-	-	(47)	382	9,673	10,008
Company shares purchased for use by employee benefit trusts	-	-	-	-	(2,449)	(2,449)
Proceeds on disposal of shares by employee benefit trusts	-	-	-	-	1,057	1,057
Recognition of share-based payment costs	-	-	453	-	-	453
Transfer of reserve on share award	-	-	(499)	-	499	-
Dividends paid	-	-	-	-	(7,163)	(7,163)
At 30 July 2011	4,865	905	1,888	-	110,955	118,613
At 31 January 2010	4,865	905	1,595	(955)	94,099	100,509
Cash flow hedge - recognition of fair value	-	-	-	388	-	388
Actuarial loss on defined benefit pension plans	-	-	-	-	(2,400)	(2,400)
Deferred tax on items taken direct to equity	-	-	577	-	467	1,044
Profit for the period	-	-	-	-	11,201	11,201
Total comprehensive income for the period	-	-	577	388	9,268	10,233
Company shares purchased for use by employee benefit trusts	-	-	-	-	(1,705)	(1,705)
Proceeds on disposal of shares by employee benefit trusts	-	-	-	-	874	874
Recognition of share-based payment costs	-	-	470	-	-	470
Transfer of reserve on share award	-	-	(378)	-	378	-
Dividends paid	-	-	-	-	(6,450)	(6,450)
At 31 July 2010	4,865	905	2,264	(567)	96,464	103,931

Consolidated Condensed Statement of Changes in Equity

	Share capital	Share premium account	Share options reserve	Cash flow hedge reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000
At 31 January 2010	4,865	905	1,595	(955)	94,099	100,509
Cash flow hedge - recognition of fair value	-	-	-	573	-	573
Actuarial gain on defined benefit pension plans	-	-	-	-	4,598	4,598
Deferred tax on items taken direct to equity	-	-	82	-	(1,432)	(1,350)
Profit for the year	-	-	-	-	22,585	22,585
Total comprehensive income for the period	-	-	82	573	25,751	26,406
Company shares purchased for use by employee benefit trusts	-	-	-	-	(4,197)	(4,197)
Proceeds on disposal of shares by employee benefit trusts	-	-	-	-	2,078	2,078
Recognition of share-based payment costs	-	-	956	-	-	956
Transfer of reserve on share award	-	-	(652)	-	652	-
Dividends paid	-	-	-	-	(9,045)	(9,045)
At 29 January 2011	4,865	905	1,981	(382)	109,338	116,707

Consolidated Condensed Statement of Financial Position

	As at 30 July 2011	As at 31 July 2010	As at 29 January 2011
	£000	£000	£000
Non-current assets
Intangible assets	74,744	75,912	74,940
Property, plant and equipment	54,705	55,439	58,570
Financial instruments	-	39	-
Retirement benefit surplus	800	-	2,092
	130,249	131,390	135,602
Current assets
Inventories	19,205	17,983	20,809
Trade and other receivables	48,822	50,416	34,733
Financial instruments	204	61	219
Cash and cash equivalents	4,815	9,769	8,411
Assets classified as held for sale	2,400	2,400	2,400
	75,446	80,629	66,572
Total assets	205,695	212,019	202,174
Current liabilities
Borrowings	5,000	10,000	5,000
Trade and other payables	48,184	51,146	39,562
Financial instruments	49	956	416
Provisions	49	1,783	777
Current tax	3,799	4,250	3,920
	57,081	68,135	49,675
Non-current liabilities
Borrowings	14,799	19,777	19,814
Deferred income	60	72	72
Financial instruments	-	81	-
Deferred tax liabilities	15,142	12,942	15,906
Retirement benefit obligations	-	7,081	-
	30,001	39,953	35,792
Capital and reserves attributable to equity holders
Called up share capital	4,865	4,865	4,865
Share premium account	905	905	905
Share options reserve	1,888	2,264	1,981
Cash flow hedge reserve	-	(567)	(382)
Retained earnings	110,955	96,464	109,338
	118,613	103,931	116,707
Total equity and liabilities	205,695	212,019	202,174

Consolidated Condensed Cash Flow Statement

		6 months ended 30 July 2011		6 months ended 31 July 2010		Year ended 29 January 2011
		£000		£000		£000
Operating activities
Profit before tax		16,293		15,407		30,436
Adjustments for:
Interest receivable		(42)		(26)		(321)
Interest payable		551		781		1,423
Depreciation of property, plant and equipment		3,579		3,561		7,325
Fair value adjustment to financial instruments		64		328		(192)
Amortisation of intangible assets		196		196		392
Impairment of intangible assets		-		308		1,084
Share options costs		453		470		956
Gain on sale of property, plant and equipment		(210)		(62)		(6)
Government grants written back		(12)		(4)		(4)
Operating cash flows before movements in working capital		20,872		20,959		41,093
Decrease/ (increase) in inventories		1,604		(1,983)		(4,893)
Increase in receivables		(14,089)		(20,259)		(4,576)
Increase in payables		8,123		19,058		6,038
Net decrease in retirement benefit obligation		(2,349)		(1,174)		(3,105)
Cash generated by operations		14,161		16,601		34,557
Tax on profit paid		(3,911)		(3,838)		(7,243)
Net cash from operating activities		10,250		12,763		27,314
Investing activities
Purchase of property, plant and equipment		(3,082)		(3,067)		(9,840)
Proceeds on sale of property, plant and equipment		3,463		142		281
Interest received		12		31		48
Net cash generated by investing activities		393		(2,894)		(9,511)
Financing activities
New loans received		-		7,000		12,000
Loans repaid		(5,000)		(10,000)		(20,000)
Bank arrangement fees paid		(60)		-		-
Purchase of Company shares via employee benefit trusts		(2,449)		(1,705)		(4,197)
Proceeds from disposal of Company shares via employee benefit trusts		1,057		874		2,078
Dividends paid		(7,163)		(6,450)		(9,045)
Interest paid		(624)		(745)		(1,154)
Net cash used in financing activities		(14,239)		(11,026)		(20,318)
Net decrease in cash and cash equivalents		(3,596)		(1,157)		(2,515)
Cash and cash equivalents at beginning of period		8,411		10,926		10,926
Cash and cash equivalents at end of period		4,815		9,769		8,411

1.   General information

The Company is a public limited company incorporated and domiciled in the U.K. The address of its registered office is A.G. BARR p.l.c., Westfield House, 4 Mollins Road, Cumbernauld G68 9HD.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 29 January 2011 were approved by the board of directors on 28 March 2011 and delivered to the Registrar of Companies. The comparative figures for the financial year ended 29 January 2011 are an extract of the Company's statutory accounts for that year. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.

This condensed consolidated interim financial information is unaudited but has been reviewed by the Company's Auditors.

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.  The performance of the operating segments is assessed by reference to their gross profit before exceptional items.

All of the assets 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 consolidated condensed statement of financial position has been disclosed for any of the periods presented.          

6 months ended 30 July 2011
	Carbonates	Still drinks and water	Other	Total
	£000	£000	£000	£000
Total revenue	93,913	29,757	283	123,953
Gross profit before exceptional items	52,984	9,073	249	62,306
6 months ended 31 July 2010
	Carbonates	Still drinks and water	Other	Total
	£000	£000	£000	£000
Total revenue	91,814	27,101	292	119,207
Gross profit before exceptional items	52,704	8,153	244	61,101
Year ended 29 January 2011
	Carbonates	Still drinks and water	Other	Total
	£000	£000	£000	£000
Total revenue	172,316	49,420	630	222,366
Gross profit before exceptional items	98,932	15,235	543	114,710

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 and other soft drink related items such as water cups.

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

3.   Operating profit

The following items have been charged/ (credited) to operating profit during the period:

	6 months ended 30 July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
	£000	£000	£000
Inventory write down	221	87	464
Foreign exchange (gains)/losses recognised	(266)	221	199
Fair value movements in financial instruments	64	328	(192)

The following exceptional items have been charged/ (credited) to operating profit during the period:

Net redundancy costs for production site closure	62	-	-
Dual running costs	460	-	331
Total cost of sales	522	-	331
Dual running costs	13	327	103
Release of provision no longer required	(63)
Redundancy cost for Group reorganisation	-	51	136
Net Redundancy (cost release) / provision for production site closure	-	(96)	(157)
Gain on disposal of property and plant related to production site closure	(72)	-	-
Total distribution costs	(122)	282	82
Curtailment of retirement benefit scheme	(497)	-	(341)
Impairment of intangible assets	-	308	1,084
Total administration costs	(497)	308	743
Net exceptional (credits)/charges	(97)	590	1,156

Exceptional costs for the half year to 30 July 2011 are dual running, redundancy and travel costs relating to the completion of the Mansfield site closure. These have been offset by a net gain on disposal of assets at this site and the release of provisions no longer required. In addition, as a result of the final site closure, a further curtailment in the Group 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 £497,000.

The exceptional items for the year to 29 January 2011 related to the impairment of three intangible assets.  In addition there were costs relating to the closure of Mansfield and the reorganisation of the Group. These included dual running costs in the lead up to the closure of the Mansfield distribution operation offset by an exceptional pension curtailment credit and net release of redundancy provisions.

4.   Tax on profit

The interim period tax charge is accrued based on the estimated average annual effective income tax rate of 23.2% (six months ended 31 July 2010: 27.3%; year ended 29 January 2011: 25.8%).

The March 2011 budget announced changes to the main corporate tax rate.  A decrease in the tax rate to 26% was substantively enacted for the purposes of IAS 12 Income taxes on 29 March 2011.  The 2011 budget also proposed a further 1% reduction to 25% from 1 April 2012. This amendment received its third reading in the House of Commons on 5 July 2011 resulting in the decrease in the tax rate to 25% being substantively enacted for the purposes of IAS 12. Further reductions to the main rate are proposed, to reduce the rate by 1% per annum to 23% by 1 April 2014. As the reduction in the rate from 28% to 25% had been enacted at the statement of financial position date the effect of this rate change is reflected in calculating the estimated average annual effective income tax rate.

The proposed remaining two reductions of the main rate of corporation tax, by 1% per year to 23% by 1 April 2014, are expected to be enacted separately each year.

These changes had not been substantively enacted at the statement of financial position date and have therefore not been recognised in these financial statements. It has not been possible to quantify the impact of the changes in these rates.

5.   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.

	6 months ended 30 July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
Profit attributable to equity holders of the Company (£000)	12,513	11,201	22,585
Weighted average number of ordinary shares in issue	38,362,812	38,307,258	38,385,598
Basic earnings per share (pence)	32.62	29.24	58.84

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.

	6 months ended 30 July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
Profit attributable to equity holders of the Company (£000)	12,513	11,201	22,585
Weighted average number of ordinary shares in issue	38,362,812	38,307,258	38,385,598
Adjustment for share options	220,537	323,481	216,127
Diluted weighted average number of ordinary shares in issue	38,583,349	38,630,739	38,601,725
Diluted earnings per share (pence)	32.43	29.00	58.51

6.   Intangible assets

	6 months ended 30 July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
	£000	£000	£000
Opening net book value	74,940	76,416	76,416
Amortisation	(196)	(196)	(392)
Impairment	-	(308)	(1,084)
Closing net book value	74,744	75,912	74,940

The amortisation charge for the six months to 30 July 2011 represents £126,000 (six months ended 31 July 2010: £126,000; year ended 29 January 2011: £253,000) of charges for the Rubicon customer list and £70,000 (six months ended 31 July 2010: £70,000; year ended 29 January 2011: £139,000) for the amortisation of the Strathmore customer list.

The impairment charge for the six months to 31 July 2010 represents the impairment of the Vitsmart brand and related goodwill.  During the six months to 31 July 2010 the directors undertook a strategic review and decided to remove the brand from the market.  As the product had no foreseeable future cash flows, the related goodwill of £18,000 and brand of £290,000 were fully impaired. 

During the second half of the year to 29 January 2011 a strategic decision was made to remove the Taut brand from the sports and energy drinks market for the foreseeable future. Goodwill of £318,000 recognised at the date of acquiring Taut (U.K.) Limited was fully written off. 

Neither of the brands had any other assets associated with them that require an impairment review. 

In the second half of the year to 29 January 2011 the water rights A.G. BARR p.l.c. holds for the use of the spring for Findlays water were written down by £458,000 to the recoverable value of £1.  The impairment arose following declining volumes in the sales of Findlays water.

All of these impairments were treated as exceptional costs.

7.   Property, plant and equipment

	6 months ended 30  July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
	£000	£000	£000
Opening net book value	58,570	55,902	55,902
Additions	2,967	3,187	10,268
Disposals	(3,253)	(89)	(275)
Depreciation	(3,579)	(3,561)	(7,325)
Closing net book value	54,705	55,439	58,570

The closing balance includes £1,034,000 (as at 31 July 2010: £3,641,000; as at 29 January 2011: £1,922,000) of assets under construction.

8.   Financial instruments

Current assets of £204,000 (at 31 July 2010:  £61,000; 29 January 2011: £219,000) relate to foreign exchange forward contracts with a maturity of less than 12 months.

The financial instrument non-current asset at 31 July 2010 of £39,000 included an interest rate swaption and foreign exchange forward contracts with maturity date more than 12 months away.

Both current and non-current assets are classified as assets at fair value through profit and loss. 

Current liabilities of £49,000 represent foreign exchange forward contracts (classified at fair value through the profit and loss account).  At 31 July 2010 and 29 January 2011 the values were £956,000 and £416,000 respectively. At these dates the value represented both foreign exchange forward contracts and an interest rate hedge which was classified as a derivative used for hedging. The interest rate hedge expired on 29 July 2011.

The non-current liability of £81,000 at 31 July 2010 related to foreign exchange forward contracts with maturity more than 12 months away.  These are also classified at fair value through the profit and loss account. 

9.   Assets classified as held for sale

Assets classified as held for sale represent the Atherton production site closed during the year to 26 January 2008.  The land and buildings qualify as an asset classified as held for sale. 

10. Provisions

	6 months ended 30 July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
	£000	£000	£000
Opening provision	777	1,962	1,962
Provision recognised in the period	14	63	72
Provision utilised during the period	(671)	(146)	(1,071)
Provision released during the period	(71)	(96)	(186)
Closing provision	49	1,783	777

The closing provision balance at 30 July 2011 relates to the remaining expected employee termination costs relating to the closure of the Atherton and Mansfield production sites.

11. Borrowings and loans

Movements in borrowings and loans are analysed as follows:

	6 months ended 30 July 2011	6 months ended 31 July 2010	Year ended 29 January 2011
	£000	£000	£000
Opening loan balance	25,000	33,000	33,000
Borrowings made	-	7,000	12,000
Repayments of borrowings	(5,000)	(10,000)	(20,000)
Closing loan balance	20,000	30,000	25,000
Unamortised arrangement fee	(201)	(223)	(186)
Closing loan balance	19,799	29,777	24,814

During the six months to 30 July 2011 the Group successfully negotiated a three year revolving credit facility which expires in March 2014. The facility is in addition to a five year facility taken at the time of the Rubicon acquisition which expires in July 2013.

The Group has sufficient headroom to enable it to meet the covenants on its existing borrowings. 

There are sufficient working capital and undrawn funding facilities available to meet the Group's ongoing requirements

The closing balance of £19.8m is split between current liabilities of £5m and non-current liabilities

of £14.8m on the statement of financial position at 30 July 2011.

12. Retirement benefit surplus/obligations

The surplus on the defined benefit retirement scheme has decreased by £1.292m since 29 January 2011.

The key financial assumptions used to value the liabilities at 30 July 2011, 31 July 2010 and 29 January 2011 were as follows:

	As at 30 July 2011	As at 31 July 2010	As at 29 January 2011
	%	%	%
Discount rate	5.50	5.40	5.70
Expected return on scheme assets	6.42	6.42	6.42
Salary inflation	4.75	4.45	4.75
Price inflation	3.50	3.20	3.50

The change in the discount rate has resulted in approximately £2.6m of an increase in the liability. In addition there has been a decrease in the asset value of the defined benefit retirement scheme of £1.0m.  The changes in valuation have been partially offset by an ongoing deficit funding programme, with a total of £2m of contributions paid in the six months to 30 July 2011.

13. Movements in Company shares held by employee benefit trusts

During the six months to 30 July 2011 the employee benefit trusts of the Group acquired 187,481 (six months to 31 July 2010: 165,688; year to 29 January 2011: 375,020) of the Company's shares.  The total amount paid to acquire the shares has been deducted from shareholders' equity and is included within retained earnings.  At 30 July 2011 the shares held by the Company's employee benefit trusts represented 567,226 (31 July 2010: 649,405: 29 January 2011: 552,849) shares at a purchased cost of £6,321,122 (31 July 2010: £4,608,958; 29 January 2011: £5,465,821).

173,104 (six months to 31 July 2010: 123,321; year to 29 January 2011: 429,218) shares were utilised in satisfying share options from the Company's employee share schemes during the same period.

The related weighted average share price at the time of exercise for the six months to 30 July 2011 was £12.65 (six months to 31 July 2010: £11.90; year to 29 January 2011: £11.90) per share.

14. Events occurring after the reporting period

The interim dividend of 7.30p per share was approved by the board on 27 September 2011 and will be paid on 21 October 2011 to shareholders on record on 7 October 2011. 

The assets classified as held for sale in the statement of financial position represents the Atherton site.  It was sold on 8 August 2011 at a value comparable to its carrying value on the statement of financial position.  The resulting proceeds and gain on disposal will be recognised in the financial statements for the year to 28 January 2012.

 

END

 

 

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