2019 Annual Report and Notice of AGM

RNS Number : 3542W

Britvic plc

10 December 2019

 

Britvic plc ("Britvic", the "Company" or the "Group")

10 December 2019

2019 ANNUAL REPORT & NOTICE OF ANNUAL GENERAL MEETING

Following the release on 27 November 2019 of the Group's Preliminary Results Announcement for the 52 weeks to 29 September 2019, and in compliance with Listing Rule 9.6.1, the Company has today submitted the following documents to the UK Listing Authority, and they will shortly be available for inspection at the National Storage Mechanism which is located at www.morningstar.co.uk/uk/NSM.  

·    Annual Report and Accounts 2019.

·    Notice of the Annual General Meeting of the Company, to be held on Friday 31 January 2020 at 11.00am at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ.

·    Proxy form for the 2020 AGM.

The Annual Report and Accounts 2019 is available to view or download in pdf format from the Company's website at www.britvic.com/annualreport.

The Notice of Meeting is available to view or download in pdf format from the Company's website at www.britvic.com/agm.

A condensed set of Britvic plc financial statements and information on important events that have occurred during the year and their impact on the financial statements were included in the Company's preliminary announcement on 27 November 2019. That information, together with the information set out below which is extracted from the Annual Report and Accounts 2019, constitute the requirements of DTR 6.3.5 which are to be communicated via a RIS in unedited full text.  This announcement is not a substitute for reading the full Annual Report and Financial Statements.  Page and note references in the text below refer to page numbers in the Annual Report and Accounts 2019.

Jonathan Adelman

Company Secretary

Appendix A

Principal risks and uncertainties

The principal risks and uncertainties relating to the Company are set out on pages 35 - 38 of the Britvic Annual Report and Accounts 2019. The following is extracted in full and unedited text from the Britvic Annual Report and Accounts 2019.

The table below sets out the principal risks faced by the company, the link to the company's strategies, movement in the risk score, examples of relevant controls, mitigating factors, and recent developments. The company is exposed to a wide range of other risks in addition to those listed.

Alignment to strategy key:

G: Generate profitable growth in our core markets

R: Realise global opportunities in kids, family and adult categories

C: Continue to step-change our business capability

B: Build trust and respect in our communities

Consumer preference: Innovation

Principal risk

Failure to successfully evolve our portfolio to take advantage of growth categories and/or reinvent our core brands to meet consumer needs.

Risk score movement from the prior year: Decreased.

Alignment to strategy: G, R, B

Risk description

Consumer preferences, tastes and behaviours change over time and differ between the markets in which we operate. As part of this, the consumer's desire for healthier choices and premiumisation are significant trends. Our ability to anticipate these trends, innovate and ensure the relevance of our brands is critical to our competitiveness in the market place and our performance.

Controls and mitigating activities

·    We have a broad portfolio of products across a number of sub-categories and markets to increase coverage of consumer trends

·    Continuous assessment of consumer/customer trends, insight and behaviours in order to anticipate changes in preferences and match our offering to these trends

·    Every period, the Category Board meets to oversee the overall Marketing & Innovation pipeline. The Category Board has visibility and oversight on project progress, resourcing and spend

·    Ongoing prioritisation exercise underway to ensure that the innovation pipeline is balanced between long-term and more immediate opportunities

2019 developments

·    92% of our innovation in GB and Ireland was in low or no added sugar drinks this year

·    We refreshed our Tango brand with three new sugar free flavours, a new packaging design, supported by a marketing campaign

·    Our premium adult mixer brand, LEC, grew its presence to nearly 80 cities in 29 countries

Health Concerns

Principal risk

Failure to respond to growing health concerns of key stakeholders, from public health bodies and government officials.

Risk score movement from the prior year: No change.

Alignment to strategy: G, R, B

Risk description

There is a high and ever increasing level of media and government scrutiny on health and obesity in all of the markets we operate in, highlighted in the UK by the potential introduction of regulation over HFSS products. It is important that we continue to take a leadership position on health issues.

Controls and mitigating activities

·    We have a wide range of soft drinks, many of which are low or no sugar which means we are well placed to take advantage of the consumer's increased demand for healthier products

·    Ongoing evaluation and development of the brand portfolio and innovation pipeline; our innovation pipeline is weighted towards lower sugar or nutritionally enhanced brands

·    We work closely with non-government organisations and trade associations in our markets to fully participate in the debate and help shape solutions

2019 developments

·    We exceeded our 2020 calorie reduction goal a year early, achieving a 22% reduction in average calories per 250ml serve vs 2013

·    This year saw the start of a strategic partnership with Diabetes UK, through which we supported the delivery of over 1,400 'Make the Grade' packs to help schools better care for children with diabetes

·    Commercial assessment of the impact of the potential introduction of regulation on advertising and sales of HFSS products

·    92% of Britvic's total GB portfolio by volume and 84% of Britvic's volume in Ireland is now exempt/below the levy/tax threshold (including PepsiCo)

Retailer landscape and customer relationships

Principal risk

We may not be able to maintain strong relationships with our key customers or respond to changes in the retailer landscape (e.g. consolidation).

Risk score movement from the prior year: No change.

Alignment to strategy: G, R, C

Risk description

Maintaining strong relationships with our existing customers and building relationships with new customers and technology-enabled channels is critical for our brands to be readily available and well presented to our consumers. A failure to do this may impact our ability to obtain competitive pricing and trade terms and/or the availability and presentation of our brands.

Controls and mitigating activities

·    We operate across many different customer channels and markets and continuously monitor customer performance and trends

·    We develop joint business plans with customers that include investment and activation plans

·    We have capabilities in the soft drinks category which enable us to find new ways to improve customer performance and enhance our relationships

2019 developments

·    Continued to strengthen our position in the licensed and leisure channel, including extending our relationship with Mitchells & Butlers

·    Continued to prepare as necessary where consolidation may occur, for example ahead of the now unsuccessful Asda/Sainsbury's merger

·    Implementation of the SDIL in GB and SSDT in Ireland successfully embedded in 'business-as-usual' processes

Third party relationships

Principal risk

Partnerships may not be renewed or are renewed on less favourable terms.

Risk score movement from the prior year: No change.

Alignment to strategy: G, R, C

Risk description

We currently bottle and co-market a number of PepsiCo products in GB and Ireland, including 7UP and Pepsi. Additionally we have a relationship with a number of partners to grow our family, adult and kids brands outside of our core markets. Our partnership with PepsiCo and distributors and franchisees is an important part of our business and delivery of our strategy going forward.

Controls and mitigating activities

·    Robust governance and management of relationship with PepsiCo and other partners

2019 developments

·    Pepsi and Pepsi MAX have gained more share of the cola market in 2019 in GB. This continues our strong performance, which we have been driving for well over a decade

·    Continued success with the Pepsi MAX Taste Challenge which saw 65% of responses choose Pepsi MAX over its rivals

·    ARTO LifeWTR was jointly launched in the UK by PepsiCo and Britvic in May 2019. This premium water showcases the work of emerging local artists

Supply chain     

Principal risk

Supplier failure, market shortage or an adverse event in our supply chain impacts sourcing of raw materials or the cost of our products is significantly affected by commodity price movements.

Risk score movement from the prior year: Decreased.

Alignment to strategy: G, R, C, B

Risk description

Our business depends on purchasing a wide variety of products and services, efficient manufacturing and distribution processes. Brexit presents a specific risk which is explored in further detail in the 2019 developments below.

Controls and mitigating activities

·    Flexibility in being able to manufacture key products at multiple sites and strong relationships with contract packers to support business interruption

·    We have robust supplier strategy, selection, monitoring and management processes

·    We monitor market conditions for commodities and, where appropriate, hedge our contractual positions

·    Externally certified management systems across the supply chain

2019 developments

·    The GB supply chain investment programme has improved the flexibility and resilience of our supply chain. Over the past year, this programme has moved from the build phase through commissioning new lines and has now moved into business as usual

·    At Rugby we have opened a new fully automated warehouse and are installing a combined heat and power plant to increase capacity

·    We have worked closely with our suppliers to understand their level of preparedness, reviewed supply alternatives, explored tariff mitigation opportunities and increased the level of raw materials held in the run up to the key Brexit deadlines in both March and October 2019. We will continue to manage any changes as a result of Brexit through the Brexit Steering Committee

Sustainability and environment

Principal risk

Climate change presents a risk to our ability to source, manufacture and market our drinks. The increased focus from all stakeholders (governments, customers and consumers) on sustainability means there is increased risk of regulation on our packaging, and increased requirements to source sustainably and appropriately report on the impact of a changing climate.

Risk score movement from the prior year: No change.

Alignment to strategy: G, R, C, B

Risk description

Increasing regulatory requirements and growing societal pressure with regards to packaging (plastics in particular) may present a financial and/or reputational risk to our existing packaging portfolio and impact upon our ability to market our products. In addition, climate change presents risks, operationally, financially and reputationally, across the business from reduced stock availability to supply interruption.

Controls and mitigating activities

·    Within our A Healthier Everyday sustainability programme we make environmental commitments, including carbon emission reductions, water savings and reducing the environmental impact of our packaging

·    We have externally certified management systems in place to monitor and reduce the environmental impact of our operations and ensure compliance with environmental legislation

·    We were a founding signatory to the UK Plastics Pact and 100% of our cans, glass and PET bottles are recyclable in the UK

·    Through our trade associations and directly, we continue to proactively engage with government on the feasibility of a deposit return scheme and other actions to increase recycling and reduce littering

2019 developments

·    In 2019 we switched our grid-sourced manufacturing electricity in GB to 100% renewable, joining Ireland and Brazil which are already sourcing green electricity

·    We committed to setting a 1.5°C-aligned science-based carbon reduction target

·    We removed nearly 646 tonnes of primary plastic in 2019

·    Established the ESG Committee, with key representatives from HR, Risk, Supply Chain, Corporate Relations and Health and Safety teams to govern our response to this risk

·    Working on packaging alternatives so we can adhere to impending regulation, across our markets, for example on plastic straws (outside of GB&I) and recycled plastic requirements

International expansion

Principal risk

Failure to grow our business internationally in line with strategic aims due to the risks associated with start-up profitability (new markets and new brands) and regulations.

Risk score movement from the prior year: No change.

Alignment to strategy: R, C, B

Risk description

To achieve our strategy of growing internationally, it is important that we have the appropriate governance, systems and processes in place and that our brand propositions respond appropriately to local consumer preferences.

Controls and mitigating activities

·    Strategic plan in place for international business unit built on Global Premium Adult and foundation channels

·    We carry out extensive due diligence prior to entering a new market

·    Monitoring of regulations (current and proposed or future changes)

2019 developments

·    In Brazil we continue to look for growth in core and new brands against a backdrop of improving macro conditions

·    We have closed our multi-pack Fruit Shoot business in the US to focus on growth opportunities, such as with LEC in the US and Teisseire in Benelux

Quality of our products and the health and safety of our people

Principal risk

Risk that a faulty or contaminated product, either through malicious contamination, human error or equipment failure, is supplied to the market.

Risk associated with the safe management of employees, contractors and visitors when working on Britvic sites and when working or travelling on behalf of Britvic or on customer premises.

Risk score movement from the prior year: No change.

Alignment to strategy: G, R, C, B

Risk description

The quality of our products is of the utmost importance to us and it is essential that we manage product quality and integrity.

Controls and mitigating activities

·    We have robust quality management standards applied and rigorously monitored

·    Where incidents do occur, we have a clear Incident Management Policy and conduct annual scenario testing across all markets

·    We have supplier assurance and management processes

·    We have dedicated central teams to oversee quality and supplier assurance, working closely with the business units

·    External compliance and system audits performed regularly through accredited bodies

2019 developments

·    Rolled out a new reporting tool to help monitor and maintain quality, safety and environmental standards across all our sites

·    Evolved management systems and quality processes to reflect the new technology in the GB supply chain

·    Ongoing support to sites from Quality and Health and Safety teams involved in the BCP

·    Conducted incident management training with the Brazilian senior management team

Legal and Regulatory

Principal risk

Non-compliance with local laws or regulations or breach of our internal policies and standards.

Risk score movement from the prior year: Increased.

Alignment to strategy: G, R, C, B

Risk description

Britvic is subject to a wide range of legislation, regulation, guidance and codes of practice in areas such as labelling, packaging, marketing, advertising, safety, environment, competition, data privacy, ethical business, anti-bribery and corruption, and tax. Failure to comply with such requirements could have a significant impact on our reputation and/or incur financial penalties.

Controls and mitigating activities

·    Britvic's key global policies, including our Code of Conduct, are rolled out to new joiners and training is performed at regular intervals, such as competition law training for commercial teams

·    A Speak-Up Code operates across the business enabling reporting of breaches of regulation and company policy via an independent third party

·    We monitor processes to ensure compliance with all relevant legislation and regulations

·    We work closely with our external advisors and the regulators, government bodies and trade associations regarding current and future legislation which would impact upon the company

2019 developments

·    Building a strategy to deal with non-compliance in a clear and consistent manner, supported by a new compliance intranet site

·    Ongoing data protection processes and compliance will be overseen by the Data Privacy Committee, which is led by the company's Global Head of Compliance

·    External providers in place to support horizon scanning processes to help monitor changes in law and regulation

·    A Brazil compliance committee has been formed to drive progress in this area

Technology and information security

Principal risk

We experience a major failure of IT infrastructure or breach in system or information security.

Risk score movement from the prior year: No change.

Alignment to strategy: R, C, B

Risk description

We interact electronically with customers, suppliers and consumers, and our supply chain operations are dependent on reliable IT systems and infrastructure. Disruption to our IT systems could have a significant impact on our sales, cash flows and profits. Additionally, cyber security breaches could lead to unauthorised access to, or loss of, sensitive information.

Controls and mitigating activities

·    Disaster recovery plans tested every year with annual penetration testing also performed

·    Central governance and decision-making processes for system changes

·    Information and IT policies are in place and are regularly reviewed

·    Incident response plans are in place, recognising that while this risk can be managed it cannot be eliminated

2019 developments

·    We continue to see an increasing frequency in cyber-attacks (including phishing and ransomware) in the market place

·    We have increased investment to improve information and cyber security controls and cyber risk awareness

·    Continued to deliver cyber awareness programmes including phishing tests

·    Began the preparatory steps to implement cyber insurance

Treasury, tax and pension

Principal risk

Changes to exchange, interest or tax rates can have an impact on profits and cash flows. Business changes also present a risk as to how we are financed or taxed.

Risk score movement from the prior year: Decreased

Alignment to strategy: R, C, B

Risk description

Britvic is exposed to a variety of external financial risks relating to treasury, tax and pensions. Changes to exchange rates and interest rates can have an impact on business results and the cost of interest on our debt.

Additionally, the GB and Ireland businesses have defined benefit pension plans which, while closed to new employees, are exposed to movements in interest and inflation rates, values of assets and increased life expectancy.

Controls and mitigating activities

·    Robust monitoring of exchange rates and interest rates

·    Active risk management and hedging strategies are in place to manage exchange and interest fluctuations, overseen by the Treasury Committee

·    Monitoring of investment and funding strategies for the pension fund

·    Strong relationships with external stakeholders (such as HMRC and tax specialists) to ensure that a high standard of advice is provided to the business

2019 developments

·    The recent depreciation of sterling has led to higher input costs across a number of our key commodities. The risk of a 'no-deal' Brexit could elevate this risk further. We closely monitor and manage this risk through a rolling 18 month hedging policy which is governed by the Treasury Committee

·    Triennial pension valuation discussions have kicked off ahead of completion in 2020

Talent

Principal risk

Limited capacity and/or capability impacts our ability to deliver our business plans for growth. In addition, our ability to retain and attract talent can impact our ability to achieve our objectives.

Risk score movement from the prior year: No change.

Alignment to strategy: G, R, C, B

Risk description

We rely on key individuals to contribute to the success of Britvic. We need our people to continue to develop and be fit for the future and ensure we continue to attract top talent to the business.

Controls and mitigating activities

·    Talent and succession planning processes in place

·    Annual GPTW survey takes place across the company to obtain employee feedback on a wide range of topics

·    Annual performance management processes in place

2019 developments

·    In this year's GPTW survey, GB's overall Trust Index scores increased this year by 4% to 77%, our highest ever score, and our overall engagement scores also increased by 4% to 84%

·    Activities in place to launch a new Learning and Development tool for employees

·    We have launched a new D&I Strategy and a new offering to enhance the wellbeing of our employees including establishing employee network groups and updated our Wellbeing and Resilience Policy

Appendix B

Responsibility statement of the Directors in respect of the Annual Report

The Annual Report and Accounts 2019 contains a responsibility statement in compliance with DTR 4.1.12. This statement is set out on page 79 of the Annual Report and Accounts 2019, and is set out below in full and unedited text. This statement relates solely to the Britvic Annual Report and Accounts 2019 and is not connected to the extracted information set out in this announcement or the Preliminary Announcement.

The Directors confirm that to the best of their knowledge:

•    The consolidated financial statements prepared in accordance with IFRSs as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit of the company and undertakings included in the consolidation taken as a whole

•    the Annual Report, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the company and undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties that they face

•    having taken into account all matters considered by the Board and brought to the attention of the Board during the year, the Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable. The Directors believe that the disclosures set out in this Annual Report provide the information necessary for shareholders to assess the company's performance, business model and strategy

On behalf of the Board

Simon Litherland, Chief Executive Officer

Joanne Wilson, Chief Financial Officer

 

END

 

 

ACSKMMMZLGKGLZG