Interim Results
Britvic plc
21 May 2007
Britvic plc ('Britvic')
-----------------------
Interim Results
---------------
Britvic today announces its Interim Results for the 28 weeks ended 15 April 2007
('the period').
28 weeks ended 28 weeks ended
15 April 2007 16 April 2006 % change
------------------------------------------
£m £m
Total Branded Revenue 353.6 323.5 9.3
Stills Revenue 166.8 153.7 8.5
Carbonates Revenue 175.2 159.8 9.6
EBITDA* 48.2 43.4 11.1
Operating Profit 24.2 18.6 30.1
Operating Profit Margin 6.8% 5.7% 1.1%pts
Free cashflow** (12.2) (42.3)
Net Debt (309.8) (362.5)
Profit after tax 10.9 6.5 67.7
Basic earnings per share 5.0p 3.0p 66.7
Interim dividend per share 3.3p 3.0p 10.0
Note regarding those numbers in this announcement other than those included
within the Statutory Accounts: all numbers (other than revenue and dividend per
share) are disclosed before exceptional items.
* EBITDA is defined as operating profit before exceptional items, depreciation,
amortisation and any gain or loss on disposal of fixed assets
**Free cash flow is defined as net cash flow excluding movements in borrowings,
dividend payments and non cash exceptional items
• Britvic out-performed the soft drinks market in both stills and
carbonates during the period with strong total branded revenue growth,
up 9.3% to £353.6m
• Stills showed continued good growth with revenues up 8.5%, driven by a
strong performance from Britvic's leading brands:
• The success of Fruit Shoot H2O, which further strengthened its position as
the number one kid's water brand;
• Continuing growth in Robinsons squash, with the new large pack facilities
enabling us to compete effectively with own label;
• J2O continues to strengthen its category leadership with the recently
launched PET pack performing well.
• Carbonates saw strong revenue growth of 9.6% in the period driven by:
• A growing presence in the increasingly important discounters sector;
• The strength of the Pepsi brand proposition which continues to deliver
further market share gains despite an increasingly competitive sector.
• Operating profit up 30.1% at £24.2m with operating profit margin up
1.1%pts to 6.8%
• Strong top line growth with a continued focus on Average Realised
Price (ARP) has helped drive margin improvements;
• Progress on Product Value Optimisation (PVO) savings mitigating
input cost pressures.
• Profit after tax up 67.7% at £10.9m, with a reduction in the effective
tax rate from last year.
• Significantly improved free cash flow, up £30.1m on last year,
underpins the Board's confidence in proposing an interim dividend per
share of 3.3p up 10.0% on prior year.
Paul Moody, Chief Executive, commented:
'Britvic's improved performance has been achieved through exploiting our brand
strength in the stills category, sustaining core brand activity in carbonates
and by further driving revenue through innovation and international expansion.
These actions, together with a sharp focus on improving efficiency, optimising
working capital and increasing operating margins mean we are very well placed to
capture the benefits of the attractive future growth and large size of the soft
drinks market.
We have continued to build market share in stills and carbonates and look
forward to a second half where we will benefit from several new innovative
product launches, such as Robinsons Smooth Juice and Fruit Shoot 100% Juice.
The encouraging trading trends seen over the period have continued through the
early weeks of the second half and as a result, we remain confident with regard
to the full year outcome. However, as we enter this more important and typically
more volatile period, the soft drinks market as a whole will face much stronger
comparatives.
The agreement to acquire the soft drinks and distribution businesses of C&C
Group plc provides us with a leading position in the soft drinks market in
Ireland and a great opportunity to accelerate earnings growth. Additionally,
there is exciting potential for anticipated synergies of €14m, brand and product
expansion and innovation. This important acquisition for Britvic allows us to
grow the business both within the UK and by selective international expansion.'
For further information please contact:
---------------------------------------
Investors:
John Gibney +44 (0)1245 504 330
Jo Guano
Craig Marks
Media:
Britvic - main switchboard +44 (0)1245 261 871
Julian Mears +44 (0)7834 962542
A presentation for analysts and investors will be held at 9.30am on 21 May 2007
in the Auditorium at Linklaters, 1 Silk Street, EC2Y 8HQ. A live webcast of the
presentation including Q&A will be available on Britvic's website
www.britvic.com
There will also be a conference call today at 2.30pm (9.30am Eastern Time)
primarily for US investors and analysts where there will be an opportunity to
ask questions. A recording of the call will be available for seven days. To
access this call please dial the access number below and use the pin number
given.
Access number +44 (0)20 8609 0205
Pin number 542386#
Redial number +44 (0)20 8609 0289
Conference reference 172873#
Notes to editors
----------------
Britvic is one of the two leading soft drinks businesses in Great Britain. The
Company is the largest supplier of still soft drinks, the faster growing
category in the soft drinks market, and the number two supplier of carbonates.
Britvic's broad portfolio of leading brands includes established names with high
brand recognition such as Robinsons and Tango and highly successful innovations
such as J2O and Fruit Shoot. Included within the portfolio are the Pepsi and 7UP
brands, which Britvic produces, markets, sells and distributes under its
exclusive appointment from PepsiCo which runs until December 2023. This brand
and product portfolio enables Britvic to target and satisfy a wide range of
consumer demands in all major soft drinks categories, via all available routes
to market.
Cautionary note regarding forward-looking statements
----------------------------------------------------
This announcement includes statements that are forward-looking in nature.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Except as
required by the Listing Rules and applicable law, Britvic undertakes no
obligation to update or change any forward-looking statements to reflect events
occurring after the date such statements are published.
Operating and Financial Review
==============================
Chief executive's review
========================
In the 28 weeks ended 15 April 2007 Britvic has delivered a strong performance
with revenue increasing by 9.3% due to its out-performance of the market in both
stills and carbonates. The strong volume growth has been allied with a sharp
focus on growing average realised price (ARP) as we continue to drive effective
and efficient promotional activity improving operating margins. These combined
factors have resulted in operating profit before exceptional items up 30.1%.
This flows through to profit after tax (PAT) up 67.7% and earnings per share
(EPS) up 66.7% both before exceptional items. This performance has been acheived
against the backdrop of an improving soft drinks market and some easier
comparatives, with Britvic's brands growing market share in both stills and
carbonates. The strong and improving free cash flow, £30.1m better than the same
period last year, has underpinned the Board's decision to propose an interim
dividend of 3.3p up 10% on the prior year.
The soft drinks market
----------------------
The total soft drinks market continued to perform well with market volumes up
1.7%. However the second half of the year is typically much more volatile,
influenced last year by both exceptional weather and key events such as the
World Cup. There are no major events that are likely to influence the soft
drinks market in the summer of 2007, but the weather remains a key factor.
The stills market showed continued growth, with total volumes up 1.7% for the
period. Although this is a lower rate than last year we continue to believe that
in both the short and long term the stills category will provide the majority of
the growth in the total market. Britvic out-performed the stills market with
strong volume growth of 7.5%. The slower market growth rate compared to last
year is a result of the consumer trend towards health and well-being settling
down as consumers have adapted their product repertoire and are consuming across
a wider range of categories. Last year we saw a market step change increase in
stills volumes that was unlikely to be repeated as we moved into this year.
Stills growth continues to marginally outperform carbonates against much tougher
comparatives, providing evidence that new consumers are coming into stills but
at a slower rate than seen last year. To a degree, we have seen a pendulum
effect as consumers switched into stills but have now reverted to a more
balanced position across carbonates and stills. The stills market has also been
affected by some short term one-off factors such as in pure juice where an
increase in raw material cost has in turn been passed on to the consumer and has
subsequently supressed volume growth which was nonetheless positive.
The carbonates market showed a marked improvement on the unprecedented volume
decline that we experienced in the first half of last year, growing 1.7% over
the period. Whilst the pattern of trading over the period is clearly consistent
with prior years, the post-Christmas decline was much milder than last year. The
category is appearing to show a rebound after the pronounced movement towards
'better for you' stills. Consumers have begun to realise that the no added sugar
(NAS) variants of carbonates, all of which other than fruit carbonates are
showing growth, are an acceptable 'healthy' proposition. Although an improved
performance, the market is not back to the levels of 2004/05, though there was a
very strong Easter peak associated with a reasonably prolonged spell of good
weather.
Against this background, Britvic's total carbonates volumes grew by 8.1% in the
period. Just over half of this performance has been driven by our strategic
decision to enter the increasingly important discounters sector of the market.
This is a growing sector, stocking leading brands as well as generic and own
label ranges, where customer appeal is growing. As a result, we have enjoyed a
strong performance that will continue into the second half of the year in
absolute terms but will not exhibit the same level of year on year growth.
Britvic's strategy
------------------
The strategy has remained focused on the following elements:
Supporting and growing our core brands
We continue to invest in our strong portfolio of brands through both innovation
and media promotion, to ensure that they are preferred by consumers.
The Pepsi brand has made further market share gains, attaining a 23.5% share of
the cola market for the period, an increase of 1.8%pts on the same period last
year. The success enjoyed by the brand in the period reflects strong promotional
execution across all key customers. This growth in market share combined with a
growing presence of the brand in the discounters sector was achieved without any
adverse impact on ARP.
We have invested to further reinforce Robinsons' number one position in the
increasingly important squash category. We now have the capability for in-house
bottle-blowing for all our large packs leading to a significant cost reduction
enabling us to increase our promotional competitiveness. Large pack value share
is 3.5%pts ahead of last year in the last 12 weeks driving the overall brand
value share by 1.2%pts. Later in the year we will see the launch of the
Robinsons squash brand featuring a pack re-design and product improvement
centred on no artificial colours or flavours to ensure that the brand maintains
its authoritative, category leading position. Over the important summer trading
months around £12.5m of marketing support will be given across the Robinsons
range behind the new 'Raise them on Robinsons' campaign and this year's
Wimbledon on-pack promotion marking the 71st year on the umpire's chair. Fruit
Shoot in its 'natural' formulation with no artificial flavours and colourings
has performed well with its value share rising to 33% in the last 12 weeks,
4.4%pts ahead of last year.
The performance of J20 continues to strengthen its category leadership both in
take-home and on-premise with 7% growth against the prior year. The brand
enjoyed a strong Christmas performance driving success for both Britvic and our
customers. The PET pack launched in June 2006 has broadened the brand's
footprint outside the on-premise heartland and into the take-home channels,
gaining new listings. After a successful limited edition period the Orange and
Pomegranate flavour has now become the sixth permanent flavour for the product.
Our TV advertising campaign 'If H2O were J2O', aimed at further growing
distribution was well received by consumers.
Our International business continues to achieve improved results, with further
distribution gains for Robinsons squash in the recent launch markets of Sweden
and Denmark and impressive growth from Fruit Shoot in the Netherlands, where we
have developed a brand new TV campaign which airs at the end of May. The success
from Robinsons in Denmark and Sweden led to the decision to launch Robinsons
High Juice into Finland in May to further build the scale of our business in the
Nordic region. Listings have been secured in all major grocery chains and we
expect to achieve distribution of around 70% during the summer. A full
promotional campaign, including TV advertising, is accompanying the launch.
Innovating / Developing new products
Central to our future success is the ability to innovate further into the large
and growing segments of the market. At flotation we outlined our plans focused
on the four key themes of naturalness, health and well-being, occasionality and
indulgence.
Our three new water brands launched last year, (Fruit Shoot H2O, Pennine Spring
and Drench) have established themselves in a relatively short period. H2O is
perfoming very strongly and now has a market share of nearly 50% with repeat
rates of sale at 41%, well ahead of new product benchmarks and relatively low
levels of cannibalisation of the core Fruit Shoot brand. For Drench and Pennine
Spring, as for most new brand launches, it has been necessary to effect some
changes to the proposition in order to optimise their performance. Pennine
Spring will be focused solely on the licensed and food service sectors, building
on the fact that in the former it is the third largest and fastest growing water
brand, with Drench undergoing a packaging re-design and re-positioning to widen
its appeal and strengthen its differentiated proposition as a take-home product.
From May activity will focus on driving distribution in the convenience and
impulse channels and a new advertising campaign will run for 12 weeks from July
to September to introduce a compelling new message for the water category and
Drench brand.
The 2007 innovation programme is well underway with the re-launch of Fruit Shoot
in its 'natural' formulation with no artificial flavours and colourings; the
launch of the 'Really Wild Drinks Company' a range of six natural juice drinks
in response to changing guidelines with regard to soft drinks in schools; the
introduction of a more modern and premium position for the Britvic mixer and
juice range in non-returnable, recyclable bottles; and finally a major brand
re-design of brand Pepsi that capitalises upon the trend for personal
customisation with multiple designs for each variant being available - the
designs will change on a regular basis to ensure that the most contemporary
themes are reflected on our packs. All four initiatives are performing well and
evidence our expertise in developing products that help us manage the changing
legislative framework at the same time as giving consumers relevant choices.
In the remainder of our financial year, we will launch the following:
• Two products manufactured on our new aseptic line, that enables us to deliver
great tasting preservative free products that have no artificial ingredients:
• Robinsons Smooth Juice- a 100% fruit juice blended with barley in 1L PET
bottles.
• Fruit Shoot 100% - a pure juice specifically designed for children.
• The re-designed and re-positioned Drench.
• The re-formulated and re-designed Robinsons squash.
Driving efficiency - improving margins and free cash flow
Our Business Transformation Programme, which we described at the time of
flotation as being focused on driving improved efficiency and building
capability, is delivering against both objectives - with £11m of annualised
savings having been made prior to the start of financial year 2007 (FY07). Such
has been the success of the Business Transformation Programme, that we are on
target to deliver an incremental £4m savings in FY07 and £3m in FY08, as
previously announced.
In addition to this we expect to see incremental annualised savings of £5-6m by
FY09 as a consequence of the proposed outsourcing of the secondary distribution
network and vending and chiller re-manufacturing operations, at a one-off
exceptional cost of £3-4m in FY08. The proposals would also reduce capital
expenditure requirements by £2-3m from FY08. Related to this proposal, we have
disposed of our depot in Tamworth, the only freehold site within the secondary
retail distribution network, at a net cash consideration of £9m.
We continue to drive our Product Value Optimisation (PVO) programme and are on
track to deliver £2m of savings in FY07 with the introduction of in-house large
pack PET squash bottles at our Norwich factory and other vertical integration
opportunities.
Acquisition of the soft drinks and related businesses of C&C Group plc
----------------------------------------------------------------------
We have agreed to acquire the soft drinks and distribution businesses ('CCSD')
of C&C Group plc for €249.2m (£169.5m) in cash. CCSD owns a number of leading
brands in the Republic of Ireland and Northern Ireland ('the territory'),
including Club, Ballygowan water, Britvic, Cidona, MiWadi, and Energise Sport,
as well as the rights to Pepsi and 7Up brands in the territory through its
bottling agreements with PepsiCo.
This is a great opportunity to accelerate earnings growth and provides us with a
leading position in the soft drinks markets in the territory. Additionally,
there is exciting potential for anticipated synergies of €14m, as well as brand
and product expansion and innovation.
This is an important acquisition for Britvic as we seek to grow the business
both within the UK and by selective international expansion. We are very pleased
to welcome an experienced and highly capable CCSD senior management team and
their colleagues. We believe we have many opportunities to further develop both
CCSD's own brands and the Pepsi and 7Up brands in these markets. Completion is
expected before 31 August 2007.
Current trading and outlook
---------------------------
The encouraging trading trends seen over the period have continued through the
early weeks of the second half and as a result, Management remain confident with
regard to the full year outcome. However as we enter this more important and
typically more volatile period, the soft drinks market as a whole will face much
stronger comparatives.
Financial and business review
=============================
The following discussion is based on Britvic's results for the 28 weeks ended 15
April 2007 ('the period') compared with the same period last year.
Key performance indicators
--------------------------
The principal key performance indicators that Management uses to assess the
performance of the Group in addition to income statement measures of performance
are as follows:
Volume growth - number of litres sold by the Group relative to prior period.
Average Realised Price (ARP) - average revenue per litre sold.
Revenue growth - sales achieved by the Group relative to prior period.
Brand contribution margin - revenue less material costs and all other marginal
costs that Management considers to be directly attributable to the sale of a
given product, divided by revenue. Such costs include brand specific advertising
and promotion costs, raw materials, and marginal production and distribution
costs. Management uses the brand contribution margin to analyse Britvic's
financial performance, because it provides a measure of contribution at brand
level.
Operating profit margin - operating profit before exceptional items and before
the deduction of interest and taxation divided by revenue.
Free cash flow - net cash flow excluding movements in borrowings, dividend
payments and non cash exceptional items.
Return on invested capital (ROIC) - ROIC is a performance indicator used by
Management and defined as operating profit after tax before exceptional items as
a percentage of invested capital. Invested capital is defined as non-current
assets plus current assets less current liabilities, excluding all balances
relating to interest bearing liabilities and all other assets or liabilities
associated with the financing and capital structure of the Group and excluding
any deferred tax balances.
Overview
--------
In the period total volumes were up 7.9% on the prior year with total revenues
up 9.3% at £353.6m. Operating profit before exceptional items for the period was
up 30.1% to £24.2m with operating profit margin also showing improvement at
6.8%, up 1.1%pts. PAT for the period was £10.9m up 67.7% on the prior period,
with EPS up 66.7%.
Stills 28 weeks 28 weeks
------ ended 15 ended 16
April 2007 April 2006 % change
£m £m
-------- ---------- --------
Volume (millions litres) 229.9 213.8 7.5
ARP per litre 72.6p 71.9p 1.0
Revenue 166.8 153.7 8.5
Brand contribution 76.9 69.9 10.0
Brand contribution margin 46.1% 45.5% 0.6%pts
In stills we have seen continued strong growth with revenue up 8.5% driven by
the success of Fruit Shoot H20 which further strengthened its position as the
number one kid's water; the continuing growth in Robinsons squash with the new
large pack facilities enabling us to compete effectively with own label; and
J20's strong performance.
Britvic has out-performed the market over the period with Britvic volumes up
7.5% against a market up 1.7%. Stills have also seen a continued improving ARP
up 1% for the period.
The brand contribution margin up 0.6%pts at 46.1% has been impacted by the
continued strategic decision to focus an increasing proportion of advertising
and promotional (A&P) spend on stills, although this has been mitigated by our
PVO programme again predominantly focused on stills with the impact of the new
in-house bottling facilities at Norwich.
Carbonates 28 weeks 28 weeks
---------- ended 15 ended 16
April 2007 April 2006 % change
£m £m
-------- ---------- --------
Volume (millions litres) 449.1 415.6 8.1
ARP per litre 39.0p 38.5p 1.3
Revenue 175.2 159.8 9.6
Brand contribution 68.0 60.6 12.2
Brand contribution margin 38.8% 37.9% 0.9%pts
In carbonates we have delivered a strong performance with volumes up 8.1% in the
period driven by a growing presence in the increasingly important discounters
sector which accounts for just over half of the growth in the period and shows a
similar ARP and margin profile to the rest of the business, and by the strength
of the Pepsi brand proposition which continues to deliver further market share
gains despite an increasingly competitive sector.
Neilson data excludes the discounters but even after taking out the growth
associated with this sector our underlying carbonates growth of around 4% still
out-performed the market which grew 1.7% year on year. Allied with the strong
volume growth was an increase in ARP which generated strong revenue growth of
nearly 10%.
Direct product cost increases below inflation were more than offset by the
reduction in A&P spend, which, as already explained, was focused on stills, and
hence carbonates brand contribution continues to trend upwards
International 28 weeks 28 weeks
------------- ended 15 ended 16
April 2007 April 2006 % change
£m £m
-------- --------- --------
Volume(millions litres) 17.2 15.9 8.2
ARP per litre 67.4p 62.3p 8.2
Revenue 11.6 9.9 17.2
Brand contribution 3.1 2.8 10.7
Brand contribution margin 26.7% 28.3% (1.6)%pts
The International business continues to achieve improved results with both
volume and ARP growth of 8.2%, and revenue growth of 17.2% driven by further
distribution gains for Robinsons squash in the recent launch markets of Sweden
and Denmark. The Fruit Shoot business in the Netherlands is continuing to
perform strongly with volumes doubling versus the same period last year
resulting in Fruit Shoot being the fastest growing brand in the category.
The decrease in the brand contribution margin can be explained by an increase in
A&P spend as we continued our launch campaign into the Nordic countries, and the
effect of the increase in direct product costs up 4.5% reflecting the higher
volume and value of stills products sold.
Costs and overheads 28 weeks 28 weeks
------------------- ended 15 ended 16
April 2007 April 2006 % change
£m £m
-------- --------- --------
Non brand A&P* (4.4) (3.5) (25.7)
Fixed supply chain** (34.2) (36.1) 5.3
Selling costs** (46.5) (44.2) (5.2)
Overheads and other* (38.7) (30.8) (25.6)
Total (123.8) (114.6) (8.0)
Total A&P spend (24.3) (23.3) (4.3)
A&P as a % of net revenue 6.9% 7.2%
* contained within Administration Expenses
** contained within Selling and Distribution Costs
Overall, we have maintained our investment in total A&P at circa 7% of net
revenue to continue our long term brand building programme. We continue our
strategy of a more selective focus on A&P spend in those areas where we believe
we will get the best results.
Fixed supply chain costs are down by circa £2m due in part to the benefit of
cost savings from our Business Transformation Programme. The increase in selling
costs is a reflection of the strong revenue performance and the correlation
between that and the higher investment made in customer space for promotional
activity etc; and the fact that last year the phasing of spend was
proportionately higher in the second half. The increase in overheads and other
of circa £8m reflects an increase of £5.7m in the employee bonus provision
reflecting the strong revenue and profit performance over the period and a £0.8m
buy as you earn share scheme cost which only commenced in April 2006.
Exceptional items
-----------------
During the period, Britvic incurred exceptional operating costs totalling £4.8m.
These comprised:
• Restructuring costs of £1.8m resulting from the £4m Business Transformation
Programme overhead cost savings identified for FY07 and relate principally to
redundancy costs and advisor fees.
• The £1.7m cost of transitional award shares vesting under the Performance
Share Plan (PSP). As we announced last year, in addition to the annual PSP
awards, a one-off transitional award was made to approximately 90 of the most
senior managers within the business. The award vests in three tranches over
the three financial years 2005/6, 2006/7 and 2007/8. It is designed to aid the
transition from Long Term Incentive plans which terminated on separation from
IHG, whilst also serving as a retention and incentive plan measured by ROIC
and is paid in shares, which forms part of a shareholding requirement for
senior executives. The charge of £1.7m for the period is in line with guidance
given in November for a full year charge of between £2-4m.
• A non cash charge of £0.2m relating to IHG share options held by Britvic
employees which is purely an accounting entry.
• A £1.1m returnable bottle impairment relates to an impairment made for
returnable glass bottle stocks held in inventory which are redundant due to
the strategic move to a more profitable programme of non-returnable bottles.
Exceptional operating costs are £9.8m lower than the same period last year. This
is primarily due to the following costs incurred in the prior year: listing
costs of £5.4m; £1.9m one-off cost of the all-employee share award announced at
the time of flotation; and higher restructuring costs incurred.
All exceptional costs in the period are tax deductible. The share incentive
scheme costs will attract deductions but on a basis different to the accounting
treatment.
Interest
--------
The net finance charge before exceptional items for the period for the Group was
£9.0m compared with £9.2m in same period in the prior year.
Taxation
--------
The tax charge of £4.3m before exceptional items represents an effective tax
rate of 28.2%, a rate lower than the UK statutory rate of 30% due to a greater
focus on the management of taxation as an independent plc. The effective tax
rate as reported in the accounts for the same period last year was 30.9%.
Including the effect of exceptional items, the effective tax rate was 33.0% for
the period.
Earnings per share
------------------
EPS for the period, adjusted for exceptional items, was 5.0p, up 66.7% on EPS
for the same period last year of 3.0p. Basic EPS (after exceptional items) for
the period was 3.2p compared with a loss per share of 2.6p for the same period
last year.
Dividends
---------
The Board is recommending an Interim dividend for 2007 of 3.3p per share, an
increase of 10% on the dividend last year with a total value of £7.1m. The
Interim dividend will be paid on 29 June 2007 to shareholders on record as at 1
June 2007.
Cash flow and net debt
----------------------
There has been a £30.1m pre-exceptional free cash flow improvement on the same
period last year. This improvement has been principally driven by the following:
•Lower net capital expenditure in the period (£14.3m) than the same period
last year (£27.4m).
•An additional pension contribution of £10m in the period compared to £30m
last year.
Net debt defined as current and non-current borrowings less cash, was £309.8m at
15 April 2007 compared to £362.5m at 16 April 2006. This is due in the main to a
special dividend of £98.5m paid out in the prior year compared to £15.1m (final
for FY06) paid in the period.
Capital employed
----------------
Non-current assets have reduced from £329.9m at 16 April 2006 to £305.9m at 15
April 2007 due in part to more tightly controlled capital expenditure which is
down £13.1m compared to the same period last year. Depreciation has decreased by
£1.3m compared to the same period last year.
Share price and market capitalisation
-------------------------------------
At 15 April 2007 the closing share price for Britvic plc was 339.5p. The Group
is a member of the FTSE 250 index with a market capitalisation of approximately
£733m at the period end.
Treasury management
-------------------
A key activity in the period was to replace around £229m of bank-based
borrowings with the proceeds of a private placement. The issue of the placement,
largely in the US, had the following features:
• a maturity ranging from 7 to 12 years;
• sterling and US dollar proceeds (the latter swapped to sterling);
• all proceeds on an effective fixed-interest rate basis.
Pensions
--------
The Group operates a pension scheme, which has both a defined benefit fund and a
defined contribution fund. The defined benefit section of the scheme was closed
on 1 August 2002, and since this date new employees have been eligible to join
the defined contribution section of the scheme. As a result of the full
actuarial valuation carried out as at 31 March 2004, further contributions of
£30m were made in March and December 2005 and an additional £10m in December
2006. Additional annual contributions of £10m will be made in December 2007 to
2010 (total of £40m) in order to further reduce the deficit in the scheme. A
full actuarial valuation is currently being prepared in line with the normal
three year cycle as at 31 March 2007, the results of which will be reflected in
the year end financial statements. The results of this valuation are not yet
available.
The Group IAS 19 deficit at the half year was £16.8m (£65.8m at 1 October 2006).
The decrease in the deficit is due to changes in actuarial assumptions applied
as at 15 April 2007. It should be noted that this is an accounting valuation and
subject to high volatility.
BRITVIC PLC
Company number: 5604923
INTERIM FINANCIAL STATEMENTS
For the 28 weeks to 15 April 2007
=================================
INDEPENDENT REVIEW REPORT TO BRITVIC PLC
========================================
We have been instructed by the company to review the financial information for
the 28 weeks ended 15 April 2007 which comprises consolidated income statement,
consolidated balance sheet, consolidated cash flow statement, consolidated
statement of recognised income and expense, and the related notes 1 to 8. 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 is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company, for our work,
for this report, or for the conclusions we have formed.
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 which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
---------------------
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. 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 accounting policies and presentation have been consistently applied, unless
otherwise disclosed. 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 performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. 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 28 weeks ended
15 April 2007.
Ernst & Young LLP
Nottingham
18 May 2007
CONSOLIDATED INCOME STATEMENT
For the 28 weeks ended 15 April 2007
====================================
(Unaudited) (Unaudited) (Audited)
28 Weeks Ended 28 Weeks Ended 52 Weeks Ended
Note 15 April 2007 16 April 2006 1 October 2006
---- --------------- --------------- ---------------
Before Exceptional Total Before Exceptional Total Before Exceptional Total
Exceptional items Exceptional items Exceptional items
items items items
£m £m £m £m £m £m £m £m £m
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Revenue 353.6 - 353.6 323.6 - 323.6 677.9 - 677.9
Cost of sales (139.9) - (139.9) (127.4) - (127.4) (263.5) - (263.5)
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit 213.7 - 213.7 196.2 - 196.2 414.4 - 414.4
Selling and
distribution costs (126.5) - (126.5) (118.0) - (118.0) (231.0) - (231.0)
Administration
expenses 3 (63.0) (4.8) (67.8) (59.6) (14.6) (74.2) (109.7) (19.1) (128.8)
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating profit 24.2 (4.8) 19.4 18.6 (14.6) 4.0 73.7 (19.1) 54.6
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Finance income 0.8 - 0.8 - - - 0.2 - 0.2
Finance costs (9.8) (0.1) (9.9) (9.2) (0.1) (9.3) (18.0) (0.3) (18.3)
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Profit/(loss)before
tax 15.2 (4.9) 10.3 9.4 (14.7) (5.3) 55.9 (19.4) 36.5
Taxation 5 (4.3) 0.9 (3.4) (2.9) 2.7 (0.2) (16.3) 4.0 (12.3)
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Profit/(loss) for the
period attributable
to the equity
shareholders 10.9 (4.0) 6.9 6.5 (12.0) (5.5) 39.6 (15.4) 24.2
-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Earnings per share 6
------------------
Basic earnings per
share 5.0p (1.8p) 3.2p 3.0p (5.6p) (2.6p) 18.4p (7.2p) 11.2p
------ ------ ------ ------ ------ ------ ------ ------ ------
Diluted earnings per
share 5.0p (1.8p) 3.2p 3.0p (5.6p) (2.6p) 18.3p (7.1p) 11.2p
------ ------ ------ ------ ------ ------ ------ ------ ------
Dividends
---------
Paid in the period
Dividend per share (pence) 7.0 45.9 48.9
------ ------ ------
Total dividend (£m) 15.1 98.5 105.0
------ ------ ------
Proposed after the balance sheet date
Dividend per share (pence) 3.3 3.0 7.0
------ ------ ------
Total dividend (£m) 7.1 6.5 15.1
------ ------ ------
CONSOLIDATED BALANCE SHEET
At 15 April 2007
================
(Unaudited) (Unaudited) (Audited)
15 April 16 April 1 October
2007 2006 2006
Note £m £m £m
---------------------------- ----- -------- -------- --------
Assets
Non-current assets
Property, plant and equipment 207.6 232.4 218.2
Intangible assets 95.9 95.1 95.4
Trade and other receivables - lease premiums 2.4 2.4 2.4
---------------------------- -------- -------- --------
305.9 329.9 316.0
---------------------------- -------- -------- --------
Current assets
Inventories 35.5 37.3 31.7
Trade and other receivables 132.3 115.7 99.6
Other financial assets 0.3 0.2 0.6
Income tax receivable 1.1 5.7 -
Cash and cash equivalents 9.1 1.2 19.2
---------------------------- -------- -------- --------
178.3 160.1 151.1
---------------------------- -------- -------- --------
Total assets 484.2 490.0 467.1
---------------------------- -------- -------- --------
Equity and liabilities
Issued capital 7 (43.2) (43.2) (43.2)
Share premium 7 (2.5) - (2.5)
Own shares 7 0.3 0.5 0.5
Share scheme reserve 7 (4.9) (5.7) (4.5)
Hedging reserve 7 0.5 - 0.4
Retained earnings 7 87.3 116.6 107.0
---------------------------- -------- -------- --------
Total equity 7 37.5 68.2 57.7
---------------------------- -------- -------- --------
Non-current liabilities
Interest-bearing loans and
borrowings 4 (297.8) (354.2) (284.3)
Deferred tax liabilities (17.5) (7.1) (3.3)
Pension liability (16.8) (48.9) (65.8)
---------------------------- -------- -------- --------
(332.1) (410.2) (353.4)
---------------------------- -------- -------- --------
Current liabilities
Trade and other payables (166.5) (138.3) (147.7)
Interest-bearing loans and
borrowings 4 (21.1) (9.5) (17.5)
Other financial liabilities (2.0) (0.2) (1.0)
Income tax payable - - (5.2)
---------------------------- -------- -------- --------
(189.6) (148.0) (171.4)
---------------------------- -------- -------- --------
Total liabilities (521.7) (558.2) (524.8)
---------------------------- -------- -------- --------
Total equity and liabilities (484.2) (490.0) (467.1)
---------------------------- -------- -------- --------
CONSOLIDATED CASH FLOW STATEMENT
For the 28 weeks ended 15 April 2007
====================================
(Unaudited) (Unaudited) (Audited)
28 Weeks 28 Weeks 52 Weeks
Ended Ended Ended
15 April 16 April 1 October
2007 2006 2006
£m £m £m
------------------------- --------- ---------- ----------
Cash flows from operating activities
Profit from continuing operations
before tax and net finance costs 19.4 4.0 54.6
Depreciation 19.2 20.5 38.3
Amortisation 2.0 2.5 4.7
Share based payments 3.7 7.8 7.8
Net pension charge less contributions (9.4) (29.4) (29.6)
(Increase)/decrease in inventory (3.8) 0.6 6.2
(Increase)/decrease in trade
and other receivables (32.7) (11.9) 2.2
Increase/(decrease) in trade
and other payables 21.1 (6.0) 3.8
Loss on disposal of property,
plant and equipment 2.8 1.8 4.0
Loss on disposal of intangible
assets - - 0.4
Income tax paid (7.1) (3.7) (3.8)
------------------------- --------- ---------- ----------
Net cash flows from operating
activities 15.2 (13.8) 88.6
------------------------- --------- ---------- ----------
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment - 0.2 0.2
Interest received 0.8 - 0.2
Purchase of property, plant and
equipment (11.8) (26.7) (29.4)
Purchase of intangible assets (2.5) (0.9) (3.8)
------------------------- --------- ---------- ----------
Net cash flows used in investing
activities (13.5) (27.4) (32.8)
------------------------- --------- ---------- ----------
Cash flows from financing activities
Issue costs paid (0.8) (0.1) (0.2)
Interest paid (11.8) (5.8) (16.4)
Interest-bearing loans received 321.6 364.4 667.0
Interest-bearing loans repaid (302.5) (233.9) (598.4)
Repayment of borrowings - (2.8) (2.8)
Purchase of own shares (3.2) (0.5) (0.5)
Increase in share capital - 0.2 0.3
Dividends paid to equity
shareholders (15.1) (98.5) (53.3)
Dividends paid to previous
shareholders - - (51.7)
------------------------- --------- ---------- ----------
Net cash flows from financing
activities (11.8) 23.0 (56.0)
------------------------- --------- ---------- ----------
Net decrease in cash and cash
equivalents (10.1) (18.2) (0.2)
Cash and cash equivalents at
beginning of period 19.2 19.4 19.4
------------------------- --------- ---------- ----------
Cash and cash equivalents at
end of period 9.1 1.2 19.2
------------------------- --------- ---------- ----------
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
For the 28 weeks ended 15 April 2007
====================================
(Unaudited) (Unaudited) (Audited)
28 Weeks 28 Weeks 52 Weeks
Ended Ended Ended
15 April 16 April 1 October
2007 2006 2006
£m £m £m
------------------------- --------- --------- ---------
Actuarial gain/(loss)on defined
benefit pension scheme 39.6 6.7 (10.8)
Current tax on additional pension
contributions 3.0 9.0 9.0
Deferred tax on pension liability (14.9) (11.0) (5.7)
Movement in cash flow hedges 0.1 1.0 0.6
Deferred tax on share options granted
to employees (0.3) 1.1 0.1
Current tax on share options exercised 0.4 0.6 1.1
------------------------- --------- --------- ---------
Net income/(expense)recognised
directly in equity attributable to
equity shareholders 27.9 7.4 (5.7)
Profit/(loss) for the period 6.9 (5.5) 24.2
------------------------- --------- --------- ---------
Total recognised income for the
period 34.8 1.9 18.5
------------------------- --------- --------- ---------
NOTES TO THE FINANCIAL INFORMATION
For the period ended 15 April 2007
==================================
1. Basis of preparation
-----------------------
This interim financial information comprises the consolidated balance sheet as
at 15 April 2007 and 16 April 2006 and related consolidated income statement,
consolidated cash flow statement and consolidated statement of recognised income
and expense for the 28 weeks then ended and for the 52 weeks ended 1 October
2006 of Britvic plc ('financial information'). This financial information has
been prepared in accordance with the Listing Rules of the Financial Services
Authority. This financial information has been prepared using the principal
accounting policies as set out in pages 43 - 50 of the Group's annual financial
statements for the 52 weeks ended 1 October 2006. In preparing these interim
financial statements the Group has chosen not to apply IAS 34 'Interim Financial
Reporting'.
This interim report does not constitute statutory accounts as defined by Section
240 of the Companies Act 1985. It has been reviewed but not audited by the
Group's auditors. The statutory accounts for Britvic plc for the 52 weeks ended
1 October 2006, which were prepared under IFRS, have been delivered to the
Registrar of Companies. The auditors' opinion on those accounts was unqualified
and did not contain a statement made under section 237 (2) or (3) of the
Companies Act 1985.
2. Segmental reporting
----------------------
The directors consider that the Group has only one reportable geographic
segment, being the UK, and one business segment being the manufacture and sale
of soft drinks. The directors consider that the risks and returns of the Group's
products are similar in nature.
3. Exceptional items before interest and taxation
-------------------------------------------------
Exceptional items are those items of financial performance that Britvic plc
believes should be separately disclosed by virtue of the nature and infrequency
of the events giving rise to them to allow shareholders to understand better the
elements of financial performance in the period so as to facilitate comparison
with prior periods and to assess trends in financial performance more readily.
28 Weeks 28 Weeks 52 Weeks
Ended Ended Ended
15 April 16 April 1 October
2007 2006 2006
£m £m £m
----------------------- --------- ---------- ----------
Listing costs - (5.4) (5.5)
Incentive schemes directly
associated with the flotation (1.9) (6.6) (6.6)
Restructuring costs (1.8) (2.6) (7.0)
Returnable bottle impairment (1.1) - -
----------------------- --------- ---------- ----------
Exceptional costs (4.8) (14.6) (19.1)
----------------------- --------- ---------- ----------
'Listing costs' relates to various costs incurred in pursuit of the listing on
the London Stock Exchange which include advisors' fees.
'Incentive schemes directly associated with the flotation' include all-employee
share schemes and management incentives. The cost in the 28 weeks ended 15 April
2007 relates to a transitional award granted to members of both the senior
leadership team and the senior management team shortly after flotation, the
purpose of which is to compensate these individuals for the loss of existing
long-term incentive bonuses which were discontinued upon flotation.
'Restructuring costs' includes the costs of the major restructuring programmes.
These costs relate principally to redundancy costs and advisors' fees.
'Returnable bottle impairment' relates to an impairment made for returnable
glass bottle stocks, held in inventory, which are redundant due to the move to
non-returnable bottles.
4. Analysis of changes in interest-bearing loans and borrowings
---------------------------------------------------------------
28 Weeks 28 Weeks 52 Weeks
Ended Ended Ended
15 April 2007 16 April 2006 1 October
2006
£m £m £m
------------------- ---------- ---------- ----------
Non-current liabilities 284.3 219.3 219.3
Current liabilities 17.5 13.9 13.9
------------------- ---------- ---------- ----------
At the beginning of the
period 301.8 233.2 233.2
Issue of US$ Notes 228.5 - -
New unsecured loans 93.1 364.4 667.0
Issue costs of new loans/US$
Notes (0.8) (0.1) (0.1)
Amortisation of issue costs 0.2 0.1 0.1
Borrowings repaid (302.5) (233.9) (598.4)
Translation gain on US$ Notes (1.4) - -
------------------- ---------- ---------- ----------
At the end of the period 318.9 363.7 301.8
------------------- ---------- ---------- ----------
Non-current liabilities 297.8 354.2 284.3
Current liabilities 21.1 9.5 17.5
------------------- ---------- ---------- ----------
On 20 February 2007, Britvic plc issued US$450m of Senior Notes ('the Notes') in
the United States Private Placement market. The proceeds of the issue were used
to repay a £150m term loan, with the remainder being used to repay the amounts
drawn on the Group's revolving credit facility.
The amount, maturity and interest terms of the Notes are shown in the table
below:
Series Tranche Maturity date Amount Interest
------- --------- ------------- --------- terms
----------
A 7 year 20 February 2014 US$87m Fixed at 5.80%
B 7 year 20 February 2014 US$15m US$ LIBOR + 0.5%
C 7 year 20 February 2014 £25m(US$49m) Fixed at 6.11%
D 10 year 20 February 2017 US$147m Fixed at 5.90%
E 12 year 20 February 2019 US$126m Fixed at 6.00%
F 12 year 20 February 2019 £13m(US$26m) Fixed at 5.94%
------- --------- ------------- --------- ----------
Britvic plc will make semi-annual interest payments in US dollars, other than
the interest due on series B which is payable quarterly, with the first payment
being on 21 May 2007. The Notes are unsecured and rank pari passu in right of
repayment with other senior unsecured indebtedness of the Company. In order to
manage the risk of foreign currency and interest rate fluctuations, the Group
has entered into currency swaps whereby fixed / floating US dollar interest is
swapped for fixed sterling interest. The swap contracts have the same duration
and other critical terms as the borrowings which they hedge.
As a result of applying hedge accounting, the translation gain shown above of
£1.4m has been offset by an equivalent change in the fair value of the swap
arrangements.
5. Taxation
-----------
The tax charge on profit before tax, excluding the impact of exceptional items
has been calculated using an estimated effective annual rate of 28.2% (2006:
30.9%). Including tax on exceptional items, this leaves an estimated tax charge
of £3.4m for the 28 weeks ended 15 April 2007 (£0.2m for the 28 weeks ended 16
April 2006). The tax charge before exceptional items of £4.3m includes £2.1m of
foreign tax.
6. Earnings per share
---------------------
28 Weeks 28 Weeks 52 Weeks
Ended Ended Ended
15 April 16 April 1 October
2007 2006 2006
£m £m £m
---------------------------- -------- -------- --------
Basic earnings per share for reported earnings
Net profit/(loss) for the period
attributable to ordinary shareholders 6.9 (5.5) 24.2
---------------------------- -------- -------- --------
Weighted average number of ordinary shares
in issue for basic earnings per share 215.5 214.9 215.4
---------------------------- -------- -------- --------
Basic earnings per share for profit/(loss)
for the period 3.2p (2.6p) 11.2p
---------------------------- -------- -------- --------
Diluted earnings per share for reported earnings
Net profit/(loss) for the period attributable
to ordinary shareholders 6.9 (5.5) 24.2
---------------------------- -------- -------- --------
Weighted average number of ordinary shares
in issue for diluted earnings per share 218.1 214.9 216.7
---------------------------- -------- -------- --------
Diluted earnings per share for profit/(loss)
for the period 3.2p (2.6p) 11.2p
---------------------------- -------- -------- --------
Basic earnings per share for pre-exceptional
earnings
Net profit/(loss) for the period attributable
to ordinary shareholders 6.9 (5.5) 24.2
Add: Net impact of exceptional items 4.0 12.0 15.4
---------------------------- -------- -------- --------
Net profit for the period attributable to
ordinary shareholders (before
exceptional items) 10.9 6.5 39.6
---------------------------- -------- -------- --------
Weighted average number of ordinary shares
in issue for basic earnings per share 215.5 214.9 215.4
---------------------------- -------- -------- --------
Basic earnings per share for pre-exceptional
earnings 5.0p 3.0p 18.4p
---------------------------- -------- -------- --------
Diluted earnings per share for pre-exceptional
earnings
Net profit for the period attributable to
ordinary shareholders (before
exceptional items) 10.9 6.5 39.6
---------------------------- -------- -------- --------
Weighted average number of ordinary shares
in issue for diluted earnings per share 218.1 218.4 216.7
---------------------------- -------- -------- --------
Diluted earnings per share for pre-exceptional
earnings 5.0p 3.0p 18.3p
---------------------------- -------- -------- --------
7. Reconciliation of movements in equity
----------------------------------------
Issued Share Own Share Hedging Retained Total
capital premium shares scheme reserve earnings
reserve
£m £m £m £m £m £m £m
---------------------- ------ ------ ------ ------ ------ ------ ------
At 2 October 2006 (43.2) (2.5) 0.5 (4.5) 0.4 107.0 57.7
Total recognised (income)/
expense for the period - - - - 0.1 (34.9) (34.8)
Own shares purchased for
share schemes - - 3.2 - - - 3.2
Own shares awarded for
share schemes - - (3.4) - - 3.4 -
Movement in share schemes - - - (0.4) - (3.3) (3.7)
Payment of dividend - - - - - 15.1 15.1
---------------------- ------ ------ ------ ------ ------ ------ ------
At 15 April 2007 (43.2) (2.5) 0.3 (4.9) 0.5 87.3 37.5
---------------------- ------ ------ ------ ------ ------ ------ ------
8. Post balance sheet events
----------------------------
On 30 April 2007 a sale and leaseback transaction with regard to one of the
Group's depots completed.
On 14 May 2007 the Group reached an agreement to buy the soft drinks and
distribution businesses, CCSD, of C&C Group plc. The transaction will now be
reviewed by the competition authorities, as defined by Irish competition law,
and it is expected that completion of the transaction will occur by 31 August
2007.
Please refer to the Chief Executive's Review where further details of these post
balance sheet events are given.
-END-
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