2020 Annual Report and Notice of AGM

RNS Number : 0593I

Britvic plc

09 December 2020

 

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

9 December 2020

2020 ANNUAL REPORT, 2021 NOTICE OF ANNUAL GENERAL MEETING AND RELATED PARTY TRANSACTION

Following the release on 26 November 2020 of the Group's Preliminary Results Announcement for the year ended 30 September 2020, and in compliance with Listing Rule 9.6.1, the Company has today submitted the following documents to the Financial Conduct Authority, and they will shortly be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. 

·    Annual Report and Accounts 2020

·  Notice of the Annual General Meeting of the Company, to be held on Thursday 28 January 2021 at 11.00am at Breakspear Park, Breakspear Way, Hemel Hempstead, HP2 4TZ

·    Proxy form for the 2021 AGM

The Annual Report and Accounts 2020 is available to view or download in pdf format from the Company's website at www.britvic.com/annualreport.

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 26 November 2020. That information, together with the information set out below in appendices A and B which is extracted from the Annual Report and Accounts 2020, 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 2020.

The 2021 Notice of Meeting is available to view or download in pdf format from the Company's website at www.britvic.com/agm.

Please note that within the 2021 Notice of Meeting, the Company is proposing a resolution in relation to certain past dividends paid by the Company relating to the financial years 2013, 2014, 2018 and 2019 (the 'Relevant Dividends').  

Although importantly there were sufficient distributable profits available across the Britvic Group at all relevant times, the technical accounting treatment applied to certain share-based payments meant that there were not in fact enough distributable profits at the level of the holding company, Britvic plc, when the Relevant Dividends were paid.

The purpose of the resolution in the Notice of Meeting, therefore, is to rectify this issue and to put shareholders and current/former directors in the position they would have been in had the Relevant Dividends fully complied with the Companies Act 2006 (the 'Act'). This includes entering into deeds of release to release the shareholders who received the Relevant Dividends, and the directors of the Company at the time the Relevant Dividends were paid, from any liability to repay any amounts to the Company.

The approach that the Company is proposing by way of certain resolutions in respect of the Relevant Dividends is consistent with the approach taken by other listed companies that have, similarly, made such distributions otherwise than in accordance with the Act.

The issue is of a historical nature and there is no change to the financial outlook of the Company and no past accounts will need to be restated.  No fines or other penalties have been incurred by the Company. There is no impact on the final 2020 dividend proposed for approval by shareholders at the AGM. The total aggregate amount of the Relevant Dividends relating to the financial years 2013, 2014, 2018 and 2019 was £100.3m.

Shareholders should note that the Company has taken immediate steps to rectify the situation, with new processes in place to ensure full compliance with the Act going forward.

The current Directors[1] are related parties of the Company and therefore the entry by the Company into deeds of release in favour of the Directors constitutes a related party transaction for the purposes of the Listing Rules, specifically LR 11.1.10R.

The 2021 Notice of Meeting contains further details of the Relevant Dividends.

Clare Thomas

Company Secretary

Britvic plc LEI: 635400L3NVMYD4BVCI53

Appendix A

Principal risks and uncertainties

The principal risks and uncertainties relating to the Company are set out on pages 54 - 59 of the Britvic Annual Report and Accounts 2020. The following is extracted in full and unedited text from the Britvic Annual Report and Accounts 2020.

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:

B: Build local favourites and global premium brands

F: Flavour billions of water occasions

H: Healthier People, Healthier Planet

I: Innovate to access new spaces

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: No change.

Alignment to strategy: B, F, I

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 meet evolving

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

- The Category Board focuses on a plan for the next 18 months and putting strategic plans in place by category.

- Ongoing prioritisation exercise ensuring a clear innovation pipeline balanced between long-term and more

immediate opportunities.

2020 developments

- Over 200 London Essence Fresh Serve founts now available in restaurants and pubs across the UK.

- We have purchased The Boiling Tap Company (TBTC) to help access new spaces in consumer landscape.

- We launched ready-to-drink and coconut water in Brazil with the Puro Coco and Natural Tea brands.

- We have continued to innovate with our flavours, introducing the Robinsons Superfruit Cordials this year and

Les Bios, our organic ranges of syrups in France.

Health Concerns

Principal risk

The continued focus on health and obesity results in a decline in the soft drinks category and/or our share of it, and the risk of additional complexity and cost as a result of further regulation after the successful implementation of SDIL.

Risk score movement from the prior year: Increased

Alignment to strategy: H

Risk description

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

Controls and mitigating activities

- We have a wide range of soft drinks, many of which are low or no calorie, 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 calorie 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.

2020 developments

- UK Government Obesity Strategy announced (July 2020) with some key details outstanding. Initial assessments

performed of HFSS regulations included within the strategy and our impact assessment will be refreshed as more

details are announced.

- We set a strategic aim to have fewer than 30 calories per 250ml serve by 2025 to drive a continuation of our

calorie reduction programme.

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 prior year: No change.

Alignment to strategy:  B, I

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.

- We have trade credit insurance in place to cover our sales in both the UK and France and payment plans to

mitigate credit risk.

2020 developments

- Significant disruption in this area as a result of COVID-19. For example, promotions were significantly reduced

by grocers across Q3.

- Our London Essence Company founts offer a forward thinking trade dispense system that serves flavoured

tonic water infusions and provides a new opportunity for us and our customers.

- We work with all our customers, including through category partnerships and range reviews, to match our

product offering to consumer needs.

Third party relationships

Principal risk

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

Risk score movement from prior year: No change.

Alignment to strategy: B

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.

2020 developments

- In October 2020, Britvic reached an agreement with PepsiCo for a new and exclusive 20-year franchise bottling

agreement for the production, distribution, marketing and sales of its carbonated soft drink brands - including

Pepsi, 7UP and Mountain Dew in Great Britain.

- The new agreement includes the Rockstar energy band, for which Britvic will take responsibility from 1

November this year.

Supply Chain

Principal risk

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

Risk score movement from last year: No change

Alignment to strategy: H, I

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 below.

Controls and mitigating activities

- Flexibility in dual site supply for key products and strong relationships with contract packers to support

business interruption or changes in demand.

- 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.

2020 developments

- Improved our business resilience through various projects, including improving site accessibility to allow for

additional can supply and running table-top scenario disaster emerging planning sessions with sites in GB.

- Record output as new lines moved into business as usual (BAU).

- Maintained high service levels despite COVID-19.

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 (from governments, customers and consumers) on sustainability means there is increased risk of regulation on our packaging, to source sustainably and appropriately report on the impact of a changing climate.

Risk score movement from last year: No change

Alignment to strategy: H

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, both financially and reputationally, across the business from reduced stock availability to supply interruption.

Controls and mitigating activities

- Within our Healthier People, Healthier Planet 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 plastic 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 system and other actions to increase recycling and reduce littering.

2020 developments

- Entered our first sustainability-linked credit facility, allowing us to borrow up to £400 million over the next five

years while linking the margin of the facility to our sustainability goals.

- Entered into a supply agreement with Esterform Packaging Limited, the largest independent converter of PET in

the UK, for the long-term supply of UK-sourced rPET.

- We have moved Fruit Shoot Hydro and 500ml Ballygowan into 100% rPET.

- We have announced our intent for all bottles in GB to be made form 100% rPET by the end of 2022.

- Developing a roadmap for decarbonisation to meet science-based targets.

- We have significantly reduced our manufacturing water intensity ratio this year by 12.4%.

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 last year: No change

Alignment to strategy: B, F, I

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 channels.

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

- Monitoring of regulations (current and proposed or future changes).

2020 developments

- Across our international markets we have focussed on actions that aim to improve margin and performance

and concentrated on growing our premium brands internationally.

- We have completed the transaction to dispose of our juice manufacturing sites in France.

- We have made good progress on growing our innovations brands and products in Brazil.

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 health and safety of our 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 last year: No change

Alignment to strategy: H

Risk description

The quality of our products and the health and safety of our employees is of the utmost importance to us and it is essential that we manage safety, 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 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.

- Programme of integrated QSE audits in place.

- Conduct unannounced site security penetration tests and form action plans to address any findings.

2020 developments

- All sites in GB and Ireland, bar one of our Irish sites due to limitations on site visits during COVID-19, achieved

FSSC22000, a food safety certification.

- All suppliers now listed and processed on QADEX, food safety and quality self-assessment questionnaire risk

assessment and audit tool. This has been rolled out in all our markets.

- Accident Frequency Rate (AFR) and Lost time accident frequency all under target.

Legal and Regulatory

Principal risk

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

Risk score movement from last year: No change

Alignment to strategy: B, H

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 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

- In-house legal and compliance functions responsible for ensuring compliance with all relevant legislation and

regulations. They work closely with the rest of the business and external advisers and other key stakeholders

regarding current and changes to legislation.

- Global policies are in place with local variations as appropriate and training rolled out as required.

2020 developments

- New compliance system in place providing one-stop-shop for policies and logging conflicts of interest and Gifts

and Hospitality (G&H) and whistleblowing.

- Updated Anti-Bribery and Corruption (ABC) training rolled out to employees along with face-to-face

competition training provided to commercial teams.

- Horizon scanning process refreshed for legal and regulatory purposes and utilises third party experts.

Technology and Information Security

Principal risk

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

Risk score movement from last year: No change

Alignment to strategy: 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 across the Group 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. Quarterly internal phishing campaigns are

run and followed up with training and guidance.

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

2020 developments

- Implementation of cyber controls framework on track.

- Updated cyber incident response plan in place.

- We have completed the majority of the actions from a third party audit on cyber security controls.

- Cyber insurance in place for FY20 and renewed for FY21.

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 last year: Increased

Alignment to strategy: B, H

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.

The group is seeking clarity through the court on its ability to determine the rate of pension increase and revaluation of deferred benefits in the Britvic Pension Plan in GB. Refer to note 22 of the financial statements for further detail.

The risk score has increased due to the level of change in the external tax environment.

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. Quarterly updates provided on the

funding position to Trustees.

- Strong relationships with external stakeholders and third party experts to ensure that a high standard of advice

is provided to the business.

- Group tax policy in place.

2020 developments

- Triennial Valuation agreed in June 2020 delivered a mutually agreeable funding basis.

- On track with identifying and implementing the changes required for Brexit and Making Tax Digital.

- In FY20, we refinanced our Revolving Credit Facility and USPP notes which were maturing.

Talent

Principal risk

Limited capacity, capability and resilience impacts the business' ability to deliver ambitious plans for our business strategy and post COVID-19 recovery - we rely on key individuals, the risk is greater if they also face sustained high levels of business pressure or encounter personal issues.

Risk score movement from last year: Increased

Alignment to strategy: H

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.

The risk score has increased due to the impact of COVID-19.

Controls and mitigating activities

- Talent and succession planning processes in place.

- Regular pulse surveys take place across the company to obtain employees feedback on a wide range of topics.

- Annual performance management processes in place.

2020 developments

- Introduction of Wellbeing Warriors and Mental Health First Aiders to provide online support during the COVID-

19 pandemic and in the future.

- MyLearning launched, a one-stop-online-shop for learning & development at Britvic.

- Britvic established B-Diverse, a BAME network, this year and launched See-Me, our diverse ability network.

COVID-19

COVD-19 (Health and Safety and COVID-19)

The outbreak of COVID-19 has led to unprecedented disruption, with Government enforced sustained lockdowns in all our markets impacting our employees, production and customers globally. Significant economic uncertainty remains with the risk of a global recession and no readily available vaccine.

The outbreak of COVID-19 has led to a significant challenge to Health and Safety, increasing pressure on our sites, with on-going risk of an outbreak or increased absenteeism due to self-isolation requirements along with an increase in mental health concerns as a result of lockdown measures.

Risk score movement from last year: New

Risk description

The uncertain nature of the severity of the pandemic and the duration of the restrictions imposed by local governments in all our markets has resulted in raising this new risk.

Controls and mitigating activities

- Financial modelling in place to assess the impact of Out-of-Home closures, restrictions on movement of people,

and differing potential supply and demand implications for our grocery business. This is Regularly monitored and

updating depending on development of COVID-19 and lockdown rules.

- COVID-19 Response team from plc and BU level set up and operational.

- Dynamic risk assessments in place for all sites and offices.

- Weekly monitoring of supply chain risks, supplier monitoring, forward purchasing/sourcing alternative supply of

raw materials where necessary. Optimising SKUs and production schedules across all our markets.

- We are tracking employees who are self-isolating and who have been confirmed to have contracted COVID-19.

- Social distancing measures put in place across our factories and offices to reduce the risk and adhere to local

government advice.

- Additional cleaning procedures in place across our sites especially for high traffic or high touch points.

- We continue to monitor government advice in all our markets to ensure the safety of our employees.

- For more details on our response to COVID-19, see Chief Financial Officer's review on page 51.

Brexit

Brexit

Increased costs and process complexity due to Brexit, including risk of port disruption, stock build-up, additional warehousing and new tariff processes.

Risk score movement from last year: no change

Alignment to strategy: B

Risk description

UK left the EU on 31 January 2020 with a transition phase in place which will end on 31 December 2020, however, if there is no or a limited trade agreement reached by the two parties, then there could still be delay at borders, tariffs and there will be additional paperwork for imports/exports.

Controls and mitigating activities

Brexit Steering committee in place with stakeholders from across the business (Risk, GB and Ireland Commercial, DSP, Tax, Procurement and Communications) meeting on regular basis.

Raw Material and Finished Goods stock build up took place in run up to the December 2019 "No Deal" deadline

and contingency warehouses were secured.

Close collaboration with relevant trade federations so we are up to date with the latest developments and

additional support.

2020 developments

- System review underway with IT to manage the impact of potential export paperwork that may be required

We have monitored the political situation and trade/future relationship talks and made a decision on the need to

build up stock as required

- We have continued our work to add dual Food Business Operator (FBO) addresses to our product to adhere to

new labelling requirements

- Supplier readiness work was refreshed to ensure we are prepared for the introduction of tariffs (e.g. confirming

commodity codes) and for any potential port delays.

Appendix B

Responsibility statement of the Directors in respect of the Annual Report

The Annual Report and Accounts 2020 contains a responsibility statement in compliance with DTR 4.1.12. This statement is set out on page 110 of the Annual Report and Accounts 2020 and is set out below in full and unedited text. This statement relates solely to the Britvic Annual Report and Accounts 2020 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

 

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[1]  John Daly, Simon Litherland, Joanne Wilson, Suniti Chauhan, Sue Clark, William Eccleshare, Ian McHoul and Euan Sutherland

 

END

 

 

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