TIDMBAG
RNS Number : 8701T
Barr(A.G.) PLC
30 March 2021
30 March 2021
A.G. BARR p.l.c.
FINAL RESULTS for the year ended 24 January 2021
A.G. BARR p.l.c., ("A.G. BARR" or the "Group"), which produces
and markets some of the UK's leading drinks brands, including
IRN-BRU, Rubicon, Barr Flavours and Funkin Cocktails, announces its
final results for the 52 weeks ended 24 January 2021.
Financial summary
2021 2020 Change
Revenue GBP227.0m GBP255.7m (11.2)%
Profit before tax (before exceptional
items)* GBP32.8m GBP37.4m (12.3)%
Statutory profit before tax GBP26.0m GBP37.4m (30.5)%
EBITDA margin* 20.5% 20.0% +50bps
Net cash from operating activities GBP50.7m GBP40.1m 26.4%
Basic earnings per share (before exceptional
items)* 22.31p 26.50p (15.8)%
Overview
-- A year of clear strategic progress and resilient financial
performance, despite a challenging backdrop
-- Swift and decisive response to Covid-19 challenges
-- Successful prioritisation of safety and wellbeing
-- Maintained continuity of supply and service to customers and consumers
-- Actions taken to control costs, conserve cash and underpin our financial stability
-- Ended the financial year with a stronger balance sheet than
previous year, with GBP50.0m net cash at bank* (2019/20:
GBP10.9m)
Strategic highlights
-- Resilient brand performance, supported by continued
investment in brand building, and with exciting innovation pipeline
for 2021
-- Business re-engineering projects completed - right-sized for 2021 return to growth
-- Environmental sustainability roadmap in progress with net zero carbon ambition of 2040
-- Increasing drive towards a multi-beverage operating model
-- Funkin cocktails strong growth in take home and direct to consumer channels
-- Strong innovation pipeline for 2021
-- Energy market strategy further developed
-- IRN-BRU Energy in growth and gaining momentum
-- Launch of Rubicon RAW Energy
-- Digital development
-- Developing and utilising digital platforms to meet changing market dynamics
Roger White, Chief Executive, commented :
"We delivered a resilient financial performance in a year that
was difficult for all. I am extremely proud of everyone in our
business for their commitment and flexibility, which allowed us to
remain fully operational throughout the pandemic.
Across the year, we continued to focus on our key strategic
initiatives. We have significantly progressed our multi-beverage
strategy, extended our reach into new channels and accelerated our
roadmap towards net zero, which we aim to deliver by 2040. We
closed the year in strong financial health, with our brands and
business poised for growth on a like for like basis, and with the
clear intention to recommence dividend payments in 2021.
Whilst there now appears to be a route out of lockdown, the
immediate future remains uncertain. Notwithstanding this current
backdrop, our strategy for the year ahead is to support our core
growth initiatives with significant investment.
We have exciting plans to deliver across the Group and are
confident of continuing to make further progress in the coming
year."
For more information, please contact :
A.G. BARR 0330 390 3900 Instinctif Partners 020 7457 2010/05
Roger White, Chief Executive Justine Warren
Stuart Lorimer, Finance Director Matthew Smallwood
Next trading update - July 2021
* Items marked with an asterisk are non-GAAP measures.
Definitions and relevant reconciliations are provided later in this
announcement.
Chairman's Introduction
In the Chairman's statement last year I described how we were
responding to the early stages of a global pandemic. I did so
without fully appreciating the severity and duration of what we
were facing. As I write this report a year later, we are still in
the grip of a crisis which has touched the lives of us all, whether
directly or indirectly. 2020 will be a year that will be remembered
with sadness by all those who lost family members and loved ones,
and praise for those who endeavoured to keep wider society moving
throughout the past long 12 months.
The A.G. Barr Board has continued to support the executive team
and the wider business to navigate through this extraordinary
period and I would like to register our thanks to everyone across
the employee, supplier and partner base, all of whom have worked
hard to deliver continuity of supply and service to all our
customers and consumers.
The variable and fast-moving impacts of the Covid-19 pandemic
have led to a volatile and unpredictable 12 months. Against this
backdrop I am pleased to report that A.G. Barr delivered a
resilient financial performance, with revenue of GBP227.0m (2019/20
: GBP255.7m).
The executive team responded with decisiveness in the face of
events that no-one could have predicted and we ended the year with
profit before tax and exceptional items* of GBP32.8m. Swift actions
were taken to control costs, conserve cash and underpin our
financial stability.
The safety and wellbeing of our employees is always our top
priority and never was this more the case than in the past 12
months. Decisions taken in this area in turn supported our
secondary objective of maintaining operational resilience. Thanks
to the commitment and adaptability of our teams, particularly
across our supply chain, we remained safe and operational
throughout the full year and continued to deliver a high level of
service and quality.
As lockdowns and social restrictions were implemented, eased and
then reinstated across the year, both our Barr Soft Drinks and
Funkin businesses felt the effects. The severity of the impact on
our business lessened as the year progressed and we became more
adept at dealing with the challenges we faced, taking timely action
to mitigate the financial, operational and consumer changes we
experienced.
Our flexibility, alongside the resilience of our business model
and the strength of our brands, were key to delivering a robust
performance in these testing times.
I am pleased to report that following the considerable
management actions to protect our financial stability the business
ended the year with an even stronger balance sheet than this time
last year.
Dividend
In April 2020, given the unprecedented circumstances arising
from Covid-19, we communicated our decision to temporarily suspend
dividend payments, one of a number of important actions we took to
conserve cash and maintain balance sheet flexibility. We kept this
position under review and, on the basis of our underlying
assumptions related to the UK's Covid-19 recovery, confirmed at our
Interim Results in September 2020 that we expected to resume
dividend payments in the 2021/22 financial year.
Subsequent to this announcement the pandemic has accelerated,
along with the associated lockdowns and societal interventions.
However, we are positive that the rapid UK vaccination response
will provide a route through, and out of, the current crisis and we
remain committed to our plan to recommence dividend payments during
the course of this financial year ending January 2022.
Board
Our desire to further develop and strengthen our Board's skills,
refresh capabilities and increase diversity continues. We will seek
to add to our Board this year as part of our normal Independent Non
Executive Director succession planning.
In addition, as I move towards the conclusion of my tenure as
Chairman, a formal search process has been initiated to find a
suitable candidate to succeed me in due course, with an update
expected later this year.
Responsibility
The Board and executive team have put considerable incremental
efforts during the year into defining our roadmap and plans across
the Environmental, Social and Governance (ESG) agenda. This will
become an increasing focus for the Board and business in the coming
years. The Chief Executive Statement, and our Responsibility and
Governance Reports, will set out our progress and further plans in
these areas.
People and culture
The Covid-19 pandemic has put a considerable strain on us all,
both personally and professionally, and our business has not been
immune from the effects. During the course of the year, facilitated
via the Independent Director responsible for employee engagement,
the Board has reviewed and discussed a range of people and culture
matters, such as wellbeing, mental health and employee
engagement.
Despite the trying times, teams have pulled together and the
positive, results-driven and supportive A.G. Barr culture has shone
through. I would like to take this opportunity to extend my thanks
on behalf of the Board to the full team at A.G. Barr, for their
contribution and commitment which have once again been
invaluable.
Prospects
Looking ahead, it is clear that 2021 will not be an entirely
"normal" year, however there are many reasons to be positive as we
look to the future. The Board remains confident in our value driven
strategy and I believe we have navigated the crisis well. The
resilience of our teams, business model and brands have been
highlighted in this most unusual and difficult year. We have gained
considerable insight and experience in 2020 which will remain
important for at least the early months of 2021, however as we now
plan for recovery the Board is confident that our strategy will
drive growth and value for all our shareholders and key
stakeholders.
John Nicolson
CHAIRMAN
Chief Executive's review
Our key financial metrics for the year were as follows :
-- Group revenue GBP227.0m (2020 : GBP255.7m)
-- Profit before tax and exceptional items* GBP32.8m (2020 : GBP37.4m)
-- Profit before tax and after exceptional items GBP26.0m (2020 : GBP37.4m)
-- Operating margin before exceptional items* 14.8% (2020 : 14.9%)
-- Strong balance sheet with net cash at bank* of GBP50.0m
Statutory profit before tax of GBP26.0m reflects a net
exceptional charge of GBP6.8m. Total exceptional costs of GBP14.4m
related to the completion of our business re-engineering programme,
the previously communicated GBP10.0m impairment of our Strathmore
brand and assets and a GBP1.3m Funkin goodwill adjustment. These
costs were partially offset by an exceptional credit of GBP7.6m,
related to a one-off contractual payment following the early
termination of the Rockstar franchise.
I had anticipated the 2020/21 financial year to be a period of
strong recovery for the Group. In the later part of 2019/20 we
initiated a number of actions to support our return to growth,
building blocks that saw us exit 2019/20 with strong momentum. This
momentum carried into the first 6 weeks of the new financial year,
however the balance of the year that followed these early weeks was
dominated by Covid-19 and the significant impact it has had on our
collective health, wellbeing, economy and a raft of associated
wider societal issues.
Notwithstanding the challenges we faced, 2020/21 was a year of
action and progress for A.G. Barr. Across the Group we executed our
strategy with the agility and pragmatism necessary in these
volatile times.
Covid-19
Since the onset of the Covid-19 pandemic we have followed a
simple approach in dealing with the crisis focusing on 3 key areas
:
1. Putting our people and safety first
We have always worked hard to create a culture in which safety
and wellbeing are our top priorities. Building on these strong
foundations we successfully introduced an enhanced range of safety
and hygiene measures across all our operations in response to the
challenges of the pandemic. This ensured we had the safest working
conditions possible across our sites whilst seamlessly and
effectively transitioning to technology-enabled home-working for as
many colleagues as possible.
Wellbeing has been at the top of our agenda throughout the year
and our 2020 Responsibility Report details some of the specific
initiatives we have introduced to support our people, such as
increasing the number of employees trained as Mental Health first
aiders who are equipped to provide support in these difficult
times.
2. Supporting Group operating resilience
Along with our fellow food and drink manufacturers we have
worked hard to successfully maintain continuity of the food and
drink supply chain across the past 12 months. I am extremely proud
of everyone in our business for the grit, determination and
resilience they have demonstrated. I am especially proud of our
wider supply chain teams who have kept our factories, warehouses
and logistics operational and delivered a high level of quality and
service to our customers and consumers throughout the year,
supported by our key suppliers and partners.
3. Ensuring our financial security and stability
Entering the 2020/21 financial year with GBP10.9m net cash at
bank*, the Group had the benefit of a very strong financial base
and balance sheet. However, given the uncertainty associated with
the pandemic, we took early and decisive action to protect
liquidity, conserve cash and reduce costs. This included the
suspension of dividends, a short period when we made use of the
government's Coronavirus Job Retention Scheme, voluntary executive
salary reductions and ultimately a restructuring plan which
commenced in the summer months and completed in January 2021,
ensuring we right-sized the business.
Many of the actions we took across 2020 were not easy decisions
to make, impacting shareholders and employees. However we believe
we did what was required to safeguard our business, to mitigate as
far as possible the risks arising from Covid-19 and to ensure our
business is well positioned to benefit from the recovery phase when
it arrives.
Soft drinks market
Once again the soft drinks market has demonstrated its
resilience.
The 2020 soft drinks market was characterised by the migration
of out of home consumer demand into the home environment. In
addition to the well understood challenges faced by the hospitality
sector, the high street and travel also suffered as a consequence
of significantly less footfall. Conversely the grocery multiple
channel benefited from the shift in shopping dynamics and there was
also some positive spill-over for soft drinks purchasing into
online and neighbourhood convenience stores.
As we have commented previously, the data across the market
reflects the changes in purchase behaviour of consumers but does
not capture the impact as accurately on out of home, general
hospitality and the on-trade markets. The switch of consumer
purchase habits and the data read in take home will reflect reality
but will not reflect the impact of reduced consumption in the less
measured but materially impacted channels.
IRI Marketplace data for the 52 weeks to 24 January 2021
recorded the total UK soft drinks retail market as increasing in
value by 1.8% and in volume by 2.4%. Volume grew ahead of value
driven by a move to bigger pack formats with unit sales down 6%
while average pack size grew by 9%.
Carbonates grew in value by 7.8%, buoyed by those sub categories
with historic strength in out of home channels, while the value
decline in stills (down 5.1%) reflected the drop in "on-the-go"
consumption of bottled water, sports drinks and to a lesser extent
fruit drinks.
Cocktail market
Pre-lockdown cocktails in the GB on trade grew in value by 6.4%,
outlets stocking cocktails increased by 3.7% and the number of
consumers enjoying cocktails rose by 13% year on year to 10.3m.
(Source : CGA Mixed Drinks Report Q1 2020).
However from the end of March 2020 out of home cocktail
consumption was significantly impacted as a result of the UK-wide
lockdown. The Q3 2020 CGA Mixed Drinks Report reported GB cocktails
value down 34%, albeit with cocktails' share of total spirits down
only 1 percentage point at 6.5%.
In the off trade, there was clear evidence however that cocktail
consumption at home has risen dramatically. Prior to Covid-19, only
a third (37%) of people who consumed mixed drinks in pubs and bars
did so at home, but the first national lockdown saw that figure
rise to half (50%), with young adults especially engaged. The
Funkin brand capitalised on this increase in demand with its range
of premium ready to drink (RTD) cocktails and is now the UK's No.1
RTD cocktail brand and a Top 5 RTD grocery brand, leading the
growth of the RTD category.
(Sources : CGA Mixed Drinks At Home Report 2020 ; Nielsen GB
Total Grocery Value 12 weeks to 16 January 2021)
Performance impact summary
We started the year with strong momentum however the Covid-19
pandemic began to have an impact at the end of March, most
significantly on our hospitality and convenience channels with a
material reduction in the "out of home" consumption of soft drinks
combined with a consumer shift towards larger, less frequent
take-home purchasing. As such Q1 revenue declined 9.1%.
While these shopping and consumption patterns continued
throughout the "full lockdown" period across April, May and June,
we believe sales benefited from the favourable weather during this
time. As lockdown measures eased somewhat from July, we saw sales
in the hospitality and 'on the go' consumption segments beginning
to recover, albeit slowly. Q2 revenue declined 6.4% resulting in H1
revenue down 7.6%
In the first 4 months of the second half trading was at the
upper end of our scenario plans with Q3 trading down 0.5%. However,
Covid-19 developments since early December 2020, in particular
increased social restrictions across the UK and the entry into full
lockdown in January 2021, had a significant effect, most notably in
the hospitality and "drink now" categories. This, alongside the end
of the Rockstar partnership at the end of October 2020, resulted in
H2 revenues down 14.6%.
Performance across major retail has been robust with a broadly
flat performance relative to the prior year and our online and
direct to consumer trading has been very strong, albeit from a
small but growing base. "Out of home" channels continue to be
impacted by trading restrictions with social distancing measures
reducing in-store capacity, and people continuing to work from
home. We will continue to support affected customers through the
current challenges, to ensure both we and they are well-placed for
the recovery as it unfolds.
Strategy execution
We remain committed to our strategic priorities - connecting
with consumers, building brands, driving efficiency and building
trust. Within this framework the evolution of our strategy
execution continued across 2020 despite the difficulties of the
pandemic. We continued to invest for growth and made progress in
some key strategic focus areas such as environmental
sustainability, digital development and our increasing drive
towards a multi-beverage operating model.
Connecting with consumers
Despite the obvious challenges of almost a full year dominated
by the impact of the global pandemic we have continued to support
and develop innovative ways to connect with consumers. Keeping our
brands front of mind in challenging times and providing a little
light relief to consumers has been our objective, especially during
the key summer trading months.
IRN-BRU has continued to provide consumers small moments of
pleasure during uncertain times, both through the enjoyment of the
product itself and through strengthening consumers' long-standing
emotional connections with the brand.
Excluding the benefit of the limited edition IRN-BRU 1901,
IRN-BRU sales declined 6.5%, a robust performance in the
circumstances, with IRN-BRU Energy and IRN-BRU XTRA both in
growth.
During the course of the year we increased the brand's presence,
particularly across social media and digital, supporting brand
affinity and awareness, giving us confidence in IRN-BRU's brand
equity strength as we now deliver our 2021 plans.
The Rubicon brand's positioning and communication strategy was
given a full refresh with the launch of the "Make the unboring
choice" campaign across TV, outdoor, social and digital channels.
This multi-year campaign is designed to support the growth of the
brand as an aspirational mainstream range of exciting fruity drinks
aimed at a broad range of consumers.
Rubicon gained market value share within both the fruit drinks
and flavoured water sub categories however total sales fell 9.8%
against a Covid-19 backdrop which impacted both the brand's
performance in impulse and during the key Ramadan trading
period.
We are confident in the refreshed brand positioning, innovation
pipeline and consumer marketing strategy in the long term.
Building brands
Our drive to build a multi-beverage portfolio has made positive
progress across the last year with Funkin's ready to drink (RTD)
cocktails gaining traction within the grocery channel, where the
Funkin brand has grown by over 100%. While Funkin was materially
affected by the difficulties experienced across the hospitality
sector, this was partially offset by take home opportunities.
Funkin grasped these opportunities, through both traditional retail
and direct to consumer channels, as consumers tried to vary their
drinks consumption at home. We are expecting to retain and grow RTD
cocktail distribution in these channels whilst we also anticipate a
strong return to growth in the on trade in due course. We have
supported our hospitality customers where possible, appreciating
the challenges they face, and will continue to work in partnership,
particularly as we look ahead to the reopening of this vital trade
channel.
In addition we have developed a range of hard seltzers to sit
within the Funkin masterbrand, which although only available
towards the end of 2020/21, will factor in our growth plans in the
year ahead.
We have underpinned our relationship with Elegantly Spirited
Limited (ESL) further investing in the business and supporting the
STRYKK brand via our distribution agreement. The low and no alcohol
market has continued to grow at pace over 2020 culminating in an
increased uptake of "dry January". This is a positive partnership
and we look forward to playing our part in the STRYKK brand's
future growth.
Driving efficiency
We continue to drive for greater efficiency and stronger
financial returns.
We initiated our business re-engineering programme in the second
half of 2019 and this 2-year programme completed in 2020/21. We
reviewed and re-scoped the programme in light of the Covid-19
impact and the confirmation of the termination of our Rockstar
partnership. The programme delivered a significant number of
simplification actions alongside a reorganisation and refocusing of
our ways of working. We now have the right capabilities and
organisational structures in place to support our growth through
the recovery phase.
We have also made a number of digital improvements across our
technology and systems driving efficiency and flexibility for our
customers, suppliers and our own operations. This has proven even
more important given the challenges we are all now dealing with, as
remote working and reliable technology continue to be more
important than ever.
We have now turned our attention to value optimisation which is
creating and delivering a continuous pipeline of product
optimisation actions which we expect to add considerable value for
some time to come.
Building trust
Trust needs to be earned over time. We have worked hard to build
trust over many decades however we are acutely aware that this
cannot be taken for granted, and is something we must continually
seek to enhance and build upon through our responsible actions.
Across the past year we have sought to play a small part in
supporting those who have done so much for us all during the
pandemic, distributing over 500,000 drinks to hospitals, care staff
and our communities throughout the UK as a gesture of our
thanks.
A key focus across the last 12 months has been on our
environmental sustainability agenda. Working with independent
experts we are accurately assessing our current carbon footprint
such that we can build a deliverable and realistic decarbonisation
roadmap - with an ambition to be net zero by 2040, if not sooner.
We plan to share our net zero roadmap during the course of
2021.
While this important assessment is underway, and building on our
move to 100% renewable electricity at all our sites in 2020, we are
now accelerating many of the actions we had already identified to
help us on our net zero journey. We have increased both the quantum
and the pace of our recycled plastic (rPET) ambition - our IRN-BRU
and Rubicon plastic bottles will be made from 100% recycled
material by early 2022 and all our plastic bottles will be 100%
rPET by the end of 2023. We're also one of the first businesses in
the UK to start using 100% recyclable packaging film made from 100%
recycled content, which will be on all our consumer multipacks by
the end of 2021.
We are actively involved in finding solutions to address
packaging waste and believe that a deposit return scheme (DRS) for
drink containers in the UK will lead the way for food and drinks
packaging to become part of a truly circular economy. Over the past
year we have worked closely with fellow drinks producers in
Scotland, along with other key stakeholders, taking the lead in the
establishment of a Scottish DRS scheme administrator. The
legislation permits producers to appoint a not-for-profit Scheme
Administrator to collectively discharge their DRS obligations and
designed correctly, we believe the DRS scheme can be a sustainable
solution to packaging waste that is positive for the environment
and practical for consumers and business.
These are just some of the actions we are taking to ensure we
play our part in reducing the effects of climate change on our
planet. We are a business that prides itself on acting with
integrity and building trust so we will only confirm our net zero
commitment as and when we have a robust and deliverable plan in
place to deliver it.
Outlook
We closed the year in strong financial health and with our
brands and business poised for growth, albeit without the Rockstar
brand which accounted for over 8% of Group revenue in 2020/21. The
past 12 months have taught us a great deal about how to manage
uncertainty. The uncertainty related to Covid-19 continues, however
we have taken steps to ensure that our planning for the year ahead
gives us as much flexibility as possible to minimise the likely
impact on our short-term financial performance. Our focus beyond
this uncertainty is to capitalise on the growth potential of our
brands in the recovery phase that will come in due course. I am
confident that we have the agility, ambition and strategy to
deliver against our potential in the short, medium and long
term.
Roger White
CHIEF EXECUTIVE
Financial review
The following is based on results for the 52 weeks ended 24
January 2021. Comparatives, unless otherwise stated, are for the 52
weeks ended 25 January 2020.
Overview
Having entered the financial year with strong trading momentum,
the impact of Covid-19 in March was as unexpected as it was
unwelcome and significantly impacted performance thereafter. The
financial imperatives for the business were to secure liquidity,
ensure continuity of operations, conserve cash and reset the cost
base. While we delivered against these priorities, trading was
nonetheless disrupted, particularly in the hospitality and 'out of
home' channels. This resulted in an 11.2% reduction in reported net
sales, down GBP28.7m to GBP227.0m, and a 12.3% reduction in profit
before tax and exceptional items, down GBP4.6m at GBP32.8m.
Statutory profit before tax at GBP26.0m was down GBP11.4m,
driven by the adverse trading performance and a net
P&L charge of GBP6.8m arising from a number of exceptional items detailed below.
The impact of Covid-19 and the termination of the Rockstar
franchise required prompt and decisive action to reduce costs and
to right-size our operations, while ensuring we maintained
appropriate capacity for growth. All aspects of expenditure were
reviewed including marketing investment, discretionary pay and
organisational structural costs. We re-focused our marketing on the
channels where spend remained effective and pivoted our resources
to those routes to market that remained open. The combined impact
of these actions enabled gross and operating margins, pre
exceptional items, to be maintained at levels broadly in line with
the prior year despite the impact of lower sales.
We entered the pandemic with strong financial fundamentals, a
well maintained asset base and significant net cash. At GBP50.7m
(2019/20 : GBP40.1m) net cash generated from operating activities
continued to be strong throughout 2020/21, reflecting the prompt
action taken. Disciplined cash management, combined with capital
programme deferrals and dividend suspension, resulted in the Group
closing the financial year with net cash at bank* of GBP50.0m.
Despite the current pandemic challenges, our strategy remains
steadfast. We are a well invested asset-backed business with strong
brands and varied, but balanced, routes to market. We are intending
to emerge from the pandemic as a simpler, more resilient and agile
business with a clear path to value-creating growth.
Covid-19 response
During the year, the business responded quickly to the evolving
Covid-19 circumstances. Our first priority was to ensure the safety
of our employees.
A Covid-19 crisis management team was established immediately
and oversaw a range of safety and wellbeing, operational, employee
engagement and technology decisions and activities to support the
Group. The crisis management team continues to operate today with a
senior leadership team, dynamic risk assessment protocols and
regular group-wide communications ensuring best practices are
identified and cascaded in what continues to be a fluid
environment.
From a financial perspective, while cost conservation measures
were taken in all business units we sustained investment in capital
assets and marketing, where it made sense to do so. We implemented
multi-scenario financial planning to ensure we were equipped to
react swiftly and course correct if required, as events
unfolded.
As part of our pandemic response, we participated in the
government Coronavirus Job Retention Scheme (CJRS) from April to
July 2020 when restrictions and consumer demand prevented a number
of our employees from undertaking their roles. Our participation in
the Scheme ended in July 2020 at the conclusion of a group-wide
organisational review. In total the Company received GBP1.3m of
CJRS funding.
Following the announcement of the termination of the Rockstar
contract during the first lockdown, we spent time determining the
right sustainable organisational structure that would facilitate a
stronger business to emerge post pandemic. Unfortunately this
review resulted in the removal of a number of roles from across the
Group. The one-off costs associated with this programme are
detailed below. While the programme benefits accrued largely within
the financial year there will be some continued savings in the
first half of the financial year 2021/22.
The Group remained net cash positive throughout the year and all
our financial forecasts predicted we would remain solvent under a
range of severe but plausible scenarios. We nevertheless took the
precautionary step to draw down our total committed credit facility
(GBP60m) in March 2020. This action had the full support of our
lending banks and all facilities were subsequently repaid in
September 2020. We remained profitable and cash generative across
the financial year. The scenario plans and viability work
undertaken as part of the annual reporting process confirm that we
continue to be a robust business with strong financial
fundamentals.
Looking forward, we expect the pandemic will continue to impact
the business in 2021/22. While we now have a better understanding
of the impact of lockdowns and social restrictions on our trading
patterns, there remains considerable uncertainty over the duration.
We will continue to employ a scenario based approach to financial
planning, with a range of possible projections built around a base
plan. Our viability modelling highlights that we have the financial
resilience to withstand all severe but plausible scenarios and we
have well developed plans to mitigate the adverse impact of
longer-term consumer restrictions on revenue, profit and cash,
should these be required.
Segmental performance
There are 3 reportable segments in our Group :
1. Carbonated soft drinks
2. Still soft drinks and water
3. Funkin
Carbonated soft drinks
Our carbonates segment represents over 81% of our revenue and
over 87% of gross profit. A reported revenue decline of 6.2% in
this segment is a creditable performance in a year clearly impacted
by Covid-19 as well as the loss of the Rockstar franchise from 1
November 2020.
The IRN-BRU brand reported net revenue down 9.7%, with a decline
in out of home sales partially offset by growth in the take home
category. Recognising the importance of focusing on core trading
activities, we chose not to launch any new brand innovation in the
year, however recent innovations - IRN-BRU Energy and IRN-BRU XTRA
- continued to deliver revenue growth.
Barr Flavours continued to grow, up 3.3%, on the back of
sustained distribution gains, largely in England, despite the
headwinds of the pandemic. The brand has built a strong position as
a great tasting value brand in symbols and independent stores, a
sector that has held up relatively well during lockdown
restrictions.
Our carbonated Rubicon drinks (Rubicon Spring and Rubicon
Sparkling) represent over 2/3rds of the Rubicon range. These
brands, particularly Rubicon Spring, are predominately 'out of
home' focused and while they performed strongly outside of lockdown
(pre Covid-19 and late summer) they were disproportionately
impacted when restrictions were in place. Rubicon Spring net
revenue was down 8.1% while Rubicon Sparkling revenues were flat
year on year.
Overall, our carbonates pricing has been sustained and strong
cost management activity has mitigated the impact of lower volumes
on our largely fixed cost base. However, the combination of
stronger than average growth by Barr Flavours and the switch from
'out of home' formats to multi-packs and larger 'at home' formats,
has resulted in a modest margin dilution on gross margin.
Stills and water
Segmental net revenue declined 36% driven by a 43.3% fall in
volume, a direct reflection of the impact of pandemic restrictions
on the brands in this segment.
The impact of a challenged fruit drinks sector combined with
lockdown restrictions preventing the execution of key promotional
activities during Ramadan (April/May 2020), resulted in Rubicon
Stills revenue being down 18.2% versus the prior year.
The other still brands in this segment, KA, Simply Fruity and
Snapple, were also exposed to the 'out of home' trading challenges
leading to year on year declines.
The closure of the crucially important hospitality sector for
much of the financial year has had a severe impact on the
Strathmore brand with sales down 80-90% during the lockdown
periods. While we took immediate and significant remedial action to
reduce costs, the extent of the sales reduction during lockdowns
and the largely fixed cost nature of the single plant Strathmore
operation had a material impact on gross profit. With an uncertain
medium-term outlook, we implemented a full review of the Strathmore
business during Summer 2020. The results of this review
necessitated the impairment of the brand value and a reduction to a
more efficient single shift manufacturing operation. These actions,
and the beneficial impact of brand mix, resulted in a gross margin
improvement for the stills and water segment as a whole.
Funkin
Funkin entered the financial year as an on-trade focused brand
with a track record of sustained, often double digit, growth.
Following the effective closure of the hospitality sector in March
2020, historically representing c.85% of revenue, we pivoted
Funkin's focus towards branded ready to drink cocktails in the take
home channels. While total sales across the year were down 11.5%,
and gross profits fell 31.5%, the underlying performance of the
take home channel, currently representing c.50% of the business,
was very strong.
Exceptional items
In the year to 24 January 2021 we incurred, and have separately
disclosed, four items considered to be non-recurring and
exceptional in nature. The net P&L charge (pre-tax) of these
items was GBP6.8m.
The Board is of the opinion that the nature and materiality of
these items makes it appropriate to classify them as 'exceptional'
providing a more useful representation of the underlying
performance of the Group. In determining whether an event or
transaction is exceptional, management considers quantitative as
well as qualitative factors, such as the frequency or
predictability of occurrence, as well as the size and nature of an
item both individually and when aggregated with similar items, for
example restructuring costs, product development or asset write
offs. This presentation is consistent with the way that financial
performance is measured and reported to the Executive Committee and
to the Board, and assists in providing a meaningful analysis of our
trading results.
-- Strathmore brand and asset impairment (GBP10.0m non cash
P&L charge). Strathmore is a highly regarded premium brand in a
structurally low margin bottled water category. The brand is
predominantly targeted on the hospitality sector which continues to
be significantly challenged by lockdown measures. A review of the
outlook for both the brand and the sector highlighted an impairment
requirement which has resulted in a write-down of the Strathmore
brand (GBP7.0m), goodwill (GBP1.9m) and tangible fixed assets
(GBP1.1m).
-- Funkin Goodwill (GBP1.3m non cash P&L charge). A charge
to the income statement relating to acquisition goodwill.
-- Business re-engineering programme (GBP3.1m P&L charge).
In September 2019 the Group embarked on a 2 year change programme.
Phase 1, which delivered a number of portfolio simplification
actions alongside an initial reorganisation and refocusing of our
Commercial teams, completed on time and to budget during the first
half of 2020/21. Following the announcement of the termination of
the Rockstar agreement, we reviewed and updated our Phase 2 plans,
also taking into account pandemic related changes in operations.
Phase 2 regrettably led to further right-sizing decisions which
resulted in a number of redundancies across the business, including
both our Strathmore production and Funkin teams where Covid-19 has
had the greatest impact. The programme is now complete
-- Rockstar compensation (GBP7.6m P&L credit). The early
termination of the Rockstar franchise entitled the Group to a
one-off contractual termination payment
The net cash impact of these exceptional items is GBP4.5m cash
in-flow with the Strathmore impairment (GBP10.0m) and Funkin
goodwill adjustment (GBP1.3m) being non cash.
In the prior year, a net zero exceptional expense was
recognised. This represented the combination of year 1 of the
simplification and standardisation programme costs offset by a
GBP1.8m receipt for compensation in relation to the removal of our
on-site wind turbine.
Interest
Net finance charges, totalling GBP0.7m, comprise the interest
relating to the drawdown of the revolving credit facilities between
March and September 2020, lease interest costs under IFRS16 and
notional finance costs associated with the defined benefit pension
deficit under IAS 19.
The constituent elements of the interest charge are:
2020/21 2019/20
GBPm GBPm
======= =======
Interest related to Group borrowings (0.4) (0.2)
======= =======
Lease Interest (0.1) (0.1)
======= =======
Finance costs related to pension (0.2) (0.3)
======= =======
Net finance costs (0.7) (0.6)
======= =======
Taxation
Our reported tax expense of GBP6.9m (2019/20: GBP7.6m)
represents an effective tax rate of 26.8% (2019/20: 20.3%). This is
higher than the UK statutory rate of 19.0% and higher than the
prior year primarily due to a one-off revaluation of deferred tax
balances following the government decision to reverse the planned
reduction in UK corporation tax rate from 19% to 17% and a non
deductible element within exceptionals. These have been partially
offset by an over-provision of prior year tax charges.
Earnings per share (EPS)
Basic EPS, before exceptionals, was 22.31p (2019/20: 26.50p), a
decrease of 15.8%, based on a basic weighted average of 111,171,047
shares (2019/20: 112,452,517), reflecting the impact of the
challenging trading environment and the increased tax charge
following the revaluation of deferred tax. Basic EPS post
exceptionals was 17.18p (2019/20: 26.50p), a decrease of 35.2%.
Based on a diluted weighted average of 111,312,006 shares, diluted
EPS was 17.16p (2019/20: 26.49p).
Dividends
The decision was taken in March 2020 to suspend dividend
payments, with the aim of protecting liquidity at the onset of the
Covid-19 pandemic. We remain committed to our plan to recommence
dividend payments during the course of our financial year ending
January 2022.
The Group took the opportunity to review the dividend
distribution strategy with the aim of creating a progressive and
sustainable dividend policy that has regard to current performance
trends including sales, profit after tax and cash, and satisfies
certain guiding principles:
-- Dividend cover: targeting 2 times cover
-- Payout ratio: targeting 50% of free cash flow
-- Consistent with medium-term profit outlook
This framework will be reviewed on an ongoing basis to ensure it
remains appropriate in the context of the Group's wider capital
allocation objectives.
Balance sheet and cash flow
The Group balance sheet remains robust and in a cash positive
position with GBP50m net cash at bank* as of 24 January 2021. This
is testament to the prompt and decisive action taken early in the
pandemic to conserve cash and provides the Group with financial
resilience and the flexibility to pursue our strategic objectives
as we exit the crisis. We entered the pandemic with a strong
balance sheet and significant liquidity and we exit the year in a
stronger financial position.
Net assets remain in line with the prior year with strong
operating cash generation, supported by the suspension of dividends
offsetting the impairment of assets relating to the Strathmore
business. This impairment, combined with lower capital spend and
strong working capital management, enabled Return on Capital
Employed (ROCE)* to be broadly maintained at 16.0% (2020: 16.1%)
despite the lower Covid-19 impacted profit before tax.
We continued to apply a disciplined approach to cash management
across the Group while supporting those customers experiencing
temporary difficulties relating to lockdown restrictions. Working
capital cash flow was a net GBP11.5m inflow, with lower receivables
more than offsetting lower payables, coupled with a small increase
in inventories related to Brexit contingency stock-builds. While
much of the receivables benefit relates to sales phasing and the
deferment of a quarterly VAT payment, the Group did avoid any
significant trade debt write-off during the year and overdue debts
were minimal at the year end.
We remain committed to a well-invested asset base. After several
years of significant capital spend our cash capital expenditure in
the year was always intended to reduce in 2020/21. At GBP7.1m
(2019/20: GBP14.8m), our spend reflects both our decision to
conserve cash and the effect of operational restrictions put in
place to protect our employees. We also took the decision to
re-phase our multi-year process facility replacement programme at
Cumbernauld, which had been originally planned to complete in 2020.
The project will now complete, within budgeted spend, in spring
2021. During the year we also took the decision to acquire the
canning line in Milton Keynes which had come to the end of its
primary lease.
Investment in associate - Elegantly Spirited Limited (STRYKK
brand)
In June 2019, the Group made a 20% minority equity investment in
Elegantly Spirited Limited (ESL), a business start-up in the
emerging zero proof spirits market, and the owner of the STRYKK
brand, a range of zero proof spirits products. The STRYKK brand has
established itself as an important player in this small but growing
market and is performing in line with expectations, having pivoted
its strategy from an on-premise to a grocery channel focus. During
the financial year the Group exercised its right to participate in
further ESL funding through a GBP1m convertible loan note. ESL is
recognised as an associate, with the equity investment accounted
for under the equity method of accounting. The investment was
originally recognised at the transaction investment price (GBP1.0m)
and subsequently adjusted to reflect the Group's share of the loss
since our investment (GBP0.2m). The Loan note (GBP1.0m) has been
recognised on the balance sheet under loans and receivables. The
Group has the right, but not the obligation, to participate in
future equity funding initiated by ESL.
Financial risk management
The Group's risk management process is owned by the Board and
operates at every level within the business to support the
successful delivery of our strategic objectives. The process is
based on a balance of risk and reward, determined through
assessment of the likelihood and impact of the risk and within the
context of the Group's risk appetite as established by the Board.
Risks are monitored throughout the year with consideration to
internal and external factors and the Group's risk appetite, and
updates to risks and mitigation plans are made as required. During
the year the business undertook several dynamic risk assessments to
ensure rapid and appropriate responses to the evolving Covid-19
pandemic and the impact of this on our operations. The principal
risks that could potentially have a significant impact on our
business have not changed since the end of the financial year.
European Union withdrawal
The Company has had a Brexit Working Group in place since
shortly after the 2016 UK Referendum with the objective of ensuring
minimal disruption for the Group during the UK exit and transition
period. Alongside this it has put in place appropriate processes
and procedures to enable effective and compliant trading under the
new UK/EU arrangements. The working group is chaired by the Head of
Group Risk, with appropriate input from external advisors and
representation from relevant business areas. As a result of actions
undertaken by the working group, the business did not experience
any significant disruption during or in the immediate aftermath
after the end to the transition period on 31 December 2020. As the
majority of the Group's production and trading is domestically
focused, we anticipate only a modest financial impact under the new
EU/UK trade arrangements resulting from tariffs on a small group of
raw materials and finished goods. We continue to believe that the
Group's overall risk remains largely around these tariffs, the
potential for short-term foreign exchange volatility and possible
temporary logistic disruption. These risks are considered
manageable and the withdrawal from the EU is not considered to be a
principal risk. Medium-term supply disruption risk is being managed
through a targeted increase in inventories, close coordination with
our logistics partners and continued monitoring of the cross border
environment. Foreign exchange requirements are not significant and
exposure to exchange rate volatility is mitigated by our currency
hedging programme.
Treasury and commodity risk management
The treasury and commodity risks faced by the Group continue to
be identified and managed by a Group Treasury Committee whose
activities are carried out in accordance with Board approved
policies and subject to regular Audit and Risk Committee reviews.
No transaction is entered into for speculative purposes. Key
financial risks managed by this committee include exposures to
foreign exchange rates, and the management of the Group's debt and
liquidity positions. The Group uses financial instruments to hedge
against foreign currency exposures.
As at 24 January 2021, in addition to the Group's cash position,
the Group had GBP60m of committed and unutilised debt facilities,
consisting of 3 revolving credit facilities with 3 individual
banks, providing the business with a secure funding platform. These
facilities are continually reviewed to ensure they remain
appropriate in terms of quantum, duration and cost effectiveness. 2
of these facilities (both GBP20m) expire in February 2022 with the
other (GBP20m) expiring in February 2025.
We expect to shortly conclude the extension of one of the
February 2022 facilities. Our new arrangements will result in the
Group maintaining three revolving credit facilities - a GBP20m
facility expiring February 2025, a GBP10m facility with 2 years
remaining and a GBP20m facility ending in February 2022. These
arrangements provide security in these volatile times and
optionality should debt capacity be required to facilitate
corporate opportunities.
The Group seeks to mitigate risks in relation to the continuity
of supply of key raw materials and ingredients by developing strong
commercial relationships with its key suppliers. The Group manages
commodity pricing risk actively and where commercially appropriate,
will enter into fixed price supply contracts with suppliers to
improve certainty. We have not directly entered into commodity
hedge contracts.
In addition, the Group enters into insurance arrangements to
cover certain insurable risks where external insurance is
considered by management to be an economic means of mitigating
these risks.
Accounting policies
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
and the Listing Rules of the Financial Conduct Authority.
There have been no changes to accounting policies applied this
year other than the adoption of IAS 20 Accounting for Government
Grants and Disclosure of Government Assistance. All new or amended
accounting standards that are applicable have been adopted with no
material impact on the results for the current and prior reporting
periods.
Pensions
The Group continues to operate two pension plans - the A.G. BARR
p.l.c. (2005) Defined Contribution Pension Scheme and the A.G. BARR
p.l.c. (2008) Pension and Life Assurance Scheme. The latter is a
defined benefit scheme based on final salary, which also includes a
defined contribution section for pension provision to senior
managers.
The defined benefit scheme has been closed to new entrants since
5 April 2002 (and to new executive entrants since 14 August 2003)
and closed to future accrual for members in May 2016. Existing and
new employees have been invited to join the Company-wide defined
contribution scheme. The defined benefit pension scheme triennial
valuation was undertaken as at April 2020 and is with the Pension
Scheme Trustee for approval. The valuation identified a GBP7.3m
deficit on a technical provisions basis as at that date reflecting
the substantial reduction in the value of the Scheme's investments
which occurred at the start of the Covid-19 crisis. Subsequent to
the valuation, the Company and the Pension Scheme Trustee have been
in discussions to agree a deficit recovery plan intended to
eliminate the deficit over the medium term. This plan, once
finalised, will be submitted to the Pension Regulator for approval.
The next triennial actuarial valuation will be as at April
2023.
On an IAS 19 valuation basis, which is before the benefit of the
asset back funding arrangement, the deficit reduced from GBP10.5m
as at 25 January 2020 to GBP7.9m as at the balance sheet date. The
fall in the deficit reflects changes in mortality assumptions to
align with the 2021 triennial valuation and the benefit of
additional contributions paid by the Company partially offset by
small changes in underlying assumptions on inflation and discount
rates. The Group continues to work proactively with the Pension
Trustee to de-risk the pension liabilities and secure the
commitments to employee benefits as part of the Group's ongoing
strategic risk management. The Group remains of the view that the
overall pension deficit is manageable.
Stuart Lorimer
Finance Director
CONSOLIDATED INCOME STATEMENT FOR THE YEARED 24 JANUARY 2021
2021 2020
Before exceptional Before exceptional
items Exceptional items* Total items Exceptional items* Total
GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 227.0 - 227.0 255.7 - 255.7
Cost of sales (132.2) (1.2) (133.4) (149.6) (1.1) (150.7)
------------------- ------------------ ------------------ ------- ------------------- ------------------ -------
Gross profit 94.8 (1.2) 93.6 106.1 (1.1) 105.0
Other income - 7.6 7.6 - 1.8 1.8
Operating expenses (61.2) (13.2) (74.4) (68.0) (0.7) (68.7)
------------------- ------------------ ------------------ ------- ------------------- ------------------ -------
Operating profit 33.6 (6.8) 26.8 38.1 - 38.1
Finance costs (0.7) - (0.7) (0.6) - (0.6)
Share of after tax
results of
associates (0.1) - (0.1) (0.1) - (0.1)
Profit before tax 32.8 (6.8) 26.0 37.4 - 37.4
Tax on profit (8.0) 1.1 (6.9) (7.6) - (7.6)
------------------- ------------------ ------------------ ------- ------------------- ------------------ -------
Profit attributable
to equity holders 24.8 (5.7) 19.1 29.8 - 29.8
------------------- ------------------ ------------------ ------- ------------------- ------------------ -------
Earnings per share (p)
Basic earnings per
share 17.18 26.50
Diluted earnings
per share 17.16 26.49
Basic earnings per
share before
exceptional items 22.31 26.50
------------------- ------------------ ------------------ ------- ------------------- ------------------ -------
*An explanation of exceptional items is provided in Note 4.
STATEMENT OF FINANCIAL POSITION AS AT 24 JANUARY 2021
2021 2020
GBPm GBPm
----------------------------------------------- ------- ---------------------------------------
Non-current assets
Intangible assets 90.5 101.8
Property, plant and equipment 96.4 101.2
Right-of-use assets 2.5 7.6
Loans and receivables 1.0 -
Investment in associates 0.8 0.9
------------------------------------------------ ------- ---------------------------------------
191.2 211.5
----------------------------------------------- ------- ---------------------------------------
Current assets
Inventories 19.3 18.3
Trade and other receivables 37.6 57.2
Assets classified as held
for sale 0.4 -
Current tax asset 0.7 -
Cash and cash equivalents 52.9 10.9
------------------------------------------------ ------- ---------------------------------------
110.9 86.4
----------------------------------------------- ------- ---------------------------------------
Total assets 302.1 297.9
------------------------------------------------ ------- ---------------------------------------
Current liabilities
Loans and other borrowings 2.9 -
Trade and other payables 43.4 52.4
Derivative financial instruments 0.1 0.1
Lease liabilities 1.1 3.2
Provisions 1.9 1.2
Current tax liabilities - 3.0
------------------------------------------------ ------- ---------------------------------------
49.4 59.9
----------------------------------------------- ------- ---------------------------------------
Non-current liabilities
Deferred tax liabilities 14.6 14.5
Lease liabilities 1.4 4.7
Retirement benefit obligations 7.9 10.5
------------------------------------------------ ------- ---------------------------------------
23.9 29.7
----------------------------------------------- ------- ---------------------------------------
Capital and reserves attributable to equity holders
Share capital 4.7 4.7
Share premium account 0.9 0.9
Share options reserve 1.8 1.4
Other reserves (0.2) -
Retained earnings 221.6 201.3
------------------------------------------------ ------- ---------------------------------------
228.8 208.3
----------------------------------------------- ------- ---------------------------------------
Total equity and liabilities 302.1 297.9
------------------------------------------------ ------- ---------------------------------------
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 24 JANUARY
2021
2021 2020
GBPm GBPm
------------------------------------------------------------------------ ----- -----
Profit for the year 19.1 29.8
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements on defined benefit pension plans 0.6 1.2
Deferred tax movements on items above (0.1) (0.2)
Deferred tax remeasurement for movement in tax rate 0.5 -
Items that will be or have been reclassified to profit or loss
Cash flow hedges:
Losses arising during the period - 0.3
Deferred tax movements on items above - (0.1)
------------------------------------------------------------------------- ----- -----
Other comprehensive income for the year, net of tax 1.0 1.2
Total comprehensive income attributable to equity holders of the parent 20.1 31.0
------------------------------------------------------------------------- ----- -----
STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 24 JANUARY 2021
Share
Share Share premium options Other Retained
capital account reserve reserves earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- ------------- -------- --------- --------- ------
At 25 January 2020 4.7 0.9 1.4 - 201.3 208.3
Profit for the year - - - - 19.1 19.1
Other comprehensive
income - - - - 1.0 1.0
----------------------------- -------- ------------- -------- --------- --------- ------
Total comprehensive
income for the year - - - - 20.1 20.1
Company shares purchased
for use by employee
benefit trusts - - - - (0.1) (0.1)
Recognition of share-based
payment costs - - 0.7 - - 0.7
Transfer of reserve
on share award - - (0.1) - 0.1 -
Deferred tax on items
taken direct to reserves - - (0.2) - - (0.2)
Reallocation between
reserves - - - (0.2) 0.2 -
----------------------------- -------- ------------- -------- --------- --------- ------
At 24 January 2021 4.7 0.9 1.8 (0.2) 221.6 228.8
----------------------------- -------- ------------- -------- --------- --------- ------
At 26 January 2019 4.7 0.9 2.4 (0.2) 202.0 209.8
Impact of IFRS 16 - - - - (0.3) (0.3)
----------------------------- -------- ------------- -------- --------- --------- ------
At 26 January 2019
as restated 4.7 0.9 2.4 (0.2) 201.7 209.5
Profit for the year - - - - 29.8 29.8
Other comprehensive
income - - - 0.2 1.0 1.2
----------------------------- -------- ------------- -------- --------- --------- ------
Total comprehensive
income for the year - - - 0.2 30.8 31.0
Company shares purchased
for use by employee
benefit trusts - - - - (1.4) (1.4)
Proceeds on disposal
of shares by employee
benefit trusts - - - - 0.1 0.1
Recognition of share-based
payment costs - - (0.2) - - (0.2)
Transfer of reserve
on share award - - (0.6) - 0.6 -
Deferred tax on items
taken direct to reserves - - (0.2) - - (0.2)
Repurchase and cancellation
of shares - - - - (11.5) (11.5)
Dividends paid - - - - (19.0) (19.0)
----------------------------- -------- ------------- -------- --------- --------- ------
At 25 January 2020 4.7 0.9 1.4 - 201.3 208.3
----------------------------- -------- ------------- -------- --------- --------- ------
Cash Flow Statement for the year ended 24 January 2021
2021 2020
GBPm GBPm
----------------------------------------------------- ------ ------
Operating activities
Profit before tax 26.0 37.4
Adjustments for:
Interest payable 0.7 0.6
Depreciation of property, plant and equipment 11.8 11.7
Amortisation of intangible assets 1.1 1.3
Share-based payment costs 0.7 (0.2)
Share of results in associates 0.1 0.1
Impairment of Strathmore brand 7.0 -
Impairment of Strathmore goodwill 1.9 -
Impairment of Strathmore property, plant and
equipment 1.1 -
Funkin goodwill adjustment 1.3 -
Exceptional income - (0.2)
------------------------------------------------------ ------ ------
Operating cash flows before movements in working
capital 51.7 50.7
(Increase)/decrease in inventories (1.2) 1.8
Decrease in receivables 19.8 2.1
Decrease in payables (7.1) (4.5)
Difference between employer pension contributions
and amounts recognised in the income statement (2.2) (2.1)
------------------------------------------------------ ------ ------
Cash generated by operations 61.0 48.0
Tax paid (10.3) (7.9)
------------------------------------------------------ ------ ------
Net cash from operating activities 50.7 40.1
------------------------------------------------------ ------ ------
Investing activities
Acquisition of investment in associate - (1.0)
Loan to associate (1.0) -
Purchase of property, plant and equipment (7.1) (14.8)
Proceeds on sale of property, plant and equipment 0.1 0.1
------------------------------------------------------ ------ ------
Net cash used in investing activities (8.0) (15.7)
------------------------------------------------------ ------ ------
Financing activities
New loans received 60.0 29.5
Loans repaid (60.0) (29.5)
Lease payments (3.2) (3.3)
Purchase of Company shares by employee benefit
trusts (0.1) (1.4)
Proceeds from disposal of Company shares by
employee benefit trusts - 0.1
Repurchase of own shares - (11.5)
Dividends paid - (19.0)
Interest paid (0.3) (0.2)
------------------------------------------------------ ------ ------
Net cash used in financing activities (3.6) (35.3)
------------------------------------------------------ ------ ------
Net increase/(decrease) in cash and cash equivalents 39.1 (10.9)
------------------------------------------------------ ------ ------
Cash and cash equivalents at beginning of
year 10.9 21.8
------------------------------------------------------ ------ ------
Cash and cash equivalents at end of year 50.0 10.9
------------------------------------------------------ ------ ------
Cash and cash equivalents per the cash flow statement above
comprises cash and cash equivalents per the statement of financial
position of GBP52.9m net of bank overdrafts of GBP2.9m.
1. General information
A.G. BARR p.l.c. (the "Company") and its subsidiaries (together
the "Group") manufacture, distribute and sell soft drinks and
cocktail solutions. The Group has manufacturing sites in the UK and
sells mainly to customers in the UK with some international
sales.
The Company is a public limited company, which is listed on the
London Stock Exchange and incorporated and domiciled in Scotland.
The address of its registered office is Westfield House, 4 Mollins
Road, Cumbernauld, G68 9HD.
The financial year represents the 52 weeks ended 24 January 2021
(prior financial year 52 weeks ended 25 January 2020).
Basis of preparation
The financial information for the year ended 24 January 2021
contained in this news release was approved by the Board on 30
March 2021. This announcement does not constitute statutory
financial statements within the meaning of Section 435 of the
Companies Act 2006, but is derived from those financial statements,
which have been prepared in accordance with International Financial
Reporting Standards (IFRS) as endorsed by the European Union.
This information has been prepared under the historical cost
method except where other measurement bases are required to be
applied under IFRS, using all standards and interpretations
required for financial periods beginning 26 January 2020. No
standards or interpretations have been adopted before the required
implementation date. Whilst the financial information included
within this announcement has been prepared in accordance with the
recognition and measurement criteria of IFRS, it does not comply
with all disclosure requirements.
Statutory financial statements for the year ended 25 January
2020 have been delivered to the Registrar of Companies. Statutory
financial statements for the year ended 24 January 2021, which have
been prepared on the going concern basis, will be delivered to the
Registrar of Companies following the Group's Annual General
Meeting.
The directors have adopted the going concern basis in preparing
these accounts after assessing the principal risks and having
considered the impact of the continuation of the COVID-19 pandemic
and associated restrictions. This assessment was undertaken through
the use of a number of severe but plausible downside scenarios that
could impact the business (both individually and cumulatively). In
the assessment of the COVID-19 impact the major variables are the
duration and the severity of the restrictions in place related to
the pandemic. The directors considered the impact of the current
COVID-19 environment on the business for the next 12 months, the
viability period and the longer term. Whilst the situation
continues to evolve the experience of the last year and the roll
out of vaccinations has improved our confidence in the robustness
and validity of the scenarios, their assumptions and their impacts
on sales, profits and cash flows. The business has adapted its
operations successfully through the last 12 months with
manufacturing, customer delivery and major routes to market
remaining operational throughout. The changes we have made,
including new working practices, the pivoting of our Funkin
business to a branded consumer offering (serviced through the
grocery channel), and a group-wide reorganisation has improved our
agility and resilience as we enter the second year of restrictions.
Last year's experience enables us to assume that our operations
will remain open and that the Group can remain profitable and
cash-generative through prolonged pandemic restrictions. The most
significant potential financial impact would be due to a reduction
in sales, and we have considered the differing impact this would
have on our Barr Soft Drinks business, operating mainly in multiple
retail (take home) and convenience (out of home) outlets, and our
Funkin business, operating in both on-trade/leisure and grocery
sectors. Overall, we scenario planned several out turns focused
primarily on the duration of restrictions (from three months of
2021 to all year) and the impact of this on volumes compared to
experience in 2020. The revenue and operational leverage impact of
such a volume loss would have a negative impact on Group
profitability however the scenario modelling would indicate that
the Group would remain profitable over the next 12 months and we
would anticipate a recovery in the following years.
The Group has GBP60m of committed and unutilised debt
facilities, consisting of three revolving credit facilities with
three individual banks, providing the business with a secure
funding platform. Two of these facilities (both GBP20m) expire in
February 2022 with the other (GBP20m) expiring in February 2025.
Throughout these severe but plausible downside scenarios, the Group
continues to have significant liquidity headroom on existing
facilities and against the revolving credit facilities financial
covenants.
The directors believe that the Group is well placed to manage
its financing and other business risks satisfactorily, and have a
reasonable expectation that the Group will have adequate resources
to continue in operation for at least 12 months from the signing
date of these consolidated financial statements. They therefore
consider it appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
The auditors have reported on those financial statements. Their
reports were not qualified, did not include a reference to any
matters which the auditors drew attention by way of emphasis
without qualifying their report, and did not contain a statement
under Section 498 (2) or (3) of the Companies Act 2006.
New and amended standards adopted by the Group
A number of new or amended standards became applicable for the
current reporting period and the Group had to change its accounting
policies as a result of adopting the following standards:
-- Definition of a material - Amendments to IAS 1 and IAS 8
-- Definition of a Business - Amendments to IFRS 3
-- Revised Conceptual Framework for Financial Reporting
-- Annual Improvements to IFRS Standards 2015 - 2017 cycle
-- Amendments to IAS 19 Employee Benefits
-- Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7
In addition, on receipt of furlough income in the year the Group
has adopted IAS 20 Accounting for Government Grants and Disclosure
of Government Assistance. The Group recognises government grants in
accordance with IAS 20. These grants were received by the Group in
the UK in the form of furlough payments made by the Government
under the Coronavirus Job Retention Scheme (JRS). The grants
received by the Group are recognised in the income statement and
matched against the costs that the grant are intended to compensate
and are therefore shown net. Furlough income included under this
JRS and included in the income statement at 24 January 2021 amounts
to GBP1.3m (year to 25 January 2020: GBPnil).
The amendments listed above do not have a material impact on the
results for the current and prior reporting periods.
2. Segment reporting
The Group's Executive Committee has been identified as the chief operating decision-maker.
The Executive Committee reviews the Group's internal reporting in order to assess performance
and allocate resources. The Executive Committee has determined the operating segments based
on these reports.
The Executive Committee considers the business from a product perspective. This has led to
the operating segments identified in the table below: there has been no change to the segments
during the year (after aggregation). The performance of the operating segments is assessed
by reference to their gross profit before exceptional items.
Year ended 24 January 2021
Carbonates & other Still drinks and water Funkin Total
GBPm GBPm GBPm GBPm
------------------------- -------------------------- ------------------------------- -------- ------
Total revenue 184.3 25.7 17.0 227.0
Gross profit 82.6 6.1 6.1 94.8
------------------------- -------------------------- ------------------------------- -------- ------
Year ended 25 January 2020
Carbonates & other Still drinks and water Funkin Total
GBPm GBPm GBPm GBPm
------------------------- -------------------------- ------------------------------- -------- ------
Total revenue 196.4 40.1 19.2 255.7
Gross profit 88.6 8.6 8.9 106.1
------------------------- -------------------------- ------------------------------- -------- ------
There are no material intersegment sales. All revenue is in relation to product sales, which
is recognised at point in time, upon delivery to the customer.
"Carbonates & other" segment represents income from the sale of carbonates and other soft
drink related items.
The gross profit from the segment reporting is stated before exceptional costs.
The gross profit before exceptional items from the segment reporting is reconciled to the
total profit before income tax, as shown in the consolidated income statement.
All of the assets and liabilities of the Group are managed by the Executive Committee on a
central basis rather than at a segment level. As a result no reconciliation of segment assets
and liabilities to the statement of financial position has been disclosed for either of the
periods presented.
Included in revenues arising from Carbonates & other, Still drinks and water and Funkin are
revenues of approximately GBP45.6m which arose from sales to the Group's largest customer
(2020: GBP41m). No other single customers contributed 10% or more to the Group's revenue in
either 2020 or 2021.
All of the segments included within "Carbonates & other" and "Still drinks and water" meet
the aggregation criteria set out in IFRS 8 Operating Segments.
Geographical information
The Group operates predominantly in the UK with some worldwide sales. All of the operations
of the Group are based in the UK.
2021 2020
Revenue GBPm GBPm
------------------------- -------------------------- ------------------------------- -------- ------
UK 219.0 244.1
Rest of the world 8.0 11.6
------------------------- -------------------------- ------------------------------- -------- ------
227.0 255.7
------------------------- -------------------------- ------------------------------- -------- ------
The rest of the world revenue includes sales to the Republic of Ireland and wholesale export
houses.
All of the assets of the Group are located in the UK.
3. Other income
2021 2020
Before exceptional Exceptional Before exceptional Exceptional
items items* Total items items* Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------------------ ----------- ----- ------------------ ----------- -----
Wind turbine removal - - - - 1.8 1.8
Rockstar compensation - 7.6 7.6 - - -
---------------------- ------------------ ----------- ----- ------------------ ----------- -----
Total - 7.6 7.6 - 1.8 1.8
---------------------- ------------------ ----------- ----- ------------------ ----------- -----
*Refer to Note 4 for details of exceptional
income.
4. Exceptional items
Exceptional items are those that in management's judgement need to be disclosed by virtue
of their size and/or nature. In determining whether an event or transaction is exceptional,
management considers quantitative as well as quantitative factors such as the frequency or
predictability of occurrence as well as the size and nature of an item both individually and
when aggregated with similar items, for example restructuring costs, product development or
asset write offs. This presentation is consistent with the way that financial performance
is measured by management and reported to the Board and the Executive Committee and assists
in providing a meaningful analysis of our trading results.
Such items are included within the income statement caption to which they relate, and are
separately disclosed in the note below. It is believed that separate disclosure of exceptional
items further helps investors to understand the performance of the Group.
2021 2020
GBPm GBPm
----------------------------------------------------------------------------------- ------- ------
Wind turbine removal - (1.8)
Simplification and standardisation of operations - 1.1
Redundancy costs for business reorganisation and restructure 3.1 0.7
Impairment of Strathmore intangible and tangible assets 10.0 -
Funkin goodwill adjustment 1.3 -
Rockstar compensation (7.6) -
----------------------------------------------------------------------------------- ------- ------
Total exceptional net charge 6.8 -
----------------------------------------------------------------------------------- ------- ------
2021 2020
GBPm GBPm
----------------------------------------------------------------------------------- ------- ------
Items included in cost of sales
Redundancy costs for business reorganisation and restructure 1.2 -
Simplification and standardisation of operations - 1.1
----------------------------------------------------------------------------------- ------- ------
Total included in cost of sales 1.2 1.1
----------------------------------------------------------------------------------- ------- ------
2021 2020
GBPm GBPm
----------------------------------------------------------------------------------- ------- ------
Items included in other income
Wind turbine removal - (1.8)
Rockstar compensation (7.6) -
----------------------------------------------------------------------------------- ------- ------
Total included in other income (7.6) (1.8)
----------------------------------------------------------------------------------- ------- ------
2021 2020
GBPm GBPm
----------------------------------------------------------------------------------- ------- ------
Items included in administration costs
Redundancy costs for business reorganisation and restructure 1.4 0.7
Impairment of Strathmore brand 7.0 -
Impairment of Strathmore goodwill 1.9 -
Impairment of Strathmore property, plant and equipment 1.1 -
Funkin goodwill adjustment 1.3
----------------------------------------------------------------------------------- ------- ------
Total included in administration costs 12.7 0.7
----------------------------------------------------------------------------------- ------- ------
Items included in distribution and selling costs
Redundancy costs for business reorganisation and restructure 0.5 -
----------------------------------------------------------------------------------- ------- ------
Total included in distribution and selling costs 0.5 -
----------------------------------------------------------------------------------- ------- ------
Total exceptional net charge included in operating expenses 13.2 0.7
----------------------------------------------------------------------------------- ------- ------
Total exceptional net charge 6.8 -
----------------------------------------------------------------------------------- ------- ------
During the year ended 24 January 2021 costs of GBP3.1m were incurred relating to the ongoing
change programme within the business which commenced in the year to 25 January 2020. Phase
1 of the programme delivered portfolio simplification actions within Supply and an initial
reorganisation and refocussing of the Commercial team. This phase completed in the first half
of 2020. Following the announcement of the termination of the Rockstar agreement and taking
into account the pandemic, Phase 2 plans were reviewed and updated. This has led to further
right-sizing decisions resulting in a number of redundancies across the business, including
Strathmore production and Funkin teams where the pandemic restrictions have had the greatest
impact.
Strathmore is a highly-regarded premium brand in a structurally low margin bottled water category.
The brand is predominantly targeted on the hospitality sector which continues to be significantly
challenged by lockdown measures. A review of the outlook for both the brand and the sector
highlighted an impairment requirement which has resulted in a write-down of the Strathmore
brand GBP7.0m, goodwill of GBP1.9m and tangible fixed assets of plant and equipment of GBP1.1m.
During the year ended 24 January 2021 there was a GBP1.3m non-cash charge to the income statement
relating to the Funkin acquisition goodwill.
The early termination of the Rockstar franchise entitled the Group to a one-off contractual
termination payment of GBP7.6m.
In the prior year, a net zero exceptional expense was recognised. This represented the combination
of year 1 of the simplification and standardisation programme costs offset by a GBP1.8m receipt
for compensation in relation to the removal of our onsite wind turbine.
5. Dividends
Dividends paid in the financial year were as follows:
2021 2020 2021 2020
per share per share GBPm GBPm
----------------------------------------- ------------------------- ---------------- ------- -------
Final dividend - 12.74p - 14.5
Interim dividend paid - 4.00p - 4.5
----------------------------------------- ------------------------- ---------------- ------- -------
- 16.74p - 19.0
----------------------------------------- ------------------------- ---------------- ------- -------
In April 2020, given the unprecedented circumstances arising from COVID-19, we communicated
our decision to temporarily suspend dividend payments, one of a number of important actions
we took to conserve cash and maintain balance sheet flexibility. However, we remain committed
to re-commence dividend payments during the course of this financial year ending January 2022.
Dividends payable in respect of the financial year were as follows:
2021 2020
per share per share
----------------------------------------- ------------------------- ----------------
Final dividend - -
Interim dividend paid - 4.00p
----------------------------------------- ------------------------- ----------------
- 4.00p
----------------------------------------- ------------------------- ----------------
6. Cash and cash equivalents
2021 2020
GBPm GBPm
------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents 52.9 10.9
------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents in the table above are included in the cash flow statements.
7. Assets held for sale
The property related to the distribution depot at Sheffield has been presented as held for
sale following the closure of the site in March 2020. This asset has been sold post year-end.
Annual General Meeting
The Annual General Meeting will be held at 12:00pm on 28(th) May
2021 at Westfield House, 4 Mollins Road, Cumbernauld G68 9HD.
Glossary
Non-GAAP measures are provided because they are tracked by management to assess the Group's
operating performance and to inform financial, strategic and operating decisions.
Definition of non-GAAP measures used are provided below:
Capital expenditure is a non-GAAP measure and is defined as the cash purchases of property,
plant and equipment and is disclosed in the consolidated cash flow statement.
EBITDA is a non-GAAP measure and is defined as operating profit before exceptional items,
depreciation and amortisation.
EBITDA margi n is a non-GAAP measure and is calculated as EBITDA divided by revenue.
Basic earnings per share before exceptional item s is a non-GAAP measure calculated by dividing
profit attributable to equity holders before exceptional items by the weighted average number
of shares in issue.
Expansionary capex is a non-GAAP measure and is defined as the purchase of property, plant
and equipment that is not the normal replacement of property, plant and equipment that has
come to the end of its useful life. Maintenance capex is a non-GAAP measure and is defined
as the purchase of property, plant and equipment that is the normal replacement of property,
plant and equipment that has come to the end of its useful life. Expansionary capex and maintenance
capex add together to the value of purchase of property, plant and equipment that appears
in the consolidated cash flow statement.
Free cash flow is a non-GAAP measure and is defined as the net cash flow as per the cash
flow statement excluding the movements in borrowings, expansionary capex, the net cash flow
on the purchase and sale of shares by employee benefit trusts, dividend payments and non-cash
exceptional items.
Gross margi n is a non-GAAP measure calculated by dividing gross profit by revenue.
Net cash at bank is a non-GAAP measure and is defined as the net of cash and cash equivalents
and loans and other borrowings as shown in the statement of financial position.
Net fun ds is a non-GAAP measure and is defined as cash and cash equivalents less lease liabilities.
Operating margi n is a non-GAAP measure calculated by dividing operating profit by revenue.
Operating margin before exceptional items is a non-GAAP measure calculated by dividing operating
profit before exceptional items by revenue.
Operating profit before exceptional item s is a non-GAAP measure calculated as operating
profit less any exceptional items. This figure appears on the income statement.
Profit before tax and exceptional item s is a non-GAAP measure calculated as profit before
tax less any exceptional items. This figure appears on the income statement.
Revenue growth is a non-GAAP measure calculated as the difference in revenue between two
reporting periods divided by the revenue of the earlier reporting period.
Return on capital employed (ROCE) is a non-GAAP measure and is defined as profit before tax
and exceptional items as a percentage of invested capital. Invested capital is a non-GAAP
measure defined as period end non-current plus current assets less current liabilities excluding
all balances relating to any provisions, financial instruments, interest-bearing liabilities
and cash or cash equivalents.
Reconciliation of non-GAAP measures
2021 2020
Gross margin GBPm GBPm
------------------------------------------ ------ ------
Revenue 227.0 255.7
Reported gross profit 93.6 105.0
------------------------------------------ ------ ------
Gross margin 41.2% 41.1%
------------------------------------------ ------ ------
2021 2020
Gross margin before exceptional items GBPm GBPm
------------------------------------------ ------ ------
Revenue 227.0 255.7
Gross profit before exceptional items 94.8 106.1
------------------------------------------ ------ ------
Gross margin before exceptional items 41.8% 41.5%
------------------------------------------ ------ ------
2021 2020
Operating margin GBPm GBPm
------------------------------------------ ------ ------
Revenue 227.0 255.7
Reported operating profit 26.8 38.1
------------------------------------------ ------ ------
Operating margin 11.8% 14.9%
------------------------------------------ ------ ------
2021 2020
Operating margin before exceptional items GBPm GBPm
------------------------------------------ ------ ------
Revenue 227.0 255.7
Operating profit before exceptional items 33.6 38.1
------------------------------------------ ------ ------
Operating margin before exceptional items 14.8% 14.9%
------------------------------------------ ------ ------
2021 2020
EBITDA GBPm GBPm
------------------------------------------ ------ ------
Operating profit before exceptional items 33.6 38.1
Depreciation and amortisation 12.9 13.0
------------------------------------------ ------ ------
EBITDA 46.5 51.1
------------------------------------------ ------ ------
2021 2020
EBITDA margin GBPm GBPm
------------------------------------------ ------ ------
Revenue 227.0 255.7
EBITDA 46.5 51.1
------------------------------------------ ------ ------
EBITDA margin 20.5% 20.0%
------------------------------------------ ------ ------
2021 2020
Expansionary capex GBPm GBPm
------------------------------------------ ------ ------
Expansionary capex 0.3 0.3
Maintenance capex 6.8 14.5
------------------------------------------ ------ ------
Capex per cash flow statement 7.1 14.8
------------------------------------------ ------ ------
2021 2020
Net cash at bank GBPm GBPm
------------------------------------------ ------ ------
Cash and cash equivalents 52.9 10.9
Loans and other borrowings (2.9) -
------------------------------------------ ------ ------
Net cash at bank 50.0 10.9
------------------------------------------ ------ ------
2021 2020
ROCE GBPm GBPm
------------------------------------------ ------ ------
Profit before tax 26.0 37.4
Exceptional items 6.8 -
------------------------------------------ ------ ------
Profit before tax and exceptional items 32.8 37.4
------------------------------------------ ------ ------
Intangible assets 90.5 101.8
Property, plant and equipment 96.4 101.2
Right-of-use assets 2.5 7.6
Investment in associates 0.8 0.9
Inventories 19.3 18.3
Trade and other receivables 37.6 57.2
Asset held for sale 0.4 -
Current tax 0.7 (3.0)
Trade and other payables (43.4) (52.4)
Invested capital 204.8 231.6
------------------------------------------ ------ ------
ROCE 16.0% 16.1%
------------------------------------------ ------ ------
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