TIDMBAG
RNS Number : 7090W
Barr(A.G.) PLC
27 April 2021
A.G. BARR p.l.c. (the "Company")
27 April 2021
Annual Report and Accounts and Notice of Annual General
Meeting
Following the release on 30 March 2021 of the Company's
financial results for the year ended 24 January 2021 (the "Final
Results Announcement"), the Company announces it has today
published its annual report and accounts for the year ended 24
January 2021 (the "Annual Report and Accounts").
The Annual Report and Accounts contains the notice convening the
Company's one hundred and seventeenth annual general meeting (the
"AGM") (the "Notice of AGM"). The AGM will be held at the Company's
head office, Westfield House, 4 Mollins Road, Cumbernauld G68 9HD
on Friday 28 May 2021 at 12.00p.m.
In light of the ongoing Government restrictions in response to
the Coronavirus (COVID-19) outbreak in the United Kingdom,
shareholders will not be permitted to attend the AGM in person and
are encouraged to vote in advance using their proxy form, further
details of which are contained in the Notice of AGM.
This year's AGM will be convened with the minimum necessary
quorum of two shareholders.
A copy of the Annual Report and Accounts, which includes the
Notice of AGM, and form of proxy for use at the AGM are available
to view on the Company's website: www.agbarr.co.uk
In accordance with Disclosure and Transparency Rule 6.3.5(2)(b),
additional information is set out in the appendices to this
announcement.
The Final Results Announcement included a set of condensed
financial statements and a fair view of the development and
performance of the business and the position of the Company.
A copy of the Annual Report and Accounts, including the Notice
of AGM, together with a copy of the proxy form in relation to the
AGM will be submitted to the National Storage Mechanism and will
shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Appendices
Where used in the following appendices, the term "Group" means
the Company together with its subsidiaries.
Appendix A: Directors' responsibility statement
The following directors' responsibility statement is extracted
from the Annual Report and Accounts (page 104):
Directors' statement pursuant to the disclosure and transparency
rules
Each of the directors, whose names and functions are set out on
pages 52 to 53 of this report, confirm that, to the best of their
knowledge:
-- The financial statements, prepared in accordance with IFRSs
adopted pursuant to regulation (EC) no. 1606/2002 as it applies in
the EU, give a true and fair view of the assets, liabilities and
financial position of the Group and parent Company and of the
consolidated profit.
-- The Annual Report and Accounts includes a fair review of the
development and performance of the business and the position of the
Group and the undertakings included in the consolidation taken as a
whole, together
with a description of the principal risks and uncertainties faced by the Group.
-- They consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
Appendix B: A description of the principal risks and
uncertainties that the Company faces
The following description of the principal risks and
uncertainties that the Company faces is extracted from the Annual
Report and Accounts (pages 43 - 51):
Risk management approach
The Board is responsible for the Group's risk management and
internal control systems and for reviewing their effectiveness,
supported by the Audit and Risk Committee (the "ARC") and the Risk
Committee. A risk management framework is in place which sets out
the ongoing processes for the identification, assessment and
management of risks, and for their ongoing monitoring and review.
The Board has defined its risk appetite in a number of key areas
for the business - this sets out the relative level of risk that
the Group is prepared to seek or accept in the pursuit of its
long-term strategic objectives. The aim is to ensure that the risks
taken by the Group fall within its defined risk appetite.
Effective risk management is essential to enable us to achieve
our operational and strategic objectives and deliver long-term
value creation. During the reporting period we have continued to
enhance our culture of risk management throughout the organisation
which will contribute towards the successful execution of the
Group's long-term strategy.
Robust risk assessment
The risk management framework sets out a systematic approach to
risk management which is designed to identify risks to the
business, regardless of source. Once identified, risks are assessed
according to the likelihood and impact of the risk occurring and an
appropriate risk response is determined in line with the Group's
risk appetite. Risks are re-assessed based on the strength of the
mitigating controls implemented. The implementation of risk
mitigation plans is subject to ongoing monitoring and review. A
risk scoring matrix is used to ensure that a consistent approach is
taken across the business at both a corporate and functional level.
This risk assessment and review process is documented in the
appropriate risk register. Risks are reviewed on an ongoing basis;
the Group's risk register is formally reviewed by the Risk
Committee every two months and by the Board and the ARC twice each
year.
The Board and the ARC carry out a robust assessment of the
Group's emerging risks at least once each year using a horizon
scanning approach together with internal and external insights. The
purpose of these assessments is to identify key emerging risks for
further evaluation, monitoring and action planning. Emerging risks
are captured on the Group's emerging risk register and are subject
to ongoing review. Emerging risks are also assessed at a functional
level and captured on the relevant function's risk register, and
are also subject to ongoing review. The Risk Committee assesses
emerging risks at a Group level and reviews the Group's emerging
risk register on a bi-monthly basis. The Risk Committee has annual
oversight of emerging risks at a functional level. Emerging risks
remain on the relevant emerging risk register until they are
captured on an appropriate risk register or are no longer deemed to
be an emerging risk. The Board has completed a robust assessment of
the Group's emerging risks, including those related to climate
change and technology, during the period.
Risk control assurance
Internal audit work is undertaken by an independent organisation
which develops an annual internal audit plan having reviewed the
Group's risk register and following discussions with the external
auditors, management and members of the ARC.
During the year the ARC has reviewed reports covering the
internal audit work. This has included assessment of the general
control environment, identification of any control weaknesses and
quantification of any associated risk, together with a review of
the status of mitigating actions. The ARC has also received reports
from management in relation to specific risk items, together with
reports from the external auditors, who consider controls to the
extent necessary to form an opinion as to the truth and fairness of
the financial statements.
The Group's internal control and risk management systems are
designed to manage rather than eliminate the risk of failure to
achieve business objectives and can provide only reasonable but not
absolute assurance against material misstatement or loss.
The report of the ARC can be found on page 67 to 70.
Principal risks and uncertainties
The Board has carried out a robust, systematic assessment of the
principal risks facing the Group during the period, including those
which would threaten its business model, future performance,
solvency or liquidity. The table below sets out the Group's
principal risks as determined by the Board, the gross risk movement
from the prior year and examples of corresponding controls and
mitigating actions. This represents the Group's current risk
profile and is not intended to be an exhaustive list of all risks
and uncertainties that may arise.
COVID-19
As the COVID-19 crisis continued during the past year, our
primary concern has remained the welfare of our employees, their
families and the communities in which we operate. Since the start
of the COVID-19 pandemic, we have followed the advice from the
Government and the NHS at all times as a minimum and will continue
to do so. We have taken action as appropriate to protect our
employees and our operations. We continue to monitor the situation
closely and take appropriate actions to minimise the impact on our
business, with the health and safety of our employees being
paramount. The ongoing impact on our business will depend on the
severity and duration of the COVID-19 pandemic. There is the
ongoing potential for an adverse impact on our operations and on
the demand for our products and we continue to take action to
mitigate possible consequences. We will continue to follow
developments closely and will take further action to protect our
employees and business as appropriate.
For more details on the Board's consideration of the impact of
COVID-19, please refer to the Chief Executive's statement on page
13, and the viability disclosures on page 50.
Brexit
The volatile and uncertain economic environment created by the
UK's decision to leave the European Union ("EU") continued over
much of the past financial year. Overseen by the Risk Committee,
the Company's Brexit Steering Group continued to monitor the
potential impact of Brexit on the Group and took appropriate
actions to ensure that the business was as well prepared as
possible for Brexit on 31 December 2020. The Brexit Steering Group
prepared for a range of Brexit outcomes, including "no deal". With
the Trade and Cooperation Agreement having been agreed between the
EU and the UK, and the fact that the Group is a UK-based Group
whose sales are predominantly made in the UK, our assessment is
that Brexit has not had and will not have a significant impact on
the Group. Therefore, as before, we do not consider Brexit-related
risks to represent a principal risk for the business. Key
Brexit-related impacts on the business and mitigating actions taken
are as follows:
-- Brexit's impact on foreign exchange rates to which the Group
is exposed through the purchase of certain commodities - this risk
is closely monitored and managed by the Treasury and Commodity
Committee, which has a
hedging strategy in place to manage the Group's exposure to foreign currency fluctuations.
-- Border disruption, which could impact the supply of certain
raw materials and finished products - we worked closely with
relevant suppliers to ensure that we had appropriate stock levels
of key raw materials and finished products in place in preparation
for Brexit and will continue to monitor the situation closely to
ensure that any supply impact from border disruption is
minimised.
-- The introduction of trade tariffs for certain imports to the
UK from the EU and vice versa could have potentially impacted the
Group - we have assessed the Group's exposure to trade tariffs
post-Brexit and consider this impact to be manageable.
-- Brexit's impact on the free movement of people - we worked
closely with our key third party logistics supplier and, having
undertaken a detailed risk assessment of EU nationals at our key
sites, do not consider this impact to be significant.
-- Brexit's impact on regulation - the extent to which the UK
may diverge from EU regulations post-Brexit remains unclear. We
will monitor the situation ongoing and determine the likely impact
on the Group in the event of specific regulatory divergence.
We will continue to monitor developments post-Brexit and adapt
our strategy accordingly.
The gross risk movement from the prior year for each principal
risk is presented on pages 46 to 50.
Movement
No change Increased Decreased Removed
Principal risks and uncertainties
Risks relating to the Group
Risk Impact Controls and mitigating actions Movement
----------------------------------- ---------------------------------- ---------------------------------- ---------
Changes in consumer preferences, Consumers may decide to purchase The Group offers a broad range of No change
perception or purchasing behaviour and consume alternative brands or branded products across a range of
spend less on soft drinks. flavours, subcategories
and markets which offer choice to
the end consumer. Changing
consumer attitudes and behaviours
are monitored on an ongoing basis
and inform our brand plans and new
product development.
Through investment in innovation
across the year we have adapted
our portfolio to align with
these changing consumer needs.
=================================== ================================== ================================== =========
Consumer rejection of reformulated Consumers may decide to purchase Over a number of years we have No change
products and consume alternative brands or implemented our extensive
spend less on soft drinks. innovation and reformulation
programme,
which was completed prior to the
introduction of the Soft Drinks
Industry Levy in April 2018.
98% of our current Barr Soft
Drinks portfolio produced by
volume contains less than 5g of
total sugars per 100ml. We
recognise that the risk of
consumer rejection of the enhanced
sweeteners
used in our reformulated products
remains. We continue to closely
monitor consumer acceptance
levels and brand performance
across our total portfolio and
take appropriate mitigating
actions.
=================================== ================================== ================================== =========
Loss of product integrity A loss of product integrity in the Appropriate risk assessments are Decreased
manufacturing supply chain could carried out on a regular basis and
lead to a product withdrawal robust quality controls
or recall. and processes are in place to
maintain the high quality of our
products. A number of additional
controls were implemented during
the year to further mitigate
product integrity and
micro-related
risks. Product recall procedures
are tested regularly.
=================================== ================================== ================================== =========
Loss of continuity of supply of The loss of continuity of supply There is a robust supplier No change
major raw materials of major raw material ingredients selection process in place.
and/or packaging materials Supplier performance is monitored
could impact our ability to on
manufacture, with an adverse an ongoing basis and audits are
impact on the Group's sales and undertaken for major suppliers.
operating Multiple sources of supply
profits. are sourced wherever possible.
Commodity risks are managed by the
procurement team and reviewed by
the Treasury and Commodity
Committee. Contingency measures
are in place and are tested
regularly.
The continued potential impact of
Brexit on the supply of certain
raw materials is referred
to above.
During the year we worked closely
with key raw material suppliers in
relation to the likely
impact of COVID-19 on their
businesses.
=================================== ================================== ================================== =========
Adverse publicity in relation to Adverse publicity in relation to Our risk management process is No change
the soft drinks industry, the Group the soft drinks industry, the designed to identify and monitor
or its brands Group or its brands could have events that may impact the
an adverse impact on the Group's Group as a result of adverse
reputation, consumer consumption publicity and to ensure that
patterns, sales and operating controls are in place to manage
profits. these risks.
Processes are in place to ensure
compliance with health and safety
legislation and ethical
working standards and these are
regularly reviewed by the Board
and Executive Committee. Quality
standards are well defined,
implemented and monitored.
Corporate Social Responsibility
champions
are in place and we have clearly
defined environmental
sustainability commitments. During
the year a Sustainability
Taskforce was established to
progress various environmental
sustainability
related workstreams. The Group
maintains and develops ISO 9001
and 14001 systems and BRC
standards
which are subject to annual
external audits, with any
non-conformances addressed in a
timely
manner.
Nutritional information is shown
on all of our products and we are
long-standing users of
the UK Government's voluntary
front-of-pack nutritional
labelling scheme.
As noted above, the Group has
followed the COVID-related advice
from the Government and the
NHS at all times throughout the
crisis as a minimum and will
continue to do so.
=================================== ================================== ================================== =========
Government intervention on climate Government intervention on climate The increased pace of change and Increased
change and environmental issues, change and environmental issues, level of environmental campaigning
e.g. packaging waste e.g. the introduction in relation to climate
of a Deposit Return Scheme and a change and areas such as packaging
plastics tax, could have an reported last year has continued
adverse impact on consumer during the year, particularly
consumption in relation to single use plastic
patterns, sales and operating bottles. We have clearly defined
profits. responsibility commitments
with regard to waste, water,
energy and packaging. We are
working constructively with the
British Soft Drinks Association,
the UK and Scottish governments,
and other key stakeholders
in relation to potential
interventions, such as the planned
introduction of a Deposit Return
Scheme ("DRS") in Scotland, the
possible introduction of a DRS in
England, and the introduction
of a single use plastics tax.
A working group is in place to
proactively manage packaging
related risks in a holistic manner
ongoing, overseen by the Risk
Committee. As noted above, a
Sustainability Taskforce was
established
during the year to progress
various environmental
sustainability related
workstreams. Internally,
various other projects and
environmental initiatives are
being progressed to mitigate the
potential impact of government
intervention on packaging.
=================================== ================================== ================================== =========
Failure to maintain customer Failure to maintain appropriate The Group offers a broad range of No change
relationships or take account of customer relationships or a brands that it manufactures and
changing market dynamics reduction in the customer base distributes through a variety
could have an adverse impact on of trade channels and customers.
the Group's sales and operating Performance is monitored closely
profits. by the Board and Executive
Committee by trade channel and
customer as appropriate. This
includes monitoring of metrics
which review brand equity
strength, financial and
operational performance.
The Group focuses on delivering
high quality products and invests
heavily in building brand
equity. We work closely in
partnership with our customers on
an ongoing basis. Members of
the senior management team meet
with key customers throughout the
year.
As reported last year, the ongoing
consolidation in channels and
route to market has increased
the level of gross risk in this
area. A project commenced in 2018
to determine the potential
impact of this consolidation in
the retail grocery market on the
Group and to take appropriate
actions; this has continued to be
a focus area during the year.
During the year we engaged with
customers in relation to control
measures put in place to
minimise COVID-related risks for
our respective employees and the
wider public.
We also engaged with customers to
ensure that all necessary
preparations were in place for
Brexit.
=================================== ================================== ================================== =========
Inability to protect the Group's Failure to protect the Group's The Group invests considerable No change
intellectual property rights intellectual property rights could effort in proactively protecting
result in a loss of brand its intellectual property
value. rights, for example through
trademark and design registrations
and vigorous legal enforcement
as and when required.
=================================== ================================== ================================== =========
Failure of the Group's operational A catastrophic failure of the Assets within the Group are No change
infrastructure Group's major production or proactively managed and
distribution facilities could lead maintained. Risk assessments are
to a sustained loss in capacity or carried
capability. out on a regular basis and
appropriate actions taken. Robust
business continuity plans are
in place and are regularly tested.
=================================== ================================== ================================== =========
Failure of critical IT systems or a A failure of critical IT systems IT assets within the Group are No change
breach of cyber security could result in a loss of key proactively managed and procedures
systems, business interruption, exist that support rapid
lost sales or lost production. A and clean recovery. Robust
cyber security breach could lead business continuity plans and
to operational disruption, contingency measures are in place
financial loss and reputational and are regularly tested. Our
damage. internal auditor carried out a
review of our IT disaster recovery
plans during the year, which
concluded that satisfactory
processes and controls related to
IT systems resilience and recovery
capability are in place.
The risk of cyber attacks
increases on an ongoing basis. An
assessment of our cyber security
maturity against the UK
Government's "10 Steps to Cyber
Security" was completed last year
by our internal auditor, which
showed improvement in our cyber
security controls since the
previous maturity assessment
carried out in 2018 and concluded
that our approach is generally
in line with industry practice;
various further actions have been
completed following that
assessment, including the
implementation of improved cyber
risk monitoring controls.
Employee awareness campaigns and
training continued during the year
to increase employee cyber
risk awareness. A Digital
Governance Group is in place,
overseen by the Risk Committee,
the
purpose of which is to manage the
risks related to the Group's
externally facing digital
properties.
=================================== ================================== ================================== =========
Financial risks The Group's activities expose it Our underlying objective is to No change
to a variety of financial risks reduce foreign currency related
which include market risk volatility through our cost
(including medium-term movements of goods. Financial risks are
in exchange rates, interest rate reviewed and managed by the
risk and commodity price Treasury and Commodity Committee,
risk), credit risk and liquidity which seeks to minimise adverse
risk. effects on the Group's financial
performance through hedging
known currency exposures
throughout the year. The continued
potential impact of Brexit on
foreign exchange rates to which
the Group is exposed through the
purchase of certain commodities
is referred to above.
The Group's finance team reviews
cash flow forecasts throughout the
year, with headroom against
banking covenants assessed
regularly. The finance team uses
external tools to assess credit
limits offered to customers,
manages trade receivable balances
vigilantly and takes prompt
action on overdue accounts. The
Group's financial control
environment is subject to review
by both internal and external
audit. Internal audit's focus is
to work with and challenge
management to ensure an
appropriate control environment is
maintained.
During the year our internal
auditor carried out a review of
the operation of our key financial
controls in light of the COVID-19
pandemic, which concluded that
these controls had not been
significantly impacted by
COVID-19.
=================================== ================================== ================================== =========
Third party relationships Termination of existing As announced in June 2020, our Removed
partnerships or renewal on less sale and distribution agreement
favourable terms could result in with Rockstar, Inc. was terminated
lost on 23 August 2020, subject to the
brand contribution and payment of a compensation sum.
under-recovery of supply chain Various mitigating actions
infrastructure costs. have been taken by the business in
response thereto. This risk is
therefore no longer considered
to be a principle risk.
=================================== ================================== ================================== =========
The net risk movement from the prior year for each principal
risk is in line with the gross risk movement as set out above.
Viability statement
In accordance with provision 31 of the UK Corporate Governance
Code 2018, the directors have assessed the viability of the Company
over a three year period to January 2024, taking account of the
Group's current financial and market position, future prospects and
the Group's principal risks, as detailed in the Strategic
Report.
The directors have determined that a three year period is an
appropriate time frame given the dynamic nature of the FMCG sector
and given that this is in line with the Group's strategic planning
period. The starting point for the viability assessment is the
strategic and financial plan which makes assumptions relating to
the economic climate, market growth, input cost inflation and
growth from the Group's performance drivers. The prospects of the
Group have been taken into account, including the size of the
current market, the strength of the Group's brands and past
production capacity investment. The model was then subject to a
series of theoretical "stress test" scenarios based on the
materialisation of principal risks, with input from the business
functions.
The directors have considered the impact of a number of severe
but plausible scenarios associated with the principal risks,
including:
-- The continuation of the COVID-19 pandemic and associated
restrictions for a further 12 months, and a
consequent channel shift and reduction in consumer demand.
-- A reduction in sales due to significant adverse damage to one
of the Group's principal brands (e.g.
IRN-BRU) sustained over the duration of the viability period.
-- Significant changes in consumer preferences and governmental
impact in relation to sugar, plastics and the
introduction of a Deposit Return Scheme, specifically in Scotland.
-- Financial impact from a significant supply chain disruption
(e.g. material supply, factory closure).
In addition the directors measured the impact of a number of
scenarios occurring together. Finally a reverse "stress test" was
performed allowing the Board to assess circumstances that would
render its business model unviable.
Credit facilities
The outputs of these tests were then reviewed against the
Group's current and projected future net cash/debt and liquidity
position. The Group closed the financial year with net cash at bank
of GBP50.0m*. In addition the Group had GBP60m of committed and
unutilised debt facilities, consisting of 3 revolving credit
facilities with 3 individual banks. During the viability period, 2
out of 3 of these facilities, totalling GBP40m, will expire. The
revolving credit facilities have two financial covenants, relating
to interest cover and leverage, and a material adverse change
clause.
* This is a non-GAAP measure. A definition and reconciliation
are provided in the Glossary on pages 165 to 167.
Result of stress tests
Under the most severe but plausible combined scenarios above,
and with no cost mitigation, the Group would remain profitable
throughout the plan. The Group would not require access to any debt
facility. All bank covenants are satisfied throughout the planning
horizon. Should the loss be worse than this scenario assumes,
sizeable cost mitigation opportunities, such as those accessed in
the year ended 24 January 2021, would be available to the Group to
further preserve viability.
The results of these tests were reviewed taking into account the
Group's current position, the Group's experience of managing
adverse conditions in the past and mitigating actions available to
the Group. Based on this assessment, the directors have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the three
year period to January 2024.
Appendix C: Related party transactions
The following related party transactions are extracted from the
Annual Report and Accounts (pages 163 - 164):
Transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on
consolidation. Details of transactions between the Company and
related parties are as follows:
Purchase of goods and
services
=== =======================
2021 2020
GBPm GBPm
======================= =========== ==========
Rubicon Drinks Limited 3.8 4.2
============================ =========== ==========
The amounts disclosed in the table below are the amounts owed to
and due from subsidiary companies that are trading
subsidiaries.
The balances are unsecured and are due on demand. The difference
between the total of these balances and the amounts disclosed as
amounts due by (Note 20) and to subsidiary companies (Note 23) are
balances due by and due to dormant subsidiary companies.
Amounts owed by related Amounts due to related
parties parties
========================= ========================
2021 2020 2021 2020
GBPm GBPm GBPm GBPm
======================= ============ =========== =========== ===========
Rubicon Drinks Limited - - 8.6 5.6
Funkin Limited 1.2 0.5 - -
======================= ============ =========== =========== ===========
The amounts disclosed in the table below are the amounts owed
from investments in associates. The balance is an interest-free
equity convertible loan note.
Amounts due to related
parties
=== ========================
2021 2020
GBPm GBPm
==================== =========== ===========
Loans to associates
Loans advanced 1.0 -
========================= =========== ===========
Closing balance 1.0 -
========================= =========== ===========
Compensation of key management personnel
The remuneration of the executive directors, non-executive
directors and other key members of management (the Executive
Committee) during the year was as follows:
2021 2020
GBPm GBPm
================================= ===== =====
Salaries and short term benefits 2.2 3.1
Post employment benefits 0.4 0.5
================================= ===== =====
2.6 3.6
================================= ===== =====
The Directors' Remuneration Report can be found on pages 71 to
98.
Retirement benefit plans
The Group's retirement benefit plans are administered by an
independent third-party service provider. During the year the
service provider charged the Group GBP0.4m (2020: GBP0.4m) for
administration services in respect of the retirement benefit plans.
At the year end GBPnil (2020: GBPnil) was outstanding to the
service provider on behalf of the retirement benefit plans.
END.
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ACSGIGDSXBDDGBR
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