BAG Barr (a.g.) Plc

IMMEDIATE RELEASE

26 March 2024

A.G. BARR p.l.c.

("A.G. BARR" or "the Group")

Results for year ended 28 January 2024

Strategic progress delivering excellent financial performance 

A.G. BARR, the branded multi-beverage business with a portfolio of market-leading UK brands, including IRN-BRU, Rubicon, FUNKIN and Boost, today announces its results for the year ended 28 January 2024.
 
Financial summary

Headlines

·      Strong brand momentum delivering volume and value growth, with like-for-like revenue* up 8%. Revenue, including a full year contribution from the Boost portfolio, up 25.9%.

·      Successfully delivered year one of our margin rebuild programme, including an initial contribution from the first phase of Boost/Rio production in-sourcing, which commenced in November 2023.

·      Adjusted profit before tax* of £50.5m, up 16.1% on the prior year. 

·      Strong cash generation and robust balance sheet with a net cash at bank* position of £53.6m after significant investment in the business and the £12.3m acquisition of the Rio soft drinks brand in October 2023.

·      Full year dividend* of 15.05 pence per share including the final recommended dividend of 12.40 pence per share.

·      Delivering growth responsibly - highlights include FUNKIN B Corp accreditation and further progress on our net-zero roadmap. 

·      Early March 2024 announcement of two proposed business reorganisations - changing the route to market strategy in the symbols and independent retail channel and fully integrating the Boost business into Barr Soft Drinks.

Outlook

Having seen continued positive brand momentum in the early weeks of the new financial year, we remain confident in our strategy and the continued delivery of revenue and profit growth in the year ahead. 

Roger White, Chief Executive, commented : 

"I would like to take the opportunity to thank all of the teams across the Group who have worked incredibly hard to deliver this excellent financial performance.  

With our business in a strong financial position, and our portfolio of differentiated brands poised for further growth, I have every confidence that our proven strategy, our results-driven teams and our well-invested asset base will continue to support long-term growth and value creation."

For more information, please contact:

Next planned trading update - July 2024

* Items marked with an asterisk are non-GAAP measures.  Definitions and relevant reconciliations are provided later in this announcement.

Chair's Introduction

I am pleased to report that A.G. BARR has enjoyed a further year of significant progress across multiple fronts, in addition to delivering an excellent financial performance.  Revenue grew by 25.9% year-on-year and we finished the year with adjusted profit before tax* of £50.5m, 16.1% ahead of the prior year.

Despite continued global macro uncertainty and volatility we have navigated these challenging times well.  Our long-term growth strategy has been well executed during the year.  We have continued to invest in our brands, people and infrastructure and have made good progress against our medium-term margin development plans, following the first full year of ownership of the higher growth but currently lower margin Boost and MOMA businesses.

Highlights during the year include :  

·      Strong revenue and volume growth across our soft drinks portfolio, with a standout performance from the Rubicon brand

·      Good progress on a number of fronts in the first full year of ownership of the Boost business alongside the acquisition of the Rio tropical fruit drinks brand

·      Margin rebuild plan well underway, accompanied by strong cash generation and balance sheet strength

Our performance has been delivered by an excellent team of people across the whole Group, who have worked hard in the execution of our winning strategy.

Dividend

The Board is pleased to maintain its progressive dividend policy and recommends a final dividend of 12.40p per share to give a proposed total dividend for the full year of 15.05p per share. This represents year-on-year growth of 14.9% (2022/23 : 13.10p).  The final dividend is payable on 7 June 2024 to shareholders on the Register of Members at the close of business on 10 May 2024. The ex-dividend date is 9 May 2024.

Board

As planned, after 62 years with the business, Robin Barr stepped down from the Board in May 2023.  We were pleased to welcome Julie Barr and Louise Smalley as Non-Executive Directors during the course of the year.

In August 2023, after over 21 years as CEO, Roger White announced his intention to retire from the business.  He will step down from the Board at the end of April 2024, remaining available until the end of July to support a smooth leadership transition. 

Roger has led the transformation of A.G. BARR from a regional soft drinks business into the highly successful multi-beverage, branded company that it is today and he has been instrumental in delivering significant value to shareholders, stakeholders and employees.  It has been a great pleasure to work with Roger and on behalf of the Board I would like to thank him for the huge contribution he has made to A.G BARR's success over two decades as CEO and to wish him well for the future. 

I was delighted to communicate earlier this year that Euan Sutherland will join as the Group's CEO with effect from 1 May 2024.  Euan has a wealth of consumer goods experience, an excellent track record in delivering sustainable growth and a history of improving efficiency and profitability through major transformation programmes.  Euan is well placed to lead A.G. BARR through the next exciting phase of its development and to ensure the continued long-term success of the business.

Responsibility

Our Environmental, Social and Governance Board sub committee is now well established and providing important oversight and direction for the Group, with a particular focus over the past 12 months on our environmental sustainability progress and our net-zero roadmap.

We continue to make good progress across our broader responsibility agenda.  Highlights during the course of the year include FUNKIN's achievement of B Corp status*, validating its high social and environmental standards, as well as external recognition, received from both customers and industry bodies, of the progress we have made.   Further details can be found within our Responsible Business Report.

People and culture

I have previously referenced A.G. BARR's unique and positive culture.  I am pleased to update shareholders that our levels of employee engagement as measured by our Everyone Barr None survey, have risen further over the last 12 months.  This reflects the steps we continue to take, supporting our colleagues across areas such as diversity and equality, reward, mental health, learning and development as well as workplace flexibility.  

We continue to build on our unique culture, protecting and supporting the individuality of our business divisions, people and brands.  Over the course of the year, we have been encouraged by the open and constructive feedback received at various Board engagement sessions which now informs much of our thinking, planning and future actions.  

We are equally as proud of our values and behaviours as we are of our financial performance.

Prospects

Looking ahead, while we operate in what is likely to remain a volatile environment, I am confident that we have a Group with growth momentum, market-leading brands, a strong margin rebuild plan which is well underway and a long-term strategy which will deliver superior shareholder returns.

Mark Allen OBE

CHAIR

Chief Executive's review

I am delighted to report our results for the 52 weeks ended 28 January 2024. 

As this is my final annual reporting of A.G. BARR results I wanted to take the opportunity to say how exceptionally proud I am of all the teams across the Group who make this such a unique and special business.  

Over the past 12 months we have delivered an excellent financial performance and made significant progress across our strategic objectives. We have navigated the challenges of persistent inflation, a volatile regulatory environment and changing consumer habits, delivering well against our priorities.  

The following financial metrics quantify our strong performance:

·      Revenue £400.0m up 25.9 %

·      Adjusted profit before tax* £50.5m up 16.1 %

·      Reported profit before tax £51.3m up 15.5 %

·      Net cash at bank* £53.6m up 1.3 %

·      Basic earnings per share 34.59p up 13.5 %

Definitions of adjusted items are provided later in this report.

Strategic objectives

We are driven by our overarching Group purpose - to create value with values - underpinned by our consistent strategic priorities:

·      connecting with consumers

·      building brands

·      driving efficiency 

·      building trust

During the year we leveraged our capabilities to drive superior growth across the Group, both in value and volume.  In this period of significant inflation during which volume growth has been hard to come by, our performance is all the more pleasing. 

We continued to invest across the Group in support of our long-term organic revenue and profit growth ambitions.  We have also benefited from the growth and diversification that our recent acquisitions have brought to the Group, further reinforcing the importance of such value-adding acquisitions as part of our overall growth strategy.  Our growing brand portfolio is strongly aligned with current consumer and category trends, providing choice for all.

Soft drinks market 

Across the period the total UK soft drinks market increased in value by 8.3% while volumes declined by 2.9%.  These trends were similarly reflected in both the Carbonates and Stills sub sectors.  The high levels of price inflation prevalent across the market in 2022 continued into 2023, however the scale of these inflationary increases eased somewhat in the latter part of the year.

Within soft drinks market sub categories, while lemonade and mixers continued to decline, Energy and Sports once again significantly outperformed the market, with strong gains in both value and volume terms.

We are pleased to report that the Group's soft drinks portfolio, supported by our brand building and pricing strategy, delivered both value and volume market share gains in the period.

(Source:  Circana Total Soft Drinks Market 52 weeks to 27 January 2024)

Cocktail market

The on-trade channel remained variable across the year, with late night venues in particular experiencing reduced footfall in the context of consumers feeling the impact of increased cost of living pressures.  Despite these tougher market conditions, the value of cocktails remained flat at £688m and cocktail penetration increased - one in five (9.4m) on-premise GB consumers now drink cocktails out of home, a 0.2% increase on the prior year.  

Growth of ready to drink (RTD) products has continued at pace within the UK take home market, now worth £544m.  Cocktails have been the main growth driver within the total RTD category, increasing in value by 19.2%, more than four times the rate of the RTD category as a whole.  FUNKIN remains the number one RTD cocktail brand within this growing sector.

(Sources: CGA Mixed Drinks Report Q3 2023 ; Nielsen Pre-Mixed Alcoholic Drinks Total Coverage Data MAT 27/01/2024)

Plant-based milk market

The value of the plant-based milk market grew year-on-year by 1.2% with volumes down 8.6% and is now worth £369m.  Oat milk continued to be the key growth driver in the category with volume growth of 2.9% and value sales up 12%, compared to value declines in almond (down 11%), soya (down 7%), and coconut (down 11%) milks.  

Oat milk's share of the total plant-based milk market increased to 59%, up from 53% in the previous year, with 21% of UK households now purchasing oat milk.

MOMA grew significantly ahead of the total plant-based milk market with sales up 37%, driven by its specific focus on the growing oat milk sub category, its strong brand momentum as well as distribution gains. 

(Sources: Nielsen Total Market Plant-Based Milk 52 weeks to Dec 23; Kantar UK Household Penetration 52 weeks ending 02/11/2023)

Porridge market

The value of the total porridge market grew 13% versus the prior year with volumes down 0.7% and is now worth £249m.  All porridge subcategories were in value sales growth, with the convenience-focused pots segment showing the fastest growth, up 18%.

MOMA's porridge pot range grew ahead of the market, up 20% in value driven by strong sales momentum and distribution gains in large multiple retailers.

(Source: Nielsen Total Porridge 52 weeks to Dec 23).

Connecting with consumers

Consumer engagement has remained fundamental to the delivery of our strategy across the year.  Our portfolio of brands appeals to a wide demographic of consumers and we employ a broad and varied range of activities to increase brand awareness, create excitement, build loyalty and offer choice.

Across our soft drinks portfolio we have invested in a number of successful advertising and marketing campaigns, including a new IRN-BRU creative, "WIRE", which engaged consumers in the great IRN-BRU taste debate, Rubicon's successful "Made of Different Stuff" campaign, with a strong social media focus, and Boost's "Let's Do This" consumer advertising programme, targeting growth across a range of channels.

FUNKIN's summer campaign "It's FUNKIN Time!" raised brand awareness with 18 to 34-year olds to 47%, while MOMA's "The Barista's Choice" out of home and digital advertising campaign promoted the brand's credentials as a high-quality oat drink perfect for both professional baristas and home coffee making alike.

We believe sponsorship remains an important means of connecting with consumers.  As such Rubicon RAW renewed its partnerships with GB Snowsports and the Boardmasters Festival, while Boost continued its partnership with Leeds United Football Club, raising brand awareness with football fans and beyond.

Building brands

Brand building is at the heart of our growth strategy.  Across the year we launched a number of innovative new products, created exciting flavours and limited editions, and gained incremental customer distribution through effective sales execution within multiple channels.

Our core soft drinks brands performed very strongly.  

IRN-BRU grew volume ahead of the market and delivered a 8% increase in sales revenue.  IRN-BRU XTRA continued to grow, supported by two sell-out Tropical and Ice Cream limited edition flavours across the summer, reflecting consumers' ongoing preference for great tasting, no sugar options.  

Energy & Sports continue to be the fastest growing subcategories within the UK soft drinks market, up 16.4% and 54.8% respectively in value terms.  Boost brought strong incremental sales to the Sport drinks market with its Raspberry & Mango limited edition innovation, delivered successful new product development to the 500ml can market with Blood Orange and Raspberry Crush and reinvigorated the brand's citrus proposition with the introduction of 250ml Lemon & Lime.  

We now have greater scale and presence in energy as we combine the Boost brand, Rubicon RAW Energy and our new energy innovation, PWR-BRU.

The Rubicon brand had an excellent year, with sales up 15%, driven by growth across the full brand portfolio.  Rubicon's exotic fruit proposition and its vibrant and energetic brand positioning are proving a winning combination, with consumers keen to experience flavours and products that differ from the norm.

FUNKIN's innovation progressed at pace.  From new additions to its RTD range, including Margarita, Aperitivo Spritz and a non-alcoholic Passion Fruit Martini, to its new premium Double Shot bar strength RTD cocktails in cans, the brand remains the UK's Number 1 cocktail choice behind the bar and at home.

MOMA continued to build its position in the plant-based oat drink market and within the breakfast porridge category.  With the range growing to include an organic oat milk product, and the development of a new professional range designed specifically for the speciality coffee sector, MOMA is a growing challenger brand with strong British farming and craft oat credentials.

In support of our brand-building strategy we were pleased to acquire the tropical fruit drinks brand Rio for a total consideration of £12.3m in October 2023.  Rio has been marketed, sold and distributed on an exclusive licence basis by Boost Drinks since 2021.  The acquisition allows us to realise the benefits of full brand ownership, support Rio's continued growth and accelerate our manufacturing in-sourcing plans to access margin benefits. 

Driving efficiency

2023 was a year of further investment in efficiency and continuous improvement across the business.

Our multi-year capital investment programme at our Cumbernauld site is progressing to plan in its second year.  This asset refresh programme will deliver faster and more efficient production lines, more dual production capability with our Milton Keynes site, providing greater resilience and flexibility, as well as contributing to our net-zero roadmap, through lower emissions and reductions in packaging weights.

Following the acquisition of the Boost business in December 2022, we have commenced the first phase of our planned manufacturing in-sourcing activity.  This insourcing, alongside our overarching supply chain capital investment programme, brings operational leverage and synergy benefits supporting our margin rebuild plans.

Building trust 

It has been a further year of progress across our responsible business priorities and commitments.  

The FUNKIN business was delighted to achieve B Corp accreditation, a further significant milestone in FUNKIN's development, certifying its high standards of social and environmental performance.

Our No Time To Waste environmental sustainability programme continued to drive the business towards the achievement of our science-based targets and net-zero commitment.  Tangible progress across the year included new bio-fuelled vehicles and further increases in recycled content across our packaging.  This progress received welcome external validation through an improved rating (A) from the Climate Disclosure Project, widely considered to be one of the most comprehensive independent environmental data sets available.

We continued to support our people across a variety of areas both professionally and personally - from learning and development opportunities to assistance with financial planning - and we are pleased to report that our employee engagement, measured by our annual survey, saw Group-wide engagement increase to 76%, versus an industry benchmark of 69%. (Source: WorkL)

Building trust also extends to our customers and suppliers with whom we aim to build strong collaborative relationships.  As an example, Boost celebrated its 20th anniversary in Northern Ireland with a retailer recognition 'Always in your Corner' campaign, and we were delighted to achieve "Best Overall Service" at the Scottish Wholesale Association's awards ceremony - our 12th win in 14 years.  

Outlook

I would like to take the opportunity to thank all of the teams across the Group who have worked hard to deliver this excellent overall performance.  It has been a privilege to lead the business and work alongside incredibly talented people. 

We closed the year in strong financial health and with our brands and business poised for further growth.  I have every confidence that our strategy, alongside our results-driven teams, unique brands and well-invested assets will continue to support our growth and success in the years ahead.

Roger White

CHIEF EXECUTIVE

Financial review

OVERVIEW

The business has delivered a very pleasing set of results in a competitive market environment, reflecting the benefit of strong brands, an agile organisation and a talented team. 

Revenue grew 25.9% to £400.0m.  Like-for-like revenue growth*, which excludes the dilutive effect of the Boost acquisition, was up 8.0%.  This strong performance was broad-based across the portfolio, driven by core brand distribution gains and successful revenue management that supported margins but ensured our brands remained affordable during a period of continued pressure on household incomes.

As expected, operating margin was impacted by the 2022 Boost acquisition.  However, the Group reported a record adjusted profit before tax* of £50.5m up 16.1% on the prior year (2022/23 : £43.5m), driven by our strong trading performance, further efficiency across our supply chain as well as progress across our margin rebuild programme.  Reported profit before tax was £51.3m (2022/23 : £44.4m).

Our balance sheet and cash generation remain strong.  During the year £60.2m cash generated from operations funded the £12.3m acquisition of Rio Tropical Limited in October 2023, supported the continued commitment to capital investment across our operating sites (cash capital expenditure* of £17.8m) and gives the confidence to recommend a 17.0% increase in the final dividend in line with our progressive dividend policy.  Following these significant investments in brands and assets, we ended the year with £53.6m net cash in bank* (2022/23 : £52.9m).  The Group has significant debt capacity headroom of up to 2.5x EBITDA.  However, in the near term, we value the financial flexibility that a positive cash position provides. 

The ongoing investment in our brands, asset base and people reinforces our confidence that the business will continue to grow and create value in line with our strategic ambition.

ADJUSTING ITEMS

The reported results include a £0.8m credit (2022/23: £0.9m credit) within operating expenses which has been excluded from adjusted profit before tax*.  The adjustment relates to a prior year accrual associated with the acquisition earn-out of Boost Drinks Limited in December 2022.  Following the lapse of the earn-out, the accrual is no longer required and has been released.

SEGMENTAL PERFORMANCE

There are three reportable segments in the Group:

·      Soft drinks

·      Cocktail solutions

·      Other

Soft drinks - Revenue up 30.0%, gross profit up 23.7%

A strong performance across our soft drinks segment was driven by the combination of growth in average unit selling price and growth in underlying volume (up c.3%) in an overall market that experienced volume decline.

Despite mixed summer weather, IRN-BRU and Rubicon delivered both volume and revenue growth as a result of securing new customers, extending distribution with existing customers, revenue growth, improved format mix and successful innovation. 

IRN-BRU performed particularly well in England, benefiting from the continued success of our zero sugar XTRA which delivered double digit growth.  IRN-BRU's innovation across the year focused on limited edition summer flavours as well as a Scottish launch of a new product, PWR-BRU, into the energy category.

Rubicon had a very strong year, delivering double-digit growth in both volume (up 10.0%) and revenue (up 14.7%), with an impressive performance from both Rubicon Spring and Rubicon Sparkling, underpinned by Rubicon Still's return to growth and the continued focus on Rubicon RAW, the brand's energy drink launched in 2021.  

Our financial results for 2023/24 include a full 12 months' contribution from the Boost portfolio, while the prior year comparators include Boost's contribution for only the two months from the point of acquisition.

The Boost Drinks portfolio spans energy, sports and iced coffee and includes Rio, the tropical fruit drinks brand acquired by the Group in October 2023.  The portfolio held volumes flat in a year when the business was focused on margin after a challenging period of sustained input inflation.

Across the remainder of our portfolio, KA grew 7.8% in revenue and 5.3% in volume.  This offset Sun Exotic and Simply Fruity which lost volume as a result of production and customer prioritisation decisions. 

Cocktail solutions - Revenue up 0.2%, gross profit down (4.9)%

FUNKIN reported broadly flat revenue versus particularly strong prior year comparatives, in the context of a difficult period for the on-trade and lost distribution in Australia, as a result of supply chain challenges.  The on-trade environment was more challenging with customers under pressure from lower late night venue footfall, consumer spending squeeze and high inflation across their cost base.  

Volume and revenue continued to grow strongly in the important take home channel. FUNKIN ready to drink (RTD) cocktails maintained their market leading position in the grocery channel with broader and deeper distribution of their award-winning RTD cocktails.  

Other - Revenue up 28.0%, gross profit up 39.1%

This segment represents our MOMA business division, comprising oat milk drinks and other oat-based products, primarily porridge.  Since acquisition we have consistently invested in the long-term potential of oat milk, given MOMA's growing position in this winning segment of plant-based drinks.

MOMA continues to build distribution, achieving revenues over £10m for the first time, up 28% versus the prior year. Oat milk continues to grow in both grocery and out of home channels.  Targeted customer wins in speciality coffee outlets are particularly pleasing and indicate further growth potential in a market where taste and quality are highly prized. 

MARGINS

While pricing moderated across many commodities, as core material costs came off their 2022 record highs, cost inflation persisted in employment and service-related inputs.  

Gross margin of 38.6% was a decline on the prior year (2022/23 : 40.3%) as a result of the known medium-term structural impact from the Boost and MOMA acquisitions.  This impact was offset by disciplined cost management, the benefit of a resilient and stable supply chain, and the operational efficiencies delivered from the accelerated initial phase of Boost/Rio in-sourced manufacturing.

Overhead costs increased by 23.8% reflecting a full year of the Boost business, marketing support behind our brands and ongoing investment in our talent base.  We continually invest in talent, through both additional resources and competitive reward and remuneration, in order to retain and recruit the right skills to support future growth.

At 12.3%, adjusted operating margin* was 130 basis points below the prior period (2022/23 : 13.6%).  This was an improvement upon our expectations from earlier in the year and largely a consequence of the successful acceleration of Boost and Rio production in-sourcing.  This provides further confidence that our margin rebuild programme will deliver as planned over the next two years.

INTEREST

The Group remained net cash positive throughout 2022/23, with surplus cash held on rolling short-term deposits.  Resulting interest income of £1.4m offset finance charges of £0.2m largely associated with lease interest costs under IFRS 16.

TAXATION 

The reported tax rate for the year ended 28 January 2024 was 25.0% compared with 23.6% for the year ended 29 January 2023.  The corporation tax rate was 19% for the first 2 months of the financial period and 25% for the remaining 10 months (2022/23 19%). Deferred tax was calculated at 25% for the full 12 months.

EARNINGS PER SHARE (EPS)

Adjusted basic EPS* for the year was 33.88p, an increase of 14.2% on the prior year. This reflects the strong profit performance, an unchanged share base and the increased tax charge detailed above. Excluding the impact of taxation, EPS rose 16.1%.   Basic reported EPS was 34.59p, an increase of 13.5% on last year.  Based on a diluted weighted average of 112,448,605 shares, diluted EPS was 34.24p (2022/23: 30.22p).

DIVIDENDS

The Group's dividend policy aims to deliver a progressive and sustainable dividend to shareholders that has regard to performance trends including revenue, profit after tax and cash, and that satisfies certain guiding principles around dividend cover, payout ratios and medium-term profit outlook.           

In line with this framework, and following the interim dividend of 2.65p per share paid in October 2023, the Board is recommending a final dividend for the period of 12.40p.  This will bring the full year dividend to 15.05p per share (2022/2023: 13.10p per share) which provides 2.3 times dividend cover and delivers a payout ratio of 51%.  Subject to approval by shareholders at the AGM in May, the final dividend will be paid to holders of ordinary shares on the register as of 10 May 2024 with an ex-dividend date of 9 May 2024. 

BALANCE SHEET 

Disciplined capital allocation is a key component of our business strategy.  The Board regularly reviews this strategy in the context of its prevailing risk appetite, current capital programme and strategic plans.  We continue to believe that a strong balance sheet supports growth, while enabling M&A and securing a sustainable progressive dividend. The Board retains a medium-term intention to operate an efficient balance sheet, which would include a prudent amount of debt, and is comfortable that the cashflows and earnings profile of the Group could support a debt capacity up to 2 - 2.5x EBITDA.  However, in the near term, the Group wishes to have the financial flexibility provided by a positive cash position to provide agility to react to adverse trading conditions and fund, from existing cash and debt resources, potential mergers and acquisitions that are a key element of the Group's growth strategy.  We will review annually the level of cash held against these objectives to identify any surplus.

In the year ended 28 January 2024, the Group successfully completed the acquisition of the Rio tropical drinks brand through the purchase of Rio Tropical Limited for £12.3m. The acquisition was fully funded from Group cash reserves. The Rio brand had previously been marketed and distributed under a franchise agreement by Boost Drinks Limited. Securing full ownership of the brand allows the Group to invest in its long-term growth.  The primary financial implications of the acquisition are the elimination of brand owner royalty payments and a £15.3m increase in intangible assets. 

The Group remains financially strong with net cash at bank, no material trade debt issues, appropriate inventory levels, a defined benefit pension surplus and a £23.9m increase in the net asset base to £292.7m.  Together with operating profit growth, these deliver a healthy and improving Return on Capital Employed of 18.7%.  

CASH FLOW 

Our cash performance remains positive with cash generated from operations of £60.2m and a profit to cash conversion ratio* of 96.0%, driven by a continued focus on disciplined cash management.

Overall working capital impact on cashflow has been an outflow of £5.2m. Higher inventories, from a combination of input cost inflation, increased mango stocks and a planned stock-build to support customer service during the installation of our new PET line at Cumbernauld have been partially offset by improved finished stock management. Trade payable and receivables have benefited from lower finished goods in both FUNKIN and Boost while trade receivables have increased by 6%, broadly in line with revenue. 

Cash capital expenditure* of £17.8m (2022/23 : £14.6m) was focused on our multi-year asset refresh programme at our Cumbernauld site.  This programme continues on plan with the upgrade of our large format PET line successfully commissioned in the summer of 2023 and the installation of a new small format PET line on schedule for completion in the first quarter of 2024. 

The capital programme is part of an overall longer term, supply chain optimisation programme that aims to support future profit growth by providing improved efficiency, capacity and customer service. The programme will facilitate improved capacity utilisation by enabling the insourcing of much of the Boost/Rio production currently undertaken by contract packers. This in-sourcing initiative is an important element of our margin rebuild strategy.  It commenced in November 2023 with the successful in-house production of key Boost and Rio canned products and will complete in 2026/27 at which time we aim to be producing over 90% of Boost/Rio products in our own facilities. 

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 and financial plans.  The process is based on a balance of risk and opportunity, 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 updates to risks and mitigation plans are made as required.  The principal risks that could potentially have a significant impact on our business have not changed since the end of the financial year.

TREASURY AND COMMODITY RISK MANAGEMENT

The treasury and commodity risks faced by the Group are identified and managed by the Group Treasury and Commodity Committee whose activities are carried out in accordance with Board approved policies and subject to regular Audit and Risk Committee oversight.   

Key financial risks managed by this committee include exposures to foreign exchange rates and the management of the Group's debt, commodity and liquidity positions.  The Group uses financial instruments to hedge against foreign currency exposures.  No transactions are entered into for speculative purposes.

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 reduce risk.

As at 28 January 2024, the Group had £20.0m of funds held on short-term, interest earning deposit with two relationship banks.  In addition to the Group's cash position, the Group had £20.0m of unutilised committed debt facilities, consisting of a revolving credit facility with our principal relationship bank.  This expires in February 2026.  Our funding requirements and facilities are continually reviewed to ensure they remain appropriate, providing a balance of security and optionality.

ACCOUNTING POLICIES

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards and the Listing Rules of the Financial Conduct Authority.

There have been no changes to the accounting policies applied this year.  All new or amended 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 the A.G. BARR p.l.c. (2008) Pension and Life Assurance Scheme.  This 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 closed to future accrual for members in May 2016.  Existing and new employees have been invited to join an outsourced defined contribution scheme. 

The pension scheme remains well funded and no cash payments were made in 2023/24.  The scheme's triennial valuation as at April 2023 identified a £3.2m surplus on a technical provisions basis and indicated that the scheme could be expected to reach self-sufficiency by 2032, with no additional cash contributions required.  

On an IAS 19 valuation basis, which is determined before the benefit of the Central Asset Reserve (CAR) funding arrangement, the surplus of £2.4m as at 29 January 2023 improved to a surplus of £3.2m as at the balance sheet date.  The scheme has a long-established financial de-risking strategy that includes pensioner buy-in policies and asset hedging. The Group continues to work proactively with the Pension Trustee to further de-risk the pension liabilities and secure the commitments to employee benefits as part of the Group's ongoing strategic risk management.  

____________

We believe our robust financial fundamentals are key in the support of our strategy, brand momentum and strong execution plans, enabling us to deliver growth in the year ahead and beyond.

Stuart Lorimer

Finance Director