TIDMBVIC
RNS Number : 0593I
Britvic plc
09 December 2020
Britvic plc ("Britvic", the "Company" or the "Group")
9 December 2020
2020 ANNUAL REPORT, 2021 NOTICE OF ANNUAL GENERAL MEETING AND
RELATED PARTY TRANSACTION
Following the release on 26 November 2020 of the Group's
Preliminary Results Announcement for the year ended 30 September
2020, and in compliance with Listing Rule 9.6.1, the Company has
today submitted the following documents to the Financial Conduct
Authority, and they will shortly be available for inspection at the
National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
-- Annual Report and Accounts 2020
-- Notice of the Annual General Meeting of the Company, to be
held on Thursday 28 January 2021 at 11.00am at Breakspear Park,
Breakspear Way, Hemel Hempstead, HP2 4TZ
-- Proxy form for the 2021 AGM
The Annual Report and Accounts 2020 is available to view or
download in pdf format from the Company's website at
www.britvic.com/annualreport.
A condensed set of Britvic plc financial statements and
information on important events that have occurred during the year
and their impact on the financial statements were included in the
Company's preliminary announcement on 26 November 2020. That
information, together with the information set out below in
appendices A and B which is extracted from the Annual Report and
Accounts 2020, constitute the requirements of DTR 6.3.5 which are
to be communicated via a RIS in unedited full text. This
announcement is not a substitute for reading the full Annual Report
and Financial Statements. Page and note references in the text
below refer to page numbers in the Annual Report and Accounts
2020.
The 2021 Notice of Meeting is available to view or download in
pdf format from the Company's website at www.britvic.com/agm.
Please note that within the 2021 Notice of Meeting, the Company
is proposing a resolution in relation to certain past dividends
paid by the Company relating to the financial years 2013, 2014,
2018 and 2019 (the 'Relevant Dividends').
Although importantly there were sufficient distributable profits
available across the Britvic Group at all relevant times, the
technical accounting treatment applied to certain share-based
payments meant that there were not in fact enough distributable
profits at the level of the holding company, Britvic plc, when the
Relevant Dividends were paid.
The purpose of the resolution in the Notice of Meeting,
therefore, is to rectify this issue and to put shareholders and
current/former directors in the position they would have been in
had the Relevant Dividends fully complied with the Companies Act
2006 (the 'Act'). This includes entering into deeds of release to
release the shareholders who received the Relevant Dividends, and
the directors of the Company at the time the Relevant Dividends
were paid, from any liability to repay any amounts to the
Company.
The approach that the Company is proposing by way of certain
resolutions in respect of the Relevant Dividends is consistent with
the approach taken by other listed companies that have, similarly,
made such distributions otherwise than in accordance with the
Act.
The issue is of a historical nature and there is no change to
the financial outlook of the Company and no past accounts will need
to be restated. No fines or other penalties have been incurred by
the Company. There is no impact on the final 2020 dividend proposed
for approval by shareholders at the AGM. The total aggregate amount
of the Relevant Dividends relating to the financial years 2013,
2014, 2018 and 2019 was GBP100.3m.
Shareholders should note that the Company has taken immediate
steps to rectify the situation, with new processes in place to
ensure full compliance with the Act going forward.
The current Directors[1] are related parties of the Company and
therefore the entry by the Company into deeds of release in favour
of the Directors constitutes a related party transaction for the
purposes of the Listing Rules, specifically LR 11.1.10R.
The 2021 Notice of Meeting contains further details of the
Relevant Dividends.
Clare Thomas
Company Secretary
Britvic plc LEI: 635400L3NVMYD4BVCI53
Appendix A
Principal risks and uncertainties
The principal risks and uncertainties relating to the Company
are set out on pages 54 - 59 of the Britvic Annual Report and
Accounts 2020. The following is extracted in full and unedited text
from the Britvic Annual Report and Accounts 2020.
The table below sets out the principal risks faced by the
company, the link to the company's strategies, movement in the risk
score, examples of relevant controls, mitigating factors, and
recent developments. The company is exposed to a wide range of
other risks in addition to those listed.
Alignment to strategy key:
B: Build local favourites and global premium brands
F: Flavour billions of water occasions
H: Healthier People, Healthier Planet
I: Innovate to access new spaces
Consumer preference: Innovation
Principal risk
Failure to successfully evolve our portfolio to take advantage
of growth categories and/or reinvent our core brands to meet
consumer needs.
Risk score movement from the prior year: No change.
Alignment to strategy: B, F, I
Risk description
Consumer preferences, tastes and behaviours change over time and
differ between the markets in which we operate. As part of this,
the consumer's desire for healthier choices and premiumisation are
significant trends. Our ability to anticipate these trends,
innovate and ensure the relevance of our brands is critical to our
competitiveness in the market place and our performance.
Controls and mitigating activities
- We have a broad portfolio of products across a number of
sub-categories and markets to meet evolving
consumer trends.
- Continuous assessment of consumer/customer trends, insight and
behaviours in order to anticipate changes in
preferences and match our offering to these trends
- The Category Board focuses on a plan for the next 18 months
and putting strategic plans in place by category.
- Ongoing prioritisation exercise ensuring a clear innovation
pipeline balanced between long-term and more
immediate opportunities.
2020 developments
- Over 200 London Essence Fresh Serve founts now available in
restaurants and pubs across the UK.
- We have purchased The Boiling Tap Company (TBTC) to help
access new spaces in consumer landscape.
- We launched ready-to-drink and coconut water in Brazil with
the Puro Coco and Natural Tea brands.
- We have continued to innovate with our flavours, introducing
the Robinsons Superfruit Cordials this year and
Les Bios, our organic ranges of syrups in France.
Health Concerns
Principal risk
The continued focus on health and obesity results in a decline
in the soft drinks category and/or our share of it, and the risk of
additional complexity and cost as a result of further regulation
after the successful implementation of SDIL.
Risk score movement from the prior year: Increased
Alignment to strategy: H
Risk description
There is a high and ever increasing level of media and
government scrutiny in health and obesity in all of the markets we
operate in, highlighted in the UK by the potential introduction of
regulation over high in HFSS products. It is important that we
continue to take a leadership position in health issues.
Controls and mitigating activities
- We have a wide range of soft drinks, many of which are low or
no calorie, which means we are well placed to
take advantage of the consumer's increased demand for healthier
products.
- Ongoing evaluation and development of the brand portfolio and
innovation pipeline; our innovation pipeline is
weighted towards lower calorie or nutritionally enhanced
brands.
- We work closely with non-government organisations and trade
associations in our markets to fully participate
in the debate and help shape solutions.
2020 developments
- UK Government Obesity Strategy announced (July 2020) with some
key details outstanding. Initial assessments
performed of HFSS regulations included within the strategy and
our impact assessment will be refreshed as more
details are announced.
- We set a strategic aim to have fewer than 30 calories per
250ml serve by 2025 to drive a continuation of our
calorie reduction programme.
Retailer Landscape and Customer Relationships
Principal risk
We may not be able to maintain strong relationships with our key
customers or respond to changes in the retailer landscape (e.g.
consolidation).
Risk score movement from prior year: No change.
Alignment to strategy: B, I
Risk description
Maintaining strong relationships with our existing customers and
building relationships with new customers and technology-enabled
channels is critical for our brands to be readily available and
well presented to our consumers. A failure to do this may impact
our ability to obtain competitive pricing and trade terms and/or
the availability and presentation of our brands.
Controls and mitigating activities
- We operate across many different customer channels and markets
and continuously monitor customer
performance and trends.
- We develop joint business plans with customers that include
investment and activation plans.
- We have capabilities in the soft drinks category, which enable
us to find new ways to improve customer
performance and enhance our relationships.
- We have trade credit insurance in place to cover our sales in
both the UK and France and payment plans to
mitigate credit risk.
2020 developments
- Significant disruption in this area as a result of COVID-19.
For example, promotions were significantly reduced
by grocers across Q3.
- Our London Essence Company founts offer a forward thinking
trade dispense system that serves flavoured
tonic water infusions and provides a new opportunity for us and
our customers.
- We work with all our customers, including through category
partnerships and range reviews, to match our
product offering to consumer needs.
Third party relationships
Principal risk
Partnerships may not be renewed or are renewed on less
favourable terms.
Risk score movement from prior year: No change.
Alignment to strategy: B
Risk description
We currently bottle and co-market a number of PepsiCo products
in GB and Ireland, including 7UP and Pepsi. Additionally we have a
relationship with a number of partners to grow our family, adult
and kids brands outside of our core markets. Our partnership with
PepsiCo and distributors and franchisees is an important part of
our business and delivery of our strategy going forward.
Controls and mitigating activities
- Robust governance and management of relationship with PepsiCo
and other partners.
2020 developments
- In October 2020, Britvic reached an agreement with PepsiCo for
a new and exclusive 20-year franchise bottling
agreement for the production, distribution, marketing and sales
of its carbonated soft drink brands - including
Pepsi, 7UP and Mountain Dew in Great Britain.
- The new agreement includes the Rockstar energy band, for which
Britvic will take responsibility from 1
November this year.
Supply Chain
Principal risk
Supplier failure, market shortage or an adverse event in our
supply chain impacts sourcing of our products and the cost of our
products is significantly affected by commodity price
movements.
Risk score movement from last year: No change
Alignment to strategy: H, I
Risk description
Our business depends on purchasing a wide variety of products
and services, efficient manufacturing and distribution processes.
Brexit presents a specific risk, which is explored in further
detail below.
Controls and mitigating activities
- Flexibility in dual site supply for key products and strong
relationships with contract packers to support
business interruption or changes in demand.
- We have robust supplier strategy, selection, monitoring and
management processes.
- We monitor market conditions for commodities and, where
appropriate, hedge our contractual positions.
- Externally certified management systems across the supply
chain.
2020 developments
- Improved our business resilience through various projects,
including improving site accessibility to allow for
additional can supply and running table-top scenario disaster
emerging planning sessions with sites in GB.
- Record output as new lines moved into business as usual
(BAU).
- Maintained high service levels despite COVID-19.
Sustainability and Environment
Principal risk
Climate change presents a risk to our ability to source,
manufacture and market our drinks. The increased focus from all
stakeholders (from governments, customers and consumers) on
sustainability means there is increased risk of regulation on our
packaging, to source sustainably and appropriately report on the
impact of a changing climate.
Risk score movement from last year: No change
Alignment to strategy: H
Risk description
Increasing regulatory requirements and growing societal pressure
with regards to packaging (plastics in particular) may present a
financial and/or reputational risk to our existing packaging
portfolio and impact upon our ability to market our products. In
addition, climate change presents risks, both financially and
reputationally, across the business from reduced stock availability
to supply interruption.
Controls and mitigating activities
- Within our Healthier People, Healthier Planet sustainability
programme we make environmental commitments,
including carbon emission reductions, water savings and reducing
the environmental impact of our packaging.
- We have externally certified management systems in place to
monitor and reduce the environmental impact of
our operations and ensure compliance with environmental
legislation.
- We were a founding signatory to The UK Plastics Pact and 100%
of our cans, glass and plastic bottles are
recyclable in the UK.
- Through our trade associations and directly, we continue to
proactively engage with government on the
feasibility of a deposit return scheme system and other actions
to increase recycling and reduce littering.
2020 developments
- Entered our first sustainability-linked credit facility,
allowing us to borrow up to GBP400 million over the next five
years while linking the margin of the facility to our
sustainability goals.
- Entered into a supply agreement with Esterform Packaging
Limited, the largest independent converter of PET in
the UK, for the long-term supply of UK-sourced rPET.
- We have moved Fruit Shoot Hydro and 500ml Ballygowan into 100%
rPET.
- We have announced our intent for all bottles in GB to be made
form 100% rPET by the end of 2022.
- Developing a roadmap for decarbonisation to meet science-based
targets.
- We have significantly reduced our manufacturing water
intensity ratio this year by 12.4%.
International Expansion
Principal risk
Failure to grow our business internationally in line with
strategic aims due to the risks associated with start-up
profitability (new markets and new brands) and regulations.
Risk score movement from last year: No change
Alignment to strategy: B, F, I
Risk description
To achieve our strategy of growing internationally, it is
important that we have the appropriate governance, systems and
processes in place and that our brand propositions respond
appropriately to local consumer preferences.
Controls and mitigating activities
- Strategic plan in place for international business unit built
on Global Premium Adult channels.
- We carry out extensive due diligence prior to entering a new
market.
- Monitoring of regulations (current and proposed or future
changes).
2020 developments
- Across our international markets we have focussed on actions
that aim to improve margin and performance
and concentrated on growing our premium brands
internationally.
- We have completed the transaction to dispose of our juice
manufacturing sites in France.
- We have made good progress on growing our innovations brands
and products in Brazil.
Quality of our Products and the Health and Safety of our
People
Principal risk
Risk that a faulty or contaminated product, either through
malicious contamination, human error or equipment failure, is
supplied to the market.
Risk associated with the health and safety of our employees,
contractors and visitors when working on Britvic sites and when
working or travelling on behalf of Britvic or on customer
premises.
Risk score movement from last year: No change
Alignment to strategy: H
Risk description
The quality of our products and the health and safety of our
employees is of the utmost importance to us and it is essential
that we manage safety, product quality and integrity.
Controls and mitigating activities
- We have robust quality management standards applied and
rigorously monitored.
- Where incidents do occur, we have a clear Incident Management
Policy and conduct annual scenario testing
across all markets.
- We have dedicated central teams to oversee quality and
supplier assurance, working closely with the business
units.
- External compliance and system audits performed regularly
through accredited bodies.
- Programme of integrated QSE audits in place.
- Conduct unannounced site security penetration tests and form
action plans to address any findings.
2020 developments
- All sites in GB and Ireland, bar one of our Irish sites due to
limitations on site visits during COVID-19, achieved
FSSC22000, a food safety certification.
- All suppliers now listed and processed on QADEX, food safety
and quality self-assessment questionnaire risk
assessment and audit tool. This has been rolled out in all our
markets.
- Accident Frequency Rate (AFR) and Lost time accident frequency
all under target.
Legal and Regulatory
Principal risk
Non-compliance with local laws or regulations or breach of our
internal policies and standards.
Risk score movement from last year: No change
Alignment to strategy: B, H
Risk description
Britvic is subject to a wide range of legislation, regulation,
guidance and codes of practice in areas such as labelling,
packaging, marketing, advertising, safety, environment,
competition, data privacy, ethical business and tax. Failure to
comply with such requirements could have a significant impact
on our reputation and/or incur financial penalties.
Controls and mitigating activities
- In-house legal and compliance functions responsible for
ensuring compliance with all relevant legislation and
regulations. They work closely with the rest of the business and
external advisers and other key stakeholders
regarding current and changes to legislation.
- Global policies are in place with local variations as
appropriate and training rolled out as required.
2020 developments
- New compliance system in place providing one-stop-shop for
policies and logging conflicts of interest and Gifts
and Hospitality (G&H) and whistleblowing.
- Updated Anti-Bribery and Corruption (ABC) training rolled out
to employees along with face-to-face
competition training provided to commercial teams.
- Horizon scanning process refreshed for legal and regulatory
purposes and utilises third party experts.
Technology and Information Security
Principal risk
We experience a major failure of our IT infrastructure or suffer
a breach in our system or information security.
Risk score movement from last year: No change
Alignment to strategy: B
Risk description
We interact electronically with customers, suppliers and
consumers, and our supply chain operations are dependent on
reliable IT systems and infrastructure. Disruption to our IT
systems could have a significant impact on our sales, cash flows
and profits. Additionally, cyber security breaches could lead to
unauthorised access to, or loss of, sensitive information.
Controls and mitigating activities
- Disaster recovery plans across the Group tested every year
with annual penetration testing also performed.
- Central governance and decision-making processes for system
changes.
- Information and IT policies are in place and are regularly
reviewed. Quarterly internal phishing campaigns are
run and followed up with training and guidance.
- Incident response plans are in place, recognising that while
this risk can be managed it cannot be eliminated.
2020 developments
- Implementation of cyber controls framework on track.
- Updated cyber incident response plan in place.
- We have completed the majority of the actions from a third
party audit on cyber security controls.
- Cyber insurance in place for FY20 and renewed for FY21.
Treasury, Tax and Pension
Principal risk
Changes to exchange, interest or tax rates can have an impact on
profits and cash flows. Business changes also present a risk as to
how we are financed or taxed.
Risk score movement from last year: Increased
Alignment to strategy: B, H
Risk description
Britvic is exposed to a variety of external financial risks
relating to treasury, tax and pensions. Changes to exchange rates
and interest rates can have an impact on business results and the
cost of interest on our debt.
Additionally, the GB and Ireland businesses have defined benefit
pension plans which, while closed to new employees, are exposed to
movements in interest and inflation rates, values of assets and
increased life expectancy.
The group is seeking clarity through the court on its ability to
determine the rate of pension increase and revaluation of deferred
benefits in the Britvic Pension Plan in GB. Refer to note 22 of the
financial statements for further detail.
The risk score has increased due to the level of change in the
external tax environment.
Controls and mitigating activities
- Robust monitoring of exchange rates and interest rates.
- Active risk management and hedging strategies are in place to
manage exchange and interest fluctuations,
overseen by the Treasury Committee.
- Monitoring of investment and funding strategies for the
pension fund. Quarterly updates provided on the
funding position to Trustees.
- Strong relationships with external stakeholders and third
party experts to ensure that a high standard of advice
is provided to the business.
- Group tax policy in place.
2020 developments
- Triennial Valuation agreed in June 2020 delivered a mutually
agreeable funding basis.
- On track with identifying and implementing the changes
required for Brexit and Making Tax Digital.
- In FY20, we refinanced our Revolving Credit Facility and USPP
notes which were maturing.
Talent
Principal risk
Limited capacity, capability and resilience impacts the
business' ability to deliver ambitious plans for our business
strategy and post COVID-19 recovery - we rely on key individuals,
the risk is greater if they also face sustained high levels of
business pressure or encounter personal issues.
Risk score movement from last year: Increased
Alignment to strategy: H
Risk description
We rely on key individuals to contribute to the success of
Britvic, we need our people to continue to develop and be fit for
the future.
The risk score has increased due to the impact of COVID-19.
Controls and mitigating activities
- Talent and succession planning processes in place.
- Regular pulse surveys take place across the company to obtain
employees feedback on a wide range of topics.
- Annual performance management processes in place.
2020 developments
- Introduction of Wellbeing Warriors and Mental Health First
Aiders to provide online support during the COVID-
19 pandemic and in the future.
- MyLearning launched, a one-stop-online-shop for learning &
development at Britvic.
- Britvic established B-Diverse, a BAME network, this year and
launched See-Me, our diverse ability network.
COVID-19
COVD-19 (Health and Safety and COVID-19)
The outbreak of COVID-19 has led to unprecedented disruption,
with Government enforced sustained lockdowns in all our markets
impacting our employees, production and customers globally.
Significant economic uncertainty remains with the risk of a global
recession and no readily available vaccine.
The outbreak of COVID-19 has led to a significant challenge to
Health and Safety, increasing pressure on our sites, with on-going
risk of an outbreak or increased absenteeism due to self-isolation
requirements along with an increase in mental health concerns as a
result of lockdown measures.
Risk score movement from last year: New
Risk description
The uncertain nature of the severity of the pandemic and the
duration of the restrictions imposed by local governments in all
our markets has resulted in raising this new risk.
Controls and mitigating activities
- Financial modelling in place to assess the impact of
Out-of-Home closures, restrictions on movement of people,
and differing potential supply and demand implications for our
grocery business. This is Regularly monitored and
updating depending on development of COVID-19 and lockdown
rules.
- COVID-19 Response team from plc and BU level set up and
operational.
- Dynamic risk assessments in place for all sites and
offices.
- Weekly monitoring of supply chain risks, supplier monitoring,
forward purchasing/sourcing alternative supply of
raw materials where necessary. Optimising SKUs and production
schedules across all our markets.
- We are tracking employees who are self-isolating and who have
been confirmed to have contracted COVID-19.
- Social distancing measures put in place across our factories
and offices to reduce the risk and adhere to local
government advice.
- Additional cleaning procedures in place across our sites
especially for high traffic or high touch points.
- We continue to monitor government advice in all our markets to
ensure the safety of our employees.
- For more details on our response to COVID-19, see Chief
Financial Officer's review on page 51.
Brexit
Brexit
Increased costs and process complexity due to Brexit, including
risk of port disruption, stock build-up, additional warehousing and
new tariff processes.
Risk score movement from last year: no change
Alignment to strategy: B
Risk description
UK left the EU on 31 January 2020 with a transition phase in
place which will end on 31 December 2020, however, if there is no
or a limited trade agreement reached by the two parties, then there
could still be delay at borders, tariffs and there will be
additional paperwork for imports/exports.
Controls and mitigating activities
Brexit Steering committee in place with stakeholders from across
the business (Risk, GB and Ireland Commercial, DSP, Tax,
Procurement and Communications) meeting on regular basis.
Raw Material and Finished Goods stock build up took place in run
up to the December 2019 "No Deal" deadline
and contingency warehouses were secured.
Close collaboration with relevant trade federations so we are up
to date with the latest developments and
additional support.
2020 developments
- System review underway with IT to manage the impact of
potential export paperwork that may be required
We have monitored the political situation and trade/future
relationship talks and made a decision on the need to
build up stock as required
- We have continued our work to add dual Food Business Operator
(FBO) addresses to our product to adhere to
new labelling requirements
- Supplier readiness work was refreshed to ensure we are
prepared for the introduction of tariffs (e.g. confirming
commodity codes) and for any potential port delays.
Appendix B
Responsibility statement of the Directors in respect of the
Annual Report
The Annual Report and Accounts 2020 contains a responsibility
statement in compliance with DTR 4.1.12. This statement is set out
on page 110 of the Annual Report and Accounts 2020 and is set out
below in full and unedited text. This statement relates solely to
the Britvic Annual Report and Accounts 2020 and is not connected to
the extracted information set out in this announcement or the
Preliminary Announcement.
The Directors confirm that to the best of their knowledge:
- The consolidated financial statements prepared in accordance
with IFRSs as adopted by the European Union
give a true and fair view of the assets, liabilities, financial
position and profit of the company and undertakings
included in the consolidation taken as a whole;
- the Annual Report, including the Strategic Report, includes a
fair review of the development and performance
of the business and the position of the company and undertakings
included in the consolidation as a whole,
together with a description of the principal risks and
uncertainties that they face;
- having taken into account all matters considered by the Board
and brought to the attention of the Board during
the year, the Directors consider that the Annual Report, taken
as a whole, is fair, balanced and understandable.
The Directors believe that the disclosures set out in this
Annual Report provide the information necessary for
shareholders to assess the company's performance, business model
and strategy.
On behalf of the Board
Simon Litherland, Chief Executive Officer
Joanne Wilson, Chief Financial Officer
[1] John Daly, Simon Litherland, Joanne Wilson, Suniti Chauhan,
Sue Clark, William Eccleshare, Ian McHoul and Euan Sutherland
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