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annual report
2012
Britvic plc
Breakspear Park
Breakspear Way
Hemel Hempstead
HP2 4TZ
Tel: +44 (0)121 711 1102
www.britvic.com
overview
business review
governance
financial statements
shareholder information
01 Our performance
02 Britvic at a glance
03 Our people
03 Strategy for growth
24 Board of directors
26 Directors’ report
30 Corporate
governance report
35 Directors’
remuneration report
04 Chairman’s
statement
06 Chief executive’s
review
08 Financial review
17 Corporate
responsibility
18 Business resources
20 Risks and
uncertainties
102 Shareholder profile
and information
104 Cautionary statement
44 Independent
auditor’s report to the
members of Britvic plc
45 Consolidated
income statement
46 Consolidated
statement of
comprehensive
income
47 Consolidated
balance sheet
48 Consolidated
statement of cash
flows
49 Consolidated
statement of changes
in equity
50 Notes to the
consolidated financial
statements
93 Independent auditor’s
report to the members
of Britvic plc
94 Company
balance sheet
95 Notes to the company
financial statements
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overview
Britvic is one of the leading soft drinks companies in Europe, with
operations in Great Britain (GB), Ireland and France.
Across these three markets, the company has developed a strong portfolio of its
own iconic brands, including Robinsons, Tango, J2O, drench, MiWadi, Ballygowan,
Teisseire and Fruité. In addition, in GB and Ireland, the company produces and
sells a number of PepsiCo’s famous soft drinks brands, including Pepsi, 7UP and
Mountain Dew Energy, under exclusive agreements with PepsiCo.
Britvic is the largest supplier of branded still soft drinks and the number two supplier
of branded carbonated soft drinks in GB, and it is an industry leader in Ireland and
France. Through export, licensing and franchising, Britvic has also been growing
its reach into other territories, particularly Australia and the United States.
Britvic’s management team has successfully developed the business through
a clear strategy of organic growth and international expansion based on creating
and building scalable brands. Britvic is listed on the London Stock Exchange
under the code BVIC.
It’s market capitalisation at 1 October 2012 was £866 million.
our performance at a glance
group revenue
group ebita
group ebita margin
2010
2011
2011
2012
£1,290.4m
£1,256.4m
2011
2012
£138.1m
£115.6m
2011
2012
10.7%
9.2%
-0.8%
-15.5%
-160bps
underlying roic
adjusted earnings per share
dividend per share
2010
2011
2011
2012
18.5%
16.4%
2011
2012
33.7p
27.2p
2011
2012
17.7p
17.7p
-210bps
-17.8% 0%
All numbers and comparisons quoted are on a constant currency basis, and before exceptional and other items unless otherwise stated.
Return on invested capital (roic) - roic is defined as operating profit after applying the tax rate for the period, stated before exceptional and other items, as a
percentage of invested capital. Invested capital is defined as non-current assets plus current assets less current liabilities, excluding all balances relating to interest
bearing liabilities and all other assets or liabilities associated with the financing and capital structure of the group and excluding any deferred tax balances and
effective hedges relating to interest-bearing liabilities. The roic has been re-stated for prior year as it now includes the reduction in the asset base taken in ireland
in 2010 and the results and assets of britvic france, both of which were previously excluded from the measure to ensure a like for like comparison.
Britvic plc Annual Report 2012
1
overview
overview
overview
Britvic at a glance
international presence
Britvic GB
Britvic Ireland
Britvic France
Distribution via Britvic International
Britvic-owned brand agreements
I R E L A N D
G R E A T
B R I T A IN
F R A N C E
2
Britvic plc Annual Report 2012
overview
overview
business review
governance
financial statements
shareholder information
our people
Employees
Our people are critical to Britvic’s success and we are
fully committed to making Britvic a great place to work,
with our vision to be a top 5 Great Place to Work. Our
emphasis is increasingly on developing our own talent,
combined with proactive external recruitment when
we need to introduce new skills or create positions that
support our growth plans. To maximise the potential
of our employees we continue to strengthen our focus
on performance management and provide multiple
learning and development programmes in GB and
Ireland that cover leadership, management skills and
functional excellence. We are early in the integration
process of Britvic France, but we retain the same high
level of commitment to keeping our new colleagues
well informed and engaged about Britvic’s future vision
and current group performance as this is fundamental
to our joint success. We continue to run our annual
engagement survey and are committed to improving
these scores year on year.
Employee wellbeing
Throughout the past year, we have focused in GB on
making improvements to work-life balance, improving
our safety record and supporting a healthier workforce.
We have continued to invest in tools and systems that
give our employees the tools they need to do their
roles and provided technology that supports more
mobile ways of working. This enables us to improve
communication and engagement and gives employees
the opportunity and control to work flexibly in terms
of both location and hours. To support the health
of employees and their families we also provide a
benefits package which includes the provision of private
healthcare and an employee assistance programme.
Other wellbeing benefits include discounted gym
membership and a cycle to work scheme, which was
requested by employees and has seen a good level of
success so far. Our employee wellbeing programme has
been successfully launched and we have run successful
initiatives about healthy eating, exercise and general
health education.
strategy for growth
Britvic’s strategy is to seek to deliver strong revenue and profit growth
and realise attractive cash returns.
The business aims to be both an international brand
owner and PepsiCo’s preferred partner. To achieve
these aims, Britvic has built a strategy around growth,
underpinned by innovation, driving distribution and
average realised prices. The key building blocks to this
strategy are:
• Capitalising on its portfolio breadth & depth
• Building the strength of its unique brands
• Continually innovating in all that it does
• Leveraging insight
• Accelerating contribution from the international
growth of its brands
• Building business scale through acquisitions
Britvic plc Annual Report 2012
3
business review
overview
chairman’s statement
The last twelve months have
been disappointing for Britvic
as the company dealt with the
product recall of Fruit Shoot,
continued economic challenges
in Ireland and the consumer focus
on value, which restricted growth
in the impulse sector in GB.
More positively the Pressade brand, which focuses on its
organic, local origin, grew ahead of the market. The Fruit
Shoot recall also impacted the Teisseire Fruit Shoot range
and as a consequence of this we postponed the
implementation of SAP until 2014 to allow the management
team to focus on the re-entry plan for Fruit Shoot. This
will delay the timing of the synergies plan as both SAP
and the introduction of Fruit Shoot were key elements
of the synergies case.
Britvic Ireland continued to struggle against a backdrop
of poor consumer confidence as a result of the country’s
economic instability. The soft drinks market continued
to decline, with the impulse and pub and club channels
performing substantially worse than grocery, all of which
adversely impacted our margins. Despite the cost reduction
initiatives that we have implemented the declining top
line has led to a reduction in profits. Inevitably there will
be a continued focus on reducing the cost base as we
look to improve profitability. In the market place we
continued to hold our own and in spite of the challenges
gained market share.
Our final business division, Britvic International, continued
to show revenue growth, up 0.7%. However, it was also
materially impacted by the recall of Fruit Shoot, which
affected exports to the Netherlands and Belgium.
Importantly 2012 saw continued strong progress in the
US. During the second half of the financial year, we
successfully moved the US business to a concentrate
in-market manufacturing model, and are no longer exporting
finished goods from the UK. We also confirmed Virginia
as the ninth state where we will be distributing Fruit Shoot
through Pepsi-Cola Bottling of Central Virginia.
On the positive side, the GB business took market share,
led by carbonates and Pepsi in particular. Robinsons take-
home value market share returned to its high of two years
ago. The formation of the GB business unit saw Simon
Litherland join us from Diageo as GB Managing Director.
In France our syrups brands took further market share
and in the US we extended the footprint of Fruit Shoot,
a significant development for the future of the business.
Unfortunately, the positive financial impact of these
successes was offset by the Fruit Shoot recall. The recall
constrained revenue growth by around 2%, leading to
a 0.8% fall in group revenue to £1,256.4m. EBITA was
also down at £115.6m, including costs associated with the
recall of £16.9m. A strong focus on cash generation across
the business generated underlying free cash flow broadly
in line with last year, despite the negative impact of the
recall.
While the stills performance was materially impacted
by the unavailability of Fruit Shoot following the recall,
Robinsons showed encouraging progress in the last six
months, increasing take-home market volume and value
share. Carbonates also continued to perform strongly,
with revenues up by 3.1%, volume growth of 2.1% and
ARP growth of 0.9%. Pepsi had a particularly good year,
crucially gaining market share in a year of major sporting
activity with the European football championships, the
Olympics and Paralympics.
With revenue up 8% and ARP up 10.9%, Britvic France
had a solid year, mostly due to a combination of price
increases and the pack size changes we made in response
to the high raw material inflation, which impacted juices
and sugar. The performance of our syrups brands, Teisseire
and Moulin de Valdonne, helped grow our overall market
share of the syrups category in both volume and value
terms. The juice business, where we have a large
private-label presence, had to make some difficult
commercial decisions in response to the raw material
inflation leading to some contract losses.
4
Britvic plc Annual Report 2012
overview
business review
business review
governance
financial statements
shareholder information
Despite the challenges we’ve faced this year, we
are confident we now have a strong plan in place to
help us deliver growth. Our immediate priorities will
be to re-establish Fruit Shoot in the market as soon
as possible, which is already well underway; build and
realise the value of our emerging US Fruit Shoot business;
strongly emphasise cash generation, maintain rigorous
cost management, and invest behind our strong brands
across the group.
faced in the last two years, the company has grown
substantially over the course of Paul’s tenure and we
have created significant shareholder value. Having
acquired operations in Ireland and France and entered
into the lucrative US market, our international aspirations
have become a reality. On behalf of the board, I would
like to take the opportunity to thank Paul for the passion,
dedication and professionalism he has shown and wish
him all the best for the future.
We have also recently announced our intention to enter
into an all-share merger with A.G. Barr, the result of which
would transform the combined business into one of the
largest soft drinks businesses in Europe, with annual
sales of over £1.5 billion, a portfolio of leading brands and
significant prospects for future growth. The proposed
merger is currently seeking approval from shareholders
and the relevant bodies and we are hopeful that we will
complete early in 2013.
The board has proposed a second interim dividend in
lieu of the final dividend of 12.4 pence per share that
maintains the full year dividend in-line with last year.
This is in recognition of our confidence in the underlying
business and its future prospects. In addition, as disclosed
on the 14 November, the board has proposed a special
interim dividend of 10.0 pence per share, conditional on
the merger with A.G. Barr p.l.c. becoming effective.
If the merger goes ahead, Paul Moody will be stepping
down from his role as chief executive. I have had the
pleasure of working with Paul since Britvic floated seven
years ago. Despite the difficulties that the business has
We would also like to thank all of Britvic’s management
and employees for their continued commitment to the
business, and we look forward to the year ahead and
the exciting opportunities it will bring.
Gerald Corbett
Non-executive chairman
The annual report and financial statements
were approved by the directors on 26 November
2012. Subsequent to this, and as a consequence
of the merger with A.G. Barr p.l.c., the board
has agreed to defer, for the time being, the
next AGM which, ordinarily, would have been
held in January 2013. Therefore no separate
circular providing details of an AGM has been
sent to shareholders with this annual report.
5
business review
overview
chief executive’s review
2012 was a challenging year for
Britvic. We achieved some notable
successes; in the UK we increased
our share of the soft drinks market,
with Pepsi performing particularly
well, in France our syrups business
took share, and we significantly
increased Fruit Shoot’s presence
in the US.
However, the recall of Fruit Shoot in July in GB,
France and some European export markets, impacted
significantly on our overall group performance.
This led us to re-set our financial expectations for the full
year and also to review our near term business priorities,
as follows:
Economic conditions in our core markets of Great Britain,
France and Ireland remained difficult throughout 2012 as
consumers were faced with austerity measures, rising
domestic bills and a fragile economic environment, all
of which adversely impacted their disposable income.
• Re-establish Fruit Shoot in the market as soon
as possible
• Build and realise the value of our emerging
US Fruit Shoot business
In this context, soft drinks continued to be resilient, but
they were not immune to these challenges. As a result,
the GB take-home market, as measured by Nielsen,
saw volume growth of just 0.3%, below the historical
2-3% growth rate that we have seen over the last 20
years. The recent trend of carbonates growing ahead
of stills continued.
In France the take-home market also saw volume growth
limited to 1.8%, whilst in Ireland the continued economic
pressures resulted in take-home market volumes
declining by 2.2%.
In GB and Ireland the pubs and clubs sector and the stills
category remained under pressure, areas where Britvic
has a leading presence.
Against this economic backdrop, GB in particular, enjoyed
a summer of celebration, with the Diamond Jubilee,
Olympics and Paralympics. Any hopes of the weather
providing a backdrop of warm, sunny days to these
celebrations were soon dashed with some of the
coldest, wettest summer weather ever recorded.
Overall, our business performed well across the first
half of the year with some tangible successes. In July
however we identified an issue with Fruit Shoot’s newly
launched sports cap, which fundamentally changed the
performance of the business. As consumer safety is
paramount to Britvic, we took the decision to recall the
Fruit Shoot and Hydro brands from GB, France and
European export markets. The financial impact of the
recall is expected to be between £15m and £25m.
• Strong emphasis on cash generation
• Maintain rigorous cost management
• Drive improved performance from the strong
brands across the group
Re-establish Fruit Shoot in the market as
soon as possible
At the time of the Fruit Shoot recall, we communicated
that we would be unable to supply Fruit Shoot for six
weeks and that it would be up to six months before we
could achieve historical supply levels.
We recommenced initial supply within the targeted six
week period and remain on track to achieve production
levels in line with historical demand by January 2013.
Our marketing teams have delivered marketing and
communication programmes in each business unit,
underpinned by strong execution activity, to ensure
that we return the Fruit Shoot brand back to its previous
market scale as soon as possible. The early indicators
are positive, with brand health measures back towards
pre-recall levels.
Build and realise the value of our emerging
US Fruit Shoot business
During 2012 we made substantial progress in building the
Fruit Shoot brand in the US. We announced earlier in the
year that we had agreements in eight US states (Alabama,
Kentucky, Ohio, North and South Carolina, Florida, Georgia
and Texas) with four partners (Buffalo Rock, Gross &
Jarson, Pepsi Bottling Ventures, PepsiCo Beverages
America (previously Pepsi Beverage Company)). We also
commenced production in the US during the second half
of the financial year with Pepsi Bottling Ventures.
6
Britvic plc Annual Report 2012
overview
business review
business review
governance
financial statements
shareholder information
We have secured a further distribution agreement for
Fruit Shoot with the Pepsi-Cola Bottling Company of
Central Virginia, which holds the longest established
franchise for Pepsi in the US. They are our fifth partner
in the US and this agreement increases our presence
to nine states. We remain on track to achieve our target
of 20,000 distribution points by the end of 2012.
In addition, we have established a US-based Britvic team
to deliver our ambitious growth plans and to support our
Fruit Shoot partners in the brand’s development.
Strong emphasis on cash generation
Our results provide evidence of our strong focus on
cash generation, although the Fruit Shoot recall has
had an adverse impact on both our profitability and
cash generation. However, we have still generated
free cash-flow ahead of last year and have been able
to pay down net debt.
At the same time, we have continued to invest in our
brands with advertising and promotions (A&P) spend
inline with last year.
Maintain rigorous cost management
Our strong focus on cost control has led to a reduction
of £5.6m in fixed costs, compared to last year. This
included costs associated with the Fruit Shoot recall,
the underlying costs were down 3.9%.The continued
decline in the top line performance of the Irish business
necessitated a further review of the cost base, leading
to a reduction in headcount this year.
Drive improved performance from
the strong brands across the group
Great Britain
Our carbonates portfolio had an exceptional year with all
of our core brands taking share. Pepsi took substantial
volume and value share and for the first time joined the
list of top ten grocery brands. Our year round marketing
programme commenced in October 2011 with a cross
category initiative linking Pepsi with Doritos. Pepsi’s
association with football personalities continued this
summer, with major on-pack activity supported by
excellent in-store execution. Both 7UP and Tango took
share this year, both brands benefitting, alongside Pepsi,
from the introduction of the new 250ml cans.
In the GB stills portfolio, Robinsons performance
benefitted from the in-market execution and consumer
communication focus on double-concentrate. Heavyweight
marketing investment behind the brand included TV,
print, in-store sampling, an on-pack promotion and
Wimbledon-themed activity. Consequently Robinsons
enjoyed six months of share gain and in the last twelve
weeks of the financial year matched the brand’s historical
market share high of two years ago.
Launched in February, we ran our first cross-portfolio
campaign with PepsiCo, ‘Transform your Patch’,
which offered consumers the chance to support local
regeneration projects across the country. With each
brand linked to a particular theme, such as football
pitches, playgrounds and skate parks, we supported
more than 165 projects throughout the year.
Britvic was the first UK soft drink manufacturer to
introduce Stevia extract as a natural alternative sweetener
to sugar this year. Both SoBe V Water and Juicy drench
introduced Stevia-based variants, broadening their appeal
to a wider consumer base.
Despite the challenges of the Fruit Shoot recall and the
decline of the stills category by the end of the year, we
succeeded in growing our overall share of the GB
take-home market.
France
The French business faced high raw material inflation
in 2012, particularly in relation to sugar and fruit juice,
which are key ingredients across its brand portfolio.
Against the backdrop of an uncertain outlook for
consumers, the primary objective was to offset the
impact of the rising costs. In the juice business we
therefore took the decision to exit contracts where we
were unable to agree commercially acceptable terms.
A combination of price increases and pack size changes
in the syrups range led to material growth in the average
realised price (ARP) of the French business with minimal
impact on volumes. The performance of syrups benefitted
from a period of warm weather during the late summer
months balancing the very poor weather during spring.
Our syrups portfolio continued to take share, supported
by the marketing campaigns for both Teisseire and Moulin
de Valdonne. We continued to sponsor the Tour De France
as well as sponsoring the popular television show ‘Plus
Belle La Vie’. Our Pressade brand, which is positioned as
an organic juice sourced from France appeared on
television for the first time and delivered double-digit
market growth, taking market share as a result.
Ireland
The difficult economic conditions in Ireland are well
documented and continued to be a challenge in 2012.
The pubs and clubs sector continued to contract and we
were significantly impacted by the performance of the
third party brands that we distribute through the licensed
wholesale business.
We continued to invest in and support our key brands,
with MiWadi, Club and 7UP retaining their number one
positions. This year saw a refresh of the Ballygowan
brand, as we looked to cement its clear number one
position. Trading conditions remained difficult in Ireland
and we had to take action to reduce costs, including
a material reduction in headcount and the outsourcing
of secondary distribution.
Britvic plc Annual Report 2012
7
business review
financial review
The following discussion is based on Britvic’s results for the 52 weeks
ended 30 September 2012, with all numbers and comparisons quoted
on a 52 week basis, before exceptional and other items and on a
constant exchange rate basis. Volumes and ARP are adjusted for the
impact of double concentrate on Robinsons and MiWadi to provide
meaningful comparisons.
overview
Overview
In the period, total group volume (excluding factored
products in Ireland) was 2.1bn litres, down 1.6% on the
previous year, and revenue was 0.8% down to £1,256.4m,
on a constant currency exchange rate. This reduction in
revenue was primarily due to the Fruit Shoot recall which
materially impacted GB stills performance, International
and France. The product recall constrained revenue growth
by approximately 2%, with an even greater impact on
profit and margin.
EBITA was down 15.5% to £115.6m. Profit after tax was
£62.9m; with adjusted EPS declining by 17.8% to 27.2p.
Profit after tax after exceptional and other items was
£57.4m, down 0.2% on 2011.
A strong focus on cash generation across the business
generated underlying free cash flow broadly in line with
last year, despite the negative impact of the Fruit Shoot
recall. Consequently the business continued to pay down
debt during the period, resulting in an adjusted net debt
to EBITDA ratio of 2.8x.
Key performance indicators
The principal key performance indicators that management
use to assess the performance of the group are as follows:
• Volume growth – increase in number of litres sold by
the group relative to prior period.
• Average Realised Price (ARP) – average revenue
per litre sold.
• Revenue growth – increase in sales achieved by
the group relative to prior period.
• Brand contribution margin – revenue less material costs
and all other marginal costs that management considers
to be directly attributable to the sale of a given product,
divided by revenue. Such costs include brand specific
advertising and promotion costs, raw material, and
marginal production and distribution costs. Management
uses the brand contribution margin to analyse Britvic’s
financial performance, because it provides a measure
of contribution at brand level.
• Operating profit margin – the group focuses on EBITA
(earnings before interest, tax and acquisition related
amortisation) before exceptional and other items as
the key operating profit measure. Margin is calculated
by dividing this number by revenue. Each business
unit’s performance is reported down to the brand
contribution level.
• Underlying free cash flow – is defined as net cash flow
excluding movements in borrowings, dividend payments,
exceptional and other items.
• Return on invested capital (ROIC) – ROIC is defined
as operating profit after applying the tax rate for the
period, stated before exceptional and other items,
as a percentage of invested capital. Invested capital
is defined as non-current assets plus current assets
less current liabilities, excluding all balances relating
to interest bearing liabilities and all other assets or
liabilities associated with the financing and capital
structure of the group and excluding any deferred tax
balances and effective hedges relating to interest-
bearing liabilities. The ROIC has been re-stated for prior
year as it now includes the reduction in the asset base
taken in Ireland in 2010 and the results and assets of
Britvic France, both of which were previously excluded
from the measure to ensure a like for like comparison.
8
Britvic plc Annual Report 2012
overview
business review
business review
governance
financial statements
shareholder information
9
9
business review
financial review continued
overview
GB stills
Volume (million litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
GB stills performance was materially impacted in the
second half of the financial year by the limited availability
of Fruit Shoot, as a result of the product recall. Revenue
declined by 8.4% and volumes were down 9.0%. The
impact of consumer down trading to cheaper dispensed
offerings in the on-premise channel and the continued
shift from impulse to grocery negatively impacted the
benefit of the underlying price increase that we achieved.
Brand contribution margin benefited by almost 50bps,
due to lower A&P investment this year.
52 weeks ended
30 Sep 2012
£m
52 weeks ended
2 Oct 2011
£m
% change
actual
exchange rate
449.2
71.6p
321.7
141.2
43.9%
493.5
71.2p
351.2
150.1
42.7%
(9.0)
0.6
(8.4)
(5.9)
120bps
Robinsons showed encouraging progress in the last six
months, increasing take-home market volume and value
share, as measured by Nielsen. In the last 12 weeks of
the financial year, the brand achieved its highest market
share for two years.
GB carbonates
Volume (million litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
30 Sep 2012
£m
52 weeks ended
2 Oct 2011
£m
% change
actual
exchange rate
1,154.1
44.9p
517.9
188.7
36.4%
1,130.5
44.5p
502.6
189.1
37.6%
2.1
0.9
3.1
(0.2)
(120)bps
Full year revenue growth was 3.1%, with volume growth
of 2.1% and ARP growth of 0.9%. The volume mix has
moved towards larger value-orientated packs within grocery
which are more promotionally driven, at the expense
of smaller single serve packs – particularly in the impulse
channel. This mix impact has negatively affected the
level of reported ARP growth and margins leading
the brand contribution margin to fall year on year, but
represents a substantial improvement on the margin
decline of 320bps at the half year.
10 Britvic plc Annual Report 2012
overview
business review
business review
governance
financial statements
shareholder information
International
Volume (million litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
30 Sep 2012
£m
52 weeks ended
2 Oct 2011
£m
% change
actual
exchange rate
38.4
76.3p
29.3
8.3
28.3%
37.8
77.0p
29.1
10.9
37.5%
1.6
(0.9)
0.7
(23.9)
(920)bps
The performance of the international business unit was
materially impacted by the Fruit Shoot recall in the scale
export markets of the Netherlands and Belgium. Brand
contribution margin has been further impacted by our
up-weighting of marketing investment supporting the
emerging Fruit Shoot business in the US.
2012 saw continued strong progress in the US and we
have confirmed Virginia as the ninth state where we will
be distributing Fruit Shoot through Pepsi-Cola Bottling
of Central Virginia. As a consequence we remain on track
to achieve twenty thousands points of distribution by
the end of the year.
During the second half of the financial year we have
successfully moved the US to a concentrate in-market
manufacturing model and are no longer exporting
finished goods from the UK.
Ireland
Volume (million litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
30 Sep 2012
£m
52 weeks ended
30 Sep 2011
£m
% change
actual
exchange rate
% change
constant
exchange rate
205.1
53.3p
138.7
44.6
32.2%
210.8
58.7p
162.8
57.8
(2.7)
(9.2)
(14.8)
(22.8)
(2.7)
(3.6)
(9.6)
(18.2)
35.5%
(330)bps
(330)bps
Note: Volumes and ARP include own-brand soft drinks sales and do not include third party drink sales included within total revenue and
brand contribution.
In addition, the performance of the third party brands
that we distribute only in the licensed wholesale business
has negatively impacted overall performance and
accounted for half of the total revenue decline in the
business unit this year. Overall volume and value market
share of our own brands has grown slightly during the
year in both carbonates and stills.
Britvic Ireland continued to face very challenging macro
economic conditions with unemployment rising, consumer
spending falling and private label growing. The soft drinks
market, as measured by Nielsen, continued to decline
with both take-home market volume and value down
in excess of 2%. Both the impulse and pub and club
channels continued to perform substantially worse than
grocery, with value down by 4.0% in both.
These unfavourable conditions continued to adversely
impact margins, with brand contribution margin down
by 330 basis points versus the prior year but showed
improvement from the interims. The business continues
to focus on cost reduction to mitigate the declining top
line and in 2012 the savings we made were in the
majority below brand contribution in fixed cost.
Britvic plc Annual Report 2012
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France
Volume (million litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
30 Sep 2012
£m
52 weeks ended
30 Sep 2011
£m
% change
actual
exchange rate
% change
constant
exchange rate
278.3
89.4p
248.8
59.2
23.8%
286.0
85.6p
244.7
62.0
(2.7)
4.4
1.7
(4.5)
(2.7)
10.9
8.0
1.4
25.3%
(150)bps
(150)bps
Note: France revenue and cost of sales both include the value for the ‘sugar tax’ and therefore at brand contribution this has a nil impact.
Britvic France delivered a strong year on year ARP
performance. This was achieved through a combination
of price increases and pack size changes. These were
implemented to offset the impact of substantial raw
material inflation, which was higher in France than
across the rest of the group, due to the nature of the
product base. Brand contribution margin was down as
the benefit of the increase in ARP was fully absorbed by
raw material inflation along with the timing lag of the
price increase. Furthermore the marketing investment
behind Teisseire Fruit Shoot did not result in the
expected revenue and profit growth, due to the recall.
During the year, we took the decision to withdraw the
Fruité juice brand from some retailers, where we were
unable to agree acceptable commercial terms. This
impacted our volume delivery, but had a minimal impact
on profit.
Our syrups business has driven category growth, with
Teisseire and Moulin de Valdonne growing our overall
market share of the syrups category in both volume and
value terms. Within juice we made good progress on
growing the Pressade brand, capitalising on its organic
and local origins. The Pressade brand continues to grow
ahead of the market.
Fixed costs
Non-brand A&P
Fixed supply chain
Selling costs
Overheads and other
Total
Total A&P investment
A&P as a % of net revenue*
(*excludes 3rd party revenue)
52 weeks ended
30 Sep 2012
£m
52 weeks ended
2 October 2011
£m
% change
actual
exchange rate
7.8
100.3
118.0
103.2
329.3
62.5
5.1%
8.0
111.1
121.7
94.1
334.9
62.8
5.0%
2.5
9.7
3.0
(9.7)
1.7
0.5
(10)bps
Reported fixed costs decreased by 1.7% which includes
the cost of the Fruit Shoot recall. The underlying fixed
cost base was a 3.9% reduction as a result of the strong
and effective management of the cost base.
Group A&P as a percentage of sales has increased by
10bps, and the absolute spend was in line with last year.
12 Britvic plc Annual Report 2012
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Exceptional and other items
In the period Britvic accounted for a net cost of £6.9m of
pre-tax (£5.5m post tax) exceptional and other costs.
These include:
• Exceptional items relating to GB of £4.9m (net cost):
– Costs associated with the relocation of the group
head office and the separation of functional support
structures between group and the GB business unit.
• Exceptional items relating to Ireland of £1.7m (net gain):
– Ireland pension gain arising as a result of the
agreement to address the funding deficit of the
Ireland defined benefits pension plan and lower
future pension provisions. The past service gain
recognised under IAS (International Accounting
Standards) 19 ‘Employee Benefits’ arises from the
removal of the guaranteed pension indexation.
– Impairment of SAP implementation costs in Ireland.
Given the material market decline in Ireland and
resulting scale reduction in our business, the original
benefits have equally reduced and the economic
value of the SAP asset is no longer consistent with
the future value to be generated. Consequently in line
with IAS 36 ‘Impairment of assets’ we have written
off the remaining value of the programme.
– Ireland restructuring cost, largely relating to
redundancy costs.
• Corporate exceptional items of £3.1m (net cost):
– Advisory fees relating to a potential acquisition that
was ultimately not progressed.
– Advisory fees relating to the potential merger of
Britvic plc and A.G. Barr plc
• Fair value and other movements £0.6m (net cost):
– Within exceptional and other items we include the
fair value movement of financial instruments where
hedge accounting cannot be applied. This is made up
of two items, a number of share swaps to satisfy our
employee incentive share schemes and an interest-
rate swap.
Interest
The net finance charge before exceptional and other
items for the 52 week period for the group was £28.3m
compared with £29.9m in the same period in the prior
year. The lower interest charge reflects the full year benefit
of the refinanced bank facility, secured in March 2011.
Taxation
The 52 week tax charge of £21.5m before exceptional
and other items represents an effective tax rate of
25.5%, a decrease on last year 52 week actual of 0.4%
primarily due to the lower current tax rate in the UK,
offset by a temporary increase in the French tax rate.
Earnings per share
Basic earnings per share (after exceptional and other items)
as defined by IFRS for the period is 23.8p compared with
the basic EPS of 24.3p for 2011.
Adjusted earnings per share for the period, before
exceptional and other items and adding back acquisition
related amortisation, was 27.2p, down 17.8% on a
constant currency basis. 2011 reported EPS was 33.7p.
Dividends
As previously announced on the 14 November, the
Board has proposed a second interim dividend of 12.4p
pence, in lieu of the final dividend, making a full year
dividend of 17.7p. The second interim dividend will be
paid on 18 January 2013 to shareholders on the register
on 7 December 2012.
In addition, as disclosed on the 14 November, the Board
has proposed a special interim dividend of 10.0p per share,
conditional upon the merger with A.G. Barr p.l.c. becoming
effective, in lieu of the dividend in relation to the period
from 1 October 2012 until the effective date (‘completion
of the merger’ - see page 104), and in recognition of the
combined group’s dividend policy. This will be paid after
the effective date to shareholders on the register at the
scheme record time (being the date and time specified
in the scheme of arrangement document, expected to
be 6.00 p.m. on the business day prior to the date of
completion of the merger - see page 104).
Cash flow and net debt
Underlying free cash flow, defined above, was £62.1m
in 2012 and £59.3m in 2011.
At 30 September 2012, the group’s non-adjusted net debt
was £511.7m compared to £530.2m at 2 October 2011.
The adjusted net debt (taking into account the foreign
exchange movements on the derivatives hedging our
US Private Placement debt) at 30 September 2012
is £446.7m compared to £452.0m last year.
14 Britvic plc Annual Report 2012
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Capital employed
Non-current assets were down in the period, £645.0m
compared to £680.3m in the prior period, primarily due
to a decrease in intangibles.
Depreciation decreased in the period by £1.2m to £34.4m.
Current assets also decreased from £384.4m to £380.8m
primarily as a result of a decrease in inventory. Current
liabilities have decreased from £390.0m to £371.9m
driven principally by a decrease in trade and other payable.
ROIC has decreased to 16.4% from 18.5%, reflecting
the impact on profits of the Fruit Shoot recall. The ROIC
has been re-stated for prior year as it now includes the
reduction in the asset base taken in Ireland in 2010 and
the results and assets of Britvic France, both of which
were previously excluded from the measure to ensure
a like for like comparison.
Treasury management
The financial risks faced by the group are identified and
managed by a central treasury department. The activities
of the treasury department are carried out in accordance
with board approved policies and are subject to regular
Audit and Treasury Committee reviews. The department
does not operate as a profit centre.
Key financial risks faced by the group that are managed
by treasury include exposures to movements in interest
rates and foreign exchange. The treasury department
is responsible for the management of the group’s
debt and liquidity, currency risk, interest rate risk and
cash management.
The group uses financial instruments to hedge against
interest rate and foreign currency exposures in line with
policies set by the treasury department and approved by
the board of directors. No derivative is entered into for
trading or speculative purposes. The group has a number
of derivatives which are economically effective, but do
not meet the requirements of IAS39 for hedge accounting.
Movements in the fair value of these derivatives are
therefore recorded in the profit and loss account.
At 30 September 2012, the group’s non-adjusted net
debt of £511.7m (excluding derivative hedges) consisted
of £560.8m of private placement notes, £0.8m of finance
leases and £2.3m of loans and unamortised issue costs.
This was netted off with £47.6m of surplus cash.
Pensions
The group principal pension scheme for GB employees,
the BPP (‘BPP’), has both a defined benefit and a defined
contribution section. The defined benefit section of the
BPP was closed to new members on 1 August 2002,
and following consultation with GB employees was
closed to future accrual for active members with effect
from 10 April 2011, with members moving into the
defined contribution section for future service benefits.
Contributions are paid into the Plan as determined by the
Trustee, agreed by the Company and certified by an
independent actuary in the Schedule of Contributions.
The latest formal actuarial valuation for contribution
purposes was carried out as at 31 March 2010. As a
result of this valuation, a proposal was set out under
which a monetary contribution or contributions will be
made to enable the Trustee of the BPP to acquire an
interest in a limited partnership. This partnership interest
is intended to provide the Trustee with an income of at
least £5.0m per annum in each year over a 15 year period
together with a final payment of up to a maximum of
£105.0m to the extent required under funding conditions
to be agreed to the satisfaction of the Trustee and the
company, at the end of the 15 year period.
As a result of the first tranche of the agreement, Britvic
Scottish Limited Partnership (‘Britvic SLP’) and Britvic
Property Partnership (‘Britvic Property‘) were established
by the group and properties were then transferred to
Britvic Property at a value of £28.6m and leased back to
Britvic Soft Drinks Limited. Britvic SLP holds an
investment in Britvic Property.
During the year, BPP entered into a second tranche of the
pension funding partnership structure. This tranche involved
the sale and leaseback of certain group brands which were
transferred to Britvic Brands LLP (‘Britvic Brands’) at a
value of £72.4m and licensed back to Britvic Soft Drinks
Limited. Britvic SLP holds an investment in Britvic Brands.
The BPP is a partner in Britvic SLP and is entitled to a share
of the profits of the partnership over the next 15 years.
At the end of this period, the partnership capital allocated
to the BPP will be changed to an amount equal to any
funding deficit of the BPP at that time, up to a maximum
value of £105.0m. At that point the group may be
required to transfer this amount in cash to the BPP.
Britvic SLP, Britvic Brands and Britvic Property are
consolidated by the group. The investment held by the
BPP in Britvic SLP does not represent a plan asset for
accounting purposes and is therefore not included in the
fair value of plan assets. The share of profits of Britvic SLP
received by the BPP is accounted for by the group as
contributions when paid. The properties transferred to
Britvic Property continue to be included within the group’s
property, plant and equipment on the balance sheet. The
group retains operational flexibility over the transferred
properties and brands, including the ability to substitute
the properties and brands held by Britvic Property and
Britvic Brands respectively.
Britvic plc Annual Report 2012
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In addition to the expected partnership income of at least
£5m per annum, the group will make payments to the BPP
of £7.5m by 31 December 2012 and £15m per annum by
31 December of each year from 2013 to 2017.
During the year £10.0m of additional contributions were
paid to the BPP, of which £5.0m was paid by the group
and £5.0m relates to income received from the pension
funding partnership structure.
The amount recognised as an expense in relation to the
BPP defined contribution scheme in the consolidated
income statement for 2012 was £10.3m (2011: £5.8m).
Britvic’s business in GB also has a secured unfunded
unregistered retirement benefit scheme called The
Britvic Executive Top Up Scheme (BETUS) which
provides benefits for members who have historically
exceeded the Earnings Cap, or the Lifetime Allowance
whilst members of the defined benefits section of the
BPP. BETUS closed to future accrual on 10 April 2011
which coincided with the closure of the defined benefit
section of the BPP.
In Northern Ireland, the Britvic Northern Ireland Pension
Plan (BNIPP) was closed to new members on 28 February
2006, and since this date new employees have been
eligible to join a Stakeholder plan with Legal & General.
Employees of C&C Group transferred out of BNIPP on
30 June 2008 with the bulk transfer of assets for the C&C
employees taking place in December 2009. The latest
formal actuarial valuation for contribution purposes was
carried out as at 31 December 2008 and as a result shortfall
correction additional contributions of £90,000 per month
until 31 December 2010, and £125,000 per month from 1
January 2011 to 31 December 2019 are being paid in
accordance with the Recovery Plan dated December 2009.
In relation to the Britvic Ireland Pension Plan (‘BIPP’),
during the year, the Trustee received approval from the
Irish Pension Board for two significant changes to the
BIPP, being the removal of the guaranteed annual 3%
pension increase for pensions in payment and the
introduction of a salary cap of €50k for future service
accrual. As part of the changes, Britvic agreed to pay the
cost on pension levy plan assets introduced by the Irish
government in 2011. The removal of the guaranteed
pension increase has resulted in the recognition of a
curtailment gain of €25.2m (£21.3m) which has been
recognised as an exceptional item. The changes
significantly improve the funding position of the BIPP.
The amount recognised as an expense in relation to the
Irish defined contribution schemes in the consolidated
income statement for 2012 was £0.3m (2011: £0.6m).
All group pension schemes are administered by trustees
who are independent of the group’s finances.
The assets and liabilities of the pension schemes were
valued on an IAS 19 basis at 30 September 2012 by Towers
Watson (BPP) and Invesco (BIPP) and Buck (BNIPP).
Included within the pension liability on the consolidated
balance sheet is an accrual of £1.8m (2011: £1.4m) for
retirement indemnities in respect of Britvic France. This
liability is considered to be immaterial and no further
disclosure is included within this note.
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corporate responsibility
In the past year, Britvic has continued its work to integrate the
principles of Corporate Responsibility (CR) into the business.
To this end, the Corporate Responsibility Committee
further refined its approach and with the agreement
of the Executive Committee introduced a Business
Sustainability strategy. This focuses on three key pillars
and objectives:
People – to be trusted and respected in our
communities
Planet – to ensure our future supply of resources
whilst minimising the group’s impacts
on the environment
Profit – to achieve continued profitable
business growth
The strategy is designed to meet all stakeholder
requirements and ensure that the group always behaves
responsibly with strong governance and a robust risk
management process, whilst maximising shareholder
value. In the past year, the business has made significant
progress across all three pillars of the strategy.
Under the ‘People’ banner, the group is committed to
having a positive impact on both its employees and the
communities in which it operates.
Globally, the group supports a clean water project in Ethiopia
and UNICEF’s emergency relief fund. Locally the group
supports a number of charities and actively encourages
its employees to get involved through volunteering.
In GB, Britvic has continued to support those young
people at risk of dropping out of the school system and
becoming NEETS (not in employment, education and
training). For example, in partnership with Barnardos,
the group created a training programme to help build
confidence in young people and encourage them to stay
in education. The programme was successfully trialled
at the Beckton factory site and the intention is to roll this
out to further sites next year.
Another key element of the focus on ‘People’ has been
to encourage employees to live healthier lifestyles through
the ‘wellness@work’ programme. Activity included
organised exercise and healthy eating challenges, the
provision of showers at many sites to encourage active
travel, and joint activity through staff canteens to promote
healthy options. Additionally, the group ran free health
assessments at a number of sites and is rolling these out
across the remainder of sites this year.
In GB, the group has continued to support the public
health agenda with commitments to the government’s
‘Responsibility Deal’ and ‘Change4Life’ programme,
while Britvic Ireland supported the government’s ‘Live
Well’ initiative. In addition, both juicy drench and SoBe V
Water were reformulated with natural Stevia extract
which has reduced calorie levels.
Through its brands the group continued to promote healthy
and active lifestyles through marketing programmes.
Britvic Ireland sponsors rugby through the Ballygowan
range and Britvic France sponsors the Tour de France
through its Teisseire brand.
Within the ‘Planet’ area, the business continued to
make significant progress on reducing its environmental
impact, particularly in the areas of water use, energy
consumption and waste. Britvic has implemented
numerous environmental initiatives across sites, such
as waste prevention reviews, equipment insulation and
rinse water recovery systems. In the GB Beckton factory
site, this system is expected to save 33 million litres
of water annually.
The group also acknowledges the importance of ensuring
the future supply of materials and is actively working
with suppliers to understand its environmental impacts
within the supply chain and address potential related
risks. An output of this was the sustainable fruit strategy
which focuses on the sustainable procurement of fruit.
As part of its focus on profit, Britvic successfully
demonstrated how commercial initiatives can deliver
a positive social impact. As part of the ‘Transform
your Patch’ campaign, Britvic teamed up with the
environmental regeneration charity, Groundwork, to
regenerate more than 180 outdoor spaces. ‘Transform
Your Patch’ was one of the most ambitious community-led
regeneration schemes to take place in the UK. Promoted
across the portfolio, every soft drink purchased of any of
the participating brands represented a 1cm² piece of land
that was transformed.
Full details of Britvic’s CR programme will be published
in the group’s annual CR Report in early 2013.
Britvic plc Annual Report 2012
17
business review
overview
business resources
The main resources the group uses to achieve its results are:
• A strong customer base. For example, in the GB
take-home market, Britvic’s customers include the ‘Big 4’
supermarkets (Tesco, J Sainsbury’s, Asda and Wm
Morrisons) together with a number of other important
grocery retailers. The group has significant supply
arrangements with a number of key players in the GB
pubs and clubs sector and leisure and catering channels.
Britvic Ireland operates across all the main sales channels,
with key customers including Musgraves, Tesco, Dunnes
and BWG. Britvic France products are distributed by all
take-home grocery customers. Key customers include
Carrefour, Galec, Auchan and Intermarche.
Britvic also has a well-invested and flexible group
production capability and distribution network that
enables its soft drinks to be made available to
consumers across all of its operating territories.
• An extensive portfolio of stills and carbonates brands,
including Robinsons, Pepsi, 7UP, Tango, J2O and Fruit
Shoot. The breadth and depth of Britvic’s portfolio
enables it to target consumer demand across a wide
range of consumption occasions, in all the major soft
drinks categories and across all relevant routes to
market. Britvic Ireland owns a number of leading
brands in the Republic of Ireland and Northern Ireland,
including Club, Ballygowan and MiWadi as well as the
rights to the Pepsi, 7UP and Mountain Dew Energy
brands. In France the portfolio includes the leading
syrup brand Teisseire as well as Moulin de Valdonne,
Pressade and Fruit Shoot. Through Britvic International,
the group has built on the success of the Robinsons
and Fruit Shoot brands by introducing these products
into markets outside GB.
• A successful long-standing relationship with PepsiCo
that resulted in the exclusive bottling agreement (EBA)
being renewed in Great Britain in 2003 for a further 15
years, with an extension to 2023 on admission to the
London Stock Exchange. The EBA for Ireland lasts until
2015. This relationship gives Britvic the exclusive right
to distribute the Pepsi and 7UP brands in Great Britain
and Ireland, access to all new carbonated drinks
developed by PepsiCo for distribution in Great Britain
and Ireland and, to support the development of its
carbonates offering, access to PepsiCo’s consumer and
customer insight, competitor intelligence, marketing best
practice, brand and product development expertise and
technological know-how. Britvic has added to its portfolio
with Mountain Dew Energy in GB and Ireland and has
also been appointed in recent years as the exclusive
GB bottler of Gatorade, Lipton Ice Tea and SoBe.
18 Britvic plc Annual Report 2012
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19
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risks and uncertainties
Risk management process
Britvic’s risk management process has been adapted
to support its growth strategy, focusing on growing the
business through both acquisition and organic growth
opportunities. Risk is an inherent part of doing business.
The intention of the risk management process is not to
avoid all risk as success comes from managing risk through
the assessment of the balance of risk versus reward set
against Britvic’s risk appetite. The system of internal
controls and risk management used to identify and manage
the principal risks the group faces is described in the
Corporate Governance Report. In assessing risk both the
financial and reputational impact are considered, as
Britvic is a brand-led business. The principal risks and
corresponding mitigation set out below represent the
principal uncertainties that may impact on our ability to
effectively deliver our strategy in the future (note - this
is not intended to be a complete list of all of the risks that
could impact Britvic, there may be other risks, that should
they materialise, could have a material impact on the group).
A) Risks relating to the group
1. An over-reliance on any specific customer or brand.
Risk – A major retailer, in the take-home or pubs and
clubs channel, may decide to remove our products from
its range and stock alternative products instead.
Mitigation – Britvic sells its products through a wide-range
of channels and retailers. This broad mix of customers
reduces our dependency on any one of these relationships.
Likewise our portfolio and innovation launches further
diversify our range thereby reducing the dependency on
any one brand.
2. A termination or variation of the bottling and
distribution arrangements with PepsiCo or an
adverse development in the PepsiCo relationship.
Risk – At the end of the bottling agreements or earlier in
specific circumstances PepsiCo may terminate our right
to sell their brands.
Mitigation – Britvic reduces this risk in two ways. Firstly,
the majority of its revenues are generated by its
wholly-owned brands. Its brand marketing focus and
innovation pipeline are balanced between its wholly-
owned brands and the PepsiCo franchised brands.
Secondly, Britvic places significant emphasis on
developing its relationship with PepsiCo through both
extending bottling agreements and maintaining an
appropriate level of communication between the two
businesses to deal with on-going operational issues.
3. Increasing commodity prices.
Risk – Prices for commodities used in the production
of our products may fluctuate widely and have increased
significantly over the last year mainly due to poor crops
and scarcity. Therefore, the risk is two-fold, one of not
being able to source enough, and one of having to pay
more than expected.
Mitigation – Britvic sources much of its planned
requirements through forward contracts and hedging
arrangements and is developing new sources of supply.
Through this process it aims to minimise the impact of
price fluctuations.
4. Inability to protect the intellectual property rights
associated with its current and future brands.
Risk – Failure to maintain these rights could result in the
value of our brands being eroded by copycat products.
Mitigation – Through our legal team we proactively
look to protect these rights by registering the relevant
trademarks and enforcing these in court when a resolution
cannot be reached with other parties.
5. Increase in the group’s funding needs or
obligations in respect of its pension scheme.
Risk – The required revaluations of the pension schemes
may highlight a worsening deficit position that requires
the company to provide additional cash contributions to
meet future needs.
Mitigation – The group pensions function works closely
with the pension Trustees to ensure an appropriate portfolio
is in place to fund pension requirements and spread risk
as best as possible. New employees of the company are
enrolled into a defined contribution scheme that limits
future liabilities. The largest of Britvic’s defined benefit
schemes, for GB employees, was closed to future accrual
in April 2011 (closed to new members in 2002). This
scheme is now partially funded by a Pension Funding
Partnership and funding requirements have been agreed
to 2017.
6. Inadequate IT disaster recovery plans.
Risk – As Britvic has grown, both through acquisition and
organically, so has its reliance on IT systems to function,
a failure of which could halt production or the ability to
deliver goods.
Mitigation – Britvic has out-sourced the management of
its data centre to a professional provider with both robust
disaster recovery and business continuity plans capable
of meeting both its current and future needs.
7. Contaminated or faulty products.
Risk – A faulty or contaminated product is supplied to
the market.
Mitigation – Britvic has robust quality control measures
and processes in place to maintain the high quality of its
products supplied at all times. These have been further
strengthened in response to the Fruit Shoot recall
required during 2012.
20 Britvic plc Annual Report 2012
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shareholder information
B) Risks relating to the market
1. The macro-economic environment
Risk – Continued economic downturn, government
regulatory changes and uncertainty in the economy
impacts consumer confidence resulting in reduced
spend on soft drinks. In addition, wider economic factors
could have an impact on Britvic, in particular increasing
counterparty credit risk.
Mitigation – The soft drinks category is reasonably
resilient and Britvic offers a range of everyday value
products to meet the consumer need for reduced
spending. Britvic monitors consumer spending trends
and develops products designed to meet the spending
requirements of its consumers. Britvic closely monitors
and manages its exposure to counterparty credit risk.
2. A change in consumer preferences and spending
on soft drinks.
Risk – Consumers may decide to switch or spend less
on soft drinks.
Mitigation – By offering a range of everyday value to
premium products across a range of sub-categories,
Britvic is not dependant on any single brand. The range
has been developed to offer consumers choice in terms
of flavour, cost and formulation. Britvic closely monitors
consumer trends in order to anticipate changes in
preferences and match its offerings to these trends.
3. Potential impact of regulatory developments.
Risk – Legislation may impact our ability to market or
sell certain products or engage with specific consumers.
Mitigation – Britvic proactively engages with the
relevant authorities through a number of organisations
such as the British Soft Drinks Association ‘BSDA’ and the
Food and Drink Federation ‘FDF’ in the UK, to ensure it can
fully participate in the future development of legislation.
4. Potential impact of taxation changes
Risk – Potential legislation to introduce a tax on
manufacturers of soft drinks.
Mitigation – Britvic will look to remain commercially
competitive whilst offsetting as much of the cost as
possible through increasing prices to customers.
5. Increasing energy costs.
Risk – Energy costs fluctuation results in unforeseen
increases in costs.
Mitigation – Britvic has contracts for some of its energy
supply with pre-agreed prices, and price increase
mechanisms in line with market, partially mitigating this
risk. In addition, Britvic has taken steps to improve its
energy efficiency to reduce its energy requirements.
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23
governance
overview
board of directors
1 Gerald Corbett
4 Ben Gordon
Gerald Corbett has been non-executive chairman
of the Company since 24 November 2005.
Ben Gordon was appointed a non-executive director on
15 April 2008.
He chairs the Nomination Committee and is a member
of the Remuneration Committee. Gerald is also chairman
of Betfair Group plc, Moneysupermarket.com Group
plc, Towry Holdings Limited and of the Royal National
Institute of the Deaf. He is also a non-executive
director of the investment and stock broking business,
Numis Securities.
He was a non-executive director of Greencore Group
plc from 2004 until February 2010, the chairman of SSL
International plc from 2005 until October 2010 and of
the Woolworths Group plc from 2001 to 2007, chief
executive of Railtrack plc from 1997 to 2000, group
finance director of Grand Metropolitan plc from 1994
to 1997 and was group finance director of Redland plc
between 1987 and 1994. He was a non-executive
director of the property group MEPC plc from 1995
to 1998 and Burmah Castrol plc from 1998 to 2000.
2 Paul Moody
Paul Moody became chief executive upon the company’s
flotation in December 2005 and is responsible for the
day-to-day running of the business.
Prior to that he had held a number of senior roles
including managing director and chief operating officer.
He joined Britvic in 1996 as director of sales for grocery
multiples (supermarkets) having previously worked for
Golden Wonder and Pedigree Pet Foods. Paul is also
currently a non-executive director of Johnson Service
Group PLC, chairman of business4Life, and immediate
past president and a director of The British Soft Drinks
Association Limited.
3 John Gibney
John Gibney was appointed finance director in 1999
and is responsible for finance, legal, estates, risk
management and business transformation.
Prior to joining Britvic, he was senior corporate finance
& planning manager for Bass PLC, and prior to that
role, finance director and subsequently deputy
managing director of Gala Clubs.
He is also a member of the Audit, Nomination and
Remuneration Committees. He is the former chief
executive of Mothercare plc and former senior vce
president and managing director, Disney Store, Europe
and Asia Pacific. Ben has also held senior management
positions with WHSmith group in the UK and the USA
and L’Oreal S.A. in France and the UK. He has an MBA
from INSEAD.
5 Joanne Averiss
Joanne Averiss was appointed a non-executive
director on 18 November 2005 and is the PepsiCo
nominee director.
She has been a member of the PepsiCo legal
department since 1990, holding a series of positions
in the UK and the US and is currently senior vice
president, General Counsel Europe with legal
responsibility for all of the PepsiCo business within
its Europe sector. Joanne is also a trustee and chair
of the Mesen Educational Trust.
6 Michael Shallow
Michael Shallow was appointed a non-executive
director on 24 November 2005 and chairs the
Audit Committee.
He is also a member of the Nomination and
Remuneration Committees. In addition, he is
a non-executive director of Domino’s Pizza Group
plc and served as non-executive director of Spice
plc from 2006 until its acquisition by Cinven in
December 2010. Michael was finance director
of Greene King plc from 1991 to 2005 and, prior to
that, he was an associate partner with Accenture.
7 Bob Ivell
Bob Ivell was appointed a non-executive director
on 24 November 2005 and is the company’s senior
independent director. He chairs the Remuneration
Committee and is a member of the Audit and Nomination
Committees. He is also currently the chairman of David
Lloyd Leisure and executive chairman of Mitchells and
Butlers plc. During the 1980s, Bob was the managing
director of Beefeater and was also on the board of
Scottish & Newcastle plc as chairman of the Retail
Division between 1999 and 2004 and was executive
chairman of Regent Inns PLC between 2004 and 2008.
24 Britvic plc Annual Report 2012
overview
business review
governance
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financial statements
shareholder information
1
4
7
2
1
5
3
6
Britvic plc Annual Report 2012
25
governance
directors’ report
For the 52 weeks ended 30 September 2012
overview
The directors are pleased to present their report and the consolidated financial statements of the company and its subsidiaries for the
52 weeks ended 30 September 2012.
Principal activities
The group trades principally as a manufacturer and distributor of soft drinks.
Business review
A detailed review of the group’s activities is contained within the Chairman’s Statement on pages 4 to 5 and the chief executive’s Review
and Business Review on pages 6 to 21. The information contained in those sections fulfils the requirements of the Business Review, as
required by Section 417 of the Companies Act 2006 and should be treated as forming part of this report.
Results and dividends
The group’s profit for the 52 weeks ended 30 September 2012 before taxation attributable to the equity shareholders amounted
to £77.5 million (2011: £79.9 million) and the profit after taxation amounted to £57.4 million (2011: £58.4 million).
An interim dividend of 5.3 pence (2011: 5.1 pence) per ordinary share was paid on 13 July 2012.
The directors have proposed a second interim dividend in lieu of a final dividend for the 52 weeks ended 30 September 2012 of
12.4 pence (2011: 12.6 pence) per ordinary share. This will be paid on 18 January 2013 to shareholders on the register at close
of business on 7 December 2012.
In addition, the directors have proposed a special interim dividend of 10.0p per share conditional on the recommended merger with
A.G. Barr p.l.c announced on 14 November 2012 (‘the merger’) becoming effective, in lieu of the dividend in relation to the period from
1 October 2012 until the effective date and in recognition of the combined group’s dividend policy. The merger is to be implemented by way
of a court-sanctioned scheme of arrangement under the Companies Act 2006 (‘the scheme’). The special interim dividend will be paid
to shareholders after the effective date on the register at the scheme record time (being the date and time specified in the scheme of
arrangement document, expected to be 6.00 p.m. on the business day immediately prior to the date of completion of the merger).
Directors
The following were directors of the company during the 52 weeks ended 30 September 2012: Gerald Corbett, Paul Moody, Joanne Averiss,
John Gibney, Ben Gordon, Bob Ivell and Michael Shallow.
Subject to company law and the company’s articles of association (‘the articles’), the directors may exercise all of the powers of the company and
may delegate their power and discretion to committees. The executive committee is responsible for the day-to-day management of the group.
The articles give the directors power to appoint and replace directors. Under the terms of reference of the nomination committee, any
appointment must be recommended by the nomination committee for approval by the board. The articles also require directors to retire
and submit themselves for election to the first annual general meeting following appointment and to retire at the annual general meeting
held in the third calendar year after election or last re-election, but to comply with provision B.7.1 of the UK Corporate Governance Code all
of the directors submit themselves for re-election at the next annual general meeting, if held. Their biographical details are set out on page
24 of this report.
Directors’ interests
The directors’ interests in ordinary shares of the company are shown within the Directors’ Remuneration Report on pages 35 to 43.
No director has any other interest in any shares or loan stock of any group company.
Other than Joanne Averiss, who is a director of a number of PepsiCo’s subsidiaries, no director was or is materially interested in any
contract other than his service contract, subsisting during or existing at the end of the 52 weeks ended 30 September 2012 which was
significant in relation to the group’s business. Further details of Joanne Averiss’ appointment are set out on page 30 in the Corporate
Governance section of the annual report.
Directors’ liabilities
As at the date of this report, indemnities are in force under which the company has agreed, to the extent permitted by law and the
company’s articles of association, to indemnify:
• The directors, in respect of all losses arising out of, or in connection with, the execution of their powers, duties and responsibilities as
directors of the company or any of its subsidiaries; and
• Directors of companies which are corporate trustees of the group’s pension schemes against liability incurred in connection with those
companies’ activities as trustees of such schemes.
Directors’ remuneration
The remuneration committee, on behalf of the board, has adopted a policy that aims to attract and retain the directors needed to run the
group successfully. The Directors’ Remuneration Report is shown on pages 35 to 43.
26 Britvic plc Annual Report 2012
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business review
governance
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financial statements
shareholder information
Annual general meeting
In the light of the recommended merger between the company and A.G. Barr p.l.c. announced on 14 November 2012 the board has agreed
to defer for the time being the next AGM which ordinarily would have been held in January 2013. Therefore no separate circular providing
details of the AGM have been sent to shareholders with this annual report.
Employee involvement
The group uses a number of ways to engage employees on matters that impact them and the performance of the group. These include
annual road shows at key sites by members of the executive committee, regular team meetings, the publication of a bi-monthly internal
newsletter, “Britvic Life”, together with the “b.link+” intranet site providing easy access to the latest company information as well as company
policies and vacancies. The company organises quarterly formal business performance updates for employees, which are cascaded by line
managers. An Employee Involvement Forum was established in 2004 through which nominated representatives ensure that employees’ views
are taken into account regarding issues that are likely to affect them. In addition, where the group has entered into a recognition agreement
with a trade union, it fulfils its obligations to consult and negotiate accordingly. The group approaches these relationships from a partnership
perspective. A robust employee opinion survey process is also in place to ensure that employees are given a voice in the organisation and that
the group can take action based on employee feedback. This covers a variety of topics including leadership & line management, employee
wellbeing, career development, training, communications and corporate responsibility commitments.
All eligible employees are able to participate in the Britvic Share Incentive Plan which gives them the opportunity to purchase ordinary shares
in the company using money deducted from their pre-tax salary, and to receive matching shares from the company, up to a maximum of £50
per four week pay period.
Equal opportunities
The group is committed to providing equality of opportunity to all employees without discrimination and applies fair and equitable
employment policies which ensure entry into and progression within the group. Appointments are determined solely by application of job
criteria and competency.
Disabled persons
Disabled persons, whether registered or not, are accorded equal opportunities when applying for vacancies, with due regard to their aptitudes
and abilities. In addition to complying with legislative requirements, procedures ensure that disabled employees are fairly treated in respect
of training and career development. For those employees who become disabled during the course of their employment, the group is supportive,
whether through retraining or redeployment, so as to provide an opportunity for them to remain with the group, wherever reasonably practicable.
In the opinion of the directors, all employee policies are deemed to be effective and in accordance with their intended aims.
Supplier payment policy
It is group policy to agree terms and conditions for its business transactions with all suppliers. Payment is made in accordance with these
terms provided the supplier meets its obligations. The average number of days of payments outstanding for the group at 30 September
2012 was 51 (2011: 48).
Political contributions
During the 52 weeks ended 30 September 2012, the group and its subsidiaries made no political contributions (2011: Nil).
Charitable donations
During the 52 weeks ended 30 September 2012, the group and its subsidiaries donated £1.6 million for charitable purposes (2011:
£581,297). This included cash and product donations directly to charitable organisations and other investment in support of community
programmes and, in particular, increased charitable donations and employee volunteering as a result of the core brands’ support in GB
of Transform Your Patch.
Major shareholders
At 26 November 2012 the company has been notified, pursuant to DTR5 of the Financial Services Authority’s Disclosure and Transparency
Rules, of the following notifiable voting rights in its ordinary share capital:
Route One Investment Company LLP
FMR LLC
PepsiCo, Inc.
APG Algemene Pensioen Groep N.V.
Prudential plc
Number of
ordinary shares
Percentage
of voting rights
14,059,440
12,958,007
11,813,032
7,461,817
7,347,468
5.80%
5.35%
4.88%
3.09%
3.03%
Nature of
holding
Direct
Indirect
Direct
Direct
Direct
Britvic plc Annual Report 2012
27
governance
directors’ report continued
overview
Share capital
As at 30 September 2012, the company’s issued share capital comprised a single class of shares referred to as ordinary shares. 700,000
ordinary shares were allotted and issued to the trustee of the Britvic Share Incentive Plan at par value during the 52 weeks ended 30
September 2012 to enable the trustee to meet its obligations under the Britvic Share Incentive Plan (‘the Plan’). Full details of the ordinary
share capital can be found in note 13 to the financial statements which should be treated as forming part of this report.
On a show of hands at a general meeting of the company every holder of ordinary shares present in person and entitled to vote shall have
one vote and on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held.
Any notice of general meeting issued by the company will specify deadlines for exercising voting rights and in appointing a proxy of proxies
in relation to resolutions to be passed at the general meeting. All proxy votes are counted and the numbers for, against or withheld in
relation to each resolution are announced at the general meeting and published on the company’s website after the meeting.
There are no restrictions on the transfer of ordinary shares in the company other than:
• Certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws).
• Pursuant to the Listing Rules of the Financial Services Authority whereby certain employees of the company require the approval
of the company to deal in its ordinary shares.
IFG Trust (Jersey) Limited, as trustee of the Britvic Employee Benefit Trust (‘the Trustee’), holds 0% of the issued share capital of the
company, as at 26 November 2012, on trust for the benefit of the executive directors, senior executives and managers of the group.
A dividend waiver is in place in the event the trustee’s holding increased. The Trustee is not permitted to vote on any unvested shares
held in the trust unless expressly directed to do so by the company.
Under the rules of the Plan eligible employees are entitled to acquire shares in the company. Plan shares are held in trust for participants
by Equiniti Share Plan Trustees Limited (‘the Trustees’). Voting rights are exercised by the Trustees on receipt of participants’ instructions.
If a participant does not submit an instruction to the Trustees no vote is registered. In addition, the Trustees do not vote on any unawarded
shares held under the Plan as surplus assets. As at 26 November 2012, the Trustees held 0.051% of the issued share capital of the company.
The company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and/or
voting rights.
There are no agreements between the company and its directors or employees providing for compensation for loss of office or employment
(whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid. The company’s banking arrangements
are terminable upon a change of control of the company. Certain other indebtedness becomes repayable if a change of control leads to
a downgrade in the credit rating of the company. The company’s agreements with PepsiCo are terminable upon a change of control, details
of which are included on page 20. Conditional on the recommended merger with A.G. Barr p.l.c. becoming effective, Pepsi and Britvic have
agreed certain variations to the contractual terms of Pepsi’s exclusive bottling and distribution agreements with the company (to reflect the
operations of the combined group following the merger) and, on the basis of these revised terms, Pepsi has agreed not to exercise any
rights of termination it may have as a consequence of the merger under these agreements. Similarly, change of control waivers have been
sought and received from the company’s bankers in relation to the company’s banking arrangements.
The company’s articles of association may only be amended by a special resolution at a general meeting of shareholders.
Financial risk management
It is the group’s objective to manage its financial risk so as to minimise the adverse fluctuations in the financial markets on the group’s
reported profitability and cash flows. The specific policies for managing each of the group’s main financial risk areas are detailed in the
Treasury Management section of the Business Review on page 15.
28 Britvic plc Annual Report 2012
overview
business review
governance
governance
financial statements
shareholder information
Directors’ statement as to disclosure of information to auditors
So far as each director is aware, there is no relevant audit information (as defined by the Companies Act 2006) of which the auditors are
unaware. Each director has taken all steps that ought to be taken by a director to make himself aware of and to establish that the auditors
are aware of any relevant audit information.
A copy of the financial statements is placed on the company’s website. The maintenance and integrity of this website is the responsibility
of the directors. The work carried out by the auditors does not involve consideration of these matters and accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Going concern
In presenting the financial statements on a going concern basis, the directors have considered both the business activities and principal
risks and uncertainties as set out in the Business Overview and Business Review on pages 1 to 21. In addition, the directors have
considered the following factors: the group’s ability to generate cash flows, the financial resources available to it, headroom under bank
covenants, and exposure to credit risk. Based on the group’s cash flow forecasts and projections, the board is satisfied that the group will
be able to operate within the level of its facilities for the foreseeable future. For this reason the group continues to apply the going concern
basis in preparing its financial statements.
Auditors
Ernst & Young LLP were re-appointed auditors of the company at the company’s last AGM held on 25 January 2012 to hold office until
the conclusion of the next general meeting at which accounts are laid before the company. Subject to the auditors’ willingness to accept
re-appointment as auditors of the company at the relevant time, a resolution proposing their re-appointment will be contained in the next
notice of AGM, if held, and put to the shareholders at that meeting.
By Order of the Board
Clare Thomas
Company secretary
26 November 2012
Britvic plc Annual Report 2012
29
governance
overview
corporate governance report
UK corporate governance code compliance
The company is committed to high standards of corporate governance and supports the principles laid down in the UK Corporate
Governance Code (the ‘Code’). This statement describes how the principles of the Code are applied and reports on the company’s
compliance with the Code’s provisions.
The directors consider that the company has been in compliance with the provisions of the Code throughout the 52 weeks ended
30 September 2012.
The board
The board of directors (‘the board’) currently has seven members, comprising the non-executive chairman, chief executive, finance director,
three further independent non-executive directors and the PepsiCo nominated non-executive director. All of the directors bring strong
judgement to the board’s deliberations. The board is of sufficient size and diversity that the balance of skills and experience is considered
to be appropriate for the requirements of the business. With the exception of the PepsiCo nominated non-executive director, Joanne
Averiss, the non-executive directors are all independent of management and free from any business or other relationship, including those
relationships and circumstances referred to in provision B.1.1 of the Code that could materially interfere with the exercise of independent
and objective judgement. In addition to her fiduciary obligations to act in the best interests of the Company, Joanne Averiss is required
under her letter of appointment to discharge her duties in the interests of the company notwithstanding her connection with PepsiCo. The
company considers that, on appointment, the chairman was independent for the purposes of provision A.3.1 of the Code. The non-executive
directors were all appointed for an initial three-year term and, thereafter, subject to satisfactory performance, may serve one or two additional
three-year terms, with a thorough review of their continued independence and suitability to continue as directors if they are to remain on
the board for more than six years.
The chairman and chief executive
The different roles of the chairman and chief executive are acknowledged. A responsibility statement for each of those roles has been
agreed with the chairman and chief executive, respectively, and adopted by the board. The chairman is primarily responsible for the workings
of the board and ensuring that its strategic and supervisory role is achieved and for ensuring effective communication with shareholders.
The board has delegated appropriate responsibilities to the Executive Committee (which comprises in addition to the executive directors,
the marketing director, supply chain director, strategy director, human resources director, and the managing director of Britvic GB) who are
responsible for the day-to-day running of the business, carrying out agreed strategy and implementing specific board decisions relating to
the operation of the group.
Senior independent non-executive director
The senior independent non-executive director, Bob Ivell, is available to shareholders if they have concerns which are not resolved through
the normal channels of chairman, chief executive or finance director; or for which such contact is inappropriate.
The directors
The biographical details of the board members are set out on pages 24 and 25. The directors have all occupied, or occupy, senior positions
in UK and/or non-UK listed companies and have substantial experience in business. The non-executive directors do not participate in any
of the group’s pension schemes or in any of the group’s bonus, share option or other incentive schemes. At all times there has been
a majority of non-executive independent directors on the board, in compliance with Code provision B.1.2. The company’s articles of
association provide that all directors will stand for re-election at least every three years but to comply with provision B.7.1 of the Code,
all of the directors submit themselves for re-election at each annual general meeting (‘AGM’) of the company.
Role of the board
The board is collectively responsible for the proper management of the company. The board normally meets ten times each financial year and
has a formal schedule of matters reserved to it for decision making, including responsibility for the overall management and performance of
the group and the approval of its long term objectives and commercial strategy, approval of annual and interim results, annual budgets, material
acquisitions and disposals, material agreements and major capital commitments, approval of treasury policies, and assessment of its going
concern position.
Board members are given appropriate documentation in advance of each board or committee meeting. This normally includes a detailed report
on current trading and comprehensive briefing papers on matters where the board will be required to reach a decision. Senior executives
below board level attend board meetings where appropriate to present business updates.
There is an established procedure for the preparation and review, at least annually, by the board of medium-term plans and the annual budget.
The business reports monthly on its performance against its agreed budget. The board receives a monthly update on performance and reviews
any significant variances at each of its meetings. All major investment decisions are subject to post-completion reviews. At least one of the
board’s regular meetings every year is devoted to reviewing and agreeing the company’s long-term strategy.
The company secretary maintains a record of attendance at board meetings and committee meetings, further details of which are set out on
page 32. During the year the chairman met with the non-executive directors without the executive directors present and the non-executive
directors met without the chairman present, to evaluate his performance.
Directors’ and officers’ insurance cover is provided by the company in line with normal market practice, for the benefit of directors in respect
of claims arising in the performance of their duties.
30 Britvic plc Annual Report 2012
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business review
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governance
financial statements
shareholder information
Board performance evaluation
The formal annual evaluation of the performance of the board, its committees and individual directors was undertaken during the year. This
consisted of an internally run exercise led by the chairman with the assistance of the company secretary. The appraisal questionnaire used
in connection with the process was wide-ranging and based on questions outlined in the Code, covering both board and committee
performance. The board considered that an internally run exercise was most appropriate in the current year but agreed annually to give
consideration as to whether an externally facilitated evaluation may be appropriate.
The appraisal output is used to identify strengths and development areas and confirmed that the board and its committees were operating
effectively. Individual performance was also appraised following consultation with each of the other directors.
Independent professional advice
The board has approved a procedure for directors to take independent professional advice at the company’s expense if necessary. No such
advice was sought by any director during the year. In addition, the directors have direct access to the advice and services of the company
secretary, who is responsible for ensuring that board procedures are followed.
Training and development
The company secretary is responsible for preparing and co-ordinating an induction programme for newly appointed directors, including
presentations from senior management on different aspects of the business, as well as guidance on their duties, responsibilities and
liabilities as a director of a listed company. Business familiarisation involves directors visiting sites in the UK, Ireland and France. The
non-executive directors are encouraged to visit group manufacturing sites to enable them to gain a greater understanding of the group’s
activities and to meet senior managers throughout the business. Every director has access to appropriate training as required subsequent
to his appointment and is encouraged to develop his understanding of the company.
Conflicts of interest
The company’s articles of association were amended at the 2008 AGM, in line with the Companies Act 2006, to allow the board to
authorise potential conflicts of interest that may arise and to impose limits or conditions, as appropriate. Any decision of the board to
authorise a conflict of interest is only effective if it is agreed without the participation of the conflicted directors, and in making such a
decision, as always, the directors must act in a way they consider in good faith will be most likely to promote the success of the company.
The company has established a procedure whereby actual or potential conflicts of interest are regularly reviewed and for the appropriate
authorisation to be sought prior to the appointment of any new director or if a new conflict arises. During the year under review this
procedure was adhered to and operated effectively.
Board committees
There are a number of standing committees of the board to which various matters are delegated. Each has formal terms of reference that
have been approved by the board which are available on the group’s website (www.britvic.com). Details are set out below:
The Nomination Committee
The Nomination Committee comprises Ben Gordon, Bob Ivell, Michael Shallow and Gerald Corbett, who acts as its chairman. The committee
meets as necessary and is responsible for considering and recommending to the board persons who are appropriate for appointment as
executive and non-executive directors. There is a formal, rigorous and transparent procedure for the appointment of new directors to the
board under which the Nomination Committee interviews suitable candidates who are proposed either by existing board members or by
an external search firm. Careful consideration is given to ensure proposed appointees have enough time available to devote to the role and that
the balance of skills, knowledge and experience on the board is maintained. When dealing with the appointment of a successor to the chairman,
the senior independent non-executive director will chair the committee instead of the chairman. When the committee has found a suitable
candidate, the chairman of the committee will make a proposal to the whole board, which has retained responsibility for all such appointments.
During the year, the Nomination Committee met to consider matters relating to succession planning and to consider the continued
independence of the non-executive directors. The chairman reports the outcome of its meetings to the board.
The Remuneration Committee
The Remuneration Committee comprises Gerald Corbett, Ben Gordon, Michael Shallow and Bob Ivell, who acts as its chairman. It is
responsible for: (i) making recommendations to the board on the group’s policy on the remuneration of the company’s chief executive,
chairman, the executive directors, the company secretary and other members of the executive committee; (ii) the determination, within
agreed terms of reference, of the remuneration of the chairman and of specific remuneration packages for each of the executive directors
and other members of the executive committee, including pension rights, any compensation payments and benefits; and (iii) the determination
of awards under the company’s employee share plans to the executive directors, the company secretary and other members of the
executive committee. It meets at least three times a year and during the year met five times. Full details of its activities and of directors’
remuneration are set out in the Directors’ Remuneration Report on pages 35 to 43. Those pages detail compliance with the legal requirements
with regard to remuneration matters. The chairman of the committee reports the outcome of its meetings to the board.
Britvic plc Annual Report 2012
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governance
corporate governance report continued
overview
The Audit Committee
The Audit Committee comprises Ben Gordon, Bob Ivell and Michael Shallow, who acts as its chairman. The board is satisfied that Michael
Shallow, who is a chartered accountant and was formerly finance director of Greene King plc, has recent and relevant financial experience
as required by the Code.
The role of the Audit Committee is to monitor the financial reporting process, the integrity of the group’s interim and annual financial
statements prior to their submission to the board and the statutory audit of the annual and consolidated accounts. It is also responsible for
reviewing the group’s internal financial control and risk management systems, advising the board on the appointment of external auditors,
overseeing the relationship with the external auditors, approving auditor remuneration, reviewing the group’s whistle blowing procedures,
reviewing accounting policies, compliance and monitoring and reviewing the effectiveness of the group’s internal audit function.
The committee met three times during the year, including immediately prior to the publication of the company’s interim and preliminary
results statements. On each occasion the finance director, the head of internal audit and risk and the company’s external auditors attended
by invitation. Other senior executives of the company are invited to attend by the committee as appropriate.
Significant areas of review during the year included the continued embedding of Britvic’s real-time risk management solution across the
group. The committee also received comprehensive reports from the head of internal audit and risk on the outputs and progress of the
internal audit plan.
The Audit Committee regularly monitors the relationship with the auditors and assesses their performance, cost-effectiveness, objectivity
and independence. It agrees the scope of the audit work and discusses the results of the full year audit and interim review each year. At
each Audit Committee meeting the external auditors meet with the committee without management being present.
The Audit Committee is responsible for ensuring that an appropriate relationship is maintained between the group and its auditors. The
group has a policy of controlling the provision of non-audit services by the external auditors in order to maintain their independence and
ensure that their objectivity and independence are safeguarded. This control is exercised by ensuring non-audit projects, where fees are
expected to exceed £50,000, are subject to the prior approval of the chairman of the Audit Committee and the finance director. If non-audit
project fees are expected to exceed £150,000 the prior approval of the Audit Committee is required. The committee has scrutinised the
internal procedures of the company’s auditors, Ernst & Young LLP, and satisfied itself that the independence and objectivity of the auditors
are not affected by the non-audit work undertaken.
Attendance at meetings
The attendance of directors at board and committee meetings during the 52 weeks ended 30 September 2012 was as follows:
Gerald Corbett
Paul Moody
Joanne Averiss
John Gibney
Bob Ivell
Michael Shallow
Ben Gordon
Total number of meetings
Board
Nomination
Committee
Remuneration
Committee
Audit
Committee
10
10
9
10
10
10
9
10
1
1
-
-
1
1
1
1
4
-
-
-
5
5
5
5
-
-
-
-
3
3
3
3
32 Britvic plc Annual Report 2012
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shareholder information
Shareholder relations
The company is committed to maintaining good communications with shareholders. Senior executives, including the chairman, chief
executive and finance director, have dialogue with individual institutional shareholders in order to develop an understanding of their views
which is discussed with the board. All directors are offered the opportunity to meet with major shareholders to listen to their views and, in
addition to a monthly report prepared by the finance director, receive regular reports prepared by an independent capital markets advisory
firm which provides comprehensive information relating to the company’s major shareholders.
Presentations are made to analysts, investors and prospective investors covering the annual and interim results and the company seeks to
maintain a dialogue with the various bodies which monitor the company’s governance policies and procedures. The Business Review set
out on pages 4 to 21 details the financial performance of the company as well as setting out the risks it faces. All shareholders have the
opportunity to ask questions at the company’s AGMs, at which the chairmen of the Nomination, Remuneration and Audit Committees are
available to answer questions. The company secretary generally deals with questions from individual shareholders. In addition, the group’s
website containing published information and press releases can be found at www.britvic.com
Internal control
The board has overall responsibility for the group’s system of internal control and risk management and for reviewing its effectiveness.
In discharging that responsibility, the board confirms that it has established the procedures necessary to apply the Code, including clear
operating procedures, lines of responsibility and delegated authority. These procedures have been in place since the company listed and
are regularly reviewed by the board.
Business performance is managed closely and the board and the executive committee have established processes, as part of the normal
good management of the business, to monitor:
• Strategic plan achievement, through a regular review of progress towards strategic objectives;
• Financial performance, within a comprehensive financial planning and accounting framework, including budgeting and forecasting,
financial reporting, analysing variances against plan and taking appropriate management action;
• Capital investment and asset management performance, with detailed appraisal, authorisation and post investment reviews; and
• Principal risks and risk management processes, which accords with the Turnbull guidance published by the FRC in October 2005 and is
supported by reports from the head of internal audit and risk that the significant risks faced by the group are being identified, evaluated
and appropriately managed, having regard to the balance of risk, cost and opportunity. The board has delegated the management of risk
to the group executive committee, chaired by the chief executive, which reviews the group risk register on a quarterly basis, and reports
to the Audit Committee at least twice a year.
Management, with the assistance of the finance function, is responsible for ensuring the appropriate maintenance of financial records and
processes that ensure all financial information is relevant, reliable, in accordance with the applicable laws and regulations, and distributed
both internally and externally in a timely manner. A review of the consolidation and financial statements is completed by management to
ensure that the financial position and results of the group are appropriately recorded, circulated to members of the board and published
where appropriate. All financial information published by the group is subject to the approval of the board, on the recommendation of the
Audit Committee.
Risk management process
There is in place an on-going process for identifying, evaluating and managing the significant risks faced by the group, which has operated
throughout the year. The group’s risk management framework, which is developed by the Head of Internal Audit and Risk and approved by
the group executive committee, is designed to support this process. The risk framework governs the management and control of both
financial and non-financial risks. The adoption of this policy throughout the group enables a consistent approach to the management of risk
at both regional and business unit level. The internal audit function holds regular workshops across the group to ensure a consistent
deployment of the framework and test compliance with the policy.
In addition, during the year, the Audit Committee received:
• Reports from the head of internal audit and risk on the work carried out under the annual internal audit plan;
• Risk management reports, including the status of actions to mitigate major risks and the quantification of selected risks; and,
• Reports from the external auditors.
Through the monitoring processes set out above, the board has conducted a review of the effectiveness of the system of internal control
during the year. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives
and it must be recognised that it can only provide reasonable and not absolute assurance against material misstatement or loss. In that
context, the review, in the opinion of the board, did not indicate that the system was ineffective or unsatisfactory and the board is not
aware of any change to this status up to the date of approval of this report.
Britvic plc Annual Report 2012
33
governance
corporate governance report continued
overview
Statement of directors’ responsibilities in relation to the financial statements
The directors have prepared the financial statements for the group in accordance with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union, and for the company in accordance with United Kingdom Generally Accepted Accounting Practice
(“UK GAAP”).
In the case of UK GAAP financial statements, under English company law it is the directors’ responsibility to prepare financial statements
for each financial period, which give a true and fair view of the state of affairs of the company as at the end of the financial period and of
the profit or loss of the company for that period. In preparing those financial statements, the directors are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable;
• State whether applicable accounting standards have been followed; and
• Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the company will continue in
business.
In the case of IFRS financial statements, IAS1 requires that the financial statements present fairly for each financial period the group’s
financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in
the International Accounting Standards Board’s ‘Framework for the preparation and presentation of financial statements’. In virtually all
circumstances, a fair presentation will be achieved by compliance with all applicable IFRS. Directors are also required to:
• Properly select and apply accounting policies consistently;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• Provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the group’s financial position and financial performance; and
• State that the group has complied with IFRS.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial
position of the group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the
IAS Regulation. They are also responsible for the system of internal controls, for safeguarding the assets of the group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
Disclosure and transparency rules
The directors confirm that, to the best of their knowledge:
(a) The Financial Statements, which are prepared in accordance with International Financial Reporting Standards as adopted by the
European Commission, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the
undertakings included in the consolidation as a whole; and
(b) The Business Review includes a fair review of the development and performance of the business and the position of the company and
the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face.
Neither the company nor the directors accept any liability to any person in relation to the annual report and financial statements except to
the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue
or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.
34 Britvic plc Annual Report 2012
overview
business review
governance
governance
financial statements
shareholder information
directors’ remuneration report
The following is a report by the Remuneration Committee (the ‘committee’), which has been approved by the board of Britvic plc for
submission to shareholders. This report has been prepared in accordance with the Companies Act 2006 and Schedule 8 of The Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. In addition, the committee has followed the principles of
good governance set out in the UK Corporate Governance Code and has complied with the requirements of the UKLA Listing Rules. It
provides the company’s statement of how it has applied the principles of good governance relating to directors’ remuneration and is
intended to communicate the company’s policies and practices on executive remuneration.
In accordance with the Companies Act 2006, a resolution will be submitted at the next AGM (if held) to approve the Directors’
Remuneration Report.
Membership of Remuneration Committee
During the year, the committee consisted wholly of independent non-executive directors:
Bob Ivell (Chairman)
Michael Shallow
Ben Gordon
Gerald Corbett
At the invitation of the chairman of the committee, the chief executive and group human resources director attend the meetings of the
committee except when their own remuneration is under consideration. Details of the attendance by committee members at committee
meetings are shown in the Corporate Governance Report on page 32.
Composition and terms of reference
The committee’s composition and terms of reference are in line with the UK Corporate Governance Code and are available on the
company’s website or on request from the company secretary. While the chairman of the board is a member of the Remuneration
Committee, he is not present when his own remuneration is under discussion.
The Committee meets not less than three times a year and has responsibility for:
• Looking at executives’ remuneration in terms of the pay policy of the company as a whole, pay and conditions elsewhere in the group,
and the overall cost to the shareholders;
• Making recommendations to the board on the group’s policy on the remuneration of the company’s chief executive, chairman, the
executive directors and other members of the Executive Committee;
• Determining, within agreed terms of reference, and taking into account corporate performance on environmental, social and governance
issues, the remuneration of the chairman and specific remuneration packages for each of the executive directors and other members
of the Executive Committee, including pension rights, any compensation payments and benefits; and
• Determining the level and extent to which awards should be made to the executive directors and other members of the Executive
Committee under the company’s employee share plans. The committee also ensures compliance with the UK Corporate Governance
Code in this respect and takes into consideration the wider pay and employment conditions of the employees across the company.
Advisors
The committee has appointed an external consultant, Towers Watson, to provide advice on executive compensation issues and
performance-related remuneration. The company is also advised by Towers Watson on other remuneration-related issues. During the year,
Addleshaw Goddard were engaged by the committee to advise on share schemes and pensions. The following individuals also provided
material advice or services to the committee during the year:
Paul Moody (Chief executive);
John Gibney (Group finance director);
Doug Frost (Group human resources director); and
Julie Withnall (Group head of reward)
Remuneration objectives
The principal objective of the remuneration policy is to provide market competitive levels of remuneration for the company’s senior
executives, including incentive arrangements that will reward successful execution of the company’s short and long-term strategy.
The committee believes that this requires:
• The provision of mid-market base salaries and incentive levels for the sector, with appropriate leverage to reward sustained exceptional
performance and support the future growth plans of the company;
• A reward structure that places appropriate emphasis on short-term operating performance and sustained longer-term performance; and
• Competitive incentive arrangements that are underpinned by a balance of operational and long-term performance metrics to provide both
a focus on business performance and alignment with returns to the company’s shareholders.
Britvic plc Annual Report 2012
35
governance
directors’ remuneration report continued
overview
Remuneration policy and components of remuneration
The remuneration policy has been designed to provide market competitive remuneration relative to appropriate peer groups for base salary
and incentive opportunity. The table below outlines the purpose for and performance measures attaching to each element of the package.
Base salary
Pension and
benefits
Short-term
incentive plan
Purpose
Measures of performance for 2012/3 Changes in year
• Positions the role and the
individual fairly within a
competitive market range derived
from a peer group of similar-sized
UK-listed companies.
• Individual contribution.
• Sustained value in the business.
• Executives’ salaries increased
by 2% effective January 2012.
• Long-term retention of employees
• N/a.
• No change.
• Provides focus on the delivery
of the financial targets set out
in the annual budget.
• Profit Before Tax (PBT) (50%).
• The weighting for the measure
• Net revenue (20%).
• Free cash flow (30%).
of Net Revenue and Free
Cash Flow have been
changed for 2012/13.
Executive share
option plan
• Provides focus on longer-term
• EPS growth during the three
• No change.
share price growth.
year performance period.
• Reflects sustained delivery
of earnings growth.
• Alignment to shareholder interests.
Performance
share plan
• Provides focus on sustained
growth and long-term returns
to shareholders.
• Relative TSR positioning against
a peer group of similar sector
companies (50%).
• No change.
• Average Return on Invested Capital
(‘ROIC’) during the three year
performance period (50%).
The committee believes that the remuneration of executive directors should be appropriately balanced between base salary and
performance-related pay elements with the predominant proportion of potential reward being linked to performance.
The table below shows the current pay mix in place for executive directors under both target and maximum performance scenarios.
Executive director reward elements
Chief
executive
Maximum
Target
Maximum
Target
Group
finance
director
l
a
t
o
t
f
o
e
g
a
t
n
e
c
r
e
P
0
10
20
30
40
50
60
70
80
90
100
Base
Bonus
ESOP
PSP
The committee regularly reviews the remuneration policy to ensure that it is sufficiently flexible to take account of future changes
in the company’s business operations and environment, provides alignment to shareholder interests and that it recognises key
developments in remuneration practice. The committee believes the remuneration policy described above remains appropriate and that
the incentive structure does not raise environmental, social or governance risks by inadvertently motivating irresponsible behaviour.
36 Britvic plc Annual Report 2012
overview
business review
governance
governance
financial statements
shareholder information
Remuneration in practice
We note that the future remuneration of the executive directors and other members of the Executive Committee will be subject
to change should the completion of the recommended all-share merger of the Company and A.G. Barr p.l.c. be completed. Further
information on the recommended merger with A.G. Barr p.l.c. will be set out in a separate circular to be sent to the company’s shareholders
and will be available on our website at www.britvic.com in due course.
Base salary
Salaries are reviewed annually to take account of:
• The individual performance and contribution of each executive director;
• The annual salary review budget for the rest of the group;
• Business performance;
• Mid-market data for a peer group of UK-listed companies of similar revenue size and scope as well as pay information; and
• Mid-market data for the few relevant companies in the UK food and beverage sector.
When determining directors’ remuneration, the committee considers the overall GB salary review budget which was 3% in 2012/13,
with increases of 3% for on target performance. There are no changes to current base salaries planned prior to 31 December 2012.
Incentive plans
The committee seeks to ensure that variable pay is determined by relevant and stretching measures of performance that are consistent
with the strategic objectives and risk profile of the Company, in order to appropriately align directors’ interests with those of shareholders
and to engender appropriate risk-based behaviour.
In setting incentive levels, the committee considers mid-market data on short and long-term incentive opportunity from a peer group of
both general industry and appropriate consumer goods/retail sector companies.
Short-term incentive plan
In 2011/12, targets were approved by the committee at the beginning of the year and were aligned to internal targets and strategic
business objectives.
Target
Maximum
Performance metrics
Chief executive
70%
140%
Group finance director
60%
120%
Target bonus is payable for achievement of target PBT, net revenue growth
and free cash flow performance.
Maximum bonus is payable for the achievement of exceptional performance
targets.
For 2011/12, a bonus of 0% of salary was earned by both the chief executive and the group finance director as performance was below the
committee’s stretching performance targets.
The committee has decided to maintain the same target and maximum bonus opportunity for executive directors in 2012/13.
The committee has also decided that the key short-term operational drivers of the business for 2012/13 remain appropriate, but that
a greater weighting should be applied to free cash flow. The amended bonus structure for 2012/13 will be paid for achievement of
performance targets based on PBT (unchanged at 50% of total bonus), net revenue growth (reduced from 25% of total bonus to 20%)
and free cash flow (increased from 25% of total bonus to 30%) and will be set at appropriately stretching levels.
This weighting was considered appropriate by the committee to give a greater emphasis on cash flow management whilst maintaining
a focus building brand strength and profit growth.
Britvic plc Annual Report 2012
37
governance
directors’ remuneration report continued
overview
Long-term incentives – executive share option plan
Annual grants of options are made to senior executives, at the discretion of the committee, over shares in Britvic plc at the market price at
date of grant. The level of option grant and the performance conditions are determined and reviewed by the committee annually. Options
are normally exercisable between three and ten years from the date of grant to the extent that the performance conditions have been satisfied.
In the event that grants are made in 2012/13, the committee has decided to maintain the same focus on long-term EPS growth as applied
in 2011/12 and believes the performance range remains sufficiently stretching in the context of the current business outlook and growth
strategy of the company. The key design features are summarised below:
Face value1 (% of salary)
• Chief executive: 300%
• Group finance director: 250%
Performance metrics
• EPS (100%)
Performance condition in 2012/132,3
• 25% vests for EPS growth equivalent to RPI +3% per annum.
• No awards will vest below this level of performance.
• 100% vests for EPS growth equivalent to RPI +7% per annum.
• Vesting is on a straight line between threshold and maximum.
• Options lapse to the extent that the performance condition is not achieved.
Change In control provisions
• Vesting is subject to achievement of performance conditions
• Vesting is pro rated for the portion of the performance period elapsed
• At the discretion of the committee vesting maybe reduced to zero or the way that
performance is measured can be adjusted but should be no more or less difficult to achieve
• Subject to consent of the company and any acquirer, awards may be rolled over into
awards with equivalent structure and terms, except for performance conditions
• Awards must be exercised within 6 months of the change in control
1 Based on market price at grant
Long-term incentives - performance share plan
Annual grants of performance shares are made at the discretion of the committee to senior executives and managers. The awards normally
vest at the end of the three-year performance period, to the extent that the performance conditions are achieved. The key design features
are summarised below:
Face value1 (% of salary)
• Chief executive: 100%
Performance metrics
• Group finance director: 100%
• Relative TSR (50%)
• ROIC (50%)
Performance condition in 2012/132,3
Relative TSR portion:
• Peer group comprises 18 similar sector companies
• 25% vests for ranking at median
• 100% vests for ranking at or above upper quartile
• Vesting is on a straight line between threshold and maximum
ROIC portion:
• 25% vests for three-year average ROIC of 21.5%
• 100% vests for three-year average ROIC at or above 22.3%
• Vesting is on a straight line between threshold and maximum
Change in control provisions
• Vesting is subject to achievement of performance conditions
• Vesting is pro rated for the portion of the performance period elapsed
• At the discretion of the committee the way that performance is measured can be
adjusted but should be no more or less difficult to achieve
• Subject to consent of the company and any acquirer, awards may be rolled over into
awards with equivalent structure and terms, except for performance conditions
1 Based on market price at grant
2 The comparator companies are: AG BARR, Associated British Foods, C&C Group, Dairy Crest, Diageo, Fuller Smith & Turner, Glanbia, Greencore, Greene King,
Marston’s, Nichols, Origin Enterprises, Premier Foods, Reckitt Benckiser, SABMiller, Smith & Nephew, Tate and Lyle, Wetherspoon.
3 These conditions will apply in the event that awards are made in 2012/13
38 Britvic plc Annual Report 2012
overview
business review
governance
governance
financial statements
shareholder information
Other share plans
Executive directors participate in the Britvic Share Incentive Plan, which is an all-employee tax approved share scheme open to employees
based in Great Britain. The Plan has three parts, all of which the Directors participate in:
• Free share awards are made annually at the discretion of the committee. The value of the award is discretionary and the maximum is
3% of reckonable earnings, capped at £3,000. In light of our 2011/12 performance against internal targets, the committee has determined
that no award of free shares will be made in April 2013.
• Partnership shares are purchased by employees through payroll deductions between £5 and £115 per pay period.
• Matching shares are provided by the employer to individuals purchasing partnership shares on a one for one basis up to a maximum of
£50 per pay period.
Share ownership guidelines
To align the interests of executive directors and shareholders, share ownership guidelines are in place that require executive directors to
acquire a shareholding equal to their annual salary within five years from IPO (calculated at the IPO share price) or from the point of joining
Britvic (calculated at the share price on the date of joining). Until this holding is acquired, the executive directors may not sell any shares
other than to finance the cost of exercising options and any tax liabilities arising from the vesting of long-term incentive plans, unless
approved by the committee, for example, in cases of financial hardship.
Retirement benefits
The executive directors ceased participation in the defined benefit section of the Britvic Pension Plan (‘the Plan’) on 10 April 2011 following
the closure of the Plan to future accrual. Both executive directors now receive a cash allowance in lieu of pension.
The cash allowance payable:
• Reflects contributions Britvic would have made to the defined contribution section of the the Plan had these individuals elected to join,
less a deduction to ensure the cash allowance is cost neutral to the company from a National Insurance perspective.
• Is paid at a rate of 24.6% of pensionable pay (base salary only) to the chief executive and 22.0% of pensionable pay to the group finance director.
Both executive directors continue to have a deferred pension in the defined benefit section of the DB Plan and also the Britvic Executive Top
Up Scheme (‘BETUS’), the company’s unfunded retirement benefits scheme which also closed to future accrual on 10 April 2011.
The normal retirement age for executive directors is 60.
In line with all members of the defined benefits section Plan the executive directors may benefit from the Enhanced Early Retirement Facility
(‘EERF’) which allows the Plan members to retire within five years of reaching normal pension age without a reduction in their pension. The
EERF includes benefits payable from BETUS and is non-contractual. Continuation on the EERF formed part of the agreement with the DB
Plan trustees on the closure of the defined benefit section of the Plan, and the rules of EERF state that it cannot be reasonably refused to
any retiring member. The company has given notice to all of DB Plan members that the EERF will be withdrawn by 5 April 2016.
Where a BETUS member is retiring, the committee may consider offering a discounted one-off cash settlement to the member at the point
of retirement to reduce the company’s balance sheet exposure to the BETUS liability. Further details of Paul Moody’s retirement arrangements
under the proposed merger are set out below.
Other benefits
Executive directors receive an annual car benefit or allowance and membership of the company’s private medical healthcare plan.
Service contracts
The current policy is for the notice period in the executive directors’ service contracts to be normally no longer than 12 months.
The service contracts of the current executive directors include the following terms:
Paul Moody
John Gibney
14 December 2005
14 December 2005
121
121
6
6
12
12
Effective date
of contract
Unexpired term
(approx. months)
Notice period from director
(months)
Notice period from
company (months)
1 Executive directors are appointed on 12-month rolling contracts.
There are no special provisions for executive or non-executive directors with regard to compensation in the event of loss of office. In the
event of the employment of an executive director being terminated, the committee would pay due regard to best practice and take account
of the individual’s duty to mitigate their loss.
In the event of the recommended merger with A.G. Barr p.l.c. it has been agreed that Paul Moody would retire early. Consequently, he would
not be entitled to any severance arrangements under the terms of his contract or bonus payments in respect of FY2012/13. As an early
retiree the basis of his retirement benefits will follow the same provisions as apply to all Britvic employees in such situations. Paul Moody
would qualify for EERF which means that his pension would not be actuarially reduced as it would be within five years of his normal pension
age. Similarly, with respect to long-term incentive awards, Paul Moody would be subject to the same change in control provisions as all
other participants in receipt of such awards and described in the policy table above. In order to provide expert integration and synergy support
as well as handover of the current Pepsi relationship following completion of the proposed merger, Paul Moody would be provided with
a consulting services agreement with the combined Group for a fixed period of six months following completion to ensure his expertise is
available for as long as the new Board requires it during that period. The agreed fee for these services, to be paid monthly, is £350,000 in total.
Britvic plc Annual Report 2012
39
governance
directors’ remuneration report continued
overview
Other appointments
The executive directors are not permitted to have any engagement with any other company during the term of their appointment without
the prior written consent of the board.
The chief executive’s current external appointments are:
• Non-executive director of Johnson Service Group plc
• Director of The British Soft Drinks Association Limited
• Chairman of business4Life
The group finance director has no such external appointments.
Chairman and non-executive directors
Under his Letter of Appointment, Gerald Corbett was appointed chairman of the company for an initial three-year term to 14 December 2008.
This has been extended until 14 December 2014 subject to annual re-election by the company’s shareholders in accordance with the UK
Corporate Governance Code.
The non-executive directors do not have service contracts but instead have Letters of Appointment for a three-year term, subject to annual
re-election by the company’s shareholders in accordance with the UK Corporate Governance Code.
Effective date
of contract
Unexpired term
(approx. months)
Notice period from
director (months)
Notice period from
company (months)
Non-executive directors:
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
14 December 20111
14 December 20111
15 April 20111
14 December 20111
14 December 20111
24
24
16
24
24
12
3
3
3
3
12
3
3
3
3
1 The Non-executive directors’ letters of appointment were extended for a further three-year term to 14 December 2014 with the exception of Ben Gordon
whose letter of appointment was extended for a further three-year term to 14 April 2014.
Remuneration of non-executive directors consists solely of fees. Non-executive directors’ fees are reviewed by the board annually and they
do not participate in any of the group’s pension schemes or in any of the group’s bonus, share option or other incentive schemes.
No changes to current fees are planned prior to 31 December 2012.
Performance graph – total shareholder return
The committee considers the FTSE 250 excluding Investment Trusts Index is a relevant index for total shareholder return and comparison
disclosure as it represents a broad equity market index in which the company is a constituent member.
Historical TSR performance
Growth in the value of a hypothetical £100 holding over five years
FTSE 250 excluding Investment Trusts comparison based on spot values.
FSTE 250 Excluding Investment Trusts Britvic
250
200
150
100
50
0
30 Sept 2007
28 Sept 2008
27 Sept 2009
3 Oct 2010
30 Sept 2011
30 Sept 2012
40 Britvic plc Annual Report 2012
overview
business review
governance
governance
financial statements
shareholder information
Audited information
Directors’ remuneration
Executive directors:
Paul Moody
John Gibney
Non-executive directors:
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
Basic salary
and fees1
£’000
Taxable
benefits2
£’000
Performance
related bonuses3
£’000
Total
2011/12
£’000
652
407
227
48
48
64
56
18
21
-
-
-
-
-
-
-
-
-
-
-
-
670
428
227
48
48
64
56
Total
2010/11
£’000
517
339
272
47
47
63
55
1 The basic salary and fees includes for Paul Moody basic salary of £507,359.48 and a pensions cash alternative of £144,728.74 and for John Gibney basic salary of
£323,685.33 and a pensions cash alternative of £83,800.61.
2 Benefits for Paul Moody and John Gibney incorporate all taxable benefits and expense allowances arising from employment, which relate mainly to the provision of
an annual car benefit or allowance (worth £17,319 for Paul Moody and £20,059 for John Gibney) and membership of the Company’s private medical healthcare plan
(worth £1,409 for Paul Moody and £1,128 for John Gibney). In line with policy for all employees, Paul Moody elected to sell 5 days’ holiday in this performance year.
3 For 2011/12 no bonus is payable for either executive director
Directors’ interests in share options
The executive directors participate in the Britvic Executive Share Option Plan (on the terms and subject to the EPS growth performance
condition as described on page 88).
Granted
Exercised
Lapsed
date of
At end of year/
Option
exercise
during year
during year
during year
cessation
price (pence)
Date
from which
exerciseable
Expiry
date
Number of shares
under Option
Date of
grant
Paul Moody
Total
John Gibney
15/12/051
06/12/061
05/12/071
05/12/082
07/12/092
07/12/102
07/12/112
15/12/051
06/12/061
05/12/071
05/12/082
07/12/092
07/12/102
06/12/112
At start of
year/date of
appointment
273,005
338,776
246,369
615,068
372,326
310,111
-
2,155,655
124,366
162,245
119,135
330,486
200,065
166,634
-
-
-
-
-
-
-
452,368
452,368
-
-
-
-
-
-
240,502
Total
1,102,931
240,502
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(84,879)
-
-
-
273,005
338,776
246,369
530,189
372,326
310,111
452,368
(84,879)
2,523,144
-
-
-
(45,607)
-
-
-
124,366
162,245
119,135
284,879
200,065
166,634
240,502
(45,607)
1,297,826
245.0
245.0
347.0
221.0
387.0
465.0
332.0
245.0
245.0
347.0
221.0
387.0
465.0
332.0
15/12/08
06/12/09
05/12/10
05/12/11
07/12/12
07/12/13
06/12/14
15/12/08
06/12/09
05/12/10
05/12/11
07/12/12
07/12/13
6/12/14
15/12/15
06/12/16
05/12/17
05/12/18
07/12/19
07/12/20
06/12/21
15/12/15
06/12/16
05/12/17
05/12/18
07/12/19
07/12/20
6/12/21
1 Awards of share options from 2005 to 2007 vested at 40% threshold (EPS growth equal to RPI + 3% compound over three years) and 100% at maximum
(EPS growth equal to RPI + 7% compound over three years).
2 Awards of share options from 2008 onwards vest 25% at threshold with the EPS performance condition calibrated as detailed above.
The market price of the company’s shares on 30 September 2012 was 364.1p and the range of closing prices during the year was 260.1p to 398.0p
Britvic plc Annual Report 2012
41
governance
directors’ remuneration report continued
overview
Directors’ interests in the performance share plan
The executive directors participate in the Britvic Performance Share Plan (as described on page 89).
Date of award
At start of
year/date of
appointment
Awarded
during year
Vested
Lapsed
during year
during year
date of
cessation
At end of year/
Market price
at date of
award (pence)
Vesting
date
Paul Moody
Total
John Gibney
Total
05/12/082
05/12/093
07/12/104
06/12/115
05/12/082
05/12/093
07/12/104
06/12/115
205,024
124,110
103,370
-
432,504
132,196
80,026
66,654
-
278,876
-
-
150,790
(186,572)
-
-
-
(18,452)
-
-
-
0
124,110
103,370
150,790
150,790
(186,572)
(18,452)
378,270
-
-
(120,298)
-
-
(11,898)
-
-
-
80,026
66,654
96,200
(120,298)
(11,898)
242,880
96,200
96,200
224.0
380.1
475.4
329.8
224.0
380.1
475.4
329.8
05/12/11
07/12/12
07/12/13
06/12/14
05/12/11
07/12/12
07/12/13
06/12/14
1 Awards of performance shares in 2006 and 2007 vest 40% at threshold (TSR performance at median of comparator group of similar companies) and 100% at
maximum (TSR at upper quartile of comparator group).
2 Awards of performance shares in 2008 vest 25% at threshold and 100% at maximum (with 50% of the award subject to the TSR performance condition detailed
above and 50% of the award subject to threshold ROIC of 16.5% and maximum ROIC condition of 17.8%).
3 Awards of performance shares in 2009 vest 25% at threshold and 100% at maximum (with 50% of the award subject to the TSR performance condition detailed
above and 50% of the award subject to threshold ROIC of 20.7% and maximum ROIC condition of 21.5%).
4 Awards of performance shares in 2010 vest 25% at threshold and 100% at maximum (with 50% of the award subject to the TSR performance condition detailed
above and 50% of the award subject to threshold ROIC of 21.9% and maximum ROIC condition of 22.7%).
5 Awards of performance shares in 2011 vest at 25% at threshold and 100% at maximum (with 50% of the award subject to the TSR performance condition detailed
above and 50% of the award subject to threshold ROIC of 21.5% and maximum ROIC condition of 22.3%.
Directors’ interests in shares
Britvic plc ordinary shares of 20p each
Executive directors:
Paul Moody
John Gibney
Non-executive directors:
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
30 September 2012
445,040
373,434
103,695
14,696
11,393
10,870
21,739
2 October 2011
354,846
315,051
103,695
8,696
11,393
10,870
21,739
The above shareholdings are all beneficial interests and include shares held on behalf of the executive directors by the trustee of the Britvic
Share Incentive Plan which is detailed on page 87.
In the period 1 October 2012 to 27 November 2012 there has been no change in the directors’ interests, other than through the monthly
purchases in October and November of partnership and matching shares under the Share Incentive Plan, resulting in an increase in the
interests held by Paul Moody and John Gibney of 88 shares each.
42 Britvic plc Annual Report 2012
overview
business review
governance
governance
financial statements
shareholder information
Pensions
The table below shows, amongst other items, as at the year end, the accrued pension should the director leave employment; the increase
in the accrued pension during the year; the increase excluding inflation and member contributions; the transfer value of accrued pension;
and any increase/(decrease) in this value assessed on the transfer value basis as under the Britvic Pension Plan (‘the DB Section’). This
disclosure is in compliance with both the London Stock Exchange Listing Rules and the Companies Act 2006.
Age
(last birthday) at
30/09/12
55
52
Accrued
pension at
30/09/2012
£p.a.
216,600
191,800
Increase
in accrued
pension1
£p.a.
6,400
5,700
Increase
in accrued
pension2
£p.a.
900
800
Name of director
Paul Moody
John Gibney
1 Absolute increase during accounting period.
Transfer
value of increase
in accrued
pension3
£
Transfer
value of
accrued
benefits -
30/09/12
£
Transfer
value of accrued
benefits -
02/10/11
£
Increase in
transfer value
over accounting
period less
directors’
contributions4
£
18,800
13,600
4,597,900
3,333,800
3,528,100
2,641,000
1,069,800
692,800
2 Increase in accrued pension during the accounting period, net of inflation (measured using the Retail Prices Index).
3 Net of inflation (measured using the Retail Prices Index) and contributions.
4 Increase from last year due to changes in the transfer value basis used by the Britvic Pension Plan.
The defined benefit section of the DB Section and the Britvic Executive Top-Up Scheme (‘BETUS’) were closed to future accrual on
10 April 2011. Most active members transferred to the defined contribution section of the DB Section, but the two executive directors opted
to cease tax-relievable pension provision at the point of closure and instead now receive a cash sum in lieu of pension contributions. The
cash sum received by Paul Moody equates to 24.6% of basic salary and that received by John Gibney equates to 22% of basic salary. The
accrued pensions and transfer values listed above are calculated on the basis of entitlements accrued to 10 April 2011, but calculated where
relevant in line with market conditions at 30 September 2012.
The entitlements shown also include increases to accrued pensions since date of leaving defined benefit service for deferred members
which are required under the rules of the DB Plan and the BETUS, the aim of which are to increase the benefits in line with price inflation
between the date of leaving pensionable service in the DB Section and the BETUS and the date when benefits are drawn. The increase
due on 1 October 2012 has been included in the above figures. The transfer values shown have been calculated in accordance with
relevant regulations, which are before allowances for any discretionary options available.
In line with normal application of the EERF policy for legacy DB pension members, the committee agreed to apply its discretion to allow
Paul Moody to use the EERF upon completion of the proposed merger. The cost to the company of EERF is approximately £1.1M.
The associated total liabilities of the BETUS in relation to Paul Moody are approximately £3.6M on an IAS19 basis in the company accounts.
In order to reduce the BETUS related company balance sheet exposure sooner, the committee agreed to a one off payment to Paul Moody
of £2.85M which eliminates all current and future entitlements under BETUS for him. Taking into account employer NIC costs, this
represents a saving of 10% to the company. Following confirmation from the takeover panel, the committee also agreed to adopt this
approach (on a discretionary basis) as an ongoing policy that could be applied to all BETUS members.
On behalf of the board
Bob Ivell
Chairman of the Remuneration Committee
26 November 2012
Britvic plc Annual Report 2012
43
financial statements
overview
independent auditor’s report to the
members of Britvic plc
We have audited the group financial statements of Britvic plc for the 52 week period ended 30 September 2012 which comprise the
consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated
statement of cash flows, the consolidated statement of changes in equity and the related notes 1 to 32. The financial reporting framework that
has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 34, the directors are responsible for the preparation of the group
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether
the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition,
we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the group financial statements:
• give a true and fair view of the state of the group’s affairs as at 30 September 2012 and of its profit for the 52 week period then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the
financial statements; and
• the information given in the Corporate Governance Statement set out on pages 30 to 34 with respect to internal control and risk management
systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Corporate Governance Statement has not been prepared by the company.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 29, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review; and
• certain elements of the report to shareholders by the Board on directors’ remuneration.
Other matter
We have reported separately on the parent company financial statements of Britvic plc for the 52 week period ended 30 September 2012
and on the information in the Directors’ Remuneration Report that is described as having been audited.
Nigel Meredith (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
26 November 2012
44 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
consolidated income statement
For the 52 weeks ended 30 September 2012
52 weeks ended 30 September 2012
52 weeks ended 2 October 2011
Before
exceptional &
other items
£m
Exceptional
& other
items*
£m
Note
1,256.4
(624.6)
631.8
(353.3)
(165.8)
112.7
(28.3)
84.4
(21.5)
-
-
-
-
(4.8)
(4.8)
(2.1)
(6.9)
1.4
Before
exceptional &
other items
£m
1,290.4
(627.3)
663.1
(371.4)
(156.7)
135.0
(29.9)
105.1
(27.2)
Total
£m
1,256.4
(624.6)
631.8
(353.3)
(170.6)
107.9
(30.4)
77.5
(20.1)
Exceptional
& other
items*
£m
-
-
-
-
(23.1)
(23.1)
(2.1)
(25.2)
5.7
Total
£m
1,290.4
(627.3)
663.1
(371.4)
(179.8)
111.9
(32.0)
79.9
(21.5)
62.9
(5.5)
57.4
77.9
(19.5)
58.4
23.8p
22.4p
27.2p
26.5p
24.3p
23.0p
33.7p
32.9p
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administration expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before tax
Taxation
Profit / (loss) for the
period attributable to the
equity shareholders
Earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings
per share**
Adjusted diluted earnings
per share**
* See note 5.
6
9
10
11
11
11
11
**
Adjusted basic and diluted earnings per share measures have been adjusted by adding back exceptional & other items (see notes 5 and 11) and amortisation
relating to acquired intangible assets (see note 14). This reconciliation is shown in note 11.
All activities relate to continuing operations.
Britvic plc Annual Report 2012
45
financial statements
overview
consolidated statement
of comprehensive income
For the 52 weeks ended 30 September 2012
52 weeks ended
30 September 2012
£m
52 weeks ended
2 October 2011
£m
Note
Profit for the period attributable to the equity shareholders
Actuarial gains on defined benefit pension schemes
Deferred tax on actuarial gains on defined benefit pension schemes
Current tax on additional pension contributions
(Losses) / gains in the period in respect of cash flow hedges
Amounts recycled to the income statement in respect of cash flow hedges
Deferred tax in respect of cash flow hedges accounted for in the hedging reserve
Exchange differences on translation of foreign operations
Tax on exchange differences accounted for in the translation reserve
Other comprehensive income for the period net of tax
Total comprehensive income for the period attributable to the equity shareholders
23
26
26
26
57.4
9.2
(7.9)
4.6
(17.0)
9.5
2.1
(3.9)
4.0
0.6
58.0
58.4
45.1
(16.7)
4.3
5.8
(3.7)
(0.5)
(1.6)
1.5
34.2
92.6
46 Britvic plc Annual Report 2012
overview
business review
governance
fi nancial statements
fi nancial statements
shareholder information
consolidated balance sheet
As at 30 September 2012
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Other receivables
Other fi nancial assets
Pension asset
Current assets
Inventories
Trade and other receivables
Other fi nancial assets
Cash and cash equivalents
Non-current assets held for sale
Total assets
Current liabilities
Trade and other payables
Bank overdrafts
Interest bearing loans and borrowings
Other fi nancial liabilities
Current income tax payable
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Pension liability
Other fi nancial liabilities
Other non-current liabilities
Total liabilities
Net assets
Capital and reserves
Issued share capital
Share premium account
Own shares reserve
Share scheme reserve
Hedging reserve
Translation reserve
Merger reserve
Retained losses
Total equity
Note
13
14
16
26
23
17
18
26
19
20
24
19
22
26
22
10e
23
26
27
21
2012
£m
236.6
305.2
3.6
92.1
7.5
645.0
73.8
257.4
0.1
49.5
380.8
2011
£m
243.8
337.9
5.6
93.0
-
680.3
88.5
250.0
2.9
43.0
384.4
-
1,025.8
0.7
1,065.4
(357.2)
(1.9)
(0.6)
(4.4)
(7.8)
(371.9)
(558.7)
(34.1)
(11.2)
(10.9)
(1.9)
(616.8)
(988.7)
37.1
48.5
17.7
(0.8)
4.2
3.6
22.5
87.3
(145.9)
37.1
(370.1)
-
-
(4.3)
(15.6)
(390.0)
(573.2)
(23.0)
(45.1)
(9.7)
(1.9)
(652.9)
(1,042.9)
22.5
48.3
15.0
(1.0)
7.8
9.0
22.4
87.3
(166.3)
22.5
The fi nancial statements were approved by the board of directors and authorised for issue on 26 November 2012.
They were signed on its behalf by:
Paul Moody
Chief executive
John Gibney
Finance director
Britvic plc Annual Report 2012
47
financial statements
overview
consolidated statement of cash flows
For the 52 weeks ended 30 September 2012
Cash flows from operating activities
Profit before tax
Finance costs
Other financial instruments
Impairment of property, plant and equipment and intangible assets
Depreciation
Amortisation
Share based payments
Net pension charge less contributions
Decrease / (increase) in inventory
Increase in trade and other receivables
(Decrease) / increase in trade and other payables
Loss on disposal of tangible and intangible assets
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
Purchases of intangible assets
Acquisition of subsidiary net of cash acquired
Net cash flows used in investing activities
Cash flows from financing activities
Finance costs
Interest paid
Issue of US$ notes
Interest bearing loans drawn down / (repaid)
Issue of shares
Purchase of own shares
Dividends paid to equity shareholders
Net cash flows used in financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Exchange rate differences
Cash and cash equivalents at the end of the period
Note
9
13
14
23
12
19
2012
£m
77.5
30.4
(1.4)
14.9
34.4
9.5
3.0
(31.1)
10.9
(2.0)
(2.8)
1.5
(12.5)
132.3
2.2
(43.9)
(5.4)
-
(47.1)
(0.1)
(28.5)
-
(1.0)
2.0
(9.3)
(42.5)
(79.4)
5.8
43.0
(1.2)
47.6
2011
£m
79.9
32.0
10.2
0.5
35.6
12.9
3.8
(27.9)
(4.4)
(24.1)
22.8
4.6
(20.9)
125.0
0.6
(37.7)
(11.9)
(4.5)
(53.5)
(3.9)
(27.2)
113.9
(123.4)
2.3
(3.3)
(40.3)
81.9
(10.4)
54.0
(0.6)
43.0
48 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
consolidated statement of changes in equity
For the 52 weeks ended 30 September 2012
Issued
share
capital
£m
Share
premium
account
£m
Own
shares
reserve
£m
Share
scheme
reserve
£m
48.0
10.6
(1.9)
9.7
At 3 October 2010
Profit for the period
Other comprehensive income
Issue of shares
Own shares purchased for share schemes
Own shares utilised for share schemes
Movement in share based schemes
Current tax on share based payments
Deferred tax on share based payments
Payment of dividend
-
-
-
0.3
-
-
-
-
-
-
-
-
-
4.4
-
-
-
-
-
-
At 2 October 2011
48.3
15.0
Profit for the period
Other comprehensive income
Issue of shares
Own shares purchased for share schemes
Own shares utilised for share schemes
Movement in share based schemes
Current tax on share based payments
Deferred tax on share based payments
Payment of dividend
-
-
-
0.2
-
-
-
-
-
-
-
-
-
2.7
-
-
-
-
-
-
At 30 September 2012
48.5
17.7
Hedging
reserve
£m
Translation
reserve
£m
Merger
reserve
£m
Retained
losses
£m
Total
£m
7.4
-
1.6
1.6
-
-
-
-
-
-
-
22.5
87.3
(214.3)
(30.7)
-
(0.1)
(0.1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
58.4
32.7
91.1
-
-
(1.0)
-
0.7
(2.5)
(40.3)
58.4
34.2
92.6
0.6
(3.3)
1.7
3.7
0.7
(2.5)
(40.3)
9.0
22.4
87.3
(166.3)
22.5
-
-
-
-
(5.4)
(5.4)
-
0.1
0.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
57.4
5.9
63.3
-
-
(2.0)
-
0.6
1.0
(42.5)
57.4
0.6
58.0
0.5
(9.3)
4.3
2.0
0.6
1.0
(42.5)
-
-
-
-
-
(5.6)
3.7
-
-
-
7.8
-
-
(5.6)
2.0
-
-
-
4.2
-
-
-
(4.1)
(3.3)
8.3
-
-
-
-
(1.0)
-
-
-
(2.4)
(9.3)
11.9
-
-
-
-
(0.8)
3.6
22.5
87.3
(145.9)
37.1
Britvic plc Annual Report 2012
49
financial statements
overview
notes to the consolidated
financial statements
1. General information
Britvic plc (the “company”) is a company incorporated in the United Kingdom under the Companies Act 2006. It is a public limited
company domiciled in England & Wales and its ordinary shares are traded on the London Stock Exchange. Britvic plc and its subsidiaries
(together the “group”) operate in the soft drinks manufacturing and distribution industry, principally in the United Kingdom, Republic of
Ireland and France.
The operating companies of the group are disclosed within note 31.
The financial statements were authorised for issue by the Board of Directors on 26 November 2012.
2. Statement of compliance
The financial information has been prepared on the basis of applicable International Financial Reporting Standards as adopted by the
European Union (IFRS), as they apply to the financial statements of the group.
3. Accounting policies
Basis of preparation
The financial statements have been prepared on a going concern basis. For further detail, please refer to note 32.
The consolidated financial statements have been prepared on a historical cost basis except where measurement of balances at fair value
is required as explained below. The consolidated financial statements of the group are presented in pounds sterling, which is also the
functional currency of the company, and all values are rounded to the nearest 0.1 million except where otherwise indicated.
Basis of consolidation
The consolidated financial statements of the group incorporate the financial information of the company and the entities controlled by
the company (its subsidiaries) in accordance with IAS 27 ‘Consolidated and Separate Financial Statements’. The financial statements of
subsidiaries are prepared for the same reporting period as the company, using consistent accounting policies. All intra-group
transactions, balances, income and expenses are eliminated on consolidation. The results of subsidiary undertakings acquired or
disposed of in the year are included in the Consolidated Income Statement from the date the group gains control or up to the date
control ceases respectively. Control comprises the power to govern the financial and operating policies of the investee so as to obtain
benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible
potential voting rights; or by way of contractual agreement.
Revenue recognition
Revenue is the value of sales, excluding transactions with or between subsidiaries, and after deduction of sales related discounts and
rebates, value added tax and other sales related taxes. Revenue is recognised when the significant risks and rewards of ownership of
the goods have passed to the buyer and the amount can be measured reliably.
Sales related discounts are calculated based on the expected amounts necessary to meet claims by the group’s customers in respect
of these discounts and rebates.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost comprises the
aggregate amount paid and the fair value of any other consideration given to acquire the asset and includes costs directly attributable to
making the asset capable of operating as intended. Depreciation is calculated so as to write off the cost of an asset, less its estimated
residual value, on a straight-line basis, over the useful economic life of that asset as follows:
Plant and machinery
Vehicles (included in plant and machinery)
Equipment in retail outlets (included in fixtures, fittings, tools and equipment)
Other fixtures and fittings (included in fixtures, fittings, tools and equipment)
3 to 20 years
5 to 7 years
5 to 10 years
3 to 10 years
Land is not depreciated.
Freehold properties are depreciated over 50 years.
Leasehold properties are depreciated over 50 years, or over the unexpired lease term when this is less than 50 years.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Gains and losses on disposals are determined by comparing proceeds with carrying amount, and
are included in the Consolidated Income Statement in the period of de-recognition.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual amounts
are reviewed annually and where adjustments are required these are made prospectively.
50 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
3. Accounting policies continued
Goodwill
While the original acquisition of Britannia Soft Drinks Limited was accounted for under the merger method, business combinations on or
after 4 October 2004 have been accounted for under IFRS 3 ‘Business Combinations’ using the acquisition method. On acquisition, the
assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the
cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (discount on acquisition) is credited to the Consolidated Income
Statement in the period of acquisition.
Following initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised.
Goodwill is reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value
may be impaired. As at the acquisition date, any goodwill acquired is allocated to the group of cash-generating units expected to benefit
from the combination’s synergies by management. Impairment is determined by assessing the recoverable amount of the group of
cash-generating units to which the goodwill relates. Where the recoverable amount of the cash-generating units are less than the
carrying amount, an impairment loss is recognised immediately in the Consolidated Income Statement.
On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Intangible assets
Trademarks, franchise rights and customer lists
Intangible assets acquired separately are measured on initial recognition at the fair value of consideration paid. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation or impairment losses. An intangible asset acquired
as part of a business combination is recognised outside goodwill, at fair value at the date of acquisition, if the asset is separable or arises
from contractual or other legal rights and its fair value can be measured reliably.
The useful lives of intangible assets are assessed to be either finite or indefinite. Amortisation is charged on assets with finite lives
on a straight-line basis over a period appropriate to the asset’s useful life.
The carrying values of intangible assets with finite and indefinite lives are reviewed for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable.
Intangible assets with indefinite useful lives are also tested for impairment annually either individually or if the intangible asset does not
generate cash flows that are largely independent of those from other assets or groups of assets as part of the cash generating unit to
which it belongs. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually
to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from
indefinite to finite is made on a prospective basis.
Software Costs
Software expenditure is recognised as an intangible asset only after its technical feasibility and commercial viability can be
demonstrated. Acquired computer software licences and software developed in-house are capitalised on the basis of the costs incurred
to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three to seven years.
Impairment of assets
The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists,
or when annual impairment testing for an asset is required, the group makes an estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use and is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the
carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable
amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects senior management’s estimate of the cost of capital. Impairment losses of continuing operations are recognised in the
Consolidated Income Statement in those expense categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may
no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount.
That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Goodwill impairment losses cannot subsequently be reversed.
Britvic plc Annual Report 2012
51
financial statements
notes to the consolidated financial statements continued
overview
3. Accounting policies continued
Inventories and work in progress
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing inventories to their present location and condition. Cost is determined
using the weighted average cost method. Net realisable value represents the estimated selling price less all estimated costs of
completion and costs to be incurred in marketing, selling and distribution.
Financial assets
The group determines the classification of its financial assets at initial recognition. When financial assets are recognised initially, they are
measured at fair value, which is normally the transaction price, plus directly attributable transaction costs for those financial assets not
subsequently measured at fair value through profit or loss. The group assesses at each balance sheet date whether a financial asset or
group of financial assets is impaired.
Loans and receivables
The group has financial assets that are classified as loans and receivables. Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market, do not qualify as trading assets and have not been designated
as either fair value through profit or loss or available for sale. Such assets are carried at amortised cost using the effective interest
method if the time value of money is significant. Gains and losses are recognised in the Consolidated Income Statement when loans
and receivables are derecognised or impaired, as well as through the amortisation process.
Derivative financial instruments and hedging
The group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated
with foreign currency and interest rate fluctuations. All derivative financial instruments are initially recognised and subsequently
remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.
For those derivatives designated as hedges and for which hedge accounting is appropriate, the hedging relationship is documented at its
inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and
how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the
Consolidated Income Statement. The treatment of gains and losses arising from revaluing derivatives designated as hedging
instruments depends on the nature of the hedging relationship, as follows:
Cash flow hedges
Hedges are classified as cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular
risk associated with a recognised asset or liability or a highly probable forecast transaction. For cash flow hedges, the effective portion of
the gain or loss on the hedging instrument is recognised in other comprehensive income, while the ineffective portion is recognised in
the Consolidated Income Statement. Amounts previously recognised in other comprehensive income are transferred to the Consolidated
Income Statement in the period in which the hedged item affects profit or loss, such as when a forecast sale occurs. However, when
the forecast transaction results in the recognition of a non-financial asset or liability, the amounts previously recognised in other
comprehensive income are included in the initial carrying amount of the asset or liability.
If a forecast transaction is no longer expected to occur, amounts previously recognised in other comprehensive income are transferred
to the Consolidated Income Statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or
rollover, or if its designation as a hedge is revoked, amounts previously recognised in other comprehensive income remain in equity until
the forecast transaction occurs and are then transferred to the Consolidated Income Statement or included in the initial carrying amount
of a non-financial asset or liability as above.
Net investment hedges
Financial instruments are classified as net investment hedges when they hedge the group’s net investment in foreign operations.
Some of the group’s foreign currency borrowings qualify as hedging instruments that hedge foreign currency net investment balances.
The effective portion of gains or losses on translation of borrowings designated as net investment hedges is recognised in other
comprehensive income. Any ineffective portion is recognised immediately in the Consolidated Income Statement. Upon disposal of
the associated investment in foreign operations any cumulative gain or loss previously recognised in other comprehensive income
is recycled through the Consolidated Income Statement.
Fair value hedges
Hedges of the change in fair value of recognised assets or liabilities are classified as fair value hedges. For fair value hedges, the gain or
loss on the fair value of the hedging instrument is recognised in the Consolidated Income Statement. The gain or loss on the hedged item
attributable to the hedged risk adjusts the carrying amount of the hedged item and is also recognised in the Consolidated Income Statement.
If the hedge relationship no longer meets the criteria for hedge accounting, the hedged item would no longer be adjusted and the cumulative
adjustment to its carrying amount would be amortised to the Consolidated Income Statement based on a recalculated effective interest
rate. The fair value gain or loss on the hedging instrument would continue to be recorded in the Consolidated Income Statement.
52 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
3. Accounting policies continued
Derecognition of financial instruments
The derecognition of a financial asset takes place when the contractual rights to the cash flows expire, or when the contractual rights to
the cash flows have either been transferred or an obligation has been assumed to pass them through to a third party and the group does
not retain substantially all the risks and rewards of the asset.
Financial liabilities are only derecognised when they are extinguished, that is, when the obligation is discharged, cancelled or expires.
Share-based payments
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
Fair value is determined by an external valuer using an appropriate pricing model. In valuing equity-settled transactions, no account is
taken of any performance conditions, other than conditions linked to the price of the shares (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the number of equity instruments that, in the opinion of the directors and based on the best
available estimate at that date, will ultimately vest (or in the case of an instrument subject to a market condition, be treated as vesting as
described below). The Consolidated Income Statement charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other
performance conditions are satisfied.
Taxation
The current income tax expense is based on taxable profits for the period, after any adjustments in respect of prior periods. It is
calculated using taxation rates enacted or substantively enacted by the balance sheet date and is measured at the amount expected
to be recovered from or paid to the taxation authorities.
Provision is made for deferred tax liabilities, or credit taken for deferred tax assets, on all material temporary differences between the
tax base of assets and liabilities and their carrying values in the consolidated financial statements.
The principal temporary differences arise from accelerated capital allowances, provisions for pensions and other post-retirement
benefits, provisions for share-based payments and utilised losses incurred in overseas jurisdiction.
Deferred tax assets are recognised to the extent that it is regarded as probable that future taxable profits will be available against which
the temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the periods in which the asset or liability will be settled based
on the tax rates enacted or substantively enacted by the balance sheet date.
Pensions and post-retirement benefits
The group operates a number of pension schemes. These include both defined benefit and defined contribution plans.
Defined benefit plans
The defined benefit pension liability or asset in the balance sheet comprises the total for each plan of the present value of the defined
benefit obligation less any past service cost not yet recognised and less the fair value of plan assets out of which the obligations are to
be settled directly. Plan assets are measured at fair value based on market price information and in the case of quoted securities, the
published bid price. Plan liabilities are measured on an actuarial basis, using the projected unit credit method and discounted at an
interest rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the plan liabilities.
The movement in the defined benefit pension asset or liability in the balance sheet consists of four main elements.
• The service cost of providing pension benefits to employees for the period which is recognised in the Consolidated Income Statement.
• A charge representing the unwinding of the discount on the plan liabilities during the year which is included within administrative expenses.
• A credit representing the expected return on the plan assets during the year which is included within administrative expenses.
This credit is based on the market value of the plan assets, and expected rates of return, at the beginning of the period.
• Actuarial gains and losses. These may result from: differences between the expected return and the actual return on plan assets;
differences between the actuarial assumptions underlying the plan liabilities and actual experience during the year; or changes in the
actuarial assumptions used in the valuation of the plan liabilities. Actuarial gains and losses, and taxation thereon, are recognised
immediately in other comprehensive income.
Britvic plc Annual Report 2012
53
financial statements
notes to the consolidated financial statements continued
overview
3. Accounting policies continued
Pensions and post retirement benefits continued
Changes to benefits under a defined benefit plan are accounted for as follows:
• Past service cost is the increase in the present value of the defined benefit obligation for employee service in prior periods,
resulting from changes to post-employment benefits. Past service costs are recognised in profit or loss on a straight-line
basis over the vesting period or immediately if the benefits have vested.
• When a settlement (eliminating all obligations for part or all of the benefits already accrued) or a curtailment (reducing future obligations
as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs the obligation and related
plan assets are re-measured using current actuarial assumptions and the resultant gain or loss is recognised in the Consolidated
Income Statement during the period in which the settlement or curtailment occurs.
Any net pension assets arising are assessed for restrictions.
Defined contribution plans
Under defined contribution plans, contributions payable for the period are charged to the Consolidated Income Statement as an
operating expense.
Employee benefits
Wages, salaries, bonuses and paid annual leave are accrued in the period in which the associated services are rendered by the
employees of the group.
Leases
Leases in which substantially all the risks and rewards of ownership of the leased asset are retained by the lessor are classified as
operating leases by the group. Leases in which the group assumes substantially all the risks and rewards of ownership are classified
as finance leases.
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Any lease incentives
received are credited to the Consolidated Income Statement on a straight-line basis over the term of the leases to which they relate.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with
original maturities of three months or less, which are readily convertible into known amounts of cash and subject to insignificant risk of
changes in value. For the purposes of the statement of cash flows, bank overdrafts repayable on demand are a component of cash and
cash equivalents.
Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised at the lower of their original invoiced value and recoverable amount.
Provision is made when collection of the full amount is no longer considered probable. Balances are written off when the probability of recovery
is assessed as being remote.
Interest-bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised in the balance sheet at fair value less directly attributable transaction costs
and are subsequently measured at amortised cost using the effective interest rate method.
Gains and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance
income and finance cost.
Foreign currencies
Functional and presentation currency
The consolidated financial statements of the group are presented in pounds sterling. The presentation currency of the consolidated
financial statements is the same as the functional currency of the company.
Transactions and balances
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All differences are taken to the Consolidated Income
Statement, except when hedge accounting is applied and for differences in monetary assets and liabilities that form part of the Group’s net
investment in a foreign operation. These are taken in other comprehensive income until the disposal of the net investment, at which time they
are recognised in profit and loss.
Foreign operations
The Consolidated Income Statement and statement of cash flows of foreign operations are translated at the average rate of exchange
during the period. The balance sheet is translated at the rate ruling at the reporting date. Exchange differences arising on opening net
assets and arising on the translation of results at an average rate compared to a closing rate are both recognised in other comprehensive
income. On disposal of a foreign operation, the accumulated exchange differences previously recognised in other comprehensive
income are included in the Consolidated Income Statement.
54 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
3. Accounting policies continued
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The
chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has
been identified as the board of directors of the company.
Issued share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Nature and purpose of other reserves
Share premium account
The share premium account is used to record the excess of proceeds over the nominal value on the issue of shares.
Own shares reserve
The own shares reserve is used to record purchases by the group of its own shares, which will be distributed to employees as and
when share awards made under the Britvic employee share plans vest.
Share scheme reserve
The share scheme reserve is used to record the movements in equity corresponding to the cost recognised in respect of equity-settled
share based payment transactions. Amounts recognised in the share scheme reserve are transferred to retained losses upon
subsequent settlement of any awards that vest either by issue or purchase of the group’s shares, or when awards lapse.
Hedging reserve
The hedging reserve records the effective portion of movements in the fair value of forward exchange contracts, interest rate and cross
currency swaps that have been designated as hedging instruments in cash flow hedges.
Translation reserve
The translation reserve includes cumulative net exchange differences on translation into the presentational currency (sterling) of items
recorded in group entities with a non-sterling functional currency net of amounts recognised in respect of net investment hedges.
Merger reserve
The merger reserve arose as a result of the non pre-emptive share placement which took place on 21 May 2010. It was executed using
a structure which created a merger reserve under Section 612-3 of the Companies Act 2006.
Own shares
The cost of own shares held in employee share trusts and in treasury is deducted from shareholders’ equity until the shares are
cancelled, reissued or disposed. Where such shares are subsequently sold or reissued, the fair value of any consideration received is
also included in shareholders’ equity.
Exceptional and other items
The group presents items as exceptional and other items on the face of the Consolidated Income Statement to allow shareholders to
understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess
trends in financial performance more readily.
• ‘Exceptional’ items include those significant items of income and expense which, because of the nature and infrequency of the events
giving rise to them, merit separate presentation.
• ‘Other’ items include fair value movements on financial instruments where hedge accounting cannot be applied. These items have been
included within ‘exceptional and other items’ because they are non-cash and do not form part of how management assesses performance.
Key judgements and sources of estimation uncertainty
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts
reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year.
However, the nature of estimation means that the actual outcomes could differ from those estimates. In the process of applying the
group’s accounting policies, management has made the following judgements which have the most significant effect on the amounts
recognised in the financial statements.
Post-retirement benefits
The determination of the pension and other post retirement benefits cost and obligation is based on assumptions determined with
independent actuarial advice. The assumptions include discount rate, inflation, pension and salary increases, expected return on scheme
assets, mortality and other demographic assumptions. These key assumptions are disclosed in note 23.
Impairment of goodwill and intangible assets with indefinite lives
Determining whether goodwill and intangible assets with indefinite lives are impaired requires an estimation of the value in use of the
cash generating units to which the goodwill / intangible asset has been allocated. The value in use calculation requires an estimate of the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Further
details are given in note 15.
Britvic plc Annual Report 2012
55
financial statements
notes to the consolidated financial statements continued
overview
3. Accounting policies continued
Key judgements and sources of estimation uncertainty continued
Deferred tax
Deferred tax assets and liabilities require management’s judgement in determining the amounts to be recognised. In particular,
significant judgement is used when assessing the extent to which deferred tax assets should be recognised which is dependent on the
generation of sufficient future taxable profits. The group recognises deferred tax assets to the extent it is probable that the benefit will
be realised. Further details are given in note 10.
Cross currency interest rate swaps
The group measures cross currency interest rate swaps at fair value at each balance sheet date. The fair value represents the net
present value of the difference between the projected cash flows at the swap contract rate and the relevant exchange/interest rate for
the period from the balance sheet date to the contracted expiry date. The calculation therefore uses estimates of present value, future
foreign exchange rates and interest rates. Information regarding cross currency interest rate swaps is provided in notes 22 and 26.
Other
The group also makes estimations and judgements in the valuation of share-based payments. However, the value of this item is such
that any variation in the estimates used is unlikely to have a significant effect on the amounts recognised in the financial statements.
Further details are given in note 28.
New standards adopted in the current period
During the period, the group adopted a number of interpretations and amendments to standards which had an immaterial impact
on the consolidated financial statements of the group.
New standards and interpretations not applied
The group has not applied the following IFRSs, which may be applicable to the group, that have been issued but are not yet effective:
International Financial Reporting Standards (IFRS)
IFRS 7
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
Amendment to IFRS 7 – Offsetting of assets and liabilities
Financial Instruments – Classification and measurement
Consolidated financial statements
Joint arrangements
Disclosures of interests in other entities
Fair value measurement
International Accounting Standards (IAS)
IAS 1
IAS 12
IAS 19
IAS 27
IAS 32
Other
Amendment to IAS 1 – Presentation of financial statements
Amendment to IAS 12 – Income taxes
IAS 19 (revised 2011) – Employee benefits
IAS 27 (revised 2011) – Separate financial statements
Amendment to IAS 32 – Offsetting of assets and liabilities
Annual
improvements
Annual improvements 2011
Effective date – periods
commencing on or after
1 January 2013
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 July 2012
1 January 2012
1 January 2013
1 January 2013
1 January 2014
1 January 2013
The Directors do not anticipate that the adoption of these standards, which will be adopted in line with the effective date will have a
material impact on the group’s reported income or net assets in the period, with the exception of IAS 19 revised which is not anticipated
to have a material impact on net assets, but the impact on the reported income of the group is not possible to determine as it will
depend on conditions at the time of adoption.
The most significant change for Britvic under IAS 19 revised is the replacement of interest cost and expected return on plan assets with
a finance cost component which is determined by applying the same discount rate used to measure the defined benefit obligation to the
net defined benefit liability or asset. The difference between the actual return on plan assets and the discount rate will be presented in
other comprehensive income. The effect at the date of adoption will depend on market interest rates, rates of return and the actual mix
of scheme assets at that time. The directors consider that this change will not have a material impact on the Group consolidated results.
Following consultation with GB employees, the group principal pension scheme, the Britvic Pension Plan (BPP), was closed to future
accrual for active members with effect from 10 April 2011 and the intention of the Trustees is to change the asset allocation over time to
reduce the risk of volatility within the asset portfolio. Changes to the mix of scheme assets to reduce risk may also reduce the impact of
IAS 19 Revised.
56 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
4. Segmental reporting
For management purposes, the group is organised into business units and has five reportable segments as follows:
• GB Stills – United Kingdom excluding Northern Ireland
• GB Carbs – United Kingdom excluding Northern Ireland
• International
• Ireland
• France
These business units sell soft drinks into their respective markets.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on brand contribution. This is defined as revenue less
material costs and all other marginal costs that management considers to be directly attributable to the sale of a given product. Such
costs include brand specific advertising and promotion costs, raw materials and marginal production and distribution costs. However,
group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to reportable segments.
Transfer prices between reportable segments are on an arm’s length basis in a manner similar to transactions with third parties.
52 weeks ended 30 September 2012
Revenue
- External
- Inter-segment***
Brand contribution
Non-brand advertising & promotion*
Fixed supply chain**
Selling costs**
Overheads and other costs*
Operating profit before exceptional
& other items
Finance costs before exceptional
& other items
Exceptional & other items
Profit before tax
52 weeks ended 2 October 2011
Revenue
- External
- Inter-segment***
Brand contribution
Non-brand advertising & promotion*
Fixed supply chain**
Selling costs**
Overheads and other costs*
Operating profit before exceptional
& other items
Finance costs before exceptional &
other items
Exceptional & other items
Profit before tax
GB Stills
£m
GB Carbs
£m
International
£m
Total GB &
International
£m
Ireland
£m
France
£m
Adjustments
£m
Total
£m
321.7
15.0
336.7
141.2
517.9
9.6
527.5
188.7
29.3
-
29.3
8.3
868.9
24.6
893.5
338.2
138.7
8.0
146.7
44.6
248.8
0.8
249.6
59.2
-
(33.4)
1,256.4
-
(33.4)
1,256.4
-
442.0
(7.8)
(100.3)
(118.0)
(103.2)
112.7
(28.3)
(6.9)
77.5
GB Stills
£m
GB Carbs
£m
International
£m
Total GB &
International
£m
Ireland
£m
France
£m
Adjustments
£m
Total
£m
351.2
13.8
365.0
150.1
502.6
10.1
512.7
189.1
29.1
-
29.1
10.9
882.9
23.9
906.8
350.1
162.8
8.4
171.2
57.8
244.7
0.6
245.3
62.0
-
(32.9)
1,290.4
-
(32.9)
1,290.4
-
469.9
(8.0)
(111.1)
(121.7)
(94.1)
135.0
(29.9)
(25.2)
79.9
*
Included within ‘Administration expenses’ in the Consolidated Income Statement. Costs included within ‘Overheads and other costs’ relate to central costs
including salaries, IT maintenance, depreciation and amortisation.
**
Included within ‘Selling and distribution costs’ in the Consolidated Income Statement.
*** Inter-segment revenues are eliminated on consolidation.
Britvic plc Annual Report 2012
57
financial statements
notes to the consolidated financial statements continued
overview
4. Segmental reporting continued
Geographic information
Revenues from external customers
The analysis below is based on the location where the sale originated.
United Kingdom
Republic of Ireland
France
Total revenue
Non-current assets
United Kingdom
Republic of Ireland
France
Total
2012
£m
900.4
107.2
248.8
2011
£m
913.4
132.3
244.7
1,256.4
1,290.4
2012
£m
260.1
104.8
181.3
546.2
2011
£m
262.6
128.7
196.0
587.3
2011
£m
13.2
-
-
(25.0)
(1.3)
-
(1.5)
(10.6)
(25.2)
Non-current assets for this purpose consist of property, plant and equipment, intangible assets and other receivables.
5. Exceptional and other items
Net pension gain*
Asset impairments*
Advisory fees
Restructuring costs*
Head office relocation*
Onerous leases*
Write off of unamortised financing fees**
Other fair value movements***
Total exceptional and other items before tax
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
2012
£m
21.1
(14.9)
(3.1)
(7.9)
(1.5)
0.2
-
(0.8)
(6.9)
*
Included within administration expenses in the Consolidated Income Statement.
**
Included within finance costs in the Consolidated Income Statement.
*** For 2012, a gain of £1.3m (2011: £10.0m) is included within administration expenses and £2.1m (2011: £0.6m) included within finance costs in the Consolidated
Income Statement.
58 Britvic plc Annual Report 2012
overview
business review
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financial statements
financial statements
shareholder information
5. Exceptional and other items continued
a) For 2012 this includes an Ireland pension curtailment gain of £21.3m recognised under IAS19 Employee Benefits (note 23) arising
from the removal of the guaranteed pension indexation and a £0.4m past service gain, offset by £0.6m consultancy costs related to
the second tranche of the pension funding partnership structure. For 2011 this included a pension curtailment gain of £17.7m arising
due to the closure to future accrual of the defined benefit section of the BPP. Offsetting the gain in 2011 was a one off transitional
payment of 10% of final salary to pension members of £2.9m and consultancy costs of £1.6m.
b) In 2012, the asset impairments relate to the impairment of SAP implementation costs in Ireland. The original benefits have reduced
against a backdrop of market decline in Ireland and the economic value is no longer consistent with the future value to be generated.
c) This relates to advisory fees for a potential acquisition that was not progressed and the potential merger of Britvic plc and A.G.Barr p.l.c.
d) Restructuring costs includes the costs of major restructuring programmes undertaken.
The 2012 costs principally relate to:
• Redundancy costs arising in the Ireland segment;
• Redundancy and restructuring costs relating to the separation of functional support structures between group and the GB business unit; and
• Costs relating to the outsourcing of the customer operations tecnical service.
The 2011 costs principally related to:
• Redundancy costs arising in the Ireland segment;
• Redundancy and restructuring costs relating to the separation of functional support structures between group and the GB business unit;
• Costs relating to the outsourcing of the group data centre involving dual running and temporary infrastructure cost; and
• The outsourcing of our GB full service vending operation. This includes exit and redundancy costs and a write down of the
associated assets.
e) Head office relocation relates to costs associated with the transfer of the Britvic head office from Chelmsford to Hemel Hempstead
which took place in 2012. The 2011 cost principally relates to a dilapidations provision and lease break fee in respect of the existing
office in Chelmsford.
f) In 2012, there is a credit against the onerous lease provision relating to rental received from a sublet in the year.
g) Following the successful refinancing of the group’s committed bank facility in March 2011, the unamortised 2009 refinancing
fees of £1.5m were written off to finance costs in the Consolidated Income Statement.
h) Other fair value movements relate to the fair value movement of derivative financial instruments where hedge accounting
cannot be applied.
Details of the tax implications of exceptional items are given in note 10a.
6. Operating profit / (loss)
This is stated after charging:
Cost of inventories recognised as an expense
Including: write-down of inventories to net realisable value
Research and development expenditure written off
Net foreign currency exchange differences
Depreciation of property, plant and equipment
Amortisation of intangible assets
Operating lease payments – minimum lease payments
7. Auditor’s remuneration
Audit of the group financial statements
Audit of subsidiaries
Total audit
Audit related assurance services
Other assurance services
All taxation advisory services
Corporate finance services (excluding amounts included above in tax advisory
and other assurance services)
Other non-audit services not covered above
Total non-audit services
Total fees
2012
£m
624.6
3.6
0.6
2.4
34.4
9.5
21.4
2012
£m
0.2
0.4
0.6
-
-
0.2
1.2
1.3
2.7
3.3
2011
£m
627.3
2.3
0.6
(0.1)
35.6
12.9
16.6
2011
£m
0.2
0.4
0.6
-
0.1
0.1
-
0.2
0.4
1.0
Britvic plc Annual Report 2012
59
financial statements
notes to the consolidated financial statements continued
overview
8. Staff costs
Wages and salaries*
Social security costs
Net pension income (note 23) **
Expense of share based compensation (note 28)
2012
£m
125.4
19.0
(7.3)
3.0
140.1
2011
£m
147.3
19.8
(6.4)
4.7
165.4
* £6.4m (2011: £13.3m) of this is included within ‘restructuring costs’ in exceptional and other items (note 5).
** 2012 pension income includes a curtailment gain of £21.3m in relation to changes in the Ireland defined benefit pension plan which is in exceptional and
other items (note 5).
2011 pension income included a curtailment gain of £17.7m arising in relation to the BPP which was included within exceptional and
other items (note 5).
Directors’ emoluments which are included above are detailed in the Directors’ Remuneration Report.
Directors’ emoluments
Aggregate gains made by directors on exercise of options
Amounts receivable under long term incentive plans
Number of directors accruing benefits under defined benefit schemes
The average monthly number of employees during the period was made up as follows:
Distribution
Production
Sales and marketing
Administration
9. Finance costs
Bank loans, overdrafts and loan notes
Fair value movement on interest rate swap (see note 26)
Total finance costs
2012
£m
1.5
0.7
-
2012
No.
-
2012
370
1,465
1,038
464
3,337
2012
£m
28.3
2.1
30.4
2011
£m
1.3
0.3
-
2011
No.
2
2011
407
1,516
1,114
495
3,532
2011
£m
31.4
0.6
32.0
60 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
10. Taxation
a) Tax on loss on ordinary activities
Income statement
Current income tax
Current income tax (charge) / credit
Amounts underprovided in previous years
Total current income tax (charge) / credit
Deferred income tax
Origination and reversal of temporary differences
Amounts overprovided in previous years
Total deferred tax charge
Total tax (charge) / credit in the income statement
Statement of comprehensive income
Current tax on additional pension contributions
Deferred tax on actuarial losses on defined benefit pension schemes
Deferred tax in respect of cash flow hedges accounted for in the hedging reserve
Tax on exchange differences accounted for in the translation reserve
Total tax credit in the statement of comprehensive income
Statement of changes in equity
Current tax on share options exercised
Deferred tax on share options granted to employees
Total tax credit in the statement of changes in equity
Income statement
Current income tax
Current income tax (charge) / credit
Amounts overprovided / (underprovided) in previous years
Total current income tax (charge) / credit
Deferred income tax
Origination and reversal of temporary differences
Amounts (underprovided) / overprovided in previous years
Total deferred tax credit
Total tax (charge) / credit in the income statement
Statement of comprehensive income
Current tax on additional pension contributions
Deferred tax on actuarial losses on defined benefit pension schemes
Deferred tax in respect of cash flow hedges accounted for in the hedging reserve
Tax on exchange differences accounted for in the translation reserve
Total tax charge in the statement of comprehensive income
Statement of changes in equity
Current tax on share options exercised
Deferred tax on share options granted to employees
Total tax charge in the statement of changes in equity
Before
exceptional
& other
items
£m
Exceptional
& other
items
£m
(13.0)
(2.1)
(15.1)
(6.8)
0.4
(6.4)
(21.5)
3.2
(0.3)
2.9
(1.5)
-
(1.5)
1.4
Before
exceptional
& other
items
£m
Exceptional
& other
items
£m
(31.3)
1.1
(30.2)
3.3
(0.3)
3.0
(27.2)
4.3
(0.3)
4.0
1.5
0.2
1.7
5.7
2012
Total
£m
(9.8)
(2.4)
(12.2)
(8.3)
0.4
(7.9)
(20.1)
4.6
(7.9)
2.1
4.0
2.8
0.6
1.0
1.6
2011
Total
£m
(27.0)
0.8
(26.2)
4.8
(0.1)
4.7
(21.5)
4.3
(16.7)
(0.5)
1.5
(11.4)
0.7
(2.5)
(1.8)
Britvic plc Annual Report 2012
61
financial statements
notes to the consolidated financial statements continued
overview
10. Taxation continued
b) Reconciliation of the total tax charge
The tax expense in the Consolidated Income Statement is higher (2011: lower) than the standard rate of corporation tax in the UK of
25% (2011: 27%). The differences are reconciled below:
Profit / (loss) before tax
Profit / (loss) multiplied by the UK average rate of corporation tax of 25%
Permanent differences
Impact of change in UK tax rate on deferred tax liability
Tax underprovided in previous years
Overseas tax rates
Effective income tax rate
Profit / (loss) before tax
Profit / (loss) multiplied by the UK average rate of corporation tax of 27%
Permanent differences
Tax relief on share-based payments
Tax overprovided in previous years
Overseas tax rates
Effective income tax rate
c) Unrecognised tax items
Before
exceptional
& other
items
£m
Exceptional
& other
items
£m
84.4
(21.1)
1.2
2.0
(1.7)
(1.9)
(21.5)
25.5%
(6.9)
1.7
(0.6)
0.2
(0.3)
0.4
1.4
Before
exceptional
& other
items
£m
Exceptional
& other
items
£m
105.1
(28.4)
(0.2)
1.1
0.8
(0.5)
(27.2)
25.9%
(25.2)
6.8
0.1
0.1
(0.1)
(1.2)
5.7
2012
Total
£m
77.5
(19.4)
0.6
2.2
(2.0)
(1.5)
(20.1)
25.9%
2011
Total
£m
79.9
(21.6)
(0.1)
1.2
0.7
(1.7)
(21.5)
26.9%
The temporary differences associated with investments in subsidiaries for which a deferred tax liability has not been recognised total
£3.8m (2011: £13.0m). No deferred tax has been provided in respect of these differences, since the timing of the reversals can be
controlled and it is probable that the temporary differences will not reverse in the future.
The group expects that future remittances of earnings from its overseas subsidiaries will be covered by the UK dividend exemption
and so the un-remitted earnings of these subsidiaries are not disclosed above.
A deferred tax asset of £nil (2011: £0.2m) has not been recognised in respect of tax losses.
62 Britvic plc Annual Report 2012
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10. Taxation continued
d) Impact of rate change
Finance Act 2012 enacted reductions in the UK corporation tax rates from 25% to 24% from 1 April 2012 and to 23% from 1 April
2013. The effect of the new rate is to reduce the deferred tax provision by a net £1.7m, comprising a credit of £2.2m to the
Consolidated Income Statement and to reduce the amount within the Consolidated Statement of Comprehensive Income by £0.5m.
An additional change to the main rate of UK Corporation Tax is proposed, to reduce the rate to 22% by 1 April 2014. This change had
not been substantively enacted at the balance sheet date and consequently is not included in these financial statements. The effect
of the proposed reduction would be to reduce the UK net deferred tax liability by £1.0m.
During the period, the French Government announced a temporary 2 year 5% surcharge to the corporate tax liabilities of French
companies whose turnover exceeds €250m from 1 January 2012. The effect of the new rate is to increase the deferred tax provision
by a net £0.1m, comprising a charge of £0.1m to the Consolidated Income Statement.
e) Deferred tax
The deferred tax included in the balance sheet is as follows:
Deferred tax liability
Accelerated capital allowances
Acquisition fair value adjustments
Other temporary differences
Pensions
Deferred tax liability
Deferred tax asset
Employee incentive plan
Pensions
Unutilised losses incurred in overseas jurisdictions
Other temporary differences
Deferred tax asset
Net deferred tax liability
2012
£m
(9.8)
(17.8)
(0.1)
(19.5)
(47.2)
3.6
-
4.4
5.1
13.1
2011
£m
(17.5)
(20.2)
(0.1)
-
(37.8)
3.7
7.4
1.9
1.8
14.8
(34.1)
(23.0)
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset) for
financial reporting purposes:
Net deferred tax assets
Net deferred tax liabilities
The deferred tax included in the Consolidated Income Statement is as follows:
Employee incentive plan
Accelerated capital allowances
Post employment benefits
Acquisition fair value adjustments
Unutilised losses incurred in overseas jurisdictions
Other temporary differences
Deferred tax (charge) / credit
£1.5m of the deferred tax charge in the current period relates to exceptional items (2011: credit of £1.7m).
2012
£m
-
(34.1)
(34.1)
2012
£m
(1.1)
7.8
(19.0)
0.9
3.1
0.4
(7.9)
2011
£m
-
(23.0)
(23.0)
2011
£m
(0.5)
2.2
(3.4)
0.9
1.5
4.0
4.7
Britvic plc Annual Report 2012
63
financial statements
notes to the consolidated financial statements continued
overview
11. Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit / (loss) for the period attributable to the equity shareholders
of the parent by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to the ordinary equity shareholders of the parent
by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares
that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.
The following table reflects the income and share data used in the basic and diluted earnings per share computations:
Basic earnings per share
Profit for the period attributable to equity shareholders
Weighted average number of ordinary shares in issue for basic earnings per share
Basic earnings per share
Diluted earnings per share
Profit for the period attributable to equity shareholders
Weighted average number of ordinary shares in issue for diluted earnings per share
Diluted earnings per share
2012
£m
57.4
241.6
23.8p
57.4
256.6
22.4p
2011
£m
58.4
240.4
24.3p
58.4
254.1
23.0p
The group presents as exceptional and other items on the face of the Consolidated Income Statement, those significant items of income
and expense which, because of the nature and infrequency of the events giving rise to them, merit separate presentation to allow
shareholders to understand better the elements of financial performance in the period, so as to facilitate comparison with prior periods
and to assess trends in financial performance more readily.
To this end, basic and diluted earnings per share are also presented on this basis with the amortisation of acquisition related intangible
assets also added back using the weighted average number of ordinary shares for both basic and diluted amounts as per the table
below:
In addition, adjusted diluted earnings per share have been modified to exclude the impact of share options that have been granted
but not yet vested.
Adjusted basic earnings per share
Profit for the period attributable to equity shareholders
Add: Net impact of exceptional and other items
Add: Intangible assets amortisation (acquisition related)
Note
14
Weighted average number of ordinary shares in issue for basic earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Profit for the period attributable to equity shareholders before exceptional items and
other items and acquisition related intangible assets amortisation
Weighted average number of ordinary shares in issue for diluted earnings per share
Adjusted diluted earnings per share
2012
£m
57.4
5.5
2.9
65.8
241.6
27.2p
65.8
248.8
26.5p
2011
£m
58.4
19.5
3.1
81.0
240.4
33.7p
81.0
246.4
32.9p
64 Britvic plc Annual Report 2012
overview
business review
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financial statements
financial statements
shareholder information
12. Dividends paid and proposed
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2011: 12.6p per share (2010: 12.0p per share)
Interim dividend for 2012: 5.3p per share (2011: 5.1p per share)
Dividends paid
Proposed
Second interim dividend in lieu of final dividend for 2012: 12.4p per share
(2011: final dividend 12.6p per share)
2012
£m
29.9
12.6
42.5
30.1
2011
£m
28.3
12.0
40.3
29.9
In addition, as disclosed on 14 November 2012, the board has proposed a special interim dividend of 10.0p per share, conditional upon
the merger with AG Barr p.l.c. becoming effective, in lieu of the dividend in relation to the period from 1 October 2012 until the effective
date, and in recognition of the combined group’s dividend policy. This will be paid after the effective date to shareholders on the register
at the scheme record time.
13. Property, plant and equipment
At 3 October 2010, net of accumulated
depreciation and impairment
Exchange differences
Reclassifications
Acquisitions
Additions
Disposals at cost
Depreciation eliminated on disposals
Assets transferred to held for sale
Depreciation charge for the year
Impairment
At 2 October 2011, net of accumulated
depreciation and impairment
Exchange differences
Additions
Disposals at cost
Depreciation eliminated on disposals
Depreciation charge for the year
Impairment
At 30 September 2012 net of accumulated
depreciation and impairment
At 30 September 2012
Cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
At 2 October 2011
Cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
Freehold
land and
buildings
£m
Leasehold
land and
buildings
£m
Plant and
machinery
£m
Fixtures,
fittings,
tools and
equipment
£m
61.7
(0.3)
(0.3)
0.5
1.4
(1.2)
0.7
(0.7)
(1.9)
-
59.9
(1.4)
3.5
(0.9)
0.1
(2.1)
-
59.1
77.9
(18.8)
59.1
78.6
(18.7)
59.9
28.9
(0.1)
-
-
0.5
(0.1)
-
-
(0.5)
-
28.7
(0.6)
0.4
-
-
(0.7)
-
27.8
39.9
(12.1)
27.8
40.6
(11.9)
28.7
100.7
(0.5)
0.3
0.1
23.7
(24.5)
23.8
-
(18.0)
(0.5)
105.1
(2.9)
20.2
(12.1)
11.0
(19.6)
-
101.7
255.1
(153.4)
101.7
256.1
(151.0)
105.1
56.4
(0.1)
-
-
12.6
(36.8)
33.2
-
(15.2)
-
50.1
(0.1)
15.5
(7.5)
6.3
(12.0)
(4.3)
48.0
166.6
(118.6)
48.0
161.4
(111.3)
50.1
Total
£m
247.7
(1.0)
-
0.6
38.2
(62.6)
57.7
(0.7)
(35.6)
(0.5)
243.8
(5.0)
39.6
(20.5)
17.4
(34.4)
(4.3)
236.6
539.5
(302.9)
236.6
536.7
(292.9)
243.8
In 2011, properties with a net book value of £26.6m, comprising freehold land and buildings of £21.4m and leasehold land and buildings
of £5.2m, were transferred to Britvic Property Partnership (see note 23). These secure the future income stream to the pension plan. At
30 September 2012 these properties have a net book value of £26.2m, of which £21.1m is freehold land and buildings and £5.1m is
leasehold land and buildings.
Finance leases
The net book value of freehold land and buildings and plant and machinery includes £0.2m and £0.3m respectively (2011: £0.3m and
£0.5m respectively) in respect of assets held under finance leases. The assets are pledged as security for the finance lease liabilities.
Britvic plc Annual Report 2012
65
financial statements
notes to the consolidated financial statements continued
overview
14. Intangible assets
Cost as at 3 October 2010 net,
of accumulated amortisation
Exchange differences
Acquisitions
Additions
Disposals at cost
Amortisation eliminated on disposals
Amortisation charge for the period
Cost as at 2 October 2011, net
of accumulated amortisation
Exchange differences
Additions
Amortisation charge for the period
Impairment
At 30 September 2012
At 30 September 2012
Cost (gross carrying amount)
Accumulated amortisation
and impairment
Net carrying amount
At 2 October 2011
Cost (gross carrying amount)
Accumulated amortisation
and impairment
Net carrying amount
* See Note 11
Trademarks
£m
Franchise
rights
£m
Customer
lists
£m
Software costs
£m
Goodwill
£m
101.6
(1.7)
-
-
-
-
-
99.9
(7.4)
-
-
-
92.5
120.1
(27.6)
92.5
129.8
(29.9)
99.9
23.5
(0.2)
-
-
-
-
(0.7)
22.6
(1.6)
-
(0.7)*
-
20.3
23.6
(3.3)
20.3
25.5
(2.9)
22.6
43.2
(0.5)
-
-
-
-
(2.4)
40.3
(2.9)
-
(2.2)*
-
35.2
47.2
(12.0)
35.2
51.0
(10.7)
40.3
30.7
(0.2)
-
11.9
(24.6)
24.3
(9.8)
32.3
(0.2)
5.4
(6.6)
(10.6)
20.3
143.5
(1.1)
0.4
-
-
-
-
142.8
(5.9)
-
-
-
136.9
Total
£m
342.5
(3.7)
0.4
11.9
(24.6)
24.3
(12.9)
337.9
(18.0)
5.4
(9.5)
(10.6)
305.2
56.0
198.9
445.8
(35.7)
20.3
51.8
(19.5)
32.3
(62.0)
136.9
208.9
(66.1)
142.8
(140.6)
305.2
467.0
(129.1)
337.9
Trademarks
Britvic Ireland and Britvic France
Trademarks represent those trade names acquired which the group plans to maintain. All trademarks have been allocated an indefinite
life by management. A list of the trademarks held in respect of the Britvic Ireland and Britvic France segments is shown in note 15.
It is expected, and in line with existing well-established trademarks within the group, that the trademarks with indefinite lives in respect
of Britvic France and Britvic Ireland will be held and supported for an indefinite period of time and are expected to generate economic
benefits. The group is committed to supporting its trademarks and invests in significant consumer marketing promotional spend.
Franchise rights
Franchise rights represent the franchise agreements acquired as part of the Britvic Ireland business combination which provide the long
term right to distribute certain soft drinks. These agreements have been allocated a 35 year useful economic life. As at 30 September
2012 these intangible assets have a remaining useful life of 30 years. The franchise agreement itself has a contract life less than the
useful economic life. The useful economic life has been determined on the basis that the renewal of the contract is highly probable.
Customer lists
Britvic France
Customer lists recognised on the acquisition of Britvic France relate to those customer relationships acquired. These intangible assets have
been allocated useful economic lives of 20 years. At 30 September 2012 these intangible assets have a remaining useful life of 18 years.
Britvic Ireland
Customer lists represent those customer relationships acquired which are valued in respect of the grocery and wholesale businesses.
These customer lists have been allocated useful economic lives of between 10 and 20 years. At 30 September 2012 these intangible
assets have a remaining useful life of between 5 and 15 years.
Software costs
Software is capitalised at cost. These intangible assets have been assessed as having finite lives and are amortised using the straight-
line method over a period of 3 to 7 years. These assets are tested for impairment where an indicator of impairment arises. As at 30
September 2012 these intangible assets have a remaining useful life of up to 5 years.
66 Britvic plc Annual Report 2012
overview
business review
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financial statements
financial statements
shareholder information
14. Intangible assets continued
Goodwill
Goodwill is subject to an impairment review at each reporting date in accordance with IAS 36 ‘Impairment of Assets’. Further detail
is provided in note 15.
Intangible assets recognised on the acquisition of Britvic Ireland and Britvic France are valued in Euros and translated to sterling at the
reporting date.
15. Impairment testing of intangible assets
Carrying amount of goodwill and trademarks with indefinite lives
The carrying amount of goodwill acquired through business combinations, and trademarks with indefinite lives recognised as part of fair
value exercises on acquisitions, are attributable to the following cash-generating units:
Goodwill
Orchid
Tango
Robinsons
Britvic Soft Drinks business (“BSD”)
Water business
Britvic Ireland
Britvic France
Total Goodwill
Trademarks with indefinite lives
Britvic Ireland
Britvic
Cidona
Mi Wadi
Ballygowan
Club
Britvic France
Teisseire
Moulin de Valdonne
Pressade
Fruité
Total trademarks
2012
£m
6.0
8.9
38.6
7.8
1.7
15.8
58.1
136.9
6.0
5.3
8.1
2.2
13.5
35.1
45.4
3.7
4.3
4.0
57.4
92.5
2011
£m
6.0
8.9
38.6
7.8
1.7
17.0
62.8
142.8
6.4
5.7
8.8
2.4
14.6
37.9
49.1
4.0
4.6
4.3
62.0
99.9
The Britvic Ireland and Britvic France goodwill and trademarks with indefinite lives are valued in Euros and translated into sterling at the
reporting date. The movements in the carrying amount of goodwill from the prior year only relate to translation movements.
With the exception of Britvic Ireland and Britvic France goodwill, all other goodwill amounts were recognised on acquisitions made
within Britvic GB.
Trademarks with indefinite lives were recognised as part of the fair value exercises relating to the 2007 acquisition of Britvic Ireland and
the 2010 acquisition of Britvic France. They were allocated by senior management to the individual cash-generating units for impairment
testing as shown in the table above.
Method of impairment testing
Annual impairment reviews of goodwill and intangible assets are undertaken and are determined from value in use calculations for each
cash-generating unit and brands using cash flow projections based on the latest financial budgets prepared by senior management and
approved by the Board of Directors.
The group has considered the impact of the current economic climate in determining the appropriate discount rate to use in impairment
testing. The pre-tax discount rate applied to pre-tax cash flow projections is:
Britvic GB
Britvic Ireland
Britvic France
At 30 Sep 2012
11%
11%
12%
At 2 Oct 2011
11%
11%
12%
Cash flows beyond a one year period are extrapolated based on senior management forecasts for the following four years. Beyond this,
a terminal multiplier is applied to the year five cash flows based on growth and discount rates as described below. Senior management
expectations are formed in line with performance to date and experience, as well as available external market data.
Britvic plc Annual Report 2012
67
financial statements
notes to the consolidated financial statements continued
overview
15. Impairment testing of intangible assets continued
Key assumptions used in value in use calculation
The following describes each key assumption on which management has based its cash flow projections to undertake impairment
testing of goodwill.
Volume growth rates – reflect senior management expectations of volume growth based on growth achieved to date, current strategy
and expected market trends.
Discount rates – reflect senior management’s estimate of the pre-tax cost of capital adjusted where necessary to reflect the different
risks of different countries in which the group operates. The estimated pre-tax cost of capital is the benchmark used by management
to assess operating performance and to evaluate future capital investment proposals.
Marginal contribution – being revenue less material costs and all other marginal costs that management considers to be directly
attributable to the sale of a given product. Marginal contribution is based on financial budgets approved by the Britvic plc board.
Key assumptions are made within these budgets about pricing, discounts and costs based on historical data, current strategy and
expected market trends.
Advertising and promotional spend – financial budgets approved by senior management are used to determine the value assigned
to advertising and promotional spend. This is based on the planned spend for year one and strategic intent thereafter.
Raw materials price, production and distribution costs, selling costs and other overhead inflation – the basis used to determine the value
assigned to inflation is the forecast increase in consumer price indices in the relevant market. This has been used in all value in use
calculations performed.
Results and conclusions
The excess of the recoverable amount over the carrying value for intangibles at 30 September 2012 are shown below.
2012
Excess of recoverable
amount over
carrying amount
£m
Carrying value
£m
6.0
8.9
38.6
7.8
1.7
15.8
58.1
136.9
6.0
5.3
8.1
2.2
13.5
35.1
45.4
3.7
4.3
4.0
57.4
92.5
2.9
92.2
1,068.4
2,166.0
62.7
0.7
6.1
3,399.0
1.3
4.0
25.6
7.6
37.1
75.6
318.3
36.6
0.5
1.8
357.2
432.8
Goodwill
Orchid
Tango
Robinsons
Britvic Soft Drinks (“BSD”)
Water business
Britvic Ireland
Britvic France
Total Goodwill
Trademarks with indefinite lives
Britvic Ireland
Britvic
Cidona
Mi Wadi
Ballygowan
Club
Britvic France
Teisseire
Moulin de Valdonne
Pressade
Fruité
Total Trademarks
68 Britvic plc Annual Report 2012
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15. Impairment testing of intangible assets continued
Results and conclusions (continued)
The intangibles for which the excess of the recoverable amount over the carrying value are susceptible to impairment from a reasonably
possible change in the assumptions are shown below.
Britvic Ireland goodwill
The key assumption to which the calculation of value in use for Britvic Ireland is most sensitive is the discount rate.
Sensitivity analysis
Change in discount rate required to reduce recoverable amount to carrying amount
2012
0.1%
Britvic France goodwill
The key assumptions to which the calculation of value in use for Britvic France is most sensitive are the discount rate and volume
growth rate.
Sensitivity analysis
Change in discount rate required to reduce recoverable amount to carrying amount
Adverse change in sales volume to reduce recoverable amount to carrying amount
2012
0.2%
0.4%
Britvic France Pressade trademark
The key assumptions to which the calculation of value in use for the Pressade Trademark is most sensitive are the discount rate and the
volume growth rate.
Sensitivity analysis
Discount rate to reduce recoverable amount to carrying amount
Adverse change in sales volume to reduce recoverable amount to carrying amount
2012
0.4%
0.5%
There have been no impairments of goodwill or intangible assets with indefinite lives during the period.
In both Britvic Ireland and Britvic France, management have taken a prudent view on growth rates which are less than forecast by the
International Monetary Fund. In addition, potential future cash-flow benefits have been identified and then could significantly reduce
these sensitivities.
Intangible assets with finite lives
Franchise rights
Franchise rights represent the franchise agreements acquired, as a result of the acquisition of Britvic Ireland, which provide the long
term right to distribute certain soft drinks. Management have reviewed the performance of those products since acquisition and no
indicators of impairment have been identified (2011: £nil).
Customer lists
As part of the fair value exercise regarding the acquisitions of Britvic Ireland in 2007 and Britvic France in 2010, customer list assets with
finite lives were recognised. Management have reviewed trading levels with those customers since acquisition. No indicators of impairment
have been identified in the current year and accordingly no impairments have been recognised in respect of customer lists (2011: £nil).
Software costs
During 2012, there has been an impairment of SAP implementation costs in Ireland. The original benefits have reduced against
a backdrop of market decline in Ireland and the economic value is no longer consistent with the future value to be generated.
16. Other receivables (non-current)
Operating lease premiums
Prepayments
Other
Total other receivables (non-current)
2012
£m
2.3
1.3
-
3.6
2011
£m
2.3
3.1
0.2
5.6
Operating lease premiums relates to the un-amortised element of lease premiums paid on inception of operating leases.
Britvic plc Annual Report 2012
69
financial statements
notes to the consolidated financial statements continued
overview
17. Inventories
Raw materials
Finished goods
Consumable stores
Returnable packaging
Total inventories at lower of cost and net realisable value
18. Trade and other receivables (current)
Trade receivables
Other receivables
Prepayments
2012
£m
22.2
42.5
7.2
1.9
73.8
2012
£m
207.7
19.7
30.0
257.4
2011
£m
28.6
49.2
6.1
4.6
88.5
2011
£m
209.1
10.8
30.1
250.0
Trade receivables are non-interest bearing and are generally on credit terms usual for the markets in which the group operates. As at 30
September 2012, trade receivables at nominal value of £2.5m (2011: £1.2m) were impaired and fully provided against. Movements in
the provision for impairment of receivables were as follows:
At 3 October 2010
Charge for period
Utilised
Unused amounts reversed
At 2 October 2011
Charge for period
Utilised
Unused amounts reversed
At 30 September 2012
Total
£m
1.2
1.0
(0.5)
(0.5)
1.2
1.9
(0.5)
(0.1)
2.5
The group takes the following factors into account when considering whether a provision for impairment should be made for trade receivables:
• Payment performance history; and
• External information available regarding credit ratings.
As at 30 September 2012, the ageing analysis of trade receivables is as follows:
Total
£m
207.7
209.1
Neither past due
nor impaired
£m
196.5
194.1
2012
2011
<30 days
£m
30 – 60 days
£m
60 – 90 days
£m
90 – 120 days
£m
> 120 days
£m
6.7
12.0
0.3
0.8
2.0
0.5
0.5
0.5
1.7
1.2
Past due but not impaired
The credit quality of trade receivables that are neither past due nor impaired is considered good. Refer to note 25 for details of the group’s credit
risk policy. The group monitors the credit quality of trade receivables by reference to credit ratings available externally.
70 Britvic plc Annual Report 2012
Total inventories at lower of cost and net realisable value
18. Trade and other receivables (current)
17. Inventories
Raw materials
Finished goods
Consumable stores
Returnable packaging
Trade receivables
Other receivables
Prepayments
Unused amounts reversed
At 3 October 2010
Charge for period
Utilised
At 2 October 2011
Charge for period
Utilised
Unused amounts reversed
At 30 September 2012
2012
£m
22.2
42.5
7.2
1.9
73.8
2012
£m
207.7
19.7
30.0
257.4
2011
£m
28.6
49.2
6.1
4.6
88.5
2011
£m
209.1
10.8
30.1
250.0
Total
£m
1.2
1.0
(0.5)
(0.5)
1.2
1.9
(0.5)
(0.1)
2.5
The group takes the following factors into account when considering whether a provision for impairment should be made for trade receivables:
• Payment performance history; and
• External information available regarding credit ratings.
As at 30 September 2012, the ageing analysis of trade receivables is as follows:
Total
£m
207.7
209.1
Neither past due
nor impaired
£m
196.5
194.1
2012
2011
<30 days
30 – 60 days
60 – 90 days
90 – 120 days
> 120 days
£m
6.7
12.0
£m
0.3
0.8
£m
2.0
0.5
£m
0.5
0.5
£m
1.7
1.2
Past due but not impaired
The credit quality of trade receivables that are neither past due nor impaired is considered good. Refer to note 25 for details of the group’s credit
risk policy. The group monitors the credit quality of trade receivables by reference to credit ratings available externally.
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19. Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents
Bank overdrafts
Cash and cash equivalents in the statement of cash flows
2012
£m
49.5
49.5
(1.9)
47.6
2011
£m
43.0
43.0
-
43.0
During the year short-term deposits are made for varying periods of between one day and one month depending on the immediate cash
requirements of the group, and earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents is
equal to the book value.
At 30 September 2012 the group had available £400.0m (2011: £400.0m) of un-drawn committed borrowing facilities in respect of which
all conditions precedent had been met.
Where available, the group operates cash pooling arrangements whereby the net cash position across a number of accounts is
recognised for interest purposes.
Trade receivables are non-interest bearing and are generally on credit terms usual for the markets in which the group operates. As at 30
September 2012, trade receivables at nominal value of £2.5m (2011: £1.2m) were impaired and fully provided against. Movements in
the provision for impairment of receivables were as follows:
20. Non-current assets held for sale
Net transfer from property, plant and equipment
2012
£m
-
2011
£m
0.7
During the first half of the year a property with net book value of £0.4m was held for sale in Britvic GB. The sale of the property
completed on 13 September 2012 resulting in a profit of £0.4m. There was no gain or loss on transfer from property, plant and
equipment to non-current assets held for sale.
The transfer in the prior year related to a property held for sale in Britvic France. The sale of the property completed on 10 November
2011 resulting in a profit of £0.2m. There was no gain or loss on transfer from property, plant and equipment to non-current assets held
for sale.
21. Issued share capital
The issued share capital as at 30 September 2012 comprised 242,344,551 ordinary shares of £0.20 each (2011: 241,400,052 ordinary
shares), totalling £48,468,910 (2011: £48,280,010).
The ordinary shares carry voting rights of one vote per share. There are no restrictions placed on the distribution of dividends, or the
return of capital on a winding up or otherwise.
Issued, called up and fully paid ordinary shares
242,344,551 (2011: 241,400,052) ordinary shares of £0.20 each
Share issues in the current and prior periods relating to incentive schemes for employees are detailed below:
2012
£m
2011
£m
48.5
48.3
52 weeks ended 30 September 2012
6 December 2011
14 December 2011
8 February 2012
10 February 2012
15 February 2012
27 March 2012
5 September 2012
11 September 2012
19 September 2012
26 September 2012
No of shares
issued
27,148
500,000
32,577
14,116
31,204
48,912
46,805
24,660
19,077
200,000
944,499
Value
£
5,430
100,000
6,515
2,823
6,241
9,783
9,361
4,932
3,815
40,000
188,900
Britvic plc Annual Report 2012
71
financial statements
notes to the consolidated financial statements continued
overview
21. Issued share capital continued
52 weeks ended 2 October 2011
2 December 2010
15 December 2010
23 December 2010
4 February 2011
1 April 2011
8 April 2011
12 May 2011
27 June 2011
No of shares
issued
12,244
122,449
21,974
300,000
32,013
484,343
20,851
500,000
1,493,874
Value
£
2,449
24,490
4,395
60,000
6,402
96,868
4,170
100,000
298,774
Of the issued and fully paid ordinary shares, 217,994 shares (2011: 258,683 shares) are treasury shares. This equates to £43,599 (2011: £51,737)
at £0.20 par value of each ordinary share. These shares are held for the purpose of satisfying the share schemes detailed in note 28.
An explanation of the group’s capital management process and objectives is set out in note 25.
22. Interest-bearing loans and borrowings
Current
Finance leases
Bank loans
Total current
Non-current
Finance leases
Bank loans
Private placement notes
Less unamortised issue costs
Total non-current
2012
£m
(0.3)
(0.3)
(0.6)
(0.5)
(1.1)
(560.8)
3.7
(558.7)
2011
£m
-
-
-
(1.2)
(2.2)
(574.4)
4.6
(573.2)
Total interest-bearing loans and borrowings
(559.3)
(573.2)
The table below provides an analysis of amounts included within current and non-current interest-bearing loans and borrowings:
Finance leases
2007 Notes
2009 Notes
2010 Notes
Accrued interest
Bank loans
Capitalised issue costs
Analysis of changes in interest-bearing loans and borrowings
At the beginning of the period
Net loans repaid
Repayment of finance leases
Issue of 2010 / 2009 Notes
Issue costs
Amortisation and write off of issue costs
Net translation loss / fair value adjustment
Accrued interest
At the end of the period
Derivatives hedging balance sheet debt*
Debt translated at contracted rate
2012
£m
(0.8)
(269.9)
(171.8)
(114.5)
(4.6)
(1.4)
3.7
(559.3)
2012
£m
(573.2)
0.7
0.3
-
-
(0.9)
13.5
0.3
(559.3)
65.0
(494.3)
2011
£m
(1.2)
(278.6)
(174.3)
(116.5)
(5.0)
(2.2)
4.6
(573.2)
2011
£m
(569.9)
123.4
-
(113.9)
3.9
(2.9)
(12.6)
(1.2)
(573.2)
78.2
(495.0)
* Represents the element of the fair value of interest rate currency swaps hedging the balance sheet value of the Notes. This amount has been disclosed separately
to demonstrate the impact of foreign exchange movements which are included in interest-bearing loans and borrowings.
72 Britvic plc Annual Report 2012
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22. Interest-bearing loans and borrowings continued
Bank loans
The bank loans classified as non-current are repayable by December 2018 (2011: December 2012 and 2018).
Loans outstanding at 30 September 2012 attract interest at an average rate of 4.16% for euro denominated loans (2011: 5.09%).
There were no sterling denominated loans outstanding at 30 September 2012 (2011: Nil).
Private placement notes
2007 Notes
On 20 February 2007, Britvic plc issued US$375m and £38m of Senior Notes (‘the 2007 Notes’) in the United States Private Placement
market (USPP). The amount, maturity and interest terms of the Notes are shown in the table below:
Series
A
B
C
D
E
F
Tranche
7 year
7 year
7 year
10 year
12 year
12 year
Maturity date
20 February 2014
20 February 2014
20 February 2014
20 February 2017
20 February 2019
20 February 2019
Amount
US$87m
US$15m
£25m
US$147m
US$126m
£13m
Interest terms
Swap interest
US$ fixed at 5.80%
US$ LIBOR + 0.5%
UK£ fixed at 6.11%
US$ fixed at 5.90%
US$ fixed at 6.00%
UK£ fixed at 5.94%
UK£ fixed at 6.10%
UK£ fixed at 6.07%
n/a
UK£ fixed at 5.98%
UK£ fixed at 5.98%
n/a
Britvic plc makes quarterly or semi-annual interest payments in US dollars and sterling under these notes. The 2007 Notes are
unsecured and rank pari passu in right of repayment with other senior unsecured indebtedness of the company. In order to manage the
risk of foreign currency and interest rate fluctuations, the group has entered into currency interest rate swaps whereby fixed / floating
US dollar interest is swapped for fixed sterling interest. The swap contracts have the same duration and other critical terms as the
borrowings which they hedge and are designated as part of effective hedge relationships (see note 26).
2009 Notes
On 17 December 2009, Britvic plc issued US$250m of Senior Notes in the United States Private Placement market (‘the 2009 Notes’).
The 2009 Notes are additional borrowings to the 2007 Notes.
Britvic plc makes semi-annual interest payments in US dollars under these notes. The 2009 Notes are unsecured and rank pari passu in
right of repayment with other senior unsecured indebtedness of the group.
In order to manage foreign exchange risk, interest rate risk and to ensure an appropriate mix of sterling and euro funding, the group has
entered into a number of cross currency interest rate swaps. The 2009 Notes were swapped into floating rate sterling and euro liabilities
through a series of US dollar to sterling and, with the exception of series A, sterling to euro swap instruments. These cross currency
interest rate swap contracts have the same duration and other critical terms as the relevant borrowings they hedge and are designated
as part of effective hedge relationships (see note 26).
The amount, maturity and interest terms of the 2009 Notes are shown in the table below:
Series
A
B
C
D
Tranche
5 year
7 year
8 year
10 year
Maturity date
17 December 2014
17 December 2016
17 December 2017
17 December 2019
Amount
US$30m
US$75m
US$25m
US$120m
Interest terms
Swap interest
US$ fixed at 4.07%
US$ fixed at 4.77%
US$ fixed at 4.94%
US$ fixed at 5.24%
UK£ LIBOR + 1.44%
EURIBOR + 1.69%
EURIBOR + 1.70%
EURIBOR + 1.75%
The 2009 USPP cross currency swaps converted an amount of US dollar borrowings into a floating rate euro liability. To mitigate
exposure to changes in euro interest rates on a portion of this liability, €75.0m of interest rate swaps were transacted into a fixed rate
Euro liability with an effective date of December 2010. These interest rate swaps do not form part of an effective hedge relationship.
Britvic plc Annual Report 2012
73
financial statements
notes to the consolidated financial statements continued
overview
22. Interest-bearing loans and borrowings continued
2010 Notes
On 17 December 2010, Britvic plc issued US$163.0m and £7.5m of Senior Notes in the United States Private Placement market (‘the
2010 Notes’). The 2010 Notes are additional borrowings to the 2007 and 2009 Notes.
Britvic plc makes semi-annual interest payments in US dollars and sterling under these notes. The 2010 Notes are unsecured and rank
pari passu in right of repayment with other senior unsecured indebtedness of the group.
In order to manage foreign exchange risk, interest rate risk and to ensure an appropriate mix of sterling and euro funding, the group has
entered into a number of cross currency interest rate swaps. The 2010 Notes were swapped into a mix of fixed and floating rate sterling
and fixed euro liabilities through a series of US dollar to sterling and sterling to euro swap instruments. These cross currency interest
rate swap contracts have the same duration and other critical terms as the relevant borrowings they hedge and are designated as part
of effective hedge relationships (see note 26).
The amount, maturity and interest terms of the 2010 Notes are shown in the table below:
Series
A
B
C
D
Tranche
7 year
7 year
Maturity date
17 December 2017
17 December 2017
10 year
17 December 2020
12 year
17 December 2022
Amount
£7.5m
US$25m
US$25m
US$37m
US$23m
US$10m
US$18m
US$25m
Interest terms
Swap interest
UK£ fixed at 3.74%
US$ fixed at 3.45%
US$ fixed at 3.45%
US$ fixed at 4.04%
US$ fixed at 4.04%
US$ fixed at 4.04%
US$ fixed at 4.14%
US$ fixed at 4.14%
n/a
UK£ fixed 3.85%
€ fixed 3.34%
UK£ LIBOR +1.24%
€ fixed 3.85%
UK£ fixed 4.49%
UK£ LIBOR +1.18%
€ fixed 3.97%
The 2010 USPP cross currency swaps converted an amount of US dollar borrowings into a floating rate sterling liability. To mitigate
exposure to interest rates on a portion of this liability, £20m of 3-year interest rate swaps were transacted with an effective date of
December 2011. These interest rate swaps do not form part of an effective hedge relationship.
Covenants on all Notes include a term which states that Britvic plc must offer to repay the Notes should a change in control of the group
occur which results in a downwards movement in the credit rating as defined in the Note purchase agreement. Change of control
waivers have been sought and received from the Company’s bankers in relation to the Company’s banking arrangements.
23. Pensions
The group principal pension scheme for GB employees, the BPP (BPP), has both a defined benefit and a defined contribution section.
The defined benefit section of the BPP was closed to new members on 1 August 2002, and following consultation with GB employees
was closed to future accrual for active members with effect from 10 April 2011, with members moving into the defined contribution
section for future service benefits.
Contributions are paid into the Plan as determined by the Trustee, agreed by the Company and certified by an independent actuary in the
Schedule of Contributions. The latest formal actuarial valuation for contribution purposes was carried out as at 31 March 2010. As a
result of this valuation, a proposal was set out under which a monetary contribution or contributions will be made to enable the Trustee
of the BPP to acquire an interest in a limited partnership. This partnership interest is intended to provide the Trustee with an income of
at least £5.0m per annum in each year over a 15 year period together with a final payment of up to a maximum of £105.0m to the extent
required under funding conditions to be agreed to the satisfaction of the Trustee and the Company, at the end of the 15 year period.
As a result of the first tranche of the agreement, Britvic Scottish Limited Partnership (Britvic SLP) and Britvic Property Partnership
(‘Britvic Property‘) were established by the group and properties were then transferred to Britvic Property at a value of £28.6m and
leased back to Britvic Soft Drinks Limited. Britvic SLP holds an investment in Britvic Property.
During the year, BPP entered into a second tranche of the pension funding partnership structure. This tranche involved the sale and
leaseback of certain group brands which were transferred to Britvic Brands LLP (‘Britvic Brands’) at a value of £72.4m and licensed back
to Britvic Soft Drinks Limited. Britvic SLP holds an investment in Britvic Brands.
The BPP is a partner in Britvic SLP and is entitled to a share of the profits of the partnership over the next 15 years. At the end of this
period, the partnership capital allocated to the BPP will be changed to an amount equal to any funding deficit of the BPP at that time,
up to a maximum value of £105.0m. At that point the group may be required to transfer this amount in cash to the BPP.
Britvic SLP, Britvic Brands and Britvic Property are consolidated by the group. The investment held by the BPP in Britvic SLP does not
represent a plan asset for accounting purposes and is therefore not included in the fair value of plan assets. The share of profits of
Britvic SLP received by the BPP is accounted for by the group as contributions when paid. The properties transferred to Britvic Property
continue to be included within the group’s property, plant and equipment on the balance sheet. The group retains operational flexibility
over the transferred properties and brands, including the ability to substitute the properties and brands held by Britvic Property and
Britvic Brands respectively.
In addition to the expected partnership income of at least £5.0m per annum, the group will make payments to the BPP of £7.5m
by 31 December 2012 and £15.0m per annum by 31 December of each year from 2013 to 2017.
During the year £10.0m of additional contributions were paid to the BPP, of which £5.0m was paid by the group and £5.0m relates
to income received from the pension funding partnership structure.
74 Britvic plc Annual Report 2012
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23. Pensions continued
The amount recognised as an expense in relation to the BPP defined contribution scheme in the Consolidated Income Statement for
2012 was £10.3m (2011: £5.8m).
Britvic’s business in GB also has a secured unfunded unregistered retirement benefit scheme called The Britvic Executive Top Up
Scheme (BETUS) which provides benefits for members who have historically exceeded the Earnings Cap, or the Lifetime Allowance
whilst members of the defined benefit section of the BPP. BETUS closed to future accrual on 10 April 2011 which coincided with the
closure of the defined benefit section of the BPP. In Northern Ireland, the Britvic Northern Ireland Pension Plan (BNIPP) was closed to
new members on 28 February 2006, and since this date new employees have been eligible to join a Stakeholder plan with Legal &
General. Employees of C&C Group transferred out of BNIPP on 30 June 2008 with the bulk transfer of assets for the C&C employees
taking place in December 2009. The latest formal actuarial valuation for contribution purposes was carried out as at 31 December 2008
and as a result shortfall correction additional contributions of £90,000 per month until 31 December 2010, and £125,000 per month from
1 January 2011 to 31 December 2019 are being paid in accordance with the Recovery Plan dated December 2009.
In relation to the Britvic Ireland Pension Plan (BIPP), during the year, the Trustee received approval from the Irish Pension Board for two
significant changes to the BIPP, being the removal of the guaranteed annual 3% pension increase for pensions in payment and the
introduction of a salary cap of €50k for future service accrual. As part of the changes, Britvic agreed to pay the cost on pension levy plan
assets introduced by the Irish government in 2011. The removal of the guaranteed pension increase has resulted in the recognition of a
curtailment gain of €25.2m (£21.3m) which has been recognised as an exceptional item. The changes significantly improve the funding
position of the BIPP.
The amount recognised as an expense in relation to the Irish defined contribution schemes in the Consolidated Income Statement for
2012 was £0.3m (2011: £0.6m).
All group pension schemes are administered by trustees who are independent of the group’s finances.
The assets and liabilities of the pension schemes were valued on an IAS 19 basis at 30 September 2012 by Towers Watson (BPP),
Invesco (BIPP) and Buck (BNIPP).
Included within the pension liability on the consolidated balance sheet is an accrual of £1.8m (2011: £1.4m) for retirement indemnities
in respect of Britvic France. This liability is considered to be immaterial and no further disclosure is included within this note.
Principal assumptions
Financial assumptions
Discount rate
Rate of compensation increase
Expected long term return on plan assets
Pension increases
Inflation assumption
2012
%
ROI
4.20
3.00
4.85
0.00
2.00
2012
%
NI
4.70
3.60
5.21
1.65-2.05
2.00
2012
%
GB
4.85
n/a
5.61
1.80-2.75
2.90
2011
%
ROI
5.35
3.00
5.90
3.00
2.00
2011
%
NI
5.20
4.00
6.71
3.00
3.00
2011
%
GB
5.60
n/a
5.83
2.30-3.40
3.50
To develop the expected long term rate of return on assets assumption, the group considered the level of expected returns on risk free
investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the
portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then
weighted based on the target asset allocation to develop the expected long term rate on assets assumption for the portfolio.
Demographic assumptions
The most significant non-financial assumption is the assumed rate of longevity. This is based on standard actuarial tables, which for the
BPP are known as SAPS Series 1. An allowance for future improvements in longevity has also been included. The following life
expectancy assumptions have been used:
Current pensioners (at age 65) – males
Current pensioners (at age 65) – females
Future pensioners currently aged 45
(at age 65) – males
Future pensioners currently aged 45
(at age 65) – females
2012
years
ROI
23.1
24.7
25.8
26.9
2012
years
NI
21.0
23.8
22.8
25.3
2012
years
GB
22.1
24.7
24.3
27.0
2011
years
ROI
22.7
24.4
25.6
26.7
2011
years
NI
20.9
23.7
22.7
25.2
2011
years
GB
22.0
24.5
24.2
26.9
The mortality assumptions used to calculate the GB pension obligation were revised in 2010 following a mortality analysis carried out as
part of the actuarial valuation of the BPP at 31 March 2010.
Britvic plc Annual Report 2012
75
financial statements
notes to the consolidated financial statements continued
overview
23. Pensions continued
Sensitivities
The value of plan assets is sensitive to market conditions, particularly equity values. Changes in assumptions used for determining
retirement benefit costs and obligations may have a material impact on the Consolidated Income Statement and balance sheet. The
main assumptions are the discount rate, the rate of inflation and the assumed mortality rate. The following table provides an estimate
of the potential impact of each of these variables on the principal pension plans.
Assumption
Change in assumption
Impact on ROI plan liabilities
Impact on NI plan liabilities
Impact on GB plan liabilities
Discount rate Increase/Decrease by 0.1% Decrease/Increase by £1.3m Decrease/Increase by £0.5m Decrease/Increase by £9.9m
Inflation rate
Increase/Decrease by 0.1% Increase/Decrease by £0.6m Increase/Decrease by £0.2m Increase/Decrease by £9.8m
Mortality rate Increase in life expectancy
by one year
Net benefit income / (expense)
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Curtailment gain
Net income / (expense)
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Curtailment gain
Net income / (expense)
Increase by £1.0m
Increase by £0.6m
Increase by £14.1m
ROI
£m
(0.9)
(3.4)
2.5
21.3
19.5
ROI
£m
(2.4)
(3.6)
2.8
1.2
(2.0)
NI
£m
(0.2)
(1.3)
1.2
-
(0.3)
NI
£m
(0.3)
(1.3)
1.3
-
(0.3)
GB
£m
-
(26.5)
25.9
-
(0.6)
GB
£m
(2.6)
(27.0)
27.0
17.7
15.1
2012
Total
£m
(1.1)
(31.2)
29.6
21.3
18.6
2011
Total
£m
(5.3)
(31.9)
31.1
18.9
12.8
The net income detailed above is all recognised in arriving at net profit from continuing operations before tax and finance costs / income,
and is included within cost of sales, selling and distribution costs and administration expenses.
The ROI curtailment gain in 2012 has been recognised under IAS19 Employee Benefits arising from the removal of the guaranteed
pension indexation.
The ROI curtailment gain in 2011 was triggered by the redundancies of employees resulting in a significant number of members moving
from active to deferred status in the period, thereby no longer accruing future entitlement. The GB curtailment gain in 2011 year arose
due to the closure to future accrual of the defined benefit section of the GB plan.
Taken to the statement of comprehensive income
Actual return on scheme assets
Less: Expected return on scheme assets
Other actuarial gains
Actuarial (losses) / gains taken to the statement
of comprehensive income
Actual return on scheme assets
Less: Expected return on scheme assets
Other actuarial losses
Actuarial gains taken to the statement of comprehensive income
76 Britvic plc Annual Report 2012
ROI
£m
6.4
(2.5)
3.9
(12.3)
(8.4)
ROI
£m
(2.2)
(2.8)
(5.0)
8.8
3.8
NI
£m
2.4
(1.2)
1.2
(0.4)
0.8
NI
£m
0.7
(1.3)
(0.6)
2.2
1.6
GB
£m
55.6
(25.9)
29.7
(12.9)
16.8
GB
£m
5.9
(27.0)
(21.1)
60.8
39.7
2012
Total
£m
64.4
(29.6)
34.8
(25.6)
9.2
2011
Total
£m
4.4
(31.1)
(26.7)
71.8
45.1
overview
business review
governance
financial statements
financial statements
shareholder information
23. Pensions continued
Net (liability) / asset
Present value of benefit obligation
Fair value of plan assets
Net (liability) / asset
Present value of benefit obligation
Fair value of plan assets
Net liability
Movements in the present value of benefit obligation are as follows:
At 2 October 2011
Exchange differences
Curtailment gain
Current service cost
Member contributions
Interest cost on benefit obligation
Benefits paid
Actuarial gains
At 30 September 2012
At 3 October 2010
Exchange differences
Curtailment gain
Current service cost
Member contributions
Interest cost on benefit obligation
Benefits paid
Actuarial gains
At 2 October 2011
ROI
£m
(53.6)
47.2
(6.4)
ROI
£m
(64.4)
44.5
(19.9)
ROI
£m
(64.4)
4.7
21.3
(0.9)
(0.4)
(3.4)
1.8
(12.3)
(53.6)
ROI
£m
(69.6)
0.8
1.2
(2.4)
(0.5)
(3.6)
0.9
8.8
(64.4)
NI
£m
(26.8)
23.8
(3.0)
NI
£m
(25.4)
20.3
(5.1)
NI
£m
(25.4)
-
-
(0.2)
-
(1.3)
0.5
(0.4)
(26.8)
NI
£m
(26.8)
-
-
(0.3)
-
(1.3)
0.8
2.2
(25.4)
GB
£m
(503.9)
511.4
7.5
GB
£m
(481.2)
462.5
(18.7)
GB
£m
(481.2)
-
-
-
-
(26.5)
16.7
(12.9)
(503.9)
GB
£m
(544.6)
-
17.7
(2.6)
(0.8)
(27.0)
15.3
60.8
(481.2)
2012
Total
£m
(584.3)
582.4
(1.9)
2011
Total
£m
(571.0)
527.3
(43.7)
2012
Total
£m
(571.0)
4.7
21.3
(1.1)
(0.4)
(31.2)
19.0
(25.6)
(584.3)
2011
Total
£m
(641.0)
0.8
18.9
(5.3)
(1.3)
(31.9)
17.0
71.8
(571.0)
Britvic plc Annual Report 2012
77
financial statements
notes to the consolidated financial statements continued
overview
23. Pensions continued
Movements in the fair value of plan assets are as follows:
At 2 October 2011
Exchange differences
Expected return on plan assets
Actuarial gains
Employer contributions
Member contributions
Benefits paid
At 30 September 2012
At 3 October 2010
Exchange differences
Expected return on plan assets
Actuarial losses
Employer contributions
Member contributions
Benefits paid
At 2 October 2011
ROI
£m
44.5
(3.6)
2.5
3.9
1.3
0.4
(1.8)
47.2
ROI
£m
45.7
(0.6)
2.8
(5.0)
2.0
0.5
(0.9)
44.5
Categories of scheme assets as a percentage of the fair value of total scheme assets
Equities & real estate
Bonds and gilts
Cash
Total
Equities & real estate
Bonds and gilts
Cash
Total
ROI
£m
28.4
18.8
-
47.2
ROI
£m
28.0
16.5
-
44.5
Analysis of expected return on assets by categories of scheme assets
Equities & real estate
Bonds and gilts
Cash
Total
Equities & real estate
Bonds and gilts
Cash
Total
78 Britvic plc Annual Report 2012
ROI
£m
2.0
0.5
-
2.5
ROI
£m
2.3
0.5
-
2.8
NI
£m
11.7
11.9
0.2
23.8
NI
£m
9.5
10.2
0.6
20.3
NI
£m
0.8
0.3
0.1
1.2
NI
£m
1.2
0.1
-
1.3
NI
£m
20.3
-
1.2
1.2
1.6
-
(0.5)
23.8
NI
£m
18.8
-
1.3
(0.6)
1.6
-
(0.8)
20.3
GB
£m
271.5
236.6
3.3
511.4
GB
£m
243.5
214.0
5.0
462.5
GB
£m
16.5
9.2
0.2
25.9
GB
£m
18.5
8.3
0.2
27.0
GB
£m
462.5
-
25.9
29.7
10.0
-
(16.7)
511.4
GB
£m
459.3
-
27.0
(21.1)
11.8
0.8
(15.3)
462.5
2012
Total
£m
311.6
267.3
3.5
582.4
2011
Total
£m
281.0
240.7
5.6
527.3
2012
Total
£m
19.3
10.0
0.3
29.6
2011
Total
£m
22.0
8.9
0.2
31.1
2012
Total
£m
527.3
(3.6)
29.6
34.8
12.9
0.4
(19.0)
582.4
2011
Total
£m
523.8
(0.6)
31.1
(26.7)
15.4
1.3
(17.0)
527.3
2012
Total
%
54
46
-
100
2011
Total
%
53
46
1
100
2012
Total
%
65
34
1
100
2011
Total
%
71
29
-
100
overview
business review
governance
financial statements
financial statements
shareholder information
23. Pensions continued
History of experience gains and losses
Fair value of schemes assets
Present value of defined benefit obligations
Deficit in the schemes
Experience adjustments arising on plan
liabilities
Experience adjustments arising on plan assets
2012
£m
582.4
(584.3)
(1.9)
-
(34.8)
2011
£m
527.3
(571.0)
(43.7)
1.5
(26.7)
2010
£m
523.8
(641.0)
(117.2)
36.7
27.2
2009
£m
461.9
(547.0)
(85.1)
2.0
(2.7)
2008
£m
424.5
(448.4)
(23.9)
3.3
(98.9)
The cumulative amount of actuarial gains and losses recognised since 4 October 2004 in the group statement of comprehensive income
is an overall loss of £49.2m (2011: loss of £58.4m). The directors are unable to determine how much of the pension scheme deficit
recognised on transition to IFRS and taken direct to equity of £1.3m is attributable to actuarial gains and losses since the inception of
those pension schemes. Consequently, the directors are unable to determine the amount of actuarial gains and losses that would have
been recognised in the group statement of comprehensive income before 4 October 2004.
Normal contributions of £1.0m are expected to be paid into the defined benefit pension schemes during the 2013 financial year.
Additional contributions of £14.0m are expected to be paid into the defined benefit pension schemes during the 2013 financial year, of
which £9.0m is expected to be paid by the group and £5.0m will be received from the pension funding partnership structure.
24. Trade and other payables (current)
Trade payables
Other payables
Accruals and deferred income
Other taxes and social security
2012
£m
230.9
8.5
92.2
25.6
357.2
2011
£m
235.9
8.7
89.0
36.5
370.1
Trade payables are non-interest bearing and are normally settled on 60 - 90 day terms.
25. Financial risk management objectives and policies
Overview
The group’s principal financial instruments comprise derivatives, borrowings and overdrafts, and cash and cash equivalents. These
financial instruments are used to manage interest rate and currency exposures, funding and liquidity requirements and share price
exposure arising under the group’s employee incentive schemes. Other financial instruments which arise directly from the group’s
operations include trade receivables and payables (see notes 18 and 24 respectively).
It is, and has always been, the group’s policy that no derivative is entered into for trading or speculative purposes.
The main risks arising from the group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
Additionally, the group is exposed to commodity price risk and share price risk. The Board of Directors review and agree policies for
managing these risks as summarised below.
Interest rate risk
The group’s exposure to the risk of changes in market interest rates relates primarily to the group’s long-term debt obligations with
floating interest rates.
The group’s policy is to manage its interest cost by maintaining a mix of fixed and variable rate debt. The group’s policy is to have an
average over the next three years of between 25% and 80% of its borrowings at fixed rates of interest. To manage this, the group
enters into interest rate swaps, cross currency swaps and forward rate agreements which are designated to hedge underlying debt
obligations. At 30 September 2012 after taking into account the effect of these instruments, approximately 86% of the group’s
borrowings are at a fixed rate of interest (2011: 82%).
Britvic plc Annual Report 2012
79
financial statements
notes to the consolidated financial statements continued
overview
25. Financial risk management objectives and policies continued
Interest rate risk table
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on
the group’s profit before tax (through the impact on floating rate borrowings) and equity (through the change in fair values of applicable
derivative instruments).
2012
Sterling
Euro
2011
Sterling
Euro
Increase /
(decrease) in
basis points
Effect on
profit / (loss)
before tax
£m
200
(200)
200
(200)
200
(200)
200
(200)
(0.2)
0.2
1.6
(1.8)
0.4
(0.1)
3.5
(2.3)
Effect on
equity
£m
24.5
(27.6)
7.0
(8.4)
28.9
(32.8)
6.8
(8.2)
Foreign currency risk
Foreign currency risk is primarily in respect of exposure to fluctuations to the sterling-euro, sterling-US dollar and euro-US dollar rates
of exchange. The group has operations in euro-denominated countries and finances these partly through the use of foreign currency
borrowings and cross currency swaps which hedge the translation risk of net investments in foreign operations. Additionally cash
generation from euro-denominated operations can be utilised to meet euro payment obligations in sterling denominated companies,
providing a natural hedge.
The group also has transactional exposures arising from purchases of prime materials, capital expenditure and interest costs in
currencies other than the functional currency of the individual group entities. Non functional currency purchases and interest costs are
made in the currencies of US dollars and euros. As at 30 September 2012 the group has hedged 69% (2011: 67%) of forecast net
exposures 12 months in advance using forward foreign exchange contracts.
Where funding is raised in a currency other than the currency ultimately required by the group, cross currency interest rate swaps are used
to convert the cash flows to the required currency. These swaps have the same duration and other critical terms as the underlying borrowing.
The following table demonstrates the sensitivity to a reasonably possible change in the US dollar and euro exchange rates, with all other
variables held constant, of the group’s profit before tax (due to changes in the fair value of monetary assets and liabilities) and the
group’s equity (due to changes in fair value of forward exchange contracts).
Increase /
(decrease) in
currency rate
%
Effect on
profit before
tax
£m
Effect on
equity
£m
10
(10)
10
(10)
10
(10)
10
(10)
10
(10)
10
(10)
(0.6)
0.6
-
-
-
-
(0.4)
0.4
-
-
-
-
5.1
(5.1)
0.9
(0.9)
0.9
(0.9)
5.0
(5.0)
1.2
(1.2)
1.7
(1.7)
2012
Sterling / euro
Sterling / US dollar
Euro / US dollar
2011
Sterling / euro
Sterling / US dollar
Euro / US dollar
80 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
25. Financial risk management objectives and policies continued
Credit risk
The group trades only with recognised creditworthy third parties. It is the group’s policy that all customers who wish to trade on credit
terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result
that the group’s exposure to bad debts is not significant. The maximum exposure is the carrying amount disclosed in note 18. For
transactions that do not occur in the country of the relevant operating unit, the group does not offer credit terms without the approval
of the Head of Finance Shared Services. There are no significant concentrations of credit risk within the group.
The group maintains a policy on counterparty credit exposures with banks and financial institutions arising from the use of derivatives
and financial instruments. This policy restricts the investment of surplus funds and entering into derivatives to counterparties with a
minimum credit rating maintained by either Moody’s, Standard & Poors or Fitch. The level of exposure with counterparties at various
ratings levels is also restricted under this policy. The level of exposure and the credit worthiness of the group’s banking counterparties
is reviewed regularly to ensure compliance with this policy.
Commodity price risk
The main commodity price risk arises in the purchases of prime materials, being PET, sugar, steel and frozen concentrated orange juice.
Where it is considered commercially advantageous, the group enters into fixed price contracts with suppliers to hedge against
unfavourable commodity price changes.
Share schemes equity price risk
The group operates several employee incentive share schemes. It has an exposure to the share price for the schemes in which shares
are purchased in the market to satisfy the requirements of the plan. To hedge this risk the group has entered into a number of total
return share swaps against schemes maturing in 2012 and 2013.
The following table demonstrates the sensitivity to a reasonably possible change in the Britvic plc share price, with all other variables
held constant, of the group’s profit before tax (due to changes in the fair value of the share swaps).
2012
2011
Increase /
(decrease) in
share price
%
Effect on
profit before
tax
£m
10
(10)
10
(10)
1.5
(1.5)
1.9
(1.9)
Liquidity risk
The group monitors its risk of a shortage of funds using rolling cash flow forecasts. These forecasts consider the maturity of both its
financial investments and financial assets (e.g. accounts receivable, other financial assets) and projected cash flows from operations.
The objective of the group’s liquidity policy is to maintain a balance between continuity of funds and flexibility through the use of bank
loans and overdrafts and long term private placement issuance. The bank loans entered into under the £400m bank facility are
unsecured however £1.4m of outstanding Britvic France bank loans are secured. At 30 September 2012, £0.3m of the group’s debt
will mature in less than one year (2011: none).
The table below summarises the maturity profile of the group’s financial liabilities at 30 September 2012 based on contractual
undiscounted payments:
2012
Secured bank loans
Private placement notes
Derivatives hedging private placement notes - payments
Derivatives hedging private placement notes - receipts
Interest rate swap - payments
Interest rate swap - receipts
Trade and other payables
Finance leases
Other financial liabilities
Less than 1
year
£m
0.3
27.4
18.5
(24.8)
21.1
1.6
(0.8)
0.8
324.3
0.3
4.4
351.2
1 to 5
years
£m
0.9
331.2
243.4
(271.6)
303.0
3.5
(1.5)
2.0
-
0.5
-
306.4
> 5 years
£m
0.2
320.1
265.2
(286.3)
299.0
-
-
-
-
-
-
299.2
Total
£m
1.4
678.7
527.1
(582.7)
623.1
5.1
(2.3)
2.8
324.3
0.8
4.4
956.8
Britvic plc Annual Report 2012
81
financial statements
notes to the consolidated financial statements continued
overview
25. Financial risk management objectives and policies continued
Less than 1
year
£m
2011
Secured bank loans
Private placement notes
Derivatives hedging private placement notes - payments
Derivatives hedging private placement notes - receipts
Interest rate swap - payments
Interest rate swap - receipts
Trade and other payables
Finance leases
Other financial liabilities
0.1
27.9
19.8
(25.3)
22.4
1.7
(1.4)
0.3
333.6
-
4.3
360.7
1 to 5
years
£m
2.7
206.8
140.6
(161.7)
185.7
5.5
(4.3)
1.2
-
1.2
-
> 5 years
£m
-
486.7
413.2
(425.0)
474.9
-
-
-
-
-
-
190.8
474.9
Total
£m
2.8
721.4
573.6
(612.0)
683.0
7.2
(5.7)
1.5
333.6
1.2
4.3
1,026.4
In respect of the private placement notes, the periods when the cash flows are expected to occur (as shown by the tables above) and
when they are expected to affect the Consolidated Income Statement are the same.
Details with regard to derivative contracts are included in note 26.
All bank loans outstanding at year end were secured loans from inception.
Fair value hierarchy
The group uses the following valuation hierarchy to determine the carrying value of financial instruments that are measured at fair value:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
2012
Level 1
Level 2
- Derivatives used for hedging
- Financial instruments at fair value through profit or loss
Level 3
Total
2011
Level 1
Level 2
- Derivatives used for hedging
- Financial instruments at fair value through profit or loss
Level 3
Total
82 Britvic plc Annual Report 2012
Assets
Liabilities
£m
-
92.2
-
-
92.2
£m
-
(6.9)
(8.4)
-
(15.3)
Assets
Liabilities
£m
-
95.9
-
-
95.9
£m
-
(2.7)
(11.3)
-
(14.0)
overview
business review
governance
financial statements
financial statements
shareholder information
25. Financial risk management objectives and policies continued
Capital management
The group defines ‘capital’ as being net debt plus equity.
The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern and maintain an
appropriate capital structure to balance the needs of the group to grow, whilst operating with sufficient headroom within its bank covenants.
The group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust
the capital structure, the group has a number of options available to it including modifying dividend payments to shareholders, returning
capital to shareholders or issuing new shares. In this way, the group balances returns to shareholders between long term growth and
current returns whilst maintaining capital discipline in relation to investing activities and taking any necessary action on costs to respond
to the current environment.
The group monitors capital on the basis of the adjusted net debt / EBITDA ratio. Adjusted net debt is calculated as being the net of cash
and cash equivalents, interest bearing loans and borrowings and the element of the fair value of interest rate currency swaps hedging
the balance sheet value of the US private placement Notes. Adjusted net debt is shown in note 29. The adjusted net debt / EBITDA ratio
enables the group to plan its capital requirements in the medium term. The group uses this measure to provide useful information to
financial institutions and investors. The group believes that an adjusted net debt / EBITDA ratio in the range of 2.0 – 3.0 provides an
efficient capital structure and an appropriate level of financial flexibility. At 30 September 2012 the adjusted net debt / EBITDA ratio was
2.8 (2011: 2.4).
26. Derivatives and hedge relationships
Fair values of financial assets and financial liabilities
Set out below is a comparison by category of carrying amounts and fair values of all of the group’s financial instruments,
except trade and other receivables and payables.
Book value
2012
£m
Fair value
2012
£m
Book value
2011
£m
Fair value
2011
£m
Financial assets
Cash and cash equivalents
Cross currency interest rate swaps*
Forward currency contracts**
Foreign exchange swaps**
Financial liabilities
Interest-bearing loans and borrowings
(bank loans and private placement notes):
Fixed rate borrowings
Floating rate borrowings
Bank overdrafts
Finance leases
Forward currency contracts***
FX Swaps ***
Cross currency interest rate swaps****
Interest rate swaps****
Forward rate agreements***
Share swaps***
Share swaps****
49.5
92.1
0.1
-
141.7
(549.2)
(9.3)
(1.9)
(0.8)
(1.9)
(0.2)
(5.0)
(3.5)
-
(2.3)
(2.4)
(576.5)
49.5
92.1
0.1
-
141.7
(598.9)
(9.3)
(1.9)
(0.8)
(1.9)
(0.2)
(5.0)
(3.5)
-
(2.3)
(2.4)
(626.2)
43.0
93.0
1.8
1.1
138.9
(563.4)
(8.6)
-
(1.2)
(0.3)
-
(2.4)
(1.4)
(0.1)
(3.9)
(5.9)
(587.2)
43.0
93.0
1.8
1.1
138.9
(616.7)
(8.6)
-
(1.2)
(0.3)
-
(2.4)
(1.4)
(0.1)
(3.9)
(5.9)
(640.5)
* Included within ‘Non-current assets: Other financial assets’ on the consolidated balance sheet
** Included within ‘Current assets: Other financial assets’ on the consolidated balance sheet
*** Included within ‘Current liabilities: Other financial liabilities’ on the consolidated balance sheet
**** Included within ‘Non-current liabilities: Other financial liabilities’ on the consolidated balance sheet
Non-derivative financial assets are categorised as loans and receivables as defined in IAS 39 ‘Financial instruments – recognition and
measurement’. Non-derivative financial liabilities are all carried at amortised cost.
The fair value of derivatives, which are quoted at market price, has been calculated by discounting the expected future cash flows at
prevailing interest rates.
The fair value of the current trade and other receivables and payables approximate to book value.
The fair value of fixed rate borrowings has been derived from the sum of future cash flows to maturity discounted back to present
values at a market rate.
Britvic plc Annual Report 2012
83
financial statements
notes to the consolidated financial statements continued
overview
26. Derivatives and hedge relationships continued
Derivatives not designated as part of hedge relationships
Interest rate swaps
The 2009 USPP cross currency swaps converted an amount of US dollar borrowings into a floating rate euro liability. To mitigate
exposure to changes in euro interest rates on this liability, €75.0m of interest rate swaps were transacted. These 5-year fixed rate swaps
had an effective start date of December 2010.
From the 2010 USPP issuance an amount of $55.0m was swapped into a floating rate sterling liability. To mitigate exposure for a
proportion of this liability, £20.0m of 3-year interest rate swaps were transacted with an effective date of December 2011.
Forward rate agreement
To mitigate exposure to floating interest rates at the next interest rate fixing on a portion of the 2009 floating rate euro liability, a series
of forward rate agreements with a notional totalling €30m were transacted with an effective date of December 2012.
Share swaps
The group operates several employee incentive share schemes. It has an exposure to the share price for the schemes in which shares
are purchased in the market to satisfy the requirements of the plan. To hedge this risk the group has entered into a number of total
return share swaps against schemes maturing in 2012 and 2013.
Foreign exchange swaps
As part of operational cash management €83.0m of euro / sterling FX swaps were in existence at 30 September 2012 (2011:€108.0m).
Hedging activities
The group has a number of derivative contracts which are designated as part of effective hedge relationships. These are included in
other financial assets and liabilities as follows:
Consolidated balance sheet
Non-current assets: Other financial assets
Fair value of the 2007 USD GBP cross currency fixed interest rate swaps¹
Fair value of the 2009 USD GBP cross currency floating interest rate swaps³
Fair value of the 2009 GBP euro cross currency floating interest rate swaps²
Fair value of the 2010 USD GBP cross currency floating interest rate swaps³
Fair value of the 2010 GBP euro cross currency fixed interest rate swaps²
Current assets: Other financial assets
Fair value of forward currency contracts¹
Fair value of foreign exchange swaps
Current liabilities: Other financial liabilities
Fair value of forward currency contracts¹
Fair value of share swaps
Fair value of forward rate agreements
Fair value of foreign exchange swaps
Non-current liabilities: Other financial liabilities
Fair value of the 2010 GBP euro cross currency fixed interest rate swaps²
Fair value of the 2010 USD GBP cross currency fixed interest rate swaps¹
Fair value of share swaps
Fair value of interest rate swaps
¹ Instruments designated as part of a cash flow hedge relationship
² Instruments designated as part of a net investment hedge relationship
³ Instruments designated as part of a fair value hedge relationship
84 Britvic plc Annual Report 2012
2012
£m
49.9
27.1
11.1
1.6
2.4
92.1
0.1
-
0.1
(1.9)
(2.3)
-
(0.2)
(4.4)
-
(5.0)
(2.4)
(3.5)
(10.9)
2011
£m
61.6
29.6
0.6
1.2
-
93.0
1.8
1.1
2.9
(0.3)
(3.9)
(0.1)
-
(4.3)
(1.1)
(1.3)
(5.9)
(1.4)
(9.7)
overview
business review
governance
financial statements
financial statements
shareholder information
26. Derivatives and hedge relationships continued
There have been no significant changes to derivative contracts designated as part of effective hedge relationships in the period.
As at the 30 September 2012 these hedging relationships are categorised as follows:
Cash flow hedges
Forward currency contracts
At 30 September 2012, the group held 68 (2011: 72) US dollar and 38 (2011: 51) euro forward exchange contracts (the ‘forward currency
contracts’) designated as hedges of expected future purchases from suppliers in US dollars and euros which the group believe to be highly
probable transactions. The forward currency contracts are being used to hedge the foreign currency risk of these highly probable transactions.
The forward currency contracts hedge the expected future purchases in the period to 30 September 2013 and have been assessed as
part of effective cash flow hedge relationships. At the period end there is a net unrealised loss of £1.8m (2011: net unrealised gain of
£1.5m), with a related deferred tax asset of £0.4m (2011: related deferred tax liability of £0.4m), which has been included in equity in
respect of these contacts.
The terms of these forward contracts are detailed in the table below.
Forward contracts to hedge expected future purchases
Maturity range
2012
£ / US$13.8m
£ / €64.3m
€ / US$14.0m
2011
£ / US$19.4m
£ / €57.5m
€ / US$26.8m
Oct 12 to Sep 13
Oct 12 to Sep 13
Oct 12 to Mar 13
Oct 11 to Jul 12
Oct 11 to Aug 12
Oct 11 to Sep 12
Average
exchange rate
US$1.57 / £
€1.22 / £
US$1.27 / €
£ / US$1.62
£ / €1.16
€ / US$1.43
Cross currency interest rate swaps
2007 Notes / 2007 cross currency interest rate swaps
The group continues to have a number of cross currency interest rate swaps relating to the 2007 Notes. These cross currency interest
rate swaps (the ‘2007 cross currency interest rate swaps’) have the effect of fixing the borrowings into sterling and the rate of interest
payable on the 2007 Notes. The 2007 cross currency interest rate swap instruments have the same duration and other critical terms as
the 2007 Notes and continue to be designated as part of a cash flow hedge relationship with the 2007 Notes. This has been assessed
to be a highly effective relationship as at 30 September 2012. The fair value of the 2007 cross currency interest rate swap instruments
at 30 September 2012, included within ‘Non-current assets: Other financial assets’ on the balance sheet, was £49.9m (2011: £61.6m).
The movement in the fair value has been taken to Consolidated Statement of Comprehensive Income. A total gain of £8.7m (2011: loss
£3.6m) has been recycled to the Consolidated Income Statement in the year to match the foreign exchange gain on the 2007 Notes.
Within equity there is a net unrealised gain of £8.4m (2011: net unrealised gain of £11.4m) with a related deferred tax liability of
£1.9m (2011: deferred tax liability of £2.9m) in respect of the 2007 cross currency interest rate swap instruments.
2010 Notes / 2010 USD GBP cross currency fixed interest rate swaps
The group continues to have a number of cross currency interest rate swaps relating to the 2010 Notes. These instruments swap the
principal and interest from US dollar into sterling (the ‘2010 USD GBP cross currency fixed interest rate swaps’). The 2010 USD GBP
cross currency interest rate swaps which swap interest from fixed US dollar to fixed sterling are designated as part of a cash flow hedge
relationship with the future cash flows associated with the 2010 Notes. This has been assessed to be a highly effective relationship as
at 30 September 2012. The fair value of these instruments at 30 September 2012, included within ‘Non-current liabilities: Other financial
liabilities’ on the balance sheet, was £5.0m (2 October 2011: £1.3m). The movement in fair value has been taken to consolidated
statement of comprehensive income. A total of £2.5m (2 October 2011: £0.7m) has been recycled to the Consolidated Income
Statement to match the foreign exchange loss on the 2010 Notes. Within equity there is a net unrealised loss of £1.9m (2 October 2011:
net unrealised loss of £0.7m) with a related deferred tax asset of £0.4m (2 October 2011: deferred tax asset of £0.2m) in respect of the
2010 cross currency interest rate swap instruments.
Britvic plc Annual Report 2012
85
financial statements
notes to the consolidated financial statements continued
overview
26. Derivatives and hedge relationships continued
Fair value hedges
2009 Notes / 2009 USD GBP cross currency interest rate swaps
The group continues to have a number of cross currency interest rate swaps in respect of the 2009 Notes. These instruments swap the
principal and interest from fixed US dollar into floating sterling (the ‘2009 USD GBP cross currency interest rate swaps’). The 2009 USD
GBP cross currency interest rate swaps are designated as part of a fair value hedge relationship with the 2009 Notes. The fair value
movements on the 2009 USD GBP cross currency interest rate instruments are recorded in the Consolidated Income Statement, as is
the fair value movement in the 2009 Notes. The 2009 USD GBP cross currency interest rate swap contracts have the same duration and
other critical terms as the 2009 Notes they hedge. The 2009 USD GBP cross currency interest rate swaps have been assessed as part
of a highly effective hedge relationship as at 30 September 2012. The fair value of the swap instruments at 30 September 2012,
included within ‘Non-current assets: Other financial assets’ on the Consolidated Balance Sheet, was £27.1m (2 October 2011: £29.6m).
2010 Notes / 2010 USD GBP cross currency floating interest rate swaps
The group has entered into swap instruments which swap the principal and fixed rate interest of the 2010 Notes to floating sterling
(‘2010 USD GBP cross currency floating interest rate swaps’). These instruments are designated as part of a fair value hedge
relationship with the 2010 Notes. The fair value movements on the 2010 USD GBP cross currency floating interest rate swaps are
recorded in the Consolidated Income Statement, as is the fair value movement of the hedged item. The swap contracts have the same
duration and other critical terms as the 2010 Notes they hedge. The 2010 USD GBP cross currency floating interest rate swaps have
been assessed as part of a highly effective hedge relationship as at 30 September 2012. The fair value of the swap instruments at 30
September 2012, included within ‘Non-current assets: Other financial assets’ on the Consolidated Balance Sheet was £1.6m (2 October
2011: Non-current assets: Other financial assets £1.2m).
Net investment hedges
2009 GBP euro cross currency interest rate swaps
These instruments swap floating sterling liabilities into floating euro liabilities. They have been designated as part of an effective hedge
of the net investment in Britvic Ireland. The 2009 GBP euro cross currency interest rate swaps, along with the underlying loan
instruments, are being used to hedge the group’s exposure to foreign exchange risk on this euro investment. Movements in the fair
value of the 2009 GBP euro cross currency interest rate swaps are taken to equity where they offset foreign exchange movements
on the translation of the net investment in Britvic Ireland. The fair value of the 2009 GBP euro cross currency interest rate swaps at
30 September 2012, is an asset of £11.1m (2 October 2011: asset of £0.6m) included within ‘Non-current assets: Other financial assets’
on the Consolidated Balance Sheet (2011: included within ‘Non-current assets: Other financial assets’). No ineffectiveness has been
recognised in the Consolidated Income Statement (2011: £nil).
2010 GBP euro cross currency interest rate swaps
These instruments swap fixed sterling liabilities arising from the 2010 USD GBP cross currency fixed interest rate swaps into fixed euro
liabilities and have been designated as part of an effective hedge of the net investment in Britvic France. The 2010 GBP euro cross
currency interest rate swaps, along with the underlying loan instruments, are being used to hedge the group’s exposure to foreign
exchange risk on this euro investment. Movements in the fair value of the 2010 GBP euro cross currency interest rate swaps are taken
to equity where they offset foreign exchange movements on the translation of the net investment in Britvic France. The fair value of the
2010 GBP euro cross currency interest rate swaps at 30 September 2012, is an asset of £2.4m (2 October 2011: liability of £1.1m)
included within ‘Non-current assets: Other financial assets’ on the Consolidated Balance Sheet. No ineffectiveness has been recognised
in the Consolidated Income Statement (2011: £nil).
86 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
26. Derivatives and hedge relationships continued
The impact on the consolidated statement of comprehensive income of the derivatives and hedge relationships described above is
summarised in the table below.
Consolidated statement of comprehensive income
Amounts recycled to the income statement in respect of cash flow hedges
Forward currency contracts*
2007 cross currency interest rate swaps**
2010 cross currency interest rate swaps**
Gains / (losses) in the period in respect of cash flow hedges
Forward currency contracts
2007 cross currency interest rate swaps
2010 cross currency interest rate swaps
Exchange differences on translation of foreign operations
Movement on 2009 GBP euro cross currency interest rate swaps
Movement on 2010 GBP euro cross currency interest rate swaps
Exchange movements on translation of foreign operations
* Offsetting amounts recorded in cost of sales
** Offsetting amounts recorded in finance costs
27. Other non-current liabilities
Firm Commitment
2012
£m
(1.7)
8.7
2.5
9.5
(1.6)
(11.7)
(3.7)
(17.0)
10.5
3.5
(17.9)
(3.9)
2012
£m
1.9
2011
£m
(0.7)
(3.6)
0.6
(3.7)
2.8
3.6
(0.6)
5.8
1.0
0.1
(2.7)
(1.6)
2011
£m
1.9
A firm commitment exists in respect of the receipt of the 2009 and 2010 Notes.
28. Share-based payments
The expense recognised for share-based payments in respect of employee services received during the 52 weeks ended 30 September
2012, including national insurance of £0.4m (2011: £0.5m) and dividend equivalents of £1.0m (2011: £0.4m), is £3.0m (2011: £4.7m).
This expense arises from transactions which are expected to be equity-settled share-based payment transactions.
The Britvic Share Incentive Plan (‘SIP’)
The SIP is an all-employee plan approved by HMRC. The plan allows for discretionary annual awards of free ordinary shares with a value
of 3% of salary (subject to HMRC maximum limits) together with an offer of matching shares on the basis of one free matching share
for each ordinary share purchased with a participant’s savings, up to a maximum of £50 (2011: £75) per four week pay period.
Employees are entitled to receive the annual free share award, where granted by the group, provided they are employed by the
company on the last day of each financial year and on the award date. There are no cash settlement alternatives.
Awards made during the period are shown in the table below. The fair value of these awards is equivalent to the intrinsic value of the shares.
Annual free shares award
Matching shares award – 1 free share for every ordinary share purchased
2012
-
281,662
No of shares
2011
484,343
346,267
Britvic plc Annual Report 2012
87
financial statements
notes to the consolidated financial statements continued
overview
28. Share-based payments continued
The Britvic Executive Share Option Plan (‘Option Plan’)
The Option Plan allows for options to buy ordinary shares to be granted to selected employees. The option price is the average market
price of Britvic plc’s shares on the three business days before the date of grant. Options become exercisable on the satisfaction of the
performance condition and remain exercisable until ten years after the date of grant.
The performance condition requires average growth in EPS of 7% pa over a three year period in excess of the average growth in RPI
over the same period for the options to vest in full. If EPS growth averages 3% per annum in excess of RPI growth, 25% (2011: 25%)
of the options will vest. Straight-line apportionment will be applied between these two levels to determine the number of options that
vest and no options will vest if average EPS growth is below the lower threshold.
In some circumstances, at the discretion of the company, an option holder who exercises his/her option may receive a cash payment
rather than the Ordinary shares under option. The cash payment would be equal to the amount by which the market value of the
ordinary shares under option exceeds the option price. However, it is expected that this plan will be equity-settled and as a consequence
has been accounted for as such.
The following table illustrates the movements in the number of share options during the period.
Outstanding as at 3 October 2010
Granted during the period
Exercised during the period
Forfeited during the period
Outstanding as at 2 October 2011
Granted during the period
Exercised during the period
Forfeited during the period
Lapsed during the period
Outstanding at 30 September 2012
Exercisable at 30 September 2012
Number
of share
options
Weighted average
exercise price
(pence)
7,548,083
1,566,418
(209,531)
(140,584)
8,764,386
2,175,767
(244,499)
(246,138)
(9,496)
10,440,020
4,659,273
283.7
464.6
265.8
392.4
314.8
331.6
233.1
406.4
347.0
318.0
258.1
The weighted average share price at the date of exercise for share options exercised during the period was 362.2p (2011: 459.3p).
The share options outstanding as at 30 September 2012 had a weighted average remaining contractual life of 6.7 years (2011: 7.1 years)
and the range of exercise prices was 221.0p – 464.6p (2011: 221.0p – 464.6p).
The weighted average fair value of options granted during the period was 58.2p (2011: 82.8p).
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking account of the
terms and conditions upon which the options were granted.
The following table lists the inputs to the model used in respect of the award granted during the 52 weeks ended 30 September 2012.
The comparative shows the inputs to the model used in respect of the award granted during the 52 weeks ended 2 October 2011.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Share price at date of grant (pence)
Exercise price (pence)
2012
3.6
27.9
0.8
5.0
329.8
331.6
2011
4.8
27.5
1.9
5.0
475.0
464.6
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily
be the actual outcome.
88 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
28. Share-based payments continued
The Britvic Performance Share Plan (‘PSP’)
The PSP allows for awards of ordinary shares or nil cost options to be made to selected employees with vesting subject to the
satisfaction of a performance condition. Different performance conditions apply to different groups of employees. Awards up to and
including 2008 were made in respect of ordinary shares. Awards granted in 2009 and 2010 were made in respect of nil cost options.
Nil cost options become exercisable on the satisfaction of the performance conditions and remain exercisable until 10 years / 7 years
after the date of grant for employees based in the UK / Ireland respectively.
The performance condition applying to the total number of awards granted to members of the senior leadership team during the current
period is divided equally between the total shareholder return (“TSR”) and return on invested capital (“ROIC”) performance conditions
described below.
The TSR condition measures the company’s TSR relative to a comparator group (consisting of 18 companies) over a three year
performance period. The awards will not vest unless the company’s position in the comparator group is at least median. At median
25% (2011: 25%) will vest, rising on a straight-line basis to 100% vesting at upper quartile.
For the award granted during the 52 weeks ended 30 September 2012, the ROIC performance condition requires the company’s ROIC
to be at least 22.3% (2011: for the award granted during the 52 weeks ended 2 October 2011, 22.7%) over the three year performance
period for the award to vest in full. If ROIC is 21.5% (2011: 21.9%) over the performance period, 25% (2011: 25%) of the award will
vest. Straight-line apportionment will be applied between these two levels to determine the percentage of awards that vest and no
awards will vest if ROIC is below the lower threshold.
Awards granted to members of the senior management team vest solely subject to a performance condition which requires average
growth in EPS of 7% pa over a three year period in excess of the growth in RPI over the same period for the awards to vest in full. If
EPS growth averages 3% pa in excess of RPI growth, 25% (2011: 25%) of the awards will vest. Straight-line apportionment will be
applied between these two levels to determine the number of awards that vest and no awards will vest if average EPS growth is below
the lower threshold.
In some circumstances, at the discretion of the company, vested awards may be satisfied by a cash payment rather than a transfer of
ordinary shares. However, it is expected that this plan will be equity-settled and as a consequence has been accounted for as such.
The following tables illustrate the movements in the number of shares and nil cost options during the period.
Outstanding as at 3 October 2010
Granted during the period
Vested during the period*
Lapsed during the period
Outstanding as at 2 October 2011
Granted during the period
Vested during the period*
Outstanding at 30 September 2012
* The share price on the date of vesting was 329.8p (2011: 462.0p).
Outstanding as at 3 October 2010
Granted during the period
Forfeited during the period
Outstanding at 2 October 2011
Granted during the period
Forfeited during the period
Outstanding at 30 September 2012
Number of shares
subject to
TSR condition
Number of shares
subject to
EPS condition
Number of shares
subject to
ROIC condition
1,052,989
-
(460,963)
(7,245)
584,781
-
(532,156)
52,625
1,656,051
10,575
(463,228)
(107,970)
1,095,428
14,997
(916,249)
194,176
591,672
-
-
(6,893)
584,779
-
(532,157)
52,622
Number of nil cost
options subject to
TSR condition
Number of nil cost
options subject to
EPS condition
Number of nil cost
options subject to
ROIC condition
396,578
353,423
(50,723)
699,278
481,128
(62,591)
1,117,815
746,858
749,543
(154,376)
1,342,025
1,001,479
(313,138)
2,030,366
396,578
353,423
(50,723)
699,278
481,128
(62,591)
1,117,815
There were no nil cost options exercisable at 30 September 2012 (2011: Nil).
The nil cost options outstanding as at 30 September 2012 had a weighted average remaining contracted life of 8.2 years (TSR condition)
(2011: 8.5 years), 8.0 years (EPS condition) (2011: 8.4 years) and 8.2 years (ROIC condition) (2011: 8.5 years).
The weighted average fair value of nil cost options granted during the period was 194.2p (TSR condition) (2011: 258.6p), 323.0p (EPS
condition) (2011: 413.0p) and 322.7p (ROIC condition) (2011: 413.0p).
The fair value of equity-settled shares and nil cost options granted is estimated as at the date of grant using separate models as detailed
below, taking account of the terms and conditions upon which the shares and nil cost options were granted.
Britvic plc Annual Report 2012
89
financial statements
notes to the consolidated financial statements continued
overview
28. Share-based payments continued
The following table lists the inputs to the models used in respect of the award granted during the 52 weeks ended 30 September 2012.
Valuation model used
Dividend yield (%)
Expected volatility (%)
Share price at date of grant (pence)
Nil cost options
subject to
TSR condition
Nil cost options
subject to
EPS condition
Nil cost options
subject to
ROIC condition
Monte Carlo
simulation
Share price at date of grant adjusted
for dividends not received during
vesting period
Share price at date of grant adjusted
for dividends not received during
vesting period
3.6
27.9
329.8
3.6
n/a
329.8
3.6
n/a
329.8
The following table lists the inputs to the models used in respect of the award granted during the 52 weeks ended 2 October 2011.
Nil cost options
subject to
TSR condition
Nil cost options
subject to
EPS condition
Nil cost options
subject to
ROIC condition
Monte Carlo
simulation
Share price at date of grant adjusted
for dividends not received during
vesting period
Share price at date of grant adjusted
for dividends not received during
vesting period
Valuation model used
Dividend yield (%)
Expected volatility (%)
Share price at date of grant (pence)
4.8
27.5
475.0
4.8
n/a
475.0
29. Notes to the consolidated cash flow statement
Analysis of net debt
Cash at bank and in hand
Bank overdrafts
Debt due within one year
Debt due after more than one year
Derivatives hedging the balance sheet debt*
Adjusted net debt
Cash at bank and in hand
Debt due after more than one year
Derivatives hedging the balance sheet debt*
Adjusted net debt
2011
£m
43.0
-
-
(573.2)
(530.2)
78.2
(452.0)
2010
£m
54.0
(569.9)
(515.9)
64.7
(451.2)
Cash flows
£m
Exchange
differences
£m
Other
movement
£m
7.7
(1.9)
-
1.0
**
6.8
-
6.8
(1.2)
-
-
13.5
12.3
(13.2)
(0.9)
-
-
(0.6)
-
(0.6)
-
(0.6)
Cash flows
£m
(10.4)
13.4**
3.0
-
3.0
Exchange
differences
£m
Other
movement
£m
(0.6)
(12.6)
(13.2)
13.5
0.3
-
(4.1)
(4.1)
-
(4.1)
4.8
n/a
475.0
2012
£m
49.5
(1.9)
(0.6)
(558.7)
(511.7)
65.0
(446.7)
2011
£m
43.0
(573.2)
(530.2)
78.2
(452.0)
*
Represents the element of the fair value of interest rate currency swaps hedging the balance sheet value of the Notes. This amount has been disclosed
separately to demonstrate the impact of foreign exchange movements which are included in debt due after more than one year.
** This includes issue costs paid on new loans / facilities received during the period of £nil (2011: £3.9m). This has been included in the ‘Finance costs’ in the
Consolidated Statement of Cash Flows.
90 Britvic plc Annual Report 2012
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business review
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financial statements
shareholder information
30. Commitments and contingencies
Operating lease commitments
Future minimum lease payments under non-cancellable operating leases are as follows:
Within one year
After one year but not more than five years
More than five years
Within one year
After one year but not more than five years
More than five years
Finance lease commitments
Future minimum lease payments under finance leases are as follows:
Within one year
After one year but not more than five years
More than five years
Land and
buildings
£m
3.1
13.4
44.0
60.5
Land and
buildings
£m
4.1
13.5
42.0
59.6
Other
£m
10.3
17.0
0.2
27.5
Other
£m
9.2
15.4
1.1
25.7
2012
£m
0.3
0.5
-
0.8
2012
Total
£m
13.4
30.4
44.2
88.0
2011
Total
£m
13.3
28.9
43.1
85.3
2011
£m
-
1.2
-
1.2
Due to the timing of the expiry of the finance lease commitments, there is no material difference between the total future minimum
lease payments and their fair value.
Capital commitments
At 30 September 2012, the group has commitments of £3.3m (2011: £16.9m) relating to the acquisition of new plant and machinery.
Contingent liabilities
The group had no material contingent liabilities at 30 September 2012 (2011: none).
Britvic plc Annual Report 2012
91
financial statements
notes to the consolidated financial statements continued
overview
overview
31. Related party disclosures
The consolidated financial statements include the financial statements of Britvic plc and the subsidiaries listed in the table below.
Particulars of dormant and non-trading subsidiaries which do not materially affect the group results have been excluded.
Name
Directly held
Britannia Soft Drinks Limited
Britvic Finance No 2 Limited
Indirectly held
Britvic International Limited
Britvic Soft Drinks Limited
Britvic Irish Holdings Limited
Britvic Ireland Limited
Britvic Northern Ireland Limited
Aquaporte Limited
Britvic Worldwide Brands Limited
Britvic North America LLC
Britvic France SNC
Fruité Entreprises SA
Fruité SAS
Bricfruit SAS
Unisource SAS
Teisseire SAS
Teisseire Benelux SA
Principal activity
Country of
incorporation
% equity
interest
Holding company
Financing company
England and Wales
Jersey
Marketing and distribution of soft drinks
Manufacture and sale of soft drinks
Holding company
Manufacture and marketing of soft drinks
Marketing and distribution of soft drinks
Supply of water-coolers and bottled water
Marketing and distribution of soft drinks
Marketing and distribution of soft drinks
Holding partnership
Holding company
Manufacture and sale of soft drinks
Manufacture and sale of soft drinks
Manufacture and sale of soft drinks
Manufacture and sale of soft drinks
Marketing and distribution of soft drinks
England and Wales
England and Wales
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
USA
France
France
France
France
France
France
France
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Key management personnel are deemed to be the executive and non-executive directors of the company and members of the Executive
Committee. The compensation payable to key management in the period is detailed below.
Short-term employee benefits
Post-employment benefits
Share-based payment
2012
£m
3.0
0.6
0.4
4.0
2011
£m
2.8
0.5
1.1
4.4
See note 8 for details of directors’ emoluments
There were no other related party transactions requiring disclosure in these financial statements.
32. Going concern
The directors are confident that it is appropriate for the going concern basis to be adopted in preparing the financial statements. As at 30
September 2012, the Consolidated Balance Sheet is showing a net assets position of £37.1m (2 October 2011: net assets of £22.5m).
Group reserves are low due to the capital restructuring undertaken at the time of flotation. This does not impact on Britvic plc’s ability to
make dividend payments.
The liquidity of the group remains strong in particular with £491.0m of long term Private Placement Notes with maturity dates between
2014 and 2022 and a £400.0m bank facility maturing in March 2016. Details are provided in note 22.
92 Britvic plc Annual Report 2012
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business review
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financial statements
financial statements
shareholder information
independent auditor’s report to the
members of Britvic plc
We have audited the parent company financial statements of Britvic plc for the 52 week period ended 30 September 2012 which comprise the
company balance sheet and the related notes 1 to 17. The financial reporting framework that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 34, the directors are responsible for the preparation of the
parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to
identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the parent company financial statements:
• give a true and fair view of the state of the company’s affairs as at 30 September 2012;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the
parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the group financial statements of Britvic plc for the 52 week period ended 30 September 2012.
Nigel Meredith (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
26 November 2012
Britvic Plc Annual Report 2012
Britvic plc Annual Report 2012
93
fi nancial statements
overview
company balance sheet
At 30 September 2012
Non-current assets
Investments in Group undertakings
Other fi nancial assets
Current assets
Trade and other receivables
Deferred tax asset
Cash in hand and at bank
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Other fi nancial liabilities
Net current (liabilities) / assets
Total assets less current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Other fi nancial liabilities
Other non-current liabilities
Net assets
Capital and reserves
Issued share capital
Share premium account
Own shares reserve
Share scheme reserve
Hedging reserve
Merger reserve
Retained earnings
Equity shareholders’ funds
Note
6
11
8
7
9
10
11
10
11
12
13
14
14
14
14
14
14
2012
£m
742.5
92.1
834.6
3.1
0.9
-
4.0
(14.1)
(22.4)
(0.2)
(36.7)
(32.7)
801.9
(557.1)
(8.6)
(1.9)
(567.6)
2011
£m
739.5
93.0
832.5
50.7
1.4
8.0
60.1
(8.0)
-
(0.1)
(8.1)
52.0
884.5
(569.8)
(3.8)
(1.9)
(575.5)
234.3
309.0
48.5
17.7
(0.8)
4.2
6.4
87.3
71.0
234.3
48.3
15.0
(1.0)
7.8
10.8
87.3
140.8
309.0
The fi nancial statements were approved by the Board of Directors and authorised for issue on 26 November 2012.
They were signed on its behalf by:
Paul Moody
Chief executive
John Gibney
Finance director
94 Britvic plc Annual Report 2012
94 Britvic plc Annual Report 2012
overview
overview
business review
business review
governance
governance
financial statements
financial statements
financial statements
shareholder information
shareholder information
notes to the company financial statements
1. Parent Undertaking
The financial statements are prepared under the historical cost convention except for the measurement of derivative instruments at fair
value. They have been drawn up to comply with applicable accounting standards in accordance with the Companies Act 2006.
These accounts have been prepared under UK Generally Accepted Accounting Principles and present information about the Company as
an individual undertaking, and not about its Group.
The Company has taken advantage of the exemption permitted by section 408 of the Companies Act 2006 not to publish its individual
profit and loss account and related notes.
The Company is exempt from the requirements of Financial Reporting Standard No.1 (Revised) “Cash Flow Statements”.
2. Accounting Policies
Investments
The Company recognises its investments in subsidiaries at cost less any provisions made for impairment.
In respect of FRS 20 ‘Share-based payment’, the Company records an increase in its investment in subsidiaries to reflect the share-based
compensation expense recorded by its subsidiaries.
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised at fair value less directly attributable transaction costs and are subsequently
measured at amortised cost using the effective interest rate method or at fair value.
Finance costs arising from the outstanding loan balance and finance charges are charged to the profit and loss account using an
effective interest rate method.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All differences are taken
to the profit and loss account.
Issued share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Dividends
Dividend income is recognised when the Company’s right to receive payment is established.
Final dividends are recorded in the financial statements in the period in which they are approved by the Company’s shareholders. Interim
dividends are recorded in the period in which they are declared.
Deferred taxation
Deferred tax assets and liabilities are recognised, subject to certain exceptions, in respect of all material timing differences between
the recognition of gains and losses in the Financial Statements and for tax purposes. Those timing differences recognised include
accelerated capital allowances, unrelieved tax losses and short term timing differences. Timing differences not recognised include
those relating to the revaluation of fixed assets in the absence of a commitment to sell the assets, the gain on sale of assets rolled into
replacement assets and the distribution of profits from overseas subsidiaries in the absence of any commitment by the subsidiary to
make the distribution.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered and to the extent
that it is regarded as probable that future taxable profits will be available against which temporary differences can be utilised.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences
reverse, based on tax rates and laws enacted or substantially enacted at the balance sheet date.
Britvic plc Annual Report 2012
Britvic plc Annual Report 2012
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95
financial statements
notes to the company financial statements continued
overview
2. Accounting policies continued
Derivative financial instruments and hedging
The Company uses cross currency interest rate swaps to hedge its risks associated with foreign currency and interest rate fluctuations
classified as cash flow hedges (when hedging exposure to variability in cash flows that is either attributable to a particular risk associated
with a recognised asset or liability or a highly probable forecast transaction). All derivative financial instruments are initially recognised
and subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the
fair value is negative.
For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its
inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and
how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the profit and
loss account. The treatment of gains and losses arising from revaluing interest rate swaps designated as hedging instruments is as follows:
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while the
ineffective portion is recognised in the profit and loss account. Amounts taken to equity are transferred to the profit and loss account
when the hedged transaction affects profit or loss, such as when a forecast sale or purchase occurs.
If a forecast transaction is no longer expected to occur, amounts previously recognised in equity are transferred to the profit and loss
account. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a
hedge is revoked, amounts previously recognised in equity remain in equity until the forecast transaction occurs and are transferred to
the profit and loss account. If the related transaction is not expected to occur, the amount is taken to the profit and loss account.
For fair value hedges, the gain or loss on the fair value of the hedging instrument is recognised in the profit and loss account. The gain
or loss on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognised in the
profit and loss account. If the hedge relationship was ineffective the hedged item would no longer be adjusted and the fair value gain
or loss on the hedging instrument would continue to be recorded in the profit and loss account.
3. Auditor’s remuneration
Auditor’s remuneration has been borne by another Group undertaking. For further details, refer to note 7 to the consolidated financial statements.
4. Profit / loss of the company
The Company made a loss of £25.3m in the period (2011: loss £9.6m).
5. Directors’ remuneration
The remuneration of the directors of the Company is borne by another Group company.
Directors’ emoluments are disclosed in the Directors’ Remuneration Report on pages 35 to 43 of the consolidated financial statements.
6. Investments in group undertakings
Cost and net book value at the beginning of the period
Capital contribution
Cost and net book value at the end of the period
2012
£m
739.5
3.0
742.5
2011
£m
734.8
4.7
739.5
96 Britvic plc Annual Report 2012
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business review
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financial statements
financial statements
shareholder information
6. Investments in group undertakings continued
The following is a list of the principal subsidiary undertakings of which Britvic plc is, either directly or through subsidiary companies,
the beneficial owner of the whole of the equity share capital.
Principal activity
Country of
incorporation
% equity
interest
Holding company
Financing company
England and Wales
Jersey
Marketing and distribution of soft drinks
Manufacture and sale of soft drinks
Holding company
Manufacture and marketing of soft drinks
Marketing and distribution of soft drinks
Supply of water-coolers and bottled water
Marketing and distribution of soft drinks
Marketing and distribution of soft drinks
Holding partnership
Holding company
Manufacture and sale of soft drinks
Manufacture and sale of soft drinks
Manufacture and sale of soft drinks
Manufacture and sale of soft drinks
Marketing and distribution of soft drinks
England and Wales
England and Wales
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
USA
France
France
France
France
France
France
France
Name
Directly held
Britannia Soft Drinks Limited
Britvic Finance No 2 Limited
Indirectly held
Britvic International Limited
Britvic Soft Drinks Limited
Britvic Irish Holdings Limited
Britvic Ireland Limited
Britvic Northern Ireland Limited
Aquaporte Limited
Britvic Worldwide Brands Limited
Britvic North America LLC
Britvic France SNC
Fruité Entreprises SA
Fruité SAS
Bricfruit SAS
Unisource SAS
Teisseire SAS
Teisseire Benelux SA
7. Deferred tax
Opening balance
Profit and loss account
Closing balance
Analysed as tax on timing differences related to:
Other
8. Trade and other receivables
Amounts due from subsidiary undertakings
Other receivables
9. Trade and other payables
Amounts due to subsidiary undertakings
Accruals and deferred income
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2011
£m
2.5
(1.1)
1.4
1.4
2011
£m
50.6
0.1
50.7
2011
£m
7.0
1.0
8.0
2012
£m
1.4
(0.5)
0.9
0.9
2012
£m
3.0
0.1
3.1
2012
£m
13.6
0.5
14.1
Britvic plc Annual Report 2012
97
financial statements
notes to the company financial statements continued
overview
10. Interest-bearing loans and borrowings
Current
Bank overdrafts
Non-current
Private placement notes
Less unamortised issue costs
Total non-current
2012
£m
(22.4)
(560.8)
3.7
(557.1)
2011
£m
-
(574.4)
4.6
(569.8)
Private placement notes
2007 Notes
On 20 February 2007, Britvic plc issued US$375m and £38m of Senior Notes (‘the 2007 Notes’) in the United States Private Placement
market. The amount, maturity and interest terms of the Notes are shown in the table below:
Series
A
B
C
D
E
F
Tranche
7 year
7 year
7 year
10 year
12 year
12 year
Maturity date
20 February 2014
20 February 2014
20 February 2014
20 February 2017
20 February 2019
20 February 2019
Amount
US$87m
US$15m
£25m
US$147m
US$126m
£13m
Interest terms
Swap terms
US$ fixed at 5.80%
US$ LIBOR + 0.5%
UK£ fixed at 6.11%
US$ fixed at 5.90%
US$ fixed at 6.00%
UK£ fixed at 5.94%
UK£ fixed at 6.10%
UK£ fixed at 6.07%
n/a
UK£ fixed at 5.98%
UK£ fixed at 5.98%
n/a
Britvic plc makes quarterly or semi-annual interest payments in the currency of issue. The Notes are unsecured and rank pari passu in
right of repayment with other senior unsecured indebtedness of the Company. In order to manage the risk of foreign currency and
interest rate fluctuations, the Company has entered into cross currency interest rate swaps whereby fixed / floating US dollar interest
is swapped for fixed sterling interest. The swap contracts have the same duration and other critical terms as the borrowings which they
hedge and are considered to be effective.
2009 Notes
On 17 December 2009, Britvic plc issued US$250m of Senior Notes in the United States Private Placement market (‘the 2009 Notes’).
The 2009 Notes are additional borrowings to the 2007 Notes.
Britvic plc makes semi-annual interest payments in US dollars. The 2009 Notes are unsecured and rank pari passu in right of repayment
with other senior unsecured indebtedness of the Group.
In order to manage foreign exchange risk, interest rate risk and to ensure an appropriate mix of sterling and euro funding, the Company
has entered into a number of new cross currency interest rate swaps. The 2009 Notes were swapped into floating rate sterling and euro
liabilities through a series of US dollar to sterling and sterling to euro swap instruments. The US dollar to sterling cross currency interest
rate swap contracts have the same duration and other critical terms as the relevant borrowings they hedge and are designated as part
of effective hedge relationships.
The amount, maturity and interest terms of the 2009 Notes are shown in the table below:
Series
A
B
C
D
Tranche
5 year
7 year
8 year
10 year
Maturity date
17 December 2014
17 December 2016
17 December 2017
17 December 2019
Amount
US$30m
US$75m
US$25m
US$120m
Interest terms
Swap terms
US$ fixed at 4.07%
US$ fixed at 4.77%
US$ fixed at 4.94%
US$ fixed at 5.24%
UK£ LIBOR + 1.44%
EURIBOR + 1.69%
EURIBOR + 1.70%
EURIBOR + 1.75%
As detailed in the table above, the 2009 USPP cross currency swaps converted an amount of US dollar borrowings into a €147.0m
floating rate euro liability. To mitigate exposure to changes in euro interest rates on this liability, €75.0m of interest rate swaps were
transacted. These swaps do not form part of an effective hedge relationship.
98 Britvic plc Annual Report 2012
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business review
governance
financial statements
financial statements
shareholder information
10. Interest-bearing loans and borrowings continued
2010 Notes
On 17 December 2010, the Company issued US$163m and £7.5m of Senior Notes in the United States Private Placement market (‘the
2010 Notes’). The 2010 Notes are additional borrowings to the 2007 Notes and the 2009 Notes.
Britvic plc makes semi-annual interest payments in US dollars and sterling under these notes. The 2010 Notes are unsecured and rank
pari passu in right of repayment with other senior unsecured indebtedness of the Group.
In order to manage foreign exchange risk, interest rate risk and to ensure an appropriate mix of sterling and euro funding, the Company
has entered into a number of cross currency interest rate swaps. The 2010 Notes were swapped into a mix of fixed and floating rate
sterling and euro liabilities through a series of US dollar to sterling and sterling to euro swap instruments. These cross currency swap
contracts have the same duration and other critical terms as the relevant borrowings they hedge and are designated as part of effective
hedge relationships.
The amount, maturity and interest terms of the 2010 Notes are shown in the table below:
Series
A
B
C
D
Tranche
7 year
7 year
Maturity date
17 December 2017
17 December 2017
10 year
17 December 2020
12 year
17 December 2022
Amount
£7.5m
US$25m
US$25m
US$37m
US$23m
US$10m
US$18m
US$25m
Interest terms
Swap terms
UK£ fixed at 3.74%
US$ fixed at 3.45%
US$ fixed at 3.45%
US$ fixed at 4.04%
US$ fixed at 4.04%
US$ fixed at 4.04%
US$ fixed at 4.14%
US$ fixed at 4.14%
N/A
UK£ fixed 3.85%
€ fixed 3.34%
UK£ LIBOR +1.24%
€ fixed 3.85%
UK£ fixed 4.49%
UK£ LIBOR +1.18%
€ fixed 3.97%
Covenants on all Notes include a term which states that Britvic plc must offer to repay the Notes should a change in control of the
Group occur which results in a downwards movement in the credit rating as defined in the Note purchase agreement.
11. Other financial asset and financial liabilities
Other financial assets
Cross currency interest rate swaps relating to the 2007 Notes
Cross currency interest rate swaps relating to the 2009 Notes
Cross currency interest rate swaps relating to the 2010 Notes
Other financial liabilities: Current
Forward rate agreements
Foreign exchange swaps
Other financial liabilities: Non-current
Cross currency interest rate swaps relating to the 2010 Notes
Interest rate swap
12. Other non-current liabilities
Firm commitment
A firm commitment exists in respect of the receipt of the 2009 and 2010 Notes.
2012
£m
49.9
38.2
4.0
92.1
-
(0.2)
(0.2)
(5.0)
(3.6)
(8.6)
2012
£m
1.9
2011
£m
61.6
30.2
1.2
93.0
(0.1)
-
(0.1)
(2.4)
(1.4)
(3.8)
2011
£m
1.9
Britvic plc Annual Report 2012
99
financial statements
notes to the company financial statements continued
overview
13. Issued share capital
The issued share capital as at 30 September 2012 comprised 242,344,551 ordinary shares of £0.20 each (2011: 241,400,052 ordinary
shares), totalling £48,468,910 (2011: £48,280,010).
The ordinary shares carry voting rights of one vote per share. There are no restrictions placed on the distribution of dividends, or the
return of capital on a winding up or otherwise.
Issued, called up and fully paid ordinary shares
242,344,551 (2011: 241,400,052) ordinary shares of £0.20 each
2012
£m
2011
£m
48.5
48.3
Share issues in the current and prior periods relating to incentive schemes for employees are detailed below:
52 weeks ended 30 September 2012
No of shares
issued
Value
£
6 December 2011
14 December 2011
8 February 2012
10 February 2012
15 February 2012
27 March 2012
5 September 2012
11 September 2012
19 September 2012
26 September 2012
52 weeks ended 2 October 2011
2 December 2010
15 December 2010
23 December 2010
4 February 2011
1 April 2011
8 April 2011
12 May 2011
27 June 2011
27,148
500,000
32,577
14,116
31,204
48,912
46,805
24,660
19,077
200,000
944,499
No of shares
issued
12,244
122,449
21,974
300,000
32,013
484,343
20,851
500,000
1,493,874
5,430
100,000
6,515
2,823
6,241
9,783
9,361
4,932
3,815
40,000
188,900
Value
£
2,449
24,490
4,395
60,000
6,402
96,868
4,170
100,000
298,774
Of the issued and fully paid ordinary shares, 217,994 shares (2011: 258,683 shares) are treasury shares. This equates to £43,599 (2011:
£51,737) at £0.20 par value of each ordinary share. These shares are held for the purpose of satisfying the share schemes detailed in
note 28 of the consolidated financial statements.
100 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
financial statements
shareholder information
14. Reconciliation of movement in equity shareholders’ funds
At 2 October 2011
Loss for the year
Issue of shares
Own shares utilised for share schemes
Own shares purchased for share
schemes
Movement in share based schemes
Movement in cash flow hedges
Payment of dividend
Issued
share
capital
£m
48.3
-
0.2
-
-
-
-
-
Share
premium
account
£m
15.0
-
2.7
-
-
-
-
-
At 30 September 2012
48.5
17.7
15. Dividends paid and proposed
Own
shares
reserve
£m
Share
scheme
reserve
£m
Hedging
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
(1.0)
-
(2.4)
11.9
(9.3)
-
-
-
(0.8)
7.8
-
-
(5.6)
-
2.0
-
-
4.2
10.8
-
-
-
-
-
(4.4)
-
6.4
87.3
-
-
-
-
-
-
-
87.3
140.8
(25.3)
-
(2.0)
-
-
-
(42.5)
71.0
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2011: 12.6p per share (2010: 12.0p per share)
Interim dividend for 2012: 5.3p per share (2011: 5.1p per share)
Dividends paid
Proposed
Second interim dividend in lieu of final dividend for 2012: 12.4p per share
(2011: 12.6p per share)
2012
£m
29.9
12.6
42.5
30.1
Total
£m
309.0
(25.3)
0.5
4.3
(9.3)
2.0
(4.4)
(42.5)
234.3
2011
£m
28.3
12.0
40.3
29.9
In addition, as disclosed on 14 November 2012, the board has proposed a special interim dividend of 10.0p per share, conditional upon
the merger with AG Barr p.l.c. becoming effective, in lieu of the dividend in relation to the period from 1 October 2012 until the effective
date, and in recognition of the combined group’s dividend policy. This will be paid after the effective date to shareholders on the register
at the scheme record time.
16. Contingent liabilities
The Company is co-guarantor of the Group’s bank loan and overdraft facilities.
17. Related party transactions
The Company has taken advantage of the exemption under FRS 8 available to a parent company not to disclose transactions with
its wholly owned subsidiaries within its financial statements.
Britvic plc Annual Report 2012
101
shareholder information
overview
shareholder information
Shareholder profile as at 30 September 2012
Range of holdings
1 - 199
200 - 499
500 - 999
1,000 - 4,999
5,000 - 9,999
10,000 - 49,999
50,000 - 99,999
100,000 - 499,999
500,000 - 999,999
1,000,000 Plus
Category
Private individuals
Nominee companies
Limited and public limited companies
Other corporate bodies
Pension funds, insurance companies and banks
Number of
shareholders
Percentage
of total
Ordinary
shareholders
shares (million)
Percentage
of issued share
capital
196
289
406
1,086
237
169
54
105
20
53
2,615
7.50%
11.05%
15.53%
41.53%
9.06%
6.46%
2.07%
4.02%
0.76%
2.03%
13,472
94,582
281,745
2,307,659
1,526,676
3,731,201
3,837,528
24,943,862
14,866,174
190,741,652
0.01%
0.04%
0.12%
0.95%
0.63%
1.54%
1.58%
10.29%
6.13%
78.71%
100.00%
242,344,551
100.00%
Number of
shareholders
Percentage
of total
Ordinary
shareholders
shares (million)
Percentage
of issued share
capital
1,780
745
24
62
4
2,615
68.07%
28.49%
0.92%
2.37%
0.15%
6,054,340
218,362,318
11,161,974
6,715,090
50,829
2.50%
90.10%
4.60%
2.77%
0.02%
100.00%
242,344,551
100.00%
Recommended all-share merger with A.G. Barr p.l.c.
The full text of the announcements and all other information and
documents relating to the merger process will remain available
during the course of the offer period on our website at http://ir.
britvic.com. Shareholders may request a hard copy of all
announcements and documents in relation to the merger, free of
charge, by contacting the Company Secretary whose details are
below. The Shareholder Helpline in relation to the merger is 0871
384 2909 (UK callers) or +44 121 415 0196 (non-UK callers). Calls
to the 0871 number are charged as set out below. Please note that
Shareholder Helpline operators can not provide advice on the merits
of the merger, nor give financial, tax, investment or legal advice.
Dividend reinvestment plan (DRIP)
Shareholders can choose to reinvest dividends received to
purchase further shares in the company through the company’s
DRIP. A DRIP application form is available via the registrar or for
download from the company’s website http://ir.britvic.com/
shareholder-centre/dividends.aspx. Shareholders on the register on
7 December 2012 will be entitled to elect to reinvest the proposed
second interim dividend in accordance with the company’s DRIP.
However, the option to reinvest the proposed special interim
dividend, which is conditional upon the completion of the merger
and will be payable after the date on which the merger becomes
effective, will not be available to shareholders.
Dividend mandates
Shareholders who wish dividends to be paid directly into a bank or
building society account should contact the Registrar for a dividend
mandate form or the form can be downloaded from the company’s
website http://ir.britvic.com/shareholder-centre/dividends.aspx. This
method of payment removes the risk of delay or loss of dividend
cheques in the post and ensures that your account is credited on
the due date. All mandates and other instructions to the company in
force in relation to the company’s shares at the time of the merger
shall, unless and until revoked or amended, be deemed as from the
date the merger becomes effective, be valid and effective mandates
and instructions to A.G. Barr p.l.c. in relation to the A.G. Barr p.l.c.
shares issued in respect thereof.
Share dealing services
The company’s registrar, Equiniti Financial Services Limited, offer a
telephone and internet dealing service, Shareview, which provides a
simple and convenient way of buying and selling shares. For telephone
dealings call 08456 037 037 between 8.00am and 4.30pm, Monday
to Friday, and for internet dealings log onto www.shareview.co.uk/
dealing Shareholders should note the indicative last day of dealings
in, and for registration of transfers of, and disablement in CREST of,
shares in the company which will be set out in a circular being sent
shortly to shareholders in relation to the merger.
102 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
shareholder information
shareholder information
Individual savings accounts (ISAs)
ISAs in Britvic plc ordinary shares are available through Equiniti
Financial Services Limited. Further information may be obtained
through their ISA Helpline, telephone 0845 300 0430.
Financial calendar
Ex-dividend date
Record date
Annual general meeting1
Payment of second interim dividend
in lieu of final dividend2
5 December 2012
7 December 2012
18 January 2013
Interim results announcement3
May 2013
1 In light of the merger the board has agreed to defer for the time being the next
AGM which ordinarily would have been held in January 2013.
2 In addition to the second interim dividend, the board has proposed a special
interim dividend conditional upon completion of the merger and will be payable
after the date on which the merger becomes effective.
3 Only if the merger has not completed by this time.
Electronic communications
Shareholders can elect to receive shareholder documents electronically
by registering with Shareview at www.shareview.co.uk. This will
save on printing and distribution costs, creating environmental
benefits. When you register, you will be sent an email notification to
say when shareholder documents are available on our website and
you will be provided with a link to that information. When registering,
you will need your shareholder reference number which can be found
on your share certificate or a proxy form. Please contact Equiniti if
you require any assistance or further information.
Contacts
The company secretary is Clare Thomas. The registered office is
Breakspear Park, Breakspear Way, Hemel Hempstead, Hertfordshire
HP2 4TZ, telephone +44 (0)1442 284411, fax +44 (0)1442 284402,
website www.britvic.com. Shareholder inquiries to the Company
Secretary may also be submitted to company.secretariat@britvic.co.uk
This report is available to download via the company’s website
http://ir.britvic.com/results-and-presentations/results-and-
presentations/2012.aspx
The company’s registrar is Equiniti, Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA, telephone 0871 384 2550* (UK
callers), +44 121 415 7019 (non- UK callers).
* For those with hearing difficulties, a textphone is available on 0871 384 2255
for UK callers with compatible equipment. Calls to 0871 numbers are charged
at 8p per minute from a BT landline. Other telephony provider costs may vary.
Britvic plc Annual Report 2012
103
Cautionary note regarding forward-looking statements
This announcement includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially
different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as
required by the Listing Rules and applicable law, Britvic undertakes no obligation to update or change any forward-looking statements
to reflect events occurring after the date such statements are published.
Definitions
1. All numbers and comparisons are quoted before exceptional and other items unless otherwise stated. Volume and ARP (average
realised price) are adjusted for the impact of double concentrate on Robinsons and MiWadi to provide a meaningful comparison and
comparisons are on a constant currency basis. Numbers not adjusted for double concentrate are available at the Investor Centre
‘Results and Presentations’ section on the Britvic Investor Relations website at www.britvic.com.
2. Constant currency growth removes the impact of exchange rate movements during the period by retranslating prior year foreign
currency denominated results of the group at current period exchange rates.
3. EBITA is defined as operating profit before exceptional and other items and amortisation. Only amortisation attributable to intangibles
on acquisition is added back, in the period this is £2.9m (2011: £3.1m AER). EBITA margin is the EBITA number as a proportion of
group revenues.
4. Adjusted earnings per share amounts are calculated by dividing adjusted earnings by the average number of shares during the period.
Adjusted earnings is defined as the profit/(loss) attributable to ordinary equity shareholders before exceptional and other items
adjusted for the adding back of acquisition related amortisation. Average number of shares during the period is defined as the
weighted average number of ordinary shares outstanding during the period excluding any own shares held by Britvic that are used to
satisfy various employee share-based incentive programmes. The weighted average number of ordinary shares in issue for adjusted
earnings per share for the period was 241.6m (2011: 240.4m).
5. Underlying free cash flow is defined as net cash flow excluding movements in borrowings, dividend payments, exceptional and
other items.
6. Group adjusted net debt is defined as group net debt, adding back the impact of derivatives hedging the balance sheet debt.
7. Underlying return on invested capital (ROIC) - ROIC is defined as operating profit after applying the tax rate for the period, stated
before exceptional and other items, as a percentage of invested capital. Invested capital is defined as non-current assets plus current
assets less current liabilities, excluding all balances relating to interest bearing liabilities and all other assets or liabilities associated
with the financing and capital structure of the group and excluding any deferred tax balances and effective hedges relating to
interest-bearing liabilities. The ROIC has been re-stated for prior year as it now includes the reduction in the asset base taken in
Ireland 2010 and the results and assets of Britvic France, both of which were previously excluded from the measure to ensure a like
for like comparison.
8. “Effective Date” the date upon which the Merger becomes Effective, “Effective” in the context of the Merger:
a) if the Merger is implemented by way of the Scheme, the Scheme having become effective pursuant to its terms; or
b) if the Merger is implemented by way of a Merger Offer, such Merger Offer having been declared and become unconditional
in all respects in accordance with the requirements of the Code.
9. “ Scheme Record Time” - the time and date specified in the Scheme Document expected to be 6.00 p.m. on the business day
immediately prior to the date of the Court Hearing.
All numbers in this announcement other than where stated or included within the financial statements are disclosed before exceptional
and other items.
The auditors have reported on the 2012 and 2011 accounts. Their reports for both years were unqualified and did not contain statements
under section 498 (2) or (3) of the Companies Act 2006.
104 Britvic plc Annual Report 2012
overview
business review
governance
financial statements
shareholder information
01 Our performance
02 Britvic at a glance
03 Our people
03 Strategy for growth
24 Board of directors
26 Directors’ report
30 Corporate
governance report
35 Directors’
remuneration report
04 Chairman’s
statement
06 Chief executive’s
review
08 Financial review
17 Corporate
responsibility
18 Business resources
20 Risks and
uncertainties
102 Shareholder profile
and information
ibc Cautionary statement
44 Independent
auditors’ report to the
members of Britvic plc
45 Consolidated
income statement
46 Consolidated
statement of
comprehensive
income
47 Consolidated
balance sheet
48 Consolidated
statement of cash
flows
49 Consolidated
statement of changes
in equity
50 Notes to the
consolidated financial
statements
93 Independent auditors’
report to the members
of Britvic plc
94 Company
balance sheet
95 Notes to the company
financial statements
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The paper used in this production is made from 100% recycled waste
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Britvic plc
Breakspear Park
Breakspear Way
Hemel Hempstead
HP2 4TZ
Tel: +44 (0)121 711 1102
www.britvic.com