annual report 2013
contents
overview
01 Performance at a glance
02 Britvic at a glance
04 Our people
04 Strategy for growth
business review
06 Chairman’s statement
08 Chief Executive Officer’s strategic review
10 Chief Financial Officer’s review
17 Business resources
19 Risks and uncertainties
governance
25 Corporate governance report
26 Board of Directors and Company Secretary
33 Audit Committee report
35 Nomination Committee report
36 Directors’ remuneration report
56 Directors’ report
59 Statement of directors’ responsibilities
Independent auditor’s report to the members of Britvic plc
financial statements
63
65 Consolidated income statement
66 Consolidated statement of comprehensive income
67 Consolidated balance sheet
68 Consolidated statement of cash flows
69 Consolidated statement of changes in equity
70 Notes to the consolidated financial statements
111 Independent auditor’s report to the members of Britvic plc
112 Company balance sheet
113 Notes to the company financial statements
shareholder information
120 Shareholder information
122 Cautionary statement
overview
performance at a glance* continued
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 franchising,
export and licensing, Britvic has also been growing its reach into other territories, particularly 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.
Its market capitalisation at 27 September 2013 was £1,398 million.
performance at a glance*
group revenue
group ebita
group ebita margin
£1,321.9m £137.9m 10.4%
+18.4%
+4.4%
+120bps
2012 £1,256.4m
2012 £115.6m
2012 9.2%
underlying roic*
20.7%
+430bps
2012 16.4%
adjusted earnings
per share
35.2p
+27.7%
2012 27.2p
dividend per share
18.4p
+4.0%
2012 17.7p
* All numbers, other than where stated or included within the financial statements, are disclosed before exceptional and other items and are
expressed on a constant currency basis. A list of definitions can be found on page 122 of the annual report.
Reconciliation from actual exchange rate to constant exchange rate
Group Revenue
Group EBIT
Group EBITA (3)
Adjusted Earnings Per Share (4)
2012 actual
exchange rate £m
1,256.4
112.7
115.6
27.2p
Change
£m
9.4
0.9
1.0
0.4p
2012 constant
exchange rate £m
1,265.8
113.6
116.6
27.6p
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Britvic plc Annual Report 2013business reviewfinancial statementsshareholder informationgovernance overview
Britvic at a glance
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Britvic plc Annual Report 2013 overview continued
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3
Britvic GB
Britvic Ireland
Britvic France
Distribution via Britvic International
Britvic-owned brand agreements
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance
overview
our people
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, talent management and providing
learning and development programmes across all our geographies.
We have embarked on inspiring all our employees across our entire
business in our new Britvic plc purpose, vision and values and we
expect this to further drive engagement and motivation.
strategy for growth
Our vision for Britvic is to become one of
the most admired soft drinks businesses
in the world.
Our new strategy is designed to realise that ambition and capitalise
on the many opportunities available to our business.
• Becoming the benchmark branded soft drinks business
for both PepsiCo and our own brands in GB & Ireland
In our core markets, we will continue to build a company that is
acknowledged for commercial excellence, efficient operations
and the strength and breadth of our brand portfolio, both our own
brands and PepsiCo’s. We will maintain a dedicated commercial
focus in both countries, but will combine support functions to
maximise efficiencies.
• Fully exploiting global category opportunities in the kids,
family and adult categories
We will build on the strength of our own brands in these categories,
in particular Fruit Shoot, Robinsons and Teisseire, and leverage
them internationally. We will launch them in countries where we
believe they have real potential to succeed and a dedicated
International business unit will work with local partners, through
franchise, distribution or licensing agreements, to ensure an
asset-light and low risk approach to growth.
• Creating a simple focused operating model, empowering our
people and matching resource and capability to the growth
opportunities
Delivery of the strategy requires a simpler, more focused and
accountable organisational structure. Resources will be aligned
against the growth opportunities and we will create a lower cost
and more efficient business.
• Being a trusted and respected member of the communities
in which we operate
We will deliver a strong performance with integrity,
acknowledging the responsibility we have to contribute to our
local economies and society more broadly. Corporate social
responsibility and sustainability will be fully embedded in our
business.
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Britvic plc Annual Report 2013 overview our people continued
business
review
06 Chairman’s statement
08 Chief Executive Officer’s strategic review
10 Chief Financial Officer’s review
17 Business resources
19 Risks and uncertainties
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverviewshareholder information
business review
chairman’s
statement
In July, we finally received clearance from the Competition
Commission for the merger with AG Barr plc to take place. However,
by then our fortunes had changed so substantially that we were
unable to agree new mutually acceptable terms. The board decided
that a future independent of AG Barr plc, implementing the new
team’s plans, was preferable to merging on the terms that were
available.
We have seen the progress we have made reflected in strong
share price growth, with the share price recovering from a low of
249p at the time of the Fruit Shoot recall to end the year at 575p.
Britvic has undergone significant change in the past year and the
board and I have been hugely impressed by the commitment of
the Britvic team, at what has been a challenging time for our
employees. We have every confidence in the future prospects of
the business and believe that, under Simon’s leadership, we will
see sustainable profit growth and the creation of meaningful
shareholder value in the coming years.
Reflecting this confidence and the continued strong cash generation,
we are proposing a final dividend of 13.0p pence per share, an
increase on the previous year of 4.8%, making the full year increase
in the dividend 4%.
As part of the board’s on-going development and desire to support
the company in executing the new strategy, I can report that the
board is seeking to make further changes to its composition. During
the next 12 to 18 months two of our Non-Executive Directors, Bob
Ivell and Michael Shallow, move closer to a nine year tenure from
the date of their first election by shareholders in 2007 and therefore
the end of their term of office. More details in relation to the board’s
succession plans are set out in the Corporate Governance Report
on page 35. As in previous years, all of our directors will retire at
the AGM and, being eligible, will offer themselves for re-election.
The AGM will be held at 11am on Wednesday, 29 January 2014
at Nomura, 1 Angel Lane, London EC4R 3AB and I look forward
to seeing you there.
Gerald Corbett
Chairman
Dear Shareholder
The last twelve months have been the most
eventful in Britvic’s time as a public company.
We began the year having agreed an all-share
equity merger with AG Barr plc. We ended
the year remaining independent, with a new
Chief Executive Officer, Simon Litherland,
at the helm, with a new strategy and a
significant turnaround in our share price
performance. Group EBIT grew by 18.8% on
a constant currency basis to £135m and
adjusted earnings per share rebounded by
27.5% to 35.2p per share.
The merger with AG Barr plc was conceived against the backdrop
of the Fruit Shoot recall of July last year, which cost the company
£25m. The combination of Britvic and AG Barr plc and the associated
synergies was welcomed by our shareholders, who overwhelming
voted in favour of the merger.
However, the proposed deal lapsed in February of this year, when
the Office of Fair Trading referred the deal to the Competition
Commission. With the OFT referral, Paul Moody, our Chief Executive
at the time, retired from Britvic. Paul had spent some 16 years with
the business, including seven years on the board, during which
time the company grew substantially and overall delivered
significant shareholder value. On behalf of the board, I would like
to thank Paul for the dedication and professionalism he showed
during his tenure and wish him all the best for the future.
Simultaneously to Paul’s departure, the board appointed Simon
Litherland as our new Chief Executive Officer. Simon had joined us
the previous year, as part of our succession planning, from Diageo
plc and had spent a busy year heading up our GB business. With
the outcome of the merger unknown whilst the Competition
Commission carried out their investigation, Simon set about
defining a new strategy and organisational model for Britvic, with
a net investment of £40m underpinning annual costs saving of
£30m by 2016.
The response to this new strategy, which was shared at our interim
results in May, has been overwhelmingly positive. With a new
strategy and leadership team in place, we have seen a turnaround
in the fortunes of the business. Fruit Shoot has enjoyed a strong
recovery since the recall, avoiding long-term damage to the brand.
Our international growth opportunities gained momentum with new
agreements in Spain and India for Fruit Shoot and a step-change
for the brand in the USA, with distribution into 32 states. Our
businesses in France and Ireland also significantly improved their
performance and the whole company benefited from the warm
summer, as well as a number of the programmes Simon had initiated.
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverviewshareholder information
business review
chief executive
officer’s
strategic review
We have reported a strong set of results for
our financial year ending 29 September 2013.
As well as an improvement in the underlying
performance of the business, we have made
good progress on both the strategic initiatives
we announced in May and on the international
growth opportunities of our brands.
Performance highlights
Although market conditions remained difficult in each of our
business units, we saw some notable successes across the
business and benefitted from the warm weather, with an
exceptionally hot July.
• In GB stills, Fruit Shoot has recovered from the impact of the recall
in July 2012 with its take-home market share at the end of the
financial year back to pre-recall levels. Brand perception measures,
such as “brand you love” and “happy to give to your child”,
recovered from the low point of 2012.
• In GB carbonates, in a particularly competitive environment, we
protected our volume whilst growing both price and revenue. Pepsi
gained market value share, building on its share gains in 2012.
• Our International business unit and our franchising model
gained further momentum. Earlier in the year we announced that
distribution would be expanded to 32 states in the USA in time
for the summer. In addition we saw Fruit Shoot roll-out nationally
in Spain with Pepsi South West Europe. In India we remain
on-track to produce Fruit Shoot in-market by mid-2014 through
the distribution agreement with the Narang Group.
• In France, our syrups brands continued to perform well and
gained further market share. Fruit Shoot successfully returned to
the market and is performing ahead of where it was pre-recall.
• In Ireland, our own brands increased market share, despite
the difficult trading conditions in that market.
Towards the end of the financial year market performance was
more subdued across all business units, for example, in GB in
September take-home market volumes were down 1.2%.
A new strategy for the business
In May I communicated that Britvic has the potential to become
one of the most admired soft drinks businesses in the world by:
• Becoming the benchmark integrated branded soft drinks
business for both PepsiCo and our own brands in GB & Ireland.
• Fully exploiting global category opportunities in kids, family
and adult.
• Creating a simple focused operating model, empowering our
people and matching resource and capability to the opportunities
and:
• Being a trusted and respected member of the communities in
which we operate.
To achieve this vision we set out a new strategy to drive market
leading profit growth underpinned by margin enhancing revenue
growth. The strategy has two parts, firstly our full portfolio markets
of GB and Ireland and secondly the International and France
business where we will leverage our category leadership of kids,
family and adult categories. Further details of the strategy can be
found on page 4 of the annual report.
Delivery of the strategy requires a new streamlined organisation
structure based on three clear principles: simplicity to reduce
complexity, enabling faster decision making and a lower cost
operating model; focus against fewer strategic priorities matching
resources and capability to execute better and; accountability
ensuring we have clear ownership to deliver the performance.
We have announced our new operating model and appointed
our senior leadership and management teams.
The restructuring of our GB and Ireland teams is due to be largely
completed by quarter two 2014. We are now working hard to
simplify our internal ways of working across all functions and
will continue to fully support all employees impacted by change,
including those in the supply chain who will leave the business
between February and May 2014, or relocate between sites
following the closure of Chelmsford & Huddersfield.
We also announced that we would deliver £30m of annualised
cost savings by 2016, of which £25m would be realised by 2015.
Of these savings we intend to reinvest a net £10m into the
International business. We are on track to achieve these savings
and the phasing that we outlined at the interims with the
announcement of the new strategy.
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Britvic plc Annual Report 2013 chief executive officer’s strategic review continued
Strategic initiatives update
1. Increase operational leverage through fewer manufacturing
sites by redistributing capacity, reducing the cost base and
improving our asset utilisation
- Production to end in Huddersfield and Chelmsford by March 2014
- Ballygowan becomes the single water brand for GB and Ireland
in spring 2014
- Achieved a 7% reduction in the number of production lines
2. Fundamentally change the Irish operating model
- Combined senior leadership team for GB and Ireland appointed
- Belfast warehouse closed November 2013
- Licensed wholesale separated from the core business
3. Transform our procurement and product optimisation
initiatives
- Increased investment in people, systems and insight
- Implemented a strategic sourcing programme for key raw
materials, such as juice
- Consolidated the indirect supplier base in GB by 16% and
Ireland by 29%
4. Implement a commercial change programme in GB
to ensure our brands deliver strong and profitable
revenue growth
- Developing a stronger partnership with intermediaries and
direct customers to deliver a more efficient and profitable
route to market solution
- Moved from three to two sales channels
- Improving our end-outlet contact model
International update
Our International business progressed well this year with a number
of significant developments:
• In the USA we saw distribution for Fruit Shoot grow to 32 states
following further expansion with PepsiCo Americas Beverages
(PAB) and a new agreement with the independent bottler,
Pepsi Cola Bottling Company of Pittsburgh.
• An agreement with PepsiCo South West Europe for the national
distribution of Fruit Shoot in Spain.
• A distribution agreement for Fruit Shoot with the Narang Group
will see the brand available to consumers in India mid-2014.
• The establishment of a management team and fully resourced
business unit to drive our international expansion.
• We have announced further material developments in
the USA with the signing of a long term exclusive bottling
agreement with PAB, for both expanded distribution and
additional manufacturing capacity. This will see Fruit Shoot
available in 41 states next year.
Being trusted and respected in our communities
Acknowledging the need to further incorporate the principles of
corporate responsibility into the core of our business, in 2012 our
Executive Team approved a new sustainable business strategy. This
ensures that Britvic is well placed to address the key social and
environmental risks facing us, including public health and responsible
resource use, and acts on the opportunities that give us a business
advantage. Finally, we aim to positively contribute to the communities
on which we impact – whether that’s our employees, our consumers
or the local geographies where we have a physical presence. In
addition we recognise our impact on global communities, particularly
those from which we source ingredients and all our direct suppliers
are required to adhere to our ethical trading policy.
Full details of our sustainable business programme and the progress
we have made can be found in the annual Sustainable Business
Report. This can be downloaded from the results and presentation
section of the website (www.britvic.com) or a hard copy can be
requested by writing to:
The Director of Corporate Affairs
Britvic plc
Breakspear Park
Hemel Hempstead
HP2 4TZ
We recognise that the diversity of our workforce is important to
the success of the business and the board will be taking steps to
address this. In 2013, women comprised 15% of our board and
Executive Team membership, 27% of senior managers and 31%
of total employees. There is currently one female on the Britvic plc
board and a female General Counsel and Company Secretary.
The organisation has faced a year of uncertainty, firstly with the
aborted merger and then with the focus on implementing the new
strategy. The commitment and the passion shown by the Britvic
team has been outstanding. In 2014 we will continue to implement
our new strategy and we have comprehensive plans across the
group to drive growth, including new innovation for Robinsons with
“Squash’d”, Fruit Shoot partnering with Angry Birds, Teisseire
sponsoring the Tour De France and Pepsi will bring football to life in
its unique way. We recognise that there is a further period of change
for our people, as we continue to implement our new operating
model and change the way we work and that the external consumer
environment will continue to be challenging.
However, I am confident that with the team we have, our portfolio
of great brands and our strong plans, we will continue to prosper
and realise our ambition to be one of the world’s most admired soft
drinks businesses.
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Simon Litherland
Chief Executive Officer
Britvic plc Annual Report 2013
9
business reviewgovernancefinancial statementsoverviewshareholder information
business review
chief financial officer’s
review
Overview
In the period, total group volumes (excluding factored products in
Ireland) were 2,066.9m litres, down 0.4% on 2012, as a result of
the reduced supply of Fruit Shoot at the start of the financial year.
Average realised price grew by 5.4% and revenue of £1,321.9m
was ahead of last year by 4.4% on a constant currency basis.
The group focused on building sustainable profit and margin
improvement. Significant progress was achieved against this
objective with all business units delivering pricing and brand
contribution margin growth. As a result, group EBITA was up
18.4% to £137.9m and EBITA margin increased by 120bps to
10.4%. This includes the remaining £8m cost of the Fruit Shoot
recall that occurred in July 2012 which was accounted for as an
operating cost.
We have maintained a disciplined approach to improving free cash
flow generation and this has led to a strong improvement in free
cash flow of 66.7% (£103.5m inflow) versus the prior year, leading
to a further reduction in adjusted net debt of 9.9% to £402.3m. As
a result, the business saw a significant deleverage with the adjusted
net debt to EBITDA ratio falling to 2.2X from 2.8X last year, thereby
already achieving the target we set for 2014.
The following is based on Britvic’s results for the 52 weeks ended
29 September 2013 *
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, excluding factored brands.
• Average Realised Price (ARP) – average revenue per litre sold,
excluding factored brands.
• 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 materials, 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.
• EBITDA – is defined as earnings before interest, tax, depreciation,
amortisation, profit or loss on disposal of tangible and intangible
assets, and exceptional and other items.
• 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 EBITA 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) – 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.
* Refer to definitions 1 and 2 on page 122
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Britvic plc Annual Report 2013 chief financial officer’s review continued
overview our people continued
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverviewshareholder information
chief financial officer’s review continued
GB stills
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
% change
actual exchange rate
398.7
85.3p
340.1
154.5
45.4%
402.9
79.8p
321.7
141.2
43.9%
(1.0)
6.9
5.7
9.4
150bps
Full year volume was down 1.0%, reflecting the limited availability
of Fruit Shoot earlier in the year. Supply returned to historical levels
in January 2013 with a phased return of promotional activity in
quarter two. Fruit Shoot has now returned its take-home market
share to pre-recall levels and its brand perception measures are
strong. Robinson’s double concentrate continued to grow with the
introduction of the 500ml pack this year. J2O also grew this year, in
part helped by the warm weather this summer which had a positive
impact on both at-home social occasions and casual dining in the
pub and club channel.
Brand contribution margin was up by 150 basis points in the year.
The growth in margin was due to a combination of effective
promotional management and positive product mix which drove the
strong ARP growth, as well as lower raw material cost inflation.
GB carbonates
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
% change
actual exchange rate
1,153.9
46.5p
536.4
200.1
37.3%
1,154.1
44.9p
517.9
188.7
36.4%
0.0
3.6
3.6
6.0
90bps
In what was a competitive environment, we maintained our volume
position and grew ARP, leading to revenue growth of 3.6%. Following
our 2012 Olympic year share gains in carbonates, and especially on
Pepsi, we are delighted that we have successfully held take-home
market volume share and gained market value share.
Brand contribution was up 6.0%, with a 90bps margin improvement.
This was as a result of both the focus on revenue and promotional
management as well as the strong performance of the Impulse
channel which benefited our overall mix.
International
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
% change
actual exchange rate
37.7
99.5p
37.5
14.1
37.6%
38.2
76.8p
29.3
8.3
(1.3)
29.6
28.0
69.9
28.3%
930bps
Note: Concentrate sales revenues are included in both revenue and ARP but do not have any associated volume
International delivered strong growth in both ARP and revenue, with
volumes declining by 1.3%. The volume decline reflected the switch
to a concentrate model for the US Fruit Shoot business that impacted
the first half of the year. In addition, we saw some volume loss as
a result of price increases on some low margin export volumes. This
volume loss was offset by the growth of more profitable Fruit Shoot
volume into Belgium and the Netherlands. Fruit Shoot has returned
successfully in these markets and is performing ahead of where it
was pre-recall.
The ARP growth of 29.6% in part reflects the growth of Fruit Shoot
concentrate sales in the U.S. where we saw distribution in 32 states
ahead of the summer period. Today we are also announcing a new
agreement with PepsiCo Americas Beverages for a long-term
exclusive bottling agreement that will see Fruit Shoot distribution
expand to 41 states during 2014.
12
Britvic plc Annual Report 2013 chief financial officer’s review continued
Ireland
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
% change
actual exchange rate
% change
constant exchange rate
199.0
56.8p
136.9
49.0
35.8%
201.3
54.3p
138.7
44.6
32.2%
(1.1)
4.6
(1.3)
9.9
(1.1)
2.3
(3.5)
7.2
360bps
360bps
Note: Volumes and ARP include own-brand soft drinks sales and do not include factored product sales included within total revenue and brand contribution.
The underlying market conditions remained difficult in Ireland
throughout 2013. In the second half of the year we saw a tangible
benefit from the warm weather in July and August whilst the
market in September was much more subdued. Over the year, we
grew take-home market value share with a minimal loss of volume
share, reflecting our focus on revenue management. The decline in
the licensed wholesale business was the driver of the 3.5%
revenue decline and more than offset the revenue growth in the
core branded business. The licensed wholesale business margin is
materially lower than the core branded business which, as a result,
had a positive mix impact on brand contribution and margin.
France
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
% change
actual exchange rate
% change
constant exchange rate
277.6
97.6p
271.0
67.9
25.1%
278.3
89.4p
248.8
59.2
23.8%
(0.3)
9.2
8.9
14.7
(0.3)
6.4
6.2
11.5
130bps
120bps
In France, we saw a marginal volume decline of 0.3%, reflecting
the limited availability of Fruit Shoot earlier in the year. The syrups
portfolio continued to perform well, gaining market share and
benefiting from the warm weather in quarter four. Fruit Shoot is
ahead of where it was pre-recall and continued to grow throughout
the year, out-performing the kid’s category. As a result overall
revenue grew by 6.2% outperforming the total soft drinks market
which, as measured by IRI, grew value by 0.9%.
Fixed costs
Non-brand A&P
Fixed supply chain
Selling costs
Overheads and other
Total
Total A&P investment
A&P as a % of revenue*
* excludes 3rd party revenue
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
% change
actual exchange rate
(7.3)
(100.7)
(124.5)
(118.1)
(350.6)
(70.3)
5.4%
(7.8)
(100.3)
(118.0)
(103.2)
(329.3)
(62.5)
5.1%
6.4
(0.4)
(5.5)
(14.4)
(6.5)
(12.5)
(30)bps
Fixed costs were up by 6.5% this year and included the £8m
remaining costs associated with the recall of Fruit Shoot and the
cost of the expanded in-market team supporting our USA Fruit
Shoot business communicated last year. In addition “overheads
and other” included a provision for employee incentives triggered
by the relevant performance measure, compared to a zero
incentive payment in 2012.
A&P increased in both absolute terms, by £7.8m, and by 30bps as
a % of net revenue which is in line with the guidance we provided
at the interim results and is core to our strategy of reinvesting part
of our growth in margin to build stronger brand equity in the
medium term.
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverviewshareholder information
chief financial officer’s review continued
14
Britvic plc Annual Report 2013 Exceptional and other items
In the period, we accounted for a net charge of £25.5m of pre-tax
(£20.7m post tax) exceptional and other costs. These include:
• Corporate exceptional items of £9.6m costs, relating to advisory
fees regarding the aborted merger with AG Barr plc, in line with
previous disclosures.
• Corporate exceptional items of £23.5m, relating to the
implementation of the strategic cost initiatives announced at
interims in May. Cash related items totalled £10.6m with
non-cash, primarily factory closure write-off costs, of £12.9m
• Other fair value movements gain of £7.6m. Within exceptional
and other items we include the fair value movement of financial
instruments where hedge accounting could not be applied. This
was made up of two items, a number of share swaps to satisfy
our employee incentive share schemes and interest-rate swaps.
The cash costs of exceptional items in the period were £16.1m
made up of £1.5m from the previous year and £14.6m from the
current year.
Interest
The net finance charge before exceptional and other items for the
52 week period for the group was £26.9m compared with £28.3m
in the same period in the prior year, reflecting the lower debt
profile of the group.
Taxation
The tax charge before exceptional items was £25.5m which
equates to an effective tax rate of 23.6% (52 weeks ending 30
September 2012: 25.5%). The reduction in the effective tax rate
reflects the fall in the UK corporation tax rate, the revaluation of
deferred tax liabilities related to the pension funding partnership
and the impact of the mix of profits by business unit.
Earnings per share
Adjusted basic EPS for the period, excluding exceptional and other
items and acquisition related amortisation, was 35.2p, up 29.4%
on the same period last year of 27.2p.
Basic EPS (after exceptional and other items charges post-tax) for
the period was 25.5p compared with 23.8p for the same period
last year.
Dividends
The board is recommending a final dividend of 13.0p per share, an
increase of 4.8% on the dividend declared last year, with a total
value of £31.7m. The final dividend will be paid on 7 February 2014
to shareholders on record as at 6 December 2013. The ex-dividend
date is 4 December 2013.
chief financial officer’s review continued
Cash flow and net debt
Underlying free cash flow was a £103.5m inflow, a 66.7%
improvement compared to a £62.1m inflow the previous year.
Working capital saw a small outflow of £6m primarily as a result of
the stock build ahead of the closure of our two factories in GB and
the year-end being one day earlier than the end of the month,
whilst in other costs we saw a reduction in cash outflow during the
period as there was no requirement to purchase shares to satisfy
bonus schemes given the nil pay-out from December 2012.
Furthermore in other costs there was a cash inflow from the
exercise of options given the share price growth that the business
saw. Capital expenditure was lower than our previous guidance of
£40m to £50m, largely due to re-phasing into 2014. The pension
contributions increase was due to the planned £2.5m increase in
the GB defined benefits deficit contribution and the remainder of
the full impact of the Northern Ireland deficit payments which
started part way through the previous year. Overall adjusted net
debt came down by over £44m and took our leverage to 2.2X
EBITDA from 2.8X last year. The adjusted net debt (taking into
account the foreign exchange movements on the derivatives
hedging our US Private Placement debt) at 29 September 2013
was £402.3m, compared to 2012 of £446.7m.
Strategic cost savings
A dedicated project management office (PMO) has been
established to oversee both the delivery and tracking of the cost
and benefit analysis of the strategic initiatives that contribute to the
£30m cost savings and operating model design. The Programme
Change Director reports to both the Executive Team and the board
on a regular basis to update them on the associated revenue costs,
capital, exceptional items and risk.
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverviewshareholder information
chief financial officer’s review continued
Pensions
At 29 September 2013, the IAS19 pension deficit in respect of the
group defined benefit pension schemes was £19.3m (2012: net
deficit of £3.7m). This increase is predominately driven by changes
to the underlying market conditions on which the valuation
assumptions are based for the GB plan including a decrease in the
discount rate from 4.85% at 30 September 2012 to 4.55% at the
29 September 2013. The group principal pension scheme is the
Britvic Pension Plan which has both a defined benefit and defined
contribution section. The defined benefit section was closed to
new members on 1 August 2002, and closed to future accrual for
active members from 10 April 2011, with new members being
invited to join the defined contribution scheme. The actuarial
valuation as at 31 March 2013 is currently underway, and will be
completed by 30 June 2014. Paul Moody took early retirement on
26 February 2013. In accordance with agreed policy he chose to
receive the portion of his pension provided by the Britvic Executive
Top-up Scheme (BETUS) as a cash sum in April 2013. As a result of
this, a £0.5m gain has been recognised in exceptional and other
items in the income statement for the period. The amount
recognised during the year as an expense in relation to the group
defined contribution schemes was £11.4m (2012: £10.8m). For
further disclosure, please see note 22 to the financial statements.
John Gibney
Chief Financial Officer
Treasury management
The financial risks faced by the group are identified and managed
by a central treasury department, whose activities are carried out
in accordance with board approved policies and subject to regular
Audit and Treasury Committee reviews. The department does not
operate as a profit centre and no transaction is entered into for
trading or speculative purposes.
Key financial risks managed by the treasury department include
exposures to movements in interest rates and foreign exchange
whilst managing 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.
The group has £891m of committed debt facilities consisting of a
£400m bank facility which matures in 2016 and a series of private
placement notes with maturities between 2014 and 2022, providing
the business with a secure funding platform. At 29 September
2013, the group’s unadjusted net debt of £458.4m (excluding
derivative hedges) consisted of £1.0m drawn under the group’s
committed bank facilities, £547.3m of private placement notes,
£3.9m of accrued interest and £0.5m of finance leases, offset by
net cash and cash equivalents of £91.5m and unamortised loan
issue costs of £2.8m. After taking into account the element of the
fair value of interest rate currency swaps hedging the balance
sheet value of the private placement notes, the group’s adjusted
net debt was £402.3m which compares to £446.7m in 2012.
In November 2013, the group reached agreement with a number of
investors in the USA private placement market to raise an additional
$170.4m equivalent of funding for terms of between 7 and 12
years. This funding is subject to documentation and due diligence
which is scheduled to be completed in December 2013. Where
this funding is dollar-denominated this has been hedged using
cross-currency interest-rate swaps to meet the group’s desired
funding profile and to manage the associated foreign currency risk
to the profit and loss account. Further detail of the group’s financial
risk management objectives and policies can be found in note 24
of the consolidated financial statements.
16
Britvic plc Annual Report 2013 business review
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.
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.
• 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 brands. In France the portfolio includes the
leading syrup brand Teisseire as well as Moulin de Valdonne,
Pressade and Fruit Shoot.
• A successful long-standing relationship with PepsiCo that
resulted in the exclusive bottling agreement (EBA) being
renewed in GB 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 GB and
Ireland, access to all new carbonated drinks developed by
PepsiCo for distribution in GB and Ireland and, to support the
development of its carbonates offering, access to PepsiCo’s
consumer insight, 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.
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverview
18
Britvic plc Annual Report 2013 business review
risks and uncertainties
Risk management process
Britvic operates a robust risk management process that has been further strengthened over recent years.
There are fi ve stages to this process:
Risk identifi cation
Risk analysis
Risk mitigation
planning
Risk review
Risk monitoring
Risk identifi cation, analysis and mitigation planning is undertaken at
all levels of the business through functional and operational teams.
Each risk is assigned an owner at management level who has
responsibility for ensuring that appropriate actions are taken to
manage the risk. A dedicated Risk and Insurance Manager manages
and supports this process and owns the group-wide risk register.
Risks are regularly reviewed and monitored
by Business Unit or functional management
teams. The Executive Team review the major
risks across the group on a quarterly basis
to ensure that the management of these
risks has appropriate focus. The board
review these at least twice a year.
Principal risks
The principal risks that could potentially have a signifi cant impact
on our business in the future are set out below, together with the
actions we are taking to mitigate these.
Soft drinks market
The economic environment could reduce consumer spending
on our brands
Risk: Whilst our products are relatively low value goods, they are
non-essential items. Pressure on consumer spending could reduce
spend on our products, or they may switch to cheaper non-branded
alternatives.
Mitigation: The soft drinks category has proven to be reasonably
resilient and we offer a range of everyday value products to meet
the consumer need for reduced spending. We understand what
the consumer wants and develop products designed to meet their
spending requirements.
A change in consumer preferences could reduce sales of our
brands
Risk: Consumer preferences evolve over time and in the FMCG
environment it is necessary to keep up with consumer requirements
and tastes and develop our products to meet these. Failure to do
this could result in consumers switching away from Britvic products.
Mitigation: We offer a range from everyday value to premium
products across a range of sub-categories and operate in a number
of different markets, therefore we are not reliant on the preferences
of one set of consumers. We closely monitor consumer trends in
order to anticipate changes in preferences and match our offerings
to these trends across our diversifi ed portfolio and markets. We
regularly develop our current products and aim to offer innovative
new products to create new sub-categories and generate
consumer needs.
Increased competition could reduce our profi tability through
reducing the average realised price of our products or reducing
sales
Risk: We operate in a highly competitive market with relatively low
barriers to entry and high levels of promotional activity. There is a
risk that our competitors increase their activity or new products
enter the market and take market share from our products.
Mitigation: We have strong brands that show resilience even
when under pressure from competitor promotional activity. In
established markets, we operate a strong promotional programme
ourselves and develop strategies for growth that are aligned to
consumer preferences. We also continuously monitor the market and
are able to develop tactics to respond to changes in the competitive
environment where appropriate; however in many cases we are
confi dent that our brand strength and understanding of the category
ensure that the strategy we are following is robust. The diversifi cation
of our geographical profi le also helps to reduce the risk.
Health and obesity debate could reduce sales of our products
Risk: There is currently a high level of media and government
scrutiny on health and obesity in our core markets; GB, Ireland
and France. ‘Sugary drinks’ are often cited as one of the issues
affecting national obesity levels in media reports. Despite the fact
that many of our products are low calorie, negative reporting and
lack of understanding could result in consumers switching away
from our products or spending less on soft drinks.
Mitigation: We offer a range of soft drinks, many of which are low
calorie products containing no sugar. Nutritional information is
shown on all of our products and, in GB, we have signed up to the
government’s front of pack labelling scheme. We actively consider
the consumer health debate as part of our strategy development
and ensure that our product development provides a range of
lower calorie choices.
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Britvic plc Annual Report 2013
19
risks and uncertainties continued
A termination or variation of the bottling and distribution
arrangements with PepsiCo could significantly reduce our
business in GB and Ireland
Risk: We bottle a number of PepsiCo products in GB and Ireland,
including Pepsi and 7UP and this makes up a significant proportion
of our carbonated drinks portfolio in these markets. At the end of
the bottling agreements (or earlier in specific circumstances)
PepsiCo can terminate our right to sell their brands.
Mitigation: We place significant emphasis on developing our
relationship with PepsiCo, which includes maintaining an appropriate
level of communication between the two businesses to deal with
on-going operational issues. This is further strengthening through
the development of the Fruit Shoot franchise in the US with
PepsiCo and the independent Pepsi bottlers. The addition of more
PepsiCo products to the Britvic portfolio in recent years
demonstrates the strength of this relationship.
Supply risks
Increasing commodity demand and pricing could impact our
profitability
Risk: We utilise a wide variety of commodities in our products,
many of which are subject to crop availability and increasing
demand from around the world. As a result of this, there is a risk
that we are not able to source the products that we require when
we would like to, or we have to pay more than we planned to for
them. In addition, the market commodity prices could fluctuate
significantly which could impact on the profitability of our products
going forward.
Mitigation: We manage the risk associated with availability of
supply through a robust programme of understanding future
requirements, developing new sources and strategic partnerships
through our Procurement Transformation programme. In addition,
we ensure that sustainability of prime materials is a key
consideration in our product development process. We aim to
manage the impact of market price fluctuations through sourcing
much of our planned requirements through forward contracts and
hedging arrangements.
A product quality issue leads to a recall and significant cost
Risk: Our products are generally of very high quality and are not
high risk products for causing any significant harm, however there
is a risk that a faulty or contaminated product is supplied to the
market. This could result in a costly product recall and claims
against the company if injury or damage is caused.
Mitigation: We have robust quality control measures and
processes in place to maintain the high quality of our products
supplied at all times. These have been further strengthened in
response to the Fruit Shoot recall required during 2012.
Loss of a key operational site could reduce product availability
and therefore sales
Risk: A severe event could lead to the loss of use of a key site of
production or distribution.
Mitigation: We seek to maintain multiple sources of supply for our
products wherever possible. In addition, we review and manage
the resilience of our sites to significant events and put protection in
place where practical and beneficial to the business to do so.
Regulatory risks
Increase in the group’s funding needs or obligations in respect
of our 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. The
triennial pension valuation for the largest of our defined benefit
schemes, for GB employees, will be completed during the current
financial year.
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 in the most appropriate
way. New employees of the company are enrolled into a defined
contribution scheme thereby limiting future liabilities. The largest of
Britvic’s defined benefit schemes 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.
20
Britvic plc Annual Report 2013 risks and uncertainties continued
Future regulations that affect the sale of soft drinks may
impact our profitability
Macro economic environment
Macro-economic factors could adversely impact the business
Risk: There is a wide range of regulations that we are required to
comply with, ranging from controlling the content, labelling and
packaging of our products to the marketing of them. Changes in
these regulations in the markets in which we operate could result
in direct additional taxation on our products, increased cost to
produce our brands or changes to the nature of the product such
that is not as desirable to the consumer, therefore reducing sales.
In addition, regulations may impact our ability to market or sell
certain products or engage with specific consumers.
Mitigation: We proactively engage with the relevant authorities
both directly and through a number of trade organisations to
ensure we can fully participate in the future development of
legislation. We also continuously develop our product portfolio and
develop new products in anticipation of likely regulatory
requirements.
Changes in tax legislation could impact our shareholder returns
Risk: We operate in a number of tax jurisdictions with complicated
and different tax requirements and legislation regularly changes.
Any changes in tax legislation or rates could potentially impact the
distributable profits of the organisation. In addition, the subjective
nature of some tax treatments could lead to challenge from the
relevant tax authorities which could result in disputes.
At the current time, there is a risk that any potential ‘sugar tax’ in
GB or Ireland could impact some of our products.
Mitigation: We have a dedicated tax team, supported by external
advisors, who ensure that we comply with all tax regulations and
requirements. We monitor likely changes in these and consider the
impact that these could have on our business, taking action to
mitigate this impact where possible. We have a broad portfolio of
low sugar products that should not be affected by any ‘sugar tax’,
and would look to minimise the impact on the profitability of our
other products to the extent that it is possible through consumer
pricing.
Risk: We have a number of exposures as a result of changes in the
macro-economic environment, particularly counterparty credit risk
through our banking relationships and currency fluctuations. Whilst
we are not directly exposed to any high risk areas in the Eurozone,
we would be indirectly affected through the impact on those that
we deal with and the on the wider economy.
Mitigation: We closely monitor and manage our exposure to wider
economic factors to the extent that it is possible or beneficial to do
so, in particular, hedging our currency requirements.
IT risks
A systems issue could result in significant disruption to the
business over a prolonged period or permanent loss of records
and data if the IT disaster recovery plans are not adequate
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. There are
disaster recovery plans in place should a catastrophic failure occur,
however should these prove to be inadequate this would result in
permanent loss of records and data that would have a significant
impact on our ability to operate.
Mitigation: The management of our data centre has been
outsourced to a professional provider with both robust disaster
recovery and business continuity plans capable of meeting both
our current and future needs.
Inadequate security over the IT network could result in data
loss or corruption
Risk: All IT networks are at risk of unwanted access which can
have adverse consequences in terms of data leakage or loss, or
systems failures.
Mitigation: Much of system is now hosted by a professional
provider who is well set up to maintain robust cyber security.
We review our security processes at least annually and conduct
penetration tests to identify weaknesses and take corrective action.
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Britvic plc Annual Report 2013business reviewgovernancefinancial statementsoverviewshareholder information
22
Britvic plc Annual Report 2013 governance
25 Corporate governance report
26 Board of directors
33 Audit Committee report
35 Nomination Committee report
36 Directors’ remuneration report
56 Directors’ report
59 Statement of directors’ responsibilities
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Britvic plc Annual Report 2013
24
Britvic plc Annual Report 2013 governance
corporate governance
report
Board evaluation
In the spirit of continuous improvement and in seeking a regular
evaluation of the board’s own effectiveness, we invited Ffion Hague
of Independent Board Evaluation to interview the directors and
senior executives as part of a comprehensive review of the board
and its committees’ performance during the year. Ms Hague’s
findings are summarised on page 31.
Gerald Corbett
Chairman
25 November 2013
Dear Shareholder
We believe that good governance reduces
risk and adds value to our business. As such,
the board is committed to high standards of
corporate governance and supports the
principles laid down in the revised UK
Corporate Governance Code published in
September 2012 by the Financial Reporting
Council (‘the Code’).
I am pleased to introduce our Corporate Governance Report which
includes individual reports from the Chairmen of the Audit Committee,
the Nomination Committee and the Remuneration Committee (as
part of the Directors’ Remuneration Report) on pages 33 to 54.
Together, these describe how we conduct our operations in line
with the Code’s provisions and other accepted principles of good
corporate governance.
Board composition
Your board is also committed to remaining effective and recognises
that to do so it must ensure that it has the right balance of skills,
independence and knowledge of the company to enable it to
discharge its duties and responsibilities. This is particularly important
to ensure that the board is best placed to support our new strategy.
With the exception of the appointment of Simon Litherland, our
new Chief Executive Officer, resulting in a change to the executive
membership this year, no changes have been made to the board’s
composition for some time. However, as part of our ongoing
succession planning, we are seeking to recruit two new Non-
Executive Directors to add to and to refresh the board’s skills and
experience during the course of the next 12-18 months. My
medium term ambitions for the composition of the board are to
bring in further manufacturing/FMCG and international expertise,
and, without disregarding the desire to give consideration to all
candidates based on merit and their overall suitability for the role,
to seek to achieve a greater diversity of board members. The
board’s succession planning activities and the steps it is taking to
develop its policy on diversity, are discussed in my Nomination
Committee Report on page 35.
For further details of the directors’ biographies please see pages
26 and 27.
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25
Britvic plc Annual Report 2013
governance
board of directors and
company secretary
Gerald Corbett
Simon Litherland
John Gibney
Bob Ivell
Chairman of the board and
Chairman of the Nomination
Committee
Background and experience
Over a long business career,
Gerald has been a director of 12
public companies, five of which
he has chaired. His most recent
role was as Chairman of SSL
International plc between
2005-2010. His executive career
included Group Finance Director
roles with Redland plc and
Grand Metropolitan plc, and he
was Chief Executive of Railtrack
between 1997-2000.
Date of appointment
Chief Executive Officer
Chief Financial Officer
Simon Litherland joined Britvic in
September 2011 to perform the
newly created role of Managing
Director, Britvic GB, bringing with
him valuable experience he
obtained from Diageo, where he
was the Managing Director of
the GB business. Prior to this,
Simon was the Managing Director
in South Africa which led to his
appointment as Managing
Director of Brandhouse, a joint
venture involving Diageo,
Heineken and Namibia Breweries.
John Gibney joined Britvic as
Finance Director in 1999. His
responsibilities include Finance,
Legal, Estates, Risk Management
and Procurement. He is also
Chairman of Counterpoint, the
Britvic licenced wholesale
business for Ireland. Prior to
joining Britvic, John was Senior
Corporate Finance & Planning
Manager for Bass PLC, and prior
to that he was Finance Director
and subsequently Deputy
Managing Director of Gala Clubs.
Senior Independent
Non-Executive Director
and Chairman of the
Remuneration Committee
During the 1980s, Bob Ivell
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. He was the Executive
Chairman of Regent Inns PLC
between 2004 and 2008.
Gerald was appointed to the
board as Non-Executive
Chairman in November 2005.
Simon was appointed to the
board as Chief Executive
Officer in February 2013.
John was appointed to the
board as Chief Financial Officer
in November 2005.
Bob was appointed to the
board as a Non-Executive
Director in November 2005.
External appointments
Gerald is Chairman of Betfair
Group plc, Moneysupermarket.
com Group plc and Towry
Holdings Limited and a
Non-Executive Director of
Numis Corporation Plc.
Committee membership
Gerald is Chairman of
Nomination Committee and is a
member of the Remuneration
Committee.
26
Simon is a Director of The
British Soft Drinks Association.
None.
Bob is Chairman of David Lloyd
Leisure and Executive Chairman
of Mitchells and Butlers plc.
As Chief Executive Officer,
Simon regularly attends Audit
Committee, Remuneration
Committee and Nomination
Committee meetings by
invitation. He is Chairman
of the Executive Team.
As Chief Financial Officer,
John regularly attends Audit
Committee meetings by
invitation. He also attends
Remuneration Committee
meetings for certain items
of business.
Bob is Chairman of the
Remuneration Committee and
is a member of the Audit and
Nomination Committees.
Britvic plc Annual Report 2013 governance
corporate governance report
corporate governance report continued
Joanne Averiss
Michael Shallow
Ben Gordon
Clare Thomas
Non-Executive Director
Independent Non-Executive
Director and Chairman of the
Audit Committee
Independent Non-Executive
Director
Company Secretary
and General Counsel
Background and Experience
Joanne Averiss has been a
member of the Pepsi Group
legal department since 1990,
holding a series of positions in
the UK and the US and is
currently Senior Vice President
Law, General Counsel, Europe
with legal responsibility for all
of the Pepsi Group’s business
within its Europe sector.
Date of appointment
Joanne was appointed to the
board as a Non-Executive
Director in November 2005 and
is the Pepsi Group Nominee
Director.
External appointments
Joanne is a Trustee and Chair of
the Mesen Educational Trust.
Committee membership
None.
Michael was a Non-Executive
Director of Spice plc from 2006
until its acquisition by Cinven in
December 2010. He was the
Finance Director of Greene King
plc from 1991 to 2005 and, prior
to that, he was an associate
partner with Accenture.
Ben Gordon was the Chief
Executive of Mothercare plc
and former Senior Vice
President and Managing
Director of Disney Store,
Europe and Asia Pacific. He has
also held senior management
positions with WHSmith group
in the UK and the USA and
L’Oreal S.A. in France and in the
UK and has an MBA from
INSEAD.
Clare Thomas initially joined the
group as interim Company
Secretary and General Counsel
in September 2012, a position
which she took up permanently
in September 2013. Clare has a
corporate and commercial legal
background and prior to joining
Britvic was a Partner at law
firm Addleshaw Goddard LLP.
Michael was appointed to the
board as a Non-Executive
Director in November 2005.
Ben was appointed to the board
as a Non-Executive Director in
April 2008.
Clare was appointed Company
Secretary in September 2012.
Michael is a Non-Executive
Director of Domino’s Pizza
Group plc.
Ben is a Non-Executive Director
of St. Ives plc.
Not applicable.
Michael is Chairman of the
Audit Committee and is a
member of the Nomination
Committee and the
Remuneration Committee.
Ben is a member of the Audit
Committee, Nomination
Committee and Remuneration
Committee.
In addition to her attendance
at board meetings, Clare
attends the meetings of the
Audit Committee, Nomination
Committee and Remuneration
Committee. Clare also attends
meetings of the Executive Team.
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Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance
corporate governance report continued
Compliance with the UK corporate governance code
The board supports the principles laid down in The UK Corporate
Governance Code as issued by the Financial Reporting Council in
September 2012, which applies to financial years beginning on or
after 1 October 2012 (‘the Code’) and is available at www.frc.org.uk
This report describes how the principles of the Code are applied
and reports on the company’s compliance with the Code’s provisions.
The board
The board of directors currently has seven members, comprising
the Non-Executive Chairman, Chief Executive Officer, Chief
Financial Officer, three independent Non-Executive Directors and
the PepsiCo nominated Non-Executive Director. At all times there
has been a majority of non-executive independent directors on the
board, in compliance with the Code.
The board considers that it has been in compliance with the
provisions of the Code throughout the 52 weeks ended
29 September 2013.
2013 Board programme
The board met ten times during the year in accordance with its
scheduled meeting calendar and an additional four times in
connection with the merger with AG Barr plc. The attendance
by each board member at scheduled meetings is shown on page 32.
The board agenda included standing items as well as ‘deep dive’
reviews of key issues for the business, including the major projects
the company initiated to implement the strategic initiatives and the
company’s international franchise model as set out in the Chief
Executive Officer’s Review on page 9. The board also attended an
off-site two day strategy meeting with members of the Executive
Team during the financial year.
The directors
The biographical details of the board members are set out on
pages 26 and 27. All of the directors bring strong judgement to the
board’s deliberations. They have all occupied, or occupy, senior
positions in UK and/or non-UK listed companies and have
substantial experience in business. Other than their fees, which are
disclosed on page 51, the Non-Executive Directors received no
remuneration from the company during the year. They also 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.
Re-election of directors
The company’s articles of association provide that all directors will
stand for re-election at least every three years but in order to
comply with the Code, all of the directors submit themselves for
re-election at each annual general meeting (‘AGM’).
Governance framework
Shareholders
2,648 shareholders
as at 29 September 2013
Board
Non-Executive Chairman,
2 Executive Directors and
4 Non-Executive Directors
Nomination Committee
Audit Committee
Remuneration Committee
Non-Executive Chairman,
3 Non-Executive Directors
Primary responsibility for succession
planning, board/director selection and
board composition
3 Non-Executive Directors
3 Non-Executive Directors
Provides oversight and governance over
the group’s annual reporting, internal
controls , risk management and
relationship with external auditors
Agrees remuneration policy and sets
individual compensation levels for
directors and senior management
Committee Report pages 36 to 54
Committee Report page 35
Committee Report pages 33 and 34
Executive Management Level Committees
Executive
Team
Sustainable
Business
Committee
Health &
Safety
Committee
Treasury
Committee
Pensions
Committee
Share
Allotment
Committee*
Architecture
Group*
Incident
Management
Committee*
*Meets as and when required
28
Britvic plc Annual Report 2013
corporate governance report continued
The role of the board
The board is responsible for the long term success of the company,
corporate governance, strategy, risk management and financial
performance. 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 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
by the board, at least annually, 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. Major investment decisions are usually 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.
Board committees
The board is assisted by three board committees (as shown in
the above governance framework diagram) to which it delegates
specific responsibilities. Each committee has full terms of reference
that have been approved by the board and which can be found on
our website at britvic.com/corporate-governance.aspx
Company secretary
The Company Secretary maintains a record of attendance at board
meetings and committee meetings, further details of which are set
out on page 32. The Company Secretary’s other responsibilities
include ensuring good information flows to the board and its
committees and between senior management and the Non-
Executive Directors, advising the board on all legal and corporate
governance matters and assisting the directors with their
professional development.
The role of the chairman and chief executive officer
The Chairman is primarily responsible for the workings of the
board; to ensure that its strategic and supervisory role is achieved
and for ensuring effective communication with our shareholders.
The Chairman works closely with the Chief Executive Officer to
ensure that the strategies and actions agreed by the board are
implemented and provides support and appropriate advice to the
Chief Executive Officer. The Chief Executive Officer is responsible
for the day to day management of the business, developing the
group’s strategic direction for consideration and approval by the
board and implementing agreed strategy. He is supported by the
other members of the Executive Team.
The different roles of Chairman and Chief Executive Officer are
acknowledged. A responsibility statement for each of those roles
has been agreed with the Chairman and Chief Executive Officer,
respectively, and adopted by the board.
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.
Executive team
The board has delegated appropriate responsibilities to the
Executive Team (which comprises in addition to the two Executive
Directors, the International Managing Director, the HR, IT &
Change Director, the GB General Manager, the Managing Director,
Britvic France, and the Commercial Director, Britvic Ireland. The
Executive Team meets 12 times a year and is 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.
In addition to the Executive Team, there are a number of
committees which meet to consider various issues involved in the
day-to-day management of Britvic and matters for recommendation
to the board and its committees. Details of these committees are
set out within the governance framework diagram above.
Senior independent director
The Senior Independent Director is available to shareholders if they
have concerns which are not resolved through the normal channels
of Chairman, Chief Executive Officer or Chief Financial Officer; or
for which such contact is inappropriate.
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Britvic plc Annual Report 2013
corporate governance report continued
Tenure of Non-Executive Directors
The Code provides that the length of tenure is a factor to consider
when determining the independence of Non-Executive Directors.
The table below shows the tenure and independence of each of
our Non-Executive Directors since the date of their first election by
shareholders.
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
Notes:
Date first elected
by shareholders
January 2007
January 2007
January 2009
January 2007
January 2007
Years from first
election to 2014 AGM
Considered to be
independent by the board
7
7
5
7
7
Note (1)
Note (2)
Yes (2)
Yes (2)
Yes (2)
1. The company considers that, on appointment, the Chairman was independent for the purposes of provision A.3.1 of the Code.
2. 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.
Service contracts and letters of appointment
Details of the Executive Directors’ service contracts and the
Chairman’s and the Non-Executive Directors’ letters of appointment
are set out in the Directors’ Remuneration Report on page 48.
These documents are available for inspection at the registered
office of the company during normal business hours and at the
place of the AGM from at least 15 minutes before and until the end
of the meeting.
Conflicts of interest
The company’s articles of association 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, whether matter-specific or situational, is only
effective if it is agreed without the participation of the conflicted
director(s), 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
reviewed annually and for the appropriate authorisation to be sought
prior to the appointment of any new director or if a new conflict
arises. No conflicts of interest have been identified during the year.
Education 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.
Independent 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.
Board performance evaluation
Each year the performance of the board, its committees and
directors is evaluated. As required by the Code, every third year
the evaluation should be conducted by an external adviser. This
year the evaluation was conducted by Ffion Hague of Independent
Board Evaluation. Ms Hague is an independent advisor and has no
other connection with the company.
The evaluation process began with the evaluation team being given
a comprehensive brief by the Chairman and the Company
Secretary. The evaluation team observed a main board meeting
and a Remuneration Committee meeting and was provided with
support materials by the company for briefing purposes. Detailed
interviews were then conducted with the Chairman, each board
member, the Company Secretary, senior management who
frequently interact with the board or its committees, and an
external adviser. All views and comments contained within the
board evaluation report were made by the participants during
interviews and all recommendations were based on best practice
as described in the Code and other current corporate governance
guidelines.
Draft conclusions were discussed with the Chairman and
subsequently with the whole board at its subsequent board
meeting, at which Ffion Hague was present. The conclusions of
that discussion were recorded in the minutes of the meeting. The
evaluation team also gave feedback to the board committee
chairmen on the performance of each committee. Bob Ivell, as
Senior Independent Director, received the report on the Chairman
and the Chairman received the report on the individual board
directors. The board and committees considered the reports of
their effectiveness at their respective meetings.
30
Britvic plc Annual Report 2013 The report produced by Independent Board Evaluation indicated
that the board is working well and that there are no significant
concerns among the directors about its effectiveness. In particular
the report noted that the board had been truly tested during the
year as a consequence of the Fruit Shoot recall and the merger
negotiations. The report also highlighted the importance of
succession planning and the board is conscious that changes will
be needed to its composition in the future and to support the new
Chief Executive and strategy.
In light of the review by Independent Board Evaluation, the board
considers the performance of each director to be effective and has
concluded that the board and its committees provide the
leadership and control required.
As a result of recommendations made in this year’s board
performance evaluation, the board has agreed:
• To increase focus on non-executive succession planning and also
executive talent management;
• To revisit the board skills matrix and to match candidate
specifications to the new strategy;
• To agree specific board roles and to ensure development plans
and a detailed induction process for new directors are put in place;
• To create more opportunities for the Non-Executive Directors,
who have a long standing relationship with the senior
management, to interact more frequently with senior
management outside of board meetings;
• To create more opportunities for the board to discuss significant
risks at board meetings, particularly in relation to the operational
side of the business; and
• To improve the content and timeliness of circulating board papers
in advance of board and committee meetings.
The board will continue to review its procedures, effectiveness and
development in the financial year ahead, particularly in relation to
succession planning and in considering afresh the balance of skills
and expertise needed by the board to support the company’s new
strategy, giving due consideration to all aspects of diversity,
including gender. Further information in these areas can be found
in the Nomination Committee Report on page 35.
Indemnification of directors
In addition to the indemnity granted by the company to directors in
respect of their liabilities incurred as a result of their office in
accordance with our articles of association, we maintain a directors’
and officers’ liability insurance policy throughout the year. Neither
our indemnity nor the insurance provides cover in the event that a
director has proven to have acted dishonestly or fraudulently.
corporate governance report continued
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 Team 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 Executive Team,
chaired by the Chief Executive Officer, which reviews the risk
register on a quarterly basis, and reports to the Audit Committee.
Management, with the assistance of the finance function, is
responsible for 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
Britvic operates a robust risk management process that has been
further strengthened over recent years. Further details can be
found within the Risks and Uncertainties section on page 19.
Through its monitoring processes, 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.
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Britvic plc Annual Report 2013
corporate governance report continued
Attendance at scheduled meetings of the board and its committees
The attendance of directors at board and committee meetings during the 52 weeks ended 29 September 2013 was as follows:
Board
Nomination
Committee1
Remuneration
Committee
Audit Committee1
Gerald Corbett
Simon Litherland2
Paul Moody3
Joanne Averiss
John Gibney
Bob Ivell
Michael Shallow
Ben Gordon
Total number of meetings
Notes:
10
7
4
10
10
10
9
10
10
2
-
-
-
-
2
2
2
2
3
2
1
-
2
3
3
3
3
1
1
1
-
2
2
2
2
2
1. Committee meetings scheduled to take place in September 2013 were moved to October 2013.
2. Meetings attended by Simon Litherland subsequent to his appointment on 13 February 2013.
3. Meetings attended by Paul Moody up until his retirement on 26 February 2013.
The board scheduled ten meetings during the year and additional
meetings were convened to deal with specific matters which
required the board’s attention between scheduled meetings.
Excluding ad hoc conference calls and committee meetings to
approve the financial results, in total, the board met 14 times,
including attendance at a dedicated two day strategy meeting with
the Executive Team.
Shareholder engagement
Investor Relations
The board is committed to maintaining good communications with
shareholders. Senior executives, including the Chairman, Chief
Executive Officer and Chief Financial Officer, have regular dialogue
with individual institutional shareholders in order to develop an
understanding of their views which is then 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 Chief Financial Officer, 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 6 to 21 details the financial performance
of the company as well as setting out the risks it faces.
Private investors
We are keen to hear the views of our private shareholders and we
encourage them to use our shareholder mailbox (investors@britvic.
co.uk) for detailed enquiries and to access our website for our
company reports and business information. The website also
provides direct access to Shareview (www.Shareview.co.uk) which
enables shareholders to manage their shareholding account online.
Specific enquiries to the Company Secretary may be sent to the
Secretariat mailbox (company.secretariat@britvic.co.uk) or sent to
the registered office.
At the AGM, the Chief Executive Officer gives a regular update on
the positioning and outlook for the business. Shareholders are
invited to ask questions formally during the meeting and to follow
up these discussions with directors on a one to one basis
afterwards. The chairmen of the board committees and the Senior
Independent Director are present and available to respond to
questions at the AGM.
We look forward to welcoming all our shareholders to our 2014
AGM in January and to updating them on our business
developments.
32
Britvic plc Annual Report 2013 governance
audit committee
report
Michael Shallow
Chairman
Audit Committee
Objective
To provide oversight and governance over the group’s financial
reporting, the internal control environment and processes in place
to monitor this, risk management and the external auditors.
Responsibilities
• Reviewing the financial results announcements and financial
statements and any significant financial reporting issues and
judgements which they may contain;
• Advising the board on whether the annual report and accounts,
taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the
company’s performance, business model and strategy;
• Ensuring compliance with applicable accounting standards and
reviewing the appropriateness of accounting policies and
practices in place;
• Assessing the adequacy of the internal control environment and
the processes in place to monitor this, including reviewing the
performance of the internal audit team;
• Reviewing risk management processes and considering the
adequacy of the actions being taken to reduce the risk exposure
of the group in relation to the key risks;
• Overseeing the relationship with the external auditors, reviewing
their performance and advising the board on their appointment
and remuneration;
• Ensuring appropriate safeguards are in place for individuals
to raise issues with the board where a breach of conduct or
compliance, including any financial reporting irregularity, is
suspected.
Membership
The Committee comprises Independent Non-Executive Directors,
Ben Gordon, Bob Ivell and myself as Chairman. The board is
satisfied that I have recent and relevant financial experience as
required by the Code.
Meetings
The Committee meets three times a year; in November and May
to provide an appropriate time to review the annual report and
accounts and interim report, respectively, and to consider the
external audit findings, and in September to review the activities of
the previous year and the plan for the year ahead. This year the
Committee meeting scheduled for September was held in October.
At each meeting the performance and findings of the internal audit
team are reviewed and the most recent key risks are considered.
Attendees at each of the meetings are the Committee’s members
as well as, by invitation, the Chief Executive Officer, the Chief
Financial Officer, the Group Financial Controller, the General
Counsel, the Head of Audit and Risk and the external auditor, Ernst
and Young LLP. A record of the meeting attendance by Committee
members is set out on page 32.
Each meeting allows time for the Committee to speak with key
people without the presence of the others; in particular the
external auditor, the internal management team and the Head of
Audit and Risk.
Main activities during the year:
The Committee supports the board in carrying out its
responsibilities in relation to financial reporting, risk management
and assessing internal controls. It also reviews the effectiveness of
the company’s internal audit function and manages the relationship
with the external auditor.
Committee meetings usually take place just prior to a board
meeting, where I report to the board on the activity of the
Committee and matters of particular relevance to the board.
Following the revision to the Code, which applies to financial years
commencing on or after 1 October 2012, the board asked the
Committee to advise them on whether the annual report and
accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the company’s performance, business model and strategy.
The Committee’s terms of reference have been amended to reflect
this and can be found on our website at britvic.com/corporate-
governance.aspx
The Committee undertook the following activities during the
course of the year to discharge its responsibilities:
Financial reporting
The role of the Committee in relation to financial reporting is to
review that the half year and annual financial statements are
appropriate. The review is carried out with both management and
the external auditor, and focus areas include evaluating whether:
• The annual report and financial accounts represent a fair, balanced
and understandable view of information for shareholders;
• Material areas of significant judgement have been given due
consideration by management and reviewed with external auditors;
• The application of acceptable accounting policies and practices is
consistent across the group;
• Clarity of disclosures and whether compliance to financial
reporting standards is acceptable;
• Any correspondence from regulators has been received in
relation to our financial reporting.
The review is based on reporting by the Group Financial Controller,
as well as reports from the external auditor based on the outcomes
of their half year review and annual audit.
Primary areas of judgement considered by the Committee in relation
to the 2013 accounts, and how these were addressed were:
Valuation of goodwill and indefinite lived assets
The review of goodwill and intangible assets is based on a
calculation of value in use, using cash flow projections based on
financial budgets prepared by senior management and approved by
the board of directors. The challenging economic conditions in the
UK and Europe increase the risk of impairment and the Committee
addresses this by receiving reports from management outlining the
basis for assumptions used for cash generating units. Business
plans are signed off by the board and assessment models are
reviewed as part of the audit, for which the external auditor, Ernst
& Young LLP provide reporting to the Committee.
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Britvic plc Annual Report 2013
the audit committee report continued
Derivative and hedging activities
External auditor performance
The group has derivative instruments to which hedge accounting
is applied and which swap principal and interest of US Private
Placement notes. The Committee reviews reporting on comparisons
of valuations to external confirmations, assessment of hedge
effectiveness and the quality of financial statement disclosures.
Revenue recognition
The group recognises revenue when goods are delivered and
accepted by customers. The Committee reviews the testing and
controls of the revenue cycle, including long term discounts,
promotional discounts and account development funds to ensure
that an IFRS compliant policy is in place and it is complied with.
Taxation
Any uncertain tax positions within the group are reviewed to
ensure that the group effective tax rate is calculated at an
acceptable level.
Defined benefit pension scheme valuation
The Committee reviews benchmarks and assumptions that are
provided by the group’s actuaries and used to value the pension
liabilities for the three defined benefit schemes. The underlying
assumptions based on market conditions and the characteristics
of the schemes are reviewed by management and the external
auditors and reported on to the Committee.
Internal audit and control
The Committee agreed the audit plan to be undertaken by the
internal audit team prior to the start of the year and, during each
of the meetings throughout the year, progress against this plan
was reviewed. The plan was assessed on the basis of providing
appropriate coverage over the internal control environment to
provide the Committee with a balanced overview across the
group, taking into account the level of risk and previous coverage.
Additional areas of review were added to the plan as required
where circumstances gave rise to an increased level of risk and
any changes to the agreed audit plan were agreed by the
Committee. The Committee received an update from the Head
of Audit and Risk at each meeting summarising the findings of the
internal audits undertaken and the progress made against actions
agreed from previous audits. Detailed updates on specific areas
are provided at the request of the Committee.
Risk management
The risk management process is reviewed annually by the
Committee to ensure that it is set up to deliver appropriate risk
management across the group. During the year the risk
management process was developed, and improvements to the
identification and review of major risks were implemented. The
Committee believe that the improvements will further strengthen
the way that the business understands and manages risk. In
addition, the Committee reviewed the key risks on the corporate
risk register at the time of each meeting. A detailed report was
provided to the Committee from the Head of Audit and Risk,
showing movements in major risks and an update on risk
mitigation activity undertaken in relation to those risks. A summary
of the key risks and uncertainties to which the business is exposed
to can be found on pages 19 to 21.
External audit
There are a number of areas that the Committee considers in relation
to the external auditors; their performance in discharging the audit
and interim review of the financial statements, their independence
and objectivity, and their reappointment and remuneration.
The external auditors, Ernst and Young LLP, provided the
Committee with their plan for undertaking the year end audit at
the Committee meeting in May 2013. This highlighted the proposed
approach and scope of the audit for the coming year and identified
the key areas of audit risk, including the audit approach for these
areas in some detail. These key areas were primarily identified as
areas of judgement and complexity and included the valuation of
goodwill and indefinite lived assets, the hedging of group borrowings,
revenue recognition and the valuation of the defined benefit
pension scheme. The Committee reviewed and appropriately
challenged the basis for these before agreeing the proposed
approach and scope of the external audit.
The external auditors prepared a detailed report of their audit
findings at the year end, which they were invited to take the
Committee through at the Committee’s meeting in November. The
findings were reviewed and discussed in detail by the Committee,
particularly in relation to the areas highlighted. A similar review of
the external auditors’ report of their findings at the half year review
is undertaken by the Committee. As part of this review the
Committee question and challenge the work undertaken, the
findings and the key assumptions made, with particular attention to
the areas of audit risk identified.
Independence and Reappointment
The Committee reviews the independence of the auditors when
considering their reappointment following the year end close each
year, and during the year. The external auditor is required to rotate
the lead audit partner every five years. The current lead auditor
partner was rotated on during the year. Ernst and Young LLP have
been the company’s auditors since its stock market listing in 2005
(8 years). During that time the external auditor has not been
formally tendered; however, the Committee will continue to
regularly consider this in accordance with the audit tendering
provisions in the Code.
I have regular contact with the external audit partner outside of
Committee meetings and without the management of the
business present.
The group is in the process of developing a revised policy regarding
the provision of non-audit services by the external auditors, based
on best practice of a maximum audit to non-audit fee ratio of 1:1,
except in exceptional circumstances. There will be a transition to
this policy with the intention to implement ahead of the re-tender
of the audit services which will be undertaken for the September
2015 year end. In the meantime, control over non-audit fees is
exercised by ensuring non-audit projects, where fees are expected
to exceed £50,000, are subject to my prior approval and that of the
Chief Financial Officer. If non-audit fees on a certain project are
expected to exceed £150,000, prior approval of the Committee is
required. The Committee has scrutinised the internal procedures
of the company’s auditors, Ernst & Young LLP, during the year and
satisfied itself that the independence and objectivity of the external
auditors has not been affected by the non-audit work undertaken
by them. Non-audit fees are disclosed in note 7 to the report
and accounts.
Committee evaluation
The Committee was included in the external board evaluation
performed during the year, the details of which can be found
on pages 30 and 31.
34
Britvic plc Annual Report 2013 governance
nomination
committee report
Gerald Corbett
Chairman
Nomination Committee
Objective
To lead the process for board and senior management
appointments and to make recommendations to the board.
Responsibilities
The Committee is responsible for considering and recommending
to the board persons who are appropriate for appointment as
Executive and Non-Executive Directors and for other senior
management roles, so as to maintain an appropriate balance of
skills and experience within the company and on the board and
to ensure progressive refreshing of the board.
Membership
The Committee comprises Independent Non-Executive Directors,
Ben Gordon, Bob Ivell and Michael Shallow and myself as Chairman.
Meetings
The Committee meets as necessary and at least twice a year.
A third Committee meeting which was scheduled to be held in
September was moved to October 2013.
Main activities during the year
The Committee considered and made recommendations to the
board in respect of:
• the appointment of Simon Litherland as our new Chief Executive
Officer;
• senior management appointments including changes in the
membership of the Executive Team;
• matters relating to succession planning, in particular, the tenure
of Bob Ivell, Senior Independent Director and Chairman of the
Remuneration Committee, and Michael Shallow, Non-Executive
Director and Chairman of the Audit Committee; and
• the results of the external evaluation of the board, the directors
and the committees and, as part of that process, reviewed the
continued independence of the Non-Executive Directors.
Appointment of directors
There is a formal, rigorous and transparent procedure for the
appointment of new directors to the board under which the
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
discussions relate to the appointment of my successor, the Senior
Independent Director chairs the Committee instead of me. When
the Committee has found a suitable candidate, as Chairman of the
Committee, I will make a proposal to the whole board, which has
retained responsibility for all such appointments. I also report on
the outcome of Committee meetings to the board.
Simon Litherland’s appointment as Chief Executive Officer took
place in February this year. Simon joined Britvic in September 2011
to perform the newly created role of Managing Director, GB. When
Paul Moody, our former Chief Executive, decided to retire at the
time the Office of Fair Trading referred the AG Barr plc merger in
February, the board was unanimous in its decision to appoint
Simon as his successor. Simon was appointed a director on the
board on 13 February 2013. Further biographical details for Simon
can be found on page 26.
During the year, as part of the new organisational design, a number
of changes were made to the membership of the Executive Team.
Martin Rose, former Supply Chain Director, and Alan Beaney, former
Strategy Director, both retired at the end of the financial year. Paul
Graham - GB General Manager, Kevin Donnelly - Commercial Director,
Ireland, and Jean-Luc Tivolle - General Manager France, became full
members of the Executive Team (and PDMRs for the purposes of
the UK Listing Rules) with effect from 1 October 2013. Biographies
for Paul, Kevin and Jean-Luc may be viewed on our website at
www.britivic.com
Succession planning
Whilst board succession planning has been less of an area of focus
during the last year, the Committee has agreed to spend more time
discussing the matter in the coming year. Job profiles to commence
the search for two new Non-Executive Directors to succeed Bob Ivell
and Michael Shallow during the next 12-18 months have been drawn up
and a shortlist of external search consultancies is being considered to
assist us with this process. Bob and Michael have both been directors
since the company’s listing on the London Stock Exchange in 2005.
Having been the company’s Chairman since 2005, my succession
is something which the Committee will keep under review. For the
foreseeable future, however, I am excited to be working with, and to
extend my support to Simon, our new Chief Executive Officer, as he
leads the business through its new strategy and organisational model.
Diversity
The board has determined it will monitor diversity through the
Committee and more focus will be made in this area in the coming
year and to the development of a company wide diversity policy.
My medium term ambitions for the composition of the board are to
bring in further manufacturing/FMCG and international expertise.
At Britvic, we see diversity as a wider topic than simply gender and
the board will continue to recommend to the company that, in
order to achieve its future growth aspirations, it should remain
committed to building a pipeline of diverse talent and to regularly
review its HR processes, including recruitment and performance
management frameworks.
Although we do have a number of women in senior operational
roles, we recognise that there is a gender imbalance on the board.
Whilst the directors do not feel in a position to publish a target of
the percentage of women they aspire to having on the board, they
recognise that diversity is important to the success of the business
and will look to find opportunities to address this. Any woman
appointed to the board, however, will be selected because they are
the best candidate for the role based on merit.
Our disclosure in relation to gender diversity within our organisation
can be found on page 9 within the Chief Executive Officer’s Review.
Board evaluation
Details of the externally facilitated evaluation of the board, the
directors and the board committees, including this Committee, can
be found on pages 30 and 31.
Having reviewed the results of the evaluation, the Committee has
confirmed to the board that the present board and its committees
continue to operate effectively and that all of the Non-Executive
Directors remained independent in accordance with the Code and
should stand for re-election at the AGM.
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35
Britvic plc Annual Report 2013
governance
directors’ remuneration
report
Bob Ivell
Chairman
The Remuneration Committee
Objective
To agree remuneration policy and to set individual compensation
for directors and senior management.
Membership
The Committee comprises Gerald Corbett, Ben Gordon, Michael
Shallow and myself, as its Chairman. The company Chairman and
Chief Executive Officer (who may attend by invitation) do not
attend meetings when their individual remuneration is discussed.
Meetings
The Committee meets at least three times a year. As Chairman, I
report on the outcome of the Committee’s meetings to the board.
Main activities during the year
Full details of the Committee’s responsibilities and its activities are
set out in this report.
Committee evaluation
The Committee was included in the external board evaluation
performed during the year, the details of which can be found on
pages 30 and 31.
Introduction from the committee chairman
I am pleased to present the Directors’
Remuneration Report for the year ended 29
September 2013, which was a particularly
strong year for Britvic and our shareholders.
The company’s 2013 year end has fallen one day before the new
regulations relating to the changes in narrative and remuneration
reporting came into force on 30 September 2013. However, to
reflect good practice, this report has been prepared not only in
accordance with the Companies Act 2006 and Schedule 8 of The
Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008, but also includes the main elements
of the “new reporting regime” under the regulations as amended
in August 2013, which the company will be required to fully adhere
to next year. The Committee has decided therefore to voluntarily
include the following additional disclosures in this year’s report:
• A policy table which summarises how the Committee
approaches each element of remuneration including details of
our recruitment and termination policy;
• Performance scenario charts showing the value of packages
based on different levels of performance;
• A single total figure of remuneration for each Executive Director
and a five year history of remuneration and incentive plan
outcomes for the position of Chief Executive Officer (CEO); and
• A distribution statement comparing annual changes in pay spend,
profit after tax, dividends and capital expenditure.
To accommodate these additions, and to proactively adopt many
of the key changes in the new reporting requirements, we are
presenting this report in a different format than our previous
Directors’ Remuneration reports. The first part of the report sets out
our forward-looking directors’ remuneration policy for 2014. The
second part of the report provides details of the implementation of
our existing policies in respect of 2013. As in previous years, at the
AGM to be held on 29 January 2014, an advisory vote will be put to
shareholders to approve the Directors’ Remuneration Report. The
board are not proposing that shareholders vote on our remuneration
policy until next year’s AGM.
In addition, when preparing this report, the Committee has complied
with the Code and with the requirements of the UKLA Listing Rules.
We note that further guidance has been issued by the GC100 and
by some institutional shareholders since the new regulations came
into effect. Whilst it has not been possible to fully reflect all of this
guidance in this year’s report, for reasons of timing, I wanted to
acknowledge the Committee’s general support of the principal
suggestions which are emerging. For example, we note the
preference of many large shareholders for the development of a
more flexible policy than that summarised in this report so that the
company’s remuneration policy is only put to shareholder vote
once in every three years and it is how best we approach some of
these emerging issues which the Committee will want to reflect
on over the forthcoming year and as the relevant guidance evolves.
36
Britvic plc Annual Report 2013
directors’ remuneration report continued
The year under review
During the year we dealt with a number of specific pay-related
issues. These arose against the backdrop of a period of both
significant change and robust performance at Britvic. For example:
• In accordance with best practice, we introduced malus
provisions and discretion to allow the Committee to reduce
future unvested or vested but unexercised long term incentive
awards in various circumstances.
• We set the remuneration arrangements of Simon Litherland
when he took up the role of CEO, following Paul Moody’s
retirement on 26 February 2013, at the same position to allow a
swift transition and agreed to review this package at the end of
the financial year.
• In keeping with our market competitive remuneration policy we
agreed it appropriate to move John Gibney’s base salary to
£345,000 to reflect his contribution during a period of significant
potential change and uncertainty.
• As referred to in last year’s report, we also agreed the detailed
terms relating to Paul Moody’s early retirement and subsequent
six month consultancy arrangement. In line with normal practice
for eligible employees the Committee used its discretion to allow
Paul Moody to apply the Enhanced Early Retirement Facility
(EERF) to his pension.
• We agreed bonus payouts for the year under review which
reflected excellent progress on our new business strategy and
the delivery of a material increase in shareholder value.
• We further reviewed and confirmed the award levels and
performance conditions for grants made under our two share-
based long-term incentive plans as well as confirming there
would be no vesting of awards of certain grants made in earlier
years due to the non-fulfilment of performance targets.
• Finally, we agreed the changes in salary for the CEO and Chief
Financial Officer (CFO) effective from 1 January 2014 as part of
the annual pay review process for the whole company.
As Chairman of the Committee and Senior Independent Director, I
am committed to ensuring an open dialogue with our shareholders.
Therefore, should you have any comments in relation to the
content of this report, or any issues relating to our approach to
executive remuneration, please feel free to contact me at
investors@britvic.co.uk.
Bob Ivell
Chairman of the Remuneration Committee
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Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ remuneration report continued
38
Britvic plc Annual Report 2013 directors’ remuneration report continued
remuneration policy
section
Our overall approach to remuneration
The principal objective of our executive remuneration policy is to
support a high performance culture and the successful execution
of our new business strategy. In return we aim to provide competitive
levels of remuneration opportunity for our senior executives and
leadership team, a significant portion of which is in the form of
variable pay.
Our new business strategy is based on unlocking opportunities to
deliver substantial value to our shareholders by sustaining market
leading growth in our established markets and investing in rapid
growth opportunities in new international markets. As set out in
the Chief Executive Officer’s Review on page 9 a key part of the
strategy is to successfully secure a step change in our cost base
and realising the huge potential opportunities from our investment
in international markets.
The Committee believes that this requires the provision of a simple,
transparent and competitive total remuneration policy that can help
attract, retain and inspire the calibre of senior executive talent to
deliver our ambitious growth plans.
In particular this requires:
• Competitively positioned base salary and incentive levels taking
into account both our industry sector and other companies of a
similar size and scope.
• An incentive mix that balances our short and medium priorities to
ensure sustained long- term value creation for our shareholders.
• An incentive structure that provides an appropriate degree of
variability to only reward excellent performance with superior pay
opportunity.
• Benefit arrangements sufficient to maintain the overall reward
package close to the competitive norms described above.
• Share ownership levels which, over time, align the actions and
interests of executives with those of our long-term shareholders.
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
our long-standing remuneration policy as described in this report
continues to remain appropriate and that the incentive structures
do not raise environmental, social or governance risks by
inadvertently motivating irresponsible behaviour.
The Committee also takes account of general workforce pay and
conditions when determining the remuneration of the Executive
Directors and is kept abreast of all relevant issues through regular
interaction with our HR function. Where our pay policy for directors
differs to our pay policies for employees more widely, this reflects
wider market-related influences. In keeping with typical market
practice, the Committee did not consult with employees or
shareholders in relation to our executive remuneration policies but
believes that these policies are entirely justified and appropriate in
light of our wider reward practices.
The section below provides further detail on how we apply these
overriding principles to each element of the executives’
remuneration packages.
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Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ remuneration report continued
Elements of the package
The table below outlines the purpose for and, where relevant, performance measures attaching to each element of the remuneration package.
Element and purpose
Policy and opportunity
Operation and performance measures
Implementation of policy in the year
Base Salary
A core element of fixed pay which reflects the individual’s role
and position within the group, with some adjustment to reflect
their experience, capability and contribution
To position the role and the individual fairly around mid-market
derived from a peer group of similar sized UK listed companies
(both pan-sector and from the food and beverages sector).
The Committee used this data when giving consideration to
the appropriate pay level having regard to other relevant factors
including corporate and individual performance and any changes
in an individual’s role and responsibilities.
Base salaries are paid in cash and reviewed annually,
Paul Moody’s salary was not increased during the year. John
with any changes normally taking effect from 1 January.
Gibney’s salary was increased from £324,000 to £345,000 from
Benefits
To provide other standard benefits which should be
valued by recipient
To provide market competitive benefits in kind. Values are shown in
later tables but may fluctuate without the Committee taking action.
Main benefits include annual car benefit (or allowance) and
No changes were made in the current year and no changes are
membership of the company’s private medical healthcare plan,
proposed in the forthcoming year.
The company may amend the benefits available to staff from time
to time, and the Executive Directors would normally be subject to
the same changes.
Pension
To aid retention and to remain market-competitive
To provide a competitive suite of post-retirement benefits.
1 January 2013. When determining this increase, the Committee
considered the overall GB salary review budget which was 3% in
2013 but considered this increase appropriate for the reasons set
out in the Committee Chairman’s introduction above.
As an interim measure, Simon Litherland’s salary was set at
£510,000 upon him taking up the role as CEO and shall remain
at this level until at least 31 December 2013.
The Committee has been considering what the appropriate level of
salary for Simon Litherland should be, and from 1 January 2014
Simon Litherland’s salary is planned to increase to £560,000 and
John Gibney’s salary is planned to increase to £360,000 in line with
both their individual and the company’s strong performance, in
addition to the Committee’s market competitive policy.
and the ability to “buy” or “sell” holiday under the company’s
flexible benefits plan.
There is also a relocation policy which provides for reasonable
expenses to be paid subject to the Committee’s approval.
While not considered a benefit, consistent with general market
practice, executives may attend various functions representing the
company whether provided by the company or by a third party.
Such attendance and the resulting costs are monitored under the
company’s anti-bribery policy.
Executive Directors can receive a cash allowance in lieu of pension
The cash allowance in lieu of pension contributions for Paul Moody
contributions where they are in possession of protections from
and subsequently Simon Litherland is 24.6% of basic salary and is
HM Revenue and Customs in relation to the Lifetime Allowance.
22% for John Gibney.
Paul Moody and John Gibney’s participation in the defined benefit
No changes were made in the current year and no changes are
section of the Britvic Pension Plan ceased on 10 April 2011 following
planned in the forthcoming year.
the closure of the Plan to future accrual. They both qualify for the
Enhanced Early Retirement Facility (EERF) which means that their
pensions are not actuarially reduced if they retire within five years
of normal pension age. However, the company has given notice to
all Plan members that the EERF will be withdrawn by 11 April 2016.
Paul Moody and John Gibney are also members of the Britvic
Executive Top Up Scheme (BETUS), a securitised unfunded
unregistered pension scheme. BETUS closed to future accrual
on 10 April 2011, in line with the closure of the defined benefit
As an early retiree, the basis of Paul Moody’s retirement benefits
followed the same provisions that apply to all former members in
the defined benefit section of the Britvic Pension Plan who are
eligible to retire before 11 April 2016 and who remain in active
service with the company.
He qualified for the EERF which meant that his pension was not
actuarially reduced as the date of Paul Moody’s retirement was
within five years of his normal pension age.
section of the Britvic Pension Plan. Members of BETUS may be
We also offered Paul the option to take his BETUS benefits as a
offered a cash out of their benefits by Britvic on a basis previously
cash payment which he exercised. As pre-agreed with the
agreed by the Committee.
Committee this was based on the IAS19 value of those benefits,
reduced by 10%, and reduced further to account for the National
Insurance costs arising for the company as a result of making the
payment as a cash lump sum.
Short-term incentive plan (STIP) (see Note 1 below)
To motivate employees and incentivise delivery of annual
performance targets
Simon Litherland’s maximum bonus opportunity is 140% of salary,
with 70% at target. The equivalent percentages for John Gibney
are 120% and 60%, respectively.
These levels were set in accordance with the same remuneration
principles described above. The Committee reserves the right to
adjust these levels from time to time in keeping with those objectives.
The targets are split between profit before tax (50% of bonus
Due to his exceptional performance since appointment as CEO,
opportunity), net revenue (20%) and free cash flow (30%).
including the 24% increase in share price over the period to
The Committee reserves the right to adjust these levels and/or
use different targets in accordance with our remuneration
principles from time to time.
29 September, the Committee agreed to a bonus payment
equivalent to 138% of Simon Litherland’s annual salary out
of a maximum possible of 140%.
40
Britvic plc Annual Report 2013 Element and purpose
Policy and opportunity
Operation and performance measures
Implementation of policy in the year
directors’ remuneration report continued
Base Salary
To position the role and the individual fairly around mid-market
A core element of fixed pay which reflects the individual’s role
derived from a peer group of similar sized UK listed companies
and position within the group, with some adjustment to reflect
(both pan-sector and from the food and beverages sector).
their experience, capability and contribution
The Committee used this data when giving consideration to
the appropriate pay level having regard to other relevant factors
including corporate and individual performance and any changes
in an individual’s role and responsibilities.
Base salaries are paid in cash and reviewed annually,
with any changes normally taking effect from 1 January.
Benefits
valued by recipient
To provide other standard benefits which should be
To provide market competitive benefits in kind. Values are shown in
later tables but may fluctuate without the Committee taking action.
The company may amend the benefits available to staff from time
to time, and the Executive Directors would normally be subject to
the same changes.
Main benefits include annual car benefit (or allowance) and
membership of the company’s private medical healthcare plan,
and the ability to “buy” or “sell” holiday under the company’s
flexible benefits plan.
There is also a relocation policy which provides for reasonable
expenses to be paid subject to the Committee’s approval.
While not considered a benefit, consistent with general market
practice, executives may attend various functions representing the
company whether provided by the company or by a third party.
Such attendance and the resulting costs are monitored under the
company’s anti-bribery policy.
Paul Moody’s salary was not increased during the year. John
Gibney’s salary was increased from £324,000 to £345,000 from
1 January 2013. When determining this increase, the Committee
considered the overall GB salary review budget which was 3% in
2013 but considered this increase appropriate for the reasons set
out in the Committee Chairman’s introduction above.
As an interim measure, Simon Litherland’s salary was set at
£510,000 upon him taking up the role as CEO and shall remain
at this level until at least 31 December 2013.
The Committee has been considering what the appropriate level of
salary for Simon Litherland should be, and from 1 January 2014
Simon Litherland’s salary is planned to increase to £560,000 and
John Gibney’s salary is planned to increase to £360,000 in line with
both their individual and the company’s strong performance, in
addition to the Committee’s market competitive policy.
No changes were made in the current year and no changes are
proposed in the forthcoming year.
Pension
To aid retention and to remain market-competitive
To provide a competitive suite of post-retirement benefits.
Executive Directors can receive a cash allowance in lieu of pension
contributions where they are in possession of protections from
HM Revenue and Customs in relation to the Lifetime Allowance.
The cash allowance in lieu of pension contributions for Paul Moody
and subsequently Simon Litherland is 24.6% of basic salary and is
22% for John Gibney.
Paul Moody and John Gibney’s participation in the defined benefit
section of the Britvic Pension Plan ceased on 10 April 2011 following
the closure of the Plan to future accrual. They both qualify for the
Enhanced Early Retirement Facility (EERF) which means that their
pensions are not actuarially reduced if they retire within five years
of normal pension age. However, the company has given notice to
all Plan members that the EERF will be withdrawn by 11 April 2016.
Paul Moody and John Gibney are also members of the Britvic
Executive Top Up Scheme (BETUS), a securitised unfunded
unregistered pension scheme. BETUS closed to future accrual
on 10 April 2011, in line with the closure of the defined benefit
section of the Britvic Pension Plan. Members of BETUS may be
offered a cash out of their benefits by Britvic on a basis previously
agreed by the Committee.
No changes were made in the current year and no changes are
planned in the forthcoming year.
As an early retiree, the basis of Paul Moody’s retirement benefits
followed the same provisions that apply to all former members in
the defined benefit section of the Britvic Pension Plan who are
eligible to retire before 11 April 2016 and who remain in active
service with the company.
He qualified for the EERF which meant that his pension was not
actuarially reduced as the date of Paul Moody’s retirement was
within five years of his normal pension age.
We also offered Paul the option to take his BETUS benefits as a
cash payment which he exercised. As pre-agreed with the
Committee this was based on the IAS19 value of those benefits,
reduced by 10%, and reduced further to account for the National
Insurance costs arising for the company as a result of making the
payment as a cash lump sum.
Short-term incentive plan (STIP) (see Note 1 below)
To motivate employees and incentivise delivery of annual
Simon Litherland’s maximum bonus opportunity is 140% of salary,
with 70% at target. The equivalent percentages for John Gibney
performance targets
are 120% and 60%, respectively.
These levels were set in accordance with the same remuneration
principles described above. The Committee reserves the right to
adjust these levels from time to time in keeping with those objectives.
The targets are split between profit before tax (50% of bonus
opportunity), net revenue (20%) and free cash flow (30%).
The Committee reserves the right to adjust these levels and/or
use different targets in accordance with our remuneration
principles from time to time.
Due to his exceptional performance since appointment as CEO,
including the 24% increase in share price over the period to
29 September, the Committee agreed to a bonus payment
equivalent to 138% of Simon Litherland’s annual salary out
of a maximum possible of 140%.
41
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ remuneration report continued
Element and purpose
Policy and opportunity
Operation and performance measures
Implementation of policy in the year
Long-term incentives
To motivate and incentivise delivery of sustained and exceptional
performance over the medium and long-term, we operate two
plans, the Performance Share Plan (PSP) and Executive Share
Option Plan (ESOP)
ESOP (see note 2 on page 44)
The policy is to award the CEO and CFO an initial face value equal
to no more than 300% and 250% of annual salary each year,
respectively.
PSP (see note 3 on page 45)
The policy is to award Executive Directors shares with an initial
face value equal to no more than 100% of annual salary each year.
Shareholding Guidelines
To encourage long-term share ownership by the Executive
Directors so that interests are aligned with other investors
Executive Directors are to acquire a shareholding equal to their
salary within five years from the date of appointment to the board.
The required shareholding is periodically reviewed and is currently
No changes were made in the current year and no changes are
set at 100% of salary. Until this holding is acquired, the Executive
proposed in the forthcoming year.
Directors may not sell any shares other than to finance the cost of
exercising share 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).
All-employee Share Plans
To encourage share ownership by employees, thereby allowing
them to share in the long-term success of the company and
align their interests with those of investors
Executive Directors are able to participate in an all-employee share
plan on the same terms as other employees.
Executive directors may participate in the Britvic Share Incentive
In light of 2012 performance against internal targets, the
Plan, which is an all-employee HMRC approved share plan open to
Committee determined that no award of free shares would be
employees based in Great Britain. The plan has three parts, all of
made in the year under review.
The table below summarises the policy applied to setting the remuneration of the Chairman and Non-Executive Directors:
Element and purpose
Policy and opportunity
Operation and performance measures
Implementation of policy in the year
Chairman and Non-Executive Director fees
42
The fees paid to the Chairman and the fees of the other Non-
Executive Directors aim to be competitive with other fully listed
companies of equivalent size and complexity. Fee levels are
periodically reviewed by the board (for Non-Executives) and the
Committee (for the Chairman).
Additional fees are paid to Non-Executive Directors who are
members of and who chair a board committee and to the Senior
Independent Director (‘SID’).
Non-Executive Directors do not participate in company incentive
arrangements, and do not receive any form of pension provision.
ESOP
PSP
The Committee chooses performance metrics that support the
The Committee undertook a review of the existing share incentive
company’s strategy, provide a direct link with shareholder value
plans at the outset of the year. Due to the merger discussions with
and ensure a clear line of sight for participants between
AG Barr plc, awards under the long-term incentive plans were
performance and reward. For Executive Directors:
delayed until March 2013 rather than December 2012.
Three year real (i.e. above inflation) EPS growth. 25% vests for
over shares with a face value of 300% and 100% of his salary,
Simon Litherland received on appointment ESOP and PSP awards
achieving a challenging threshold level of real growth, with 100%
respectively.
vesting for achieving particularly stretching targets.
John Gibney received ESOP and PSP awards over shares with
a face value of 250% and 100% of salary respectively.
Paul Moody received no awards in the year under review.
Awards are equally split between three year relative TSR and
absolute ROIC targets. For the TSR element, 25% vests for median
performance versus a peer group of similar sector companies, with
In the event that awards under both plans are made in 2014, the
100% vesting at upper quartile. For the ROIC element, 25% vests
grant date will revert back to December 2013.
for achieving a challenging threshold level of ROIC, with full vesting
for reaching particularly stretching targets in light of the current
economic environment.
The Committee sets these measures and targets having regard
both to Britvic’s ambitious long-term business plan and strategic
priorities. It reserves the right to use different targets in keeping
with those objectives and realistic growth aspirations.
Malus and claw-back provisions will also be introduced into the
documents governing the PSP and ESOP to ensure the Committee
have the ability to respond to unexpected financial events and
unacceptable behaviour in an appropriate manner.
See pages 52 and 53 for description of performance conditions
attaching to awards made in March 2013 and pages 44 and 45 for
performance conditions agreed for awards planned for 2014.
However, the CEO has voluntarily agreed to purchase the
equivalent of £200,000 shares at the earliest opportunity following
the announcement of the financial results. As a result of this
purchase his total holding will be equivalent to circa 36% of his
new salary from 1 January 2014. These shares will not be sold for
at least three years and are intended to pro-actively strengthen his
alignment with shareholder interests ahead of any future potential
vesting of outstanding awards under the company’s long-term
incentive plans.
However, in light of 2013 performance a free share award will be
made in January 2014, up to the maximum amount described in
the previous column.
which the directors do participate in:
- Free share awards, which are made annually subject to the
company’s performance and 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 per annum. This award
is typically made in the following financial year.
- Partnership shares, which are purchased by employees through
payroll deductions ranging between £5 and £115 per pay period.
- Matching shares which 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.
The Committee reserves the right to use its discretion to amend
the operation of the all-employee share plan from time to time.
Fees are paid in cash.
Fees for Non-Executive Directors are reviewed annually with any
changes taking effect from 1 January 2014.
On 1 January 2013, the fees were increased as follows: £230,000
for the Chairman of the board (from £227,000), £50,000 for the role
of Non-Executive Director (from £48,000) with additional fees of: (i)
£8,000 payable for the role of SID; and (ii) £8,000 payable where an
individual chairs a board committee.
Britvic plc Annual Report 2013 Element and purpose
Long-term incentives
Option Plan (ESOP)
To motivate and incentivise delivery of sustained and exceptional
The policy is to award the CEO and CFO an initial face value equal
performance over the medium and long-term, we operate two
plans, the Performance Share Plan (PSP) and Executive Share
respectively.
to no more than 300% and 250% of annual salary each year,
PSP (see note 3 on page 45)
The policy is to award Executive Directors shares with an initial
face value equal to no more than 100% of annual salary each year.
Policy and opportunity
ESOP (see note 2 on page 44)
Shareholding Guidelines
Executive Directors are to acquire a shareholding equal to their
To encourage long-term share ownership by the Executive
salary within five years from the date of appointment to the board.
Directors so that interests are aligned with other investors
All-employee Share Plans
Executive Directors are able to participate in an all-employee share
To encourage share ownership by employees, thereby allowing
plan on the same terms as other employees.
them to share in the long-term success of the company and
align their interests with those of investors
directors’ remuneration report continued
Operation and performance measures
Implementation of policy in the year
The Committee chooses performance metrics that support the
company’s strategy, provide a direct link with shareholder value
and ensure a clear line of sight for participants between
performance and reward. For Executive Directors:
The Committee undertook a review of the existing share incentive
plans at the outset of the year. Due to the merger discussions with
AG Barr plc, awards under the long-term incentive plans were
delayed until March 2013 rather than December 2012.
Simon Litherland received on appointment ESOP and PSP awards
over shares with a face value of 300% and 100% of his salary,
respectively.
John Gibney received ESOP and PSP awards over shares with
a face value of 250% and 100% of salary respectively.
Paul Moody received no awards in the year under review.
In the event that awards under both plans are made in 2014, the
grant date will revert back to December 2013.
Malus and claw-back provisions will also be introduced into the
documents governing the PSP and ESOP to ensure the Committee
have the ability to respond to unexpected financial events and
unacceptable behaviour in an appropriate manner.
See pages 52 and 53 for description of performance conditions
attaching to awards made in March 2013 and pages 44 and 45 for
performance conditions agreed for awards planned for 2014.
No changes were made in the current year and no changes are
proposed in the forthcoming year.
However, the CEO has voluntarily agreed to purchase the
equivalent of £200,000 shares at the earliest opportunity following
the announcement of the financial results. As a result of this
purchase his total holding will be equivalent to circa 36% of his
new salary from 1 January 2014. These shares will not be sold for
at least three years and are intended to pro-actively strengthen his
alignment with shareholder interests ahead of any future potential
vesting of outstanding awards under the company’s long-term
incentive plans.
In light of 2012 performance against internal targets, the
Committee determined that no award of free shares would be
made in the year under review.
However, in light of 2013 performance a free share award will be
made in January 2014, up to the maximum amount described in
the previous column.
ESOP
Three year real (i.e. above inflation) EPS growth. 25% vests for
achieving a challenging threshold level of real growth, with 100%
vesting for achieving particularly stretching targets.
PSP
Awards are equally split between three year relative TSR and
absolute ROIC targets. For the TSR element, 25% vests for median
performance versus a peer group of similar sector companies, with
100% vesting at upper quartile. For the ROIC element, 25% vests
for achieving a challenging threshold level of ROIC, with full vesting
for reaching particularly stretching targets in light of the current
economic environment.
The Committee sets these measures and targets having regard
both to Britvic’s ambitious long-term business plan and strategic
priorities. It reserves the right to use different targets in keeping
with those objectives and realistic growth aspirations.
The required shareholding is periodically reviewed and is currently
set at 100% of salary. Until this holding is acquired, the Executive
Directors may not sell any shares other than to finance the cost of
exercising share 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).
Executive directors may participate in the Britvic Share Incentive
Plan, which is an all-employee HMRC approved share plan open to
employees based in Great Britain. The plan has three parts, all of
which the directors do participate in:
- Free share awards, which are made annually subject to the
company’s performance and 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 per annum. This award
is typically made in the following financial year.
- Partnership shares, which are purchased by employees through
payroll deductions ranging between £5 and £115 per pay period.
- Matching shares which 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.
The Committee reserves the right to use its discretion to amend
the operation of the all-employee share plan from time to time.
The table below summarises the policy applied to setting the remuneration of the Chairman and Non-Executive Directors:
Element and purpose
Policy and opportunity
Operation and performance measures
Implementation of policy in the year
Chairman and Non-Executive Director fees
The fees paid to the Chairman and the fees of the other Non-
Executive Directors aim to be competitive with other fully listed
companies of equivalent size and complexity. Fee levels are
periodically reviewed by the board (for Non-Executives) and the
Committee (for the Chairman).
Additional fees are paid to Non-Executive Directors who are
members of and who chair a board committee and to the Senior
Independent Director (‘SID’).
Non-Executive Directors do not participate in company incentive
arrangements, and do not receive any form of pension provision.
Fees are paid in cash.
Fees for Non-Executive Directors are reviewed annually with any
changes taking effect from 1 January 2014.
On 1 January 2013, the fees were increased as follows: £230,000
for the Chairman of the board (from £227,000), £50,000 for the role
of Non-Executive Director (from £48,000) with additional fees of: (i)
£8,000 payable for the role of SID; and (ii) £8,000 payable where an
individual chairs a board committee.
43
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ remuneration report continued
Additional information to Policy Table
1 STIP
For 2014, the Committee will maintain the same target and maximum bonus opportunity for Executive Directors as was the case in 2013.
The Committee has also decided that the key short-term operational drivers of the business used in the year under review remain
appropriate. Therefore, performance targets based on profit before tax (50% of total bonus), net revenue growth (20%) and free cash
flow (30% of total bonus) will be set at appropriately stretching levels. Further details of performance against these targets will be set
out in the 2014 remuneration report. Given the competitive environment in which the company operates, whilst the performance
measures for annual bonus are disclosed, the detailed targets are considered to be commercially sensitive and therefore not disclosed.
2 Long-term incentives - Executive Share Option Plan
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 2014, the Committee has decided to maintain the same focus on long-term EPS growth as applied
in 2013 and believes that the performance range remains sufficiently stretching in the context of the emerging business outlook and
growth strategy of the company. Therefore, the ESOP will operate for Executive Directors as follows and will include the malus/
clawback provisions referred to in the policy table:
Face value1 (% of salary)
• CEO: 300%
• CFO: 250%
Performance metrics
• Earnings per share (EPS) – defined as the company’s adjusted diluted earnings per
ordinary share.
Performance condition in 2014
• 25% vests for EPS growth equivalent to RPI +3% compound per annum.
• No awards will vest below this level of performance.
• 100% vests for EPS growth equivalent to RPI +7% compound per annum.
• Vesting is on a straight line basis 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 may be reduced to zero or the way that
performance is measured can be adjusted but should be no more or less difficult to
achieve.
• Normally, awards must be exercised within six months of the change in control.
• Subject to consent of the company and any acquiror, awards may be rolled over into
other awards with equivalent structure and terms, except for performance conditions
which may become subject to the performance conditions of the acquiror.
1 Based on average mid-market price for the three days prior to grant
44
Britvic plc Annual Report 2013 directors’ remuneration report continued
3 Long-term incentives - Performance Share Plan
In the event that grants are made in 2014, the Committee has decided to apply a higher ROIC range to those used for grants made in
the year under review but will maintain the same relative TSR performance conditions. The higher ROIC range is designed to support
the new business strategy. Therefore, the PSP will operate for Executive Directors as follows and will include the malus/clawback
provisions referred to in the policy table:
Face value1 (% of salary)
• CEO: 100%
• CFO: 100%
Performance metrics
• Relative Total Shareholder Return (TSR)
Performance condition in 20142, 3
Relative TSR portion (50%)
• Peer group comprises a group of similar sector companies (18 for the last grant).
• Return on invested capital (ROIC) is defined as pre-exceptional operating profit after tax
divided by average invested capital including goodwill (expressed as a percentage).
• 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 (50%)
• 25% vests for three year average ROIC of 23.4%.
• 100% vests for three year average ROIC at or above 24.2%.
• Vesting is on a straight line between threshold and maximum.
Change in control provisions
• Vesting is subject to achievement of performance conditions.
• The extent of vesting also takes account 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.
1 Based on the average mid-market price for the three days prior to grant
2 The comparator companies are currently: AG Barr plc, 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. The Committee retains
discretion to review and amend the group of comparator companies from time to time where it is considered appropriate to do so.
3 The ROIC range has been changed from 20.7% to 21.5% which applied to awards made in 2013.
How our incentive plan targets link to our strategy
Metric
Incentive Plan
Link to strategy
Profit before tax (PBT)
Short term incentive plan
Net revenue
Short term incentive plan
Free cash flow
Short term incentive plan
Three year EPS growth
Executive share option plan
Three year relative
total shareholder
return growth
Performance share plan
ROIC
Performance share plan
PBT is a key measure of the company’s financial performance and, in
particular, how successful the company has been in at accelerating its
profitability from various strategic initiatives in place. For STIP purposes
PBT is pre-exceptional and other items in order to reflect the financial
performance of the business, although the Committee will maintain
discretion to adjust outcomes downward if deemed appropriate.
Reflects a core strategic objective of growing revenues in all the company’s
markets, particularly in emerging markets.
FCF is a good indicator of the company’s financial health, which links to a
key corporate objective of improving cash conversion and is vitally important
in ensuring our ability to invest in key international opportunities.
EPS is an important long-term financial metric linked to value creation for our
shareholders and provides an appropriate underpin for awards to vest under
the ESOP. For ESOP performance measurement, adjusted diluted EPS is used.
TSR reflects the growth in value of the company’s share price and dividends
compared to broad sector peers, thereby ensuring that participants only
receive rewards if they outperform a basket of other investment comparables.
ROIC is an important measure for the company to ensure it optimises its
invested capital to deliver returns significantly in excess of the cost of that
capital.
45
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ remuneration report continued
Recruitment remuneration policy
Our recruitment remuneration policy aims to give the Committee
sufficient flexibility to secure the appointment and promotion of
high-calibre executives to strengthen the management team and
secure the skill sets to deliver our strategic objectives.
• For external appointments, the Committee may offer additional
cash/share-based elements when they consider it in the best
interests of the company and its shareholders.
• For an internal appointment, any variable pay element awarded in
respect of the prior role may either continue on its original terms or
be adjusted to reflect the new appointment as appropriate.
• For external and internal appointments, the Committee may agree
that the company will meet certain relocation expenses as
appropriate.
• Ignoring any special recruitment arrangements which may prove to
be necessary, it is not envisaged that the annual bonus or long-term
incentive compensation arrangements will operate differently
(including the maximum award levels) than for the predecessor of
any newly appointed executive.
The following represents the Committee’s guidelines in relation to
recruitment remuneration which may need to be interpreted flexibly
by the Committee in relation to securing an appropriate candidate
whose appointment would, in the view of the board, be in
shareholders’ best interests.
• Where it is necessary to make a recruitment- related pay award
to an external candidate, the company will not pay more than is
necessary and will in all cases seek, in the first instance, to deliver
any awards under the terms of the existing incentive pay structure.
In some cases it may be necessary to make awards on terms
that are more bespoke than the existing annual and equity-based
pay structures at the company in order to secure a candidate.
• All awards for external appointments, whether under the STIP,
ESOP, PSP or otherwise, will take account of the nature,
time-horizons and performance requirements for any remuneration
relinquished by the individual when leaving a previous employer,
and will be appropriately discounted to ensure that the company
does not, in the opinion of the Committee, “over-pay”.
The elements of any reward package for a new executive recruit and the approach taken by the Committee in relation to setting each
element of the package will be consistent with the Executive Directors’ remuneration policy described in this report, as modified by the
above statement of principles, where appropriate.
Potential rewards under various scenarios
The potential total rewards available to the Executive Directors,
ignoring any change in share price and roll-up of dividends, are set
out in the illustration below.
The Committee believes that the mix and variability in the reward
package is aligned with our performance-orientated remuneration
principles and business objectives already described above.
£2,553
20%
22%
31%
£1,363
9%
10%
29%
£705
100%
52%
27%
ESOP
PSP
Short Term Incentives
Total Fixed Pay
£1,522
18%
24%
28%
£834
8%
11%
26%
55%
30%
£460
100%
Minimum
On-target
Maximum
Minimum
On-target
Maximum
Simon Litherland
John Gibney
3000
2500
2000
0
0
0
’
£
1500
1000
500
0
46
Britvic plc Annual Report 2013
directors’ remuneration report continued
The previous chart has been prepared using the following assumptions:
Minimum
• Consists of base salary, benefits and pension.
• Base salary is the salary to be paid in 2014.
• Benefits measured as benefits paid in 2013 as set out in the single figure table on page 51
(which may vary, albeit not materially, over the course of next year).
• Pension based on cash allowance levels described in policy table above.
Simon Litherland
John Gibney
Base Salary
£560,000
£360,000
Benefits
£7,500
£21,000
Pension
£138,000
£79,000
Total Fixed
£705,500
£460,000
On-target
Based on what the director would receive if performance was on-target (excl. share price appreciation and dividends):
• STIP: consists of the on-target bonus (i.e. 50% of maximum).
• ESOP: 25% (being the vesting level at threshold) of 30% of the face value of the shares under option (the 30%
being a standard market value for options which have a lower per share value than the PSP awards); and
• PSP: 25% of the face value of the shares awarded (equivalent to threshold level of vesting in the plan).
Maximum
Based on the maximum remuneration receivable (excl. share price appreciation and dividends):
• STIP: consists of maximum bonus.
• ESOP: assumes maximum vesting, therefore 30% of the face value of the shares under option (the 30% being
a standard market value for options before any performance conditions are applied).
• PSP: 100% of the face value of the shares awarded
Directors’ service contracts
General policy
The current policy is for the notice period in the Executive Directors’ service contracts to be normally no longer than one year. The service
contracts of the Executive Directors at the start of 2013 included the following terms regarding notice periods:
Effective date of contract
Unexpired term
(approx. months)
Notice period from
director (months)
Notice period from company (months)
Paul Moody
14 December 2005
Simon Litherland
14 February 2013
John Gibney
14 December 2005
121
121
121
6
92
6
12
182
12
1. Executive Directors are appointed on 12-month rolling contracts.
2. Simon Litherland has temporary arrangements relating to notice periods which are explained in the paragraph below.
Simon Litherland was appointed CEO on 13 February 2013. Due to
the ongoing uncertainty regarding the merger with AG Barr plc that
existed at the time of his appointment, it was considered necessary
to depart from the Committee’s normal notice period policy. As a
result, Simon Litherland’s service contract, dated 19 March 2013,
contains an initial notice period of eighteen months from the company
(nine months from Simon). However, this notice period returns to a
policy-compliant twelve months from the company (six months from
Simon) on 19 September 2014. During the first eighteen months
following the service contract date of Simon Litherland’s contract,
any payment in lieu of notice will take into consideration both base
salary and pension allowance. In the period following this initial
eighteen months, any payment in lieu of notice will be based on
base salary only. For John Gibney, our standard notice period of
twelve months from Britvic (six months from John) applies with
payment in lieu of notice based on base salary only. In both cases,
the payment in lieu of notice will be made in monthly instalments
(in which case any income earned by Simon or John over the
payment period will reduce the monthly amounts), however the
Committee retains the discretion to make such payments as a
lump sum where they consider the circumstances merit it.
There are no other 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 practice, any form of termination payment to an Executive Director
would require the Committee to consider all of the relevant facts
and circumstances available at that time to ensure the company is
protected and to prevent any “reward for failure” being made to an
Executive Director. This policy applies both to any negotiations
linked to notice periods on a termination and any treatment which
the Committee may choose to apply under the discretions available
to it under the terms of the STIP, ESOP or PSP. The potential
treatments on termination under both of these plans are
summarised on the next page.
47
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance
directors’ remuneration report continued
Incentives
Good leaver
If a leaver is deemed to be a ‘good leaver’;
i.e. leaving through voluntary redundancy,
serious ill health or death or otherwise at
the discretion of the Committee (e.g.
circumstances of departure, personal
contribution to company performance, how
close the next vesting date is).
Bad leaver
If a leaver is deemed to be a ‘bad leaver’;
typically voluntary resignation or leaving for
disciplinary reasons
In the event of a change in
control or a winding up of the
company
STIP
Pro-rated bonus
Awards forfeited
Pro-rated bonus
ESOP & PSP
Pension
All awards will normally lapse unless
the Committee determines otherwise.
Pro-rated award, subject to the
application of the performance
conditions at the normal measurement
date. If the Committee determines that
awards vest on cessation, they will do
so subject to the performance
conditions and taking account of time
elapsed since the start of the relevant
performance period.
No special provisions apply.
If the Executive Director is eligible for
the EERF then the Committee may
determine at their discretion to grant
early retirement with the EERF
applying. The EERF can only be applied
to those who are eligible and only
when taking early retirement.
Awards will normally vest subject to
the application of the performance
conditions at the date of the event and
will take account of the time elapsed
since the start of the relevant
performance period.
No special provisions apply.
Paul Moody
Paul Moody retired on 26 February 2013 and did not receive any
severance arrangements under the terms of his contract or bonus
payments in respect of 2013. As an early retiree in the defined
benefit section of the Britvic Pension Plan, his retirement benefits
followed the same provisions as apply to all other company
employees who qualify for the Enhanced Early Retirement Facility,
resulting in his pension not being actuarially reduced as the date of
his retirement was within five years of his normal pension age.
Further information can be found in the Pensions section on page
54. In addition, in order to provide expert support to the board in
relation to discussions with the Competition Commission regarding
the proposed merger with AG Barr plc, Paul was provided with a
consulting services agreement with Britvic plc for a fixed period of
six months following his retirement to ensure his expertise was
available for as long as the board required it during that period.
The agreed fee for these services is £350,000 plus expenses.
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.
Non-Executive Directors:
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
Effective date
of contract
14 December 20111
14 December 20111
15 April 20111
14 December 20111
14 December 20111
Paul Moody had the following external appointments:
• Non-Executive Director of Johnson Service Group plc
• Interactive Screen Media Limited
• Director of The British Soft Drinks Association
On 5 March 2013 Paul Moody ceased to be a director of The British
Soft Drinks Association Limited and was replaced by Simon
Litherland. John Gibney has, following the 2013 year end, replaced
Paul Moody as a director of Interactive Screen Media Limited.
Paul Moody received a fee of £30,000[1] per annum for his role as
Non-Executive Director of Johnson Service Group plc.
[1] Information from latest audited Johnson Service Group plc Report and
Accounts as at 31 December 2012.
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 Company’s shareholders in accordance
with the UK Corporate Governance Code.
Unexpired term
(approx. months)
Notice period from
director (months)
Notice period from
Britvic (months)
12
12
4
12
12
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.
All Directors’ service contracts and Letters of Appointment are available for inspection at the company’s registered office and at the AGM
up until the start of the meeting.
48
Britvic plc Annual Report 2013 directors’ remuneration report continued
Advisors
The Committee’s appointed external advisor on executive
compensation issues and performance-related remuneration
is Towers Watson Limited (Towers Watson). Towers Watson
were appointed following an extensive review of the leading
remuneration advisers as it was felt that they had the most
relevant experience and expertise to advise the Committee on
executive compensation issues. The company is also advised by
Towers Watson on other remuneration-related issues. Towers
Watson’s fees in respect of advice to the Committee in the year
under review were £140,408 and were charged on the basis of that
firm’s standard terms of business for advice provided. These fees
are higher than usual due to the aborted merger discussions with
AG Barr plc. During the year, Linklaters LLP and Addleshaw
Goddard LLP were also engaged by the Committee to advise on
contractual arrangements, share schemes and pension matters.
The Committee is entirely comfortable that the advice it received
from these organisations was objective and independent.
The following individuals also provided material advice or services
to the Committee during the year:
• Paul Moody (former Chief Executive Officer);
• Simon Litherland (current Chief Executive Officer);
• John Gibney (Chief Financial Officer);
• Doug Frost (Group Human Resources Director); and
• Mario Yiannopoulos (Director of Compensation & Benefits).
Distribution statement
The new disclosure regulations require companies to provide
information on how the total remuneration paid to all employees of
the company compares to any distributions made to shareholders
by way of dividends and/or share buybacks. The following chart
sets out this information as it applies to the company, comparing
figures for the year under review and the previous year. Capital
expenditure is also shown below for context given it is another
relevant and significant distribution decision by the company. For
the purposes of this table capital expenditure is defined as net
cash flow from the purchase and sale of both tangible and
intangible assets:-
implementation report
unaudited information
The Remuneration Committee
Membership
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 Officer 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 Code and are available on the company’s website or on
request from the Company Secretary. While the Chairman, who
was independent on initial appointment, is a member of the
Remuneration Committee, he is not present when his own
remuneration is under discussion.
The Committee meets no less than three times a year and has
responsibility for:
• Reviewing 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;
• 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 team, including
pension rights, any compensation payments and benefits;
• Approving the design and operation of the company’s incentive
arrangements, both short and long-term. This includes agreeing
the targets that are applied to awards made to senior executives;
• Responsibility for all of the company’s employee share plans and
the share dilution position; and
• Ensuring, via regular reviews, that the company’s pay policies
remain appropriate and relevant.
Capex
% Change (25.9%)
FY13
FY12
£34.9m
£47.1m
Profit after tax
% Change 31.3%
FY13
FY12
£82.6m
£62.9m
Dividend payout
% Change (0.1%)
FY13
FY12
£42.5m
£42.5m
Salary roll
% Change (4.8%)
FY13
FY12
£119.4m
£125.4m
49
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance
directors’ remuneration report continued
Performance graph and table
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:
Britvic’s Historical TSR Performance Growth in the value of
a hypothetical £100
FTSE 250 Excluding Investment Trusts
Britvic
£350
£300
£250
£200
£150
£100
£50
£0
28 Sept 2008
27 Sept 2009
03 Oct 2010
02 Oct 2011
30 Sept 2012
29 Sept 2013
The new disclosure regulations require companies to set out certain details of the CEO’s pay in the years covered by the chart above.
These include details of the payments the CEO received under short and long-term incentive plans over these financial years. This
information is set out below:
Financial year
Paul Moody
Single figure of total remuneration
(£,000)
Simon Litherland
Single figure of total remuneration
(£,000)
Annual variable element award rates
against maximum opportunity3
(£,000)
2009
1,982.1
2010
1,955.3
2011
1,819.7
2012
670.1
2013
1,412.61
n/a
n/a
79%
501.6
95%
637.8
n/a
0%
0.0
n/a
1,114.62
0%
0.0
0% for
Paul Moody
0.0
98.6% for
Simon Litherland
703.8
Long-term incentive vesting rates against
maximum opportunity4 (£,000)
ESOP: 100%
ESOP: 100%
ESOP: 86%
ESOP: 0%
ESOP: 0%
PSP: 100%
PSP: 100%
773.8
599.6
PSP: 91%
1,279.9
PSP: 0%
PSP: 0%
0.0
0.0
n/a for
Simon Litherland
1. This sum covers the period during which Paul Moody was an Executive Director up to his retirement on 26 February 2013. It includes £1.1m in respect of the EERF
enhancement received to his pension at the Committee’s discretion. The total calculation comprises of base salary, benefits, pension and the value of ESOP and PSP
awards at year end.
2. This sum covers the period from Simon Litherland’s appointment as CEO on 13 February 2013.
3. Actual amount paid.
4. Actual value of shares at the date of vesting.
Voting outcomes
The new regulations state that the Directors’ Remuneration Report should include details of how shareholders cast their votes on
remuneration-related resolutions at the last AGM. Of the votes cast to approve the 2012 Directors’ Remuneration Report, at the AGM
held on 19 March 2013, 171,751,061 (95.7%) were cast in favour of the resolution, 7,555,269 (4.2%) were cast against the resolution,
and 2,582,938 votes were withheld.
Directors Remuneration Report
Votes for
Votes against
2012
2011
2010
50
171,751,061 (95.7%)
154,461,496 (99.6%)
164,606,804 (99.7%)
7,555,269 (4.2%)
560,016 (0.4%)
527,943 (0.3%)
Withheld
2,582,938
6,315,270
1,207,276
Britvic plc Annual Report 2013
directors’ remuneration report continued
implementation report
audited information
Directors’ remuneration
The emoluments of the directors for the year under review based on the current disclosure requirements were as follows:
Executive Directors:
Paul Moody*
Simon Litherland**
John Gibney
Non-Executive Directors:
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
Base salary
and fees1
£’000
Taxable
benefits /
other2
£’000
Performance
related bonuses
£’000
273.7
383.0
414.2
38.8
27.83
22.5
-
703.8
401.1
Total
2013
£’000
312.55
1,114.6
837.8
Total
2012
£’000
670.0
n/a
428.0
213.7
26.94
49.7
49.7
65.7
57.7
-
-
-
-
-
-
-
-
-
240.6
227.0
49.7
49.7
65.7
57.7
48.0
48.0
64.0
56.0
*
Paul Moody retired on 26 February 2013 – figures shown are for the period in the role of CEO.
**
Simon Litherland was appointed CEO on 13 February 2013 having previously been MD GB from 3 October 2011 – figures shown are only for the period in the role of CEO.
1. The base salary and fees includes for Paul Moody a pro-rated base salary to 26 February 2013 of £219,692 and a pro-rated pensions cash alternative of £54,054. For
Simon Litherland this number includes a pro-rated base salary from 13 February 2013 of £307,479 and a pro-rated pensions cash alternative of £75,529. For John
Gibney this number includes a base salary of £339,639 and a pension cash alternative of £74,630 (being representative of earnings during the period under review).
The agreed fee of £350,000 plus expenses for Paul Moody’s consultancy agreement detailed on page 48 above has not been included.
2. Benefits for Paul Moody, Simon Litherland and John Gibney incorporate all taxable benefits and expense allowances arising from employment, which relate to the
provision of car benefits or allowance and membership of the company’s private medical healthcare plan (worth £17,242 for Paul Moody to 26 February 2013, £7,831
for Simon Litherland from 13 February 2013 and £22,488 for John Gibney). Paul Moody also received a payment of £21,577 in lieu of unused holiday allowance.
3. Includes a payment to Simon Litherland of £20,000 relating to the terms of his recruitment prior to his appointment as CEO.
4. Gerald Corbett received one-off benefits of £26,919 in relation to medical expenses.
5. A sum of £1.1m in respect of the benefit of the EERF for Paul Moody is not included within the numbers above. (See page 54 (Pension table) for additional information.)
Single figure table
The new disclosure regulations require companies to provide a single total figure of remuneration for each director, broken down by each
element of pay and compared to the prior year figures. This information is set out in the table below for each of the Executive Directors.
To avoid further replication this year the Non-Executive Director fees described above have not been disclosed again in the new format.
Single Total Figure of Remuneration for each director:
Salary5
Benefits3
Other
STIP6
LTIP6
Pension or cash in lieu4
Total
Paul Moody1
Simon Litherland2
John Gibney
2013
£’000
219.7
38.8
1,100.0
-
-
54.1
1,412.6
2012
£’000
507.4
18.0
-
-
-
144.7
670.1
2013
£’000
307.5
7.8
20.07
703.8
-
75.5
1,114.6
2012
£’000
n/a
n/a
-
n/a
n/a
n/a
n/a
2013
£’000
339.6
22.5
-
401.1
-
74.6
837.8
2012
£’000
323.7
21.1
-
-
-
83.8
428.6
1. Paul Moody, former CEO, retired on 26 February 2013. The figures above have been adjusted to reflect the period of the 2013 year that Paul Moody was an Executive
Director. Upon retirement Paul Moody decided to crystallise his future pension promise under BETUS early at a discount to its current value equivalent to £0.5m. The
other number above includes £1.1m for the cost of the EERF. (See page 54 (Pension table) for additional information.)
2. Simon Litherland was appointed CEO on 13 February 2013, and the figures for 2013 above only reflect the period he was in role.
3. Benefits comprise car allowance and private medical insurance and life assurance. In the case of Paul Moody this number also includes payment in lieu of unused
holiday allowance of £21,577.
4. All three Executive Directors have opted out of the occupational pension scheme due to HMRC protections from the Lifetime Allowance. They receive a cash sum
rather than an employer contribution into the Britvic Pension Plan.
5. The Executive Directors are entitled to adjust their salary/benefit combination under flexible benefits arrangements and the figures shown are before individual selections.
6. Details of the performance measures and targets applicable to the annual bonus and long-term incentive awards are set out in the Director’s Remuneration Policy table.
7. Simon Litherland became eligible for a payment of £20,000 in September 2013 as per his employment terms as MD GB prior to his appointment as CEO. This
payment was made in November 2013 following approval by the Committee but is included in the single figure above.
51
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance
directors’ remuneration report continued
STIP outcomes
Although we are unable to disclose our detailed targets, the table below shows the actual out-turn against the STIP maximum for the
year under review:
Target
PBT
Net revenue
Free cash flow
Total
Weighting
(% of bonus
maximum)
50%
20%
30%
100%
2013 maximum
bonus (% of salary)
2013 bonus
earned (% of salary)
CEO
70%
28%
42%
CFO
60%
24%
36%
CEO
70%
26%
42%
CFO
60%
22%
36%
140%
120%
138%
118%
1. The Committee decided that on account of Paul Moody’s early retirement he would not participate in the STIP in the year under review.
Given the competitive environment in which the company operates, whilst the performance measures for annual bonus are disclosed,
the detailed targets are considered commercially sensitive and are accordingly not disclosed. However, as explained on page 37, these
bonus payouts reflected a strong year for the company in which excellent progress on the company’s new business strategy was
achieved, significant shareholder value was delivered (with our share price increasing by 58% as at 29 September 2013), both of which
were underpinned by a material improvement in underlying financial performance.
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 44.
Number of shares under option
At start of
year/date of
appoint-
ment
Date of grant
Granted
during year
Exercised
during year
Lapsed
during year
At end of
year/date of
cessation
Option
exercise
price (pence)
Date from
which
exercise-
able
Expiry date
Paul Moody
15/12/051
273,005
06/12/061
338,776
05/12/071
246,369
05/12/082
530,189
07/12/092
372,326
07/12/102
310,111
06/12/112
452,368
2,523,144
Total
Simon Litherland
06/12/112
174,916
-
-
-
-
-
-
-
-
-
Total
174,916
357,881
06/03/132
-
357,881
John Gibney
15/12/051
124,366
06/12/061
162,245
05/12/071
119,135
05/12/082
284,879
07/12/092
200,065
07/12/102
166,634
06/12/112
240,502
-
-
-
-
-
-
-
Total
1,297,826
201,747
06/03/132
-
201,747
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
273,005
338,776
246,369
530,189
245.0
26/11/08
15/12/15
245.0
26/11/09
06/12/16
347.0
03/12/10
05/12/17
221.0
01/12/11
05/12/18
(372,326)
-
387.0
28/11/12
07/12/19
(77,528)3
232,583
464.4
27/11/13
07/12/20
(263,881)3
188,487
331.6
26/11/14
06/12/21
(713,735) 1,809,409
-
-
-
-
-
-
-
174,916
357,881
532,797
124,366
162,245
119,135
284,879
331.6
26/11/14
06/12/21
427.5
06/03/16
06/03/23
245.0
26/11/08
15/12/15
245.0
26/11/09
06/12/16
347.0
03/12/10
05/12/17
221.0
01/12/11
05/12/18
(200,065)
-
387.0
28/11/12
07/12/19
-
-
-
166,634
240,502
201,747
464.4
27/11/13
07/12/20
331.6
26/11/14
06/12/21
427.5
06/03/16
06/03/23
(200,065) 1,299,508
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.
3. Awards pro-rated as a result of leaving by retirement on 26 February 2013.
The market price of the company’s shares on 29 September 2013 was 575p and the range of closing prices during the year was 364.1p to
592.0p.
52
Britvic plc Annual Report 2013 Directors’ interests in the Performance Share Plan
The Executive Directors participate in the Britvic Performance Share Plan (as described on page 42).
directors’ remuneration report continued
Number of Shares
Awarded
during year
Vested
during year
Lapsed
during year
At end of
year/date of
cessation
Market price
at date of
award
(pence) Vesting date
Paul Moody
Total
Date of
award
At start of
year/date of
appointment
07/12/091
124,110
07/12/102
103,370
06/12/113
150,790
378,270
Simon Litherland
06/12/113
69,966
-
-
-
-
-
Total
John Gibney
Total
06/03/134
-
119,294
69,966
119,294
07/12/091
07/12/102
06/12/113
06/03/134
80,026
66,654
96,200
-
242,880
-
-
-
80,699
80,699
-
-
-
-
-
-
-
-
-
-
-
(124,110)
-
380.1
28/11/12
(25,843)5
77,527
477.0
27/11/13
(87,961)5
62,829
329.8
26/11/14
(237,914)
140,356
-
-
69,966
329.8
26/11/14
119,294
189,260
421.2
06/03/16
(80,026)
-
380.1
28/11/12
-
-
-
66,654
96,200
80,699
477.0
27/11/13
329.8
26/11/14
421.2
06/03/16
(80,026)
243,553
1. Awards of performance shares in December 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 21.9% and maximum ROIC condition of 23.2%).
2. Awards of performance shares in December 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%).
3. Awards of performance shares in December 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%).
4. Awards of performance shares in March 2013 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 20.7% and maximum ROIC condition of 21.5%).
5. Awards pro-rated as a result of retirement from the business as a good leaver on 26 February 2013.
Directors’ interests in shares
Executive and Non-Executive Directors
30 September 2012
29 September 2013
Britvic plc ordinary shares of 20p each
Paul Moody
Simon Litherland
John Gibney
Gerald Corbett
Joanne Averiss
Ben Gordon
Bob Ivell
Michael Shallow
445,040
n/a
373,434
103,695
14,696
11,393
10,870
21,739
445,246*
222
243,900
103,695
14,696
11,393
10,870
21,739
*as at date of resignation on 26 February 2013
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 42. As such, they count towards the shareholding guideline described on page 42,
which will be reviewed in the forthcoming year.
In the period 30 September 2013 to 25 November 2013 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.
53
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ remuneration report continued
Pensions
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. Most active
members of the Plan transferred to the defined contribution section
of the Plan, 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 allowance payable:
• Reflects contributions the company would have made to the
defined contribution section of 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) for
the CEO (both Paul Moody and subsequently to Simon Litherland)
and 22.0% of pensionable pay (base salary only) to the CFO.
John Gibney continues to have a deferred pension in the defined
benefit section of the 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 of the Plan,
John Gibney 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 of the EERF formed part of the
agreement with the Plan trustee on the closure of the defined
benefit section of the Plan. The company has given notice to all of
the 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.
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 Plan. This disclosure is in
compliance with both the London Stock Exchange Listing Rules
and the Companies Act 2006.
Name of
Director
Paul Moody
John Gibney
Age (last
birthday) at
29/09/13
Accrued
pension at
29/09/2013
£ p.a.
Increase in
accrued
pension1
£ p.a.
Increase in
accrued
pension2
£ p.a.
56
53
216,600
197,700
n/a
5,900
n/a
(200)
Transfer value
of increase in
accrued
pension3
£
n/a
Transfer value
of accrued
benefits -
29/09/13
£
Transfer value
of accrued
benefits -
30/09/12
£
Increase in transfer
value over accounting
period less directors’
contributions4
£
5,970,000
4,597,900
(2,900)
3,690,900
3,333,800
1,372,100
357,100
1. Absolute increase during accounting period.
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. Figures for Mr Moody have been presented as at his date of retirement as described in the notes below.
The transfer value shown above has been calculated in accordance with the relevant regulations, which preclude allowance being made
for any discretionary options available.
The associated total liabilities of the BETUS in relation to Paul
Moody were approximately £3.8m on an IAS19 basis. In order to
reduce the BETUS related company balance sheet exposure
sooner, the Committee agreed to a cash payment to the former
CEO of £2.9m to eliminate all current and future entitlement under
BETUS for Paul Moody. Taking into account employer NIC costs,
this represents a saving of £0.5m to the company.
On behalf of the board
Bob Ivell
Chairman of the Remuneration Committee
25 November 2013
Notes in relation to Mr Gibney
The accrued pension and transfer value listed above is calculated
on the basis of entitlements accrued to 10 April 2011, but calculated
where relevant in line with market conditions at 29 September 2013.
The entitlement shown also includes increases to accrued pension
since date of leaving defined benefit service for this member as
required under the rules of the Plan and BETUS, the aim of which
are to increase the benefits in line with price inflation between the
date of leaving pensionable service in the Plan and BETUS and the
date when benefits are drawn. The increase due on 1 October 2013
has been included in the above figures.
Notes in relation to Mr Moody
Mr Moody retired from the Britvic Pension Plan and the Britvic
Executive Top-Up Scheme on 26 February 2013, utilising the
Committee’s discretion to allow him to retire under the EERF. The
accrued pension quoted above is calculated as the member’s
pension (prior to commutation of pension for tax free cash) as at
26 February 2013, on the basis of entitlements accrued to 10 April
2011. Mr Moody retired before receiving any pension increase on
his accrued pension subsequent to 30 September 2012; we have
therefore not disclosed any figures relating to increases in accrued
pension for this financial year. The transfer value listed above is
calculated as the transfer value of his early retirement pension as
at 26 February 2013 (prior to commutation of pension for tax free
cash) and following the enhancement received through the EERF,
using market conditions as at 29 September 2013. The increase in
the transfer value as a result of access to the EERF was £1.1m.
54
Britvic plc Annual Report 2013
directors’ remuneration report continued
55
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance governance
directors’ report
for the 52 weeks ended 29 September 2013
The directors present their report and the audited consolidated
financial statements of the company and the group for the 52
weeks ended 29 September 2013.
In support of the new requirements introduced by The Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2013
which became effective on 1 October, 2013, the directors have
voluntarily included disclosures in this annual report in relation to
gender and human rights which may be found in the Chief
Executive Officer’s Strategic Review on page 9 and on the
company’s greenhouse gas (GHG) emissions which are set out on
page 57 of this Directors’ Report.
Certain information required for disclosure in this report is provided
in other appropriate sections of the annual report. These include
the Business Review, the Corporate Governance, Audit Committee,
Nomination Committee and Directors’ Remuneration Reports and
the Group Financial Statements, and these are, accordingly,
incorporated into this report by reference.
Principal activities
The group trades principally as a manufacturer and distributor of
soft drinks.
Business review
A detailed review of the group’s business is contained within the
Chairman’s Statement, the Chief Executive Officer’s Strategic
Review and the Chief Financial Officer’s Review on pages 8 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 29 September 2013
before taxation attributable to the equity shareholders amounted to
£82.6 million (2012: £77.5 million) and the profit after taxation
amounted to £61.9 million (2012: £57.4 million).
An interim dividend of 5.4p (2012: 5.3p) per ordinary share was
paid on 12 July 2013.
The directors have proposed a final dividend of 13.0p (2012: 12.4p)
per ordinary share payable on 7 February 2014 to shareholders on
the register at the close of business on 4 December 2013, giving a
total dividend in respect of 2013 of 18.4p (2012: 17.7p).
Annual general meeting (AGM)
The company’s AGM will be held at Nomura, One Angel Lane, London
EC4R 3AB at 11.00a.m. on 29 January 2014. Details of the resolutions
to be proposed at the AGM are set out in the separate circular which
has been sent to all shareholders with this annual report.
Articles of association (Articles)
The company’s articles may only be amended by a special
resolution at a general meeting of shareholders. No amendments
to the articles are being proposed at the AGM.
Directors
The following were directors of the company during the 52 weeks
ended 29 September 2013: Gerald Corbett, Simon Litherland
(appointed 13 February 2013), Paul Moody (resigned on 26
February 2013), Joanne Averiss, John Gibney, Ben Gordon,
Bob Ivell and Michael Shallow.
Subject to company law and the company’s articles, the directors
may exercise all of the powers of the company and may delegate
their power and discretion to committees. The Executive Team 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 at the
first annual general meeting following appointment and to retire at
the AGM held in the third calendar year after election or last
re-election, but to comply with the UK Corporate Governance Code
all of the directors will submit themselves for re-election at the
AGM. The biographical details of the directors are set out on pages
26 and 27 of this report.
Directors’ interests
The directors’ interests in ordinary shares of the company are
shown within the Directors’ Remuneration Report on pages 36 to
54. 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 29 September 2013
which was significant in relation to the group’s business. Further
details of Joanne Averiss’ appointment are set out on pages 27
and 30 in the Corporate Governance 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, 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.
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Britvic plc Annual Report 2013 directors’ report continued
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 effectively. This is contained within the Directors’
Remuneration Report on pages 36 to 54.
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
road shows at key sites by members of the Executive Team, 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.
Greenhouse gas (GHG) emissions
The table below sets out the quantities of GHG emissions in
tonnes of carbon dioxide equivalent (CO2e) for the 52 weeks ended
29 September 2013. The directors are making this disclosure for
the first time, ahead of the new requirements for companies to
disclose their GHG emissions in periods ending on or after 30
September 2013.
We have reported on all of the emission sources required under
the Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013. These sources fall within our consolidated
financial statement. We do not have responsibility for any emission
sources that are not included in our consolidated statement.
Emissions outside of our responsibility, including shared office
locations, have been omitted from our disclosure. We have used
the GHG Protocol Corporate Accounting and Reporting Standard
(revised edition) and emission factors from UK Government’s GHG
Conversion Factors for Company Reporting 2014.
2012-2013
Total CO2e emissions
Emissions from:
Tonnes CO2e
68,036
Combustion of fuel & operation of
facilities
Electricity, heat, steam and cooling
purchased for our own use
23,418
44,617
Intensity measure:
Emissions reported above normalised
to per tonne of product output
0.03357 Tonnes CO2e/
Tonnage produced
Notes:
1. Emissions relate to those generated by our manufacturing, office and
distribution sites in GB, Ireland and France.
2. Transport emissions, which are considered to be ‘Scope 3’, have not been
included because our distribution network is sub-contracted to a third party.
3. Emissions outside of our responsibility and under the control of a third party
have also been excluded.
Supplier payment policy
It is the group’s 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 29 September 2013 was 46 (2012: 51).
Charitable and political donations
During the 52 weeks ended 29 September 2013, the group and its
subsidiaries donated £0.7 million for charitable purposes (2012:
£1.6 million). This included cash and product donations directly to
charitable organisations and other investment in support of
community programmes including employee volunteering.
No political donations were made by the group and its subsidiaries
(2012: Nil).
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Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance directors’ report continued
Major shareholders
At 25 November 2013 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:
Number of
ordinary
shares
Percentage
of voting
rights
Standard Life Investments Ltd 20,073,633
8.24%
Prudential plc
PepsiCo, Inc.
12,324,136
5.07%
11,813,032
4.88%
Nature
of holding
Direct/
Indirect
Direct
Direct
TIAA-CREF Investment
Management, LLC
7,415,047
3.03%
Direct
Share capital
As at 29 September 2013, the company’s issued share capital
comprised a single class of shares divided into ordinary shares of
£0.20 each (referred to as ordinary shares). Full details of the
ordinary shares in issue are given in note 20 to the financial
statements on page 90.
Rights and restrictions attaching to shares
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.
The company is not aware of any agreements between
shareholders that may result in restrictions on the transfer of
securities and/or voting rights.
Shares held in employee benefit trusts
Under the rules of the Britvic Share Incentive Plan (‘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 25 November 2013, the
Trustees held 0.07% (2012: 0.05%) of the issued share capital of
the company.
Similarly, if IFG Trust (Jersey) Limited, as Trustee of the Britvic
Employee Benefit Trust (‘the Trustee’), holds ordinary shares on trust
for the benefit of the Executive Directors, senior executives and
managers of the group, a dividend waiver is in place. The Trustee is
not permitted to vote on any unvested shares held in the trust
unless expressly directed to do so by the company. The Trustee did
not hold any ordinary shares as at 25 November 2013 (2012:nil).
Change of control provisions
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.
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 policies for
managing each of the group’s main financial risk areas are referred
to in the Treasury Management section of the Chief Financial
Officer’s Review on page 16 and in more detail within Note 24 of
the consolidated financial statements.
Research and development
The group carries out research and development necessary to support
its principal activities as a manufacturer and distributor of soft drinks.
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 have indicated their willingness to accept
re-appointment as auditors of the company and a resolution
proposing their re-appointment is contained in the Notice of
AGM and will be put to the shareholders at the AGM.
By order of the board
Clare Thomas
Company Secretary
25 November 2013
58
Britvic plc Annual Report 2013
governance
statement of directors’
responsibilities in relation
to the financial statements
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.
The directors are responsible for preparing the annual report in
accordance with applicable law and regulations. Having taken
advice from the Audit and Risk Committee, the board considers
the annual report and financial statements, taken as a whole, as
fair, balanced and understandable to assess the company’s
performance, business model and strategy.
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.
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 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.
59
Britvic plc Annual Report 2013business reviewfinancial statementsoverviewshareholder informationgovernance 60
Britvic plc Annual Report 2013 63
Independent auditor’s report to the members of Britvic plc
65 Consolidated income statement
66 Consolidated statement of comprehensive income
67 Consolidated balance sheet
68 Consolidated statement of cash flows
69 Consolidated statement of changes in equity
70 Notes to the consolidated financial statements
111 Independent auditor’s report to the members of Britvic plc
112 Company balance sheet
113 Notes to the company financial statements
financial
statements
61
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 62
Britvic plc Annual Report 2013 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 29 September 2013 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. 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 59, 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 statements information in the Annual Report to identify
material inconsistencies with the audited financial statements and
to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. 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 consolidated financial statements:
• give a true and fair view of the state of the group’s affairs as at
29 September 2013 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.
Our assessment of risks of material misstatement
We identified the following risks of material misstatement which
had the greatest effect on the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the
engagement team:
• the assessment of the carrying value of goodwill and indefinite
lived assets;
• the accounting for the Group’s derivatives and hedging activities;
• revenue recognition – in particular the treatment of long term
discounts, promotional discounts and account development
funds and the timing of revenue recognition;
• the accounting for the defined benefit pension scheme; and
• the risk of management override of internal control
Our application of materiality
Materiality is a key part of planning and executing our audit strategy.
For the purposes of determining whether the financial statements
are free from material misstatement, we define materiality as the
magnitude of an omission or misstatement that, individually or in the
aggregate, in light of the surrounding circumstances, could
reasonably be expected to influence the economic decisions of the
users of the financial statements. As we develop our audit strategy,
we determine materially at the overall financial statement level and
at the individual account level. Performance materiality is the
application of materiality at the individual account level.
Planning the audit solely to detect individually material
misstatements overlooks the fact that the aggregate of individually
immaterial misstatements may cause the financial statements to
be materially misstated, and leaves no margin for possible
undetected misstatements. Performance materiality is set to
reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds
materiality for the financial statements as a whole.
When establishing our overall audit strategy, we determined a
magnitude of uncorrected misstatements that we judged would be
material for the financial statements as a whole. We determined
materiality for the group to be £5.2 million (2012: £5.1 million),
which is approximately 5% (2012: 5%) of adjusted pre-tax profit.
We used adjusted pre-tax profits to exclude those items classified
as exceptional items within the financial statements. This provided
the basis for determining the nature, timing and extent of our audit
procedures, and identifying and assessing the risk of material
misstatement.
On the basis of our risk assessments, together with our
assessment of the group’s overall control environment, our
judgement was that overall performance materiality (i.e. our
tolerance for misstatement in an individual account or balance) for
the group should be 75% (2012: 75%) of planning materiality,
namely £3.9 million (2012: £3.8 million). Our objective in adopting
this approach was to ensure that the total detected and
undetected audit differences did not exceed our planning
materiality of £5.2 million for the financial statements as a whole.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of £0.26 million (2012:
£0.25 million), as well as differences below that threshold that, in
our view warranted reporting on qualitative grounds.
63
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 independent auditor’s report to the members of Britvic plc continued
An overview of the scope of our audit
In assessing the risk of material misstatement to the consolidated
financial statements, our Group audit scope focused on three
operating locations, of which one was subject to a full scope audit
for the 52 week period ended 29 september 2013. The remaining
two operating locations were subject to a specific scope audit,
where the extent of the audit work was based on our assessment
of the risk of material misstatement and the materiality of the
Group’s business operations at those locations. The audit of these
three locations was performed at a materiality level calculated by
reference to a proportion of Group materiality appropriate to the
relevant scale of the individual business unit. Together with the
Group Functions, which were also subject to a full scope audit
these locations represent the principal business units of the Group
and account for 100% of the Group’s total assets, 100% of the
Group’s revenue and 100% of the Group’s operating profit.
The Senior Statutory Auditor also leads the audit at the full scope
location and has visited one of the specific scope locations during
the year. For all locations in scope in addition to the locations
visited the group audit team remained in continuous contact with
component teams and reviewed the work on key audit areas.
Our response to the risks of material misstatement identified
above included the following procedures:
The assessment of the carrying value of goodwill and
indefinite lived assets
• we challenged management’s assessment of impairment,
including the key inputs of the forecast cash flows, the discount
rate used, the growth rate assumed and the historical accuracy
of budgets and we used a valuation specialist to assist us with
our consideration of the discount rate used;
The accounting for the defined benefit pension
• we reviewed and challenged the assumptions used in the
pension liability valuations and we used a pensions specialist to
assist us with this procedure;
• we understood and challenged management’s input into the
assumptions underpinning the liability;
• we tested a sample of the pension asset valuations to ensure
they had been reasonably calculated; and
• we ensured that the financial statement disclosures were in
accordance with accounting standards.
The risk management override of internal control
• we performed tailored procedures, sufficient to address the
identified risk in respect of subjective areas which were
considered to be most susceptible to management override.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the
Directors’ Report for the financial year for which the group financial
statements are prepared is consistent with the group financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to you if,
in our opinion, information in the annual report is:
• materially inconsistent with the information in the audited
financial statements; or
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group acquired in the
course of performing our audit; or
• we evaluated management’s sensitivity analysis; and
• is otherwise misleading.
• we ensured that the financial statement disclosures met the
requirements of accounting standards.
The accounting for the Group’s derivatives and hedging
activities
• we obtained direct external confirmations of the valuation for
each of the derivative instruments held and tested a sample of
valuations to ensure they had been reasonably calculated;
• we evaluated management’s documentation and assessment of
hedge effectiveness; and
• we ensured that the financial statement disclosures were in
accordance with accounting standards.
Revenue recognition – including the treatment of long term
discounts, promotional discounts and account development
funds and the timing of revenue recognition
• we tested a sample of long term discounts, promotional
discounts and account development funds to ensure the revenue
recognition policies adopted complied with IFRS;
• we carried out testing relating to controls over revenue
recognition, including the timing of revenue recognition;
• we performed analytical procedures, cut-off testing on customer
delivery notes around the period end and journal testing around
revenue; and
• we ensured that the financial statement disclosures were in
accordance with accounting standards.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the directors’ statement that they consider the
annual report is fair, balanced and understandable and whether the
annual report appropriately discloses those matters that we
communicated to the audit committee which we consider should
have been disclosed.
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.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 59, 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 weeks ended 29 September
2013 and on the information in the Director’s Remuneration Report
that is described as having been audited.
Simon O’Neill (Senior statutory auditor)
for and on behalf of Ernst & Young LLP,
Statutory Auditor Birmingham
25 November 2013
64
Britvic plc Annual Report 2013 consolidated income statement
For the 52 weeks ended 29 September 2013
52 weeks
ended 29 September 2013
52 weeks
ended 30 September 2012
Before
exceptional &
other items
£m
Exceptional
& other
items*
£m
Note
1,321.9
(646.9)
675.0
(351.5)
(188.5)
135.0
(26.9)
108.1
(25.5)
82.6
-
-
-
-
(26.2)
(26.2)
0.7
(25.5)
4.8
(20.7)
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
Before
exceptional &
other items
£m
Exceptional
& other
items*
£m
1,256.4
(624.6)
631.8
(353.3)
(165.8)
112.7
(28.3)
84.4
(21.5)
62.9
-
-
-
-
(4.8)
(4.8)
(2.1)
(6.9)
1.4
(5.5)
Total
£m
1,321.9
(646.9)
675.0
(351.5)
(214.7)
108.8
(26.2)
82.6
(20.7)
61.9
25.5p
25.3p
35.2p
34.9p
Total
£m
1,256.4
(624.6)
631.8
(353.3)
(170.6)
107.9
(30.4)
77.5
(20.1)
57.4
23.8p
22.4p
27.2p
26.5p
** 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).
All activities relate to continuing operations.
65
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 consolidated statement of comprehensive income
For the 52 weeks ended 29 September 2013
52 weeks ended
29 September
2013
£m
52 weeks ended
30 September
2012
£m
Note
Profit for the period attributable to the equity shareholders
61.9
57.4
Other comprehensive income:
Items that will not be reclassified to profit or loss
Actuarial (losses)/gains on defined benefit pension schemes
Deferred tax on actuarial (losses)/gains on defined benefit pension schemes
Current tax on additional pension contributions
Items that may be subsequently reclassified to profit or loss
Losses 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
Deferred tax on other temporary differences
Other comprehensive income for the period, net of tax
Total comprehensive income for the period attributable to the equity shareholders
22
10
10
25
25
10
25
10
10
(32.4)
4.4
3.1
(24.9)
(1.4)
0.1
0.4
-
(2.9)
0.2
(3.6)
(28.5)
33.4
9.2
(7.9)
4.6
5.9
(17.0)
9.5
2.1
(3.9)
4.0
-
(5.3)
0.6
58.0
66
Britvic plc Annual Report 2013 consolidated balance sheet
As at 29 September 2013
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Other receivables
Other financial assets
Pension asset
Current assets
Inventories
Trade and other receivables
Other financial assets
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Bank overdrafts
Interest bearing loans and borrowings
Other financial liabilities
Current income tax payable
Provisions
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Pension liability
Other financial 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
2013
£m
2012
£m
13
14
16
25
22
17
18
25
19
23
19
21
25
27
21
10e
22
25
26
20
215.7
317.0
3.8
62.5
0.1
599.1
90.8
266.1
12.8
94.0
463.7
1,062.8
(381.5)
(2.5)
(91.6)
(1.4)
(17.0)
(10.5)
(504.5)
(458.3)
(27.8)
(19.4)
(10.0)
(1.9)
(517.4)
(1,021.9)
40.9
49.0
25.0
(1.1)
7.5
2.7
19.6
87.3
(149.1)
40.9
236.6
305.2
3.6
92.1
7.5
645.0
73.8
257.4
0.1
49.5
380.8
1,025.8
(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
The financial statements were approved by the board of directors and authorised for issue on 25 November 2013.
They were signed on its behalf by:
Simon Litherland
Chief Executive Officer
John Gibney
Chief Financial Officer
67
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 consolidated statement of cash flows
For the 52 weeks ended 29 September 2013
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
(Increase)/decrease in inventory
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Increase in provisions
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
Net cash flows used in investing activities
Cash flows from financing activities
Finance costs
Interest paid
Interest bearing loans repaid
Issue of shares
Purchase of own shares
Dividends paid to equity shareholders
Net cash flows used in financing activities
Net increase 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
13
14
28
12
29
19
2013
£m
82.6
26.2
(6.0)
12.9
36.6
7.1
6.2
(17.2)
(14.9)
(4.7)
9.9
10.5
3.8
(11.2)
141.8
0.3
(26.3)
(8.9)
(34.9)
-
(26.6)
(0.9)
7.1
-
(42.5)
(62.9)
44.0
47.6
(0.1)
91.5
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
68
Britvic plc Annual Report 2013 consolidated statement of changes in equity
For the 52 weeks ended 29 September 2013
Issued
share
capital
£m
48.3
Share
premium
account
£m
Own shares
reserve
£m
Share
scheme
reserve
£m
Hedging
reserve
£m
Translation
reserve
£m
Merger
reserve
£m
Retained
losses
£m
15.0
(1.0)
7.8
9.0
22.4
87.3
(166.3)
At 2 October 2011
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
At 30 September 2012
Profit for the period
Other comprehensive
income
Issue of shares
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
At 29 September 2013
-
-
-
0.2
-
-
-
-
-
-
48.5
-
-
-
0.5
-
-
-
-
-
-
-
2.7
-
-
-
-
-
-
17.7
-
-
-
7.3
-
-
-
-
-
-
-
(2.4)
(9.3)
11.9
-
-
-
-
(0.8)
-
-
-
(2.1)
1.8
-
-
-
-
49.0
-
25.0
-
(1.1)
-
-
-
-
-
(5.6)
2.0
-
-
-
4.2
-
-
-
-
(1.8)
5.1
-
-
-
7.5
Total
£m
22.5
57.4
0.6
58.0
0.5
(9.3)
4.3
2.0
0.6
1.0
(42.5)
37.1
61.9
(28.5)
57.4
5.9
63.3
-
-
(2.0)
-
0.6
1.0
(42.5)
(145.9)
61.9
(24.7)
37.2
33.4
-
1.4
-
1.0
5.7
1.4
5.1
1.0
(0.3)
(0.3)
-
(5.4)
(5.4)
-
0.1
0.1
-
-
-
-
-
-
-
3.6
-
(0.9)
(0.9)
-
-
-
-
-
-
-
-
-
-
-
-
22.5
-
(2.9)
(2.9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87.3
-
-
-
-
-
-
-
-
-
2.7
-
19.6
-
87.3
(42.5)
(149.1)
(42.5)
40.9
69
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 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 25 November 2013.
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, after the deduction of sales related discounts and
rebates, value added tax and other sales related taxes. Revenue is recognised when goods are delivered and accepted by customers,
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 derecognition.
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.
70
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
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 is 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. Costs include resources focussed on delivery of capital projects where the choice has been made to
use internal resource rather than external resources. These costs are amortised over their estimated useful lives of three to seven years
on a straight line basis.
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.
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.
71
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
3. Accounting policies continued
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 reporting 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 on loss on the hedging instrument would continue to be recorded in the consolidated income
statement.
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.
72
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
3. Accounting policies continued
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 unutilised 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.
Provisions
Provisions are recognised when: the group has a present legal or constructive obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and the amount can be reliably estimated. Provisions are not recognised for
future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due
to passage of time is recognised as interest expense.
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.
73
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
3. Accounting policies 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.
Certain of the group’s financial instruments are classified as net investment hedges when they hedge the group’s net investment in
foreign operations. See derivative financial instruments and hedging policy above for further detail.
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.
74
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
3. Accounting policies continued
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.
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 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 size, 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 22.
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.
75
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
3. Accounting policies continued
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 21 and 25.
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 19
IAS 27
IAS 32
IAS 36
IAS 19 (revised 2011) - Employee benefits
IAS 27 (revised 2011) – Separate financial statements
Amendment to IAS 32 – Offsetting of assets and liabilities
Amendment to IAS 36 – Recoverable amount disclosures
for non- financial assets
Amendment to IFRS 9 – Novation of derivatives
and continuation of hedge accounting
IAS 39
Other
Annual improvements
IFRIC Interpretation 21
Annual improvements 2011
IFRIC 21 - Levies
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 January 2013
1 January 2013
1 January 2014
1 January 2014
1 January 2014
1 January 2013
1 January 2014
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. Other changes will include the treatment of expenses paid in relation to the plans and the narrative
disclosures. The directors consider that this change will not have a material impact on the group consolidated results.
76
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
• Ireland – Republic of Ireland and Northern Ireland
• France
• International
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
29 September 2013
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 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
GB Stills
£m
GB Carbs
£m
Total GB
£m
Ireland
£m
France
£m
International
£m
Adjustments
£m
Total
£m
340.1
22.9
363.0
154.5
536.4
8.3
544.7
200.1
876.5
31.2
907.7
354.6
136.9
18.0
154.9
49.0
271.0
1.4
272.4
67.9
37.5
-
37.5
14.1
-
(50.6)
(50.6)
-
GB Stills
£m
GB Carbs
£m
Total GB
£m
Ireland
£m
France
£m
International
£m
Adjustments
£m
321.7
15.0
336.7
141.2
517.9
9.6
527.5
188.7
839.6
24.6
864.2
329.9
138.7
8.0
146.7
44.6
248.8
0.8
249.6
59.2
29.3
-
29.3
8.3
-
(33.4)
(33.4)
-
1,321.9
-
1,321.9
485.6
(7.3)
(100.7)
(124.5)
(118.1)
135.0
(26.9)
(25.5)
82.6
Total
£m
1,256.4
-
1,256.4
442.0
(7.8)
(100.3)
(118.0)
(103.2)
112.7
(28.3)
(6.9)
77.5
* 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.
77
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
2013
£m
940.3
110.6
271.0
1,321.9
2013
£m
236.7
107.8
192.0
536.5
2012
£m
900.4
107.2
248.8
1,256.4
2012
£m
260.1
104.8
181.3
546.2
Non-current assets for this purpose consist of property, plant and equipment, intangible assets and other receivables.
5. Exceptional and other items
Exceptional and other items are those items of financial performance that management believe should be separately disclosed by virtue
of the size, nature and infrequency of the events giving rise to them to allow shareholders to better understand 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.
Unless otherwise stated, exceptional and other items are included within administration expenses in the consolidated income statement.
Net pension gain
Asset impairments
Strategic restructuring costs
Aborted merger costs
Property and relocation costs
Other fair value movements*
Total exceptional and other items before tax
(a)
(b)
(c)
(d)
(e)
(f)
52 weeks ended
29 September 2013
£m
52 weeks ended
30 September 2012
£m
-
(12.9)
(10.6)
(9.6)
-
7.6
(25.5)
21.1
(14.9)
(11.0)
-
(1.3)
(0.8)
(6.9)
* For the 52 weeks ended 29 September 2013, a gain of £6.9m is included within administration expenses (52 weeks ended 30 September 2012: £1.3m gain) and a
gain of £0.7m is included within finance costs (52 weeks ended 30 September 2012: £2.1m loss) in the consolidated income statement.
a) In 2012, the net pension gain related to an Ireland pension curtailment gain.
b) In 2013, asset impairments relates to the planned closure of two factories as part of the strategic cost initiatives announced in May
2013.
In 2012, asset impairments related to the impairment of SAP implementation costs in Ireland.
c) Strategic restructuring costs in 2013 relate to the implementation of cost initiatives announced in May 2013, including costs associated
with the closure of two factories and planned changes to the business operating model.
In 2012, restructuring costs included GB-related restructuring costs of £3.7m, Ireland restructuring costs of £5.2m and corporate
acquisition due diligence costs of £2.1m.
d) In 2013, costs related to the previously proposed merger of Britvic plc and A.G.Barr plc.
e) In 2012, property and relocation costs related to the transfer of the Britvic plc head office from Chelmsford to Hemel Hempstead and
a credit against an onerous lease provision relating to rental income received from a sublet during that year.
f) 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.
78
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
8. Staff costs
Wages and salaries*
Social security costs
Net pension charge/(income) (note 22)**
Expense of share based compensation (note 28)
2013
£m
646.9
1.5
0.6
1.1
36.6
7.1
13.1
2013
£m
0.2
0.4
0.6
-
0.1
-
0.7
1.6
2.4
3.0
2013
£m
119.4
20.3
8.7
6.2
154.6
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
2012
£m
125.4
19.0
(7.3)
3.0
140.1
* £6.7m (2012: £6.4m) of this is included within ‘strategic restructuring costs’ in exceptional and other items (note 5).
** In 2012, the pension income includes a curtailment gain of £21.3m in relation to changes in the Ireland defined benefit pension plan which is included within
exceptional and other items (note 5).
Directors’ emoluments
Aggregate gains made by directors on exercise of options
Number of directors accruing benefits under defined benefit schemes
2013
£m
2.7
-
2013
No.
-
2012
£m
1.5
0.7
2012
No.
-
79
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
8. Staff costs continued
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 25)
Total finance costs
10. Taxation
a) Tax on profit on continuing operations
Income statement
Current income tax
Current income tax (charge) / credit
Amounts over/(under) provided in previous years
Total current income tax (charge) / credit
Deferred income tax
Origination and reversal of temporary differences
Impact of change in UK tax rate on deferred tax liability
Amounts (under)/over provided 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
Deferred tax on other temporary differences
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
2013
No.
331
1,508
979
458
3,276
2013
£m
26.9
(0.7)
26.2
Before
exceptional
& other items
£m
Exceptional
& other items
£m
(26.9)
1.2
(25.7)
(0.5)
3.0
(2.3)
0.2
(25.5)
3.3
(1.1)
2.2
1.4
0.2
1.0
2.6
4.8
2012
No.
370
1,465
1,038
464
3,337
2012
£m
28.3
2.1
30.4
2013
Total
£m
(23.6)
0.1
(23.5)
0.9
3.2
(1.3)
2.8
(20.7)
3.1
4.4
0.4
(2.9)
0.2
5.2
1.0
(0.3)
0.7
80
Britvic plc Annual Report 2013
notes to the consolidated financial statements continued
10. Taxation continued
a) Tax on profit on continuing operations continued
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
Impact of change in UK tax rate on deferred tax liability
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
Before
exceptional
& other items
£m
Exceptional
& other items
£m
(13.0)
(2.1)
(15.1)
(8.8)
2.0
0.4
(6.4)
(21.5)
3.2
(0.3)
2.9
(1.7)
0.2
-
(1.5)
1.4
2012
Total
£m
(9.8)
(2.4)
(12.2)
(10.5)
2.2
0.4
(7.9)
(20.1)
4.6
(7.9)
2.1
4.0
2.8
0.6
1.0
1.6
81
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013
notes to the consolidated financial statements continued
10. Taxation continued
b) Reconciliation of the total tax charge
The tax expense in the consolidated income statement is higher (2012: higher) than the standard rate of corporation tax in the UK of
23.5% (2012: 25%). The differences are reconciled below:
Profit / (loss) before tax
Profit / (loss) multiplied by the UK average rate of corporation tax of 23.5%
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 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
Before
exceptional
& other items
£m
Exceptional &
other items
£m
108.1
(25.4)
0.4
3.0
(1.1)
(2.4)
(25.5)
23.6%
(25.5)
6.0
(0.6)
0.2
(0.1)
(0.7)
4.8
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
2013
Total
£m
82.6
(19.4)
(0.2)
3.2
(1.2)
(3.1)
(20.7)
25.0%
2012
Total
£m
77.5
(19.4)
0.6
2.2
(2.0)
(1.5)
(20.1)
25.9%
c) Unrecognised tax items
The temporary differences associated with investments in subsidiaries for which a deferred tax liability has not been recognised total
£5.6m (2012: £3.8m). 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 £0.4m (2012: £nil) has not been recognised in respect of tax losses.
d) Impact of rate change
Finance Act 2013 enacted reductions in the UK corporation tax rate from 23% to 21% from 1 April 2014 and to 20% from 1 April 2015.
The effect of the new rate is to reduce the deferred tax provision by a net £2.1m, comprising a credit of £3.2m to the income statement
and a charge of £1.1m to the consolidated statement of comprehensive income.
82
Britvic plc Annual Report 2013 10. Taxation continued
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
Post employment benefits
Deferred tax liability
Deferred tax asset
Employee incentive plan
Unutilised losses incurred in overseas jurisdictions
Other temporary differences
Deferred tax asset
notes to the consolidated financial statements continued
2013
£m
(6.8)
(17.6)
(0.1)
(13.5)
(38.0)
3.7
5.1
1.4
10.2
2012
£m
(9.8)
(17.8)
(0.1)
(19.5)
(47.2)
3.6
4.4
5.1
13.1
Net deferred tax liability
(27.8)
(34.1)
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 credit/(charge)
In 2013, £2.6m credit of the group’s overall deferred tax credit relates to exceptional items (2012: £1.5m charge).
2013
£m
-
(27.8)
(27.8)
2013
£m
0.4
3.0
1.5
1.3
0.7
(4.1)
2.8
2012
£m
-
(34.1)
(34.1)
2012
£m
(1.1)
7.8
(19.0)
0.9
3.1
0.4
(7.9)
83
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
2013
£m
61.9
243.2
25.5p
61.9
244.7
25.3p
2012
£m
57.4
241.6
23.8p
57.4
256.6
22.4p
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 size, 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.
The group modifies adjusted diluted earnings per share to exclude the impact of share options that have been granted but not yet vested,
if applicable.
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)
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
Note
14
2013
£m
61.9
20.7
2.9
85.5
243.2
35.2p
85.5
244.7
34.9p
2012
£m
57.4
5.5
2.9
65.8
241.6
27.2p
65.8
248.8
26.5p
84
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
12. Dividends paid and proposed
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2012: 12.4p per share (2011: 12.6p per share)
Interim dividend for 2013: 5.4p per share (2012: 5.3p per share)
Dividends paid
Proposed
Final dividend for 2013: 13.0p per share (2012: 12.4p per share)
13. Property, plant and equipment
2013
£m
29.6
12.9
42.5
31.7
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
Exchange differences
Additions
Disposals at cost
Depreciation eliminated on disposals
Depreciation charge for the year
Impairment *
At 29 September 2013 net of accumulated
depreciation and impairment
At 29 September 2013
Cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
At 30 September 2012
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
59.9
(1.4)
3.5
(0.9)
0.1
(2.1)
-
59.1
1.0
3.8
(0.1)
0.1
(2.4)
-
61.5
83.9
(22.4)
61.5
77.9
(18.8)
59.1
28.7
(0.6)
0.4
-
-
(0.7)
-
27.8
0.4
2.5
-
-
(0.9)
(0.8)
29.0
43.1
(14.1)
29.0
39.9
(12.1)
27.8
105.1
(2.9)
20.2
(12.1)
11.0
(19.6)
-
101.7
1.8
15.2
(3.5)
1.9
(20.3)
(10.4)
86.4
272.9
(186.5)
86.4
255.1
(153.4)
101.7
50.1
(0.1)
15.5
(7.5)
6.3
(12.0)
(4.3)
48.0
-
6.3
(12.4)
9.9
(13.0)
-
38.8
162.6
(123.8)
38.8
166.6
(118.6)
48.0
2012
£m
29.9
12.6
42.5
30.1
Total
£m
243.8
(5.0)
39.6
(20.5)
17.4
(34.4)
(4.3)
236.6
3.2
27.8
(16.0)
11.9
(36.6)
(11.2)
215.7
562.5
(346.8)
215.7
539.5
(302.9)
236.6
* The impairment in 2013 principally relates to the write down of plant and machinery following the strategic cost initiative announcement in May 2013, and has been
included within exceptional and other items (see note 5).
Finance leases
The net book value of freehold land and buildings and plant and machinery includes £0.2m and £0.1m respectively (2012: £0.2m and
£0.3m respectively) in respect of assets held under finance leases. The assets are pledged as security for the finance lease liabilities.
85
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013
notes to the consolidated financial statements continued
14. Intangible assets
Cost as at 2 October 2011, net of
accumulated amortisation
Exchange differences
Additions
Amortisation charge for the period
Impairment
Cost as at 30 September 2012, net of
accumulated amortisation
Exchange differences
Additions
Amortisation charge for the period
Impairment**
At 29 September 2013
At 29 September 2013
Cost (gross carrying amount)
Accumulated amortisation and
impairment
Net carrying amount
At 30 September 2012
Cost (gross carrying amount)
Accumulated amortisation and
impairment
Net carrying amount
* Acquisition related amortisation (see note 11).
Trademarks
£m
Franchise
rights
£m
99.9
(7.4)
-
-
-
92.5
5.0
-
-
-
97.5
126.6
(29.1)
97.5
120.1
(27.6)
92.5
22.6
(1.6)
-
(0.7)*
-
20.3
1.0
-
(0.7)*
-
20.6
24.8
(4.2)
20.6
23.6
(3.3)
20.3
Customer
Software
lists
£m
40.3
(2.9)
-
(2.2)*
-
35.2
1.8
-
(2.2)*
-
34.8
49.7
(14.9)
34.8
47.2
(12.0)
35.2
costs
£m
32.3
(0.2)
5.4
(6.6)
(10.6)
20.3
-
8.9
(4.2)
-
25.0
Goodwill
£m
142.8
(5.9)
-
-
-
136.9
3.9
-
-
(1.7)
139.1
Total
£m
337.9
(18.0)
5.4
(9.5)
(10.6)
305.2
11.7
8.9
(7.1)
(1.7)
317.0
65.5
205.6
472.2
(40.5)
25.0
56.0
(35.7)
20.3
(66.5)
139.1
(155.2)
317.0
198.9
445.8
(62.0)
136.9
(140.6)
305.2
** The impairment in 2013 relates to the write down of goodwill relating to the Water business following the strategic cost initiative announcement in May 2013, and
has been included within exceptional and other items (see note 5).
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 29 September
2013 these intangible assets have a remaining useful life of 29 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 29 September 2013 these intangible assets have a remaining useful life of 17
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 29 September 2013 these intangible
assets have a remaining useful life of between 4 and 14 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. As at 29 September 2013 these intangible assets have a remaining useful life of up to 7 years.
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.
86
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
Trademarks with indefinite lives
Britvic Ireland
Britvic
Cidona
Mi Wadi
Ballygowan
Club
Britvic France
Teisseire
Moulin de Valdonne
Pressade
Fruité
Total Trademarks
2013
£m
6.0
8.9
38.6
7.8
-
16.6
61.2
139.1
2013
£m
6.3
5.5
8.6
2.4
14.2
37.0
47.9
3.9
4.5
4.2
60.5
97.5
2012
£m
6.0
8.9
38.6
7.8
1.7
15.8
58.1
136.9
2012
£m
6.0
5.3
8.1
2.2
13.5
35.1
45.4
3.7
4.3
4.0
57.4
92.5
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 relate to translation movements and the
impairment of goodwill related to the Water business.
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
Goodwill and intangible assets with indefinite lives
Impairment reviews of goodwill and intangible assets are undertaken by senior management annually. Value in use calculations are
performed for each cash-generating unit using cash flow projections and are based on the latest financial budgets prepared by senior
management and approved by the board of directors. Senior management expectations are formed in line with performance to date and
experience, as well as available external market data.
The group has considered the impact of the current economic climate in determining the appropriate discount rate to use in impairment
testing. The applicable pre-tax discount rate for cash flow projections is:
Britvic GB
Britvic Ireland
Britvic France
At 29 September 2013
At 30 September 2012
8%
10%
10%
11%
11%
12%
Cash flows beyond a one year period are extrapolated based on growth and discount rates as described on page 86.
87
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013
notes to the consolidated financial statements continued
15. Impairment testing of intangible assets continued
Key assumptions used in value in use calculations
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.
Intangible assets with finite lives
No indicators of impairment were identified on intangible assets with finite lives and no impairment was recognised against these assets.
Results and conclusions
Following the strategic cost initiative announcement in May 2013, the carrying value of goodwill relating to the Water business of £1.7m
has been impaired, and the impairment charge recognised within exceptional and other items (see note 5).
The directors do not consider that a reasonably possible change in the assumptions used to calculate the value in use of remaining
goodwill and intangible assets would result in any impairment.
16. Other receivables (non-current)
Operating lease premiums
Prepayments
Other
Total other receivables (non-current)
2013
£m
1.8
1.5
0.5
3.8
Operating lease premiums relates to the un-amortised element of lease premiums paid on inception of operating leases.
17. Inventories
Raw materials
Finished goods
Consumable stores
Returnable packaging
Total inventories at lower of cost and net realisable value
2013
£m
27.1
54.9
7.0
1.8
90.8
2012
£m
2.3
1.3
-
3.6
2012
£m
22.2
42.5
7.2
1.9
73.8
88
Britvic plc Annual Report 2013 18. Trade and other receivables (current)
Trade receivables
Other receivables
Prepayments
notes to the consolidated financial statements continued
2013
£m
236.4
10.1
19.6
266.1
2012
£m
207.7
19.7
30.0
257.4
Trade receivables are non-interest bearing and are generally on credit terms usual for the markets in which the group operates. As at 29
September 2013, trade receivables at nominal value of £1.6m (2012: £2.5m) were impaired and fully provided against. Movements in the
provision for impairment of receivables were as follows:
At 2 October 2011
Charge for period
Utilised
Unused amounts reversed
At 30 September 2012
Charge for period
Utilised
Unused amounts reversed
At 29 September 2013
Total
£m
1.2
1.9
(0.5)
(0.1)
2.5
2.5
(1.9)
(1.5)
1.6
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.
The ageing analysis of trade receivables is as follows:
Neither past
due nor
impaired
£m
218.1
196.5
Total
£m
236.4
207.7
<30 days
£m
30 – 60 days
£m
60 – 90 days
£m
90 – 120 days
£m
> 120 days
£m
7.3
6.7
4.1
0.3
0.9
2.0
1.2
0.5
4.8
1.7
Past due but not impaired
2013
2012
The credit quality of trade receivables that are neither past due nor impaired is considered good. Refer to note 24 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.
89
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
2013
£m
94.0
94.0
(2.5)
91.5
2012
£m
49.5
49.5
(1.9)
47.6
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 29 September 2013 the group had available £400.0m (2012: £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.
20. Issued share capital
The issued share capital is wholly comprised of ordinary shares carrying one voting right each. The nominal value of each ordinary share is
£0.20. 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
At 2 October 2011
Shares issued
At 30 September 2012
Shares issued
At 29 September 2013
No. of
shares
Value
£
241,400,052
944,499
242,344,551
2,746,477
245,091,028
48,280,010
188,900
48,468,910
549,295
49,018,205
Of the issued and fully paid ordinary shares, 231,547 shares (2012: 217,994 shares) are own shares held by an employee benefit trust.
This equates to £46,309 (2012: £43,599) 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 24.
21. Interest bearing loans and borrowings
Current
Finance leases
Bank loans
Private placement notes
Less: unamortised issue costs
Total current
Non-current
Finance leases
Bank loans
Private placement notes
Less: unamortised issue costs
Total non-current
2013
£m
(0.2)
(0.2)
(92.1)
0.9
(91.6)
2013
£m
(0.3)
(0.8)
(459.1)
1.9
(458.3)
2012
£m
(0.3)
(0.3)
-
-
(0.6)
2012
£m
(0.5)
(1.1)
(560.8)
3.7
(558.7)
Total interest bearing loans and borrowings
(549.9)
(559.3)
90
Britvic plc Annual Report 2013 21. Interest bearing loans and borrowings continued
The table below provides an analysis of amounts included within current and non-current interest bearing loans and borrowings:
notes to the consolidated financial statements continued
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
Amortisation and write off of issue costs
Net translation gain / fair value adjustment
Accrued interest
At the end of the period
Derivatives hedging balance sheet debt*
Debt translated at contracted rate
2013
£m
(0.5)
(270.3)
(164.8)
(112.2)
(3.9)
(1.0)
2.8
(549.9)
2013
£m
(559.3)
0.6
0.4
(0.9)
8.6
0.7
(549.9)
56.1
(493.8)
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)
* Represents the element of the fair value of interest rate currency swaps hedging the balance sheet value of the private placement notes. This amount has been
disclosed separately to demonstrate the impact of foreign exchange movements which are included in interest bearing loans and borrowings.
Bank loans
The bank loans classified as non-current are repayable by December 2018 (2012: December 2018).
Loans outstanding at 29 September 2013 attract interest at an average rate of 4.03% for euro denominated loans (2012: 4.16%). There
were no sterling denominated bank loans outstanding at 29 September 2013 (2012: £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 25).
2009 Notes
On 17 December 2009, Britvic plc issued US$250.0m 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 25).
91
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013
notes to the consolidated financial statements continued
21. Interest bearing loans and borrowings continued
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%
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.
2010 Notes
On 17 December 2010, Britvic plc 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 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 25).
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%
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, £20.0m of 2-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.
2014 Notes
In November 2013, the group reached agreement with a number of investors in the US private placement market to raise an additional
$170.4m equivalent of funding for terms of between 7 and 12 years. This funding is subject to documentation and due diligence which is
scheduled to be completed in December 2013. Where this funding is dollar-denominated this has been hedged using cross-currency
interest-rate swaps to meet the group’s desired funding profile and to manage the associated foreign currency risk to the profit and loss
account.
22. Pensions
The group’s principal pension scheme for GB employees, the Britvic Pension Plan (BPP) has both a defined benefit and contribution
section. The defined benefit section was closed to new members from 1 August 2002 and closed to future accrual for active members
from 1 April 2011, with new members moving to the defined contribution section for future service benefits.
Contributions are paid to 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. The 31
March 2013 valuation is currently underway and is expected to be completed by 30 June 2014. Changes to the contributions payable
could result.
The BPP is a limited partner of Britvic Scottish Limited Partnership (Britvic SLP), which in turn is a limited partner in both Britvic Property
Partnership (Britvic PP) and Britvic Brands LLP (Britvic Brands). Britvic SLP, Britvic PP and Britvic Brands are all consolidated by the group.
The investment held by BPP does not represent a plan asset for accounting purposes and is therefore not included in the fair value of the
plan assets.
Properties were transferred to Britvic PP at a value of £28.6m and certain group brands to the value of £72.4m were transferred to Britvic
Brands, all of which are leased back to Britvic Soft Drinks Limited. The group retains operational flexibility over the properties and brands
including the ability to substitute the properties and brands held by Britvic PP and Britvic Brands respectively.
92
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
22. Pensions continued
The BPP is entitled to a share of the profits in Britvic SLP for the next 13 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 this time, up to a maximum of £105m.
In addition to the expected partnership income of at least £5m per annum, the group will make payments to the BPP of £15m per annum
by 31 December each year, from 2013 to 2017. During this year £12.5m of additional contributions were paid to the BPP, of which £7.5m
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 2013
was £10.6m (2012: £10.5m).
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.
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. The latest formal actuarial valuation for contribution purposes was
carried out as at 31 December 2011.
In relation to the Britvic Ireland Pension Plan (BIPP), following the changes made in 2012 no deficit recovery contributions are currently
required. The next valuation is due as at 1 January 2015. The Trustee has been undertaking investment de-risking to protect the on-going
funding position achieved as a result of the 2012 changes.
The amount recognised as an expense in relation to the Irish defined contribution schemes in the consolidated income statement for
2013 was £0.8m (2012: £0.3m).
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 29 September 2013 by Towers Watson (BPP), Invesco
(BIPP) and Buck (BNIPP).
Included within the pension liability on the consolidated balance sheet is an accrual of £2.1m (2012: £1.8m) in respect of Britvic France.
The liability represents an unfunded pension obligation made up of two components being retirement indemnities of £1.9m (2012: £1.6m)
and long-service cash payments due on retirement of £0.2m (2012: £0.2m).
Principal assumptions
Financial assumptions
Discount rate
Rate of compensation increase
Expected long term return on plan assets
Pension increases
Inflation assumption
2013
%
ROI
4.25
3.00
4.25
-
2.00
2013
%
NI
4.60
3.75
5.21
1.95-2.45
2.45
2013
%
GB
4.55
n/a
4.84
1.95-3.05
3.35
2012
%
ROI
4.20
3.00
4.85
-
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
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. 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
2013
Years
ROI
22.7
24.5
25.6
26.8
2013
Years
NI
22.0
25.0
23.3
26.6
2013
Years
GB
22.2
24.8
24.4
27.1
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
93
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
22. Pensions continued
Sensitivities
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 £1.2m Decrease/increase by £0.5m Decrease/increase by £11.0m
Inflation rate
Increase/decrease by 0.1% Increase/decrease by £0.6m Increase/decrease by £0.3m Increase/decrease by £8.4m
Mortality rate Increase/decrease in life
expectancy by one year
Net benefit income/(expense)
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Settlement gain
Net income / (expense)
Current service cost
Interest cost on benefit obligation
Expected return on plan assets
Curtailment gain
Net income / (expense)
Increase/decrease by £0.8m Increase/decrease by £0.8m Increase/decrease by £16.3m
ROI
£m
(0.8)
(2.4)
2.4
-
(0.8)
ROI
£m
(0.9)
(3.4)
2.5
21.3
19.5
NI
£m
(0.2)
(1.2)
1.2
-
(0.2)
NI
£m
(0.2)
(1.3)
1.2
-
(0.3)
GB
£m
-
(24.0)
23.9
3.8
3.7
GB
£m
-
(26.5)
25.9
-
(0.6)
2013
Total
£m
(1.0)
(27.6)
27.5
3.8
2.7
2012
Total
£m
(1.1)
(31.2)
29.6
21.3
18.6
The net income detailed above is 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 settlement gain in 2013 has been recognised due to the arrangement reached with the former chief executive upon his retirement
relating to his benefits under BETUS. The gain realised on the extinguishment of this liability has been recognised in exceptional and other
items in the income statement.
The ROI curtailment gain in 2012 was recognised under IAS19 Employee Benefits arising from the removal of the guaranteed pension
indexation.
Taken to the statement of comprehensive income
Actual return on scheme assets
Less: Expected return on scheme assets
Other actuarial gains/ (losses)
Actuarial gains/(losses) taken to the statement of comprehensive income
Actual return on scheme assets
Less: Expected return on scheme assets
Other actuarial losses
Actuarial (losses)/gains taken to the statement of comprehensive income
ROI
£m
3.5
(2.4)
1.1
4.1
5.2
ROI
£m
6.4
(2.5)
3.9
(12.3)
(8.4)
NI
£m
2.2
(1.2)
1.0
0.8
1.8
NI
£m
2.4
(1.2)
1.2
(0.4)
0.8
GB
£m
39.9
(23.9)
16.0
(55.4)
(39.4)
GB
£m
55.6
(25.9)
29.7
(12.9)
16.8
2013
Total
£m
45.6
(27.5)
18.1
(50.5)
(32.4)
2012
Total
£m
64.4
(29.6)
34.8
(25.6)
9.2
94
Britvic plc Annual Report 2013 22. 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)/asset
Movements in the present value of benefit obligation are as follows:
At 30 September 2012
Exchange differences
Settlement gain
Current service cost
Member contributions
Interest cost on benefit obligation
Benefits paid
Actuarial gains/(losses)
At 29 September 2013
At 2 October 2011
Exchange differences
Curtailment gain
Current service cost
Member contributions
Interest cost on benefit obligation
Benefits paid
Actuarial losses
At 30 September 2012
notes to the consolidated financial statements continued
ROI
£m
(54.8)
53.2
(1.6)
ROI
£m
(53.6)
47.2
(6.4)
ROI
£m
(53.6)
(3.0)
-
(0.8)
(0.3)
(2.4)
1.2
4.1
(54.8)
ROI
£m
(64.4)
4.7
21.3
(0.9)
(0.4)
(3.4)
1.8
(12.3)
(53.6)
NI
£m
(26.6)
26.7
0.1
NI
£m
(26.8)
23.8
(3.0)
NI
£m
(26.8)
-
-
(0.2)
-
(1.2)
0.8
0.8
(26.6)
NI
£m
(25.4)
-
-
(0.2)
-
(1.3)
0.5
(0.4)
(26.8)
GB
£m
(562.4)
546.7
(15.7)
GB
£m
(503.9)
511.4
7.5
GB
£m
(503.9)
-
3.8
-
-
(24.0)
17.1
(55.4)
(562.4)
GB
£m
(481.2)
-
-
-
-
(26.5)
16.7
(12.9)
(503.9)
2013
Total
£m
(643.8)
626.6
(17.2)
2012
Total
£m
(584.3)
582.4
(1.9)
2013
Total
£m
(584.3)
(3.0)
3.8
(1.0)
(0.3)
(27.6)
19.1
(50.5)
(643.8)
2012
Total
£m
(571.0)
4.7
21.3
(1.1)
(0.4)
(31.2)
19.0
(25.6)
(584.3)
95
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
22. Pensions continued
Movements in the fair value of plan assets are as follows:
At 30 September 2012
Exchange differences
Expected return on plan assets
Actuarial gains
Employer contributions
Member contributions
Benefits paid
At 29 September 2013
At 2 October 2011
Exchange differences
Expected return on plan assets
Actuarial gains
Employer contributions
Member contributions
Benefits paid
At 30 September 2012
ROI
£m
47.2
2.6
2.4
1.1
0.8
0.3
(1.2)
53.2
ROI
£m
44.5
(3.6)
2.5
3.9
1.3
0.4
(1.8)
47.2
Categories of scheme assets as a percentage of the fair value of total scheme assets
Equities
Bonds and gilts
Properties
Cash
Total
Equities
Bonds and gilts
Properties
Cash
Total
ROI
£m
30.7
21.9
0.6
-
53.2
ROI
£m
24.7
18.8
3.7
-
47.2
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
96
ROI
£m
2.0
0.4
0.0
2.4
ROI
£m
2.0
0.5
-
2.5
NI
£m
13.8
12.6
-
0.3
26.7
NI
£m
11.7
11.9
-
0.2
23.8
NI
£m
0.9
0.3
0.0
1.2
NI
£m
0.8
0.3
0.1
1.2
NI
£m
23.8
-
1.2
1.0
1.5
-
(0.8)
26.7
NI
£m
20.3
-
1.2
1.2
1.6
-
(0.5)
23.8
GB
£m
225.3
310.7
7.6
3.1
546.7
GB
£m
249.8
236.6
21.7
3.3
511.4
GB
£m
16.3
7.5
0.1
23.9
GB
£m
16.5
9.2
0.2
25.9
GB
£m
511.4
-
23.9
16.0
12.5
-
(17.1)
546.7
GB
£m
462.5
-
25.9
29.7
10.0
-
(16.7)
511.4
2013
Total
£m
269.8
345.2
8.2
3.4
626.6
2012
Total
£m
286.2
267.3
25.4
3.5
582.4
2013
Total
£m
19.2
8.2
0.1
27.5
2012
Total
£m
19.3
10.0
0.3
29.6
2013
Total
£m
582.4
2.6
27.5
18.1
14.8
0.3
(19.1)
626.6
2012
Total
£m
527.3
(3.6)
29.6
34.8
12.9
0.4
(19.0)
582.4
2013
Total
%
43
55
1
1
100
2012
Total
%
49
46
4
1
100
2013
Total
%
70
30
0
100
2012
Total
%
65
34
1
100
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
22. 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
2013
£m
626.6
(643.8)
(17.2)
6.1
18.3
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)
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 £81.6m (2012: loss of £49.2m). 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 2014 financial year. Additional
contributions of £21.5m are expected to be paid into the defined benefit pension schemes during the 2014 financial year, of which £16.5m
is expected to be paid by the group and £5.0m by the partnership.
23. Trade and other payables (current)
Trade payables
Other payables
Accruals and deferred income
Other taxes and social security
2013
£m
237.1
4.9
99.2
40.3
381.5
2012
£m
230.9
8.5
92.2
25.6
357.2
Trade payables are non-interest bearing and are normally settled on 60 - 90 day terms.
24. 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 23 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 29 September 2013 after taking into account the effect of these instruments, approximately 97% of the group’s borrowings are at a
fixed rate of interest (2012: 86%).
97
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
24. 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).
2013
Sterling
Euro
2012
Sterling
Euro
Increase /
(decrease)
in basis
points
Effect on
profit /loss
before tax
£m
Effect on
equity
£m
200
(200)
200
(200)
200
(200)
200
(200)
-
-
0.7
(0.8)
(0.2)
0.2
1.6
(1.8)
18.7
(22.1)
6.5
(7.6)
24.5
(27.6)
7.0
(8.4)
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 29 September 2013 the group has hedged 65% (2012: 69%) 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)
(1.1)
1.1
(0.5)
0.5
(1.1)
1.1
(0.6)
0.6
-
-
-
-
6.5
(6.5)
1.3
(1.3)
1.6
(1.6)
5.1
(5.1)
0.9
(0.9)
0.9
(0.9)
2013
Sterling / euro
Sterling / US dollar
Euro / US dollar
2012
Sterling / euro
Sterling / US dollar
Euro / US dollar
98
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
24. 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 polyethylene terephthalate (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 2014.
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).
2013
2012
Increase /
(decrease) in
share price
%
Effect
on profit
before tax
£m
10
(10)
10
(10)
0.8
(0.8)
1.5
(1.5)
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 £400.0m bank facility are unsecured
however £1.0m of outstanding Britvic France bank loans are secured. At 29 September 2013, £91.6m of the group’s debt will mature in
less than one year (2012: £0.6m).
The table below summarises the maturity profile of the group’s financial liabilities at 29 September 2013 based on contractual
undiscounted payments:
2013
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
0.2
113.2
67.9
(75.0)
106.1
1.6
(0.3)
1.3
341.2
0.2
1.4
450.4
1 to 5
years
£m
0.8
285.7
229.2
(256.4)
258.5
2.1
(0.3)
1.8
-
0.3
-
> 5
years
£m
0.1
253.4
215.7
(226.6)
242.5
-
-
-
-
-
-
261.4
242.6
Total
£m
1.1
652.3
512.8
(558.0)
607.1
3.7
(0.6)
3.1
341.2
0.5
1.4
954.4
99
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
24. Financial risk management objectives and policies continued
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
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 25.
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.
Assets
£m
-
74.0
1.3
-
75.3
Assets
£m
-
92.2
-
-
92.2
Liabilities
£m
-
(8.5)
(2.9)
-
(11.4)
Liabilities
£m
-
(6.9)
(8.4)
-
(15.3)
2013
Level 1
Level 2
- Derivatives used for hedging
- Financial instruments at fair value through profit or loss
Level 3
Total
2012
Level 1
Level 2
- Derivatives used for hedging
- Financial instruments at fair value through profit or loss
Level 3
Total
100
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
24. 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.
25. 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.
Financial assets
Cash and cash equivalents
Cross currency interest rate swaps *
Cross currency interest rate swaps **
Forward currency contracts **
Share 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 ***
Foreign exchange swaps ***
Cross currency interest rate swaps ****
Interest rate swaps ***
Interest rate swaps ****
Share swaps ***
Share swaps ****
Book value
2013
£m
Fair value
2013
£m
Book value
2012
£m
Fair value
2012
£m
94.0
62.5
11.4
0.1
1.3
169.3
(540.1)
(9.3)
(2.5)
(0.5)
(1.2)
(0.1)
(7.3)
(0.1)
(2.7)
-
-
(563.8)
94.0
62.5
11.4
0.1
1.3
169.3
(572.6)
(9.3)
(2.5)
(0.5)
(1.2)
(0.1)
(7.3)
(0.1)
(2.7)
-
-
(596.3)
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)
* 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.
101
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013
notes to the consolidated financial statements continued
25. 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 $55m was swapped into a floating rate sterling liability. To mitigate exposure for a proportion
of this liability, £20.0m of 2-year interest rate swaps were transacted with an effective date of December 2011.
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 2014.
FX swaps
As part of operational cash management €82.5m of euro / sterling FX swaps were in existence at 29 September 2013 (2012: €83.0m).
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:
2013
£m
36.9
20.2
5.4
-
-
62.5
11.4
0.1
1.3
12.8
(1.2)
-
(0.1)
(0.1)
(1.4)
(4.9)
(1.6)
(0.8)
-
(2.7)
(10.0)
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)
Consolidated balance sheet
Non-current assets: other financial assets
Fair value of the 2007 USD GBP cross currency fixed interest rate swaps ¹
Fair value of the 2009 USD GBP cross currency floating interest rate swaps ³
Fair value of the 2009 GBP euro cross currency floating interest rate swaps ²
Fair value of the 2010 USD GBP cross currency floating interest rate swaps ³
Fair value of the 2010 GBP euro cross currency fixed interest rate swaps ²
Current assets: other financial assets
Fair value of the 2007 USD GBP cross currency fixed interest rate swaps ¹
Fair value of forward currency contracts ¹
Fair value of share swaps
Current liabilities: other financial liabilities
Fair value of forward currency contracts ¹
Fair value of share swaps
Fair value of foreign exchange swaps
Fair value of interest rate swaps
Non-current liabilities: other financial liabilities
Fair value of the 2010 USD GBP cross currency fixed interest rate swaps ¹
Fair value of the 2010 GBP euro cross currency fixed interest rate swaps ²
Fair value of the 2010 USD GBP cross currency floating interest rate swaps ³
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
102
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
25. 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
29 September 2013 these hedging relationships are categorised as follows:
Cash flow hedges
Forward currency contracts
At 29 September 2013, the group held 99 (2012: 68) US dollar and 47 (2012: 38) 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 15 October 2014 and have been assessed as part of
effective cash flow hedge relationships. At the period end there is a net unrealised loss of £1.2m (2012: net unrealised loss of £1.8m),
with a related deferred tax asset of £0.3m (2012: related deferred tax asset 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
Average exchange rate
2013
£ / US$ 20.9m
£ / € 77.6m
€ / US$ 21.2m
2012
£ / US$ 13.8m
£ / € 64.3m
€ / US$ 14.0m
Oct 2013 to Oct 2014
Oct 2013 to Sep 2014
Oct 2013 to Sep 2014
Oct 2012 to Sep 2013
Oct 2012 to Sep 2013
Oct 2012 to Mar 2013
$1.56/£
€1.18/£
$1.33/€
$1.57/£
€1.22/£
$1.27/€
Cross currency interest rate swaps
2007 Notes / 2007 USD GBP 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 29 September 2013.
The fair value of the 2007 cross currency interest rate swap instruments on the balance sheet at 29 September 2013 is:
Consolidated balance sheet
Non-current assets: other financial assets
Fair value of the 2007 USD GBP cross currency fixed interest rate swaps
Current assets: other financial assets
Fair value of the 2007 USD GBP cross currency fixed interest rate swaps
2013
£m
36.9
11.4
2012
£m
49.9
-
The movement in the fair value has been taken to the consolidated statement of comprehensive income. A total loss of £0.4m (2012:
£8.7m gain) 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 £6.5m (2012: net unrealised gain of £8.4m) with a related deferred tax liability of £1.3m
(2012: deferred tax liability of £1.9m) 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 dollars 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 29 September 2013.
103
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
25. Derivatives and hedge relationships continued
The fair value of these instruments on the balance sheet at 29 September 2013 is:
2013
£m
2012
£m
Consolidated balance sheet
Non-current liabilities: other financial liabilities
Fair value of the 2010 USD GBP cross currency fixed interest rate swaps
(4.9)
(5.0)
The movement in fair value has been taken to the consolidated statement of comprehensive income. A total loss of £0.1m (2012: £2.5m
gain) has been recycled to the consolidated income statement to match the foreign exchange gain on the 2010 Notes.
Within equity there is a net unrealised loss of £1.9m (2012: net unrealised loss of £1.9m) with a related deferred tax asset of £0.4m (2012:
deferred tax asset of £0.4m) in respect of the 2010 cross currency interest rate swap instruments.
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
29 September 2013.
The fair value of the swap instruments at 29 September 2013, included within ‘Non-current assets: other financial assets’ on the
consolidated balance sheet, was £20.2m (2012: Non-current assets: other financial assets £27.1m).
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
29 September 2013.
The fair value of the swap instruments at 29 September 2013, included within ‘Non-current liabilities: other financial liabilities’ on the
consolidated balance sheet was £0.8m (2012: Non-current assets: other financial assets £1.6m).
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 29 September 2013, included within ‘Non-current assets: other
financial assets’ on the consolidated balance sheet is £5.4m (2012: ‘Non-current assets: other financial assets’ of £11.1m). No
ineffectiveness has been recognised in the consolidated income statement (2012: £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 29 September 2013, included within ‘Non-current liabilities:
other financial liabilities’ on the consolidated balance sheet is £1.6m (2012: ‘Non-current assets: other financial assets’ of £2.4m). No
ineffectiveness has been recognised in the consolidated income statement (2012: £nil).
104
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
25. 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.
2013
£m
2012
£m
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.
26. Other non-current liabilities
Firm commitment
A firm commitment exists in respect of the receipt of the 2009 and 2010 Notes.
27. Provisions
At 30 September 2012
Provisions made during the year
Provisions used during the year
Exchange differences
At 29 September 2013
* Included within trade and other payables in 2012
0.6
(0.4)
(0.1)
0.1
0.1
(1.6)
0.1
(1.4)
(5.7)
(4.0)
9.7
-
2013
£m
1.9
Other
£m
2.4
-
(0.4)
0.1
2.1
(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
Total
£m
2.4*
11.4
(3.3)
-
10.5
Restructuring
£m
-
11.4
(2.9)
(0.1)
8.4
Restructuring provisions
During the 52 week period ended 29 September 2013, the group committed to a restructuring plan to reduce costs across the supply
chain and back office functions. Following the announcement of the plan, the group recognised a provision of £11.4m for expected
restructuring costs, including contract termination costs, consultation fees and employee termination benefits. Estimated costs were
based on the terms of relevant contracts. It is expected that the remaining provision will be utilised within 2014.
Other provisions
Other provisions at 29 September 2013 and 30 September 2012, primarily relate to onerous lease provisions that have arisen due to the
exit of certain group premises, and range from 3 to 10 years.
105
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013
notes to the consolidated financial statements continued
28. Share-based payments
The expense recognised for share-based payments in respect of employee services received during the 52 weeks ended 29 September
2013, including national insurance of £1.1m (2012: £0.4m) and dividend equivalents of £nil (2012: £1.0m), is £6.2m (2012: £3.0m). 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 (2012: £50) 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
2013
-
185,563
No. of shares
2012
-
281,662
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% (2012: 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 2 October 2011
Granted during the period
Exercised during the period
Forfeited during the period
Lapsed during the period
Outstanding at 30 September 2012
Granted during the period
Exercised during the period
Forfeited during the period
Lapsed during the period
Outstanding at 29 September 2013
Exercisable at 29 September 2013
Number
of share
options
8,764,386
2,175,767
(244,499)
(246,138)
(9,496)
10,440,020
1,583,878
(2,220,417)
(573,284)
(1,994,425)
7,235,772
2,739,540
Weighted
average
exercise
price
(pence)
314.8
331.6
233.1
406.4
347.0
318.0
427.5
253.7
367.7
364.4
347.1
257.1
The weighted average share price at the date of exercise for share options exercised during the period was 491.1p (2012: 362.2p).
The share options outstanding as at 29 September 2013 had a weighted average remaining contractual life of 6.8 years (2012: 6.7 years)
and the range of exercise prices was 221.0p – 464.6p (2012: 221.0p – 464.6p).
The weighted average fair value of options granted during the period was 79.8p (2012: 58.2p).
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.
106
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
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 since 2009 have been 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%
(2012: 25%) will vest, rising on a straight-line basis to 100% vesting at upper quartile.
For the award granted during the 52 weeks ended 29 September 2013, the ROIC performance condition requires the company’s ROIC to
be at least 21.5% (2012: 22.3%) over the three year performance period for the award to vest in full. If ROIC is 20.7% (2012: 21.5%) over
the performance period, 25% (2012: 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% (2012: 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 at 2 October 2011
Granted during the period
Vested during the period*
Outstanding at 30 September 2012 and 29 September 2013
Outstanding at 2 October 2011
Granted during the period
Forfeited during the period
Outstanding at 30 September 2012
Granted during the period
Forfeited during the period
Lapsed during the period
Outstanding at 29 September 2013
Number of shares
subject to
TSR condition
Number of shares
subject to
EPS condition
Number of shares
subject to ROIC
condition
584,781
-
(532,156)
52,625
1,095,428
14,997
(916,249)
194,176
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
699,278
481,128
(62,591)
1,117,815
372,514
(116,080)
(353,192)
1,021,057
1,342,025
1,001,479
(313,138)
2,030,366
746,155
(244,435)
(578,173)
1,953,913
699,278
481,128
(62,591)
1,117,815
372,514
(116,080)
(353,192)
1,021,057
* The share price on the date of vesting was 329.8p.
There were no nil cost options exercisable at 29 September 2013 (2012: nil).
The nil cost options outstanding as at 29 September 2013 had a weighted average remaining contracted life of 8.2 years (TSR condition)
(2012: 8.2 years), 8.3 years (EPS condition) (2012: 8.0 years) and 8.2 years (ROIC condition) (2012: 8.2 years).
The weighted average fair value of nil cost options granted during the period was 203.1p (TSR condition) (2012: 194.2p), 381.5p (EPS
condition) (2012: 323.0p) and 250.2p (ROIC condition) (2012: 322.7p).
107
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
28. Share-based payments continued
The Britvic Performance Share Plan (PSP)
The fair value of equity-settled shares and nil cost options granted is estimated as at the date of grant using separate models, taking
account of the terms and conditions upon which the shares and nil cost options were granted. The fair value of the options subject to the
TSR condition is determined using a Monte Carlo simulation. The fair value of all other options is calculated using the share price at the
date of grant, adjusted for dividends not received during the vesting period.
The following table lists the inputs to the model used in respect of the Option Plan and PSP awards granted during the 52 weeks ended
29 September 2013. The comparative shows the inputs to the model used in respect of the awards granted during the 52 weeks ended
30 September 2012.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Share price at date of grant (pence)
Exercise price (pence)
2013
4.45
32.2
0.8
5.0
421.0
427.5
2012
3.6
27.9
0.8
5.0
329.8
331.6
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be
the actual outcome.
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
Bank overdrafts
Debt due within one year
Debt due after more than one year
Derivatives hedging the balance sheet debt*
Adjusted net debt
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)
Cash flows
£m
Exchange
differences
£m
Other
movement
£m
44.4
(0.4)
0.9
-
44.9
-
44.9
0.1
(0.2)
(0.3)
9.0
8.6
(8.9)
(0.3)
-
-
(91.6)
91.4
(0.2)
-
(0.2)
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)
2013
£m
94.0
(2.5)
(91.6)
(458.3)
(458.4)
56.1
(402.3)
2012
£m
49.5
(1.9)
(0.6)
(558.7)
(511.7)
65.0
(446.7)
* 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.
108
Britvic plc Annual Report 2013 notes to the consolidated financial statements continued
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
After more than five years
Within one year
After one year but not more than five years
After 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
3.2
14.9
41.0
59.1
Land and
buildings
£m
3.1
13.4
44.0
60.5
2013
Total
£m
11.6
31.9
41.0
84.5
2012
Total
£m
13.4
30.4
44.2
88.0
2012
£m
0.3
0.5
-
0.8
Other
£m
8.4
17.0
-
25.4
Other
£m
10.3
17.0
0.2
27.5
2013
£m
0.2
0.3
-
0.5
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 29 September 2013, the group has commitments of £8.0m (2012: £3.3m) relating to the acquisition of new plant and machinery.
Contingent liabilities
The group had no material contingent liabilities at 29 September 2013 (2012: none).
109
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the consolidated financial statements continued
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 principally 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 Property Partnership
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
Financing company
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
Scotland
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
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
2013
£m
6.6
0.1
1.1
7.8
2012
£m
3.0
0.6
0.4
4.0
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 29
September 2013, the consolidated balance sheet is showing a net assets position of £40.9m (30 September 2012: net assets of £37.1m).
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 £491.2m of private placement notes with maturity dates between 2014 and
2022 and a £400.0m bank facility maturing in March 2016. In addition, it is expected that additional private placement notes will be
secured in December 2013 subject to completion of documentation and due diligence (see note 21).
110
Britvic plc Annual Report 2013 independent auditor’s report to the
members of Britvic plc
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 29 September 2013.
Simon O’Neill (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
25 November 2013
We have audited the parent company financial statements of
Britvic plc for the 52 week period ended 29 September 2013 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 59, 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 and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. 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 29 September 2013;
• 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.
111
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 company balance sheet
At 29 September 2013
Non-current assets
Investments in group undertakings
Other financial assets
Current assets
Trade and other receivables
Deferred tax asset
Other financial assets
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Other financial liabilities
Net current liabilities
Total assets less current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Other financial 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
11
9
10
11
10
11
12
13
14
14
14
14
14
14
2013
£m
748.7
62.5
811.2
59.2
0.7
11.4
71.3
(69.8)
(117.9)
(0.1)
(187.8)
(116.5)
694.7
(457.2)
(10.0)
(1.9)
(469.1)
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)
225.6
234.3
49.0
25.0
(1.1)
7.5
4.6
87.3
53.3
225.6
48.5
17.7
(0.8)
4.2
6.4
87.3
71.0
234.3
The financial statements were approved by the board of directors and authorised for issue on 25 November 2013. They were signed on its
behalf by:
Simon Litherland
Chief Executive Officer
John Gibney
Chief Financial Officer
112
Britvic plc Annual Report 2013 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 substantively enacted at the balance sheet date.
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.
113
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the company financial statements continued
3. Auditor’s remuneration
Auditor’s remuneration has been borne by another group undertaking. For further details, refer to note 7 of the consolidated financial
statements.
4. Profit/loss of the company
The company made a profit of £23.4m in the period (2012: loss £25.3m).
5. Directors’ remuneration
The remuneration of the directors of the company is borne by another group company.
Directors’ emoluments
Aggregate gains made by directors on exercise of options
Number of directors accruing benefits under defined benefit schemes
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
2013
£m
2.7
-
2013
No.
-
2013
£m
742.5
6.2
748.7
2012
£m
1.5
0.7
2012
No.
-
2012
£m
739.5
3.0
742.5
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. Particulars of dormant and non-trading subsidiaries 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 Property Partnership
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
Financing company
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
Scotland
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
100
114
Britvic plc Annual Report 2013 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
10. Interest bearing loans and borrowings
Current
Bank overdrafts
Private placement notes
Unamortised issue costs
Total current
Non-current
Private placement notes
Unamortised issue costs
Total non-current
notes to the company financial statements continued
2013
£m
0.9
(0.2)
0.7
2012
£m
1.4
(0.5)
0.9
0.7
0.9
2013
£m
59.2
-
59.2
2013
£m
(68.7)
(1.1)
(69.8)
2013
£m
(26.7)
(92.1)
0.9
(117.9)
(459.1)
1.9
(457.2)
2012
£m
3.0
0.1
3.1
2012
£m
(13.6)
(0.5)
(14.1)
2012
£m
(22.4)
-
-
(22.4)
(560.8)
3.7
(557.1)
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 2007 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
115
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the company financial statements continued
10. Interest bearing loans and borrowings continued
Britvic plc makes quarterly or semi-annual interest payments in the currency of issue. 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 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%
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. These interest rate swaps do
not form part of an effective hedge relationship.
2010 Notes
On 17 December 2010, the company 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 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%
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, £20.0m of 2-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.
2014 Notes
In November 2013, the group reached agreement with a number of investors in the US private placement market to raise an additional
$170.4m equivalent of funding for terms of between 7 and 12 years. This funding is subject to documentation and due diligence which is
scheduled to be completed in December 2013. Where this funding is dollar-denominated this has been hedged using cross-currency
interest-rate swaps to meet the group’s desired funding profile and to manage the associated foreign currency risk to the profit and loss
account.
116
Britvic plc Annual Report 2013 11. Other financial asset and financial liabilities
Other financial assets: non-current
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 assets: current
Cross currency interest rate swaps relating to the 2007 Notes
Other financial liabilities: current
Foreign exchange swaps
Interest rate swaps
Other financial liabilities: non-current
Cross currency interest rate swaps relating to the 2010 Notes
Interest rate swaps
12. Other non-current liabilities
Firm commitment
A firm commitment exists in respect of the receipt of the 2009 and 2010 Notes.
13. Issued share capital
notes to the company financial statements continued
2013
£m
36.9
25.6
-
62.5
11.4
11.4
-
(0.1)
(0.1)
(7.3)
(2.7)
(10.0)
2013
£m
(1.9)
2012
£m
49.9
38.2
4.0
92.1
-
-
(0.2)
-
(0.2)
(5.0)
(3.6)
(8.6)
2012
£m
(1.9)
The issued share capital is wholly comprised of ordinary shares carrying one voting right each. The nominal value of each ordinary share is
£0.20. 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
At 2 October 2011
Shares issued
At 30 September 2012
Shares issued
At 29 September 2013
No. of shares
241,400,052
944,499
242,344,551
2,746,477
245,091,028
Value
£
48,280,010
188,900
48,468,910
549,295
49,018,205
Of the issued and fully paid ordinary shares, 231,547 shares (2012: 217,994 shares) are own shares held by an employee benefit trust.
This equates to £46,309 (2012: £43,599) 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 24 of the consolidated accounts.
117
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 notes to the company financial statements continued
14. Reconciliation of movement in equity shareholders’ funds
Issued share
capital
£m
Share
premium
account
£m
Own shares
reserve
£m
Share
scheme
reserve
£m
Hedging
reserve
£m
Merger
reserve
£m
Retained
earnings
£m
At 30 September 2012
Profit for the year
Issue of shares
Own shares utilised for share schemes
Movement in share based schemes
Movement in cash flow hedges
Payment of dividend
At 29 September 2013
48.5
-
0.5
-
-
-
-
49.0
17.7
-
7.3
-
-
-
-
25.0
(0.8)
-
(2.1)
1.8
-
-
-
(1.1)
4.2
-
-
(1.8)
5.1
-
-
7.5
6.4
-
-
-
-
(1.8)
-
4.6
87.3
-
-
-
-
-
-
87.3
71.0
23.4
-
1.4
-
-
(42.5)
53.3
15. Dividends paid and proposed
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2012: 12.4p per share (2011: 12.6p per share)
Interim dividend for 2013: 5.4p per share (2012: 5.3p per share)
Dividends paid
Proposed
Final dividend for 2013: 13.0p per share (2012: 12.4p per share)
16. Contingent liabilities
The company is co-guarantor of the group’s bank loan and overdraft facilities.
17. Related party transactions
2013
£m
29.6
12.9
42.5
31.7
Total
£m
234.3
23.4
5.7
1.4
5.1
(1.8)
(42.5)
225.6
2012
£m
29.9
12.6
42.5
30.1
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.
118
Britvic plc Annual Report 2013
shareholder
information
120 Shareholder information
122 Cautionary statement
119
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 Shareholder information
Shareholder profile as at 29 September 2013
Number of
shareholders
Percentage
of total
shareholders
Ordinary
shares (million)
Percentage
of issued
share capital
204
278
424
1,079
226
174
68
116
24
55
2,648
Number of
shareholders
1,635
579
371
60
3
2,648
7.70%
10.50%
16.01%
40.75%
8.53%
6.57%
2.57%
4.38%
0.91%
2.08%
100.00%
Percentage
of total
shareholders
61.75%
21.87%
14.01%
2.27%
0.11%
13,516
91,330
296,889
2,278,188
1,462,922
4,125,813
5,057,231
25,955,294
16,886,381
188,923,464
245,091,028
Ordinary
shares (million)
5,262,629
219,923,541
13,471,898
6,227,663
205,297
100.00%
245,091,028
0.01%
0.04%
0.12%
0.93%
0.60%
1.68%
2.06%
10.59%
6.89%
77.08%
100.00%
Percentage
of issued
share capital
2.15%
89.73%
5.50%
2.54%
0.08%
100.00%
Range of holdings
1 - 199
200 - 499
500 - 999
1000 - 4999
5000 - 9999
10000 - 49999
50000 - 99999
100000 - 499999
500000 - 999999
1000000 Plus
Category
Private Individuals
Nominee Companies
Limited and Public Limited Companies
Other Corporate Bodies
Pension Funds, Insurance Companies and Banks
2013 Dividends
Interim
Final
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.
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
Share dealing services
The company’s registrar, Equiniti Financial Services Limited, offers
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
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.
120
Payment Date
12 July 2013
7 February 2014
Amount per share
5.4p
13.0p
American depository receipts
Britvic American Depository Receipts (ADRs) are traded on the Over
The Counter (OTC) market under the symbol BTVCY. One ADR
represents two Britvic plc ordinary shares. This is a sponsored
Level 1 ADR programme for which The Bank of New York Mellon acts
as both Depositary Bank and Registrar. For the issuance and management
of ADRs and any general ADR questions, please contact:
The Bank of New York Mellon
Investor Services
P.O. Box 11258
Church Street Station
New York, NY 10286-1258
USA
Investor Helpline: +1-888-BNY-ADRs (USA caller, toll free)
+1 201 680 6825 (non-USA caller)
Email: shrrelations@bnymellon.com
Website: http://www.bnymellon.com/shareowner
Warning to shareholders – boiler room fraud
and other investment scams
Share or investment scams are often run from ‘boiler rooms’ where
fraudsters cold-call investors offering them worthless, overpriced or
even non-existent shares, or offer to buy their shares in a company
at a higher price than the market value. Shareholders are advised
to be very wary of any unsolicited advice, offers to buy shares at a
discount, or offers of free reports about the company. Even seasoned
investors have been caught out by such fraudsters and it is estimated
that £200 million is lost in this way in the UK each year.
The FCA have some helpful information about such scams on their
website, including tips to protect your savings and how to report
a suspected investment scam. Britvic encourages shareholders
to read the information on the site which can be accessed at
www.fca.org.uk/consumers/scams/investment-scams
Britvic plc Annual Report 2013
Financial calendar
Ex-dividend date
Record date
Annual general meeting
Payment of final dividend
Interim results announcement
4 December 2013
6 December 2013
29 January 2014
7 February 2014
21 May 2014
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 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
Investor Relations: investors@britvic.co.uk
This report is available to download via the company’s website
http://ir.britvic.com/results-and-presentations/results-and-
presentations/2013.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 plus network extras.
121
business reviewfinancial statementsoverviewshareholder informationgovernanceBritvic plc Annual Report 2013 Shareholder information continued
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 group 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) Where appropriate, comparisons are quoted using constant exchange rates. Constant currency change 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 to aid comparability.
(2) EBITA is defined as operating profit before exceptional and other items and amortisation. Only amortisation attributable to intangibles
related to acquisitions is added back, in the period this is £2.9m (2012: £2.9m as reported last year). EBITA margin is the EBITA as a
proportion of group revenues.
(3) 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 243.2m (2012: 241.6m).
(4) Underlying free cash flow is defined as net cash flow excluding movements in borrowings, dividend payments and exceptional and
other items.
(5) Group adjusted net debt is defined as group net debt, adding back the impact of derivatives hedging the balance sheet debt.
(6) Return on invested capital (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.
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 2013 and 2012 accounts. Their reports for both years were unqualified and did not contain statements
under section 498 (2) or (3) of the Companies Act 2006.
122
Britvic plc Annual Report 2013 Designed by sg design [sg-design.co.uk]
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Britvic plc
Breakspear Park
Breakspear Way
Hemel Hempstead
HP2 4TZ
Tel: +44 (0)121 711 1102
www.britvic.com