Annual Report 2016
making
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everyday
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Contents
Strategic report
2 Chairman’s introduction
4 Britvic at a glance
6 Our brands
8 Our business model
10 Trends
11 Our geographies
12 Our strategy
14 Key performance indicators
16 Chief Executive Officer’s review
19 Chief Financial Officer’s review
24 Sustainable business review
28 Our risks
32 Viability statement
Governance
34 Corporate governance report
36 Board of directors
47 Nomination committee
50 Audit Committee
58 Remuneration Committee
59 Directors’ remuneration report
61 At a glance
67 Annual Report on Remuneration
76 Directors’ Remuneration Policy
85 Directors’ report
88 Statement of directors’ responsibilities
Financial statements
90 Independent Auditor’s Report to the members of Britvic plc
96 Consolidated income statement
97 Consolidated statement of comprehensive income/(expense)
98 Consolidated balance sheet
99 Consolidated statement of cash flows
100 Consolidated statement of changes in equity
101 Notes to the consolidated financial statements
148 Company balance sheet
149 Company cash flow statement
150 Company statement of changes in equity
151 Notes to the company financial statements
Other information
160 Shareholder information
162 Glossary
163 Non-GAAP reconciliations
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.
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Strategic report
Welcome to
Britvic’s 2016
annual report
for the fi nancial
year ended
2 October 2016
Responding to the growing
trend for premium adult
drinking experiences
Britvic has been building on its history
to combine heritage with innovation to
build our presence in the premium adult
soft drinks category. We re-launched
three new premium low calorie fl avours
in the R Whites range, alongside a full
heritage-focused rebrand centred on
Robert and Mary White who fi rst sold
R White’s Lemonade in 1845 from a
wheelbarrow in London. Simultaneously,
Britvic-backed incubator company
Wisehead Productions launched
Thomas & Evans, a premium zero proof
drink designed for adults who may not
want an alcoholic
drink but who want
to drink something
sophisticated when
socialising.
This year, Britvic continued to
deliver on the strategy laid out
in May 2013 to drive growth in
Kids, Family and Adult soft drinks
through our market leading
brands. Despite a challenging
external environment, we made
signifi cant progress in executing
our strategy and have delivered
a third successive year of profi t
growth.
Delivering against
consumer needs:
Leading on low/no sugar
Britvic continued to lead the GB market
in ‘No Added Sugar’ (NAS) drinks as
a proportion of our portfolio through
reformulation, innovation, and responsible
marketing. We have taken bold steps to
help consumers make healthier choices
and currently, 68% of our GB portfolio
and 65% of our ROI portfolio is below or
exempt from the proposed sugar tax.
Growing internationally
Robinson’s Fruit Shoot continued to
grow in the United States and Brazil.
In the USA we have continued to make
good progress in single serve and
multi-pack Fruit Shoot, which we have
successfully launched into grocery. We
maintained our share of the market and
distribution is up by 10%. We continue
to use our strong relationship with
Pepsi to sell Fruit Shoot single bottles
in convenience and leisure, including
a listing in Pizza Hut. With our partner,
Advantage Sales and Marketing,
we have established an eff ective
route to market for Fruit Shoot
multipack and have achieved
listings with major retailers
including Walmart, Kroger
and HEB. In Brazil, we have
successfully combined the
strength of the local team
with group capability, to deliver
Maguary Fruit Shoot onto the
shelves in Sao Paulo with four
fl avours developed for the local
market in under 12 months.
Britvic plc Annual Report 2016
1
Strategic report
Chairman’s
introduction
The UK’s decision to leave
the EU and the proposed
sugar tax on soft drinks
were momentous external
events for Britvic in an
already challenged market
place with price deflation.
Despite this Britvic has,
once again, delivered a
record pre-exceptional
EBITA* of £186.1m, up
8.4%. Profit after tax of
£114.5m has translated
into adjusted earnings
per share* of 49.3p. The
board is declaring a final
dividend of 17.5p, bringing
the full year dividend to
24.5p, a 6.5% increase
on 2015. These results
reflect the resilience of our
brands and the strength
of the company.
Performance review
Simon Litherland has now been Chief
Executive Officer for three years and in
that time has overseen the delivery of
record profits each year. His team have
continued to make good progress on
delivering the strategic priorities he set out
in 2013. Mathew Dunn has now been in
place as Chief Financial Officer for a year,
he brings a new energy and has been
relentless in his pursuit of improving
performance.
Trading conditions in our European
markets have not improved over the last
12 months with structural challenges in
the GB market and the consolidation of
buying groups in France. GB stills
performance during the year was
disappointing but was compensated for
by the performance of our carbonates
portfolio. In Ireland performance has been
particularly encouraging with both the
branded and Counterpoint business
performing well. The investment in our
supply chain in GB is now entering its
second year and tangible progress in
efficiency and flexibility is being made
across the network which should provide
a solid platform for future profitability.
The announcement of a proposed sugar
tax in the UK was disappointing. Whilst we
recognise the need to tackle obesity, given
the choice that the soft drinks category
offers compared to other categories, the
focus is frustrating. No other company has
done as much work to remove calories
from its products reducing calories by
19 billion annually since 2012. We are well
positioned to respond and are working
constructively with Government to ensure
the best outcome for the business.
Outside of Europe our team in the US has
launched the Fruit Shoot multi-pack, building
on the success of our single serve business.
The focus now for the team is to build brand
awareness and encourage consumers to
try the brand. The scale of the opportunity
is huge but we are under no illusions of the
challenges and levels of investment that we
face to succeed in this market. In Brazil, we
are now one year on from our acquisition of
Ebba, and the early signs are promising.
João Caetano has joined the PLC Executive
team we are all impressed by the contribution
the local management team have made
over this first year as part of Britvic.
2
Britvic plc Annual Report 2016
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3 Britvic plc Annual Report 2016Strategic report Chairman’s introduction continuedThe boardAs announced, Bob Ivell has now stepped down from the board. I would like to take this opportunity to thank him for the significant contribution he made over the last 9 years as our Senior Independent Director and Chairman of the Remuneration Committee. We wish him well for the future. This year we have welcomed two new non-executive directors onto the board. Firstly, Euan Sutherland, CEO of Supergroup, joined us in February. He has over 23 years of experience in both retail and FMCG having held leadership roles with Kingfisher, B&Q, AS Watson and more recently as CEO of The Co-operative Group. Sue Clark also joined us in February. Sue, until recently, was Managing Director of SAB Miller in Europe and sat on their executive committee until the merger with Anheuser-Busch. Both Sue and Euan bring with them extensive multinational experience and I am delighted to have them on the board. The new board has settled in well, the results are good and the Company is in good shape, notwithstanding the challenges we face. I have been Chairman now for 11 years and I have indicated to the board my intention to step down. Chairing Britvic has been a privilege, the business has changed significantly and I am continually impressed by the quality and commitment of all colleagues in the business in the many countries in which we now operate. The Nomination Committee chaired by John Daly, our Senior Independent Director will identify my successor. I will seek re-election at the AGM in January 2017 to ensure a smooth handover. Capital allocationThe board remains committed to its progressive dividend policy with a target of paying out 50% of earnings in dividends. Since flotation in 2005 the dividend has risen from 10p per share to 24.5p this year and has returned over £448m to shareholders. Our adjusted earnings per share* has more than doubled from 18.4p to 49.3p.A strong balance sheet is a key part of any company’s success and the board is confident that the structure we have in place puts Britvic in a strong position to overcome any short term headwinds that may prevail and remain agile and flexible to take advantage of any opportunities that may come our way.The board continues to be supportive of the management team’s ambition to grow internationally through selective M&A and to invest in the fabric of the business, with the three-year supply chain investment and the acquisition in Brazil evidence of its support.AGMThe AGM will be held at 11am on 31 January at RSA House, Durham House Street, off the Strand, London WC2N 6HG and I look forward to seeing you there.Gerald Corbett Chairman177534_BRITVIC_TEXT-p001-037.indd 313/12/2016 18:57 Strategic report
Britvic at a
glance
4
Britvic plc Annual Report 2016
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Strategic report
Britvic at a
glance
Strategic report Britvic at a glance continued
Performance highlights
REVENUE
+10.1%
2016 £1,431.3m
2015
£1,300.1m
PROFIT AFTER TAX
+10.3%
2016 £114.5m
2015
£103.8m
PRE-EXCEPTIONAL
EBITA*
+8.4%
2016 £186.1m
2015
£171.6m
PRE-EXCEPTIONAL
EBITA MARGIN*
-20bps
2016 13.0%
2015
13.2%
ADJUSTED EARNINGS
PER SHARE*
DIVIDEND PER SHARE
+6.5%
2016 49.3p
2015
46.3p
+6.5%
2016 24.5p
2015
23.0p
Sustainable business highlights
BITC CR INDEX
AVERAGE CALORIES
PER 250ML
GREAT PLACE TO
WORK
2016
2.5 stars
2015
2 stars
2016
34.9
2015
35.4
2016
72%
2015
70%
* Items marked with an asterisk throughout this document are non-GAAP measures, definitions and relevant reconciliations
are provided in the Glossary on page 162
Britvic plc Annual Report 2016
177534_BRITVIC_TEXT-p001-037.indd 5
5
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6 Britvic plc Annual Report 2016Strategic reportOur brandsFruit Shoot HydroTeisseire Fruit ShootMY5Maguary Fruit Shoot Fruit ShootKidsFamily MiWadiRobinsons Squash’dMaguary DafrutaFruité PressadeBallygowan177534_BRITVIC_TEXT-p001-037.indd 613/12/2016 18:58 7 Britvic plc Annual Report 2016Strategic report Our brands continuedAdultPortfolioIn our core markets we have a broad portfolio of carbonates and still brands including the brands that we bottle and market on behalf of PepsiCo. A selection of those brands is shown here.Purdey’sJ2O SpritzBritvic MixersR WhitesBallygowanDrenchClub Orange 7Up TK Gatorade TangoMountain Dew LiptonEnergise SportPepsi MaxC&CTeisseire syrup MiWadi177534_BRITVIC_TEXT-p001-037.indd 713/12/2016 18:58 Strategic report
Our
business
model
We manufacture, market and sell both
Britvic and PepsiCo brands in GB and
Ireland, supported by dedicated
commercial teams in both countries. In
France, we manufacture, market and sell
our own category-leading brands, as well
as supplying private label juice and syrups.
On 30 September 2015, we completed
the acquisition of Brazilian soft drinks
company Ebba, which manufactures and
sells the two leading liquid dilutable brands,
Maguary and Dafruta, and has a growing
presence in the ready to drink
nectar category.
Internationally, we work primarily in
partnership with local companies through
franchise, distribution or licensing
arrangements to exploit the global potential
of our kids, family and adult brands.
Britvic sets itself apart from its competitors by our
unrivalled combination of market leading brands
and track record in innovation, our expert
knowledge of the soft drinks market, longstanding
and sustainable relationships with our partners,
including PepsiCo, and a highly talented and
committed workforce.
In the USA, we have agreements with a
number of Pepsi bottlers. We also export
Britvic products around the world and are
a signifi cant player in the travel sector.
We are committed to building sustainable
relationships with all our partners, from
suppliers of raw materials through to the
customers who sell our brands.
Our brands and innovations are built on
the quality of our insight and understanding
of the soft drinks markets in which we
operate. We have a strong track record in
innovation and our dedicated technical
and consumer innovation teams are at
the forefront of identifying consumer trends
and new technologies to ensure that we
deliver products that meet consumers’
evolving needs. Our marketing teams
ensure that our brands are front of mind
for our consumers.
We have developed an operating model
which is based on the principles of simplicity,
focus and accountability, to ensure we
are cost-effi cient and effective and can
invest in the growth opportunities.
All of this allows us to deliver value to our
shareholders, our customers and partners,
the consumers who buy our brands, the
communities in which we operate and to
our employees.
MANUFACTURING
MARKETING
Our operations
Responsible
marketing
CUSTOMERS
Commercial
relationships
In GB we have factories in Leeds,
Norwich, Rugby and Beckton.
In Ireland we have factories in Dublin
and Newcastle West.
In France we have factories in Crolles,
Beziers, La Roche sur Foron and
Nantes
All our marketing activity is governed by
a Responsible Marketing Code, which
acknowledges that soft drinks should
be consumed as part of a balanced
diet and lifestyle and that we have a
particular responsibility to children. We
do not market our drinks to children
under the age of 12.
We pride ourselves on being a great
company to do business with. We
work in partnership with our customers
to grow both their businesses and
our own. Equally we value our
relationships with our suppliers
and are committed to long term,
sustainable partnerships.
In Brazil, we have factories in
Araguari and Aracati.
For PepsiCo franchised brands
in GB and Ireland we jointly fund
and manage marketing campaigns,
combining PepsiCo global collateral
and local market activations.
We fully understand the impact our
operations have on the environment
and are committed to effi cient and
sustainable production, as well as the
highest quality standards.
We use the power of our brands
to inspire people to actively play
together and Fruit Shoot has helped
over 500,000 children get active
through its ‘Active Skills’ campaign.
Creativity is at the heart of our business
and our marketing activity and we have a
track record of award-winning campaigns.
In the last year, we have been
acknowledged by the annual
Advantage survey of food and drink
companies and overall, we ranked
2nd across convenience and routes to
markets, a step change improvement
on the previous year.
As part of our responsible sourcing
programme, all our partners are
required to comply with our Ethical
Business Policy and are subject to
our annual audit programme.
8
Britvic plc Annual Report 2016
9 Britvic plc Annual Report 2016 INTERNATIONAL FRANCHISEINTERNATIONAL EXPORTBRITVICBRITVICPARTNER ACTIVITIESBRITVICPARTNER ACTIVITIESTransport to international partnerMarketingManufacturing full goodsRaw materialsDistributionDistributionCustomersCustomersConsumersConsumersManufacturing full goodsManufacturing full goodsRaw materialsExport to international partnerDistributionCustomersConsumersMarketingMarketingRaw materialsManufacturing compoundStrategic report Our business model continuedGB, IRELAND, FRANCE AND BRAZIL177534_BRITVIC_TEXT-p001-037.indd 913/12/2016 18:58 Strategic report
Trends
There are several
consumer trends that
are shifting the soft drink
landscape in our core
markets – however there
are two major ones that
are increasingly dominating,
both underpinned by
consumer attitudes around
increasing health and
well-being and the desire
to have more premium
experiences when
choosing a soft drink.
There are further trends around looking
for new functionality – both in liquids and
packaging – whether it is around time
saving convenience or improving health/
wellness. There is a growing debate on
sugar vs natural sweeteners vs artificial
sweeteners which is driving growth of
packaged water and leading to consumer
confusion as to what is best for them –
the ultimate proposition is low in calories
and completely natural.
Consumers are increasingly looking to
brands for reassurance and little moments
of reward and indulgence. Within this,
consumers are becoming more ingredient
conscious and are also willing to pay
a premium for this. There has been a
proliferation of choice in brand offerings
as consumer requirements widen and
create future opportunities for growth.
Product choices and package formats/
materials definitions are becoming more
blurred and soft drinks are becoming
more varied as the range of consumer
requirements widen. Thus growth
opportunities are not just about
refreshment, hydration or additional
functional benefits, but all of the above.
10
Strategic report
Our geographies
We operate as fi ve geographic business units: GB, France, Ireland, International and
Brazil. We report separately on each geography with GB further segmented by stills
and carbonates performance.
VOLUME (MILLION LITRES)
REVENUE (£M)
BRAND CONTRIBUTION (£M)
FINANCIALS BY REGION*
FINANCIALS BY REGION*
FINANCIALS BY REGION*
GB
France
Ireland
International
Brazil
Total
1,621.9
280.0
209.5
41.9
184.6
2,337.9
GB
France
Ireland
International
Brazil
894.9
244.5
131.7
50.5
89.5
GB
France
Ireland
International
Brazil
Total
1,411.1
Total
377.5
76.0
47.2
9.6
17.5
527.8
% SHARE BY REGION
% SHARE BY REGION
% SHARE BY REGION
8%
2%
9%
12%
69%
6.3%
3.6%
9.3%
17.3%
63.5%
3%
2%
9%
14%
72%
*52 weeks ended 25 September 2016
Britvic plc Annual Report 2016
11
12 Britvic plc Annual Report 2016 Strategic reportOur strategyACTwith integrity, by embedding our sustainable business strategy across all our business units and continuing to lead the industry on public healthINCREASE our participation in soft drink categories and sales channels through innovation, disciplined revenue management, and a balanced portfolio1 Generate profitable growth in our core marketsENSUREwe have the right people, with the right capabilities to achieve our vision and establish a winning culture whilst continuing to improve efficiency and develop our business capability3 Continue to step-change our business capability4 Build trust and respect in our communitiesDELIVER on our strong growth potential in a number of international markets, either by making selective acquisitions or by working with local partners2 Realise global opportunities in kids, family and adult categories OUR STRATEGY TO SUPPORT OUR VISION IS BASED ON 4 KEY PILLARSWe have a clear strategy that is designed to realise our ambition to become the most dynamic, creative and admired soft drinks company in the world and supports our purpose of making life’s every day moments more enjoyable.For further information on our strategy, please see our CEO’s report on page 16177534_BRITVIC_TEXT-p001-037.indd 1213/12/2016 18:58 13 Britvic plc Annual Report 2016Strategic report Chairman’s introduction continued STRATEGY IN ACTION: THE HEADLINES New innovation* generated 4% of total revenue. These included:• Drench – largest of all adult innovation launched in the past 3 years• Purdeys and Purdeys Edge – fastest growing evolved energy brand; • J20 Spritz – recent successful launch in GB market;• WiseHead Productions: Thomas & Evans – inventing and growing new Zero Proof category • Launch of sugar-free MiWadi Mini and ‘MiWadi 0% sugar’, which has become the first soft drinks brand to receive approval from Diabetes Ireland.• Launch of Teisseire pump pack in FranceOut of home, we have grown in leisure and licensed, winning accounts such as Subway – giving us a 7 year arrangement in over 2000 outlets – and G1, the leading hospitality group in Scotland, as well as retaining major contracts including KFC and Fullers.GB delivered an outstanding carbonates performance, led by Pepsi Max, Tango and 7UP Free. Volume led full year revenue growth and a robust performance with double-digit Q4 revenue growth. Supply chain investments & efficiencies Programme is on-track to deliver projected returns.The new PET line – the fastest in Europe – is now running in Leeds, producing pack sizes from 500ml to 3litres, enabling us to better access growth channels. Additional warehousing is operational in Leeds, giving additional space to supply the North and Scotland, and also in London - reducing mileage, stockholding and emissions.Separately, we will deliver £5m annualised cost savings from 2017.We continue to lead the market in ‘No Added Sugar’ (NAS) drinks as a proportion of our portfolio in GB through reformulation, innovation, and responsible marketing.Reformulating drinks with no compromise on taste or quality.• Removed added sugar Fruit Shoot (2014) and Robinsons (2015) in GB and reformulated other brands, e.g. J20.• GB & Ireland reduced sweetness of Fruit Shoot.• 68% of our current volume sold in the UK is exempt or below the proposed sugar tax threshold.• Our actions have led to an annualised 19bn calorie reduction across our portfolio***.• In the Republic of Ireland, we are the leaders in no added sugar in both market share and in absolute revenue terms. 65% current volume exempt or below proposed tax threshold.Continual innovation in products and range• Led the use of Stevia in 2012.• 60% of new innovation will be no or lower sugar and/or nutritionally enhanced drinks by 2020.• This year we’ve launched Purdey’s Edge – caffeine free evolved energy drink; re-launched Drench & R Whites with sugar levels under the proposed sugar tax; added multi-vitamins and reduced sweetness in Fruit Shoot; launched MiWadi Mini (NAS) and MiWadi Zero.Using the power of our brands responsibly through our Responsible Marketing Code to promote low and no sugar alternatives and encourage active play:• Focus on low/no sugar • Britvic does not advertise any products to children under 12 and does not advertise high sugar products to underv 16s.• Since 2005, all above the line advertising in relation to Pepsi has led with sugar-free Pepsi MAX. • We’ve used the power of our brands to inspire 2.6m people to actively play together and Fruit Shoot has helped over 500,000 children get active through its ‘Active Skills’ campaign. GENERATING SHAREHOLDER VALUEFruit Shoot delivered growth in United States and BrazilIn the USA we have continued to make good progress in single serve and multi-pack Fruit Shoot, which we have successfully launched into grocery.We maintained our share of the market and distribution is up by 10%. We continue to use our strong relationship with Pepsi to sell Fruit Shoot single bottles in convenience and leisure, including a listing in Pizza Hut which will give access to over 6,000 outlets.With our partner, Advantage Sales and Marketing, we have established an effective route to market for Fruit Shoot multipack and have achieved listings with major retailers including Walmart, Kroger and HEB.In Brazil, we have successfully combined the strength of the local team with group capability, to deliver Maguary Fruit Shoot single serve onto the shelves in Sao Paulo with four flavours developed for the local market in under 12 months. Fruit Shoot is already listed in key retailers with 56% distribution.This achievement demonstrates the benefits of us bringing together the expertise of our core markets with the local knowledge of our Brazilian team underpinned by strong commercial execution and a full marketing campaign. *** Calorie and sugar savings from reformulations undertaken during the year are assumed on the previous year’s sales volumes regardless of when the reformulation entered onto the market in that year. Where a change of flavour occurs, the calorie/sugar calculations are assumed on the closest comparable flavour for sales volumes, e.g. blackcurrant & apple assumed comparable to pear & blueberry. All reformulation values are based on the latest recipe nutritional content.177534_BRITVIC_TEXT-p001-037.indd 1313/12/2016 18:58 Strategic report
Key performance
indicators
We use these key performance indicators to measure our performance
in fi nancial and non-fi nancial terms, as described below.
LINK TO STRATEGIC PRIORITIES
WHY DO WE MEASURE THIS?
PERFORMANCE
Revenue
Pre-exceptional
EBITA*
Pre-exceptional
EBITA margin*
Adjusted EPS*
Underlying free
cash fl ow*
This measure refl ects our performance
in terms of our ability to participate in
markets effectively and to grow average
prices and/or grow volume sold.
Group net revenue increased by 10.1%
to £1431.3m in 2016, refl ecting an
outstanding year in GB Carbs and an
excellent fi rst year in Brazil, offset by a
challenging year in GB Stills.
Underlying EBITA measures the on-going
profi tability for the group. EBITA is preferred
ahead of EBIT to allow for the impact of
fair value amortisation that is generated
when acquisitions are made.
Pre-exceptional EBITA of £186.1m
represented growth of 8.4% driven by
like for like growth of 3.8%, the inclusion
of a 53rd week and the acquisition
of Brazil.
Improving operating margin is a key focus
of the business and measures our ability
to drive a positive mix and eliminate
unnecessary cost. EBITA is preferred
ahead of EBIT to allow for the impact of
fair value amortisation that is generated
when acquisitions are made.
Earnings per share refl ects the profi tability
of the business and how effectively we
fi nance our balance sheet. It is a key
measure for our shareholders.
Underlying free cash fl ow is a key
indicator of the fi nancial management
of the business and refl ects the cash
generated by the business to fund
payments to our shareholders and
acquisitions.
Pre-exceptional EBITA margin reduced by
20bps as a result of incorporating Brazil,
which operates at a lower margin than
the group average margin.
Adjusted earnings per share was
49.3p, up 6.5%, refl ecting the growth in
pre-exceptional EBITA of 8.4% and the
benefi t of a reduction of £1.2m in net
pre-exceptional interest costs.
Free cash fl ow was £10.9m, compared
to a £89.3m in 2015.
Working capital was an outfl ow of £25.8m
due to the 53rd week resulting in an extra
payment run and, as planned, capital
expenditure was £61.0m higher than last
year due to the implementation of our
business capability programme in the
GB supply chain.
Key to our strategic priorities:
Generate profi table
growth in our core
markets
Realise global opportunities
in kids, family and adult
categories
Continue to step-
change our business
capability
Build trust and respect
in our communities
14
Britvic plc Annual Report 2016
15 Britvic plc Annual Report 2016Strategic report Chairman’s introduction continuedmaking life’s everyday moments more enjoyableLINK TO STRATEGIC PRIORITIESWHY DO WE MEASURE THIS?PERFORMANCEGreat place to work surveyThe Great Place to Work survey allows all our people to anonymously feedback their views.This is our fourth year for completing the survey and we continue to make progress in making Britvic a great place to work.This year we achieved a Trust Index score of 72% with an 86% response rate.Average calories per 250mlWe are committed to helping consumers make healthier choices, and use average calories per 250ml as our key performance measure to track development of our portfolio.Average calories per 250ml is 34.9 in 2016, down from 35.4 in 2015. This reflects continued development of our portfolio, for example removal of added sugar from our Robinsons range.Advantage surveyThe Advantage Survey is an independent report providing insight into customer service direct from retailers, and benchmarking against our peers.In 2016 Britvic were ranked 2nd in GB Wholesale and Convenience, 3rd in Ireland and 4th in GB Grocery.Business in the community corporate responsibility indexThe CR index measure reflects the progress of our Sustainable Business programme and provides an indication of our contribution towards society through our responsible business practices.Britvic scored 2.5 stars in 2016, an improvement from 2 stars in 2015. For further information on our strategy, please see our CEO’s report on page 16.177534_BRITVIC_TEXT-p001-037.indd 1513/12/2016 18:58 Strategic report
Chief
Executive
Officer’s
review
We remain focused on
delivering the strategy
we laid out in May 2013.
Despite a challenging
environment in all the
markets in which
we operate, we have
delivered another strong
set of financial results
and continue to make
good progress in
executing our longer
term strategic goals.
The breadth of our portfolio, strength
of our core brands and increasing
innovation capability means we are
well placed to adapt and evolve with
consumer trends and customer needs
that continue to change, probably
faster than ever before.
We have returned to like-for-like
revenue growth and, through our
transformational business capability
programme, we continue to build a
stronger, more efficient business. Our
pre-exceptional EBITA* increased by
8.4%, enabling us to declare a 6.5%
increase in the dividend.
Generate profitable growth
in our core markets
GB
Our carbonates portfolio, which includes
both PepsiCo brands and our owned
brands, enjoyed another successful year.
Our continued focus on no and low sugar
resulted in Pepsi Max, 7UP and Tango all
delivering growth. Whilst the value of the
cola category declined by 1.4%, Pepsi
grew its retail market value* by 6.7%,
adding over £26m of retail value from
Max, with its new Cherry variant leading
this growth. 7UP Free outperformed the
fruit carbonates category with double digit
retail value* growth, and Tango delivered
its best performance in over 10 years.
We have been more challenged in stills
this year although the second half of the
year reflected encouraging signs of
improvement. Robinsons declined year
on year following our decision to remove
added sugar from the range and due to
very competitive own label pricing in the
dilutes category. J2O had a weak
Christmas and our limited-edition flavours
performed poorly this year. J20 Spritz, a
lower sugar sparkling variant introduced
last year is performing well and offers
good future growth potential. Fruit Shoot
gained share in a declining category. We
continue to evolve the brand, reducing
sweetness and adding vitamins to the
core brand and Fruit Shoot Hydro, our
flavoured kids water, is growing strongly.
Over the last three years we have invested
in our marketing and innovation capability
and this is now starting to bear fruit. The
contribution from innovation* continues to
grow and represented 4% of our 2016
revenue. Recent successes in GB include
J20 Spritz and Robinsons Squash’d; we
are particularly pleased with the early
performance of the Drench and Purdey’s
brands which we have improved,
repositioned and relaunched with new
variants. Our innovation pipeline is strong;
2017 will include new adult offerings such
as the relaunch and extension of R Whites
lemonade and the introduction of adult
premium brands, including our ‘zero proof’
Thomas and Evans and our premium mixers
range from the London Essence Company.
16
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Strategic report Chief Executive Officer’s review continued
We have made good progress broadening
our channel presence, winning new
accounts such as Subway and G1, the
leading hospitality group in Scotland, and
retaining major contracts such as KFC
and Fullers. A key element of our revenue
management strategy has been to grow
our higher margin immediate refreshment
portfolio which includes pack sizes such
as 500/600ml PET and 330ml cans. As
a result we have taken share and grown
more retail market value in this category
than any other manufacturer, with Pepsi
Max, Drench and Ballygowan leading this
success. Further opportunity in this
segment remains as we still under-index
versus our overall market share.
France
The tragic terrorist events of the last year,
combined with social and economic
pressures, have had an impact on
consumer confidence and behaviour
in France. In addition, syrup sales are
particularly weather sensitive and the
weather this summer did not match the
previous year affecting sales. In contrast
Fruit Shoot performed well, aided by the
introduction of a 1.5 litre sharing pack.
Our juice brand Pressade also continued
to grow strongly, with its focus on organic
and locally sourced fruit proving popular
with consumers. Next year we are
introducing a high juice version of Fruit
Shoot and a new range of premium
syrups under the Moulin de Valdonne
brand, addressing the consumer demands
for naturalness and a premium treat.
Ireland
2016 has been a successful year for our
Irish business unit. We leveraged our
number one position in “no added sugar”,
in which we enjoy over 30% share, to
outperform the market. Ballygowan water
contributed more growth to the Irish soft
drinks market than any other brand. We
successfully extended the brand through
the launch of Sparklingly Fruity.
MiWadi led the squash category back into
growth and this year MiWadi 0% sugar
became the first soft drink brand to receive
approval from Diabetes Ireland. It was a
successful year for our business out of
home as we used the breadth of our
portfolio to successfully take share in both
convenience and through our licensed
wholesaling arm, Counterpoint.
Finally, we took the difficult decision to
withdraw from India this summer. Whilst the
brand was growing its distribution, the path
to sustainable profitability was proving to be
a long one and we have decided to focus
our efforts and investment elsewhere.
Continue to step-change our
business capability
Last year we announced a
transformational three-year investment
programme to deliver increased supply
chain flexibility and efficiency with a
minimum 15% EBITDA* return. We
continue to see a significant opportunity
for our business to improve its capability
and our current expectation is that the net
capital investment in the programme will
be around £240m. The first year of our
investment into the supply chain in GB is on
track and we have identified opportunities
in Ireland and France. In 2016 we
commissioned our first new large PET line
and on site warehousing in Leeds. We also
made significant progress on the installation
of three new can lines in Rugby. These will
be fully operational in spring 2017 and will
start to deliver significant cost and
commercial benefits as we head into 2018.
In 2017 we will commence the next phase
of our investment programme, with a new
PET line in London, as well as new aseptic
lines in Rugby and in France. In Ireland,
we announced changes to our distribution
model, outsourcing all warehousing and
distribution to increase capacity and
reduce cost.
As we have looked to extend our business
capability agenda beyond supply chain,
we have taken the opportunity to flatten
our team structures and create more
synergy between our business units, which
will improve the speed and effectiveness
of decision making as well as drive out
cost. We anticipate that these initiatives
will deliver incremental annual cost
savings from 2017 of £5m.
To further increase our reach into the
Licensed channel, we are today announcing
the acquisition, subject to competition
approval, of East Coast Suppliers Ltd, a
licensed wholesaler with a strong presence
in Dublin. Through this acquisition, our
business will become the number two
wholesaler, providing a direct route to
market for our growing adult premium soft
drinks portfolio.
Realise global opportunities
in kids, family and adult
categories
We have had an excellent first year in Brazil.
Despite the current tough economic
conditions, we have grown volume and
revenue and our brands Maguary and
Dafruta have gained market share. Multiple
price increases were successfully executed
to maintain margins in the face of double
digit raw material inflation. More recently we
have launched Maguary Fruit Shoot, a
fantastic achievement for the combined
Ebba and Britvic team in such a short
period of time. Initially we are focusing our
efforts on Sao Paulo city before we
undertake a broader roll out across Brazil.
The local senior management team have all
been retained and have proved a great
addition to Britvic.
We continue to invest behind our
international division in the USA. Fruit Shoot
singles, distributed by our partner Pepsi in
the convenience and leisure channels, have
continued to perform well and we have
maintained our market share. Fruit Shoot is
now listed in Pizza Hut nationally and is
performing well.
This year we have also launched multi-pack
into the grocery channel with our partner
Advantage Sales and Marketing, who are a
well-established operator in grocery. The
scale of the opportunity is large but the USA
grocery market is complex, diverse and
highly competitive. We are pleased with the
listings we have gained with major retailers
such as Walmart, Kroger and HEB but
recognise that we have further work to do
to properly establish the brand in this
channel in the year ahead.
“ BRITVIC HAS DELIVERED ANOTHER STRONG
SET OF RESULTS IN CHALLENGING MARKET
CONDITIONS. ”
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Strategic report Chief Executive Officer’s review continued
Fruit Shoot also partnered with Right to
Play – a global organisation that uses the
transformative power of play to educate
and empower children facing adversity.
We have made good progress on reducing
our environmental impact, with the
investment in our manufacturing plants
leading to a 1.5% reduction in water
usage per litre of soft drink produced. At
our Leeds factory, water consumption is
down 22% and energy use reduced 45%
relative to production, compared to FY15.
We are confident our London and Rugby
sites should see a similar efficiency saving
once the supply chain investments
become fully operational by 2020.
This year our charitable contributions have
been valued at nearly £900,000 and our
employees have continued to live our
values, going the extra mile to support
great causes and build an inspiring place
to be. In GB, our employees have been
supporting our two new charity partners,
Sported and the Wildlife Trust. In Ireland,
we launched our employee volunteering
policy, enabling employees to take 2 days
paid leave to volunteer. In France we have
been supporting young people entering
the labour market through workshops,
open days and partnering employee
volunteers with young people on job
discovery exercises.
Outlook
2017 will be another challenging year, with
difficult trading conditions and input cost
inflation for the first time in several years.
The UK’s vote to leave the EU and the
proposed soft drinks levies in GB and
Ireland from April 2018 have created
additional uncertainty.
However, we are well positioned to deal
with these challenges. We have a clear
strategy that is working, hugely talented and
committed people, and a robust balance
sheet that provides a strong platform from
which we will continue to deliver our strategic
goals. The breadth of our portfolio, strength
of our brands and innovation capability
leaves us well placed to continue to grow.
Through our transformational business
capability programme we are creating a
stronger, more efficient business, with a
lower cost base. I am confident that we
will deliver 2017 results in line with market
expectations whilst continuing to progress
our strategic priorities.
Simon Litherland
Chief Executive Officer
Build trust and respect in our
communities
Public health has continued to be a key
issue in 2016, with soft drinks levies
proposed to be introduced in 2018 in the
UK and Ireland. Britvic believes in offering
choice, whilst making it easier for
consumers to reduce their calorific intake
without compromising taste or quality.
We are disappointed at the introduction
of category-specific taxes, since we
believe a holistic approach is necessary
to tackle this complex issue.
Playing a proactive role in helping to
address obesity has long been an integral
part of our sustainable business plan. We
have led the industry in our approach to
health: reformulating brands such as J20
and Drench; introducing new product
innovations such as MiWadi Zero and
MiWadi Mini; and removing added sugar
Fruit Shoot and Robinsons. Our actions
since 2012 have led to an annualised
19bn calorie reduction and our portfolio is
now strongly weighted towards low and
no sugar in GB and Ireland.
Our brands have also continued to help
families get active, promoting sport through
high level sponsorships including Robinsons’
enduring association with the Wimbledon
Lawn Tennis Championships and
Teisseire’s sponsorship of the Tour de
France. This year Fruit Shoot partnered
with Tough Mudder to enable children
across the UK, France, Ireland and the
USA to participate in a Mini Mudder
obstacle course.
18
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Strategic report
Chief
Financial
Officer’s
review
The following is based
on Britvic’s results for
the 53 weeks ended
2 October 2016.
Overview
In the period, we sold over 2.3 billion litres
of soft drinks, an increase of 12.3% on the
previous year, with Average Realised Price
(ARP*) of 59.2p, declining by 3.3%.
Revenue was £1,431.3m, an increase of
10.1% (AER) compared to last year.
Like-for-like* performance saw revenue
increase 0.4% to £1,321.6m.
Pre-exceptional EBITA* increased 8.4% to
£186.1m, and pre-exceptional EBITA*
margin decreased 20bps due to the
first-time inclusion of Brazil. Like-for-like
pre-exceptional EBITA increased 3.8% to
£178.8m with like-for-like pre-exceptional
EBITA margin increasing 40bps. The
summer weather was an improvement on
2015 in both GB and Ireland, whilst
France lapped a particularly warm 2015.
The better weather combined with strong
execution meant like-for-like quarter four
revenue increased 5.7% for the
comparable 12-week period.
GB CARBONATES
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
25 September 20161
£m
52 weeks ended
27 September 2015
£m
1,264.3
47.1p
595.7
244.7
41.1%
1,206.7
46.9p
565.7
225.1
39.8%
% change
4.8
0.4
5.3
8.7
130bps
The performance of the carbonates portfolio has been strong this year. Pepsi has continued to grow and gain market share, generating retail
market value growth of £28m in a category where value declined £22m. Pepsi Max was in strong growth, accounting for 90% of the brand’s
market value growth. 7UP, led by low-sugar 7UP free, outperformed the category and also gained value share. Tango achieved its highest
sales since 2005. Quarter four was particularly strong, with total carbonates revenue increasing by nearly 13.5% and both ARP* and volume
in growth. Over this period, we delivered strong growth in our single serve immediate refreshment pack formats and benefitted from the
Subway contract, where our range is now available in over 2000 outlets.
1 The GB and Ireland businesses include an additional week this year in quarter four. This occurs as we operate a 52-week accounting
calendar rather than a 365-day calendar, resulting in an additional week in 2016. As a result, the next financial year will be a 52-week period
ending on 1 October 2017. To ensure consistent and comparable reporting the additional week has been excluded from the segmental
analysis included within this report.
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Strategic report Chief Financial Officer’s review continued
GB STILLS
Volume (millions litres)
ARP* per litre
Revenue*
Brand contribution*
Brand contribution margin*
52 weeks ended
52 weeks ended
25 September 20161
£m
27 September 2015
£m
357.6
83.7p
299.2
132.8
44.4%
377.5
85.2p
321.6
151.1
47.0%
% change
(5.3)
(1.8)
(7.0)
(12.1)
(260)bps
GB stills performance was challenged and
revenue declined 7.0%. The total stills take
home market, as measured by Nielsen,
declined in retail market value* by 1.5%
(excluding water) with the squash and kids
categories declining by 3.0% and 7.6%
respectively. The removal of the added
sugar range of Robinsons in 2015 resulted
in a decline in sales as fewer consumers
switched to the new formulation than
originally anticipated. However,
performance in the second half of the year
improved, particularly in quarter four when
we began to cycle the removal of the full
sugar variant. Whilst Fruit Shoot declined, it
outperformed the category with the Hydro
flavoured water variant in growth. During
the year, we also improved the offering of
the core brand with the addition of
multi-vitamins and a reduction in
sweetness as we continued to improve the
“better for you” credentials of our portfolio.
J20 performance was also challenged, in
part due to the poorer performance of the
limited-edition variants. Earlier in the year
we relaunched the Drench juice drink
brand with a range of new, lower sugar
flavours and this resulted in strong growth
in the second half of the year.
FRANCE
Volume (millions litres)
ARP* per litre
Revenue*
Brand contribution*
Brand contribution margin*
52 weeks ended
25 September 2016
£m
52 weeks ended
27 September 2015
£m
% change
actual exchange rate
% change
constant exchange rate
280.0
87.3p
245.5
76.0
31.1%
288.9
83.2p
240.3
75.6
31.5%
(3.1)
4.9
1.7
0.5
(3.1)
0.6
(2.5)
(3.6)
(40)bps
(30)bps
Whilst market conditions have remained
tough and consumer confidence is weak,
performance in the second half of the year
was an improvement on the first half.
Quarter three was soft, largely due to
cooler, wetter weather impacting syrup
sales, whilst revenue returned to growth in
quarter four. This was in part due to a
reversal in the weather trends benefiting
our syrups brands. Fruit Shoot continued
to grow, led by the launch of a 1.5 litre
sharing pack, and the Pressade juice
brand, with its organic and “juice from
France” credentials significantly
outperformed the juice category.
IRELAND
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
25 September 20161
£m
52 weeks ended
27 September 2015
£m
% change
actual exchange rate
% change
constant exchange rate
209.5
51.1p
131.7
47.2
35.8%
202.2
49.7p
120.4
44.2
36.7%
3.6
2.8
9.4
6.8
3.6
(0.4)
5.8
2.6
(90)bps
(100)bps
Note: Volumes and ARP include own-brand soft drinks sales and do not include factored product sales included within total revenue and brand contribution
Ireland has delivered strong growth this
year with both our own brand portfolio
and the Counterpoint business
contributing to this. Our leading water
brand, Ballygowan, performed well, whilst
good performances from MiWadi Zero
and the fruit carbonate brand Club Zero
have also contributed to our growth.
Counterpoint has continued to benefit
from an improved range in both snacks
and alcohol which has helped to provide a
more attractive offering to its licensed
trade customers. The margins in the
licensed wholesale channel and in the
water category, both of which grew
strongly, are dilutive when compared to
the Ireland average.
1 The GB and Ireland businesses include an additional week this year in quarter four. This occurs as we operate a 52-week accounting
calendar rather than a 365-day calendar, resulting in an additional week in 2016. As a result, the next financial year will be a 52-week period
ending on 1 October 2017. To ensure consistent and comparable reporting the additional week has been excluded from the segmental
analysis included within this report.
20
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Strategic report Chief Financial Officer’s review continued
INTERNATIONAL
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
25 September 2016
£m
52 weeks ended
27 September 2015
£m
% change
actual exchange rate
% change
constant exchange rate
41.9
120.5p
50.5
9.6
19.0%
41.3
126.2p
52.1
16.9
32.4%
1.5
(4.5)
(3.1)
(43.2)
1.5*
(6.7)*
(5.3)*
(44.2)*
(1,340)bps
(1,330)bps
Note: Concentrate sales are included in both revenue and ARP but do not have any associated volume.
* Whilst reported revenue, ARP and brand
contribution declined, this was in part
due to a change in the route to market in
the Netherlands resulting in costs that
were previously reported against
overheads now being reported against
revenue and marginal costs.
Comparable ARP declined 2.0%,
revenue declined 0.6% and brand
contribution declined 30.4%. The
comparable revenue decline of 0.6%
was driven by weakness in our
European exports division, including our
operations in Benelux and travel sectors
where volumes declined in the mid-
single digits. Brand contribution was
further impacted by our upweighted
investment in the USA with the Fruit
Shoot multi-pack launch this year. We
have also gained a listing for the
single-serve range with Pizza Hut in the
USA, which will put Fruit Shoot in front
of thousands of families every week and
will drive brand awareness.
BRAZIL
Volume (millions litres)
ARP per litre
Revenue
Brand contribution
Brand contribution margin
52 weeks ended
25 September 2016
£m
52 weeks ended
27 September 2015
£m
% change
actual exchange rate
% change
constant exchange rate
184.6
48.5p
89.5
17.5
19.6%
Note: Brazil has no comparatives as it is the first time of inclusion in the Britvic group, however non-audited comparatives are provided in the commentary to aid
understanding.
The performance in our first year in Brazil
has been excellent. On a pro forma*
basis, volumes increased by nearly 8%,
revenue increased by nearly 19%, brand
contribution* increased by over 7% and
our brands gained retail market volume
and value share. Price increases have
been successfully implemented to recover
the inflationary cost pressure faced in the
market. Investment in the business has
seen a doubling of A&P* spend as well as
the recruitment of additional heads into
the commercial team. In the Summer we
launched Maguary Fruit Shoot in Sao
Paulo with listings secured in key retailers.
FIXED COSTS
Non-brand A&P
Fixed supply chain
Selling costs
Overheads and other
Total
Total A&P investment
A&P as a % of own-brand revenue
52 weeks ended
52 weeks ended
25 September 2016
£m
27 September 2015
£m
% change
actual exchange rate
(12.1)
(95.8)
(124.9)
(120.6)
(354.5)
(68.6)
4.9%
(9.7)
(92.6)
(118.6)
(123.0)
(343.9)
(71.1)
5.6%
(24.7)
(3.5)
(5.3)
2.0
(2.8)
(3.5)
(70)bps
Fixed costs increased by 2.8% including
Brazil. Excluding Brazil fixed costs
declined 2.2%, reflecting our continued
focus on cost control. A&P* as a percent
of revenue declined in part due to the first-
time inclusion of Brazil where A&P*
investment has historically been well
below the Britvic average. Actual spend
was £2.5m lower than last year with
spend in the second half of the year
in-line. The reduction in the first half of the
year reflected the Robinsons relaunch in
2015 as well as progress in driving down
our non-working A&P* spend across the
group.
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Strategic report Chief Financial Officer’s review continued
Exceptional and other items
In the period, we accounted for a net
charge of £6.0m of pre-tax (£7.1m post
tax) exceptional and other costs. These
include:
• Brazil integration costs of £5.2m
• Costs in relation to closure of
operations in India of £2.4m
• Gain on disposal of property in GB £3.2m
• Strategic restructuring – cost initiatives
of £0.6m
• Strategic restructuring – business
capability programme of £8.4m
• Fair value gains of £11.3m
• Unwind of discount on deferred
consideration of £3.3m
• Debt repayment charges of £0.6m
The cash cost of exceptional and other
items in the period were £11.6m.
Interest
The net finance charge before exceptional
and other items for the 53-week period
for the group was £20.8m compared with
£22.0m in the prior year, reflecting the
lower debt profile of the group and the
refinancing of the group bank facilities
earlier in the financial year.
Taxation
The underlying tax charge was £36.3m
which equates to an effective tax rate of
23.0% (52 weeks ended 27 September
2015: 23.5%). The decrease in the
effective tax rate reflects the decrease in
the UK corporate tax rate during the period.
However further start-up losses in certain
territories as a part of its International
expansion, for which no tax relief is
currently available, continue to exert
upward pressure on the effective tax rate.
Earnings per share
Adjusted basic EPS for the period was
49.3p, up 6.5% on the same period last
year. Basic for the period was 43.8p
compared with 41.8p for the same period
last year.
Dividends
The board is recommending a final
dividend of 17.5p per share, an increase
of 7.4% on the dividend declared last
year, with a total value of £46.0m. The
final dividend will be paid on 3 February
2017 to shareholders on record as at 9
December 2016. The ex-dividend date is
8 December 2016.
Cash flow and net debt
Underlying free cash flow* was £10.9m,
compared to a £89.3m inflow the previous
year. Working capital generated an outflow
of £25.8m, due to the 53rd week resulting
in an extra payment run. Capital expenditure
was £61.0m higher than last year, driven
by the implementation of our business
capability programme in the GB supply
chain. Overall adjusted net debt*
increased by £152.5m and took our
leverage to 1.8x EBITDA* from 1.3x last
year. In July 2015 £87.8m of cash was
received from the issue of shares under a
non pre-emptive placing, which was
subsequently used in consideration for
the acquisition of “EBBA” which reduced
net debt in the prior year. Excluding the
cash received on the placing, leverage
last year was 1.7x EBITDA. The adjusted
net debt* (taking into account the foreign
exchange movements on the derivatives
hedging our US Private Placement debt)
at 2 October 2016 was £416.4m, compared
to £263.9m at the end of last year.
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 rates 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. At 2 October 2016
the group has £902.3m of committed
debt facilities consisting of a £400.0m
bank facility which matures in 2021, and
a series of private placement notes with
maturities between 2016 and 2026,
providing the business with a secure
funding platform.
At 2 October 2016, the group’s unadjusted
net debt of £573.9m (excluding derivative
hedges) consisted of £115.1m drawn under
the group’s committed bank facilities,
£659.8m of private placement notes,
£3.3m of accrued interest and £3.8m of
finance leases, offset by net cash and
cash equivalents of £205.9m and
unamortised loan issue costs of £2.2m.
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 £416.4m which
compares to £263.9m at 27 September
2015.
In November 2016, agreement was reached
with a series of investors to raise a further
£175m of USPP floating and fixed rate
notes funding in February 2017, with
maturities between February 2025 and
February 2032. The funds raised will be
used to replace USPP notes maturing in
December 2016 and February 2017 and
to provide additional funding headroom.
22
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During 2015/16, in accordance with the
requirements under the UK Corporate
Governance Code the Directors also
assessed the long-term viability of the
Company in the context of its principal risks.
Mathew Dunn
Chief Financial Officer
Strategic report Chief Financial Officer’s review continued
Pensions
At 2 October 2016, the IAS 19 pension
deficit in respect of the group defined
benefit pension schemes was £17.4m (27
September 2015: net surplus of £17.3m).
The move from surplus into deficit was
driven by significantly higher liabilities due
to a sharp decrease in gilt yields partly
offset by improved performance of the
scheme assets (especially in the GB
scheme where a significant proportion of
assets are held in corporate bonds and
gilts), the additional employer contributions
made to the GB plan of £20.0m, and the
Pension Increase Exchange exercise
completed by the GB scheme during the
financial period.
The defined benefit section of the GB
pension scheme is closed to future
accrual. The Northern Ireland scheme is
only open to future accrual for members
who joined before 28 February 2006, and
new employees are eligible to join the
defined contribution scheme. All new
employees in Ireland join the defined
contribution plan. The 1 January 2015
actuarial valuation of the Britvic Ireland
Defined Benefit scheme has been
completed and shows there was no past
service deficit. The GB Pension scheme
actuarial valuation as at 31 March 2016
is underway.
The Ireland and Northern Ireland Defined
Benefit Pension schemes have an
investment strategy journey plan to
manage the risks as the funding position
improves. The GB Pension scheme
mainly has credit-type investments and
the Trustees have developed proposals
to manage the investment risks.
Risk management process
Our approach
As with any business we face risks and
uncertainties. We believe that effective risk
management supports the successful
delivery of our strategic objectives. The
management of these risks is based on
a balance of risk and reward determined
through assessment of the likelihood and
impact as well as the Company’s risk
appetite. The Executive Team perform a
formal robust assessment of the principal
risks facing the Company annually, which
is reviewed by the Board. Similarly all
business units and functions perform
formal annual risk assessments that
consider the Company’s principal risks
and specific local risks relevant to the
market in which they operate. Risks are
monitored throughout the year with
consideration to internal and external
factors, the Company’s risk appetite
and updates to risks and mitigation
plans are made as required.
Key areas of focus
This year the Board and the Executive
Team has placed a significant focus on
defining the Company’s risk appetite. This
is an expression of the amount and types
of risk that the Company is willing to take
to achieve its strategic and operational
objectives. We have agreed a set of
Company appetite statements for our
principal risks. We are using the
articulation of risk appetite in decision
making across the Company and to
define and validate the mitigating
activities required to manage our risks.
making
life’s
everyday
moments
more
enjoyable
Britvic plc Annual Report 2016
23
Strategic report
Sustainable
business review
Britvic’s business is built on providing consumers
with great drinks that they enjoy, from brands that
they trust. We know that building trust and respect
in our communities is about doing the right thing by
our customers, our employees, our shareholders,
the environment and the communities in which we
operate and it continues to be an integral part of our
business strategy.
Our continued commitment to
our sustainable business
programme was recognised
with an improved score within
the Business in the Community
Corporate Responsibility (CR)
Index, which grew to 2.5 stars
this year.
Further information about our sustainable
business programme can be found within
our annual Sustainable Business Report
which can be found at www.britvic.com
Focused on the issues
that matter
Our sustainable business programme is
based on addressing the issues that are
most material to our business – those that
represent a direct or indirect impact on our
ability to create, preserve or erode economic,
environmental and social value for us, our
stakeholders, the environment and society at
large. We maintain regular dialogue with our
key stakeholders to understand the issues
they deem of importance and incorporate
these considerations in our sustainable
business programme, aligning time,
resources and investment accordingly. We
concentrate on the highest priority issues
within this report but more detail can be
found at www.britvic.com and within our
annual Sustainable Business Report.
Reporting boundaries
This year has been the first year we have
captured data for the Brazilian business,
Empresa Brasileira de Bebidas e Alimentos
SA “Ebba” and have included this data
within our overall business performance
unless explicitly stated otherwise. Water,
energy and carbon emissions data relates
solely to our manufacturing sites in GB,
Ireland, France and Brazil where we have
full operational control.
Uncertainty and estimates
While we make every effort to capture all
information as accurately as possible, it is
neither feasible nor practical to measure all
data with absolute certainty.
Where we have made estimates or
exercised judgement this is highlighted
against the data disclosure.
Consumer health
Obesity and other health issues such as
diabetes are a growing concern within our
markets and we are committed to helping
our consumers make informed choices to
live healthier and more active lives. We
believe that all of our drinks can be enjoyed
as part of a balanced diet and healthy
lifestyle and we are proud of our leading
approach to innovation and reformulation.
We have witnessed a shift in consumer
behaviour towards healthier products and
this year we have removed a further 19bn
calories / 5MT*** sugar from our portfolio
and remain committed to helping
consumers make healthier choices through
reduced sugar products that are clearly
labelled. Some of the innovations that
entered the market this year included the
launch of MiWadi Mini in Ireland, the launch
of Sparkling Drench with only 3.9g sugar per
can in GB and the reformulation of Fruit
Shoot in the US and France to reduce sugar
and calories respectively.
***Calorie and sugar savings from reformulations
undertaken during the year are assumed on the
previous year’s sales volumes regardless of when
the reformulation entered onto the market in that
year. Where a change of flavour occurs, the calorie/
sugar calculations are assumed on the closest
comparable flavour for sales volumes, e.g.
blackcurrant & apple assumed comparable to pear
& blueberry. All reformulation values are based on
the latest recipe nutritional content.
Average calories per 250ml serve
38
37
36
35
34
33
s
e
i
r
o
a
c
l
f
o
r
e
b
m
u
N
37.59
35.37
34.9
2014
2015
2016
Chart showing the average number of
calories per 250ml across the business
(excludes Brazil)
24
Strategic report Sustainable business review continued
Inclusion
We are committed to providing equal
opportunities to our current and potential
employees and apply fair and equitable
employment practices. We value diversity
and we recruit and promote talent on the
basis of ability, skills, experience, behaviour,
performance and potential for the job. Our
selection, training, development and
promotion policies ensure equal
opportunities for all colleagues regardless
of factors such as age, sex, disability
(including colleagues who become
disabled during service), gender (including
gender reassignment), marital status,
pregnancy and maternity, race, nationality,
religion or belief or sexual orientation.
Diversity in our workforce is crucial to our
success and we have a responsibility to
create an environment where people can
be themselves and are valued for their
uniqueness. This year we worked with the
Business in the Community (BITC) race
and gender equality campaigns, accessing
best practice resources and training on
unconscious bias. We developed reporting
and monitoring activities to include gender
and pay, internal promotions, external
applicant demographics and recruitment
decisions, and are currently participating in
the BITC benchmarking surveys for gender
and race. We also launched our four-year
roadmap for becoming a fully inclusive
organisation.
The overall gender balance across all
employees at 2 October 2016 was 28%
female and 72% male. This figure is
indicative of our industry, with a high
proportion of operational employees
typically being male. Our Board level
gender diversity increased to 22% with the
appointment of Sue Clark as an additional
female Non-executive Director.
Human rights
Our human rights policy is set out in our
Ethical Business Policy which is available at
www.britvic.com/sustainable-business/
resources. This applies to our employees,
our suppliers and partners and anyone
working on behalf of our business. It covers
bribery and corruption, conducting business
with respect, integrity and equality and
managing personal activities and interests. It
also covers responsible trading and sets out
our standards regarding human rights,
health & safety and environmental
responsibilities and what we expect of our
suppliers and other trading partners, which
are monitored through our responsible
sourcing programme.
We run a confidential whistle blowing hotline
for anyone who is concerned about a
breach of the policy.
All our employees are trained and required
to complete an on-line test to ensure
compliance with the policy.
Gender diversity
Board
Executive Committee
Senior Managers (Band D+)
All employees
Male
Female
7
10
245
3,145
78%
91%
65%
72%
2
1
131
1,228
22%
9%
35%
28%
Responsible sourcing and
Modern Slavery
We are committed to sourcing all our
materials in a responsible manner,
working alongside our suppliers to drive
best practice through audits and training
and have a responsible sourcing
programme in place to manage the
environmental and ethical risks within our
supply chain. The Modern Slavery Act
2015 has introduced changes in UK law
focusing on increasing transparency in
supply chains. We will publish a slavery
and human trafficking statement on our
website in due course and in compliance
with the Modern Slavery Act 2015.
Employee Health & Safety
We’re committed to providing a safe
working environment for our people and
identifying and managing safety risks is a
top priority for us. This year our safety
performance in relation to accident
frequency and severity rate has significantly
improved on last year with a 23% and
24.6% reduction respectively across the
group. A number of factors have
contributed towards this achievement
including the introduction of the new ‘How
2’ Standards and audit programme and
greater uptake of the ‘contribution to
safety’ behavioural safety model.
Additionally, the infrastructure investment
projects in GB have been instrumental in
introducing the highest levels of safety
possible for our plant and machinery.
Accident frequency rate
4
3
2
1
0
3.24
3.47
2.67
2014
2015
2016
f
o
r
e
b
m
u
n
e
g
a
r
e
v
A
d
e
k
r
o
w
s
r
h
0
0
0
0
0
0
1
/
s
t
n
e
d
c
c
a
,
i
Accident severity rate
0.2
0.15
0.1
0.05
0
f
o
r
e
b
m
u
n
e
g
a
r
e
v
A
d
e
k
r
o
w
s
r
h
0
0
0
,
1
/
t
s
o
l
s
y
a
d
0.182
0.13
0.098
2014
2015
2016
Health, safety and wellbeing
The health, safety and wellbeing of our
employees is paramount to Britvic and we
have a Health, Safety and Wellbeing
Committee which is chaired by our General
Counsel with cross-functional representation
and support from health and safety
specialists from across the group.
We run an employee wellbeing programme
‘Wake up to Wellbeing’ in GB and Ireland
which is based on the Government’s ‘One
You’ campaign designed to encourage,
empower and enable people to protect
and improve their health and we also
provide an Employee Assistance
Programme which is confidential and
designed to offer support 24 hours a day,
both online or on the phone.
Creating a great place to
work for our employees
We recognise that our people are central
to our success and to achieving our future
ambitions. We currently employ over 4,000
people around the world and have a talented
and diverse workforce. We want Britvic to
be an inspiring, safe place to be and for
our people to realise their ambitions. Each
employee is guided by a common purpose,
our vision and our values which are
integrated into our people processes and
programmes, including our performance,
reward and talent programme – Growth,
performance, success.
We measure our overall employee
engagement through the Great Place to
Work survey, which allows all our people to
anonymously feedback their views. This is
our fourth year of completing the survey
and we continue to make progress in
making Britvic a great place to work. This
year we achieved a Trust Index score of
72% with an 86% response rate.
Learning and development
We are committed to nurturing and growing
our employees at all levels, enabling them
to lead Britvic into the future. We encourage
them to own and grow their careers within
Britvic. We continue to run an extensive
learning and development curriculum,
which offers all employees the chance to
improve their core business skills and
managers the opportunity to enhance
their management skills, through on-line
and face to face training. We also run
programmes tailored to the needs of
specific areas of the business.
Britvic plc Annual Report 2016
177534_BRITVIC_TEXT-p001-037.indd 25
25
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Strategic report Sustainable business review continued
Communication and
engagement
Engagement with our employees is a priority
for us and we keep people informed about
our business, its performance and things
that affect them through a variety of
channels. These included, our company
intranet, Teamlink – our monthly digital
update and Teamtalk – our regular face to
face meetings led by senior management.
Our quarterly magazine, Zest, is available
to all employees.
We have well established Employee
Involvement Forums in GB and Ireland as
well as the Britvic Group Forum with
nominated employee representatives who
ensure that employee’s views are taken
into account regarding issues that are
likely to affect them. Where the group has
entered into a recognition agreement with
a trade union, it fulfils its obligations to
consult and negotiate accordingly.
Sharing in success
We monitor our total pay and benefits
offering as part of our reward philosophy
which is based on delivering competitive
salaries and benefits, performance-related
bonus and share ownership opportunities.
In a number of our markets, pay for large
populations of our employees is determined
with trade union representatives on the
basis of fair terms and conditions for all
members.
Management pay and bonuses are linked
to business performance and their personal
contribution. Selected senior executives
also receive annual awards of long-term
incentives to directly align their packages
with sustainable shareholder creation. Pay
outs under these plans depends on Britvic’s
performance over a three year period.
We also provide competitive pension and
healthcare benefits in addition to statutory
arrangements.
Supporting our communities
We recognise the importance of supporting
our local communities and this year our
charitable contributions were valued at
almost £900,000. This included volunteering
time, matched funding, payroll giving,
drinks donations and our monthly
employee lottery.
In GB our employees participated in our
‘Rowed to Rio’ fundraising challenge,
collectively covering a total of 9962 miles
and raising money for our charity partner
Sported, a charity aimed at supporting
over 3,000 local sports clubs. The Wildlife
Trust also became our charity partner in
2016 and our employees have been
volunteering at their local Wildlife Nature
Reserves, helping protect nature whilst
also building stronger relationships within
their teams.
In Ireland we launched our employee
volunteering policy, enabling employees to
take 2 days paid leave to volunteer. 304
hours of volunteering took place this year
as a result of the introduction of this new
policy, supporting charities close to our
employee’s hearts.
Reducing resource use
Protecting the environment and the natural
resources on which we depend is critical
to our business success. We manage our
environmental impacts by focusing on those
we can control, namely energy and its
associated carbon emissions, water use
and packaging. Minimising our impact on
these resources helps us control operating
costs and helps build a resilient
competitive business.
Water use
Responsible water use continues to be a
concern across the world with increasing
numbers of people without access to
clean water. We recognise we have a
responsibility to manage our water use
prudently and this year we successfully
reduced our water intensity ratio by 1.5%
to 1.9 across our European manufacturing
sites, meaning for every litre of soft drink
we produce we use 1.9 litres of water. We
have a 2020 ambition to reach a water
intensity ratio of 1.4.
Climate change
Climate change is one of the biggest
challenges we face and society is already
beginning to experience its impacts -
socially, economically and ecologically.
Through our investments in new, more
efficient technology we endeavour to
reduce our emissions in the long term,
however this year our carbon emissions
increased relative to production. This
increase was caused by the infrastructure
investment works underway that
increased our energy consumption at our
manufacturing sites by 3.4% across the
business. We are confident however that
the investments will see a significant
improvement in our energy and
subsequent carbon footprint going
forward. Our new production line at
Leeds, for example, uses 41% less
electricity than older lines.
We continued to offset our GB business
travel emissions through the
CarbonNeutral® certification scheme
supporting a de-forestation project in the
Amazon rainforest. This project works
with local communities to help preserve
the biodiversity of this area of global
significance.
The table below sets out the quantities of
greenhouse gas emissions in tonnes of
carbon dioxide equivalent (CO2e) for the
53 weeks ended 2 October 2016. The
table also contains last year’s emissions
to demonstrate our progress. Please note
the reporting scope changed this year as
we have included Brazil in our
calculations. We have also provided
performance excluding Brazil to allow for
year-on-year comparison.
We have reported on all of the emission
sources required under the Companies
Act 2006 (Strategic Report and Directors’
Reports) Regulations 2013. Emissions
outside of our responsibility, including
shared office locations and those
originating from our contract packers and
franchise partners, 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 2016 for this
year’s calculations.
26
Britvic plc Annual Report 2016
177534_BRITVIC_TEXT-p001-037.indd 26
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Strategic report Sustainable business review continued
Total Scope 1 & 2 CO2e emissions
53,673
70,587
2014-2015 Emissions
(Tonnes CO2e)
2015-2016 Emissions
(Tonnes CO2e)
Emissions from:
Scope 1: Combustion of fuel & operation of facilities
Scope 2: Electricity, heat, steam and cooling purchased
for our own use
Intensity measure:
16,963
36,710
Scope 1 & 2 emissions reported above normalised
to per thousand tonne of product output
28.7 Tonnes
CO2e/1000Tonne produced
54,466 excluding Brazil
31,129
17,115 excluding Brazil
39,457
37,351 excluding Brazil
34.1 Tonnes
CO2e/1000Tonne produced
28.9 Tonnes CO2e/1000
Tonne excluding Brazil
Notes: 1. Emissions relate to those generated by our manufacturing and distribution sites in GB, Ireland, France and Brazil only.
2. Emissions outside of our responsibility and under the control of a third party have been excluded.
3. Previously reported Scope 1 & 2 emissions have been updated to reflect a change in boundary (offices removed) to reflect our operational control
reporting responsibility
Packaging
Packaging is an essential component of
our products and we take our responsibility
to produce packaging with minimal
environmental impact very seriously.
Our approach focuses on transforming,
innovating, reducing and optimising the
use of materials we use. In order to do
this we have been developing a tool to
measure the environmental impact of our
packaging formats and will be integrating
its consideration within our packaging
development process moving forward.
Over the past 3 years we have been
working in partnership with Innovate UK
and the UK based SME, Natural Resources
(2000) Limited (NRL), on a new sustainable
packaging technology that could
revolutionise packaging across multiple
sectors. This year, we have reached a proof
of principle milestone on developing a
viable bottle from sustainable wood fibres.
The technology platform, using patented
(pending) moulding and processing
techniques, has been producing bottles
on a prototype manufacturing line.
A closure system using similar wood fibre
based material has also been demonstrated.
This new technology has the potential to
significantly reduce the environmental
impact of packaging as the materials are
sustainably sourced, renewable and fully
recyclable and the forming process
requires less energy to produce a bottle
than its contemporary equivalents. Further
work is underway to bring this technology
to market as part of our sustainable
packaging strategy.
Britvic plc Annual Report 2016
27
Strategic report
Our
risks
Generate profi table
growth in our core
markets
Realise global
opportunities in kids,
family and adult
categories
Continue to step-
change our business
capability
Build trust and respect
in our communities
As with any business we face risks and uncertainties.
We believe that effective risk management supports
the successful delivery of our strategic objectives.
The management of these risks is based
on a balance of risk and reward determined
through assessment of the likelihood and
impact as well as the group’s risk appetite.
The Executive Team perform a robust
assessment of the principal risks facing
the group annually, which is reviewed by
the Board. Similarly all business units and
functions perform annual risk assessments
that consider the group’s principal risks
and specifi c local risks relevant to the
market in which they operate. Risks are
monitored throughout the year by the
Board, Executive Team and business
units and functions with consideration to
internal and external factors, the group’s
risk appetite and updates to risks and
mitigation plans are made as required.
Key areas of focus
This year the Board and the Executive Team
has placed a signifi cant focus on defi ning the
group’s risk appetite. This is an expression
of the amount and types of risk that the
group is willing to take to achieve its strategic
and operational objectives. We have agreed
a set of group appetite statements for our
principal risks. We are starting to use the
articulation of risk appetite in decision making
across the group and to defi ne and validate
the mitigating activities required to manage
our risks. During 2015/16, in accordance
with the requirements under the UK
Corporate Governance Code, the Directors
also assessed the long term viability of the
group in the context of its principal risks.
Further detail can be found on page 32.
PRINCIPAL RISK
RISK DESCRIPTION
CONTROLS AND MITIGATING ACTIVITIES
DEVELOPMENTS IN 2016
MOVEMENT
IN SCORE
CONSUMER PREFERENCE
Failure to deliver brand propositions
which respond to changing consumer
preferences.
Consumer preferences, tastes and behaviours evolve over time
and differ between the different markets in which we operate.
Our ability to anticipate these trends and ensure the strength and
relevance of our brands is critical to our competitiveness in the
market place and performance.
HEALTH AND OBESITY CONCERNS
Failure to address health concerns of
government, consumers and other
stakeholders (e.g. sugar and obesity).
There are different consumer preferences in the markets we
operate in to natural or artifi cial sweeteners and other ingredients
such as preservatives. Additionally there is a continued high level
of media and government scrutiny on health and obesity in our
core markets; GB, Ireland and France. It is important that we
continue to take a leadership position on health issues.
RETAILER LANDSCAPE AND
CUSTOMER RELATIONSHIPS
We may not be able to maintain
strong relationships or respond to
changes in the retailer landscape.
THIRD PARTY RELATIONSHIPS
Partnerships may not be renewed or
are renewed on less favourable terms.
28
Britvic plc Annual Report 2016
Maintaining strong relationships with customers is critical for our
brands to be available and well presented to our consumers. A
failure to do this may impact our terms of business with customers
and /or the availability and presentation of our brands.
We currently bottle and co-market a number of PepsiCo products
in GB and Ireland, including 7UP and Pepsi. Additionally we have
a relationship with a number of partners to grow our family, adult
and kids brands outside of our core markets. Our partnership
with PepsiCo and distributors and franchisees is an important
part of our business and delivery of our strategy going forward.
• Broad portfolio of products across a number of sub categories
• Our mitigating approaches remain broadly unchanged and
and markets to increase coverage of consumer trends.
• Continuous assessment of consumer trends in order to
anticipate changes in preferences and match our offerings to
• Ongoing evaluation and development of brand portfolio and
these trends.
innovation pipeline.
we continue to invest in innovation and our marketing
programmes. For example, we have signifi cantly grown
market share with Pepsi max, relaunched Purdeys and
extended our presence in the premium adult category
through new brands such as Thomas & Evans and the
London Essence Company in GB. In France we have seen
signifi cant growth from our organic juice brand Pressade.
• We have a wide range of soft drinks, many of which are low or
• In GB and Ireland, the governments announced plans
for a tax on soft drinks manufacturers, commencing in
• Ongoing evaluation and development of the brand portfolio
April 2018.
no sugar.
and innovation pipeline.
• Reformulation of products where we can to help consumers
make healthier choices. For example we were the fi rst UK soft
drinks company to introduce stevia and in Fy15 we removed all
sugar variants from Robinsons and Fruit Shoot ranges in the UK.
• Our Innovation pipeline is weighted towards lower-sugar or
nutritionally enhanced brands.
• We market our brands responsibly with no marketing to under
12s and a focus on low or no sugar variants as well as
encouraging consumers to lead active life styles.
• We continue to reformulate products to reduce/remove
sugar content e.g. Drench, as well as bringing new
products to market – e.g. Purdeys Edge and MiWadi
Mini – which are outside of the tax. In addition we
reduced the sweetness of Fruit Shoot and added
multivitamins during the year.
• MiWadi Zero – partnership with Diabetes Ireland charity.
We are also supporting the change4life campaign on
Robinsons.
• In the UK and Ireland we are engaging constructively
on the detail of the proposed sugar tax with the
• We work closely with non government organisations and trade
associations in our markets to fully participate in the debate
government.
and help shape solutions.
• Operate across many different customer channels and
• Soft drinks market and retail conditions in GB, Holland
markets.
and France remain challenging.
• Continuous monitoring of customer performance and trends.
• GB supply chain investment programme will enable us
• Develop compelling offerings for our customers’ shoppers
based on our understanding of their business and the soft
drinks category.
to respond to customer and consumer needs through
improved capability to produce different pack sizes.
• Recent Subway 7 year contract win, serving 2 million
customers every week.
• Robust governance and management of relationship with
• The Pepsi and 7UP bottling agreement for Ireland was
PepsiCo and other partners.
renewed for 10 years with effect from 1 January 2016,
which further strengthens our long term relationship
with PepsiCo.
29 Britvic plc Annual Report 2016PRINCIPAL RISKRISK DESCRIPTIONCONTROLS AND MITIGATING ACTIVITIESDEVELOPMENTS IN 2016MOVEMENT IN SCORECONSUMER PREFERENCEFailure to deliver brand propositions which respond to changing consumer preferences. Consumer preferences, tastes and behaviours evolve over time and differ between the different markets in which we operate. Our ability to anticipate these trends and ensure the strength and relevance of our brands is critical to our competitiveness in the market place and performance.• Broad portfolio of products across a number of sub categories and markets to increase coverage of consumer trends. • Continuous assessment of consumer trends in order to anticipate changes in preferences and match our offerings to these trends. • Ongoing evaluation and development of brand portfolio and innovation pipeline. • Our mitigating approaches remain broadly unchanged and we continue to invest in innovation and our marketing programmes. For example, we have significantly grown market share with Pepsi max, relaunched Purdeys and extended our presence in the premium adult category through new brands such as Thomas & Evans and the London Essence Company in GB. In France we have seen significant growth from our organic juice brand Pressade. HEALTH AND OBESITY CONCERNSFailure to address health concerns of government, consumers and other stakeholders (e.g. sugar and obesity).There are different consumer preferences in the markets we operate in to natural or artificial sweeteners and other ingredients such as preservatives. Additionally there is a continued high level of media and government scrutiny on health and obesity in our core markets; GB, Ireland and France. It is important that we continue to take a leadership position on health issues.• We have a wide range of soft drinks, many of which are low or no sugar.• Ongoing evaluation and development of the brand portfolio and innovation pipeline.• Reformulation of products where we can to help consumers make healthier choices. For example we were the first UK soft drinks company to introduce stevia and in Fy15 we removed all sugar variants from Robinsons and Fruit Shoot ranges in the UK.• Our Innovation pipeline is weighted towards lower-sugar or nutritionally enhanced brands.• We market our brands responsibly with no marketing to under 12s and a focus on low or no sugar variants as well as encouraging consumers to lead active life styles.• We work closely with non government organisations and trade associations in our markets to fully participate in the debate and help shape solutions. • In GB and Ireland, the governments announced plans for a tax on soft drinks manufacturers, commencing in April 2018. • We continue to reformulate products to reduce/remove sugar content e.g. Drench, as well as bringing new products to market – e.g. Purdeys Edge and MiWadi Mini – which are outside of the tax. In addition we reduced the sweetness of Fruit Shoot and added multivitamins during the year. • MiWadi Zero – partnership with Diabetes Ireland charity. We are also supporting the change4life campaign on Robinsons.• In the UK and Ireland we are engaging constructively on the detail of the proposed sugar tax with the government.RETAILER LANDSCAPE AND CUSTOMER RELATIONSHIPSWe may not be able to maintain strong relationships or respond to changes in the retailer landscape.Maintaining strong relationships with customers is critical for our brands to be available and well presented to our consumers. A failure to do this may impact our terms of business with customers and /or the availability and presentation of our brands.• Operate across many different customer channels and markets.• Continuous monitoring of customer performance and trends. • Develop compelling offerings for our customers’ shoppers based on our understanding of their business and the soft drinks category. • Soft drinks market and retail conditions in GB, Holland and France remain challenging. • GB supply chain investment programme will enable us to respond to customer and consumer needs through improved capability to produce different pack sizes. • Recent Subway 7 year contract win, serving 2 million customers every week.THIRD PARTY RELATIONSHIPS Partnerships may not be renewed or are renewed on less favourable terms. We currently bottle and co-market a number of PepsiCo products in GB and Ireland, including 7UP and Pepsi. Additionally we have a relationship with a number of partners to grow our family, adult and kids brands outside of our core markets. Our partnership with PepsiCo and distributors and franchisees is an important part of our business and delivery of our strategy going forward.• Robust governance and management of relationship with PepsiCo and other partners.• The Pepsi and 7UP bottling agreement for Ireland was renewed for 10 years with effect from 1 January 2016, which further strengthens our long term relationship with PepsiCo.Strategic report Our risks continuedBrexit ImplicationsFollowing the vote on 23 June 2016, the Executive Team and the Board have considered the implications of the vote to leave the European Union on the short and medium prospects of the group. There are three main areas where Brexit could impact the group in the period prior to exit:1. the risk of a downturn in the UK economy leading to a weaker soft drinks category growth. However the potential impact of this is too early to foresee at this stage and historically the UK soft drinks category has shown a good level of resilience to downturns in the economy. 2. the impact of a sustained reduction in the value of Sterling which despite the group’s hedging strategies will lead to an increase in the year on year cost of commodities such as PET, sugar and juices. 3. the further reduction in gilt yields has an impact on the value of the deficit related to the group’s defined benefit schemes. Additional contributions of £15m per annum in 2018 and 2019 will be made should the formal actuarial valuation in 2016 reveal that these contributions are necessary to return the GB scheme to full funding on a self-sufficiency basis by 31 March 2020.We cannot comment on the likely impact when the United Kingdom leaves the European Union, as the terms and conditions have not yet been negotiated. Principal risks and uncertaintiesThe Executive Committee and Board considered the risks described below as the principal risks facing our business during the year. These are not the only risks that may impact the Group but they are the ones that we believe are the most significant at this time. risk impact unchangedrisk impact new or increasing177534_BRITVIC_TEXT-p001-037.indd 2913/12/2016 18:59 30 Britvic plc Annual Report 2016PRINCIPAL RISKRISK DESCRIPTIONCONTROLS AND MITIGATING ACTIVITIESDEVELOPMENTS IN 2016MOVEMENT IN SCOREINTERNATIONAL EXPANSIONOur plan to grow our International business is limited by lack of brand momentum, local geo-political or economic risks, the risks associated with start – up profitability or substandard processes and systems.To achieve our strategy of growing internationally it is important that we have the appropriate governance, systems and processes in place and that our brand propositions respond appropriately to local consumer preferences.• Geo-graphic spread mitigates against localised geo-political or economic risk. • Mix of ‘asset light’ franchise and business acquisitions also reduces our exposure to this risk. • Extensive due diligence prior to entering into a new market. • Closely monitor market and country information provided by our partners and business units. • Initial stage of integration of Ebba business completed. Continued focus on embedding the control and compliance framework.• Launch of multi pack in the US with development of associated processes and systems. SUPPLY CHAINSupplier failure, market shortage or an adverse event in our supply chain impacts sourcing of our products and / or that the cost of our products is significantly affected by commodity price movements.Our business depends on purchasing a wide variety of products and services, efficient manufacturing and distribution processes. • Monitoring of market conditions for commodities and where appropriate hedging our contractual positions. • Robust supplier strategy, selection, monitoring and management processes. • Maintain multiple sources of supply for our products wherever possible.• Externally certified management systems across the supply chain.• Business continuity planning processes. • Continued embedding and development of management systems and assurance processes. • The GB supply chain investment programme will further improve the flexibility and therefore resilience of our GB supply chain.SAFE AND HIGH QUALITY PRODUCTSA faulty or contaminated product, either through malicious contamination, human error or equipment failure, is supplied to the market.The quality of our products is of the upmost importance to us and it is of paramount importance that we manage product quality and integrity.• Robust quality management standards applied across our supply chain and rigorously monitored. • Supplier assurance and management processes.• Dedicated central teams to oversee quality and supplier assurance, working closely with the business units.• Continued focus on improving the management standards framework used across the Group and the monitoring and oversight processes.LEGAL AND REGULATORYNon-compliance with local laws or regulations or breach of our internal policies and standards.Britvic is subject to a wide range of legislation, regulation, guidance and codes of practice in areas such as composition, labelling, packaging, marketing claims, advertising, safety, environment, competition, tax and employee health and safety. Failure to comply with such requirements could have a significant impact on our reputation and/or incur financial penalties.• Britvic code of conduct and our Group policies trained and rolled out to employees. • Monitoring processes to ensure compliance with all relevant legislation and regulations.• Work closely with our external advisors and the regulators, government bodies and trade associations regarding current & future legislation which would impact upon the business.• Whistle-blowing processes.• Embedding of the control and compliance framework across the Group and in Ebba.TECHNOLOGY AND INFORMATION SECURITYWe experience a major failure of IT infrastructure or breach in system or information security.We interact electronically with customers, suppliers and consumers and our supply chain operations are dependent on reliable IT systems and infrastructure. Disruption to our IT systems could have a significant impact on our sales, cashflows and profits. Additionally, and in common with many businesses, cyber security breaches could lead to unauthorised access to, or loss of sensitive information.• Disaster recovery plans tested every year. • Central governance and decision making processes for system changes.• Development and implementation of robust information security policies and processes. • In 2015/16 a number of major organisations were subject to cyber attacks. • We have increased investment to improve information security processes and cyber risk awareness.• Recognising that this risk can be managed but not eliminated we have built and enhanced processes to test and build resilience to cyber attacks.TREASURY AND PENSIONChanges to exchange rates and interest rates can have an impact on profits and cashflows. Britvic is exposed to a variety of external financial risks relating to treasury and pension. Changes to exchange rates and interest rates can have an impact on business results and the cost of interest on our debt.Additionally the GB and Ireland businesses have defined benefit pension plans, which whilst closed to new employees and future accruals are exposed to movements in interest rates, values of assets and increased life expectancy. • Robust monitoring of exchange rates and interest rates.• Active risk management and hedging strategies in place to manage exchange and interest fluctuations.• Close working with the trustees of the pension fund to agree future investment and funding strategies.• Review of foreign exchange hedging in place ahead of the EU referendum to ensure good levels of hedging in place across the main currency pairs.• Despite the hedging strategies in place, the recent reduction in the value of Sterling, if sustained, will lead to higher input costs across a number of our key commodities. However we are taking action to reduce some of this impact. Strategic report Our risks continuedContinue to step-change our business capabilityBuild trust and respect in our communitiesGenerate profitable growth in our core marketsRealise global opportunities in kids, family and adult categories177534_BRITVIC_TEXT-p001-037.indd 3013/12/2016 18:59 31 Britvic plc Annual Report 2016PRINCIPAL RISKRISK DESCRIPTIONCONTROLS AND MITIGATING ACTIVITIESDEVELOPMENTS IN 2016MOVEMENT IN SCOREINTERNATIONAL EXPANSIONOur plan to grow our International business is limited by lack of brand momentum, local geo-political or economic risks, the risks associated with start – up profitability or substandard processes and systems.To achieve our strategy of growing internationally it is important that we have the appropriate governance, systems and processes in place and that our brand propositions respond appropriately to local consumer preferences.• Geo-graphic spread mitigates against localised geo-political or economic risk. • Mix of ‘asset light’ franchise and business acquisitions also reduces our exposure to this risk. • Extensive due diligence prior to entering into a new market. • Closely monitor market and country information provided by our partners and business units. • Initial stage of integration of Ebba business completed. Continued focus on embedding the control and compliance framework.• Launch of multi pack in the US with development of associated processes and systems. SUPPLY CHAINSupplier failure, market shortage or an adverse event in our supply chain impacts sourcing of our products and / or that the cost of our products is significantly affected by commodity price movements.Our business depends on purchasing a wide variety of products and services, efficient manufacturing and distribution processes. • Monitoring of market conditions for commodities and where appropriate hedging our contractual positions. • Robust supplier strategy, selection, monitoring and management processes. • Maintain multiple sources of supply for our products wherever possible.• Externally certified management systems across the supply chain.• Business continuity planning processes. • Continued embedding and development of management systems and assurance processes. • The GB supply chain investment programme will further improve the flexibility and therefore resilience of our GB supply chain.SAFE AND HIGH QUALITY PRODUCTSA faulty or contaminated product, either through malicious contamination, human error or equipment failure, is supplied to the market.The quality of our products is of the upmost importance to us and it is of paramount importance that we manage product quality and integrity.• Robust quality management standards applied across our supply chain and rigorously monitored. • Supplier assurance and management processes.• Dedicated central teams to oversee quality and supplier assurance, working closely with the business units.• Continued focus on improving the management standards framework used across the Group and the monitoring and oversight processes.LEGAL AND REGULATORYNon-compliance with local laws or regulations or breach of our internal policies and standards.Britvic is subject to a wide range of legislation, regulation, guidance and codes of practice in areas such as composition, labelling, packaging, marketing claims, advertising, safety, environment, competition, tax and employee health and safety. Failure to comply with such requirements could have a significant impact on our reputation and/or incur financial penalties.• Britvic code of conduct and our Group policies trained and rolled out to employees. • Monitoring processes to ensure compliance with all relevant legislation and regulations.• Work closely with our external advisors and the regulators, government bodies and trade associations regarding current & future legislation which would impact upon the business.• Whistle-blowing processes.• Embedding of the control and compliance framework across the Group and in Ebba.TECHNOLOGY AND INFORMATION SECURITYWe experience a major failure of IT infrastructure or breach in system or information security.We interact electronically with customers, suppliers and consumers and our supply chain operations are dependent on reliable IT systems and infrastructure. Disruption to our IT systems could have a significant impact on our sales, cashflows and profits. Additionally, and in common with many businesses, cyber security breaches could lead to unauthorised access to, or loss of sensitive information.• Disaster recovery plans tested every year. • Central governance and decision making processes for system changes.• Development and implementation of robust information security policies and processes. • In 2015/16 a number of major organisations were subject to cyber attacks. • We have increased investment to improve information security processes and cyber risk awareness.• Recognising that this risk can be managed but not eliminated we have built and enhanced processes to test and build resilience to cyber attacks.TREASURY AND PENSIONChanges to exchange rates and interest rates can have an impact on profits and cashflows. Britvic is exposed to a variety of external financial risks relating to treasury and pension. Changes to exchange rates and interest rates can have an impact on business results and the cost of interest on our debt.Additionally the GB and Ireland businesses have defined benefit pension plans, which whilst closed to new employees and future accruals are exposed to movements in interest rates, values of assets and increased life expectancy. • Robust monitoring of exchange rates and interest rates.• Active risk management and hedging strategies in place to manage exchange and interest fluctuations.• Close working with the trustees of the pension fund to agree future investment and funding strategies.• Review of foreign exchange hedging in place ahead of the EU referendum to ensure good levels of hedging in place across the main currency pairs.• Despite the hedging strategies in place, the recent reduction in the value of Sterling, if sustained, will lead to higher input costs across a number of our key commodities. However we are taking action to reduce some of this impact. Strategic report Our risks continuedrisk impact unchangedrisk impact new or increasing177534_BRITVIC_TEXT-p001-037.indd 3113/12/2016 18:59 Strategic report
Viability statement
During the year, the
Directors assessed the
viability of the Company
over a three-year period,
taking into account the
group’s current financial
position and the principal
risks, particularly those
that could threaten the
business model. These
risks and the actions
being taken to manage
or mitigate them are set
out above.
The Directors have determined that
a three-year period is an appropriate
timeframe for the assessment given the
dynamic nature of the FMCG sector and
this is in line with the group’s strategic
planning period. The starting point for the
viability assessment is the strategic and
financial plan, which makes assumptions
relating to the economic climate in each of
our markets, the growth of the soft drinks
category, input cost inflation and growth
from the group’s value drivers. The process
for assessing the viability of the group
involved input from a number of functions
across the business to model a series of
theoretical ‘stress test’ scenarios based
on the materialisation of principal risks.
Examples include a faulty product being
supplied to market or a failure to respond
to changing consumer preferences including
health trends. The approach also considered
interdependencies between the group’s
principal risks as well as reverse stress
testing allowing the Directors to assess
the circumstances that would render
the business model unviable.
To support the final conclusion on viability,
the assessment also took into account
the mitigations available to the group to
protect against these downside scenarios.
Finally the stress test scenarios were
reviewed against the group’s current and
projected debt and liquidity position.
Based on the results of this analysis, the
Directors have a reasonable expectation
that the group will be able to continue in
operation and meet its liabilities as they
fall due over the three year period to
September 2019.
The Strategic Report was approved by
the Board and signed on its behalf by
Simon Litherland.
Simon Litherland
Chief Executive Officer
29 November 2016
32
Britvic plc Annual Report 2016
Governance continued
Governance
34 Corporate governance report
36 Board of directors
47 Nomination committee
50 Audit Committee
58 Remuneration Committee
59 Directors’ remuneration report
61 Remuneration – At a glance
67 Annual Report on Remuneration
76 Directors’ Remuneration Policy
85 Directors’ report
88 Statement of directors’ responsibilities
Britvic plc Annual Report 2016
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Governance
Corporate
governance
report
Dear Shareholder,
As I mentioned in my Chairman’s
statement earlier in this report, market
conditions continued to be challenging
during 2016 with additional uncertainty
caused by the UK’s decision to leave
the EU, and a proposed tax on soft
drinks in GB and Ireland. Despite
these challenges, Britvic has continued
to deliver the strategic priorities set
out in 2013 and the Board has
remained focussed and close to the
key issues facing the company.
The board is committed to high standards of corporate
governance and supports the principles laid down in The
UK Corporate Governance Code published in September
2014 by the Financial Reporting Council (‘the Code’). This
report aims to demonstrate our approach to governance
through effective leadership and ensuring that good
governance principles and practices are adhered to.
Changes to board composition
There have been a number of changes to the board over the
past year. As part of our previously reported succession plans,
we welcomed Sue Clark and Euan Sutherland to the Board as
Non-Executive Directors on 29 February 2016. They stand for
appointment at the AGM in 2017. Having reached his nine year
tenure, Bob Ivell was succeeded by John Daly as Senior
Independent Director and Chair of the Remuneration Committee
at the 2016 AGM. Bob remained on the Board until the
appointments of Sue and Euan had been made. John Gibney,
our former CFO, stepped down from the Board on 27 January
2016 after 16 years of service to the company. We wish him well
in his retirement. Mathew Dunn succeeded John as Chief
Financial Officer in November 2015 and stood for appointment at
the 2016 AGM.
Your board is 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. Further details on 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 pages 47 to 49.
Details of the directors’ biographies are set out on pages 36 and 37.
34
Britvic plc Annual Report 2016
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13/12/2016 19:05
Governance Corporate governance report continued
Fair, balanced and understandable
During the year the board reviewed the requirement for directors to
make a statement that they consider the annual report and accounts,
taken as a whole, to be fair, balanced and understandable. The
Audit Committee met to consider the criteria for a fair, balanced
and understandable annual report and to review the processes
underpinning the compilation and assurance of the report, in
relation to the financial and non-financial information. The board
then considered the annual report as a whole, being mindful of
the UK reporting requirements to ensure consistency between
the narrative sections and the financial statements.
The board’s statement on the report is outlined on page 88.
Gerald Corbett
Chairman
29 November 2016
making
life’s
everyday
moments
more
enjoyable
Britvic plc Annual Report 2016
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13/12/2016 19:05
Governance
Board of directors
Ben Gordon
Independent Non-Executive
Director
John Daly
Senior Independent
Non-Executive Director
Clare Thomas
General Counsel and
Company Secretary
See full biography on page 39.
Ben Gordon was appointed a
Non-Executive Director on
15 April 2008.
Skills, competence and
experience:
Ben has a strong background in
executive management, consumer
insight and international retail
gained through his roles as 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. Ben has an MBA from
INSEAD and is a Member of
the Institution of Civil Engineers.
Current appointments:
Non-Executive Director of St.
Ives plc and a Trustee of the
Canal & River Trust.
Committees:
Member of the Audit, Nomination
and Remuneration Committees
John Daly was appointed a
Non-Executive Director on
27 January 2015 and is the
Company’s Senior
Independent Director.
Skills, competence and
experience:
John has more than 30 years of
extensive international business
and management experience
having held a variety of senior
leadership roles, most notably
during his 20 years at British
American Tobacco plc. Most
recent positions at BAT were
Chief Operating Officer (from
2010 to 2014) and Regional
Director for Asia Pacific, based in
Hong Kong (from 2004 to 2010).
Prior to his time at British
American Tobacco plc, John
held various sales and marketing
positions with Johnson &
Johnson, Bristol-Myers Squibb,
Pennwalt Corporation and
Schering-Plough.
Current appointments:
Non-Executive Director of
Wolseley plc (Member of the
Audit, Remuneration and
Nominations Committees) and
G4S PLC (Member of the Audit
Committee and Chairman of the
Remuneration Committee)
Committees:
Chair of the Remuneration
Committee and a member of
the Audit and Nomination
Committees.
36
Britvic plc Annual Report 2016
Ian McHoul
Independent Non-Executive
Director
Ian McHoul was appointed a
Non-Executive Director on
10 March 2014.
Skills, competence and
experience:
Ian is a Chartered Accountant
and has extensive finance,
strategy, beverage and retail
experience gained through
leadership roles at Scottish &
Newcastle plc, Inntrepreneur
Pub Group and Fosters Brewing
Group. Ian is Chief Financial
Officer of Amec Foster Wheeler
plc and has previously served as
Non-Executive Director and
Chairman of the Audit
Committee of Premier Foods plc
between 2004 and 2013, the
last year of which he was also
the Senior Independent Director.
Ian holds a BSc in Mathematics
from the University of Bristol.
Current appointments:
Chief Financial Officer of Amec
Foster Wheeler plc.
Committees:
Chair of the Audit Committee
and a member of the
Nomination and Remuneration
Committees.
Gerald Corbett DL
Non-Executive Chairman
Gerald Corbett has been
Non-Executive Chairman of the
Company since 24 November
2005.
Skills, competencies and
experience:
Over a long business career,
Gerald has been a director of
13 public companies, seven of
which he has chaired. These
leadership experiences have
enabled Gerald to utilise his
significant insight and
experience to cultivate an open
boardroom environment. His
most recent roles were as
Chairman of Betfair Group plc
(2012 - February 2016),
Moneysupermarket.com Group
plc (2007-2014) and SSL
International plc (2005-2010).
His executive career included
Group Finance Director roles
with Redland plc and Grand
Metropolitan plc, and Chief
Executive of Railtrack.
Current appointments:
Gerald is Chairman of Segro plc
and is Chairman of the AIM
listed investment and stockbroking
business Numis Corporation plc.
Gerald will not seek re-election at
the AGM of Numis Corporation
in February 2017. Gerald is a
member of the Advisory
Committee at Spencer Stuart.
Committees:
Chair of the Nomination
Committee and a member of
the Remuneration Committee.
177534_BRITVIC_TEXT-p033-088.indd 36
13/12/2016 19:05
Governance Board of directors continued
From left to right:
Ben Gordon
John Daly
Clare Thomas
Ian McHoul
Gerald Corbett
Simon Litherland
Euan Sutherland
Sue Clark
Mathew Dunn
Joanne Averiss
Simon Litherland
Chief Executive Officer
Simon Litherland was appointed
Chief Executive Officer in
February 2013 and is responsible
for overseeing the delivery of the
company’s business strategy.
He joined Britvic in September
2011, initially as Managing
Director of Britvic GB.
Skills, competence and
experience:
Over 20 years of his career was
spent with Diageo. His last role
was MD of Diageo Great Britain,
having previously run Diageo’s
businesses in South Africa,
Ireland and Central and Eastern
Europe. During his time at Diageo,
Simon was responsible for an
extensive portfolio of brands
including Guinness, Johnnie
Walker, Baileys, Smirnoff and
Captain Morgan. In his earlier
career he held a variety of
International Finance Director
roles in Diageo, IDV and Grand
Metropolitan. Simon qualified
as a Chartered Accountant
with Deloitte in South Africa and
has a business degree at the
University of Cape Town.
Current appointments:
President and Chairman of ISBA
Council (the voice of British
Advertisers).
Euan Sutherland
Independent Non-Executive
Director
Sue Clark
Independent Non-Executive
Director
Euan was appointed a
Non-Executive Director on
29 February 2016.
Sue was appointed a
Non-Executive Director on
29 February 2016.
Skills, competence and
experience:
Euan has over 23 years’
experience gained from the retail
and FMCG sectors having held
roles with Boots, Dixons,
Coca-Cola and Mars. Euan was
previously Group Chief Executive
Officer for the Co-op group of
companies. Earlier in his career
he was Group Chief Operating
Officer at Kingfisher Plc, Chief
Executive Officer of B&Q and
Chief Executive of AS Watson
UK, owner of Superdrug. Euan
has a first class honours degree
in Managerial & Administrative
Studies from Aston University.
Current appointments:
Group Chief Executive Officer
of SuperGroup plc.
Committees:
A member of the Audit
Committee.
Skills, competence and
experience:
Sue has strong international
credentials and has worked in
the global FMCG sector for the
last 13 years. Prior to the merger
with Anheuser-Busch InBev in
October 2016, Sue held the role
of Managing Director of
SABMiller Europe and was an
Executive Committee member
of SABMiller plc. She joined
SABMiller in 2003 as Corporate
Affairs Director and was part of
the executive team that built the
business into a top 5 FTSE
company. Previously, Sue has
held a number of senior roles in
UK companies, including that of
Director of Corporate Affairs for
Railtrack Group and Scottish
Power plc. Sue has an MBA
from Heriot-Watt University.
Current appointments:
None.
Committees:
Member of the Remuneration
Committee.
Mathew Dunn
Chief Financial Officer
Joanne Averiss
Non-Executive Director
Mathew joined the business in
September 2015 and was
appointed a director on 25
November 2015. He is responsible
for Finance, Legal, Estates, Risk
Management, and IT.
Skills, competence and
experience:
Prior to joining Britvic, Mathew
was at SABMiller PLC where he
was CFO of South African
Breweries Ltd, based in South
Africa since 2014. Mathew first
joined SABMiller in 2002 where
he held various financial
planning and management,
as well as leadership positions
before joining EMI Music Ltd as
CFO of their Global Catalogue
division in 2009. He returned to
SABMiller in 2010 as CFO, Asia
(based in China) a role which he
held until his 2014 move to
South Africa.
Current appointments:
None.
Joanne Averiss was appointed
a Non-Executive Director on
18 November 2005 and is the
Pepsi Group Nominee Director.
Skills, competence and
experience:
Joanne has gained considerable
knowledge and experience of
legal and regulatory matters
through her role at Pepsi Group.
She 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 and Sub
Saharan Africa with legal
responsibility for all of the Pepsi
Group’s business units within
Europe and Sub Saharan Africa.
Current appointments:
Trustee and Chair of the Mesen
Educational Trust.
Committees:
None.
Britvic plc Annual Report 2016
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Governance
Executive team
Simon Litherland
Chief Executive Officer
Jean-Luc Tivolle
Managing Director, France
See full biography on page 37.
Mathew Dunn
Chief Financial Officer
See full biography on page 37.
Jean-Luc Tivolle was appointed
Managing Director of Britvic
France 2010, after 14 years
as Vice-Chairman of Fruité
Entreprises SAS, which was
acquired by Britvic at that time.
Prior to this, he held senior roles
in Tetra Pak and a variety of
positions at Chocolat Poulain
(Cadbury Schweppes Group).
João Caetano de
Mello Neto
Managing Director, Ebba,
Brazil
João Caetano de Mello Neto
joined Britvic following the
acquisition of Ebba on 30
September 2015. He has over
30 years of executive
management experience in
the consumer goods industry.
Previously, João Caetano worked
for Cia. Müller de Bebidas
(Caninha 51) where he spent
14 years and acted as Chief
Executive Officer for 7 of those
years. He then worked for J.
Macedo for 7 years as Chief
Executive Officer of Hidracor
before moving to Ebba.
Doug Frost
Chief People Officer
Clive Hooper
Chief Supply Chain Officer
Doug Frost was appointed
Human Resources Director in
2004 and became Chief People
Officer in October 2016. Doug
previously worked for 15 years
with Mars Incorporated in
positions in manufacturing,
sales and human resources.
He started his career in the UK,
then worked across several
continental European markets
and latterly spent several years
in Latin America.
Clive was appointed Chief
Supply Chain Officer in October
2016 having joined the business
in 2006 as Production Director.
Clive has responsibility for
production, procurement, logistics,
warehousing, technical and
quality, safety and environment
across Britvic sites. Prior to
joining Britvic, Clive has held
senior management, production
and planning roles at Greencore,
Procter & Gamble and CeDo.
Clive has a BEng in Engineering
from the Royal Naval
Engineering College.
38
Britvic plc Annual Report 2016
Governance
Left to right back row:
Jean-Luc Tivolle,
João Caetano de
Mello Neto,
Doug Frost,
Clive Hooper,
Paul Graham,
Mathew Dunn,
Hessel de Jong
Left to right front row:
Simon Litherland,
Matt Barwell,
Kevin Donnelly,
Clare Thomas
Matt Barwell
Chief Marketing Officer
Paul Graham
Managing Director, GB
Matt is responsible for Britvic’s
global marketing, innovation and
sustainability strategies. He
joined Britvic from Diageo in
2014 where he held a number
of senior positions over 15 years
including Marketing and
Innovation Director, Africa. Matt
started his career with Mars
where he worked for ten years
in both the confectionary and
pet food businesses. Matt is a
Fellow of The Marketing Society.
Paul was appointed GB
Managing Director on 13 April
2015 having joined the business
in September 2012 as GB
General Manager. Paul is also
a member of the Executive
Council of The British Soft
Drinks Association. Before
joining Britvic, he worked in
a range of commercial roles
for companies including Mars
Confectionery and United
Biscuits. Paul has a BSc in
Management Sciences from
the University of Manchester.
Clare Thomas
General Counsel and
Company Secretary
Clare Thomas joined the group as
General Counsel and Company
Secretary in September 2013
and has responsibility for the
legal, internal audit and risk,
company secretarial and estates
teams. Clare has a corporate
and commercial legal background,
and prior to joining Britvic spent
15 years as a corporate / M&A
lawyer at law firm Addleshaw
Goddard LLP, including six years
as a partner, with a particular
focus on FMCG clients.
Kevin Donnelly
Managing Director, Ireland
Hessel De Jong
Managing Director, International
Kevin joined Britvic Ireland in
September 2008 as Marketing
Director and was appointed
Country Director in June 2013.
He has over 25 years’
experience in sales, marketing
and general management in
FMCG companies, including
Unilever and Dairygold. Kevin
holds a First Class Honours
Degree in Marketing from Trinity
College Dublin and a Post
Graduate Diploma in Digital
Marketing.
Hessel joined Britvic on 28
September 2015 as Managing
Director, International and he
has over 20 years of
management experience in
international FMCG.
Prior to joining Britvic, Hessel
worked as an advisor to a
number of private equity
companies, including
Blackstone and Bencis Capital
Partners. From 2008 through
2014, he was Managing
Director of the Dutch and
Benelux operations of the
Coca-Cola Company. Before
2008, Hessel held various
regional and global leadership
positions at Heineken and SCA
Group in Europe and Asia.
Hessel is based in Amsterdam
and holds a Master of Business
Administration from INSEAD
and a Bachelor of Business
Administration from Nyenrode
University.
Britvic plc Annual Report 2016
39
Compliance with The UK Corporate Governance CodeThe board supports the principles laid down in The UK Corporate Governance Code as issued by the Financial Reporting Council in September 2014, which applies to financial years beginning on or after 1 October 2014 (‘the Code’) (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. Throughout the financial year ended 2 October 2016 and to the date of this report, we have complied with the provisions set out in the Code with the exception of the provisions below:Code Provision B.1.2For a short period following the AGM on 31 January 2016 until 29 February 2016 when Euan Sutherland and Sue Clark were appointed as directors, the composition of the Board was temporarily imbalanced in terms of independence with Bob Ivell reaching his nine years tenure and remaining on the Board until Euan and Sue had been appointed. Code Provision B.6.2The last externally facilitated Board evaluation was carried out during July – September 2013. The Board agreed that following the significant changes to the Board over the past year, that there would be more value in delaying the externally facilitated evaluation during 2017. Further details are set out on page 46 of this report.LeadershipThe boardThe board of directors currently has nine members, comprising the Chairman, Chief Executive Officer, Chief Financial Officer, five independent Non-Executive Directors and the PepsiCo nominated Non-Executive Director. The biographical details of the board members are set out on pages 36 and 37. All of the directors bring strong judgement to the board’s deliberations. They have all occupied, or occupy, senior positions in UK and/or international companies (including listed companies) and have substantial experience across a range of businesses. Other than their fees, which are disclosed on page 69, 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. The role of the boardThe board is responsible for the long term success of the group, corporate governance, strategy, risk management and financial performance. The board normally meets at least 8 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 performance 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 of the annual budget. The business reports monthly on its performance against its agreed budget. The board receives a monthly update on performance and reviews any significant variances at each of its meetings. All major investment decisions are usually subject to post-completion reviews. At least one of the board’s regular meetings every year is devoted to reviewing and agreeing the group’s long-term strategy.Matters reserved for the boardThe board provides strong and effective leadership within a framework of prudent and effective controls, and in accordance with the Code provisions there is a formal schedule of matters specifically reserved for board decision which defines the board from sub-committees and management. This clear definition not only compliments and strengthens the company’s decisions, but builds the foundations of a solid business. Although there is a standard agenda of items, these are regularly reviewed to ensure that the board provides continual effective leadership and drive towards the group’s strategic aims. Matters which the board consider suitable for delegation are contained in the terms of reference of its committees which, in line with the Code provisions, can be found on the company’s website at http://www.britvic.com/investor-centre/corporate-governanceRe-election of directorsThe 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 (or election following first appointment) at each annual general meeting (‘AGM’).Board committees The board is assisted by four board committees (as shown in the governance framework diagram below) 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 http://www.britvic.com/investor-centre/corporate-governance40 Britvic plc Annual Report 2016Governance Board of Directors continued177534_BRITVIC_TEXT-p033-088.indd 4013/12/2016 19:05 ShareholdersCompany SecretaryClare Thomas is the Company Secretary and her biography can be found on page 39. Her 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 Chairman in ensuring that the directors have suitably tailored and detailed induction and on-going professional development programmes. The role of the Chairman and Chief Executive OfficerThe 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 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 the agreed strategy. He is supported by the other members of his 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 to evaluate their performance and the Non-Executive Directors met without the Chairman present, to evaluate his performance. Governance FrameworkBoard2,787 Shareholders as at 2 October 2016Chairman Non-Executive DirectorsExecutive Directors Chief Executive OfficerChief Financial OfficerChief Marketing OfficerChief People OfficerChief Supply Chain OfficerMD IrelandMD BrazilMD GBMD FranceMD InternationalGeneral Counsel & Company SecretaryExecutive TeamNomination CommitteeChairman 3 Non-Executive DirectorsPrimary responsibility for succession planning, board/director selection and board compositionCommittee Report pages 47 and 49Audit Committee4 Non-Executive DirectorsProvides oversight and governance over the group’s annual reporting, internal controls, risk management and relationship with external auditorsCommittee Report pages 50 to 55Remuneration Committee4 Non-Executive Directors ChairmanAgrees remuneration policy and sets individual compensation levels for directors and senior managementCommittee and Directors’ Remuneration Reports pages 58 to 84 Disclosure CommitteeChairman CEO and CFO IR Director Director of Corporate Affairs Company SecretaryProvides assistance with disclosures required under the Listing Rules and to help ensure that disclosure controls and procedures are properly implemented41 Britvic plc Annual Report 2016Governance Board of Directors continued177534_BRITVIC_TEXT-p033-088.indd 4113/12/2016 19:05 Governance Board of Directors continued
Board activities during the year
During the year, consideration and decisions taken by the board have included:
Leadership
& People
• Reviewed the
development of people
and potential talent in
Britvic including
succession planning
for senior leaders
• Discussed the
composition of the
Board and its
Committees, including
succession planning
• Visit to Amsterdam
office & local trade
visits
Financial
Performance
Internal controls
& risk management
Strategy
• Received regular
performance reports
from the CFO
• Approved annual
budget
• Approved half year
and full year results
including dividend
recommendations
and announcements
• Approved interim
management
statements
• Approved annual
report including going
concern review and
viability statement
• Approved long-term
financing plans
• Received regular
updates on risk and
reviewed key risks and
mitigation plans
• Approved insurance
renewal approach and
strategy
• Received regular
updates on quality,
health & safety &
environment
• Received regular
M&A updates
• Review of the
company’s strategy
over a 2 day off-site
meeting
• Review and approval
of investments relating
to the GB supply
chain transformation
programme
• Received updates
on Brexit implications,
innovation and the
Brazil business
• ‘Deep dives’ of
specific UK brands,
the International &
US businesses
Governance
& stakeholders
• Received regular
meeting reports
from each of the
Committee Chairs
• Reviewed annual
fee increases for
the Non-Executive
Directors
• Reviewed
developments in
corporate governance,
legal and regulatory
updates
• Received investor
relations reports and
shareholder feedback
• Received updates
on sugar tax
Board meetings and attendance
The board met nine times during the year in accordance with its scheduled meeting calendar, excluding ad-hoc conference calls and
committee meetings to approve the financial results. Additional meetings were also convened to deal with key matters requiring the
board’s attention and major projects, as required. The board meetings were held at the head office in Hemel Hempstead, except two
meetings which were held off-site in London and Amsterdam. The attendance by each board member is shown below:
Membership and attendance
Number of
Board
meetings
Number of
Audit
Committee
meetings
Number of
Remuneration
Committee
meetings
Number of
Nomination
Committee
meetings
Gerald Corbett
Simon Litherland
Mathew Dunn1
Joanne Averiss2
Sue Clark3
John Daly
Ben Gordon
Ian McHoul
Euan Sutherland3
John Gibney4
Bob Ivell5
9/9
9/9
7/7
8/9
5/5
9/9
9/9
9/9
5/5
3/3
4/4
4/4
2/2
2/2
4/4
4/4
4/4
2/2
2/2
2/2
2/2
1/2
3/3
3/3
3/3
2/2
1/1
Notes:
1. Meetings attended by Mathew Dunn following his appointment on 25 November 2015
2. Joanne Averiss was unable to attend a meeting due to a pre-existing business commitment
3. Meetings attended by Sue Clark and Euan Sutherland following their appointments on 29 February 2016.
4. Meetings attended by John Gibney until his date of resignation, 27 January 2016.
5. Meetings attended by Bob Ivell up until he stepped down from the Board on 1 March 2016.
Senior independent director
The Senior Independent Director is John Daly who 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. His
biography can be found on page 36.
42
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Tenure of Non-Executive DirectorsThe 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.Date first elected by shareholdersYears from first election to 2017 AGMConsidered to be independent by the boardGerald CorbettJanuary 200710n/a1Joanne AverissJanuary 200710No2Sue Clark--Yes3John DalyJanuary 20161YesBen GordonJanuary 20098YesIan McHoulJanuary 20152YesEuan Sutherland--Yes3 Notes:1 The company considers that, on appointment, the Chairman was independent for the purposes of provision A.3.1 of the Code. 2. Joanne Averiss is Senior Vice President Law, General Counsel, Europe of Pepsico and is the PepsiCo Non-Executive Director. Accordingly, she is not considered to be independent by the board. 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. With the exception of 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. 3. Appointed on 29 February 2016 and will stand for election at the AGM. GENDERCOMPOSITION OF THE BOARD TENURE OF BOARD Executives Non-executives Chair More than 3 years Less than 1 year 1 - 3 years Female Male 11%22%22%78%67%Number of directorsBOARD SKILLS AND EXPERIENCERetail & marketing ConsumerInternationalFinance/investment024681022%45%33%43 Britvic plc Annual Report 2016Governance Board of Directors continued177534_BRITVIC_TEXT-p033-088.indd 4313/12/2016 19:05 Service contracts and letters of appointmentDetails 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 75. These documents are available for inspection at the registered office of the company during normal business hours and at the AGM.Independent adviceThe 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.Indemnification of directorsIn 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. Risk management and internal control The board has overall responsibility for monitoring the group’s system of internal control and risk management and for carrying out a review of 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;• Monitoring and maintenance of insurance cover to insure all risk areas of the group;• 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• The principal risks facing the business ensuring that the significant risks faced by the group are being identified, evaluated and appropriately managed, giving consideration to the balance of risk, cost and opportunity. The board is supported by the Audit Committee in reviewing the effectiveness of the group’s risk process and internal control systems. 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.Management, with the assistance of the finance function, is responsible for the appropriate maintenance of financial records and processes. This ensures that 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.44 Britvic plc Annual Report 2016Governance Board of Directors continued177534_BRITVIC_TEXT-p033-088.indd 4413/12/2016 19:05 Governance Board of Directors continued
Effectiveness
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 an established 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. The
Nomination Committee engaged with Spencer Stuart during the
year for the purpose of recruiting Mathew Dunn, Sue Clark and
Euan Sutherland. As Gerald Corbett serves on the Advisory
Committee of Spencer Stuart, it was agreed that he should
absent himself from discussions relating to the engagement of
Spencer Stuart and from discussions relating to their
appointments. John Daly, the Senior Independent Director
chaired the Nomination Committee which made the appointments.
John Daly serves on the Board of Wolsely plc with Tessa Bamford
who is a consultant with Spencer Stuart. Both John Daly’s and
Gerald Corbett’s external appointments were considered as part
of the annual review and renewed for a period of one year.
Induction and development
The Chairman 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. 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 group. To strengthen the directors’
knowledge and understanding of the Group, board meetings
regularly include updates and briefings on specific areas of the
group’s activities and board meetings, where possible, are held
offsite at other Britvic sites.
Following Sue Clark and Euan Sutherland’s appointment to the
board, the Company Secretary assisted the Chairman in organising
an appropriate induction programmes for both directors. The
programme was tailored according to their background, experience
and the requirements of their role, noting their appointments as
members of the Remuneration and Audit Committees respectively.
The table below details the highlights of their induction
programme to date:
Type of induction activity
Face to face meetings
• Meetings with Chairman, CEO and CFO to understand the culture and values, strategy,
recent developments, overview of financials (including last year’s report and accounts) and key
challenges and opportunities
• Meetings with members of the Executive team to gain insight of their role and responsibilities,
the structure of their teams and current challenges and opportunities
Site visits
• Visits to our Leeds and Rugby sites to further their knowledge of operations
Committee inductions
• To understand Committee remit and overview of key issues/policies/developments
• Meeting with Chair of Committee and advisers to Committee
Investor relations
and media views
Governance, risk
management and
litigation
• To gain an overview of investor relations activities, market facing issues and investor concerns
• Matters reserved for the Board and Statement of Authorities, overview of Board procedures
and schedule of future meetings
• Directors’ duties and Board procedures for conflicts of interest and share dealing
• Key governance issues affecting the company
• Principal risk register and risk management approach
• Overview of material litigation
• Directors & Officers insurance policy
Use of Board portal
• To gain access to key materials and policies allowing each director to further their knowledge of
the work of the Board and annual planning cycles, minutes from previous meetings and other
relevant information
In terms of on-going development for the other directors, John Daly was appointed Chair of the Remuneration Committee in January
2016 and has been supported by the Remuneration Committee’s advisers to further understand remuneration related hot topics,
investor views on remuneration and market trends.
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Board evaluationEach year the performance of the Board, its Committees and directors is evaluated. The last externally facilitated evaluation was carried out during July – September 2013. The Board agreed that following the significant changes to the Board over the past year that there would be more value in delaying the externally facilitated evaluation to 2017. This year, an internal evaluation process was carried out by way of a questionnaire based on the performance of the Board and its Committees and that of the Chairman. The results of the evaluation were presented to the Board and confirmed that the Board and its Committees were operating effectively. 2015 Evaluation RecommendationsActions delivered Continue to focus on shorter-term succession planning and for a successor to the ChairmanBob Ivell and Silvia Lagnado’s succession plans were completed in February 2016 with the appointment of Sue Clark and Euan Sutherland. Given the year of change on the Board, the Chairman has agreed to remain on the Board until the new board has settledImplement a deeper succession plan and focus on talent managementA talent review is brought to the Board on an annual basis to focus on the pipeline of talent for the leadership teamIncrease the board’s visibility to external investor concerns and updatesThe Board portal is used to ensure directors have access to the latest sector and company related broker notesContinue with opportunities for the Non-Executive Directors to visit other sites and to meet informally outside of board meetingsThe Board have visited the Amsterdam office and the Rugby factory during the year. Meetings are scheduled to take place off-site with board dinners to enable discussion outside of the boardroomFocus on strategy and risk managementIn light of the increased governance focus on risk, the board’s agenda has been re-shaped with risk and strategy appearing as regular features. During the year, an additional meeting was held off-site with an exclusive focus on strategic opportunities and challenges for the company 2016 EvaluationRecommendations for 2016-17• Continue to embed the newer members of the Board through informal engagement • Continued focus on strategic priorities with regular ‘deep dives’• Develop content and format of information for the Board• Develop Board succession plans46 Britvic plc Annual Report 2016Governance Board of directors continued177534_BRITVIC_TEXT-p033-088.indd 4613/12/2016 19:06 Governance
Nomination
committee
Gerald Corbett
Nomination Committee Chairman
On behalf of the Nomination Committee,
I am pleased to present its report for
the year ended 2 October 2016. It has
been an eventful year for the Committee
with a focus on succession planning.
The Committee is responsible for
considering and recommending to the
board candidates 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. This report describes how the
Committee has carried out its
responsibilities during the year.
Committee members
Gerald Corbett (Chairman)
John Daly
Bob Ivell1
Ben Gordon
Ian McHoul
1 Bob Ivell stepped down from the Board on 1 March 2016
The Committee comprises independent Non-Executive Directors,
John Daly, Ben Gordon, Ian McHoul and myself as Chairman.
The Chief Executive Officer also attends by invitation. The
Committee meets as necessary and at least twice a year.
Main activities during the year
The Committee considered and has made recommendations
to the board in respect of:
• The appointment of Mathew Dunn, Chief Financial Officer,
who succeeded John Gibney and was appointed to the board
on 25 November 2015;
• The search for a successor to Silvia Lagnado, Non-Executive
Director, who resigned from the board on 31 July 2015 and
subsequent appointments of Sue Clark and Euan Sutherland
on 29 February 2016;
• A review of the board and committee membership following
the changes to the composition of the board;
• The appointment of Hessel De Jong, Managing Director,
International, to succeed Simon Stewart who resigned on
30 October 2015;
• Succession planning for the Chairman;
• A review of the findings of the 2015/16 board evaluation
(for more information see page 46)
• Annual review of Directors’ potential conflicts of interest.
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Governance Nomination committee continued
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 a
Chairman, the Senior Independent Director will chair the Committee
and lead the recruitment process. When the Committee has
found a suitable candidate, the Chairman of the Committee will
make a proposal to the whole board, which retains responsibility
for all such appointments. The Chairman of the Committee also
provides a report of Committee meetings to the board.
Appointment processes
The recruitment procedure described above was undertaken
during the year for the appointments of Mathew Dunn, Sue Clark
and Euan Sutherland. During the year, the Committee engaged
Spencer Stuart to assist with the recruitment process. Gerald
Corbett serves on the Advisory Committee of Spencer Stuart and
accordingly it was agreed that Gerald should absent himself from
discussions relating to the engagement of Spencer Stuart and
from discussions relating to their appointments. John Daly, the
Senior Independent Director chaired the Nomination Committee
which made the appointments. John Daly shares a directorship
link with Tessa Bamford at Wolseley plc, who is a consultant at
Spencer Stuart. The Committee agreed that whilst a potential
conflict, this would not preclude John from acting within the best
interests of the company.
Spencer Stuart held no other relations with the company, and the
following process was undertaken:
• Role profiles were prepared against which potential candidates
were considered;
• Interviews arranged between Chairman and an initial list of
candidates, from which a shortlist of preferred candidates was
selected;
• Other Non-Executive and Executive board members
interviewed the shortlist of candidates and provided feedback
to the Committee;
• The Committee considered these views in its deliberations
before recommending a preferred candidate to the Board; and
• The Board approved the appointment as recommended.
Succession planning
Succession planning has continued to be an area of focus of the
Committee during the year. This has included the succession of
longer standing members of the board, in particular, Bob Ivell
who stepped down from the board on 1 March 2016 having
reached his ninth year of tenure and initial conversations around
succession planning for the role of the Chairman. It was agreed
that John Daly would succeed Bob Ivell as Senior Independent
Director and Chairman of the Remuneration Committee with
effect from the AGM in January 2016. During the year, the
Committee were successful in finding a successor for Silvia
Lagnado, Non-Executive Director, through the appointment of
Euan Sutherland and Sue Clark as an additional independent
Non-Executive Director to ensure that it maintains the appropriate
balance of independent versus non-independent representation
on the board. The Committee recommended that Euan
Sutherland join the Audit Committee and Sue Clark joined the
Remuneration Committee.
The Committee also made a recommendation to the board
which resulted in the appointment of Hessel de Jong as
successor to Simon Stewart, International Managing Director.
In terms of succession planning for the Chairman’s role,
recognising that the Board has undergone a number of changes
during the year with the appointment of a new Chief Financial
Officer, a new Senior Independent Director and two new
non-executive directors, it is widely recognised as good practice
to avoid sequencing of changes of key roles on the Board.
Therefore, the Chairman has agreed to remain until the current
composition is settled. To ensure stability in leadership, on-going
discussions have taken place during the year to understand the
most appropriate time for departure. The formal process to
search for a successor to replace the Chairman will commence
during the next financial year (year ending 1 October 2017).
The Board acknowledges that Ben Gordon will reach his ninth year
of tenure in January 2018, appropriate succession processes are
in place and will be discussed during the coming year.
Diversity
The Committee monitors diversity on behalf of the board. At Britvic,
diversity is a wider topic than simply gender and the board
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.
There are a number of women in senior management roles. The
directors’ view, however, remains that we do not feel in a position
to publish a target of the percentage of women on the board.
Further details of the company’s statistics on gender diversity
may be found on page 25 of the Strategic Report.
48
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Governance Nomination committee continued
Board evaluation
Details of the review of the board and its committees, including
this committee and the effectiveness of the Chairman,
undertaken during the year can be found on page 46.
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, with the exception of Joanne
Averiss (PepsiCo nominated Director) in accordance with the
Code and all Directors should stand for re-election (or election
in the case of Sue Clark and Euan Sutherland) at the AGM.
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 Strategic
Report set out on pages 19 to 31 details the financial performance
of the company as well as setting out the risks it faces.
Conflicts of interest
As referred to on page 45, the Board operates a formal policy to
identify and where appropriate, manage any potential conflicts of
interest that Directors may have. It is the role of the Committee to
monitor the situation and determine actions to address any
potential or actual conflicts that may arise.
Private Investors
We are keen to hear the views of our private shareholders and
we encourage them to use our shareholder mailbox (investors@
britvic.com) for detailed inquiries and to access our website for
our company reports and business information. Specific inquiries
to the Company Secretary may be sent to the Secretariat
mailbox (company.secretariat@britvic.com) 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 2017 AGM in January and to updating them
on our business developments.
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On behalf of the Audit Committee, I am pleased to present its report for the year ended 2 October 2016. It has been another busy year for the Committee and the purpose of this report is to describe how the Committee has carried out its responsibilities during the year. During the year, we welcomed Euan Sutherland as a member of the Committee and he is already proving to be a valued member. As disclosed in the 2015 annual report, we indicated that we intended to carry out a tender for external audit services. Following a robust and comprehensive process, we concluded that it was in the best interests’ of the company to retain Ernst & Young LLP, our incumbent auditors, subject to approval at the AGM in 2017. Further details of the process and our approach to the tender can be found on page 55.Following changes to The UK Corporate Governance Code in 2014 (the ‘Code’), the Board is now required to include a statement on the group’s longer term viability. We have played a supporting role in enabling the Board to have confidence in making this statement through preparing and assessing key assumptions and sensitivities. In addition, the Committee has placed further emphasis on our assessment of principal risks facing the company including our controls for mitigating these risks and how effective these controls are. We continue to consider and challenge the integrity of the group’s financial statements, significant areas of judgement and other relevant financial information as appropriate. The Committee confirms that during the year the group has complied with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, as published by the UK Competition and Markets Authority.Role of the CommitteeThe Committee’s role is to ensure appropriate oversight and review of the presentation and integrity of the financial reporting and statements, internal control and risk management, internal audit programmes, changes in regulatory requirements, and the independence and appointment of external auditors. The terms of reference for the Audit Committee can be found on our website at http://britvic.com/investors/corporate-governance/corporate-governance.To enable the Committee to discharge its responsibilities, discussions on a broad range of topics and reports were held with management, internal audit and the external auditors throughout the year. This provided us with insight into the progress towards the company’s strategic goals and the challenges and risks and how they are being managed. The activities of the Committee can be found below on page 52.The Committee has an open dialogue throughout the year with the Director of Audit and Risk and the external auditors to raise challenges and questions to support understanding whilst sharing experience and an independent perspective.Audit CommitteeIan McHoul Audit Committee Chairman50 Britvic plc Annual Report 2016Governance177534_BRITVIC_TEXT-p033-088.indd 5013/12/2016 19:06 making life’s everyday moments more enjoyableThe most significant matters discussed over the course of the year are described in the report below. 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 group’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 activities and performance of the internal audit team;• Reviewing risk management processes and considering the adequacy of the actions being taken to identify risks and reduce the exposure of the group to those risks;• Overseeing the relationship with the external auditors, reviewing their activities and performance and advising the board on their appointment and remuneration; including an assessment of their effectiveness, independence and objectivity;• Review of the effectiveness of the Committee as required under the Code; and• 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.Meetings and Composition of the CommitteeThe Committee comprises independent Non-Executive Directors, John Daly, Ben Gordon, Euan Sutherland and the Chairman of the Committee is Ian McHoul. The board is satisfied that Ian has recent and relevant financial experience as required by the Code. The Committee meets three times a year; in November and May 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, the plan for the year ahead and to consider any emerging issues. At each meeting the performance and findings of the internal audit team are reviewed and the most recent key risks are considered. The attendance of the Committee for each meeting during the year can be found on page 42. Attendees at each of the meetings are the Committee’s members as well as, by invitation, the Chief Executive Officer, the Chief Financial Officer, Director of Finance Controls & Governance, the General Counsel, the Director of Audit and Risk and the external auditor, Ernst and Young LLP. Each meeting allows time for the Committee to speak with key people without the presence of the others, in particular the external auditor and the Director 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 group’s internal audit function and manages the relationship with the external auditor. The Committee ensures that the group has appropriate provision for confidential and impartial whistleblowing process in line with good practice. Committee meetings usually take place prior to a board meeting. The Chairman of the Committee subsequently reports on the activities of the Committee and matters of particular relevance to the board.51 Britvic plc Annual Report 2016Governance Audit Committee continued177534_BRITVIC_TEXT-p033-088.indd 5113/12/2016 19:06 Governance Audit Committee continued
The Committee undertook the following activities during the course of the year to discharge its responsibilities:
November
• Review of financial statements including changes to accounting policies, key issues and judgments and assessment that the
statements are fair, balanced and understandable
• Review of the CFO report on accounting issues and judgements
• Review findings of the external audit including any accounting and audit adjustments
• Effectiveness of external auditors including audit process, independence and objectivity
• Recommend the appointment of external auditors
• Internal audit update, including review of risk management processes
• Review year-end risk and internal controls
• Cyber security update
May
• Review of the CFO report on accounting issues and judgements
• Review of interim financial report including any changes to accounting policies
• Review of findings from the external auditors half year review, including any adjustments
• Review of the annual external audit plan including scope of the engagement for the year
• Internal audit & risk update
• Viability statement update
• Review of risk management processes
• Review of treasury policies
• Cyber security update
• External audit tender update
September
• Key accounting judgements for the full year financial statements and any potential issues
• Internal audit & risk update including approval of audit plan for the next financial year, significant audit findings and progress
against previous outstanding audit actions
• Review status of risk management processes including a review of viability statement work
In addition to the formal schedule of Committee meetings, the Committee held meetings to discuss the approach to the tender for
external audit services and further information on this key activity can be found on page 55.
Fair, balanced and understandable assessment
At the request of the board, the Committee considered whether the 2016 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 position and
performance, business model and strategy. To enable the board to have confidence in making this statement, the Committee
considered the elements in the table below:
FAIR
BALANCED
UNDERSTANDABLE
Is the whole story being presented?
Has any sensitive material been omitted
that should have been included?
Is there a good level of consistency
between the narrative in the front half
and the financial reporting in the back
of the report?
Is there a clear and understandable
framework to the report?
Are the key messages in the narrative
reflected in the financial reporting?
Is the annual report considered a
document fit for shareholders?
Are the important messages highlighted
appropriately throughout the document?
Are the KPI’s disclosed at an appropriate
level based on the financial reporting?
Are statutory and adjusted measures
explained clearly with appropriate
prominence?
Is the layout clear with good linkage
throughout in a manner which reflects
the whole story?
Are the key judgments referred to in the
narrative reporting and the significant
issues reported in the Audit Committee
report consistent with the disclosures of
key estimation uncertainties and critical
judgements set out in the financial
statements?
How do they compare with the risks that
the auditors plan to include with their
report?
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To form its opinion, the Committee reflected on the information
and reporting it received from management and the external auditor
and the discussions that took place during the year. Key
considerations for the Committee in 2016 include the following:
• The financial statements comply with all applicable financial
reporting standards and any other required regulations;
• 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;
• The disclosures provided are clear, and as required by financial
reporting standards;
• Reporting and commentary provides a fair and balanced view
of group performance; and
• Any correspondence from regulators received in relation to our
financial reporting are considered and disclosures are updated
if required.
To ensure these considerations are met, reviews take place based
on information provided by the Chief Financial Officer and his
team at each Committee meeting as well as reports from the
external auditor based on the outcomes of their half year review
and annual audit.
Financial statements and significant issues
Significant financial and reporting issues considered by the Committee in relation to the 2016 financial statements, and how these
were addressed are as follows:
Revenue
recognition
There has been no change in the group approach to revenue recognition in 2016, however
it remains a key area of focus. The control, accounting and accuracy of long term discounts,
promotional discounts and account development funds is reviewed throughout the year to ensure
it remains consistent and IFRS compliant.
Developments in the market have also been discussed with the Committee, where continued
challenging conditions increase the focus of our customers on rebates and promotional spend.
The impact of this is continually monitored by management and reviewed with the external auditor
to ensure that policy and practice remains consistent across the group, with robust controls in place.
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 market measures and financial budgets prepared by senior management
and approved by the board of directors. The assessment models were reviewed as part of the
audit, for which the external auditor, provided reporting to the Committee.
Acquisition accounting
The Committee has also considered management reports on potential triggers of impairment and
the outcome of sensitivity testing for all areas of the group including France, Ireland and Brazil and
also the potential reversal of prior year impairments.
Despite the impact of Brexit and uncertain macro economic conditions in Brazil, the Committee was
satisfied that there is no requirement or impairment or reversal of impairments made in prior years.
Following the acquisition of Ebba in 2016, management has calculated the purchase price allocation
and resulting goodwill to be accounted for in the group accounts. The Committee has reviewed
and approved the approach to these calculations, including areas of judgement and potential risks.
In addition, the Committee has discussed the integration approach, progress and associated one-
off costs and is satisfied that the plans, execution and outcome are proportionate to the investment
and risk associated with the acquisition.
Exceptional & other items The classification of exceptional items is defined by a group accounting policy, as approved by the
Committee, and includes items of significant income and expense which due to their size, nature
or frequency merit separate presentation to allow shareholders to understand better the elements
of financial performance in the year. Management have reviewed items to be included with the
Committee throughout the year to confirm appropriateness.
Derivative and hedging
activities
The group has derivative instruments to which hedge accounting is applied and which swap
principal and interest of US Private Placement notes. The Committee reviewed reporting on
comparisons of valuations to external confirmations and assessment of hedge effectiveness
to be satisfied with the quality of financial statement disclosures.
Taxation
Any uncertain tax positions within the group were reviewed to ensure that the balance sheet
provisions are appropriate and the group effective tax rate is calculated appropriately.
Defined benefit pension
scheme valuation
The Committee reviewed benchmarks and assumptions that are provided by the group’s actuaries
and used to value the pension liabilities for the four 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 conclusions reported to the Committee.
The triennial valuation of the GB scheme as at 31 March 2016 is currently underway and is
expected to be complete by 31 March 2017. The Committee has been updated by management
on current progress and will receive further reporting upon completion of the valuation.
The Committee subsequently recommended to the Board that, taken as a whole, the Company’s 2016 Annual Report is fair, balanced
and understandable and that it provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy.
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Governance Audit Committee continued
Internal audit and control
The Internal Audit function carries out work across the Company,
acting as a third line of defence. In September, the Committee
agreed the audit plan to be undertaken by the internal audit team
prior to the start of the year. The audit plan coverage is based on
risk, strategic priorities and consideration of the strength of the
control environment.
The Committee receives a report at each of the meetings and
reviews the results of the Internal Audit reports, looking in detail
at any reports where processes and controls require
improvement or any reports that are particularly pertinent to
delivery of strategic objectives or priorities. For example, a focus
of the Internal Audit work was a review of the Ebba acquisition
which was reported to the Committee. As a result the Committee
were able to understand the development of the controls
framework in Ebba. Updates are received on progress made
against actions agreed from previous audits and an update on
the overall control environment progress related to previous audit
areas.
Additional areas were added to the audit 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.
Detailed updates on specific areas are provided at the request of
the Committee.
Internal control
The board is responsible for reviewing the adequacy and
effectiveness of the risk management framework and the system
of internal controls. The board has delegated responsibility for
this review to the Committee. Management in each business unit
are responsible for establishing and maintaining adequate internal
controls. Functions such as finance, legal, procurement and
quality are responsible for setting out the Company policies to be
followed by the business units. The Committee, through the Internal
Audit function reviews the adequacy and effectiveness of internal
control procedures and identifies any weaknesses and ensures
these are addressed within agreed timelines.
The system of internal control has been designed to manage
rather than eliminate material risks to the achievement of our
strategic and business objectives and can only provide
reasonable, and not absolute assurance against material
misstatement of loss.
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. The risk management process is
continually improving, in particular in relation to embedding
across new and developing areas of the business. The Committee
believe that the improvements will continue to strengthen the way
that the business understands and manages risk.
Risk management
During the year, the Committee reviewed the Financial Reporting
Council changes to the Code and considered how these changes
would impact risk management processes and the work that
needed to be carried out to enable the Board to make the viability
statement. The risk management process is reviewed at each
meeting by the Committee to ensure that it is set up to deliver
appropriate risk management across the group. A particular
focus during this year has been on defining the group’s risk
appetite. This is an expression of the amount and types of risk
that the group is willing to take to achieve its strategic and
operational objectives. The Board has agreed these statements
which are now being used in decision making processes across
the group to define and validate the mitigating activities required
to manage our risks. Additionally during the year the risk
management process was rolled out to Ebba.
A summary of the key risks and uncertainties to which the
business is exposed to can be found on pages 28 and 31.
Viability statement
The Committee reviewed management’s work in conducting a
robust assessment of those risks which could threaten the
business model and the future viability of the Company was
carried out. This assessment included identifying severe but
plausible scenarios for each of our principal risks as well as
considering interdependencies and scenarios involving multiple
risks. Additionally, reverse stress testing was carried out, allowing
the Committee to assess the circumstances that would render
the business unable to pay its liabilities as they fall due. To
support the final conclusion on viability, the assessment also took
into account the mitigations available to the Company to protect
against these downside scenarios. Based on this analysis, the
Committee recommended to the Board that it could approve and
make the Viability Statement on page 32.
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 the interim review, their independence and objectivity,
and their reappointment and remuneration. The Chairman of the
Committee has regular contact with the external audit partner
outside of Committee meetings and without the management
of the business present.
The external auditors, Ernst & Young LLP (EY), provided the
Committee with their plan for undertaking the year end audit
which 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. These key areas
were primarily identified as areas of judgement and complexity
and included accounting for discounts, acquisition accounting for
Ebba, exceptional items classification, the carrying value of
goodwill and indefinite lived assets, the accounting for the
group’s derivatives and hedging activities, 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 took the Committee through
at the meeting in November. The findings were reviewed and
discussed in detail by the Committee, particularly in relation to
the areas highlighted above. 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
questioned and challenged the work undertaken, the findings
and the key assumptions made, with particular attention to the
areas of audit risk identified.
54
Britvic plc Annual Report 2016
Governance Audit Committee continued
Tender for external audit services
During the year, the Committee had oversight and responsibility
for carrying out the tender for external audit services. The process
spanned two phases, during which each firm was provided equal
opportunity to engage with management and the Committee and
to review relevant company information. A total of four firms,
including the incumbent auditors, were invited to participate in
the tender. During the first phase, key decision criteria were
agreed and included; partner fit, senior audit team capability,
relevant understanding of the company, commercial insight,
service history, transition approach and fees.
After a number of meetings with management, written proposals
were submitted by each firm followed by presentations to the
Committee. The Committee considered these proposals and
presentations and came to a recommendation, which was
proposed to the board. Following due consideration by the
board, the proposal was approved and a sub-committee was
established to agree the final outcome. The sub-committee
unanimously agreed that EY be re-appointed as the company’s
auditors having taken into account each of the decision criteria
and quality of presentations, subject to shareholder approval at
the AGM.
A description of the process undertaken is depicted below:
Phase 1 – Selection
Invitation to tender
Key criteria decided
Review of company
information
Stakeholder meetings
& presentations
Phase 2 – Shortlist
Written submissions
Presentations to Audit Committee
Audit Committee deliberations
Phase 3 – Recommendation
Audit Committee recommendation
Board forms sub-committee
Sub-committee approves
final decision
Independence and reappointment
The Committee reviews the independence of the auditors
throughout the year. The external auditor is required rotate the
lead audit partner every five years. The current lead auditor
partner began his tenure for the financial year ended 30 September
2013. Based on the Committee’s recommendation, the board is
proposing that EY be reappointed to office at the AGM in January
2017.
Non-audit fees
The group has a policy regarding the provision of non-audit
services by the external auditors which has been reviewed during
the year to take into consideration new regulations on non-audit
services. Any non-audit services provided must be pre-approved
by the Committee unless the activity will have a total value of less
than £5,000 and falls within the allowed services defined by FRC
guidance.
Control over total non-audit fees is also exercised by reviewing
spend on all activities proposed or provided by the external
auditor and we can confirm that we are significantly below a 1:1
ratio in this financial year as disclosed in note 7 in the reports and
accounts, and well within the FRC guidance of 70% cap that will
be required from 2019.
Ian McHoul
Chairman, Audit Committee
Britvic plc Annual Report 2016
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Governance Audit Committee continued
making
life’s
everyday
moments
more
enjoyable
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Governance Audit Committee continued
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Remuneration CommitteeJohn Daly Remuneration Committee ChairmanMeetings and Composition of the CommitteeThe Committee comprises Gerald Corbett, Ben Gordon, Ian McHoul, Sue Clark and myself, as Chairman. The company Chairman and Chief Executive Officer (who may attend by invitation) do not attend meetings when their individual remuneration is discussed. The Committee meets as necessary and 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 yearFull details of the Committee’s responsibilities and of its activities are set out in the Directors’ Remuneration Report on page 67.Committee evaluationThe Committee was included in the board evaluation performed during the year, the details of which can be found on page 46.58 Britvic plc Annual Report 2016Governance177534_BRITVIC_TEXT-p033-088.indd 5813/12/2016 19:06 Governance
Directors’
remuneration
report
Annual Statement from the Chairman of the Remuneration Committee
In my fi rst year as Remuneration Committee Chairman I am pleased to
present the Directors’ Remuneration Report for the year ending 2 October
2016 which has been another strong year for Britvic despite the continuing
sector and economic challenges in our core markets.
I would also like to take this opportunity to thank Bob Ivell for
leading the Committee prior to my appointment earlier in the
year and the other members for welcoming me into my new
role. I am also pleased to welcome Sue Clark who, as a new
member of the Committee, brings with her a wealth of business
experience. I would also like to take this opportunity to say how
pleased the Committee was to continue to receive a very positive
response at the January 2016 AGM with 98.9% votes “For” the
annual report on remuneration. The Committee remains very
mindful of the current focus on executive pay and its implications
across all our stakeholders and so I trust the actions taken
over the course of the year and disclosed below refl ect that
this responsibility is very much at the forefront of the
Committee’s decision making.
The contents of this annual statement provide an overview
of the remuneration outcomes for the period ending on
2 October 2016 and a summary of the business context
in which those outcomes have been determined.
The remainder of the report sets out:
• An ‘at a glance’ summary of the remuneration outcomes for
2015/16 and an overview of how the Remuneration Policy for
Page 61
directors will be implemented in 2016/17.
• The Annual Report on remuneration which is subject to an
advisory shareholder vote at the January 2017 AGM and sets
out the detail of payments made to directors in respect of the
Page 67
year ended 2 October 2016.
• The current Remuneration Policy for directors approved by
shareholders at the Annual General Meeting (AGM) in
January 2015.
Page 76
Executive Director changes
John Gibney stepped down from the board on 27 January 2016
and retired from the company on 5 April 2016. I am delighted to
welcome Mathew Dunn as his successor. Details of John’s
remuneration for the year are set out in this remuneration report.
I can confi rm that the treatment of his remuneration on departure
is in line with the approved Remuneration policy. John has not
received any discretionary payments or payment in lieu of notice
in respect of his retirement from the company.
Full details of Mathew Dunn’s remuneration package were disclosed
in last year’s remuneration report. I can reconfi rm that Mathew’s
remuneration is in line with the approved Remuneration Policy and
Mathew did not receive any buy out awards or one off awards on
his recruitment to the company. The company did provide
Mathew with some support to assist in his relocation from South
Africa to the UK. The intention to do this was disclosed last year
and the details are set out in the following pages.
Business performance and remuneration
outcomes for the year
Whilst the business has faced challenges over the last fi nancial
year the overall performance for the three years ending in
October 2016 has been strong. This has resulted in:
• Annual bonus pay outs for Executive Directors at 80.6% of the
maximum opportunity due to strong performance across all
three fi nancial measures during the year;
• The performance share plan awarded in 2013 will vest at 65.8%
of the maximum opportunity refl ecting sustained long-term
ROIC and relative TSR performance over the last three years.
• The executive share option plan awarded in 2013 will vest at
100% of the maximum opportunity due to strong EPS growth
over the performance period. However due to the recent share
price volatility these vested options currently have no value as the
exercise price is higher than the share price as at the year end.
In line with the remuneration reporting regulations, details of the
performance targets and actual achievement against these are
set out in the Annual Report on Remuneration.
Britvic plc Annual Report 2016
59
Governance Directors’ remuneration report continued
Looking ahead to 2016/17
Our shareholders will be aware that the current and forward
looking customer environment and price deflation in our core
markets present potential challenges to the business. In addition,
we are now dealing with greater economic uncertainty and
unfavourable exchange rate movements following the EU
referendum outcome as well as the UK government’s proposed
sugar tax. In this context and in recognition that salary increases
awarded to the wider workforce have been moderated, the
Committee have determined that no salary increases should be
awarded to the Executive Directors.
In the annual bonus the Committee has introduced an additional
component within the overall 30% revenue weighting. Net
revenue from innovation will have a 10% weight in the annual
bonus for 2016/17 and will sit alongside the total net revenue
measure with a 20% weighting. This is to reflect that net revenue
from innovation is an increasing focus for the business and so the
Committee considered it appropriate to include it as a
component of the annual bonus. The targets set and the
achievement against them for the 2016/17 annual bonus
measures will be disclosed in next year’s remuneration report.
The Committee is also mindful that our medium term growth
expectations and consensus estimates for the business have
materially reduced since the range was last reviewed in 2014
where the business was in a different economic phase. The
Committee, therefore embarked on a consultation exercise in the
second half of the year with many of our major investors to
discuss a new range that would ensure that the LTIP awards to
be made in respect of 2016/17 remain stretching in this new
economic context and at the same time provide an effective and
realistic incentive for executive directors and the wider senior
leadership team. On behalf of the Committee I would like to
thank those shareholders who participated and I can confirm that
a new three-year EPS range of 3% to 8% per annum growth will
apply to the LTIP awards in respect of 2016/17, (see page 68 for
full details). For clarity no changes are being made to the target
ranges for existing LTIP awards.
Shareholder engagement and Remuneration
policy review in summer 2017
2016/17 will be the final year of the current Remuneration Policy
that was approved by our shareholders at the January 2015
AGM. During the coming year the Committee will conduct a
holistic review of the Remuneration Policy and consider what the
structure of executive pay should be for the next policy cycle.
The objective of the review will be to consider all the internal,
external and wider stakeholder considerations including the
implications from the various executive remuneration guidance
changes anticipated over the next few months and the
corresponding evolving best practice. In particular, the
Committee is mindful of the recently released Investment
Association guidelines including the recommendations made on
the disclosure of pay ratios. I will be in contact again with our
larger shareholders over the course of 2017 to listen to your
views and feedback ahead of the 2018 AGM where a new
Remuneration Policy will be presented for shareholder approval.
In the meantime, I look forward to receiving your support on the
Annual Report on Remuneration at the January 2017 AGM.
Should you have any questions relating to our approach to
executive remuneration, please feel free to contact me at
investors@britvic.com.
John Daly
Chairman of the Remuneration Committee
60
Britvic plc Annual Report 2016
Governance Directors’ remuneration report continued
Remuneration – at a glance
FIXED PAY
PERFORMANCE RELATED PAY
Basic
salary
Benefi ts
Pension
Annual
bonus
Long term
incentives
This section summarises the remuneration outcomes for the 2015/16 year, including how the Remuneration Policy has been
implemented during the year and the link between remuneration and our strategy.
Our remuneration principles
Our Remuneration Policy is designed to support our overall vision to become the most dynamic, creative and admired soft drinks
company in the world. At the heart of our vision is our people which the company is required to attract, engage and retain from across
our global sector. Our remuneration arrangements, therefore, are simply comprised of the two pay components – Fixed and Variable
pay. Within each of these components the following arrangements above exist.
To determine the shape, size and variability of each element of pay the Committee follow fi ve key remuneration principles:
Competitive market
positioning and
opportunity
Pay aligned with
sustainable long-term
performance
To attract, retain and engage the executive talent we need to realise our vision and deliver our
strategy our remuneration arrangements need to be suffi ciently competitive but not excessive.
The mix between both fi xed and variable pay as well as the balance between rewarding short
versus long-term performance are critical to ensure they are correctly balanced and reward those
behaviours that will lead to the realisation of our long-term vision without compromise for short-
term gain. In addition, all forms of variable pay are only fully delivered in return for performance
materially above the standards required by Britvic and our shareholders – in other words the
superior pay opportunity available can only be realised in return for superior performance.
Incentive metrics aligned
with our strategy
The performance measures selected to determine both our annual bonus and long-term incentive
plans have been carefully considered to focus on a simple and effective selection of those key
drivers of our strategy and long-term value creation for our shareholders, (see below).
Alignment of executive
and shareholder interests
To ensure the continued alignment of executive and shareholder interests, the greatest potential
pay opportunity for executives is via our long-term incentive plans. Awards are based in shares
and are dependent on a balance of absolute and relative growth in long-term value creation
for shareholders. In particular, the mix of share options and performance shares is designed to
ensure that executives are only rewarded for superior market performance and the realisation of
our vision. This is further reinforced by meaningful shareholding guidelines for executives so that
their long-term wealth remains tied to Britvic’s sustained long-term success.
Mindful of our
wider stakeholder
responsibilities
In support of our vision our Executive Directors’ pay arrangement are not only focused on
fi nancial returns but also mindful of performance against our wider long-term stakeholder goals.
The Committee takes great care to set appropriate targets that do not compromise our wider
stakeholder aspirations. Both malus and claw-back provisions are in place to address potential
inappropriate actions or risk taking when determining incentive plan pay outs.
Britvic plc Annual Report 2016
61
Single total figure of remuneration for Executive Directors 2015/16Through the implementation of the Remuneration Policy and principles, the total remuneration received for 2015/16 by Executive Directors is as follows:Executive Directors Fixed Pay Performance Related Pay3TotalSalary£’000Benefits£’000Pension£’000Bonus£’000LTIP£’000£’000Simon Litherland594.323.3146.2670.3342.21,776.3Mathew Dunn1273.794.859.8322.4---750.7John Gibney2144.06.531.6139.2---321.3Notes: 1. Mathew Dunn joined the Board on 25 November 2015. 2. John Gibney stepped down from the Board on 27 January 2016. The above table shows John Gibney’s pay up to him stepping off the Board in line with the Total Single Figure requirements. Full details of John’s remuneration arrangement after stepping down from the board can be found on page 74.3. Variable pay outcomes are summarised in the tables on page 70.62 Britvic plc Annual Report 2016Governance Directors’ remuneration report Remuneration – at a glance continued177534_BRITVIC_TEXT-p033-088.indd 6213/12/2016 19:06 Governance Directors’ remuneration report Remuneration – at a glance continued
Summary of Performance related pay for 2015/16
Annual Bonus
Measure
Weighting
Threshold
Target
Maximum % Maximum
achieved
% Maximum
bonus achieved
Profit Before Tax1
Revenue2
Underlying
freecash flow3
Total
50%
30%
20%
100%
£m
148.8
1,370.6
(3.9)
0%
157.9
£m
154.1
1.401.9
1,397.3
(1.0)
50%
80.6%
£m
159.8
1,415.3
10.9
2.0
100%
83.4%
62.9%
100%
41.7%
18.9%
20.0%
80.6%
Notes:
1.Profit before tax (PBT) – Profit before tax before exceptional and other items.
2.Revenue – Net Revenue performance on a budget currency basis.
3.Underlying free cash flow as per glossary on page 162.
These measures and definitions are consistently used throughout this Remuneration Report.
Long Term Incentives
Shown below are the outcomes versus the performance conditions set and vesting levels for the 2013 Performance Share Plan
and 2013 Executive Share Option Plan:
2013 Executive Share Option Plan
2013 Performance Share Plan
100% 3 YEAR EPS1 GROWTH
50% 3 YEAR AVERAGE ROIC
50% 3 YEAR RELATIVE TSR
I
+
P
R
12%
10%
8%
6%
4%
2%
0%
RPI+7%
RPI+3%
RPI +11.1%
25%
I
C
O
R
24.2%
24.21%
23.4%
24%
23%
22%
Upper
Quartile
Median
Above
Median
Performance
range
Actual
performance
Performance
range
Actual
performance
Performance
range
Actual
performance
Plan
Performance conditions
and targets set
Performance outcome
Level of award
vesting
(% of maximum)
2013 ESOP
3-year EPS¹ growth of RPI +3% to +7% p.a. EPS growth significantly above the
100%
performance range at RPI+11.1% p.a. was
achieved
2013 PSP
3-year Relative TSR (50% weighting):
Ranking between median and upper quartile
vs. the comparator group
Relative TSR was between the median and
upper quartile of the peer group resulting
in a vesting of 15.8%
65.8%
3-year average ROIC (50% weighting):
23.4% to 24.2%
3 year average ROIC was above the
performance range at 24.21% resulting
in a vesting of 50.0%
Note:
1. EPS – Adjusted diluted earnings per share (see note 11 on page 117 for full details). Whilst EPS is calculated excluding the impact of the share placement and
earnings from the ebba acquisition which was made following this award, the vesting outcome is not impacted by this adjustment. This definition is used
consistently throughout this Remuneration Report.
Britvic plc Annual Report 2016
63
Summary of implementation of the Remuneration Policy for 2016/17The implementation of the Remuneration Policy for 2016/17 is based on 4 key pillars of our strategy:COMMUNITYOutside of bonus, our senior leaders have individual objectives designed to support trust and respect in the community EPS GROWTHSustainable long-term earnings per share (EPS) growth is aligned with long-term value creation for our shareholders.The PSP also has a ROIC underpin to ensure long-term returns are value enhancingTSR GROWTHLong term share price and dividend growth that determine Total Shareholder Returns (TSR) are heavily dependent on consistent long-term EPS growth performance. PROFIT Growing the profits our core businesses allows us to invest in our various longer term growth initiatives. For bonus purposes we use Profit Before Tax (PBT )1 Generate profitable growth in our core marketsCASHImproving our ability to convert more profit into cash will allow us to continue investing in our business capability and support our progressive dividend policy3 Continue to step change our business capability4 Build trust and respect in our communitiesOUR STRATEGY TO SUPPORT OUR VISION IS BASED ON 4 KEY PILLARSBONUS BASED ON ANNUAL PERFORMANCETo motivate and incentivise delivery of annual performance targetsLTIPS BASED ON 3YR PERFORMANCETo motivate and incentivise delivery of sustainable, long-term performance and value creation for our shareholdersREVENUE Realising the growth oppor-tunities from our investment decisions, particularly in international markets will drive long-term earnings and dividend growth for our shareholders2 Realise global opportunities in kids, family and adult categoriesJohn Gibney’s pay on retirement John Gibney stepped down from the board on 27 January 2016 and retired from the company on 5 April 2016. John was paid up to his date of departure. John received a pro-rated bonus in respect of 2015/16 and his outstanding awards under the ESOP and PSP will vest at the normal vesting date on a pro-rated basis, subject to the achievement of the relevant performance conditions. John did not receive a 2015/16 ESOP or PSP award due to his departure, nor did he receive a salary increase on 1 January 2016. John had a deferred pension under the defined benefit pension and also the Britvic Executive Top Up Scheme (BETUS), the company’s unfunded retirement benefits scheme. Both of these were closed to future accrual on 10 April 2011. John became entitled to payments from the deferred pension from his date of retirement and elected to cash out of the BETUS in exchange for any future pension entitlement under this scheme. No additional payments were made to John as a result of his departure. Full details of John’s pay prior to him stepping down from the Board are set out in the Single Total Figure of Remuneration. Details of payments for the period from him stepping down from the Board up to his retirement, including pension payments, are set out in the Payments to Past Directors disclosure on page 74.Mathew Dunn’s pay on appointment Mathew Dunn was appointed to the position of CFO on 25 November 2015. Mathew’s pay is in line with the Remuneration Policy. As part of his recruitment, Mathew received a relocation allowance with a net value of £56,148 (which was within the maximum net allowance of £70,000) to assist in his move from South Africa to the UK as previously communicated in the RNS announcement. No other payments were made to Mathew on his recruitment to compensate for awards forgone from his previous employer or otherwise. Whilst no salary increase is to be awarded to Mathew Dunn in January 2017, the Committee has previously stated in last year’s Directors’ Remuneration Report that Mathew may receive a salary increase higher than that of the wider employee population in the first 3 years following appointment subject to performance. 64 Britvic plc Annual Report 2016Governance Directors’ remuneration report Remuneration – at a glance continued177534_BRITVIC_TEXT-p033-088.indd 6413/12/2016 19:06 Governance Directors’ remuneration report Remuneration – at a glance continued
The below shows how the Remuneration Policy will be implemented for the two Executive Directors for 2016/17:
Policy Element
Simon Litherland (CEO)
Mathew Dunn (CFO)
Base salary
£600,000 No increase
Pension
28% of salary
£340,000 No increase
23% of salary
Annual Bonus
Target 70% of salary to maximum 140% of salary
Target 60% of salary to maximum 120% of salary
Annual Bonus
measures
For 2016/17 the following performance metrics and weightings apply to the bonus:
50% Profit before tax & amortisation, 30% Revenue (split Total Net Revenue 20% and Net Revenue from
Innovation 10%), Underlying free cash flow 20%
ESOP
Maximum 300% of salary
Maximum 200% of salary
ESOP
measures
EPS growth: Three year EPS growth of 3% to 8% per annum on a straight-line basis will apply for threshold
to maximum performance, respectively
PSP
Maximum 150% of salary
Maximum 80% of salary
PSP
measures
75% EPS growth: Three year EPS growth of 3% to 8% per annum on a straight-line basis will apply for
threshold to maximum performance, respectively
25% 3-year relative TSR: Threshold performance of the median of the comparator group, increasing on a
straight line basis to 100% vesting for upper quartile performance
The Committee will also consider underlying ROIC over the performance period to ensure it remains
appropriate relative to the EPS growth delivered
Payment for
threshold
performance
Malus and
clawback
For the Annual Bonus, 0% of maximum will be awarded
For the ESOP and PSP, 20% of maximum will be awarded
Malus and clawback may be applied to Annual Bonus and LTIP awards in certain conditions where the
payment of the bonus resulted from a material misstatement in the company’s accounts or an error in the
assessment of the satisfaction of a performance condition
Shareholding
requirement
200%
100%
Illustration of the application of Remuneration Policy
As described in the remuneration principles section on page 61 the
Committee believes that our executive remuneration packages should
provide a significant part of total potential pay based on performance.
Set out below are the potential total pay outcomes for both Executive
Directors across three alternative performance scenarios under the current
Remuneration Policy. The three scenarios are minimum, on-target and
maximum performance, respectively. For simplicity, the illustrations below
are calculated before any change in share price and roll-up of dividends.
3,500
3,000
2,500
2,000
1,500
1,000
500
0
£3,050
41%
31%
28%
Max
£2,054
42%
20%
38%
Target
Simon Litherland
£770
100%
Min
Britvic plc Annual Report 2016
177534_BRITVIC_TEXT-p033-088.indd 65
The chart has been prepared using the following assumptions:
1) Base salaries as at 1 January 2017
2) Benefits reflect those estimated to be paid in 2016/17
3) Target bonus is calculated at 50% of maximum opportunity
4) Target vesting for the PSP is 60%, being the mid-point between
threshold and maximum vesting level
5) Options awarded under the ESOP are valued on the standard
market value for options of 30% of the face value of award. A
target vesting of 60% values the ESOP award at 18% of the
maximum value
Total fixed pay
Short term incentives
LTIP
£427
100%
Min
£916
31%
22%
47%
Target
Mathew Dunn
£1,311
36%
31%
33%
Max
65
13/12/2016 19:06
Governance Directors’ remuneration report Remuneration – at a glance continued
Implementation of the remuneration policy for other employees
The implementation of the Remuneration Policy described above applies specifically to Executive Directors. Where possible, principles
set out in the policy have been applied to all employees to achieve alignment as per the below table:
Element
Application of policy for other employees
Base salary
Paid in cash and reviewed annually, normally taking effect 1 January. Salaries are set with reference to
internal pay levels, as well as local market competitiveness compared to roles of a similar nature and
size of responsibility.
Benefits
Britvic provide local market typical benefits focused on employee health and wellbeing. The majority
of employees participate in the company’s flexible benefits plan.
Pension
Subject to local market practice and regulations.
GB employees have rights under the GB legacy defined benefit pension arrangement which is now
closed to future accrual (the plan was closed to executives at the same time). A defined contribution
pension was introduced following the closure of the defined benefit pension in which UK employees
are entitled to participate in.
Approximately 250 leaders and senior managers participate in bonus arrangements with measures
aligned to that of the executive directors. Typically, all other employees are eligible to receive a bonus
linked to profit and revenue of the company as well as their individual performance.
The performance share plan is awarded to approximately 90 leaders globally each year. Approximately
15 leaders also receive options under the executive share option plan. Performance conditions for both
awards are linked to those of the executive directors.
Where possible, we offer employees annual free share awards linked to company performance as well
as the opportunity to purchase Britvic shares. In some locations, alternative profit sharing arrangements
are available, depending on local market practices and legislation.
Annual bonus
Long term
incentives
All employee
share plans
The value of each element the employee may receive will vary according to the employee’s seniority and level of responsibility.
66
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Governance Directors’ remuneration report continued
Annual Report on
Remuneration
Consideration by the Directors of matters
relating to directors’ remuneration
Membership of the Remuneration Committee
During the year, the Committee consisted wholly
of independent Non-Executive Directors:
• John Daly1 (Chairman)
• Sue Clark2
• Ben Gordon
• Gerald Corbett
• Ian McHoul
• Bob Ivell3
At the invitation of the Chairman of the Committee, the Chief
Executive Officer, Chief Financial Officer, PLC Human Resources
Director, Director of Compensation & Benefits and General Counsel
& Company Secretary attend the meetings of the Committee to
provide input to assist with the consideration of particular items,
except when their own remuneration is under consideration. Details
of the attendance by Committee members at Committee meetings
are shown in the Corporate Governance section on page 42.
Notes:
1. John Daly succeeded Bob Ivell as Chairman on 27 January 2016.
2. Sue Clark joined the Committee as an Independent Non-Executive Director
of the company on 29 February 2016.
3. Bob Ivell was Chairman of the Remuneration Committee until 27 January 2016.
Remuneration Committee
meeting dates
Key agenda items
Composition and terms of reference
The Committee’s composition and terms of reference are in line
with the 2014 UK Corporate Governance 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 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 on behalf of 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
• Ensuring, via regular reviews, that the company’s pay policies
remain appropriate and relevant
October 2015
November 2015
June 2016
Review of Executive remuneration payout projections for 2014/15.
Detailed design and targets for 2015/16 annual bonus.
Review of 2014/15 Directors’ Remuneration Report.
2016 salary reviews for CEO and Executive Committee.
Chairman’s remuneration review.
Update on the Executive teams’ shareholding requirements.
Annual Calendar for 2016.
2014/15 Bonus and LTIP outcomes, subject to final accounts being approved by the Board.
2014/15 ESOP and PSP targets and grants for all participants.
Approval of final draft of Directors’ Remuneration Report.
Consideration of recent market trends and governance developments in UK executive compensation
and implications for Britvic.
Review of reward structure following Britvic plc Board April strategy meeting.
Consideration of Executive remuneration payout projections for 2015/16 and beyond.
Consideration of 2016/17 Remuneration Policy and design. In particular:
• Link to business strategy;
• 2016/17 STIP design; and
• 2016/17 LTIP design.
Consideration of any feedback on the Directors’ Remuneration Report from advisor bodies and investors.
Review of the Committee’s constitution and Terms of Reference.
September 2016
Review of 2015/16 Bonus and LTIP projected outcomes.
Update on shareholder consultation exercise.
Annual Calendar for 2017.
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Letter from the
Remuneration
Committee Chairman
Governance Annual Report on Remuneration continued
Advisors
PwC were appointed as advisors to the Committee in August
2014. The company is also advised by PwC on other
remuneration-related items and provided consulting support on
non-remuneration related issues. PwC is a member of the
Remuneration Consultants Group (the professional body for
executive remuneration consultants). PwC’s fees in respect of
advice to the Committee in the year under review were £40,100
and were charged on the basis of that firm’s standard terms of
business for advice provided.
The Committee also received advice from Willis Towers Watson
during the year the fees for which were £12,000 and were
charged on the basis of that firm’s standard terms of business
for advice provided. Willis Towers Watson also provide support to
the company on other remuneration-related items.
During the year, Addleshaw Goddard LLP were also engaged by
the Committee to provide legal advice on contractual
arrangements and share schemes.
Unless otherwise stated, these advisors have no other
connection with the company and the Committee, based on its
experience, is satisfied that the advice it received from these
organisations was objective and independent.
Statement of implementation of Remuneration Policy in the following year
The Remuneration Policy approved at the January 2015 AGM
will continue to be implemented from the commencement
of the new financial year (2016/17) as follows:
Base salary
In recognition of the increasingly challenging economic and
commercial environment ahead in 2016/17, the Committee
determined that no salary increases should be awarded to the
CEO and CFO in January 2017.
2016
2017
Increase
base salary
£’000
base salary
£’000
Simon Litherland
Mathew Dunn
600.0
340.0
600.0
340.0
0%
0%
Benefits and pension
Implemented in line with policy.
Annual Bonus
Implemented in line with policy. The bonus measures¹ and
weightings for 2016/17 are:
• Profit before tax and amortisation (50%)
• Total Net Revenue (20%)
• Net Revenue from Innovation (10%)
• Underlying free cash flow (20%)
Target award amounts for the CEO and CFO are 70% and 60%
of base salary and maximum award values are 140% and 120%
of base salary, respectively.
The Committee has introduced an additional metric into the
annual bonus for 2016/17 - net revenue from innovation. This will
have a 10% weight in the annual bonus and will sit alongside the
total net revenue measure with a 20% weighting. This is to reflect
the long-term importance of innovation to the growth strategy of
the company and so an increasing focus for 2016/17 was
considered appropriate by the Committee.
The Committee is of the view that the performance targets under
the bonus plan are commercially sensitive and that it would be
detrimental to the interests of the company to disclose them
before the start of the financial year. Disclosure of targets in
advance could lead the company to be at a disadvantage as
many competitors are not subject to the same levels of
disclosure. Targets and the performance against them will be
disclosed in the Directors’ Remuneration Report following the
end of the financial year.
Note:
1. Performance measures defined as follows:
Profit Before Tax and amortisation (PBTA) - measured before exceptional
and other items on a budget currency basis
Total Net Revenue and Net Revenue from Innovation - measured on a
constant currency basis.
Underlying free cash flow - measured excluding movements in borrowings,
dividend payments, exceptional and other items.
Long-term incentive plans (PSP and ESOP)
As set out in the Chairman’s letter at the front of this report, the
current and forward looking customer environment and price
deflation in our core markets present potential challenges to the
business. In addition we are now dealing with greater uncertainty
and unfavourable exchange rate movements following the EU
referendum outcome. The result of this is that growth
expectations and consensus estimates for the business have
reduced such that the established EPS target range would be
unrealistic to achieve. The Committee, therefore, wants to ensure
that the LTIP remains incentivising and relevant to the executive
directors whilst at the same time sufficiently stretching and
aligned with shareholder interests. During the second half of the
year the Committee consulted with a number of the company’s
larger shareholders to agree a new EPS target range for the LTIP
awards in 2016/17. This consultation exercise concluded with a
decision to adopt a new three-year EPS range for LTIP awards
made in 2016/17 of 3% to 8% per annum growth and a
commitment to undertake a holistic review of Remuneration
Policy in the summer of 2017.
ESOP
Performance conditions and targets set
Award at threshold
vesting, 20% of
maximum (% salary)
Maximum
potential
value
Face value
of awards
(£’000)
Performance
period
Simon Litherland Threshold vesting for EPS growth of 3% p.a.
60%
Maximum vesting for EPS growth of 8% p.a.
Mathew Dunn
Vesting is on a straight line basis between
threshold and maximum.
40%
300% of
salary
200% of
salary
£1,800
£680
3 years
commencing
3 October 2016
68
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Letter from the
Remuneration
Committee Chairman
Governance Annual Report on Remuneration continued
PSP
Performance conditions and targets set
Award at threshold
vesting, 20% of
maximum (% salary)
Maximum
potential
value
Face value
of awards
(£’000)
Performance
period
Simon Litherland EPS growth (75% weighting):
Mathew Dunn
Threshold vesting for EPS growth of 3% p.a.
Maximum vesting for EPS growth of 8% p.a.
Relative TSR (25% weighting):
Threshold payout for ranking at median vs
the comparator group of 18 companies and
maximum payout for ranking at or above the
upper quartile.
20%
16%
150% of
salary
80% of
salary
£900
£272
3 years
commencing
3 October 2016
1. The Committee will also consider underlying ROIC over the performance period when assessing the vesting of the PSP to ensure it remains satisfactory.
2. The relative TSR comparator group will be made up of the following 17 companies following the exclusion of SAB Miller. The companies included in the TSR
group are 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, Smith & Nephew, Tate and Lyle, Wetherspoon.
Single total figure of Directors’ remuneration (subject to audit)
Non-Executive Directors
Details of the total fees paid to Non-Executive Directors and the Chairman for the year ended 27 September 2015 and 2 October
2016 are set out in the table below.
Basic Fee
£’000
Remuneration
Committee
Chair fee
£’000
Audit Committee
Chair fee
£’000
SID fee
£’000
Total fees paid
£’000
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Gerald Corbett
244.1
235.8
Joanne Averiss
John Daly1
Ben Gordon
Bob Ivell2
Ian McHoul
Sue Clark3
Euan Sutherland4
54.4
54.4
54.4
24.8
54.4
30.7
30.7
52.4
33.4
52.4
50.9
52.4
---
---
---
---
5.8
---
2.9
---
---
---
---
---
---
---
8.0
---
---
---
---
---
---
---
---
8.7
---
---
---
---
---
---
---
8.0
---
---
---
---
5.8
---
2.9
---
---
---
---
---
---
---
8.0
---
---
---
244.1
235.8
54.4
66.1
54.4
30.6
63.1
30.7
30.7
52.4
33.4
52.4
66.9
60.4
---
---
Notes:
1. John Daly succeeded Bob Ivell as Chairman of the Remuneration Committee on 27 January 2016.
2. Bob Ivell stepped down as Chairman of the Remuneration Committee on 27 January and Board on 29 February 2016.
3. Sue Clark joined the Committee as an Independent Non-Executive Director of the company on 29 February 2016.
4. Euan Sutherland joined the Board as an Independent Non-Executive Director of the company on 29 February 2016.
Executive Directors
The table below sets out the total and a breakdown of the remuneration received by each Executive during the year under review.
Additional details of each component are set out below the table.
Salary
Benefits
Pension
Annual Bonus
LTIP1
Total
Simon Litherland (CEO)
Mathew Dunn (CFO)
John Gibney (CFO retired) 2
2016
(£’000)
594.3
23.3
146.2
670.3
342.2
1,776.3
2015
(£’000)
574.4
22.6
141.2
428.6
1,908.4
3,075.2
2016
(£’000)
273.3
94.8
59.8
322.4
---
750.7
2015
(£’000)
---
---
---
---
---
---
2016
(£’000)
144.0
6.5
31.6
139.2
---
321.3
2015
(£’000)
370.4
22.1
81.0
236.9
1,179.4
1,889.8
Notes:
1. 2015 LTIP values re-stated based on the share price at vesting of £7.04 on 6 March 2016.
2. The values shown for John Gibney are in respect of services as an executive director up to him stepping down from the board on 27 January 2016. Details of
John’s pay following his departure from the Board are set out in the Payments to Past Directors disclosure on page 74.
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Governance Annual Report on Remuneration continued
i) Base salary - Corresponds to the amounts received during the year
During the year under review Simon Litherland’s salary was increased from £580,000 to £600,000 on 1 January 2016.
Mathew Dunn was appointed on 25 November 2015 with a salary of £340,000.
John Gibney’s salary up to date of departure on 5 April 2016 was £374,400. The table above shows the salary paid to John up to
27 January 2016 when he stepped down from the Board.
ii) Benefits (subject to audit) - Corresponds to the taxable value of all benefits paid in respect of the year
Benefits comprise car allowance, private medical assurance, life assurance, free and matching shares under the Share Incentive Plan.
As described in last year’s remuneration report, Mathew Dunn received a relocation allowance with a net value of £56,148 in
addition to the other benefits he received for the year.
iii) Pension (subject to audit) - The table below sets out the value of the cash allowance paid to Directors for the year under review
and the increase in value of the accrued pension.
Simon Litherland
Mathew Dunn
John Gibney1
Value of cash
allowance paid
(£’000)
Value of defined contribution
pension contributions
(£’000)
Total value of pension shown in
Total Single Figure table.
(£’000)
146.2
12.9
31.6
---
46.9
---
146.2
59.8
31.6
Notes:
1 The values shown for John Gibney are in respect of services as an executive director up to him stepping off the board on 27 January 2016.
Simon Litherland’s, Mathew Dunn’s, and John Gibney’s normal retirement age is 60. Mathew Dunn receives a contribution to the
Defined Contribution section of the Britvic Pension Plan up to the HMRC annual allowance each tax year. The balance of his
entitlement is paid as a cash allowance.
The cash allowance payable to the executives:
• 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.
• Was paid at a rate of 24.6% of pensionable pay (base salary only) for Simon Litherland, 22.0% of pensionable pay (base salary only)
for John Gibney and 4.7% for Mathew Dunn.
John Gibney had a deferred pension in the defined benefit section of the Plan and was a member of the Britvic Executive Top Up
Scheme (‘BETUS’), the company’s unfunded retirement benefits scheme.
Both the Plan and BETUS were closed to future accrual on 10 April 2011.
On his retirement, John commenced receipt of his deferred pension. John received a cash lump sum of £375,000 and is entitled to an
annual pension payable for life of £139,363. John elected to cash out of BETUS and received a cash sum of £1,055,848 in exchange
for any further entitlement under BETUS.
iv) Annual bonus (subject to audit) - Corresponds to the total bonus earned under the bonus plan in respect of 2016 performance.
The table below sets out the bonus outcome for each Executive and the respective performance targets and actual achieved performance.
Performance
measure
Weighting (% of
bonus maximum)
Performance
required for
threshold payout
Performance
required for target
payout
Performance
required for
maximum payout
PBT
Revenue1
Underlying free cash flow
Total
50%
30%
20%
100%
Notes:
1. Revenue is calculated on a budget currency basis
£148.8m
£1,370.6m
£(3.9)m
£154.1m
£1,397.3m
£(1.0)m
£159.8m
£1,415.3m
£2.0m
Actual
Performance
£157.9m
£1,401.9m
£10.9m
Performance
measure
2016 Maximum bonus opportunity
(% Salary)
2016 bonus earned
(% of salary)
2016 bonus earned
(£’000)
PBT
Revenue
Underlying free
cash flow
CEO
CFO1
70%
42%
60%
36%
CFO
retired2
60%
36%
CEO
CFO1
58.4%
26.4%
50.0%
22.6%
CFO
retired2
50.0%
22.6%
28%
24%
24%
28.0%
24.0%
24.0%
Total
140%
120%
120% 112.8%
96.7%
96.7%
CEO
CFO1
347.0
157.0
166.4
670.3
166.9
75.5
80.0
322.4
CFO
retired2
72.1
32.6
34.6
139.2
Notes:
1. Mathew Dunn joined the company and was appointed to the Board on 25 November 2015.
2. The values shown for John Gibney are in respect of services up to him stepping off the Board on 27 January 2016. John remained employed until 5 April 2016
and received a pro-rated bonus with a value of £58,500 for this period as shown on page 74. The value of this payment was linked to the same performance
conditions as set out in the above table.
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Governance Annual Report on Remuneration continued
v) Long-term incentives (subject to audit) – Corresponds to the vesting outcome of the 2013 ESOP and PSP with three year
performance periods ending 2 October 2016
2013 ESOP
Simon Litherland
John Gibney2
2013 PSP
Simon Litherland
John Gibney2
Performance
conditions and
targets set
Threshold vesting for
EPS growth of RPI
+3% p.a.
Maximum vesting for
EPS growth of RPI
+7% p.a.
Vesting is on a
straight line basis
between threshold
and maximum.
Exercise price for the
options is £6.645
Performance
conditions and
targets set
Relative TSR (50%
weighting): Threshold
payout for raking
at median vs the
comparator group of
18 companies and
maximum payout for
ranking at or above
the upper quartile.
ROIC (50% weighting):
Threshold payout
for total ROIC of
23.4% over the three
year performance
period and maximum
payout for ROIC of
24.2% Vesting is on
a straight line basis
between threshold
and maximum.
Performance
outcome
Level of
award vesting
(% of
maximum)
EPS growth
significantly above the
performance range at
RPI+11.1% p.a.
100%
100%
Maximum
potential
value
300% of
salary
250% of
salary
Total value of vesting
(£‘000)
Number
of shares
230,248
108,164
Nil (the share price
over the final quarter
of the financial year
is below the exercise
price of £6.645 and
therefore the options
have no value as at
the year-end).
Level of
award vesting
(% of
maximum)
Total value of vesting
(£‘000)
Number
of shares
65.8%
342.2
54,525
65.8%
192.9
30,620
Maximum
potential
value
100% of
salary
100% of
salary
Performance
outcome
Britvic’s TSR was
positioned between
the median and
upper quartile vs the
comparator group
resulting in 15.8%
of the total award
vesting.
3 year average ROIC
of 24.21% p.a. was
achieved resulting
in 50% of the total
award vesting.
Rolled up dividends
earned over the
period are included
within the total value
of the vesting award.
Notes:
1. The EPS outcome is calculated excluding the impact of the share placement and ebba acquisition in July 2015 as the award was made prior to this occurring.
2. Mathew Dunn joined the Company on 25 November 2015 and therefore was not granted a 2013 LTIP award.
3. John Gibney retired on 5 April 2016. John’s ESOP and PSP will vest at the normal vesting date on a pro-rated basis to reflect his service up to the point of
retirement. As vesting occurs after his retirement date, the value of his LTIP is declared in the ‘payments to past directors’ section on page 74.
4. The combined PSP and ESOP vesting values were estimated at £342,235 for Simon Litherland and £192,906 for John Gibney.
5. A share price estimate of £6.30 was used to calculate the value of the above awards which is based on the average share price over the last quarter of the
financial year.
6. The relative TSR comparator group is made up of the following 18 companies; 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.
7. Threshold vesting for this award is set at 25% of maximum for both PSP and ESOP
Outside appointments
Simon Litherland is the President and Chairman of ISBA (the voice of British Advertisers).
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Governance Annual Report on Remuneration continued
Scheme interests awarded during the year (subject to audit)
The following tables set out the ESOP and PSP awards granted to Executive Directors under the LTIP during the year under review
(2015/16). All awards are subject to performance conditions and were granted on 4 December 2015.
ESOP
Performance conditions
and targets set
Award at
threshold vesting,
20% of maximum
(% salary)
Maximum
potential
value
Face value
of awards
(£’000)
Performance
period
Simon
Litherland
Mathew
Dunn
Threshold vesting for EPS growth of 6% p.a.
60%
300% of salary £1,740
Maximum vesting for EPS growth of 12% p.a.
Vesting is on a straight line basis between
threshold and maximum.
Exercise price for the options is £7.12.
40%
200% of salary £680
3 years
commencing
28 September
2015
PSP
Performance conditions
and targets set
Award at
threshold vesting,
20% of maximum
(% salary)
Maximum
potential
value
Face value
of awards
(£’000)
Performance
period
Simon
Litherland
Mathew
Dunn
EPS growth (75% weighting):
Threshold vesting for EPS growth of 6% p.a.
Maximum vesting for EPS growth of 12% p.a.
Relative TSR (25% weighting):
Threshold payout for ranking at median vs
the comparator group of 18 companies and
maximum payout for ranking at or above the
upper quartile.
30%
16%
150% of salary £900
80% of salary
£272
3 years
commencing
28 September
2015
Notes:
1. The share price used to determine the award levels for the PSP and ESOP was £7.12 as at the date of grant.
2. The Committee will also consider underlying ROIC over the performance period when assessing the vesting of the PSP to ensure it remains satisfactory.
3. The relative TSR comparator group is made up of the following 17 companies; 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, Smith & Nephew, Tate and Lyle, Wetherspoon.
Directors’ shareholding requirements and interests in shares (subject to audit)
The table below sets out the shareholding of directors and connected persons and requirements as at 2 October 2016. A
shareholding requirement of 200% of salary for the CEO and 100% for the CFO applies. The CEO was appointed to role in February
2013 and currently has a shareholding of 120% of salary. The CFO was appointed to role on 25 November 2015 and currently has a
shareholding of 0% of salary. Under the shareholding requirement arrangement both executive directors may not sell any vested
shares from the company LTIPs (except to settle taxes and the payment of exercise prices or following approval by the Committee)
until their shareholding requirement has been satisfied.
Interest in shares in the Company as at 2 October 2016
Ordinary shares
Performance
shares
Share options
Total shares
% of salary2
Subject to
performance
conditions
Subject to
performance
conditions
Vested but
unexercised
Exercised in
the period
106,022
120%
340,060
493,484
519,185
0
14,696
15,172
53,695
0
0%
---
---
---
---
39,586
95,551
---
---
---
---
---
---
---
---
0
---
---
---
---
---
---
---
---
---
---
289,746
525%
74,580
219,937
7,017
733,852
11,393
10,870
10,000
0
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
---
Simon Litherland
Mathew Dunn
Joanne Averiss
Sue Clark
Gerald Corbett
John Daly
John Gibney3
Ben Gordon
Bob Ivell1
Ian McHoul
Euan Sutherland
Notes:
1. Bob Ivell stepped down from the Board on 29 February 2016.
2. Based on 12 month average share price of £6.78 and salary as at 2 October 2016.
3. Represents John Gibney’s holdings as at his date of retirement
Britvic plc Annual Report 2016
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Governance Annual Report on Remuneration continued
Performance graph and table
The graph below shows the Total Shareholder Return (TSR) for Britvic plc and the FTSE 250 excluding investment trusts over the
seven year period ended 2 October 2016. The table overleaf shows total remuneration for the Chief Executive over the same period.
Britvic’s Historical TSR Performance Growth in the value of a hypothetical £100
FTSE 250 Excluding Investment Trusts
Britvic
£300
£250
£200
£150
£100
£50
£0
27 Sept
2009
03 Oct
2010
02 Oct
2011
30 Sept
2012
29 Sept
2013
28 Sept
2014
27 Sept
2015
02 Oct
2016
The Committee considers the FTSE 250 (excluding Investment Trust Index) is a relevant index for total shareholder return as it
represents a broad equity index in which the company is a constituent member.
Remuneration history for Chief Executive from 2010 to 2016
£’000
Simon Litherland total single
figure of remuneration
Paul Moody total single
figure of remuneration
2010
N/A
2011
n/a
2012
n/a
2013
2014
2015
2016
1,114.6
1,964.3
3,075.2
1,776.3
1,955.3
1,819.7
670.1
1,412.6
n/a
n/a
n/a
Bonus (% of maximum)
95%
0%
0%
LTIP (% of maximum)
100%
(ESOP 100%
PSP 100%)
89.6%
(ESOP 86%
PSP 91%)
0%
(ESOP 0%
PSP 0%)
72.2%
53.3%
80.6%
63.6%
(ESOP 69.0%
PSP 50%)
100%
(ESOP 100%
PSP 100%)
91.0%
(ESOP 100%
PSP 65.8%)
98.6%
for Simon
Litherland
0% for
Paul Moody
0% for
Paul Moody
(ESOP 0%
PSP 0%)
n/a for
Simon
Litherland
Percentage change in remuneration for CEO
The table below shows how the percentage change in the Chief Executive’s salary, benefits and bonus between 2015 and 2016
compared with the percentage change in the weighted average of each of those components for all full-time equivalent employees
based in Great Britain (GB). The GB employee workforce was chosen as a suitable comparator group as the CEO is based in GB
(albeit with a global role and responsibilities) and pay changes across the Group vary widely depending on local market conditions.
In recognition of the increasingly challenging economic commercial environment in which the business operates no salary increases
will be awarded to the CEO and CFO for 2016/2017.
Element
Base salary
Taxable benefits
Bonus
Britvic plc Annual Report 2016
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Chief Executive
% increase
GB Employees
% increase
3.5%
3.1%
4.8%
3.5%
56.4%
144.8%
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Governance Annual Report on Remuneration continued
Relative importance of spend on pay
The following chart sets out this information as it applies to the company, comparing figures for the year under review and the previous
year. Profit after tax and capital expenditure are also shown below for context:
Distribution Statement (£m)
Wages &
Salaries
Dividend
payout
Profit
After Tax
Capex
FY 15 £127.1
FY 16 £144.5 +14%
FY 15 £52.9
FY 16 £60.9 +15%
FY 15 £60.9
FY 15 £112.5
FY 16 £121.5
+8%
FY 16 £121.9 +100%
Notes:
Capital expenditure is defined as net cash flow from the purchase and sale of both tangible and intangible assets.
Profit after tax is before the deduction of exceptional and other items.
Payments made to past Directors (subject to audit)
John Gibney remained employed by the company after stepping down from the board on 27 January 2016 to retirement on 5 April
2016 to assist with the smooth transition to the new CFO. Details of his pay received after he stepped off the Board up to his
retirement are set out below.
John Gibney
Salary
£’000
60.5
Benefits
£’000
Pension1
£’000
10.2
13.3
Bonus
£’000
58.5
LTIP
£’000
192.9
Total
£’000
335.4
Details for the calculation of LTIP vesting have been disclosed on page 71. The bonus value reflects the pro rated portion of his bonus
earned following him stepping off the Board. The value is based on the assessment against performance conditions as set out on
page 63 which resulted in an overall outcome of 96.7% of salary paid on a pro rated basis.
John became entitled to payments from the deferred pension from his date of retirement and as a consequence received a cash sum
of £375,000 and is entitled to an annual pension payable for life of £139,363. John elected to cash out of the BETUS and received a
cash sum of £1,055,848 in exchange for any future pension entitlement under this scheme.
Payments made for loss of office (subject to audit)
No payments for loss of office were made during the year.
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Governance Annual Report on Remuneration continued
Directors’ contracts
Details of the Executives’ service contracts and the Non-Executive Directors letters of appointment are set out below. 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.
Directors
Simon Litherland
Mathew Dunn¹
Gerald Corbett
Joanne Averiss
Ben Gordon
Ian McHoul
John Daly2
Sue Clark3
Euan Sutherland3
Effective date
of contract
14 February 2013
28 September 2015
15 December 2014
15 December 2014
16 April 2014
10 March 2014
27 January 2015
29 February 2016
29 February 2016
Unexpired term
(approx. months)
12
12
14
14
6
5
15
28
28
Notes:
1. Mathew Dunn was appointed on 25 November 2015.
2. John Daly was appointed on 27 January 2015.
3. Sue Clark and Euan Sutherland were appointed on 29 February 2016.
Executive Directors contracts operate on a 12 month rolling basis.
Statement of voting outcomes at general meeting
The following chart sets out the result from the advisory vote on the Directors’ Remuneration Report for the past 5 years at the relevant
AGMs and the binding vote on the Directors’ Remuneration Policy at the 2015 AGM. As evidenced by the voting outcomes below,
Britvic has received consistent support for its executive remuneration arrangements in this period:
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
i
t
s
n
a
g
a
r
o
r
o
f
s
e
t
o
v
%
Against
For
0.36%
99.64%
4.21%
95.79%
5.25%
94.75%
0.95%
99.05%
1.12%
98.88%
2.07%
97.93%
2012
Remuneration
Report
2013
Remuneration
Report
2014
Remuneration
Report
2015
Remuneration
Report
2016
Remuneration
Report
2015
Remuneration
Policy
Report/Policy
2016 Remuneration report
2015 Remuneration report
2014 Remuneration report
2013 Remuneration report
2012 Remuneration report
2015 Remuneration policy
Votes
For
Votes
Against
196,632,194
2,226,303
190,958,650
1,828,072
174,219,763
9,661,732
171,751,061
7,555,269
154,461,496
560,016
188,539,826
3,994,950
Votes
Withheld
201,153
334,424
8,809,241
2,582,938
6,315,270
586,370
This Directors’ Remuneration Report will be subject to an advisory vote at the 2017 AGM.
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Governance Directors’ remuneration report continued
Directors’
Remuneration Policy
For reference, the following is an extract from Britvic’s Remuneration
Policy approved at the 2015 AGM. The full policy can be found in
the 2013/14 remuneration report on www.britvic.com.
There is no intention to revise the policy more frequently than
every three years. However the Committee will review the
Remuneration Policy annually in order to ensure it remains
aligned with the company’s strategy, appropriately positioned
against the market and aligned with corporate governance
requirements.
In the event a change to the policy is required, the Committee will
consult with Britvic’s major shareholders prior to submitting the
policy for approval by all shareholders.
Please note that because the below is an extract of the
Remuneration Policy, some of the text relates specifically to the
2015 financial year.
Our overall approach to remuneration
The principal objective of our executive Remuneration Policy is to
support a performance-based culture that will help drive the
successful execution of our business strategy. 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.
In setting the Remuneration Policy the Committee carefully
considered corporate governance best practice and the
company’s environmental and social responsibilities.
Remuneration Policy table
The table below sets out the Remuneration Policy the Committee
will continue to apply to Directors in 2017 following its approval
at the 2015 AGM.
Element and link to strategy
Operation
Maximum opportunity and payment at target
Performance measures
Base Salary
Element of fixed pay that reflects the
individual’s role, position, experience and
contribution to the group.
Benefits
To provide market typical benefits which
are valued by recipients and allow
Executives to carry out their duties
efficiently.
Base salaries are paid in cash and reviewed annually, with any changes normally
taking effect from 1 January.
Whilst there is no prescribed formulaic maximum, annual increases will normally be
n/a
in the context of overall business performance and the level awarded to the general
Out of cycle reviews may be conducted if considered appropriate by the Committee.
Base salaries are set with reference to comparator groups made up of similar sized
UK listed companies (both pan-sector and from the food and beverages sector).
The Committee also has reference to international food and beverages companies.
Alternative peer groups may be considered depending on the location and domicile
of Directors based outside of the UK.
Benefits and allowances include but are not limited to: annual car benefit (or
allowance), membership of the company’s private medical healthcare plan, and the
ability to ‘buy’ or ’sell’ holiday under the company’s flexible benefits plan, payment of
up to two subscriptions to recognised professional bodies, and life assurance.
There is also a relocation policy which provides for reasonable expenses to be paid
subject to the Committee’s approval.
Other benefits may be provided from time to time if considered reasonable and
appropriate by the Committee and will be explained in the Annual Report on
Remuneration for the relevant year.
Pension
Supports a market aligned compensation
package and assists participants plan for
retirement.
Pension provision is provided in the form of a defined contribution (DC) pension or
a cash allowance where the individual opts out of the pension scheme as a result of
exceeding the tax efficient pension savings limits set by HMRC.
A legacy defined benefit pension and Executive Top Up Scheme (BETUS), a
securitised unfunded unregistered pension scheme, closed to future accrual on
10 April 2011. Current Executive Directors have accrued benefits under these
arrangements.
76
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GB-based workforce.
Higher increases may be made where there have been significant changes in the
responsibility and accountability in a role, where there are large
variances to the market, for example in the case of a new Executive Director
appointed on a salary below the market median, or where there is a significant
change in the relationship of the company relative to the peer group. Any significant
increases will be fully explained.
The maximum levels of benefit provision are:
n/a
• Provision of a company car or car allowance paid in cash. The company car rental
cost would not exceed £10,800 and a cash allowance would not exceed £10,634
per annum
• Private medical insurance on a private basis
would not be excessive
• Life assurance cover of 4 times base salary
• The value of any professional subscriptions paid by the company may vary but
The value of any relocation allowance provided is dependent on the relevant
circumstances when the need arises. However the Committee would not pay more
than necessary in such situations.
Up to 5 days holiday may be sold at a prorated value of the individual’s salary.
For the defined contribution pension, the maximum annual contribution is:
n/a
• 28% of base salary for the CEO
• 25% of base salary for the CFO
For the cash allowance, the maximum contributions reflect those under the DC
pension less a deduction to ensure the cash allowance is broadly cost neutral to the
company from a National Insurance perspective.
A discounted one-off cash settlement of the BETUS may be offered to an eligible
member of the legacy defined benefit plan who is leaving or retiring from the
company.
Governance Directors’ Remuneration Policy continued
Element and link to strategy
Operation
Maximum opportunity and payment at target
Performance measures
Base Salary
Base salaries are paid in cash and reviewed annually, with any changes normally
Element of fixed pay that reflects the
taking effect from 1 January.
individual’s role, position, experience and
Out of cycle reviews may be conducted if considered appropriate by the Committee.
contribution to the group.
Base salaries are set with reference to comparator groups made up of similar sized
UK listed companies (both pan-sector and from the food and beverages sector).
The Committee also has reference to international food and beverages companies.
Alternative peer groups may be considered depending on the location and domicile
of Directors based outside of the UK.
Benefits
To provide market typical benefits which
are valued by recipients and allow
Executives to carry out their duties
Benefits and allowances include but are not limited to: annual car benefit (or
allowance), membership of the company’s private medical healthcare plan, and the
ability to ‘buy’ or ’sell’ holiday under the company’s flexible benefits plan, payment of
up to two subscriptions to recognised professional bodies, and life assurance.
efficiently.
There is also a relocation policy which provides for reasonable expenses to be paid
subject to the Committee’s approval.
Other benefits may be provided from time to time if considered reasonable and
appropriate by the Committee and will be explained in the Annual Report on
Remuneration for the relevant year.
Pension
retirement.
Supports a market aligned compensation
package and assists participants plan for
Pension provision is provided in the form of a defined contribution (DC) pension or
a cash allowance where the individual opts out of the pension scheme as a result of
exceeding the tax efficient pension savings limits set by HMRC.
A legacy defined benefit pension and Executive Top Up Scheme (BETUS), a
securitised unfunded unregistered pension scheme, closed to future accrual on
10 April 2011. Current Executive Directors have accrued benefits under these
arrangements.
Whilst there is no prescribed formulaic maximum, annual increases will normally be
in the context of overall business performance and the level awarded to the general
GB-based workforce.
n/a
Higher increases may be made where there have been significant changes in the
responsibility and accountability in a role, where there are large
variances to the market, for example in the case of a new Executive Director
appointed on a salary below the market median, or where there is a significant
change in the relationship of the company relative to the peer group. Any significant
increases will be fully explained.
The maximum levels of benefit provision are:
n/a
• Provision of a company car or car allowance paid in cash. The company car rental
cost would not exceed £10,800 and a cash allowance would not exceed £10,634
per annum
• Private medical insurance on a private basis
• The value of any professional subscriptions paid by the company may vary but
would not be excessive
• Life assurance cover of 4 times base salary
The value of any relocation allowance provided is dependent on the relevant
circumstances when the need arises. However the Committee would not pay more
than necessary in such situations.
Up to 5 days holiday may be sold at a prorated value of the individual’s salary.
For the defined contribution pension, the maximum annual contribution is:
n/a
• 28% of base salary for the CEO
• 25% of base salary for the CFO
For the cash allowance, the maximum contributions reflect those under the DC
pension less a deduction to ensure the cash allowance is broadly cost neutral to the
company from a National Insurance perspective.
A discounted one-off cash settlement of the BETUS may be offered to an eligible
member of the legacy defined benefit plan who is leaving or retiring from the
company.
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Governance Directors’ Remuneration Policy continued
Element and link to strategy
Operation
Maximum opportunity and payment at target
Performance measures
Annual Bonus
Annual bonuses are paid after the year end of the financial year to which they relate.
Target and maximum opportunities are:
To motivate employees and incentivise
delivery of annual performance targets.
Targets are set at the beginning of the performance year which runs from the start
to the end of each financial period.
• 70% and 140% of base salary for the CEO
• 60% and 120% for the CFO
The specific measures, targets and weighting may vary from
year to year in order to align with the group’s strategy, but
always with a substantial proportion based on key financial
The Committee has the discretion to adjust the bonus outcome if the pure
application of a formula is not felt to produce an appropriate result in light
of overall underlying performance. In particular the Committee has the discretion to
adjust payments downwards if profits have fallen. Any adjustment made using this
discretion will be explained.
Malus and clawback may be applied in respect of the bonus in certain situations
where the payment of the bonus resulted from a material misstatement in the
company’s accounts or an error in the assessment of the satisfaction of a
performance condition.
The level of payment at threshold is set on an annual basis but
will not exceed 25% of the maximum award value.
For 2014/15 the annual bonus will be based 100% on key
metrics.
financial metrics.
Long-Term Incentives –
Executive Share Option Plan (ESOP)
and Performance Share Plan (PSP)
ESOP - Allows for annual grants of market value options. Awards vest after three
years, subject to performance conditions. Options expire 10 years following the
grant date.
To motivate and incentivise delivery of
sustained, long-term performance and
encourage share price and dividend growth
over the performance period of the awards.
The Committee believes that long-term
incentive plan measures should be
simple, aligned to sustainable long-term
shareholder value creation as well as
providing line of sight to management so
that they are meaningful and incentivising.
PSP - Allows for annual grants of performance share awards. Awards vest after
three years, subject to performance conditions.
Under the PSP participants are entitled to dividend equivalents between award and
vesting in respect of awards that vest.
Malus and clawback may be applied in respect of LTIP awards in certain situations
where the vesting of an LTIP award resulted from a material misstatement in
the company’s accounts or an error in the assessment of the satisfaction of a
performance condition.
ESOP - The maximum opportunities are:
• 300% of base salary for the CEO
• 250% of base salary for the CFO
PSP - The maximum opportunity is 150% of base salary for the
performance and reward.
CEO and 100% for the CFO.
For ESOP grants made in 2014/15, performance will be
Under the ESOP and PSP 20% of the maximum award vests
measured using an EPS performance condition.
for achieving threshold performance increasing to 100% of
the maximum opportunity vesting for achieving maximum
performance on a straight line basis.
The performance conditions are set annually based on the
metrics the Committee feels are most appropriate for the
business and create value for shareholders. These may include,
but are not limited to, profit, revenue and cash flow metrics.
Strategic KPIs may be chosen to support particular objectives
for the year.
Annual bonus targets are set with reference to internal budgets
and analyst consensus forecasts, with maximum pay-out
requiring performance well ahead of budget.
Further details of performance measures for the 2015/16
annual bonus are given on page 63.
The Committee chooses performance metrics measured
over three years that support the company’s long-term
strategic priorities, provide a direct link with shareholder
value and ensure a clear line of sight for participants between
For PSP grants made in 2014/2015, 75% of performance will
be measured using the same EPS performance condition as for
the ESOP, with the remaining 25% of performance measured
using relative TSR. ROIC over the performance period will also
be considered by the Committee in determining the level of
vesting at the end of the period.
EPS growth is a key measure of our success in growing value
for shareholders over time. The setting of the EPS targets takes
into account analyst consensus forecasts, internal projections,
and the levels of performance required over the long-term to
deliver absolute value appreciation for shareholders.
Relative TSR strongly links share price growth and dividends
to the rewards executives receive. The relative nature of
the measure ensures participants only receive awards if
outperformance is achieved against a basket of investment
comparables.
ROIC is an important financial discipline to ensure growth in the
business continues to be value enhancing over the long-term.
The Committee may adjust the performance measures for
future awards and the weighting of these measures if it feels
this will create greater alignment with business and strategic
priorities.
A significant change to the measures used would only be
adopted following consultation with major shareholders.
Shareholding Guidelines
To encourage long-term share ownership
by the Executive Directors so that interests
are aligned with other long-term investors
Executive Directors are to acquire and then hold a certain shareholding from the
date of their appointment to the board.
Until this holding is acquired, the Executive Directors may not sell any shares
received through the long term incentives operated by the company 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).
Shareholdings are set at 200% of base salary for the CEO and
n/a
100% for the CFO from the date of appointment to the board.
The Committee will monitor progress on this requirement on an
annual basis.
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Element and link to strategy
Operation
Maximum opportunity and payment at target
Performance measures
Governance Directors’ Remuneration Policy continued
Annual Bonus
Annual bonuses are paid after the year end of the financial year to which they relate.
Target and maximum opportunities are:
To motivate employees and incentivise
delivery of annual performance targets.
to the end of each financial period.
Targets are set at the beginning of the performance year which runs from the start
• 70% and 140% of base salary for the CEO
• 60% and 120% for the CFO
The level of payment at threshold is set on an annual basis but
will not exceed 25% of the maximum award value.
The Committee has the discretion to adjust the bonus outcome if the pure
application of a formula is not felt to produce an appropriate result in light
of overall underlying performance. In particular the Committee has the discretion to
adjust payments downwards if profits have fallen. Any adjustment made using this
discretion will be explained.
Malus and clawback may be applied in respect of the bonus in certain situations
where the payment of the bonus resulted from a material misstatement in the
company’s accounts or an error in the assessment of the satisfaction of a
performance condition.
Long-Term Incentives –
ESOP - Allows for annual grants of market value options. Awards vest after three
Executive Share Option Plan (ESOP)
years, subject to performance conditions. Options expire 10 years following the
and Performance Share Plan (PSP)
grant date.
To motivate and incentivise delivery of
sustained, long-term performance and
encourage share price and dividend growth
over the performance period of the awards.
The Committee believes that long-term
incentive plan measures should be
simple, aligned to sustainable long-term
shareholder value creation as well as
providing line of sight to management so
that they are meaningful and incentivising.
PSP - Allows for annual grants of performance share awards. Awards vest after
three years, subject to performance conditions.
Under the PSP participants are entitled to dividend equivalents between award and
vesting in respect of awards that vest.
Malus and clawback may be applied in respect of LTIP awards in certain situations
where the vesting of an LTIP award resulted from a material misstatement in
the company’s accounts or an error in the assessment of the satisfaction of a
performance condition.
ESOP - The maximum opportunities are:
• 300% of base salary for the CEO
• 250% of base salary for the CFO
PSP - The maximum opportunity is 150% of base salary for the
CEO and 100% for the CFO.
Under the ESOP and PSP 20% of the maximum award vests
for achieving threshold performance increasing to 100% of
the maximum opportunity vesting for achieving maximum
performance on a straight line basis.
The specific measures, targets and weighting may vary from
year to year in order to align with the group’s strategy, but
always with a substantial proportion based on key financial
metrics.
For 2014/15 the annual bonus will be based 100% on key
financial metrics.
The performance conditions are set annually based on the
metrics the Committee feels are most appropriate for the
business and create value for shareholders. These may include,
but are not limited to, profit, revenue and cash flow metrics.
Strategic KPIs may be chosen to support particular objectives
for the year.
Annual bonus targets are set with reference to internal budgets
and analyst consensus forecasts, with maximum pay-out
requiring performance well ahead of budget.
Further details of performance measures for the 2015/16
annual bonus are given on page 63.
The Committee chooses performance metrics measured
over three years that support the company’s long-term
strategic priorities, provide a direct link with shareholder
value and ensure a clear line of sight for participants between
performance and reward.
For ESOP grants made in 2014/15, performance will be
measured using an EPS performance condition.
For PSP grants made in 2014/2015, 75% of performance will
be measured using the same EPS performance condition as for
the ESOP, with the remaining 25% of performance measured
using relative TSR. ROIC over the performance period will also
be considered by the Committee in determining the level of
vesting at the end of the period.
EPS growth is a key measure of our success in growing value
for shareholders over time. The setting of the EPS targets takes
into account analyst consensus forecasts, internal projections,
and the levels of performance required over the long-term to
deliver absolute value appreciation for shareholders.
Relative TSR strongly links share price growth and dividends
to the rewards executives receive. The relative nature of
the measure ensures participants only receive awards if
outperformance is achieved against a basket of investment
comparables.
ROIC is an important financial discipline to ensure growth in the
business continues to be value enhancing over the long-term.
The Committee may adjust the performance measures for
future awards and the weighting of these measures if it feels
this will create greater alignment with business and strategic
priorities.
A significant change to the measures used would only be
adopted following consultation with major shareholders.
Shareholding Guidelines
Executive Directors are to acquire and then hold a certain shareholding from the
To encourage long-term share ownership
date of their appointment to the board.
by the Executive Directors so that interests
Until this holding is acquired, the Executive Directors may not sell any shares
are aligned with other long-term investors
received through the long term incentives operated by the company other than
Shareholdings are set at 200% of base salary for the CEO and
100% for the CFO from the date of appointment to the board.
n/a
The Committee will monitor progress on this requirement on an
annual basis.
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).
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Governance Directors’ Remuneration Policy continued
Element and link to strategy
Operation
Maximum opportunity and payment at target
Performance measures
All-employee Share Plans
To allow Executives to participate in
share plans on the same terms as other
employees.
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 participate in:
• Free share awards, which are made annually subject to the company’s performance
Chairman and
Non-Executive Director (NED) fees
To attract and retain experienced and
skilled Non-Executive Directors.
and at the discretion of the Committee
• Partnership shares, which are purchased by employees through payroll deductions
• Matching shares, which are provided by the employer to individuals purchasing
partnership shares
The Committee reserves the right to use its discretion to amend the operation of the
all-employee share plan from time to time.
The fees paid to the Chairman are determined by the Committee, while the fees of
the NEDs are determined by the Board with affected persons absenting themselves
from the discussions as appropriate.
Annual fees are paid to the Chairman and other NEDs on a monthly basis.
Additional fees are paid to NEDs who are members of and who chair a board
Committee and to the Senior Independent Director (SID).
NED fee levels are periodically reviewed by the board (for NEDs) and the Committee
(for the Chairman). Any increases to fees are normally effective from 1st January.
NEDs do not participate in company incentive arrangements, and do not receive any
form of pension provision.
NEDs will be reimbursed by the company for all reasonable expenses incurred in
performing their duties of office.
• Free share awards, up to a maximum of 4% of earnings,
The Committee has the discretion to limit the free share awards
in light of performance against internal profit targets.
capped at £3,600 per annum.
• Partnership shares, up to £1,800 per year.
• Matching shares, on a one for one basis up to a maximum
of £650 per year.
The maximum fee level for each NED is set by reference to
n/a
fees paid in UK-listed companies of a similar size and scope
to Britvic.
Any planned increases in fees will take into account general
increases across the wider employee population.
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Element and link to strategy
Operation
Maximum opportunity and payment at target
Performance measures
All-employee Share Plans
Executive Directors may participate in the Britvic Share Incentive Plan, which is an
• Free share awards, up to a maximum of 4% of earnings,
all-employee HMRC approved share plan open to employees based in Great Britain.
capped at £3,600 per annum.
The Committee has the discretion to limit the free share awards
in light of performance against internal profit targets.
• Partnership shares, up to £1,800 per year.
• Matching shares, on a one for one basis up to a maximum
of £650 per year.
To allow Executives to participate in
share plans on the same terms as other
employees.
Governance Directors’ Remuneration Policy continued
Chairman and
The fees paid to the Chairman are determined by the Committee, while the fees of
Non-Executive Director (NED) fees
the NEDs are determined by the Board with affected persons absenting themselves
To attract and retain experienced and
skilled Non-Executive Directors.
from the discussions as appropriate.
The maximum fee level for each NED is set by reference to
fees paid in UK-listed companies of a similar size and scope
to Britvic.
n/a
Any planned increases in fees will take into account general
increases across the wider employee population.
The plan has three parts, all of which the Directors participate in:
• Free share awards, which are made annually subject to the company’s performance
and at the discretion of the Committee
• Partnership shares, which are purchased by employees through payroll deductions
• Matching shares, which are provided by the employer to individuals purchasing
partnership shares
The Committee reserves the right to use its discretion to amend the operation of the
all-employee share plan from time to time.
Annual fees are paid to the Chairman and other NEDs on a monthly basis.
Additional fees are paid to NEDs who are members of and who chair a board
Committee and to the Senior Independent Director (SID).
NED fee levels are periodically reviewed by the board (for NEDs) and the Committee
(for the Chairman). Any increases to fees are normally effective from 1st January.
NEDs do not participate in company incentive arrangements, and do not receive any
form of pension provision.
performing their duties of office.
NEDs will be reimbursed by the company for all reasonable expenses incurred in
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Governance Directors’ Remuneration Policy continued
Remuneration policy notes
Differences in Remuneration Policy for all employees
All employees are entitled to base salary and benefits and may
also receive bonus, pension and share awards the value of which
vary according to the individual’s seniority and level of
responsibility.
Share awards made prior to the implementation of
approved Remuneration Policy
Unvested ESOP and PSP awards will continue to pay out in
accordance with the relevant plan rules. Any payments under
these plans will be disclosed in the Annual Report on
Remuneration as required by the regulations. A summary of the
operation of the outstanding awards is set out below:
Element
Summary of
operation
ESOP awards
made prior to the
2014/15 financial
year
PSP awards
made prior to the
2014/15 financial
year
Maximum PSP
opportunity is 100%
of salary for the CEO
and CFO. ESOP is
as shown in the main
policy table.
Threshold payout is
25% of the maximum
opportunity increasing
to maximum on a
straight line basis.
Performance
measures
100% EPS
growth
50% relative TSR
50% ROIC
Committee discretion
In addition to the discretion set out in this policy report, the
Committee may apply discretion in operating the Remuneration
Policy in certain matters including the following:
Discretion regarding the treatment of leavers is set out in Service
contracts and the policy on the payment for loss of office section.
The Committee also reserves the right to make a remuneration
payment that originated from before the individual became an
Executive Director.
In relation to the annual bonus and LTIP plans, the Committee
retains the ability to amend the performance conditions and/or
measures in respect of any award or payment if one or more
event(s) have occurred which would lead the Committee to
consider that it would be appropriate to do so, provided that
such an amendment would not be materially less difficult to
meet.
If the Committee used any of the discretions set out above these
would, where relevant, be disclosed in the next Annual
Remuneration Report and the views of major shareholders may
also be sought.
Statement of consideration of employment
conditions elsewhere in Britvic
The Committee is kept regularly updated on pay and conditions
across the Group and has reference to average pay increases
and the average salaries for the wider employee population.
These metrics are considered by the Committee when reviewing
the remuneration for Executive Directors.
The company did not consult with employees when drawing up
the Remuneration Policy.
Statement of consideration of shareholder
views
The Committee is committed to on-going dialogue with the
company’s shareholder base. This can take a variety of forms,
such as:
• The timing of any payments
• The impact of a change of control or restructuring
• Any adjustments to performance conditions or awards
required as a result of a corporate event (such as a transaction,
corporate restructuring event, special dividend or rights issue)
• Meetings with major shareholders to consider significant
potential changes to policy or specific issues of interest to
particular shareholder groups
• Other dialogue to update shareholders and take their feedback
on planned refinements to arrangements
• The operation of malus and clawback provisions
• Minor administrative matters to improve the efficiency of
operation of the plans or to comply with local tax law or
regulation
In drawing up the Remuneration Policy approved at the last
AGM, the Chair of the Committee wrote to Britvic’s major
shareholders and key institutional representative bodies and held
several follow up meetings. The views expressed by our
shareholders during this process have been considered in the
development of the Remuneration Policy.
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Governance Directors’ Remuneration Policy continued
Approach to remuneration on recruitment
When hiring a new Executive Director, or making internal promotions to the Board, the Committee will in principle apply the same
policy as for existing Executive Directors, as detailed in the Remuneration Policy. The rationale for the package offered will be explained
in the next Annual Remuneration Report.
For internal promotions any commitments made prior to appointment may continue to be honoured as the Executive is transitioned to
the new remuneration arrangements.
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. The details are
set out in the table below:
Area
Base salary
Policy and operation
• Base salary would be set at an appropriate level to recruit the best candidate based on their skills,
experience and current remuneration. In some instances it may be appropriate to recruit on a
salary at the lower end of the typical market range and progress salary increases above the typical
rate of increases provided to the wider employee workforce to align with performance and policy
over time
Benefits and pension
• Benefits and pension would be in line with normal policy and may include, where appropriate,
relocation benefits or other benefits reflective of normal market practice in the territory in which the
Executive Director is employed
Annual bonus
Normal LTIP awards
(ESOP and PSP)
Additional LTIP awards
(ESOP and PSP)
Replacement awards
Service contracts
• Awards would be made under the annual bonus plan in line with the Remuneration Policy
• Maximum opportunity would not exceed 140% of base salary
• Awards would be made under the LTIP plans in line with the Remuneration Policy
• Under the ESOP, maximum opportunity would not exceed 300% of base salary
• Under the PSP, maximum opportunity would not exceed 150% of base salary
• On the recruitment of a director the Committee may make a one-off performance linked award
under the ESOP and PSP subject to the below limits. Under the ESOP an award of up to 500% of
base salary may be made in a year to an executive (inclusive of the normal annual award that
would be granted to an executive)
• Under the PSP an award of up to 200% of base salary may be made in a year to an executive
(inclusive of the normal annual award that would be granted to an executive)
• The Committee will normally seek to avoid using replacement awards. However where, in
exceptional circumstances, replacement awards are considered by the Committee to be
necessary, they are not subject to a formal maximum, although would be designed to reflect only
the value of remuneration forgone by the recruited Executive or less. In making any buyout awards
the Committee would take into account any additional LTIP awards made as set out above
• The Committee may agree a contractual notice period with the Executive which initially exceeds
twelve months, as applies to other Executives, particularly if it is necessary to attract Executives
who will be required to relocate their families
• This will reduce to a twelve month rolling notice period once the individual is twelve months from
the end of their initial notice period
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Governance Directors’ Remuneration Policy continued
Service contracts and policy on payment for loss of office
The table below sets out items that are contained within the service contracts for the Executive Directors. It is the policy that these will
apply to any future Director.
Item
Policy
Notice period
Remuneration
Benefits
Contractual
termination payment
• 12 months if given by the company
• 6 months if given by the Executive
• Base salary and pension
• Eligibility to participate in the annual bonus and LTIP and other share incentive plans
• Provision of company car or cash alternative
• Payment of professional subscriptions for up to two recognised professional bodies
• Eligibility for private medical insurance
• The company may terminate the Executive’s employment at any time and with immediate effect and will
pay the Executive an after tax sum in lieu of notice equal to the basic salary which the Executive would
have been entitled to receive during their notice period. A payment may also be made in respect of
outstanding untaken holiday entitlement accrued up to and including the date of termination
• Payments in lieu of notice would be paid monthly and are subject to mitigation if the Executive obtains
alternative income during the period
• If the Executive is terminated for reasons such as gross misconduct no payment in lieu of notice will be due
• The Committee may at its discretion put the Executive on garden leave for any period provided that base
salary and contractual benefits are paid during this period. The Committee would only use this discretion
when appropriate and would seek to minimise the cost to the company if such discretion was required
Non-Executive
Directors
• The NEDs do not have service contracts but instead have letters of appointment for a three-year term
• On termination NEDs shall only be entitled to accrued fees as at the date of termination
In the event of a settlement agreement, the Committee may agree payments it considers reasonable in settlement of legal claims. This
may include reasonable reimbursement of professional fees in connection with such agreements.
The table below sets out details of how an Executive Directors incentives and pension would be treated on termination. Items of fixed
pay are detailed in the previous table.
Incentives
Treatment
Annual Bonus
• In the case of retirement with the agreement of the Committee, redundancy, death in service, or such
ESOP & PSP
Pension
other reason as the Committee may in its discretion approve, the bonus will be pro-rated to the date of
termination and paid on the normal payment date
• Executives leaving for any other reason will normally forfeit their awards
• Awards for executives who are treated as a ‘good leaver’ under the rules of the LTIPs (reasons include ill
health, injury, disability, redundancy, change of control, retirement with the consent of the company, and
any other reason at the Committee’s discretion) will vest at the normal vesting date unless the Committee
determines the awards should vest at an alternative date taking into consideration the extent to which any
performance conditions have been satisfied and time served over the performance period
• If the executive is not a ‘good leaver’, the awards will lapse immediately on termination
• If the executive ceases to be a director as a result of death, awards will vest as soon as practicable taking
into consideration the extent to which any performance conditions have been satisfied and time served
over the performance period
• The Committee may consider offering a discounted one-off cash settlement to a member who is leaving
the company to reduce the company’s balance sheet exposure to the BETUS liability. This is normally
used at retirement
• All members of the defined benefits section of the pension plan (Plan) 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
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.
On behalf of the board
John Daly
Chairman of the Remuneration Committee
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Governance
Directors’ report
The directors present their report and
the audited consolidated financial
statements of the company and the
group for the 53 weeks ended 2
October 2016.
Additional disclosures
Other information that is relevant to this report and which is also
incorporated by reference, including information required in
accordance with the UK Companies Act 2006 and Listing Rule
9.8.4R, can be located as follows:
Business model
Strategy for delivering objectives
Results
Financial assets and liabilities
Principal risks
Corporate responsibility
Greenhouse gas emissions
Our people
Going concern
Viability statement
Page 8
Pages 12-13
Pages 9-21
Page 98
Pages 28-31
Pages 24-27
Pages 26-27
Pages 23-25
Page 87
Page 32
Long-Term incentive plans*
Pages 141-142
Dividend waiver*
Page 86
*as required under Listing Rule 9.8.4R
Business review and future development
A review of the group’s operations during the year and its plans
for the future is given in the Chairman’s introduction, the Chief
Executive Officer’s Review and the Chief Financial Officer’s Review
between pages 2 to 23. Details of the group’s business model
and strategy are summarised between pages 8, 9, 12 and 13.
Results and dividends
The group’s profit before taxation attributable to the equity
shareholders amounted to £151.9m (2015: £137.6m) and the
profit after taxation amounted to £114.5m (2015: £103.8m). An
interim dividend of 7.0p (2015: 6.7p) per ordinary share was paid
on 8 July 2016.
Subject to shareholder approval, the directors have proposed a
final dividend of 17.5p (2015: 16.3p) per ordinary share payable
on 3 February 2017 to shareholders on the register at the close
of business on 9 December 2016, giving a total dividend in
respect of 2016 of 24.5p (2015: 23.0p), an increase of 6.5%
per cent over the previous year.
Articles of association
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 year:
Gerald Corbett, Simon Litherland, John Gibney (resigned on 27
January 2016), Joanne Averiss, Sue Clark (appointed 29
February 2016), Mathew Dunn (appointed 25 November 2015),
John Daly, Ben Gordon, Bob Ivell (resigned 1 March 2016), Ian
McHoul and Euan Sutherland (appointed 29 February 2016).
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 to the first
AGM 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 election (Sue Clark and Euan Sutherland)
or re-election at the AGM. The biographical details of the
directors are set out on pages 36 and 37 of this report. The
service contracts of the Executive Directors and letters of
appointment of the Non-Executive Directors are available for
inspection at the company’s registered office.
Directors’ interests
The directors’ interests in ordinary shares of the company are
shown within the Directors’ Remuneration Report on page 72.
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 under their
service contract or letter of appointment, which was subsisting
during or existing at the end of year and which was significant in
relation to the group’s business. Further details of Joanne
Averiss’ appointments are set out on page 43 in the Corporate
Governance Report.
There are procedures in place to deal with any conflicts of
interest and these have operated effectively during the year.
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Governance Directors’ report continued
Directors’ liabilities
As at the date of this report, customary indemnities are in place
under which the company has agreed, to the extent permitted by
law and the company’s articles, to indemnify:
At 29 November 2016, the company had been notified, in
accordance with the Disclosure and Transparency Rules, of the
following interests amounting to three per cent or more of the
voting rights in the issued ordinary share capital of the company:
• The directors, in respect of all losses arising out of, or in
connection with, the execution of their powers, duties and
responsibilities as directors of the company or any of its
subsidiaries; and
• Directors of companies which are corporate trustees of the
group’s pension schemes against liability incurred in connection
with those companies’ activities as trustees of such schemes.
Directors’ remuneration
The Remuneration Committee, on behalf of the board, has
adopted a policy that aims to attract and retain the directors
needed to run the group effectively. The policy is contained within
the Directors’ Remuneration Report on pages 76 to 81.
Employees
For full information on our employees, including the areas of
learning and development, employee communication and
engagement, health, safety and wellbeing and equal
opportunities these are included in our Sustainable business
review on pages 24 to 27.
Human rights
Britvic does not have a specific human rights policy. Britvic’s
Code of Conduct sets out our guidelines on human rights in that
wherever Britvic operates in the world, it ensures that work is
carried out in a safe and clean environment. Proper standards of
employment comply with local laws. Britvic only works with
suppliers who adopt the ethical business standard required
under Britvic’s ethical business policy.
Political donations
No political donations were made by the group and its
subsidiaries (2015: nil).
Greenhouse gas emissions
Details of the greenhouse gas emissions in tonnes of carbon
dioxide equivalent (CO2e) for our office and manufacturing locations
are set out in the Sustainable business review on page 27.
Major shareholders
At 2 October 2016, the company had been notified, in
accordance with the Disclosure and Transparency Rules, of the
following interests amounting to three per cent or more of the
voting rights in the issued ordinary share capital of the company:
Number of
ordinary
shares
Percentage
of voting
rights
Nature of
holding
FMR LLC
18,432,163
7.00% Indirect
Standard Life
Investments Ltd
APG Asset
Management N.V
Prudential plc group
of companies
14,838,243
5.645% Direct/
indirect
12,522,359
5.07% Direct
13,102,948
4.98% Indirect
PepsiCo, Inc.
11,813,032
4.88% Direct
Number of
ordinary
shares
Percentage
of voting
rights
Nature of
holding
16,080,643
6.12%
Direct
APG Asset
Management N.V
Blackrock, Inc.
13,195,300
5.01%
Indirect
Prudential plc group
of companies
13,193,028
5.01%
Indirect
Share capital
The company’s issued share capital comprised a single class of
shares divided into ordinary shares of 20 pence each (referred to
as “ordinary shares”). As at 2 October 2016, the company’s
issued share capital comprised of 262,871,256 ordinary shares.
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 or proxies in relation to resolutions to
be proposed 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 which may from time to time be imposed
by laws and regulations (for example, insider trading laws); and
• Pursuant to the Listing Rules of the Financial Conduct
Authority and Britvic’s share dealing code whereby certain
employees of the group 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.
Dividend Waiver
The trustees of the Britvic Share Incentive Plan have elected to
waive dividends on shares held under trust relating to dividends
payable during the year.
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
28 November 2016, the Trustees held 1.24% (2015: 0.08%) of
the issued share capital of the company.
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Governance Directors’ report continued
Similarly, if First Names (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 Trustees held 0.19% of the issued share capital as at 28
November 2016 (2015: 0.5%).
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. Further details
of these agreements can be found on page 28.
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 22 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.
Branches
As a global group, our interests and activities are held or
operated through subsidiaries, branches, joint arrangements or
associates which are established in, and subject to the laws and
regulations of, many different jurisdictions.
Going concern and viability
The Directors consider that the group and the company have
adequate resources to remain in operation for the foreseeable
future and have therefore continued to adopt the going concern
basis in preparing the financial statements.
The UK Corporate Governance Code requires the directors to
assess and report on the prospects of the Group over a longer
period. This longer term viability statement is set out on page 32.
Events since the balance sheet date
Subsequent to the period end, the group announced the
acquisition, subject to competition approval, of East Coast
Suppliers Limited, a licensed wholesaler in Ireland. The
acquisition price is deemed not material to the group.
2017 annual general meeting
The AGM will be held at RSA House, Durham House Street, off
the Strand, London WC2N 6HG, at 11.00am on 31 January
2017. 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.
Audit information
The directors confirm that, so far as they are aware, there is no
relevant audit information (as defined in section 418 of the
Companies Act 2006) of which the auditor is unaware and that
each director has taken all reasonable steps to make themselves
aware of any relevant audit information and to establish that the
auditor is aware of that information.
The directors confirm full compliance with the Competition and
Markets Authority’s Statutory Audit Services Order. A full
competitive audit tender was undertaken during the year which
resulted in Ernst & Young LLP being retained. Further information
relating to the tender process can be found on page 55 of the
Audit Committee report.
Disclaimer
The purpose of this Annual Report is to provide information to the
members of the company and it has been prepared for, and only
for, the members of the company as a body, and no other
persons. The company, its directors and employees, agents and
advisers do not accept or assume responsibility to any other
person to whom this document is shown or into whose hands it
may come and any such responsibility or liability is expressly
disclaimed. A cautionary statement in respect of forward-looking
statements contained in this Annual Report appears on the inside
front cover of this document.
The directors’ report was approved by the Board on 29
November 2016.
By Order of the Board
Clare Thomas
General Counsel and Company Secretary
Britvic plc
Company No. 5604923
Britvic plc Annual Report 2016
87
Governance
Statement of directors’
responsibilities
The Directors are responsible for
preparing the Annual Report and
Accounts, including the consolidated
financial statements and the Company
financial statements, the Directors’
Report, including the Remuneration
Report and the Strategic Report, in
accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU, and
the Company financial statements and the Remuneration Report
in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom generally accepted
accounting practice, UK GAAP). In preparing the consolidated
financial statements, the Directors have also elected to comply
with IFRS, issued by the International Accounting Standards
Board (IASB). Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Company
on a consolidated and individual basis and for the profit or loss
of the Company on a consolidated basis for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and
prudent;
• state that the consolidated financial statements comply with
IFRS as issued by the IASB and IFRS adopted by the EU and,
with regard to Company financial statements, that applicable
UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial
statements; and
• prepare the consolidated financial statements and Company
financial statements on a going concern basis unless it is
inappropriate to presume that the Company, on a consolidated
and individual basis, will continue in business, in which case
there should be supporting assumptions or qualifications as
necessary.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company on a consolidated and
individual basis, and to enable them to ensure that the consolidated
financial statements comply with the Companies Act 2006 and
Article 4 of the IAS Regulation and the Company financial statements
and the Remuneration Report comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Company and its subsidiaries and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of
the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on
page 36 to 37, confirms that:
• to the best of their knowledge, the consolidated financial
statements and the Company financial statements, which have
been prepared in accordance with IFRS as issued by the IASB
and IFRS as adopted by the EU and UK GAAP respectively,
give a true and fair view of the assets, liabilities, financial
position and profit of the Company on a consolidated and
individual basis;
• to the best of their knowledge, the Strategic Report contained
in the Annual Report and Accounts includes a fair review of the
development and performance of the business and the
position of the Company on a consolidated and individual
basis, together with a description of the principal risks and
uncertainties that it faces; and
• they consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Simon Litherland
Chief Executive Officer
Mathew Dunn
Chief Financial Officer
29 November 2016
29 November 2016
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Financial
statements
90
Independent Auditor’s Report to the
members of Britvic plc
96 Consolidated income statement
97 Consolidated statement of
comprehensive income/(expense)
98 Consolidated balance sheet
99 Consolidated statement of cash flows
100 Consolidated statement of changes in equity
101 Notes to the consolidated financial statements
148 Company balance sheet
149 Company cash flow statement
150 Company statement of changes in equity
151 Notes to the company financial statements
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Financial statements
Independent Auditor’s Report to
the members of Britvic plc
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 2 October 2016
and of the group’s profit for the 53 week period then ended;
• the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with United Kingdom generally accepted
accounting practice including FRS 101; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
What we have audited
We have audited the financial statements of Britvic plc for the 53 week period ended 2 October 2016 which comprise:
GROUP
PARENT COMPANY
Consolidated income statement for the 53 week period ended 2 October 2016
Balance sheet as at 2 October 2016
Consolidated statement of comprehensive income/(expense) for the
53 week period ended 2 October 2016
Cash Flow Statement for the 53 week period
ended 2 October 2016
Consolidated balance sheet as at 2 October 2016
Consolidated statement of cash flows for the 53 week period ended
2 October 2016
Consolidated statement of changes in equity for the 53 week period
ended 2 October 2016
Related notes 1 to 32
Statement of changes in equity for the 53 week
period ended 2 October 2016
Related notes 1 to 14
The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law
and United Kingdom accounting standards (United Kingdom generally accepted accounting practice) including FRS 101.
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 88, the directors are responsible for the preparation
of the 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 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 and 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.
Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those which had the greatest effect on our overall audit strategy, the
allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the
procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express
any opinion on these individual areas.
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These risks are consistent with those identified and reported in 2015 with the exception of one additional area within the risk of
management override of internal control, being the accounting for, and valuation of, the contingencies that management have
identified in respect of the Group’s acquisition of Britvic Brazil in the current year.
The risks noted below are discussed in the Audit Committee Report on pages 50 to 55 and in the accounting policy notes on pages 101 to 108.
RISK – revenue recognition
Description of risk
• Revenue is recognised on confirmation of product delivery to customers. Given the volume of deliveries and market focus on
revenue performance we consider there is a risk in relation to the potential overstatement of revenue at the period end.
Our response to this risk
• we tested controls over revenue recognition, including those relating to the timing of revenue recognition;
• we performed revenue transaction testing, which included ensuring that the transaction had been appropriately recorded in the
income statement at the right time;
• we performed cut-off testing on customer delivery notes around the period end;
• we reviewed post year end credit notes for any items that related to the audit period;
• we examined the appropriateness of the roll-forward adjustments recorded for both Britvic Brazil and Britvic France that are
posted due to the non-coterminous year end dates of these components with the Group.
• we looked for and tested journal entries relating to revenue for transactions close to the period end to ensure they were valid
entries. We also analysed and selected journals for testing which appeared unusual in nature either due to size, preparer or
being manually posted. We verified the journals to originating documentation to confirm that the entry was valid; and
• we ensured that the financial statement disclosures were in accordance with accounting standards.
• The above work was performed at all full and specific scope locations.
Within International Standard on Auditing (UK&I) 240 there is a presumption that there are risks of fraud in revenue recognition.
We therefore evaluated the revenue transactions or assertions which give rise to such risk in the current year as noted above.
Key observations communicated to the Audit Committee
Based on our procedures we are satisfied that the revenue cut-off was appropriate.
RISK – management override of internal control over discounts
Description of risk
• The risk of material misstatement due to management override of controls is considered a risk in every audit. Management has
the primary responsibility to prevent and detect fraud. We are required by professional auditing standards to consider how this
risk may manifest itself and design appropriate procedures.
• Management could manipulate results through the accounting for promotional discounts and long term discounts which are
deducted from revenue.
Our response to this risk
• we obtained an understanding of the Group’s processes for the recognition and management of discounts provided to customers
including obtaining an understanding of the design of the controls in place within the GB, Ireland and International divisions where
such discounts are most prevalent;
• we tested a sample of long term and promotional discount expenses throughout the period and the period end accruals by agreeing
balances through to supporting documentation and ensured that the revenue recognition policies adopted complied with IFRS;
• we performed analytical procedures including the correlation of revenue to discounts to assess completeness of discounts;
• we performed testing of post year end discounts, both settled and recorded, as evidence of the appropriateness of discount
accruals recognised at the year end;
• we reviewed post year end credit notes for any items that related to the audit period;
• we held bi-annual meetings with the customer account teams in GB to update our knowledge of the status of customer
negotiations and the process by which discounts have been recorded;
• we looked for and tested journal entries relating to revenue for transactions close to the period end to ensure they were valid
entries. We also analysed and selected journals for testing which appeared unusual in nature either due to size, preparer or being
manually posted. We verified the journals to originating documentation to confirm that the entry was valid; and
• we ensured that the financial statement disclosures were in accordance with accounting standards.
Key observations communicated to the Audit Committee
Based on our procedures, we have not identified any management override of the discounts either expensed or accrued in the
financial statements.
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Financial statements Independent Auditor’s Report to the members of Britvic plc continued
RISK – management override of internal control over customer claims and other financial items
Description of risk
• The risk of material misstatement due to management override of controls is considered a risk in every audit. Management has
the primary responsibility to prevent and detect fraud. We are required by professional auditing standards to consider how this risk
may manifest itself and design appropriate procedures;
• There are a number of judgemental accruals which are susceptible to manipulation by management including customer claims in
GB, group wide bonuses and contingent liabilities associated with the acquisition of ebba (“Britvic Brazil”).
Our response to this risk
• We performed procedures, including analytical procedures and journal entry testing, sufficient to address the identified risk in
respect of subjective areas which were considered to be most susceptible to management override.
• For GB customer claims:
- we held bi-annual discussions with a sample of customer account teams directly involved in negotiations with customers,
including those responsible for the relationship with the big supermarkets. Through these discussions we understood the
current relationship with each customer and the status of any claims;
- we reviewed the methodology and process by which claims have been accrued for appropriateness and consistency with the
prior year, specifically reviewing the process for identifying claims which have not been received and audited a sample of
payments made after the year end to audit the accuracy of the accrued amounts; and
- we compared the level of aged debt held in relation to significant customers to the customer claims provision and investigated
any additional significant un-provided aged debts that did not have a corresponding provision within the customer claims
provision.
• For other financial items (including group wide bonuses):
- we audited the inputs in the assessments made by management to determine if balanced judgement and accurate calculations
have been applied;
- where possible, we have tested post year payments to validate the amounts recorded at the reporting period end; and
- where similar accruals and provisions were held in the previous period we compared assumptions used in the current period
calculations to those used previously and tested any changes in assumptions to gain assurance that they are appropriate.
• For the contingent liabilities arising on the acquisition of Britvic Brazil:
- we have reviewed the contract terms of the sale and purchase agreement to understand the nature of any items covered by
warranties given in the sale and purchase agreement;
- we have traced the gross liabilities through to supporting documentation; and
- we have assessed the appropriateness of the weighted average probability applied to the gross liabilities to arrive at the fair
value.
Key observations communicated to the Audit Committee
Based on our procedures, we have not identified any instances of management override in the areas noted.
Our application of materiality
The scope of our work is influenced by materiality. We apply this concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming our audit opinion. As we develop our audit strategy we
determine materiality at the overall level and at the individual account level (referred to as our performance materiality).
Materiality £7.7m
Performance
materiality £5.8m
Reporting
threshold £0.39m
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Financial statements Independent Auditor’s Report to the members of Britvic plc continued
Materiality
The magnitude of an omission or misstatement that individually, or in aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our
audit procedures.
We determined materiality for the group to be £7.7 million (2015: £7.5 million), which is approximately 5% (2015: 5%) of pre-tax profit
adjusted for the exceptional costs associated with the acquisition and integration of Britvic Brazil because, in our view, this is the most
relevant measure of the underlying financial performance of the Group. This materiality provided the basis for determining the nature,
timing and extent of our audit procedures, and identifying and assessing the risk of material misstatement.
Starting basis
Adjustment
Materiality
Profit before tax of £151.9m as per the Annual Report
Acquisition and integration costs associated with Britvic Brazil of £5.2m as per Note 5
of the Annual Report
Represents 5% of the adjusted profit before tax
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
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 for the group should be 75% (2015: 75%) of planning materiality, namely £5.8 million (2015: £5.6 million).
Audit work at individual components is undertaken based on a percentage of our total performance materiality. The performance
materiality set for each component is based on the relative size of the component and our view of the risk of misstatement at that
component. In the current year the range of performance materiality allocated to components was £0.6 million to £4.9 million (2015: £0.6
million to £4.8 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.39 million (2015:
£0.38 million), as well as differences below that threshold that, in our view warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in the light of
other relevant qualitative considerations in forming our opinion.
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An overview of the scope of our audit Tailoring the scopeOur assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity within the Group which, when taken together, enable us to form an opinion on the group financial statements under International Standards on Auditing (UK and Ireland). We take into account size, risk profile, changes in the business environment and other factors when assessing the level of work to be performed at each entity.In addition to auditing the Group level functions our group audit scope focused on five businesses, of which GB, France and Brazil were subject to a full scope audit for the 53 week period ended 2 October 2016. Certain operations of the remaining two businesses - Ireland and International - 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 in specific account balances and the materiality of those operations to the Group’s business. Together with the Group functions, which were also subject to a full scope audit, these operations represent the principal business units of the Group and account for 97% (2015: 95%) of the Group’s total assets, 96% (2015: 96%) of the Group’s revenue and 95% (2015: 90%) of the Group’s adjusted profit before tax. For 2016, the full scope components contributed 105% of the Group’s adjusted profit before tax. The two specific scope components contributed 8% of the Group’s revenue and (10)% of the Group’s adjusted profit before tax. The audit scope of these components did not include testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group. For the remaining locations, we performed other procedures, including analytical review, testing of consolidation journals and intercompany eliminations and foreign currency translation recalculations to respond to any potential risks of material misstatement to the Group Financial Statements.We have obtained an understanding of the entity-level controls of the Group as a whole which assisted us in identifying and assessing risks of material misstatement due to fraud or error, as well as assisting us in determining the most appropriate audit strategy.Changes from the prior yearOur scoping broadly remains unchanged from the prior year other than the allocation of a full scope audit for Brazil, since this entity was acquired on 30 September 2015.Involvement with component teamsThe Senior Statutory Auditor leads the audit of GB, the audit of both specific scope locations, and the audit of the group functions. The Senior Statutory Auditor visited Brazil, a full scope location, participated in the Brazil and France component team’s planning including the discussion of fraud and error and joined the closing meeting calls in both territories. Opinion on other matters prescribed by the Companies Act 2006In 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 Strategic Report and the Directors’ Report for the financial period for which the financial statements are prepared is consistent with the financial statements;• the information given in the Corporate Governance Report set out on pages 34 to 35 with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the financial statements.98%8%4%3%7% GB France Ireland International BrazilADJUSTED PBT64%18%9%6%3% GB France Ireland International BrazilREVENUE94 Britvic plc Annual Report 2016Financial statementsIndependent Auditor’s Report to the members of Britvic plc continued177534_BRITVIC_TEXT-p089-158.indd 9413/12/2016 19:11 Financial statements Independent Auditor’s Report to the members of Britvic plc continued
Matters on which we are required to report by exception
ISAs (UK
and Ireland)
reporting
We are required to report to you if, in our opinion, financial and non-financial 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 have no
exceptions
to report.
• otherwise misleading.
In particular, we are required to report whether we have identified any inconsistencies between
our knowledge acquired in the course of performing the audit and the directors’ statement
that they consider the annual report and accounts taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the entity’s
performance, business model and strategy; and whether the annual report appropriately addresses
those matters that we communicated to the audit committee that we consider should have been
disclosed.
We are required 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.
• a Corporate Governance Statement has not been prepared by the company.
Companies
Act 2006
reporting
Listing
Rules review
requirements
We are required to review:
• the directors’ statement in relation to going concern, set out on page 87, and longer-term viability,
set out on page 32; and
• the part of the Corporate Governance Statement relating to the company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review.
We have no
exceptions
to report.
We have no
exceptions
to report.
Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity of the Entity
ISAs (UK
and Ireland)
reporting
We are required to give a statement as to whether we have anything material to add or to draw
attention to in relation to:
• the directors’ confirmation in the annual report that they have carried out a robust assessment of
the principal risks facing the entity, including those that would threaten its business model, future
performance, solvency or liquidity;
• the disclosures in the annual report that describe those risks and explain how they are being
We have
nothing
material
to add or
to draw
attention to.
managed or mitigated;
• the directors’ statement in the financial statements about whether they considered it appropriate
to adopt the going concern basis of accounting in preparing them, and their identification of any
material uncertainties to the entity’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements; and
• the directors’ explanation in the annual report as to how they have assessed the prospects of the
entity, over what period they have done so and why they consider that period to be appropriate,
and their statement as to whether they have a reasonable expectation that the entity will be able
to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
Simon O’Neill (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Birmingham
29 November 2016
Notes:
1. The maintenance and integrity of the Britvic Group plc web site is the responsibility of the directors; the work carried out by the auditor 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.
2. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
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Financial statements
Consolidated income
statement
For the 53 weeks ended 2 October 2016
53 weeks
ended 2 October 2016
52 weeks
ended 27 September 2015
Before
exceptional
&
other items
Exceptional
& other
items*
Total
Before
exceptional
&
other items
Exceptional
& other
items*
Total
Note
£m
£m
£m
£m
£m
£m
Revenue
Cost of sales
Gross profit
Selling and distribution costs
Administration expenses
Operating profit/(loss)
Finance income
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**
6
9
9
10
11
11
11
11
1,431.3
(659.3)
772.0
(402.3)
(191.0)
178.7
1.7
(22.5)
157.9
(36.3)
121.6
-
-
-
-
(2.3)
(2.3)
0.7
(4.4)
(6.0)
(1.1)
(7.1)
1,431.3
1,300.1
(581.4)
718.7
(355.6)
(194.1)
169.0
0.3
(22.3)
147.0
(34.5)
112.5
(659.3)
772.0
(402.3)
(193.3)
176.4
2.4
(26.9)
151.9
(37.4)
114.5
43.8p
43.5p
49.3p
49.0p
-
-
-
-
(12.4)
(12.4)
3.6
(0.6)
(9.4)
0.7
(8.7)
1,300.1
(581.4)
718.7
(355.6)
(206.5)
156.6
3.9
(22.9)
137.6
(33.8)
103.8
41.8p
41.2p
46.3p
45.7p
* See note 5.
** 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.
96
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Financial statements
Consolidated statement of
comprehensive income/(expense)
For the 53 weeks ended 2 October 2016
Profit for the period attributable to the equity shareholders
Other comprehensive income/(expense):
Items that will not be reclassified to profit or loss
Remeasurement (losses)/gains on defined benefit pension schemes
Deferred tax on defined benefit pension schemes
Current tax on additional pension contributions
Deferred tax on other temporary differences
Items that may be subsequently reclassified to profit or loss
Gains in the period in respect of cash flow hedges
Amounts recycled to the income statement in respect of cash flow hedges
Amounts recycled to goodwill on acquisition of subsidiary
Tax recycled to goodwill on acquisition of subsidiary
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
53 weeks
ended
2 October
2016
52 weeks
ended
27 September
2015
£m
114.5
£m
103.8
(58.7)
8.7
3.3
0.2
(46.5)
68.5
(64.1)
10.2
(2.0)
(0.7)
36.5
3.9
52.3
3.2
(3.7)
3.1
-
2.6
10.1
(22.1)
-
-
2.5
(1.5)
-
(11.0)
Note
22
10a
10a
10a
25
25
31
31
10a
25
10a
Other comprehensive income/(expense) for the period, net of tax
5.8
(8.4)
Total comprehensive income for the period attributable to the equity shareholders
120.3
95.4
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Financial statements
Consolidated balance sheet
As at 2 October 2016
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Other receivables
Derivative financial instruments
Deferred tax asset
Pension asset
Current assets
Inventories
Trade and other receivables
Current income tax receivables
Derivative financial instruments
Cash and cash equivalents
Non-current assets held for sale
Total assets
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Derivative financial instruments
Current income tax payable
Provisions
Other current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Pension liability
Derivative financial instruments
Provisions
Other non-current liabilities
Total liabilities
Net assets
Capital and reserves
Issued share capital
Share premium account
Own shares reserve
Other reserves
Retained losses
Total equity
2 October
2016
27 September
2015
Note
£m
£m
13
14
25
10f
22
16
17
10c
25
18
23
21
25
10c
26
21
10f
22
25
26
19
20
382.4
417.9
4.4
98.6
6.5
0.6
910.4
112.7
317.9
5.1
81.0
205.9
722.6
1.4
1,634.4
(437.2)
(288.1)
(1.1)
(13.1)
(6.8)
(33.1)
(779.4)
(491.7)
(53.0)
(18.0)
(4.3)
(5.9)
(1.1)
(574.0)
(1,353.4)
281.0
52.6
129.1
(3.3)
146.5
(43.9)
281.0
244.2
305.1
2.4
90.4
-
22.4
664.5
86.7
293.9
-
10.9
239.6
631.1
3.5
1,299.1
(417.4)
(2.9)
(13.8)
(24.0)
(1.3)
-
(459.4)
(572.4)
(46.4)
(5.1)
(1.3)
(1.2)
(1.5)
(627.9)
(1,087.3)
211.8
52.2
123.2
(11.4)
94.1
(46.3)
211.8
The financial statements were approved by the board of directors and authorised for issue on 29 November 2016. They were signed
on its behalf by:
Simon Litherland
Mathew Dunn
98
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Financial statements
Consolidated statement
of cash flows
For the 53 weeks ended 2 October 2016
Cash flows from operating activities
Profit before tax
Net 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 in inventory
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase/(decrease) in provisions
Profit on disposal of property, plant and equipment 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
Interest received
Acquisition of subsidiary, net of cash acquired
Net cash flows used in investing activities
Cash flows from financing activities
Interest paid, net of derivative financial instruments
Interest bearing loans drawndown/(repaid)
Acquired debt repaid
Repayment of 2009 USPP Notes
Issue costs paid
Issue of shares relating to incentive schemes for employees
Issue of shares under a non pre-emptive placing, net of costs
Purchase of own shares
Dividends paid to equity shareholders
Net cash flows used in financing activities
Net (decrease)/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
53 weeks
ended
2 October
2016
52 weeks
ended
27 September
2015
Note
£m
£m
9
13
13
14
27
31
21
21
21
21
19
12
28
18
151.9
24.5
(13.6)
0.7
33.2
16.3
6.6
(25.9)
(0.3)
10.9
(40.3)
3.3
(0.3)
(34.2)
132.8
6.7
(114.2)
(7.7)
1.7
(41.2)
(154.7)
(22.2)
104.5
(38.0)
-
-
5.9
(1.1)
(2.1)
(60.9)
(13.9)
(35.8)
239.6
2.1
205.9
137.6
19.0
3.9
0.1
29.9
11.1
10.6
(22.2)
(4.4)
(21.5)
36.1
(3.1)
-
(30.2)
166.9
4.1
(54.1)
(7.0)
-
-
(57.0)
(21.6)
(0.9)
-
(18.0)
(2.2)
3.7
87.8
(9.2)
(52.9)
(13.3)
96.6
143.3
(0.3)
239.6
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Financial statements
Consolidated statement of
changes in equity
For the 53 weeks ended 2 October 2016
Issued
share
capital
Share
premium
account
Own
shares
reserve
Other
reserves
(note 20)
Retained
Losses
£m
49.4
£m
33.5
£m
(2.9)
£m
£m
105.1
(102.0)
Total
£m
83.1
-
-
-
0.3
2.5
-
-
-
-
-
-
-
-
-
-
5.5
85.3
(1.1)
-
-
-
-
-
-
-
-
-
(2.1)
-
-
(13.4)
7.0
-
-
-
-
-
103.8
103.8
(11.0)
(11.0)
2.6
106.4
(8.4)
95.4
3.7
87.8
(1.1)
(13.4)
1.4
8.2
0.6
(1.0)
-
-
-
-
(5.6)
8.2
0.6
(1.0)
-
-
-
-
-
-
-
-
-
52.2
123.2
(11.4)
94.1
(46.3)
211.8
(52.9)
(52.9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1.8)
(3.2)
13.1
-
-
-
-
-
-
114.5
114.5
52.3
52.3
(46.5)
5.8
68.0
120.3
-
-
-
-
-
-
0.1
-
-
-
(12.1)
7.1
1.8
(1.4)
(0.1)
4.5
(3.2)
1.0
7.1
1.8
(1.4)
-
(60.9)
(60.9)
52.6
129.1
(3.3)
146.5
(43.9)
281.0
At 28 September 2014
Profit for the period
Other comprehensive Income/(expense)
Issue of shares relating to incentive schemes for employees
Issue of shares under a non pre-emptive placing
Transaction costs relating to placement of ordinary 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 27 September 2015
Profit for the period
Other comprehensive Income/(expense)
Issue of shares relating to incentive schemes for employees
0.4
5.9
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
Movement in non-distributable profit
Payment of dividend
At 2 October 2016
100
Britvic plc Annual Report 2016
Financial statements
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, France and Brazil.
The financial year represents 53 weeks ended 2 October 2016 (prior financial year 52 weeks ended 27 September 2015). For the UK,
Ireland and International the results are for the 53 weeks ended 2 October 2016 (prior financial year 52 weeks ended 27 September
2015). For France and Brazil the results are for the calendar year ended 30 September 2016 (prior calendar year ended 30 September
2015).
The financial statements were authorised for issue by the board of directors on 29 November 2016.
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.
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.
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
2 October 2016, the consolidated balance sheet is showing a net assets position of £281.0m (27 September 2015: net assets of
£211.8m).
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, the group has a £400.0m bank facility with a recently extended maturity date of November
2021, and £659.8m of private placement notes which have maturity dates between 2016 and 2026.
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 IFRS 10 ‘Consolidated financial statements’. Control is achieved when the company:
• Has the power over the investee;
• Is exposed, or has rights, to variable returns from its involvement with the investee; and
• Has the ability to use its power to affect its returns.
The financial statements of subsidiaries are prepared using consistent accounting policies. All intra-group transactions, balances,
income and expenses are eliminated on consolidation. The results of subsidiary undertakings acquired 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.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably
measured, regardless of when payment is being made.
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.
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
Revenue recognition (continued)
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. Sales related discounts comprise:
• Long term discounts and rebates – which are sales incentives to customers to encourage them to purchase increased volumes and
are related to total volumes purchased and sales growth
• Short term promotional discounts – which are directly related to promotions run by customers
Where sales related rebates and discounts are earned, management make an accrual where it is probable that the rebate will be
earned by the customer. Accruals are made for each individual promotion or rebate based on the specific terms and conditions of the
customer agreement. Management make estimates on an ongoing basis to assess customer performance and sales volume to
calculate total amounts earned to be recorded as deductions from revenue.
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.
Assets under construction are carried at cost. Depreciation of these assets commences when they are ready for use.
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.
Non-current assets held for sale
The group classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than
continuing use. Such non-current assets as held for sale are measured at the lower of their carrying value and fair value less costs to sell.
Property, plant and equipment and intangibles assets are not depreciated or amortised once classified as held for sale.
Assets classified as held for sale are presented separately beneath current items in the statement of financial position.
Business combinations and 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. The consideration
transferred in a business combination is measured at fair value which includes recording deferred consideration at discounted values
where the impact of discounting is material.
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.
On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Intangible assets
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 resources rather than external resources. These costs are amortised over their estimated useful
lives of three to seven years on a straight line basis.
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.
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
Intangible assets (continued)
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.
Research and development
Research costs are expensed as incurred. Development expenditure is recognised as an intangible asset when the group can demonstrate:
• The technical feasibility of completing the intangible asset so that the asset will be available for use
• Its intention to complete and its ability to use the asset
• How the asset will generate future economic benefits
• The availability of resources to complete the asset
• The ability to measure reliably the expenditure during development
• The ability to use the intangible asset generated
Following initial recognition of development expenditure as an asset, the asset is carried at cost less any accumulated amortisation
and accumulated impairment losses. Amortisation of the asset begins when development is complete and available for use. It is
amortised over the period of expected future benefit. During the period of development, the asset is tested for impairment annually.
Impairment of goodwill and intangible assets
Goodwill and indefinite life intangible assets are reviewed for impairment at least annually and whenever events or changes in circumstances
indicate that the carrying value may be impaired. For all remaining intangible assets the group assesses at each reporting date whether there
is an indication that an asset may be impaired. Where impairment testing for an asset is required, the group makes an estimate of the asset’s
recoverable amount or the recoverable amount of the Cash Generating Unit (“CGU”) to which the asset belongs if it does not generate largely
independent cash flows. 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.
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.
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.
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
Fair value
The group measures financial instruments, such as derivatives, at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either:
• In the principal market for the asset or liability; or
• In the absence of a principal market, in the most advantageous market for the asset or liability.
The fair value of an asset or liability is measured using the assumptions that market participants would use when pricing the asset or
liability, assuming that market participants act in their economic best interest.
The group uses valuation techniques that are appropriate in the circumstance and for which sufficient data is available to measure fair
value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
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.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the group determines whether transfers
have occurred between levels in the hierarchy by re-assessing categorisation at the end of each reporting period.
Derivative financial instruments and hedging
The group uses derivative financial instruments such as forward currency contracts and interest rate swaps to hedge its risks associated
with foreign currency and interest rate fluctuations. All derivative financial instruments are initially recognised and subsequently remeasured
at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.
The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar
maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.
For those derivatives designated as hedges and for which hedge accounting is appropriate, the hedging relationship is documented at
its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being
hedged and how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective.
Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken to the
consolidated income statement. The treatment of gains and losses arising from revaluing derivatives designated as hedging
instruments depends on the nature of the hedging relationship, as follows:
Cash flow hedges
Hedges are classified as cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular
risk associated with a recognised asset or liability or a highly probable forecast transaction. For cash flow hedges, the effective portion
of the gain or loss on the hedging instrument is recognised in other comprehensive income, while the ineffective portion is recognised
in the consolidated income statement. Amounts previously recognised in other comprehensive income are transferred to the
consolidated income statement in the period in which the hedged item affects profit or loss, such as when a forecast sale occurs.
However, when the forecast transaction results in the recognition of a non-financial asset or liability, the amounts previously recognised
in other comprehensive income are included in the initial carrying amount of the asset or liability.
If a forecast transaction is no longer expected to occur, amounts previously recognised in other comprehensive income are transferred
to the consolidated income statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or
rollover, or if its designation as a hedge is revoked, amounts previously recognised in other comprehensive income remain in equity
until the forecast transaction occurs and are then transferred to the consolidated income statement or included in the initial carrying
amount of a non-financial asset or liability as above.
Net investment hedges
Financial instruments are classified as net investment hedges when they hedge the group’s net investment in foreign operations. Some of the
group’s foreign currency borrowings qualify as hedging instruments that hedge foreign currency net investment balances. The effective portion of
gains or losses on translation of borrowings designated as net investment hedges is recognised in other comprehensive income. Any ineffective
portion is recognised immediately in the consolidated income statement. Upon disposal of the associated investment in foreign operations any
cumulative gain or loss previously recognised in other comprehensive income is recycled through the consolidated income statement.
Fair value hedges
Hedges of the change in fair value of recognised assets or liabilities are classified as fair value hedges. For fair value hedges, the gain or loss
on the fair value of the hedging instrument is recognised in the consolidated income statement. The gain or loss on the hedged item
attributable to the hedged risk adjusts the carrying amount of the hedged item and is also recognised in the consolidated income statement.
If the hedge relationship no longer meets the criteria for hedge accounting, the hedged item would no longer be adjusted and the cumulative
adjustment to its carrying amount would be amortised to the consolidated income statement based on a recalculated effective interest rate.
The fair value gain or loss on the hedging instrument would continue to be recorded in the consolidated income statement.
104
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
Derecognition of financial instruments
The derecognition of a financial asset takes place when the contractual rights to the cash flows expire, or when the contractual rights
to the cash flows have either been transferred or an obligation has been assumed to pass them through to a third party and the group
does not retain substantially all the risks and rewards of the asset.
Financial liabilities are only derecognised when they are extinguished, that is, when the obligation is discharged, cancelled or expires.
Share-based payments
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
Fair value is determined by an external valuer using an appropriate pricing model. In valuing equity-settled transactions, no account is
taken of any performance conditions, other than conditions linked to the price of the shares (‘market conditions’).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘vesting
date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the number of equity instruments that, in the opinion of the Directors and based on the best
available estimate at that date, will ultimately vest (or in the case of an instrument subject to a market condition, be treated as vesting
as described below). The consolidated income statement charge or credit for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other
performance conditions are satisfied.
Taxation
The current income tax expense is based on taxable profits for the period, after any adjustments in respect of prior periods. It is
calculated using taxation rates enacted or substantively enacted by the balance sheet date and is measured at the amount expected
to be recovered from or paid to the taxation authorities.
Provision is made for deferred tax liabilities, or credit taken for deferred tax assets, on all material temporary differences between the
tax base of assets and liabilities and their carrying values in the consolidated financial statements.
The principal temporary differences arise from accelerated capital allowances, intangible assets, provisions for pensions and other
post-retirement benefits, provisions for share-based payments and unutilised losses incurred in overseas jurisdictions.
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 a finance cost.
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 the fair value of plan assets out of which the obligations are to be settled directly. The cost of providing benefits
is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each reporting period.
Remeasurement, comprising actuarial gains and losses, the effect of the asset ceiling and the return on plan assets (excluding
interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive
income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in
retained earnings and will not be reclassified to profit or loss.
Past service cost is recognised in the consolidated income statement in the period of a plan amendment. Net interest is calculated by
applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Defined benefit costs are categorised as follows:
• Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements);
• Net interest expense or income; and
• Remeasurement.
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
Pensions and post retirement benefits (continued)
The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus
in the group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits
available in the form of refunds from the plans or reductions in future contributions to the plans.
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, on demand deposits 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.
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.
On a refinancing any unamortised financing charges are accelerated through the consolidated income statement.
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. For each entity the Group determines the functional
currency and items, included in the financial statements of each entity, are measured using that functional currency.
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 consolidated income statement.
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.
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.
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.
106
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
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 items of income and expense which, because of the size, nature or 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 on future
transactions and also where hedge ineffectiveness is recognised. 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 estimates
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 and estimates 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.
Franchise rights
Franchise rights represent franchise agreements acquired as part of the Britvic Ireland business combination which provides long term
rights to distribute certain soft drinks. These agreements were allocated a 35 year useful economic life at the time of acquisition based
on a third party assessment. As at 2 October 2016 these intangible assets have a remaining useful life of 26 years. The franchise
agreement itself has a remaining contract life of 9 years which is less than the useful economic life. The useful economic life has been
determined on the basis that the renewal of the franchise agreements, without significant cost, is highly probable. Evidence to support
this conclusion is:
• Significant emphasis on maintaining a strong relationship with Pepsi, strengthened through the addition of Pepsico products to
Britvic’s portfolio in recent years;
• Lack of alternative suppliers; and
• High barriers of entry to the Irish soft drinks bottling market.
Intangible assets with indefinite lives
Management have made a judgement that certain intangible assets relating to brands have indefinite lives.
It is expected that the trademarks with indefinite lives 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.
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.
New standards adopted in the current period
During the period, the group did not adopt any new standards.
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Financial statements Notes to the consolidated financial statements continued
3. Accounting policies (continued)
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 (although in some cases
not yet adopted by the EU) but are not yet effective:
Effective date – periods
commencing on or after
International Financial Reporting Standards (IFRS)
IFRS 9
Financial Instruments
1 January 2018
IFRS 10, IFRS 12 and IAS 28 Amendments to IFRS10, IFRS12 and IAS 28 – Investment Entities 1 January 2016
IFRS 15
IFRS 16
IFRS 11
Revenue from contracts with customers
Leases
Amendments to IFRS 11 – Accounting for Acquisition of Interests
in Joint Operations
1 January 2018
1 January 2019
1 January 2016
IFRS 10 and IAS 28
Amendments to IFRS 10 and IAS 28 – Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
1 January 2016
International Accounting Standards (IAS)
IAS 16 and IAS 38
Amendments to IAS 16 and IAS 38 – Clarification of Acceptable
Methods of Depreciation and Amortisation
1 January 2016
IAS 1
IAS 27
Amendments to IAS 1 – Disclosure Initiatives
Amendments to IAS 27 – Equity Method in Separate Financial
Statements
1 January 2016
1 January 2016
Annual IFRS Improvement Process
AIP IFRS 5
AIP IFRS 7
AIP IAS 19
Non-current Assets Held for Sale and Discontinued Operations -
Changes in methods of disposal
1 January 2016
Financial Instruments: Disclosure – Servicing contracts
1 January 2016
Employee Benefits – Discount rate: regional market issue
1 January 2016
The group is currently confirming the impacts of the above new standards and interpretations on its results, financial position and cash
flows, which are not expected to have a material profit impact with the exception of IFRS 16: ‘Leases’ which provides a single lessee
accounting model, requiring lessees to recognise right of use assets and lease liabilities on the balance sheet for all applicable leases.
4. 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.
For management purposes, the group is organised into business units and has six 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
• Brazil
• 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.
108
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Financial statements Notes to the consolidated financial statements continued
4. Segmental reporting (continued)
Transfer prices between reportable segments are on an arm’s length basis in a manner similar to transactions with third parties.
53 weeks ended
2 October 2016
Revenue
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
27 September 2015
Revenue
Brand contribution
GB
stills
£m
304.4
133.9
GB
carbs
£m
607.7
250.7
Total
GB
£m
912.1
384.6
Ireland
France
Brazil
International
Total
£m
£m
133.9
244.5
48.4
75.9
£m
89.5
17.5
£m
£m
51.3
1,431.3
9.7
536.1
(12.2)
(96.9)
(126.4)
(121.9)
178.7
(20.8)
(6.0)
151.9
GB
stills
£m
GB
carbs
£m
321.6
565.7
151.1
225.1
Total
GB
£m
887.3
376.2
Ireland
France International
Total
£m
£m
£m
£m
120.4
240.3
52.1
1,300.1
44.2
75.6
16.9
512.9
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
(9.7)
(92.6)
(118.6)
(123.0)
169.0
(22.0)
(9.4)
137.6
*
Included within ‘administration expenses’ in the consolidated income statement. ‘Overheads and other costs’ relate to central expenses including salaries, IT
maintenance, depreciation and amortisation.
** Included within ‘selling and distribution costs’ in the consolidated income statement.
Britvic plc Annual Report 2016
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109
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Financial statements 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
Brazil
Other
Total revenue
Non-current assets
United Kingdom
Republic of Ireland
France
Brazil
Other
Total
2016
£m
959.8
112.0
250.9
89.5
19.1
2015
£m
939.4
100.8
252.7
-
7.2
1,431.3
1,300.1
2016
£m
342.4
120.6
231.9
107.0
2.7
804.6
2015
£m
253.9
102.0
194.8
-
1.0
551.7
Non-current assets for this purpose consist of property, plant and equipment, intangible assets and other receivables.
5. Exceptional and other items
Unless otherwise stated, exceptional and other items are included within administration expenses in the consolidated income statement.
Costs in relation to the integration of subsidiary
Costs in relation to the acquisition of subsidiary
Gain on disposal of previously impaired assets
Gain on held for sale properties
Strategic restructuring – cost initiatives
Strategic restructuring – business capability programme
Costs in relation to the closure of operations
Fair value movements
Total included in administration expenses
Fair value movements
Total included in finance income
Fair value movements
Unwind of discount on deferred consideration
Debt repayment charges
Total included in finance costs
Total exceptional and other items before tax
110
Britvic plc Annual Report 2016
Note
(a)
(a)
(b)
(c)
(d)
(e)
(f)
(f)
(f)
(g)
(h)
53 weeks
ended
2 October
2016
52 weeks
ended
27 September
2015
£m
(5.2)
-
-
3.2
(0.6)
(8.4)
(2.4)
11.1
(2.3)
0.6
0.6
(0.4)
(3.3)
(0.6)
(4.3)
(6.0)
£m
-
(6.5)
0.4
0.8
(3.6)
(1.4)
-
(2.1)
(12.4)
3.6
3.6
(0.6)
-
-
(0.6)
(9.4)
177534_BRITVIC_TEXT-p089-158.indd 110
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Financial statements Notes to the consolidated financial statements continued
5. Exceptional and other items (continued)
a) Costs relating to the acquisition and integration of Empresa Brasileira de Bebidas e Alimentos SA (Ebba). Primarily these costs relate
to employee costs, travel costs and advisors fees (see note 31).
b) Gain on held for sale properties in the current period relates to the sale of two properties in Britvic GB. In the prior period the gain
relates to a sale of property in Britvic Ireland.
c) Strategic restructuring - cost initiatives relate to the completion of cost initiatives announced in May 2013, following the closure of
two factories in Britvic GB and subsequent reorganisation.
d) Strategic restructuring - business capability programme relates to a restructuring of the supply chain and operating model to
enhance commercial capabilities in Britvic GB and Ireland.
e) Costs relating to the closure of operations in India.
f) Fair value movements relate to the fair value movement of derivative financial instruments where either hedge accounting cannot be
applied to future transactions or where there is ineffectiveness in the hedge relationship including a £11.6m gain on FX forwards
taken out as part of cash management for expected future payments in relation to the deferred consideration of the purchase of
Ebba.
g) Included in the consideration for Ebba is an amount due in September 2017 (see note 31). This amount has been included on
acquisition discounted to net present value. The unwind of this discount until September 2017 is shown as exceptional costs.
h) Debt repayment charges were incurred on the repayment of acquired debt in Ebba (see note 31).
Details of the tax implications of exceptional and other items are given in note 10a.
6. Operating profit/(loss)
This is stated after charging/(crediting):
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 non-audit services not covered above
Total non-audit services
Total fees
2016
£m
659.4
3.2
4.3
(5.7)
33.2
16.3
11.0
2015
£m
581.4
2.4
3.5
1.0
29.9
11.1
13.5
2016
2015
£m
0.1
0.5
0.6
0.1
0.1
0.2
0.8
£m
0.1
0.5
0.6
0.1
0.2
0.3
0.9
Britvic plc Annual Report 2016
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Financial statements Notes to the consolidated financial statements continued
8. Staff costs
Wages and salaries
Social security costs
Net pension charge
Expense of share based compensation (note 27)
Directors’ emoluments
Aggregate gains made by directors on exercise of options
Number of directors accruing benefits under defined benefit schemes
The average monthly number of employees during the period was made up as follows:
Distribution
Production
Sales and marketing
Administration
9. Finance income and costs
Finance income
Bank deposits
Fair value movement on interest rate swap (see note 25)
Ineffectiveness in respect of cash flow hedges
Total finance income
Finance costs
Bank loans, overdrafts and loan notes
Unwind of discount in provisions
Unwind of discount on deferred consideration
Debt repayment charges
Ineffectiveness in respect of fair value hedges
Total finance costs
Net finance costs
112
Britvic plc Annual Report 2016
2016
£m
145.3
23.1
9.7
6.6
2015
£m
127.0
19.6
12.8
10.6
184.7
170.0
2016
£m
3.1
-
2016
No.
-
2016
No.
321
2,004
1,413
620
4,358
2016
£m
1.7
0.3
0.4
2.4
(22.5)
-
(3.3)
(0.6)
(0.5)
(26.9)
2015
£m
2.4
-
2015
No.
-
2015
No.
290
1,386
911
530
3,117
2015
£m
0.3
1.5
2.1
3.9
(22.2)
(0.1)
-
-
(0.6)
(22.9)
(24.5)
(19.0)
177534_BRITVIC_TEXT-p089-158.indd 112
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Financial statements Notes to the consolidated financial statements continued
10. Taxation
a) Tax on profit on continuing operations
Before
exceptional
& other items
Exceptional
& other items
2016
Total
£m
£m
£m
Income statement
Current income tax
Current income tax charge
Amounts over provided in previous years
Total current income tax charge
Deferred income tax
Origination and reversal of temporary differences
Amounts under provided in previous years
Total deferred tax charge
Total tax charge in the income statement
Statement of comprehensive income/(expense)
Current tax on additional pension contributions
Deferred tax on defined benefit plans
Deferred tax in respect of cash flow hedges accounted for in the hedging reserve
Tax recycled to goodwill on acquisition of subsidiary
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/(expense)
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
(33.6)
2.4
(31.2)
(4.1)
(1.0)
(5.1)
(36.3)
(0.6)
-
(0.6)
-
(0.5)
(0.5)
(1.1)
(34.2)
2.4
(31.8)
(4.1)
(1.5)
(5.6)
(37.4)
3.3
8.7
(0.7)
(2.0)
3.9
0.2
13.4
1.8
(1.4)
0.4
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Financial statements Notes to the consolidated financial statements continued
10. Taxation (continued)
Income statement
Current income tax
Current income tax (charge)/credit
Amounts (under)/over provided in previous years
Total current income tax (charge)/credit
Deferred income tax
Origination and reversal of temporary differences
Amounts over/(under) provided in previous years
Total deferred tax charge
Total tax (charge)/credit in the income statement
Statement of comprehensive income/(expense)
Current tax on additional pension contributions
Deferred tax on defined benefit plans
Deferred tax in respect of cash flow hedges accounted for in the hedging reserve
Total tax credit in the statement of comprehensive income/(expense)
Statement of changes in equity
Current tax on share options exercised
Deferred tax on share options granted to employees
Total tax charge in the statement of changes in equity
Before
exceptional
& other items
Exceptional
& other items
2015
Total
£m
£m
£m
(34.4)
0.9
(33.5)
(0.6)
(0.4)
(1.0)
(34.5)
1.2
(0.2)
1.0
(0.3)
-
(0.3)
0.7
(33.2)
0.7
(32.5)
(0.9)
(0.4)
(1.3)
(33.8)
3.1
(3.7)
2.5
1.9
0.6
(1.0)
(0.4)
b) Reconciliation of the total tax charge
The tax expense in the consolidated income statement is higher (2015: higher) than the standard rate of corporation tax in the UK of
20.0% (2015: 20.5%). The differences are reconciled below:
Profit/(loss) before tax
Profit/(loss) multiplied by the UK average rate of corporation tax of 20.0%
Permanent differences
Impact of change in tax rates on deferred tax liability
Tax over/(under) provided in previous years
Overseas tax rate differences
Losses not recognised
Effective income tax rate
Before
exceptional
& other items
Exceptional
& other items
£m
157.9
(31.6)
(2.5)
1.4
1.5
(2.1)
(3.0)
(36.3)
23.0%
£m
(6.0)
1.2
(0.3)
-
(0.5)
0.9
(2.4)
(1.1)
2016
Total
£m
151.9
(30.4)
(2.8)
1.4
1.0
(1.2)
(5.4)
(37.4)
24.6%
A decline in the impact of overseas tax differences on the operating effective income tax rate (ETR) in the current period reflects the
change in geographical mix of profits earned during the current period. Future period operating ETR will continue to be impacted by
the profit mix of operational jurisdictions. Permanent items have increased due to non-qualifying expenditure relating to capital
investment for the business capability programme.
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Financial statements Notes to the consolidated financial statements continued
10. Taxation (continued)
b) Reconciliation of the total tax charge (continued)
In the total tax charge there are higher unrecognised tax losses driven by the Brazil acquisition during the period which partly relate to
one off acquisition costs disclosed in exceptional items.
Before
exceptional
& other items
Exceptional &
other items
Profit / (loss) before tax
£m
147.0
Profit / (loss) multiplied by the UK average rate of corporation tax of 20.5%
(30.1)
Permanent differences
Impact of change in tax rates on deferred tax liability
Tax over/(under) provided in previous years
Overseas tax rate differences
Losses not recognised
Effective income tax rate
c) Income tax
Income tax recoverable
Income tax payable
0.5
(0.2)
0.5
(4.8)
(0.4)
(34.5)
23.5%
£m
(9.4)
1.9
(0.7)
(0.1)
(0.2)
0.4
(0.6)
0.7
2016
£m
5.1
(13.1)
(8.0)
2015
Total
£m
137.6
(28.2)
(0.2)
(0.3)
0.3
(4.4)
(1.0)
(33.8)
24.6%
2015
£m
-
(24.0)
(24.0)
The £16.0m reduction in net income tax payable from £24.0m in 2015 to £8.0m in 2016 arises due to prior year adjustments reducing
the tax due, compounded by in year quarterly instalment payments for 2015 and 2016, based on previous estimates of corporation
tax due, for both the UK and France. Other material reducing items include tax on current period share scheme exercises, credit for
loss on the prior period FX forwards hedging the Brazil acquisition and incremental tax recoverable as a result of the acquisition of
Brazil.
d) Uncertain tax positions
Uncertainties in relation to tax liabilities have been provided for in the tax payable account to the extent that it is considered probable
that the group will be required to settle a tax liability in the future. Settlement of tax provisions could potentially result in future cash tax
payments however these are not expected to result in an increased tax charge as they have been fully provided for in accordance with
management’s best estimates of the most likely outcomes.
e) Unrecognised tax items
The group expects that future remittances of earnings from its overseas subsidiaries will be covered by the UK dividend exemption
and so no tax is recognised on the un-remitted earnings of these subsidiaries.
A deferred tax asset has been recognised in relation to losses made in the preceding period. These are expected to be recoverable on
an ongoing basis due to a reduction in interest charges leading to higher profits in subsequent periods. Tax losses may be carried
forward indefinitely, but the amount of carry forwards losses that can be utilised in certain territories is limited to 30% of taxable income
in each carry forward year.
No deferred tax asset has been recognised in respect of unused tax losses of £8.3m (2015: £8.8m). Previously unrecognised losses
arising on India have been eliminated as a result of the closure of the business.
There are no other unrecognised temporary differences associated with investments.
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Financial statements Notes to the consolidated financial statements continued
10. Taxation (continued)
f) 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
Net deferred tax liability
2016
£m
(10.4)
(36.5)
-
(11.6)
(58.5)
3.4
8.0
0.6
12.0
(46.5)
2015
£m
(5.8)
(33.9)
(1.5)
(20.3)
(61.5)
5.8
4.2
5.1
15.1
(46.4)
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
Utilised losses incurred in overseas jurisdictions
Other temporary differences
Deferred tax charge
2016
£m
6.5
(53.0)
(46.5)
2016
£m
(1.0)
(1.5)
(0.1)
(0.5)
(2.6)
0.1
(5.6)
2015
£m
-
(46.4)
(46.4)
2015
£m
0.9
(0.4)
(0.4)
0.9
(1.6)
(0.7)
(1.3)
In 2016, there is a £0.5m charge relating to exceptional items (2015: £0.3m charge) included within the overall £5.6m deferred tax
charge (2015: overall £1.3m charge) in the consolidated income statement.
g) Impact of rate change
Finance Act 2015 and 2016 enacted reductions in the UK corporation tax rate from 20% to 19% from 1 April 2017 and to 17% from 1
April 2020 respectively. The effect of the reduction from 20% to 17% is to reduce the deferred tax provision by a net £2.5m,
comprising a credit of £1.4m to the income statement and a credit of £1.1m to the consolidated statement of comprehensive income.
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Financial statements 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
Effect of dilutive potential ordinary shares – share schemes
Weighted average number of ordinary shares in issue for diluted earnings per share
Diluted earnings per share
2016
£m
114.5
261.7
43.8p
114.5
1.5
263.2
43.5p
2015
£m
103.8
248.6
41.8p
103.8
3.1
251.7
41.2p
The group has granted share options to employees which have the potential to dilute basic EPS in the future which have not been
included in the calculation of diluted EPS as they are antidilutive for the periods presented (see note 27).
The group presents as exceptional and other items on the face of the consolidated income statement, those items of income and
expense which, because of the size, nature or 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:
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
2016
£m
2015
£m
114.5
103.8
7.1
7.4
129.0
261.7
49.3p
8.7
2.6
115.1
248.6
46.3p
129.0
115.1
263.2
49.0p
251.7
45.7p
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Financial statements 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 2015: 16.3p per share (2014: 14.8p per share)
Interim dividend for 2016: 7.0p per share (2015: 6.7p per share)
Dividends paid
Proposed
Final dividend for 2016: 17.5p per share (2015: 16.3p per share)
13. Property, plant and equipment
2016
£m
42.6
18.3
60.9
46.0
Freehold
land and
buildings
Leasehold
land and
buildings
Plant and
machinery
Fixtures,
fittings,
tools and
equipment
Assets
under
construction
At 28 September 2014 net of accumulated
depreciation and impairment
Exchange differences
Additions
Transfers on completion
Disposals at cost
Depreciation eliminated on disposals
Depreciation charge for the period
Assets transferred to held for sale
Reclassification
Impairment
£m
71.5
(1.8)
-
9.7
(0.2)
0.2
(2.8)
-
-
-
£m
24.0
(0.4)
-
1.7
-
-
(1.0)
(2.8)
-
-
At 27 September 2015 net of accumulated
depreciation and impairment
76.6
21.5
8.6
-
3.4
7.1
(0.7)
0.3
(3.1)
(0.8)
(0.2)
-
1.4
-
0.7
-
-
-
(1.0)
-
-
-
Exchange differences
Additions
Transfers on completion
Acquisition of subsidiary
Disposals at cost
Depreciation eliminated on disposals
Depreciation charge for the period
Assets transferred to held for sale
Reclassification
Impairment
At 2 October 2016 net of accumulated
depreciation and impairment
At 2 October 2016
Cost (gross carrying amount)
Accumulated depreciation and
impairment
£m
76.9
(2.0)
-
20.8
(2.8)
2.7
(16.2)
-
(0.3)
(0.1)
79.0
10.8
-
20.5
11.7
(9.7)
9.1
(19.4)
(0.5)
0.2
(0.7)
£m
27.1
-
-
11.6
(15.1)
14.1
(9.9)
-
0.3
-
28.1
0.8
-
23.4
0.4
(10.1)
8.4
(9.7)
-
-
-
91.2
22.6
101.0
41.3
126.3
382.4
136.1
(44.9)
37.0
(14.4)
398.5
(297.5)
190.9
(149.6)
126.3
-
888.8
(506.4)
2015
£m
36.4
16.5
52.9
42.6
Total
£m
221.0
(4.2)
61.3
-
(18.1)
17.0
(29.9)
(2.8)
-
(0.1)
£m
21.5
-
61.3
(43.8)
-
-
-
-
-
-
39.0
244.2
1.1
134.2
(48.0)
-
-
-
-
-
-
-
22.7
134.2
-
19.2
(20.5)
17.8
(33.2)
(1.3)
-
(0.7)
Net carrying amount
91.2
22.6
101.0
41.3
126.3
382.4
At 27 September 2015
Cost (gross carrying amount)
Accumulated depreciation and impairment
Net carrying amount
100.8
(24.2)
76.6
32.2
(10.7)
21.5
282.0
(203.0)
79.0
139.8
(111.7)
28.1
39.0
-
39.0
593.8
(349.6)
244.2
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Financial statements Notes to the consolidated financial statements continued
14. Intangible assets
Trademarks
Franchise
rights
Customer
lists
Software
costs
Goodwill
Other
Total
Cost as at 28 September 2014,
net of accumulated amortisation
£m
91.0
£m
18.4
£m
30.4
Exchange differences
(5.1)
(1.0)
(1.6)
Additions
Disposals at cost
Amortisation eliminated on disposals
Amortisation charge for the period
Other movement**
At 27 September 2015
Exchange differences
Additions
Acquisition of subsidiary
Disposals at cost
Amortisation eliminated on
disposals
-
-
-
-
-
85.9
23.7
-
22.2
-
-
-
-
-
-
-
-
(0.6)*
(2.0)*
-
16.8
2.9
-
-
-
-
-
26.8
10.2
-
15.7
-
-
Amortisation charge for the period
(1.8)*
At 2 October 2016
130.0
(0.7)*
19.0
(4.9)*
47.8
£m
26.0
-
8.2
(6.6)
6.4
(8.5)
-
25.5
0.3
8.2
-
(2.3)
2.0
(8.7)
25.0
£m
133.9
(4.1)
-
-
-
-
20.3
150.1
24.2
-
21.0
-
-
-
195.3
£m
-
-
-
-
-
-
-
-
0.3
-
0.7
-
-
(0.2)
0.8
£m
299.7
(11.8)
8.2
(6.6)
6.4
(11.1)
20.3
305.1
61.6
8.2
59.6
(2.3)
2.0
(16.3)
417.9
At 2 October 2016
Cost (gross carrying amount)
Accumulated amortisation and
impairment
162.2
(32.2)
25.6
(6.6)
73.7
(25.9)
86.4
(61.4)
263.6
(68.3)
1.0
(0.2)
612.5
(194.6)
Net carrying amount
130.0
19.0
47.8
25.0
195.3
0.8
417.9
At 28 September 2015
Cost (gross carrying amount)
Accumulated amortisation and
impairment
111.3
(25.4)
21.8
(5.0)
43.9
(17.1)
73.6
(48.1)
210.0
(59.9)
Net carrying amount
85.9
16.8
26.8
25.5
150.1
-
-
-
460.6
(155.5)
305.1
* Acquisition related amortisation (see note 11).
** Following a review in the prior year, further non-current deferred tax liabilities were identified that should have been recognised in relation to acquired indefinite life
brand intangibles upon acquisition of Britvic France which has resulted in an increase in goodwill.
Trademarks
Britvic Ireland and Britvic France
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.
Britvic Brazil
Trademarks in Brazil have been allocated useful economic lives of 14.3 years. As at 2 October 2016 these intangible assets have a
remaining useful life of 13.3 years.
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Financial statements Notes to the consolidated financial statements continued
14. Intangible assets (continued)
Franchise rights
Franchise rights represent franchise agreements acquired as part of the Britvic Ireland business combination which provides long term
rights to distribute certain soft drinks. These agreements were allocated a 35 year useful economic life at the time of acquisition based
on a third party assessment. As at 2 October 2016 these intangible assets have a remaining useful life of 26 years. The franchise
agreement itself has a remaining contract life of 9 years which is less than the useful economic life. The useful economic life has been
determined on the basis that the renewal of the franchise agreements, without significant cost, is highly probable.
Evidence to support this conclusion is:
• Significant emphasis on maintaining a strong relationship with Pepsi, strengthened through the addition of Pepsico products to
Britvic’s portfolio in recent years;
• Lack of alternative suppliers; and
• High barriers of entry to the Irish soft drinks bottling market.
In the unlikely event that it was deemed that the contract might not be renewed then the useful economic life would need to be
reduced to its remaining contractual life. As at 2 October 2016 this would increase the annual amortisation for franchise rights by
£1.4m to £2.1m.
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 2 October 2016 these intangible assets have a remaining useful life of 14
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 2 October 2016 these intangible
assets have a remaining useful life of between 1 and 11 years.
Britvic Brazil
Customer lists recognised on the acquisition of Britvic Brazil relate to those customer relationships acquired. These intangible assets
have been allocated useful economic lives of between 4 and 6 years. At 2 October 2016 these intangible assets have a remaining
useful life of between 3 and 5 years.
Software costs
Software is capitalised at cost. As at 2 October 2016 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, Britvic France and Britvic Brazil are valued in local currency and
translated to sterling at the reporting date.
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Financial statements 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 CGUs
Britvic GB
Orchid
Tango
Robinsons
Britvic Soft Drinks business (BSD)
Britvic Ireland
Britvic France
Britvic Brazil
Trademarks with indefinite lives
Britvic Ireland CGUs
Britvic
Cidona
Mi Wadi
Ballygowan
Club
Britvic France CGUs
Teisseire
Moulin de Valdonne
Pressade
Fruité
Total Trademarks with indefinite lives
Goodwill amounts for Britvic GB were recognised on acquisitions made within Britvic GB.
2016
£m
6.0
8.9
38.6
7.8
17.2
87.2
29.6
195.3
2016
£m
6.5
5.8
8.9
2.4
14.6
38.2
49.5
4.1
4.7
4.3
62.6
100.8
2015
£m
6.0
8.9
38.6
7.8
14.7
74.1
-
150.1
2015
£m
5.5
4.9
7.6
2.1
12.5
32.6
42.1
3.5
4.0
3.7
53.3
85.9
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 annual 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.
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Financial statements Notes to the consolidated financial statements continued
15. Impairment testing of intangible assets (continued)
Method of impairment testing (continued)
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. The group has considered the impact of the
current economic climate in determining the appropriate discount rate to use in impairment testing. The same discount rate is relevant
to all CGUs in each country as the group only operates in the soft drinks manufacturing and distribution market sector. The applicable
pre-tax discount rate for cash flow projections is:
Britvic GB
Britvic Ireland
Britvic France
Britvic Brazil
2016
9.4%
8.4%
10.9%
17.9%
2015
10.9%
9.3%
12.8%
-
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 and will vary according to each CGU.
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.
Cash flows are based on the latest approved budgets and forecasts (in most cases this is periods beyond one year). The applicable
long term growth rates are:
Britvic GB
Britvic Ireland
Britvic France
Britvic Brazil
2016
2.1%
2.7%
1.6%
2.9%
2015
2.0%
2.5%
2.0%
-
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
No impairments have been identified during the 53 week period ended 2 October 2016. In 2015 no impairments were identified.
Other than for the Britvic trademark within Britvic Ireland where the recoverable amount is equal to its carrying value, 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. The key assumption to which the calculation of value in use for the Britvic trademark
within Britvic Ireland is most sensitive is the discount rate where an increase in the discount rate from 8.4% to 9.4% would result in an
impairment charge of £1.1m.
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Financial statements Notes to the consolidated financial statements continued
16. Inventories
Raw materials
Finished goods
Consumable stores
Returnable packaging
Total inventories at lower of cost and net realisable value
17. Trade and other receivables (current)
Trade receivables
Other receivables
Prepayments
2016
£m
39.5
59.8
12.1
1.3
112.7
2016
£m
278.6
16.0
23.3
317.9
2015
£m
24.6
54.0
7.2
0.9
86.7
2015
£m
269.2
9.4
15.3
293.9
Trade receivables are non-interest bearing and are generally on credit terms usual for the markets in which the group operates. As at 2
October 2016, trade receivables at nominal value of £3.0m (2015: £1.8m) were impaired and fully provided against. Movements in the
provision for impairment of receivables were as follows:
At 28 September 2014
Charge for period
Utilised
Unused amounts reversed
At 27 September 2015
Acquisition of subsidiary
Exchange differences
Charge for period
Utilised
Unused amounts reversed
At 2 October 2016
Total
£m
1.2
2.5
(0.2)
(1.7)
1.8
0.6
0.3
3.1
(0.1)
(2.7)
3.0
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.
Britvic plc Annual Report 2016
123
Financial statements Notes to the consolidated financial statements continued
17. Trade and other receivables (current) (continued)
The ageing analysis of trade receivables is as follows:
Total
£m
278.6
269.2
Neither
past due
nor impaired
£m
239.0
224.9
<30 days
30 – 60
days
60 – 90
days
90 – 120
days
> 120 days
Past due but not impaired
£m
29.2
23.8
£m
4.8
5.8
£m
1.2
5.3
£m
1.2
1.2
£m
3.2
8.2
2016
2015
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.
18. Cash and cash equivalents
Cash at bank and in hand
Deposits
Cash and cash equivalents in the statement of cash flows
2016
£m
15.3
190.6
205.9
2015
£m
14.3
225.3
239.6
During the year, short-term deposits are made for varying periods 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 2 October 2016 the group had available £286.5m (2015: £400.0m) of un-drawn committed borrowing facilities in respect of which
all conditions precedent had been met. These facilities have a maturity date of November 2021.
Where available, the group operates cash pooling arrangements whereby the net cash position across a number of accounts is
recognised for interest purposes.
19. Share capital
Issued, called up and fully paid ordinary shares
At 28 September 2014
Shares issued relating to incentive schemes for employees
Shares issued under a non pre-emptive placing
At 27 September 2015
Shares issued relating to incentive schemes for employees
At 2 October 2016
No. of shares
Value
£
247,229,115
49,445,823
1,549,282
309,856
12,361,455
2,472,291
261,139,852
52,227,970
1,731,404
346,281
262,871,256
52,574,251
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.
Consideration received from the non pre-emptive placing during the prior period was £87.8m which was used for the acquisition of
Ebba subsequent to the period end. In addition fees relating to the raising of equity of £1.1m have been offset in share premium.
Of the issued and fully paid ordinary shares, 500,983 shares (2015: 1,678,637 shares) are own shares held by an employee benefit
trust. This equates to £100,197 (2015: £335,727) at £0.20 par value of each ordinary share. These shares are held for the purpose of
satisfying the share schemes detailed in note 27.
An explanation of the group’s capital management process and objectives is set out in note 24.
124
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Financial statements Notes to the consolidated financial statements continued
20. Other reserves
Hedging
reserve
Translation
reserve
Capital
reserve
Merger
reserve
At 28 September 2014
Gains in the period in respect of cash flow hedges
Amounts recycled to the income statement in respect of
cash flow hedges
Deferred tax in respect of cash flow hedges
Exchange differences on translation of foreign operations
At 27 September 2015
Gains in the period in respect of cash flow hedges
Amounts recycled to the income statement in respect of
cash flow hedges
£m
1.4
10.1
(22.1)
2.5
-
(8.1)
68.5
(64.1)
Amounts recycled to goodwill on acquisition of subsidiary
10.2
Tax recycled to goodwill on acquisition of subsidiary
Deferred tax in respect of cash flow hedges
Exchange differences on translation of foreign operations
Tax on exchange differences
Movement in non-distributable profit
At 2 October 2016
(2.0)
(0.7)
-
-
-
3.8
£m
16.4
-
-
-
(1.5)
14.9
-
-
-
-
-
36.5
3.9
-
55.3
£m
-
-
-
-
-
-
-
-
-
-
-
-
0.1
0.1
Total
£m
105.1
10.1
(22.1)
2.5
(1.5)
94.1
68.5
(64.1)
10.2
(2.0)
(0.7)
36.5
3.9
0.1
£m
87.3
-
-
-
-
87.3
-
-
-
-
-
-
-
-
87.3
146.5
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 and issues 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.
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 part of a cash flow hedge relationship.
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.
Capital reserve
The capital reserve relates to accumulated earnings which are not distributable to shareholders.
Britvic plc Annual Report 2016
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Financial statements Notes to the consolidated financial statements continued
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
Total interest bearing loans and borrowings
Total interest bearing loans and borrowings comprise the following:
Finance leases
2007 Notes
2009 Notes
2010 Notes
2014 Notes
Accrued interest
Bank loans
Capitalised issue costs
Analysis of changes in interest-bearing loans and borrowings
At the beginning of the period
Acquisition of subsidiary
Acquired debt repaid
Net loans (drawndown)/repaid
Partial repayment of 2009 Notes
Issue costs
Net repayment of finance leases
Amortisation of issue costs and write off of financing fees
Net translation loss and fair value adjustment
Accrued interest
At the end of the period
Derivatives hedging balance sheet debt *
Debt translated at contracted rate
2016
£m
(0.9)
(114.2)
(173.7)
0.7
(288.1)
2016
£m
(2.9)
(0.9)
(489.4)
1.5
(491.7)
(779.8)
2016
£m
(3.8)
(223.5)
(174.5)
(138.9)
(122.9)
(3.3)
(115.1)
2.2
(779.8)
2016
£m
(575.3)
(36.7)
38.0
(104.5)
-
-
0.1
(0.6)
(100.9)
0.1
(779.8)
157.5
(622.3)
2015
£m
(0.1)
(0.1)
(3.4)
0.7
(2.9)
2015
£m
(0.1)
(0.4)
(574.0)
2.1
(572.4)
(575.3)
2015
£m
(0.2)
(192.8)
(151.3)
(119.8)
(110.1)
(3.4)
(0.5)
2.8
(575.3)
2015
£m
(562.3)
-
-
0.9
18.0
2.2
0.1
(0.7)
(33.7)
0.2
(575.3)
71.8
(503.5)
*
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.
126
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Financial statements Notes to the consolidated financial statements continued
21. Interest bearing loans and borrowings (continued)
Bank loans
The bank loans classified as non-current are repayable by December 2018 (2015: December 2018).
Loans outstanding at 02 October 2016 attract interest at an average rate of 0.49% for euro denominated loans and 4.25% for
Brazilian Reals denominated loans (2015: 4.52% for euro denominated loans).
Private placement notes
The group holds loan notes with coupons and maturities as shown in the following table:
Year issued
Maturity date
Amount
Interest terms
2007
2007
2009
2010
2010
2014
2014
February 2019
February 2017 – February 2019
December 2016 – December 2019
December 2017
December 2017 – December 2022
February 2021 – February 2024
February 2024 – February 2026
£13m
$273m
$220m
£7.5m
$163m
£35m
$114m
UK£ fixed at 5.94%
US$ fixed at 5.90% - 6.00%
US$ fixed at 4.77% - 5.24%
UK£ fixed at 3.74%
US$ fixed at 3.45% - 4.14%
UK£ fixed at 3.40% - 3.92%
US$ fixed at 4.09% - 4.24%
The group entered into a number of cross-currency swap agreements in relation to the loan notes to manage any foreign exchange
risk on interest rates or on the repayment of the principal borrowed. These swaps expire in line with the loan notes and are discussed
in note 25.
See note 24 for an analysis of the interest rate profile and the maturity of the borrowings and related interest rate swaps.
22. Pensions
Net (liability)/asset by scheme
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
GB
£m
(805.4)
804.9
(0.5)
GB
£m
(619.4)
639.3
19.9
ROI
£m
(91.3)
77.7
(13.6)
ROI
£m
(61.2)
58.9
(2.3)
NI
£m
(39.8)
40.4
0.6
NI
£m
(30.1)
32.6
2.5
France
£m
(3.9)
-
(3.9)
France
£m
(2.8)
-
(2.8)
2016
Total
£m
(940.4)
923.0
(17.4)
2015
Total
£m
(713.5)
730.8
17.3
GB Schemes
The group’s principal pension scheme for GB employees, the Britvic Pension Plan (‘BPP’) has both a final salary defined benefit
section and defined 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 active members moving to the defined contribution section for future service
benefits.
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 SLP, Britvic PP and Britvic Brands LLP 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.
Certain properties and group brands have been transferred to Britvic PP and Britvic Brands LLP respectively, 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. The BPP is entitled to a share of the profits in
Britvic SLP until 2026. 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.
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Financial statements Notes to the consolidated financial statements continued
22. Pensions (continued)
GB Schemes (continued)
Contributions are paid into the defined benefit section of the BPP as determined by the Trustee, agreed by the company and certified
by an independent actuary in the Schedule of Contributions. 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, in 2016 and 2017. Additional
contributions of £15m per annum by 31 December in the years 2018 and 2019 will be made should the formal actuarial valuation in
2016 reveal that these contributions are necessary to return the BPP to full funding on a self-sufficiency basis by 31 March 2020.
During this year £20.0m of additional contributions were paid to the BPP, of which £15.0m was paid by the group and £5.0m relates
to income received from the pension funding partnership (‘PFP’) structure. The triennial valuation of the scheme as at 31 March 2016
is currently underway and is expected to be complete by 31 March 2017.
The amount recognised as an expense in relation to the BPP defined contribution scheme in the consolidated income statement for
2016 was £12.0m (2015: £11.4m).
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.
Republic of Ireland scheme
The Britvic Ireland Pension Plan (‘BIPP’) is a defined benefit pension plan. Following legislative changes made in 2012 no deficit
recovery contributions are currently required. The 1 January 2015 triennial valuation has now been completed. 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
2016 was £0.7m (2015: £0.6m).
Northern Ireland scheme
The Britvic Northern Ireland Pension Plan (‘BNIPP’) is a defined benefit pension plan which 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 2014.
France schemes
Britvic France operates two defined benefit schemes: in the first, employees receive long-service cash payments at various stages
throughout their careers. From the second, employees receive a lump sum at retirement. Payment amounts are dependent upon
salary and service with the company. The schemes are unfunded therefore these benefits are paid directly as they fall due.
All group pension schemes are administered by trustees who are independent of the group’s finances, except for the Britvic France
schemes which are operated directly by the company.
Net benefit income/(expense)
Current service cost
Past service credit
Net interest on net defined benefit asset/(liability)
Curtailment/settlement gain
Net income/(expense)
2016
Total
£m
(1.3)
2.2
1.1
1.2
3.2
2015
Total
£m
(1.2)
-
0.4
0.1
(0.7)
The past service cost gain during the current period arose on the GB scheme due to a Pension Increase Exchange that was offered to
members, in which members were given the option to exchange pensions which will receive future inflationary increases, for a higher
pension now which will not increase in future. The curtailment/settlement gain in the current period of £1.2m arose due to the
retirement of an executive and the exchange of his benefits in the BETUS for a cash lump sum recognised in administration expenses.
Other than stated below, 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.
128
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Financial statements Notes to the consolidated financial statements continued
22. Pensions (continued)
Taken to the statement of comprehensive income
Actual return on scheme assets
Less: Amounts included in net interest expense
Return on plan assets (excluding amounts included in net interest expense)
Gains/(losses) due to demographic assumptions
Losses due to financial assumptions
Experience gains
Remeasurement losses taken to the statement of comprehensive income
Movements in present value of benefit obligation
At 27 September 2015
Exchange differences
Settlement gain
Past service credit
Current service cost
Member contributions
Interest cost on benefit obligation
Benefits paid
Remeasurement losses
At 2 October 2016
GB
£m
(619.4)
-
1.2
2.2
-
-
(23.1)
26.4
(192.7)
(805.4)
ROI
£m
(61.2)
(12.6)
-
-
(1.0)
(0.2)
(1.7)
2.2
(16.8)
(91.3)
NI
£m
(30.1)
-
-
-
(0.1)
-
(1.1)
1.1
(9.7)
(39.9)
2016
Total
£m
188.0
(27.1)
160.9
(0.5)
(226.1)
7.0
(58.7)
France
£m
(2.8)
(0.6)
-
-
(0.2)
-
(0.1)
0.1
(0.3)
(3.9)
Weighted average duration of the liabilities
22 years
23 years
20 years
15 years
At 28 September 2014
Exchange differences
Curtailment gain
Current service cost
Member contributions
Interest cost on benefit obligation
Benefits paid
Remeasurement gains/(losses)
GB
£m
ROI
£m
NI
£m
(598.7)
(60.5)
(30.5)
-
-
-
-
(23.6)
18.9
(16.0)
3.5
0.1
(0.9)
(0.2)
(1.7)
1.1
(2.6)
-
-
(0.1)
-
(1.2)
0.9
0.8
At 27 September 2015
(619.4)
(61.2)
(30.1)
France
£m
(2.7)
0.1
-
(0.2)
-
-
0.1
(0.1)
(2.8)
Weighted average duration of the liabilities
22 years
21 years
20 years
15 years
2015
Total
£m
48.1
(27.0)
21.1
(0.7)
(18.7)
1.5
3.2
2016
Total
£m
(713.5)
(13.2)
1.2
2.2
(1.3)
(0.2)
(26.0)
29.8
(219.5)
(940.5)
2015
Total
£m
(692.4)
3.6
0.1
(1.2)
(0.2)
(26.5)
21.0
(17.9)
(713.5)
Britvic plc Annual Report 2016
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129
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Financial statements Notes to the consolidated financial statements continued
22. Pensions (continued)
Movements in fair value of plan assets
At 27 September 2015
Exchange differences
Interest income on plan assets
Return on scheme assets excluding interest income
Employer contributions
Member contributions
Benefits paid
At 2 October 2016
At 28 September 2014
Exchange differences
Interest income on plan assets
Return on scheme assets excluding interest income
Employer contributions
Member contributions
Benefits paid
At 27 September 2015
GB
£m
639.3
-
24.4
147.6
20.0
-
(26.4)
804.9
GB
£m
595.6
-
24.1
18.1
20.4
-
(18.9)
639.3
ROI
£m
58.9
11.2
1.6
7.1
0.9
0.2
(2.2)
77.7
ROI
£m
58.0
(3.4)
1.7
2.7
0.8
0.2
(1.1)
58.9
NI
£m
32.6
-
1.1
6.2
1.6
-
(1.1)
40.4
NI
£m
30.4
-
1.2
0.3
1.6
-
(0.9)
32.6
2016
Total
£m
730.8
11.2
27.1
160.9
22.5
0.2
(29.7)
923.0
2015
Total
£m
684.0
(3.4)
27.0
21.1
22.8
0.2
(20.9)
730.8
Principal assumptions
The assets and liabilities of the pension schemes were valued on an IAS 19 (Revised) basis at 2 October 2016 by Towers Watson
(BPP and the French schemes), Invesco (BIPP) and Buck (BNIPP).
Financial assumptions
2016
Discount rate
Rate of compensation increase
Pension increases
Inflation assumption
2015
Discount rate
Rate of compensation increase
Pension increases
Inflation assumption
* Rate dependent on employee and business unit.
130
Britvic plc Annual Report 2016
GB
%
2.30
n/a
ROI
%
1.50
2.00
NI
%
2.20
3.55
1.80 - 2.85
-
2.05 - 2.25
3.05
1.30
2.25
GB
%
3.80
n/a
ROI
%
2.60
2.00
NI
%
3.60
3.60
1.85-2.95
-
2.10-2.30
3.15
1.40
2.30
France
%
0.80 - 1.15
2.00 - 3.00
-
0.02
France
%
2.00
2.00-3.00*
-
2.00
177534_BRITVIC_TEXT-p089-158.indd 130
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Financial statements Notes to the consolidated financial statements continued
22. Pensions (continued)
Demographic assumptions
The most significant non-financial assumption is the assumed rate of longevity. This is based on standard actuarial tables, which for
the BPP are known as SAPS Series 1. An allowance for future improvements in longevity has also been included. The following life
expectancy assumptions have been used:
Current pensioners (at age 65) – males
Current pensioners (at age 65) – females
Future pensioners currently aged 45 (at age 65) – males
Future pensioners currently aged 45 (at age 65) – females
2016
GB
2016
ROI
2016
NI
Years
Years
Years
21.5
24.5
23.2
26.4
21.0
23.5
23.4
25.6
22.3
25.6
24.4
27.6
2015
GB
Years
21.4
24.4
23.2
26.3
2015
ROI
Years
20.9
23.4
23.3
25.5
2015
NI
Years
22.2
25.0
24.0
26.6
The mortality assumptions used to calculate the GB pension obligation were revised in 2014 following a mortality analysis carried out
as part of the actuarial valuation of the BPP at 31 March 2013.
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 GB
liabilities
Impact on ROI
liabilities
Impact on NI
liabilities
Impact on France
liabilities
Discount rate
Increase by 0.5%
Decrease by £81.6m Decrease by £9.6m Decrease by £3.6m Decrease by £0.3m
Decrease by 0.5% Increase by £95.4m Increase by £11.1m Increase by £4.3m
Increase by £0.3m
Inflation rate
Increase by 0.25%*
Increase by £30.6m Increase by £2.5m
Increase by £4.2m
Increase by £0.2m
Decrease by 0.25%* Decrease by £22.8m Decrease by £2.4m Decrease by £3.8m Decrease by £0.1m
Longevity rates
Increase by 1 year
Increase by £27.3m Increase by £1.6m
Increase by £4.1m
n/a
* The sensitivity to inflation assumption includes corresponding changes to future salary (applicable only to France) and future pension increase assumptions.
Categories of scheme assets
UK equities
Overseas equities
Properties
Corporate bonds
Fixed interest gilts
Index linked gilts
Cash and other assets
Total
UK equities
Overseas equities
Properties
Corporate bonds
Fixed interest gilts
Index linked gilts
Cash and other assets
Total
Britvic plc Annual Report 2016
177534_BRITVIC_TEXT-p089-158.indd 131
GB
£m
46.0
5.2
3.4
339.1
73.2
267.3
70.7
804.9
GB
£m
51.1
20.4
4.4
283.4
-
273.5
6.5
639.3
ROI
£m
2.3
30.1
-
-
41.6
-
3.7
77.7
ROI
£m
1.9
23.2
-
-
30.1
-
3.7
58.9
NI
£m
10.0
9.9
-
5.9
5.8
8.3
0.5
40.4
NI
£m
7.7
7.8
-
5.0
5.1
6.5
0.5
32.6
2016
Total
£m
58.3
45.2
3.4
345.0
120.6
275.6
74.9
923.0
2015
Total
£m
60.7
51.4
4.4
288.4
35.2
280.0
10.7
730.8
2016
Total
%
6
5
1
37
13
30
8
100
2015
Total
%
8
7
1
40
5
38
1
100
131
13/12/2016 19:11
Financial statements Notes to the consolidated financial statements continued
22. Pensions (continued)
Categories of scheme assets (continued)
The fair values of the above equity and debt instruments are determined based on quoted market prices in active markets whereas the
fair values of properties are not based on quoted market prices. The fixed interest and index linked asset classes include leveraged gilt
funds.
Normal contributions of £0.8m are expected to be paid into the defined benefit pension schemes during the 2017 financial year.
Additional contributions of £21.5m are expected to be paid into the defined benefit pension schemes during the 2017 financial year, of
which £16.5m is expected to be paid by the group and £5.0m by the partnership.
Risks
For defined contribution sections and plans, the group’s liability is limited to the requirement to pay contributions on behalf of each
employee. In these arrangements the associated risks are borne by the members.
For defined benefit sections and plans, the group bears the risks of operation. The main risk that the group runs in respect of the
defined benefit schemes is that additional contributions are required to pay for the benefits if investment returns are not sufficient. The
contributions required for the schemes are in general determined at each triennial actuarial funding valuation. The key factors that will
affect the need for additional contributions include levels of long-term inflation and interest rates and the assessment of how long
members are expected to live, along with the level of investment return achieved. The level of investment return achieved is subject to
a range of risks typical of the asset classes held, in particular market risk on equities, credit risk on corporate bonds and exposure to
the property market. The discount rates used to calculate the liabilities are set by reference to yields on high quality corporate bonds.
There is therefore a mismatch between the assets held and the way that the liabilities are calculated, meaning that the net balance
sheet position disclosed under IAS 19 could fluctuate.
For the BPP, the trustee holds the power to determine the contribution rates that the group should pay, although the group fully uses
the opportunity to make representation to the trustee on this point.
The trustee of the BPP agreed to implement an investment strategy which consists of a diverse range of fixed interest and index-linked
securities, which will provides a significant hedge against inflation and interest rate risk. The intention is to continue to remove equities
from the investment portfolio to further reduce investment risk.
The funding partnership mitigates the risk that additional cash contributions will be required after 31 March 2026, as the partnership
will pay up to £105m to remove any funding deficit at 31 March 2026.
23. Trade and other payables (current)
Trade payables
Other payables
Accruals
Other taxes and social security
2016
£m
249.8
44.4
94.7
48.3
2015
£m
261.9
23.6
80.7
51.2
437.2
417.4
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 17 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 policy is to manage its interest cost by maintaining a mix of fixed and variable rate debt. The group enters into interest rate
swaps, cross currency swaps and forward rate agreements to hedge underlying debt obligations. At 2 October 2016 after taking into
account the effect of these instruments, approximately 55% of the group’s borrowings are at a fixed rate of interest (2015: 77%).
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).
132
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Financial statements Notes to the consolidated financial statements continued
24. Financial risk management objectives and policies (continued)
2016
Sterling
Euro
2015
Sterling
Euro
Increase/
(decrease) in
basis points
Effect on
profit/(loss)
before tax
Effect on
equity
£m
£m
200
(200)
200
(200)
200
(200)
200
(200)
1.1
(1.1)
(3.1)
3.1
0.6
(0.6)
(1.4)
1.4
21.5
(24.2)
3.9
(4.2)
25.7
(28.8)
3.9
(4.4)
Foreign currency risk
Foreign currency risk is primarily in respect of exposure to fluctuations to the sterling-euro, sterling-US dollar, euro-US dollar and
sterling-Brazilian real 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. In addition during the current period the group has entered into forward
currency contracts to fix the sterling amount payable on the deferred consideration due on the purchase of a subsidiary in Brazil.
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
mainly in the currencies of US dollars and euros. As at 2 October 2016 the group has hedged 74% (2015: 62%) 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, euro and Brazilian real 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).
2016
Sterling/euro
Sterling/US dollar
Euro/US dollar
Sterling/Brazilian real
2015
Sterling/euro
Sterling/US dollar
Euro/US dollar
Increase/
(decrease) in
currency rate
Effect on
profit
before tax
Effect on
equity
%
£m
£m
10
(10)
10
(10)
10
(10)
10
(10)
10
(10)
10
(10)
10
(10)
4.1
(4.1)
0.1
(0.1)
1.1
(1.1)
(3.2)
3.2
1.9
(1.9)
0.4
(0.4)
0.4
(0.4)
(12.0)
12.0
(1.0)
1.0
(1.7)
1.7
-
-
(4.5)
4.5
(1.1)
1.1
(1.4)
1.4
Britvic plc Annual Report 2016
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133
13/12/2016 19:11
Financial statements 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 experience of bad debts is not significant. The maximum exposure is the carrying amount disclosed in note 17. 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. The group does not enter into derivative contracts to hedge commodity price risk however in the
normal course of business where it is considered commercially advantageous, the group enters into fixed price contracts with
suppliers to protect 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 equity derivatives
against future scheme maturities.
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 equity derivatives).
2016
2015
Increase/
(decrease) in
share price
Effect on
profit
before tax
%
10
(10)
10
(10)
£m
0.7
(0.7)
1.0
(1.0)
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 and 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 group’s bank facility has a maturity of November 2021 and is unsecured. As at 2 October 2016, the group had drawn down
£113.5m (2015: £nil) under this facility. In addition to this facility the group had £1.6m of outstanding external borrowings all of which
were secured (2015: £0.5m all of which were secured).
134
Britvic plc Annual Report 2016
Financial statements Notes to the consolidated financial statements continued
24. Financial risk management objectives and policies (continued)
The table below summarises the maturity profile of the group’s financial liabilities at 2 October 2016 based on contractual
undiscounted payments and receipts including interest:
2016
Bank loans
Private placement notes
Derivatives hedging private placement notes - payments
Less than
1 year
£m
114.2
198.4
132.2
1 to 5
years
£m
0.9
397.8
255.9
> 5 years
Total
£m
-
153.7
111.5
£m
115.1
749.9
499.6
Derivatives hedging private placement notes - receipts
(144.5)
(278.4)
(114.8)
(537.7)
Trade and other payables (excluding other taxes and social security)
Finance leases
Other financial liabilities
2015
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
186.1
388.9
0.9
1.1
375.3
150.4
-
2.9
0.7
-
-
-
711.8
388.9
3.8
1.8
691.2
379.8
150.4
1,221.4
Less than
1 year
£m
0.2
27.6
16.2
(25.3)
18.5
0.6
-
0.6
1 to 5
years
£m
0.4
444.3
315.2
(361.5)
398.0
-
-
-
-
0.2
1.0
> 5 years
Total
£m
-
206.0
156.7
(163.0)
199.7
-
-
-
-
-
-
£m
0.6
677.9
488.1
(549.8)
616.2
0.6
-
0.6
366.2
0.3
14.5
Trade and other payables (excluding other taxes and social security)
366.2
Finance leases
Other financial liabilities
0.1
13.5
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.
399.1
399.6
199.7
998.4
Britvic plc Annual Report 2016
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135
13/12/2016 19:11
Financial statements Notes to the consolidated financial statements continued
24. Financial risk management objectives and policies (continued)
Fair values of financial assets and financial liabilities
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.
Unless otherwise stated, the valuation basis used to calculate fair value is level 2.
All derivatives are valued using discounted cash flow analysis using the applicable yield curve for the duration of the instruments.
Forward currency contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates
matching maturities of the contracts. Cross currency interest rate swaps are measured at the present value of future cash flows
estimated and discounted based on quoted forward exchange rates and the applicable yield curves derived from quoted interest
rates. Equity derivatives are measured using share prices and yield curves derived from quoted interest rates matching maturities of
the contracts. The fair value of derivatives also includes the non-performance risk of both Britvic and its derivatives trading
counterparties.
As in the prior year, the carrying value of financial assets and liabilities are considered to be reasonable approximations of their fair
values, except for fixed rate borrowings.
The fair value of the group’s fixed rate interest-bearing borrowings and loans at 2 October 2016 was £690.3m (2015: £596.8m)
compared to a carrying value of £661.3m (2015: £575.1m). The fair value of the group’s fixed rate interest-bearing borrowings and
loans are determined by using discounted cash flow methods using discount rates that reflect the group’s borrowing rate as at the end
of the reporting period.
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 following table summarises the capital of the group:
Financial assets
Cash and cash equivalents
Derivatives hedging balance sheet debt
Financial liabilities
Financial liabilities held at amortised cost
Adjusted net debt
Equity
Capital
2016
£m
(205.9)
(157.5)
779.8
416.4
281.0
697.4
2015
£m
(239.6)
(71.8)
575.3
263.9
211.8
475.7
The group manages its capital structure and makes adjustments to it, in light of changes in economic conditions or in order to facilitate
acquisitions. 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 28. 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.
136
Britvic plc Annual Report 2016
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Financial statements Notes to the consolidated financial statements continued
25. Derivatives and hedge relationships
As at the 2 October 2016 the group had entered into the following derivative contracts.
Consolidated balance sheet
Non-current assets: derivative financial instruments
Fair value of the USD GBP cross currency fixed interest rate swaps¹
Fair value of the USD GBP cross currency floating interest rate swaps ³
Fair value of the GBP euro cross currency floating interest rate swaps ²
Fair value of forward currency contracts
Current assets: derivative financial instruments
Fair value of the USD GBP cross currency fixed interest rate swaps¹
Fair value of the USD GBP cross currency floating interest rate swaps ³
Fair value of the GBP euro cross currency floating interest rate swaps ²
Fair value of forward currency contracts ¹
Fair value of forward currency contracts
Current liabilities: derivative financial instruments
Fair value of forward currency contracts ¹
Fair value of forward currency contracts
Fair value of foreign exchange swaps
Fair value of interest rate swaps
Fair value of equity forwards
Non-current liabilities: derivative financial instruments
Fair value of the USD GBP cross currency fixed interest rate swaps¹
Fair value of the GBP euro cross currency fixed interest rate swaps ²
Fair value of the USD GBP cross currency floating interest rate swaps ³
Fair value of equity forwards
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.
2016
£m
2015
£m
58.1
39.0
1.0
0.5
98.6
41.6
16.8
1.7
9.3
11.6
81.0
44.8
21.5
24.1
-
90.4
3.4
4.6
1.1
1.8
-
10.9
(0.3)
(10.9)
-
-
-
(0.8)
(1.1)
-
(3.6)
-
(0.7)
(4.3)
(1.3)
(1.3)
(0.3)
-
(13.8)
(0.3)
-
-
(1.0)
(1.3)
Britvic plc Annual Report 2016
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137
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Financial statements Notes to the consolidated financial statements continued
25. Derivatives and hedge relationships (continued)
Derivatives not designated as part of hedge relationships
Equity derivatives –equity forwards
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. The group has equity forwards against schemes that mature in
2016 and 2017.
Forward currency contracts – Ebba
As part of cash management for expected future payments in relation to the deferred consideration of the purchase of Ebba BR$150.0m
of BR$/sterling FX forwards were in existence at 2 October 2016 (2015: BR$50.0m in relation to operational requirements).
Derivatives designated as part of hedge relationships
As at the 2 October 2016 these hedging relationships are categorised as follows:
Cash flow hedges
Forward currency contracts
The forward currency contracts hedge the expected future purchases in the period to March 2018 and have been assessed as part of
effective cash flow hedge relationships as at 2 October 2016.
Forward currency contracts – Ebba
As part of the transaction to purchase Ebba on 30 September 2015, the group purchased forward currency contracts to hedge the FX
movement on the purchase of the company in Brazilian Real.
Cross currency interest rate swaps
USD GBP cross currency interest rate swaps
The group has a number of cross currency interest rate swaps relating to the 2007, 2010 and 2014 USPP Notes. These cross
currency interest rate swaps have the effect of fixing both the value of the USD borrowings into sterling and the rate of interest
payable. The cross currency interest rate swaps are designated as part of a cash flow hedge relationship with the Notes.
Cash flows due under these cross currency interest rate swaps match the interest payment dates and maturity profile of the USPP
Notes. The maturity profile of the USPP Notes can be seen in note 21.
During the year the cash flow hedge has been tested for effectiveness and as a result a £0.4m gain (2015: £2.1m gain) has been
recognised in the income statement in respect of ineffectiveness.
Cash flow hedge net unrealised gains/(losses) and related deferred tax assets/(liabilities):
2016
Forward currency contracts
2007 cross currency swaps
2010 cross currency swaps
2014 cross currency swaps
2015
Forward currency contracts
2007 cross currency swaps
2010 cross currency swaps
2014 cross currency swaps
Fair value hedges
Net unrealised
gain/(loss) within equity
Related deferred tax
asset/(liability)
£m
9.5
2.3
(3.9)
(3.4)
£m
(1.6)
(0.4)
0.7
0.6
Net unrealised
gain/(loss) within equity
Related deferred tax
asset/(liability)
£m
(9.2)
3.9
(2.7)
(2.1)
£m
1.7
(0.8)
0.5
0.4
Cross currency interest rate swaps
The group has a number of cross currency interest rate swaps in respect of the 2009 and 2010 USPP Notes. These instruments swap
the principal and interest from fixed rate US dollar into floating rate sterling (the ‘2009 and 2010 USD GBP cross currency interest rate
swaps’). The cross currency interest rate swaps are designated as part of a fair value hedge relationship with the Notes.
The fair value movements on the 2009 and 2010 USD GBP cross currency interest rate instruments are recorded in the consolidated
income statement, with a corresponding adjustment to the carrying value of the Notes where the hedge is deemed effective.
The increase in fair value of the cross currency interest rate swaps, excluding maturities, of £29.7m (2015: £11.9m increase) has been
recognised in finance costs and offset with a similar loss on the borrowings of £30.2m (2015: £12.5m loss). The net loss of £0.5m
(2015: £0.6m loss) represents the ineffective portion on the hedges of the debt.
138
Britvic plc Annual Report 2016
Financial statements Notes to the consolidated financial statements continued
25. Derivatives and hedge relationships (continued)
Net investment hedges
2009 and 2010 GBP EUR cross currency interest rate swaps
These instruments swap sterling liabilities arising from the 2009 and 2010 USD GBP cross currency interest rate swaps into euro
liabilities and have been designated as part of effective hedges of the net investments in Britvic France and Britvic Ireland.
The GBP EUR 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 these euro investments. Movements in the fair value of the GBP EUR cross currency interest rate
swaps are taken to equity where they offset foreign exchange movements on the translation of the net investments in Britvic France
and Britvic Ireland.
No ineffectiveness has been recognised in the consolidated income statement (2015: £nil).
Impact of derivatives and hedge relationships on the consolidated statement of comprehensive income
2016
£m
2015
£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**
2014 cross currency interest rate swaps**
Ineffectiveness recognised in the income statement in respect of cash flow hedges
2010 cross currency interest rate swaps**
2014 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
2014 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 income/costs.
(8.7)
(30.6)
(12.1)
(12.8)
(64.2)
0.4
-
0.4
17.1
29.0
10.9
11.5
68.5
(18.8)
(7.2)
62.5
36.5
(0.7)
(11.8)
(4.7)
(4.9)
(22.1)
1.5
0.6
2.1
(8.2)
10.7
3.4
4.2
10.1
6.3
3.9
(11.7)
(1.5)
Britvic plc Annual Report 2016
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139
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Financial statements Notes to the consolidated financial statements continued
26. Provisions
At 28 September 2014
Provisions made during the year
Provisions utilised during the year
Unused amounts reversed
Unwinding of discount
Exchange differences
At 27 September 2015
Provisions made during the year
Acquisition of subsidiary
Provisions utilised during the year
Unused amounts reversed
Exchange differences
At 2 October 2016
Current
Non-current
Total
Restructuring
Other
Total
£m
3.8
0.6
(1.9)
(1.4)
-
-
1.1
4.2
-
(1.7)
(0.2)
0.2
3.6
3.6
-
3.6
£m
1.9
-
(0.3)
(0.1)
0.1
(0.2)
1.4
1.9
4.3
(0.2)
(0.7)
2.4
9.1
3.2
5.9
9.1
£m
5.7
0.6
(2.2)
(1.5)
0.1
(0.2)
2.5
6.1
4.3
(1.9)
(0.9)
2.6
12.7
6.8
5.9
12.7
Restructuring provisions
Restructuring provisions at 2 October 2016 and 27 September 2015, primarily relate to contract termination costs, consultation fees
and employee termination benefits, recognised by the group following the implementation of cost initiatives announced in May 2013.
Other provisions
Other provisions at 27 September 2015, primarily relate to onerous lease provisions that have arisen due to the exit of certain group
premises, and the period over which these will be settled ranges from 1 to 8 years. In addition during the current period certain
provisions have been recognised on the acquisition of a subsidiary in Brazil which relate to regulatory and legal claims and are
expected to be settled in 1 to 5 years. The impact of discounting was deemed to be immaterial.
27. Share-based payments
Britvic operates a broad base of employee plans as well as executive plans. In GB Britvic operates SIP plans for all employees,
whereas outside of GB Britvic operates both share-settled and cash-settled plans. Executives participate in ESOP and PSP plans and
senior leadership team participates in PSP plans.
The expense recognised for share-based payments in respect of employee services received during the 53 weeks ended 2 October
2016, including national insurance is £6.6m (2015: £10.6m). 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 HMRC approved share plan open to employees based in GB. 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. Employees can’t sell these shares for three years from their date of award. There are no cash settlement
alternatives. Employees also have the opportunity to invest up to £138 every 4 weeks (£1,800 per year) through the partnership share
scheme. This is deducted from their gross salary. Matching shares are offered on the basis of one free matching share for each
ordinary share purchased with a participant’s savings, up to a maximum of £50 (2015: £50) per four week pay period.
140
Britvic plc Annual Report 2016
Financial statements Notes to the consolidated financial statements continued
27. Share-based payments (continued)
The Britvic Share Incentive Plan (‘SIP’) (continued)
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
2016
2016
2015
2015
No. of
shares
Weighted
average fair
value
No. of
shares
Weighted
average fair
value
290,737
112,732
706.7p
677.8p
316,288
108,421
655.1p
700.1p
The Britvic Executive Share Option Plan (‘ESOP’)
The ESOP allows for options to buy ordinary shares to be granted to executives. 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.
Options granted in 2016 and 2015
The performance condition requires the increase in EPS of 6% - 12% pa compound over a three year performance period for the
options to vest. If the EPS growth is 6%, 20% of the options will vest, with full vesting at 12% EPS growth. Straight-line apportionment
will be applied between these two levels to determine the number of options that vest and no options will vest if the 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 at 28 September 2014
Granted
Exercised
Forfeited
Lapsed
Outstanding at 27 September 2015
Granted
Exercised
Lapsed
Outstanding at 2 October 2016
Exercisable at 2 October 2016
Number of
share options
Weighted
average
exercise price
(pence)
5,341,935
1,007,632
(1,232,994)
(31,844)
(466,483)
4,618,246
966,932
(1,438,294)
(250,608)
3,896,276
1,324,139
383.9
671.0
303.2
639.1
331.6
471.5
710.9
304.4
670.9
579.8
381.5
The weighted average share price for share options exercised during the period was 706.7p (2015: 711.8p).
The share options outstanding as at 2 October 2016 had a weighted average remaining contractual life of 7.3 years (2015: 6.9 years)
and the range of exercise prices was 221.0p – 711.7p (2015: 221.0p – 671.0p).
The weighted average fair value of options granted during the period was 110.7p (2015: 101.3p).
The fair value of equity-settled share options granted is estimated as at the date of grant using a binomial model, taking account of the
terms and conditions upon which the options were granted.
The 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 performance conditions, where different performance conditions apply to different groups of employees. Awards up to
and including 2008, and 2013 and later were made in respect of ordinary shares. Awards granted between 2009 and 2011 were nil
cost options. Nil cost options remain exercisable until 7 or 10 years after the date of grant for employees based in Ireland and UK
respectively, whereas awards of ordinary shares are exercised when vested.
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Financial statements Notes to the consolidated financial statements continued
27. Share-based payments (continued)
The Britvic Performance Share Plan (‘PSP’) (continued)
Awards granted in 2016
Two awards were granted in 2016. The first award is split between the senior leadership team and the senior management team. The
performance condition applied to awards granted to members of the senior leadership team is divided 75% and 25% between EPS
and the total shareholder return (TSR) performance conditions respectively. EPS is the only condition applied to awards granted to
senior management team. The EPS condition is the same as described in the ESOP section for options granted in 2015.
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
20% will vest, rising on a straight-line basis to 100% vesting at upper quartile.
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 second award is an exceptional award under the Performance Share Plan and has been awarded to selected employees. The
performance condition applied to awards granted is continued employment for three years from date of grant.
Awards granted in 2015
Awards granted in 2015 were as per the first award in 2016 outlined above.
The following tables illustrate the movements in the number of PSP shares and nil cost options during the period.
Number of shares and nil cost options
subject to specific conditions
TSR condition
EPS condition
ROIC condition
Continued
employment
condition
2,036,147
916,245
Outstanding at 28 September 2014
Granted
Exercised
Forfeited
Lapsed
Outstanding at 27 September 2015
Granted
Exercised
Lapsed
916,248
174,142
(292,376)
(7,086)
-
790,928
151,802
(358,438)
(50,018)
861,161
(337,124)
(55,990)
(263,209)
2,240,985
1,085,117
(729,777)
(315,665)
Outstanding at 2 October 2016
534,274
2,280,660
Weighted average remaining contracted life in years for nil cost options outstanding at:
2 October 2016
27 September 2015
5.2
6.2
4.9
5.7
-
5.7
10,365
(22,455)
(4,376)
(398,169)
501,610
(304,523)
(26,541)
179,924
9,378
147,004
-
-
-
-
-
-
-
-
147,004
-
-
Key assumptions used to determine the fair value of ESOP and PSP
The fair value of options and awards granted is estimated as at the date of grant, taking account of the terms and conditions upon
which shares options were granted. The fair value of the award subject to the TSR condition is determined using a Monte Carlo
simulation. The fair value of all other awards 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 PSP awards and ESOP options granted during the financial year:
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Share price at date of grant (pence)
Exercise price (pence)
2016
3.79 - 3.94
25.6 - 25.7
2015
3.84
26.5
0.6 - 0.9
0.7 - 1.2
3 - 5
676.0 - 704.5
683.0 - 711.7
3 - 5
648.0
671.0
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily
be the actual outcome.
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Financial statements Notes to the consolidated financial statements continued
28. Notes to the consolidated cash flow statement
Analysis of net debt
2015
Cash flows
Exchange
differences
Other
movement
Cash and cash equivalents
Debt due within one year
Debt due after more than one year
Derivatives hedging the balance sheet debt *
£m
239.6
(2.9)
(572.4)
(335.7)
71.8
£m
(35.8)
(66.5)
-
(102.3)
-
Adjusted net debt
(263.9)
(102.3)
£m
2.1
(15.0)
(85.7)
(98.6)
85.7
(12.9)
£m
-
(203.7)
166.4
(37.3)
-
(37.3)
Cash and cash equivalents
Bank overdrafts
Debt due within one year
Debt due after more than one year
Derivatives hedging the balance sheet debt *
Adjusted net debt
2014
Cash flows
Exchange
differences
Other
movement
£m
144.0
(0.7)
(22.4)
(539.9)
(419.0)
38.1
(380.9)
£m
96.0
0.6
19.0
-
115.6
-
115.6
£m
(0.4)
0.1
0.3
(34.0)
(34.0)
33.7
(0.3)
£m
-
-
0.2
1.5
1.7
-
1.7
2016
£m
205.9
(288.1)
(491.7)
(573.9)
157.5
(416.4)
2015
£m
239.6
-
(2.9)
(572.4)
(335.7)
71.8
(263.9)
* 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.
29. 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
Land and
buildings
£m
3.0
10.7
26.7
40.4
Land and
buildings
£m
2.4
11.0
29.5
42.9
Other
£m
6.0
8.9
0.1
15.0
Other
£m
8.2
6.9
0.1
15.2
2016
Total
£m
9.0
19.6
26.8
55.4
2015
Total
£m
10.6
17.9
29.6
58.1
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Financial statements Notes to the consolidated financial statements continued
29. Commitments and contingencies (continued)
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
2016
2015
£m
0.9
2.9
3.8
£m
0.1
0.2
0.3
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 2 October 2016, the group has commitments of £50.6m (2015: £8.9m) relating to the acquisition of new plant and machinery.
Contingent liabilities
The group had no material contingent liabilities at 2 October 2016 (2015: none).
144
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Financial statements Notes to the consolidated financial statements continued
30. Related party disclosures
The consolidated financial statements include the financial statements of Britvic plc and the subsidiaries listed in the table below.
Name
Principal activity
Country of
incorporation
% equity
interest
Holding company
Financing company
Marketing and distribution of soft drinks
Manufacture and sale of soft drinks
Holding company
Brand licence holder
Brand licence holder
Holding company
Holding company
Dormant
Pension funding vehicle
Pension funding vehicle
Pension funding vehicle
Pension funding vehicle
Pension funding vehicle
Pension funding vehicle
Financing company
Financing company
Pension funding vehicle
Financing company
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
Pension trust company
Financing company
Wholesale of soft drinks to the licensed trade
Wholesale of soft drinks to the licensed trade
Pension trust 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
Holding company
Directly held
Britannia Soft Drinks Limited
Britvic Finance No 2 Limited
Indirectly held
Britvic EMEA Limited
Britvic Soft Drinks Limited
Robinsons Soft Drinks Limited
Orchid Drinks Limited
Red Devil Energy Drinks Limited
Britvic International Investments Limited
Britvic Overseas Limited
Britvic Pensions Limited
Britvic Property Partnership
Britvic Brands LLP
Britvic Asset Company No.1 Limited
Britvic Asset Company No.2 Limited
Britvic Asset Company No.3 Limited
Britvic Asset Company No.4 Limited
Britvic Finance Partnership LLP
Robinsons (Finance) No.2 Limited
Britvic Scottish Limited Partnership
Britvic Finance Limited
Britvic Irish Holdings Limited
Britvic Ireland Limited
Britvic Northern Ireland Limited
Aquaporte Limited
Britvic Americas Limited
Britvic Ireland Pension Trust DAC
Robinsons (Finance) Limited
Counterpoint Wholesale (Ireland) Limited
Counterpoint Wholesale (NI) Limited
Britvic Northern Ireland Pensions Trust Ltd
Britvic North America LLC
Britvic France SNC
Fruité Entreprises SAS
Fruité SAS
Bricfruit SAS
Unisource SAS
Teisseire SAS
Teisseire Benelux SA
Britvic Brasil Holdings SA
Empresa Brasileira de Bebidas e Alimentos SA Manufacture and sale of soft drinks
Britvic Asia PTE. Ltd
Britvic India Manufacturing Private Ltd.
Britvic International Support Services Ltd
Greenbank Drinks Company Limited
The Really Wild Drinks Company Limited
H. D. Rawlings Limited
R. White & Sons Limited
Idris Limited
The Southern Table Water Company Ltd
Britvic Corona Limited
Britvic Beverages Limited
Sunfresh Soft Drinks Limited
The London Essence Company Limited
Hooper, Struve & Company Limited
British Vitamin Products Limited
Britvic Healthcare Trustee Limited
Wisehead Productions Limited
Britvic Licensed Wholesale Limited
Britvic Munster Limited
Holding company
Manufacture and sale of soft drinks
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
England and Wales
Jersey
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
Jersey
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Republic of Ireland
Northern Ireland
Northern Ireland
USA
France
France
France
France
France
France
France
Brazil
Brazil
Singapore
India
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Republic of Ireland
Republic of Ireland
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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Financial statements Notes to the consolidated financial statements continued
30. Related party disclosures (continued)
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 payments
2016
2015
£m
5.9
0.5
0.7
7.1
£m
6.1
0.1
2.0
8.2
See note 8 for details of directors’ emoluments.
There were no other related party transactions requiring disclosure in these financial statements.
31. Acquisition of subsidiary
On 30 September 2015, the group acquired 100% of the issued share capital of Empresa Brasileira de Bebidas e Alimentos SA
(Ebba), a leading soft drinks company in Brazil. The acquisition is in line with the strategic direction of the group, specifically to pursue
international expansion by capitalising on global opportunities in the kids, family and adult categories, where Britvic has the leading
brands in its core markets.
The amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.
Property, plant and equipment
Intangible assets
Other non-current assets
Deferred tax assets
Inventory
Trade and other current receivables
Current tax assets
Cash and cash equivalents
Total assets
Trade and other current payables
Interest bearing loans and borrowings
Provisions
Other non-current liabilities
Total liabilities
Total identifiable net assets
Goodwill
Total consideration
Satisfied by:
Cash
Deferred consideration (discounted)
Tax receivable
Total consideration
Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balances acquired
Total consideration transferred
146
Britvic plc Annual Report 2016
£m
19.2
38.6
0.1
5.3
12.4
12.2
0.3
1.4
89.5
(8.8)
(36.7)
(4.3)
(1.0)
(50.8)
38.7
21.0
59.7
42.6
19.1
(2.0)
59.7
42.6
(1.4)
41.2
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Financial statements Notes to the consolidated financial statements continued
31. Acquisition of subsidiary (continued)
The consideration for the acquisition comprises an initial cash consideration of £32.4m (BR$193.8m) and the cost of foreign exchange
forwards taken out to hedge the purchase of the company of £10.2m less £2.0m tax receivable in relation to the foreign exchange
forwards. The deferred consideration of £25.4m (BR$152.2m) is due on 30 September 2017 and is included in the consolidated
balance sheet in other current liabilities at its current discounted value of £31.2m. In addition there was a repayment of Ebba debt of
£32.1m (BR$192.5m) subsequent to acquisition*.
Included in goodwill are certain intangible assets that cannot be individually separated and reliably measured due to their nature. These
items include the assembled workforce and the market presence which Ebba has in the Brazilian market that Britvic can use to exploit
the potential of its global brands.
Trade and other current receivables with a fair value of £12.2m have been recognised on acquisition. The gross contractual amounts
on these receivables are £12.8m with £0.6m not expected to be collected.
From the date of acquisition to 2 October 2016, the acquired business contributed £89.5m to revenue and £17.5m to brand
contribution for the period. Due to the timing of the acquisition on 30 September 2015, the revenue and contribution for the period is
materially the same as if Ebba had been completed on the first day of the financial period. Foreign exchange gains of £8.7m on
goodwill have been recognised in the consolidated statement of other comprehensive income in the period to 2 October 2016.
Integration related costs of £5.2m have been incurred in the current period. Acquisition related costs of £6.5m were incurred in the
prior period. These have been included within exceptional and other items (see note 5).
*All £ amounts are at the £:BR$ rate prevailing at the acquisition date of 30 September 2015 with the exception of the current value of
the deferred consideration.
32. Post balance sheet event
Subsequent to the period end, the group announced the acquisition, subject to competition approval, of East Coast Suppliers Limited,
a licensed wholesaler in Ireland. The acquisition price is deemed not material to the group.
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Financial statements
Company balance sheet
At 2 October 2016
Non-current assets
Investments in group undertakings
Other receivables
Derivative financial instruments
Deferred tax asset
Current assets
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Current liabilities
Trade and other payables
Bank overdraft
Interest bearing loans
Derivative financial instruments
Other payables
Net current assets
Total assets less current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Derivative financial instruments
Other non-current liabilities
Net assets
Capital and reserves
Issued share capital
Share premium account
Own shares reserve
Hedging reserve
Merger reserve
Retained earnings
Total equity
Note
5
9
6
9
7
8
8
9
8
9
10
2016
£m
775.0
0.2
98.1
0.8
874.1
358.6
71.7
-
430.3
(92.1)
(27.7)
(173.0)
-
(1.6)
(294.4)
135.9
1,010.0
2015
£m
768.4
-
90.4
-
858.8
163.9
9.2
87.8
260.9
(81.1)
(34.5)
(2.7)
(11.8)
-
(130.1)
130.8
989.6
(487.9)
(571.9)
(3.6)
-
(0.3)
(1.5)
(491.5)
(573.7)
518.5
415.9
52.6
129.1
(3.3)
(4.2)
87.3
257.0
518.5
52.2
123.2
(11.4)
(0.8)
87.3
165.4
415.9
The financial statements were approved by the board of directors and authorised for issue on 29 November 2016. They were signed
on its behalf by:
Simon Litherland
Mathew Dunn
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Financial statements
Company cash flow statement
For the 53 weeks ended 2 October 2016
Cash flows from operating activities
Profit before tax
Finance income
Other financial instruments
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash flows from operating activities
Cash flows from investing activities
Interest received
Dividend received
Net cash flows used in investing activities
Cash flows used in financing activities
Issue costs paid
Interest paid
Repayment of 2009 USPP Notes
Internal loans repaid
Purchases of own shares
Issue of shares relating to incentive schemes for employees
Issue of shares under a non-pre-emptive placing, net of costs
Dividend paid to equity shareholders
Net cash flows used in financing activities
Net (decrease)/increase in cash and cash equivalent
Cash and cash equivalent at beginning of period
Cash and cash equivalent at the end of the period
2016
£m
157.5
(146.7)
(23.0)
2.1
0.5
(9.6)
0.5
164.7
165.2
-
(20.1)
-
(158.3)
(2.1)
5.9
(1.1)
(60.9)
(236.6)
(81.0)
53.3
(27.7)
2015
£m
44.4
(54.0)
11.5
(2.6)
10.5
9.8
3.3
72.0
75.3
(2.2)
(23.7)
(18.0)
(10.1)
(11.9)
3.7
87.8
(52.9)
(27.3)
57.8
(4.5)
53.3
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Financial statements
Company statement
of changes in equity
For the 53 weeks ended 2 October 2016
Issued
share
capital
Share
premium
account
Own
shares
reserve
Hedging
reserve
Merger
reserve
Retained
earnings
Total
£m
87.3
£m
£m
171.3
340.8
At 28 September 2014
Profit for the year
Movement in cash flow hedges
Total comprehensive income
£m
49.4
-
-
-
£m
33.5
-
-
-
Issue of shares
2.8
89.7
Own shares purchased for share schemes
Own shares utilised for share schemes
Movement in share based schemes
Payment of dividend
-
-
-
-
-
-
-
-
£m
(2.9)
-
-
-
(2.1)
(13.4)
7.0
-
-
£m
2.2
-
(3.0)
(3.0)
-
-
-
-
-
-
-
-
-
-
-
-
-
At 27 September 2015
52.2
123.2
(11.4)
(0.8)
87.3
Profit for the year
Movement in cash flow hedges
Deferred tax in respect of cash flow hedges
Total comprehensive income
-
-
-
-
-
-
-
-
Issue of shares
0.4
5.9
Own shares purchased for share schemes
Own shares utilised for share schemes
Movement in share based schemes
Payment of dividend
At 2 October 2016
-
-
-
-
-
-
-
-
-
-
-
-
(1.8)
(3.2)
13.1
-
-
-
(4.2)
0.8
(3.4)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44.4
-
44.4
-
-
(5.6)
8.2
44.4
(3.0)
41.4
90.4
(13.4)
1.4
8.2
(52.9)
(52.9)
165.4
157.5
-
-
415.9
157.5
(4.2)
0.8
157.5
154.1
-
-
(12.1)
7.1
4.5
(3.2)
1.0
7.1
(60.9)
(60.9)
52.6
129.1
(3.3)
(4.2)
87.3
257.0
518.5
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Financial statements
Notes to the company
financial statements
1. Significant accounting policies, judgements, estimates and assumptions
Statement of compliance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101)
The company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial
Reporting Council. Accordingly, these financial statements were prepared in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework (FRS 101) and in accordance with the provisions of the Companies Act 2006.
There were no material measurement or recognition adjustments on the adoption of FRS 101.
Basis of preparation
These financial statements are prepared on a going concern basis and in accordance with the Companies Act 2006 and applicable
UK accounting standards and present information about the company as an individual undertaking, and not about its group.
The financial statements are prepared under the historical cost convention except for the measurement of derivative instruments at fair
value. 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 financial statements are presented in GBP sterling and all values are rounded to the nearest million pounds (£ million).
Significant accounting policies: use of judgement, estimates and assumptions
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 income and expenditure during
the year. However, the nature of estimation means that the actual outcomes could differ from those estimates. There are no significant
judgements and estimates relevant to these financial statements.
Foreign currency translations
The company’s financial statements are presented in sterling, which is also the company’s functional currency.
Transactions in foreign currencies are initially recorded in the entity’s functional currency by applying the spot exchange rate ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange
ruling at the balance sheet date. Any resulting exchange differences are included in the income statement and should be read in
conjunction with the information provided under Derivative financial instrument and hedging in Notes 3, 24 and 25 of the consolidated
financial statements.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at
the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value was determined.
Investments
The company recognises its investments in subsidiaries at cost less any provisions made for impairment. The company assesses
investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be
recoverable. If any such indication of impairment exists, the company makes an estimate of its recoverable amount. Where the
carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its
recoverable amount.
In respect of IFRS 2 ‘Share based payment’, the company records an increase in its investment in subsidiaries to reflect the share-
based compensation expense recorded by its subsidiaries.
Share-based payments
The cost of the equity-settled transactions with employees of other members within of the group is measured by reference to the fair
value at the date at which equity instruments are granted and is recognised as a capital contribution in investments in subsidiary
undertakings over the vesting period, which ends on the date on which the employees become fully entitled to the award. A
corresponding credit is recognised within equity. Fair value is determined by using an appropriate, widely used, valuation model. In
valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the
shares of the company (market conditions).
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.
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Financial statements Notes to the company financial statements continued
1. Significant accounting policies, judgements, estimates and assumptions (continued)
Income taxes
The current income tax 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.
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.
Financial assets
All financial assets held by the company are classified as loans and receivables. Financial assets include cash and cash equivalents,
other receivables and loans. The company determines the classification of its financial assets at initial recognition. Financial assets are
recognised initially at fair value, normally being the transaction price plus directly attributable transaction costs.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in active markets, do
not qualify as trading assets and have 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 consolidated income statement when loans and receivables are derecognised or impaired.
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.
Financial liabilities
All financial liabilities are initially recognised in the balance sheet at fair value less directly attributable transactions costs and are
subsequently measured at amortised cost using the effective interest rate method.
Gain and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance
income and finance cost.
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.
Derivative financial instruments
The company 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.
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.
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Financial statements Notes to the company financial statements continued
1. Significant accounting policies, judgements, estimates and assumptions (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 and issues by the company of its own shares, which will be distributed to
employees as and when share awards made under the Britvic employee share plans vest.
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.
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.
New standards and interpretations not applied
See note 3 of the consolidated accounts for details of new standards and interpretations not applied.
2. 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.
3. Profit of the company
The company made a profit of £157.5m in the period (2015: profit £44.4m).
4. 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
2016
2015
£m
3.1
-
2016
No.
-
£m
2.4
-
2015
No.
-
Further information relating to directors’ remuneration for the 53 weeks ended 2 October 2016 is shown in the Directors remuneration
report on pages 67 to 84.
5. 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
2016
£m
768.4
6.6
775.0
2015
£m
757.8
10.6
768.4
The list of the subsidiary undertakings of which Britvic plc is, either directly or through subsidiary companies, the beneficial owner of
the whole of the equity share capital is given in note 30 of the consolidated financial statements.
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Financial statements Notes to the company financial statements continued
6. Trade and other receivables
Loans due from subsidiary undertakings
Interest basis
Britvic Soft Drinks Limited
Britvic Asia PTE Limited
Britvic EMEA Limited
Robinsons Soft Drinks Limited
Robinsons Soft Drinks Limited
Britvic Overseas Limited
Britvic North America LLC
6 month Euribor
6 month Sibor
6 month Libor
Interest free
6 month Libor
6 month Libor
1 month US Libor
Other amounts due from subsidiary undertakings
Britvic Overseas Limited
Interest free
All of the amounts due from subsidiary undertakings are repayable on demand.
7. Trade and other payables
Amounts due to subsidiary undertakings
Accruals and deferred income
Amounts due to subsidiary undertakings
Loans due to subsidiary undertakings
Interest basis
Orchid Drinks Limited
Britvic Americas Limited
6 month Libor
6 month Sibor
Other amounts due to subsidiary undertakings
Britvic Soft Drinks Limited
Interest free
All of the amounts due to subsidiary undertakings are repayable on demand.
2016
£m
85.0
10.8
30.0
86.7
65.0
75.8
4.7
358.0
0.6
358.6
2016
£m
88.7
3.4
92.1
2016
£m
7.9
11.0
18.9
69.8
88.7
2015
£m
72.5
8.2
-
73.7
-
-
6.8
161.2
2.7
163.9
2015
£m
75.2
5.9
81.1
2015
£m
7.7
-
7.7
67.5
75.2
154
Britvic plc Annual Report 2016
Financial statements Notes to the company financial statements continued
8. 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
2016
£m
27.7
173.7
(0.7)
200.7
489.4
(1.5)
487.9
2015
£m
34.5
3.4
(0.7)
37.2
574.0
(2.1)
571.9
Private placement notes
The company holds loan notes with coupons and maturities as shown in the following table:
Year issued
2007
2007
2009
2010
2010
2014
2014
Maturity date
February 2019
February 2017 – February 2019
Amount
£13m
$273m
Interest terms
UK£ fixed at 5.94%
US$ fixed at 5.90% - 6.00%
December 2016 – December 2019
$220m
US$ fixed at 4.77% - 5.24%
December 2017
£7.5m
UK£ fixed at 3.74%
December 2017 – December 2022
$163m
US$ fixed at 3.45% - 4.14%
February 2021 – February 2024
February 2024 – February 2026
£35m
$114m
UK£ fixed at 3.40% - 3.92%
US$ fixed at 4.09% - 4.24%
The company entered into a number of cross-currency swap agreements in relation to the loan notes to manage any foreign exchange
risk on interest rates or on the repayment of the principal borrowed. These swaps expire in line with the loan notes and are discussed
in note 25 of the consolidated financial statements.
See note 24 of the consolidated financial statements for an analysis of the interest rate profile and the maturity of the borrowings and
related interest rate swaps.
Fair values of financial assets and financial liabilities
Hierarchy
The company 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.
Unless otherwise stated, the valuation basis used to calculate fair value is level 2.
All derivatives are valued using discounted cash flow analysis using the applicable yield curve for the duration of the instruments.
Forward currency contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates
matching maturities of the contracts. Cross currency interest rate swaps are measured at the present value of future cash flows
estimated and discounted based on quoted forward exchange rates and the applicable yield curves derived from quoted interest rates.
Equity derivatives are measured using share prices and yield curves derived from quoted interest rates matching maturities of the
contracts. The fair value of derivatives also includes the non-performance risk of both Britvic and its derivatives trading counterparties.
As in the prior year, the carrying value of financial assets and liabilities are considered to be reasonable approximations of their fair
values, except for fixed rate borrowings.
The fair value of the company’s fixed rate interest-bearing borrowings and loans at 2 October 2016 was £689.9m (2015: £596.1m)
compared to a carrying value of £660.9m (2015: £574.6m). The fair value of the company’s fixed rate interest-bearing borrowings and
loans are determined by using discounted cash flow methods using discount rates that reflect the company’s borrowing rate as at the
end of the reporting period.
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Financial statements Notes to the company financial statements continued
9. Derivative financial instruments
Non-current assets: derivative financial instruments
USD GBP cross currency fixed interest rate swaps
USD GBP cross currency floating interest rate swaps
GBP euro cross currency floating interest rate swaps
Current assets: derivative financial instruments
USD GBP cross currency fixed interest rate swaps
USD GBP cross currency floating interest rate swaps
GBP euro cross currency floating interest rate swaps
Forward currency contracts
Current liabilities: derivative financial instruments
Foreign exchange swaps
Forward currency contracts
Interest rate swaps
Non-current liabilities: derivative financial instruments
USD GBP cross currency fixed interest rate swaps
GBP euro cross currency fixed interest rate swaps
2016
£m
58.1
39.0
1.0
98.1
41.6
16.8
1.7
11.6
71.7
-
-
-
-
-
(3.6)
(3.6)
2015
£m
44.8
21.5
24.1
90.4
3.4
4.6
1.1
0.1
9.2
(0.1)
(11.4)
(0.3)
(11.8)
(0.3)
-
(0.3)
Derivatives not designated as part of hedge relationships
Forward currency contracts – Ebba
As part of cash management for expected future payments in relation to the deferred consideration of the purchase of Ebba
BR$150.0m of BR$/sterling FX forwards were in existence at 2 October 2016 (2015: BR$388m in relation to the purchase of Ebba
and BR$50.0m in relation to operational requirements).
Derivatives designated as part of hedge relationships
As at the 2 October 2016 these hedging relationships are categorised as follows:
Cash flow hedges
Cross currency interest rate swaps
The company has a number of cross currency interest rate swaps relating to the 2007, 2010 and 2014 USPP Notes. These cross
currency interest rate swaps have the effect of fixing both the value of the USD borrowings into sterling and the rate of interest
payable. The cross currency interest rate swaps are designated as part of a cash flow hedge relationship with the Notes.
Cash flows due under these cross currency interest rate swaps match the interest payment dates and maturity profile of the USPP
Notes. The maturity profile of the USPP Notes can be seen in note 8.
During the year the cash flow hedge has been tested for effectiveness and as a result a £0.4m gain (2015: £2.1m gain) has been
recognised in the income statement in respect of ineffectiveness.
Fair value hedges
Cross currency interest rate swaps
The company has a number of cross currency interest rate swaps in respect of the 2009 and 2010 USPP Notes. These instruments
swap the principal and interest from fixed rate US dollar into floating rate sterling (the ‘2009 and 2010 USD GBP cross currency
interest rate swaps’). The cross currency interest rate swaps are designated as part of a fair value hedge relationship with the Notes.
The fair value movements on the 2009 and 2010 USD GBP cross currency interest rate instruments are recorded in the income
statement, with a corresponding adjustment to the carrying value of the Notes where the hedge is deemed effective.
The increase in fair value of the cross currency interest rate swaps, excluding maturities, of £29.7m (2015: £11.9m increase) has been
recognised in finance costs and offset with a similar loss on the borrowings of £30.2m (2015: £12.5m loss). The net loss of £0.5m
(2015: £0.6m) represents the ineffective portion on the hedges of the debt.
156
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Financial statements Notes to the company financial statements continued
10. 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
No. of shares
Value
£
At 28 September 2014
Shares issued relating to incentive schemes for employees
Shares issued under a non pre-emptive placing
At 27 September 2015
Shares issued relating to incentive schemes for employees
At 2 October 2016
247,229,115
49,445,823
1,549,282
309,856
12,361,455
2,472,291
261,139,852
52,227,970
1,731,404
346,281
262,871,256
52,574,251
Of the issued and fully paid ordinary shares, 500,983 shares (2015: 1,678,637 shares) are own shares held by an employee benefit
trust. This equates to £100,197 (2015: £335,727) at £0.20 par value of each ordinary share. These shares are held for the purpose of
satisfying the share schemes detailed in note 27 of the consolidated financial statements.
An explanation of the group’s capital management process and objectives is set out in note 24 of the consolidated financial
statements.
11. Dividends paid and proposed
Declared and paid during the period
Equity dividends on ordinary shares
Final dividend for 2015: 16.3p per share (2014: 14.8p per share)
Interim dividend for 2016: 7.0p per share (2015: 6.7p per share)
Dividends paid
Proposed
2016
£m
42.6
18.3
60.9
2015
£m
36.4
16.5
52.9
Final dividend for 2016: 17.5p per share (2015: 16.3p per share)
46.0
42.6
12. Contingent liabilities
The company is co-guarantor of the group’s bank loan and overdraft facilities.
13. Explanation of transition to FRS 101
For all periods up to and including the year ended 27 September 2015, the company prepared its financial statements in accordance
with the United Kingdom Generally Accepted Accounting Practice (‘UK GAAP’). These financial statements, for the year ended 2
October 2016, are the first the company has prepared in accordance with FRS 101.
Comparative information included in these financial statements has also been prepared in accordance with FRS 101 and the
significant accounting polices described in note 1.
On transition to FRS 101, the company has applied the requirements of paragraphs 6-33 of the IFRS 1 ‘First-time adoption of
International Financial Reporting Standards’ (‘IFRS 1’).
Exemptions applied
IFRS 1 allows first-time adopters certain exemptions from the general requirements to apply IFRS. The company has taken advantage
of the following exemptions:
(a) Business combinations (paragraphs C1-C5);
(b) Share-based payments transactions (paragraphs D2 and D3);
In preparing these financial statements, the company has started from an opening balance sheet as at 28 September 2014, the
company’s date of transition to FRS 101, and made those changes in accounting policies and other restatements required for the first
time adoption of FRS 101. There were no material measurement or recognition adjustments on the adoption of the FRS 101.
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Financial statements Notes to the company financial statements continued
14. Related undertakings
In accordance with Section 409 of the Companies Act 2006, a full list of related undertakings, the country of incorporation and the
percentage of share capital owned as at 2 October 2016 is disclosed in Note 30 in the consolidated financial statements.
Subsidiary undertakings are controlled by the group and their results are fully consolidated in the group’s financial statements.
The amount receivable and payable to the related parties at year end are disclosed in further details respectively in Note 6 and 7.
Interest basis
2016
£m
2015
£m
Interest income
Britvic Soft Drinks Limited
6 month Euribor
Britvic Asia PTE Limited
Britvic EMEA Limited
Robinsons Soft Drinks Limited
Britvic Overseas Limited
6 month Sibor
6 month Libor
6 month Libor
6 month Libor
Britvic North America LLC
1 month US Libor
Interest expense
Britvic Soft Drinks Limited
Orchid Drinks Limited
6 month Libor
6 month Libor
0.5
0.2
0.2
0.3
1.3
0.1
2.6
-
(0.1)
(0.1)
1.9
0.1
-
-
-
0.1
2.1
(1.0)
(0.1)
(1.1)
158
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Other
information
160 Shareholder information
162 Glossary
163 Non-GAAP reconciliations
Other information
Shareholder information
Shareholder profile as at 2 October 2016
Range of holdings
1 – 199
200 – 499
500 – 999
1,000 – 4,999
5,000 – 9,999
10,000 – 49999
50,000 – 99999
100000 – 499,999
500,000 – 999,999
1,000,000 Plus
Number of
shareholders
Percentage of total
shareholders
250
295
453
1,058
245
199
79
120
40
48
8.97%
10.58%
16.25%
37.96%
8.79%
7.14%
2.83%
4.31%
1.44%
1.73%
2,787
100.00%
Ordinary shares
(million)
16,697
94,842
314,814
2,271,179
1,639,760
4,730,509
5,587,823
29,074,102
30,251,074
188,890,456
262,871,256
Percentage of issued
share capital
0.01%
0.04%
0.12%
0.86%
0.62%
1.80%
2.13%
11.06%
11.51%
71.85%
100.00%
Category
Number of
shareholders
Percentage of total
shareholders
Ordinary shares
(million)
Percentage of issued
share capital
Private Individuals
Nominee Companies
Limited and Public Limited
Companies
Other Corporate Bodies
Pension Funds, Insurance
Companies and Banks
2016 Dividends
Category
Interim
Final
1621
554
554
54
4
58.16%
19.88%
19.88%
1.94%
0.14%
4,668,673
198,880,893
40,676,678
18,540,005
105,007
1.78%
75.66%
15.47%
7.05%
0.04%
2,787
100.00%
262,871,256
100.00%
Payment Date
8 July 2016
3 February 2017
Amount per share
7.0p
17.5p
160
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Other information Shareholder information continued
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 www.britvic.com/investors/shareholder-
centre/dividends
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 www.britvic.com/
investors/shareholder-centre/dividends
Share dealing services
The company’s Registrar, Equiniti Financial Services Limited, offer
a telephone and internet dealing service, Shareview, which
provides a simple and convenient way of buying and selling
shares. For telephone dealings call 03456 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 0345 300 0430.
American Depository Receipts (ADRs)
Britvic American Depository Receipts 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)
Email:
Website:
+1 201 680 6825 (non-USA caller)
shrrelations@bnymellon.com
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.
Financial calendar
Ex-dividend date
Record date
8 December 2016
9 December 2016
Annual general meeting
31 January 2017
Payment of final dividend
3 February 2017
Interim results announcement
24 May 2017
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:
Fax:
+44 (0)1442 284411
+44 (0)1442 284402
Website:
www.britvic.com
Shareholder inquiries to the Company Secretary may also be
submitted to company.secretariat@britvic.com
Investor Relations enquiries may be submitted to:
investors@britvic.com
This report is available to download via the company’s website
http://www.britvic.com/investors/results-and-presentations/2016.
The company’s Registrar is Equiniti:
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone:
0371 384 2550* (UK callers)
+44 121 415 7019 (non-UK callers)
* For those with hearing difficulties, a textphone is available on
0371 384 2255 for UK callers with compatible equipment.
Britvic plc Annual Report 2016
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Other information
Glossary
Non-GAAP measures are provided because they are closely
tracked by management to evaluate Britvic’s operating
performance and to make financial, strategic and operating
decisions. Furthermore, on the basis that the current period is a
53-week period, 52-week period information has also been
presented in the CFO report to show comparability with the
previous year.
• Volume is defined as number of litres sold, excluding factored
brands sold by Counterpoint in Ireland. No volume is recorded
in respect of international concentrate sales.
• ARP is defined as average revenue per litre sold, excluding
factored brands and concentrate sales.
• Revenue is defined as sales achieved by the group net of
price promotional investment and retailer discounts.
• Brand contribution is a non-GAAP measure and 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.
• Brand contribution margin is a non-GAAP measure and is a
percentage measure calculated as brand contribution, divided
by revenue. Each business unit’s performance is reported
down to the brand contribution level.
• Pre-exceptional EBITDA is a non-GAAP measure defined as
operating profit before exceptional and other items,
depreciation, amortisation, impairment of PPE/intangible
assets and profit/loss from sale of PPE/intangible assets.
• Pre-exceptional EBITA is a non-GAAP measure and 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
£7.4m (2015: £2.6m). EBITA margin is EBITA as a proportion
of group revenue.
• Adjusted earnings per share are a non-GAAP measure
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 261.7m (2015: 248.6m).
• Underlying free cash flow is a non-GAAP measure and is
defined as net cash flow excluding movements in borrowings,
dividend payments and exceptional and other items.
• Adjusted net debt is a non-GAAP measure and is defined as
group net debt, adding back the impact of derivatives hedging
the balance sheet debt.
• Underlying adjusted net debt is a non-GAAP measure and
is defined as group net debt, adding back the impact of
derivatives hedging the balance sheet debt and the value of
cash received from the 2015 share placement.
• Like-for-like is a non-GAAP measure and excludes the
impact of Brazil and the additional 53rd week and on a
constant currency basis.
• Innovation is a non-GAAP measure and is defined as new
launches over the last three years, excluding new flavours and
pack sizes of established brands.
• Retail market value and volume is a non-GAAP measure
and is a measure of the recorded sales at the retail point of
purchase. This data is typically collated by independent
organisations such as Nielsen and IRI from data supplied by
retailers.
• A&P is a non-GAAP measure of marketing spend including
marketing, research and advertising.
• Pro-forma is a non-GAAP measure of performance in Brazil
where non-audited comparatives are provided in the
commentary to aid understanding of performance.
• Constant currency is a non-GAAP measure of performance
in the underlying currency to eliminate the impact of foreign
exchange movements.
• Business in the community Index (BITC) is an independent
measure of responsible business practices.
• Great Place to Work (GPTW) is a methodology process
adopted by businesses to measure employee engagement.
162
Britvic plc Annual Report 2016
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Other information
Non-GAAP reconciliations
Like-for-like
2015
52-week period ended 27 September 2015, as reported
Adjust for FX
52-week period ended 27 September 2015 @ constant currency
1,315.9
Revenue
EBITA
Profit after
tax
£m
1,300.1
15.8
£m
171.6
0.7
172.3
£m
103.8
(0.1)
103.7
EPS
pence
46.3
0.1
46.4
2016
53 week period ended 2 October 2016, as reported
1,431.3
186.1
Brazil
Week 53
2016 “like for like” with 2015
EBITDA
(89.5)
(20.2)
(3.1)
(4.2)
1,321.6
178.8
Operating profit before exceptional and other items
Acquisition related amortisation (note 14)
Pre-exceptional EBITA
Depreciation
Amortisation (non-acquisition related)
Pre-exceptional impairment of property, plant and equipment
Pre-exceptional loss on disposal of property, plant and equipment
Pre-exceptional EBITDA
53 week period ended 2
October 2016
52 week period ended 27
September 2015
£m
178.7
7.4
186.1
33.2
8.9
-
1.9
230.1
£m
169.0
2.6
171.6
29.9
8.5
0.3
0.8
211.1
Britvic plc Annual Report 2016
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Other information Non-GAAP reconciliations continued
Underlying adjusted net debt
Adjusted net debt
Cash received for 2015 share placement
Underlying adjusted net debt
Free cash flow
Pre-exceptional EBITDA
Pre-exceptional working capital movements
Purchases of intangible and tangible assets
Net pension charge less contributions
Net Interest and finance costs
Income tax paid
Share based payments
Issue of shares
Purchase of own shares
Other
Underlying free cash flow
2 October 2016
27 September 2015
£m
(416.4)
-
(416.4)
£m
(263.9)
(87.8)
(351.7)
53 week period ended 2
October 2016
52 week period ended 27
September 2015
£m
230.1
(25.8)
(121.9)
(25.9)
(20.5)
(34.2)
6.6
4.8
(2.1)
(0.2)
10.9
£m
211.1
10.4
(61.1)
(22.2)
(23.8)
(30.2)
10.5
3.7
(9.2)
0.1
89.3
164
Britvic plc Annual Report 2016
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Contents
Strategic report
2 Chairman’s introduction
4 Britvic at a glance
6 Our brands
8 Our business model
10 Trends
11 Our geographies
12 Our strategy
14 Key performance indicators
16 Chief Executive Officer’s review
19 Chief Financial Officer’s review
24 Sustainable business review
28 Our risks
32 Viability statement
Governance
34 Corporate governance report
36 Board of directors
47 Nomination committee
50 Audit Committee
58 Remuneration Committee
59 Directors’ remuneration report
61 At a glance
67 Annual Report on Remuneration
76 Directors’ Remuneration Policy
85 Directors’ report
88 Statement of directors’ responsibilities
Financial statements
90 Independent Auditor’s Report to the members of Britvic plc
96 Consolidated income statement
97 Consolidated statement of comprehensive income/(expense)
98 Consolidated balance sheet
99 Consolidated statement of cash flows
100 Consolidated statement of changes in equity
101 Notes to the consolidated financial statements
148 Company balance sheet
149 Company cash flow statement
150 Company statement of changes in equity
151 Notes to the company financial statements
Other information
160 Shareholder information
162 Glossary
163 Non-GAAP reconciliations
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.
Britvic takes care of the environment by choosing pureprint® environmental print
technology. All the electricity used in the production of this report was generated from
renewable sources and vegetable oil based inks were used throughout. The printer is a
CarbonNeutral® company and certificated to Environmental Management System, ISO
14001 and registered to EMAS, the Eco Management and Audit Scheme.
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