29th Nov 2007 07:02
Britvic plc29 November 2007 Britvic plc Preliminary Results -------------------------------- Britvic plc ("Britvic") today announces its Preliminary Results for the 52 weeksended 30 September 2007 ('the period'). 52 weeks ended 52 weeks ended % change 30 September 2007 1 October 2006 --------------------------------- £m £m Revenue 716.3 677.7 5.7Stills Revenue 334.3 321.7 3.9Carbonates Revenue 342.6 332.5 3.0 EBITDA* 126.3 121.0 4.4 Operating Profit 80.0 73.7 8.5Operating Profit Margin 11.2% 10.9% 30bptsProfit before tax 61.3 55.9 9.7 Net Debt (403.6) (282.6)Profit after tax 44.0 39.6 11.1 Basic earnings per share 20.4p 18.4p 10.9Full year dividend per 11.0p 10.0p 10.0share Free cashflow** 75.1 48.9 53.6 ROIC 20.7% 17.0% 370bpts Note regarding all numbers in this announcement other than those included withinthe Financial Statements: all numbers are disclosed before exceptional items andother than free cashflow and ROIC include a 5 week contribution from therecently acquired soft drinks and distribution businesses of C&C Group plc (Britvic Ireland) which contributed revenue of £13.8m and operating profit of£0.8m. All numbers exclude the Private Label Water business where the lastcontract expired in November 2005. * EBITDA is defined as operating profit before exceptional items, depreciation,amortisation and any gain or loss on disposal of fixed assets **Free cashflow is defined as net cashflow excluding movements in borrowings,dividend payments and non cash exceptional items. Including the impact of theBritvic Ireland acquisition free cash flow is an outflow of £92.6m. The ongoing Britvic Group, including the five week contribution from BritvicIreland, grew revenues by 5.7% to £716.3m during the period. Key highlights of the Britvic results for the period, excluding the five weekcontribution from Britvic Ireland, include: • Out-performance of the soft drinks market in all of its key categories • Full year revenue growth of 3.7% to £702.5m • A resilient second half performance given the extremely poor summer weather and tough FY06 comparatives. • Operating profit margin improvement of 40 basis points • Driven by a sharp focus on growing average realised price (ARP) and increasing efficiency • Underpinned by a rapid and strong management response to the poor summer trading conditions through further cost saving initiatives. • Free cashflow of £75.1m, £26.2m ahead of the prior year driven by a continued focus on working capital and capital expenditure management • Return on Invested Capital (ROIC) of 20.7%, an increase of 370 basis points reflecting the continued focus on costs, cash flow and the proactive management of the Group's asset base. The Board is proposing a final dividend per share of 7.7p bringing the full yeardividend per share to 11.0p. This reflects the Board's confidence in the futureprospects of the business and the underlying cash generative nature of itsactivities. Paul Moody, Chief Executive commented: "We have out-performed the soft drinks market across all key categories, with astrong performance from our brands, despite difficult trading conditions in thesecond half of the year. The installation of our first aseptic line was asignificant milestone and facilitated the major innovation launches of the year,Robinsons Smooth Juice and Fruit Shoot 100% Juice, both of which play to thenatural agenda. We have maintained our focus on managing costs and drivingefficiency, and the outsourcing of our secondary retail distribution network hasbeen successfully implemented. While it is only three months since thecompletion of the Britvic Ireland acquisition, we are encouraged by theperformance of the business. The combined effect of these actions has driven an 11% growth in profit aftertax, a good result in a year of poor summer weather. The conditions in the soft drink market continued to be challenging at thebeginning of our new financial year, reflecting the normal residual impact of apoor summer. However the fundamentals of the market remain strong and the markethas shown modest growth in recent weeks. Against this background, Britvic hascontinued to grow its top line in the period since its year end, and we remainconfident that we are well positioned for the year ahead, building on the recentacquisition of Britvic Ireland, further cost saving opportunities and acontinued focus on the innovation pipeline. " For further information please contact: Investors:------------John Gibney/ Craig Marks +44 (0)1245 504 330 Media:--------Tom Buchanan (Brunswick) +44 (0)207 404 5959Emma Peacock/ Susan Turner +44 (0)1245 261 871 A presentation for analysts and investors will be held at 9.30am on 29 November2007 in the Auditorium at Deutsche Bank, Winchester House, 1 Great WinchesterStreet, EC2N 2BD. A live webcast of the presentation including Q&A will beavailable on the Britvic plc website www.britvic.com There will also be a conference call today at 2.30pm (9.30am Eastern Time)primarily for US investors and analysts where there will be an opportunity toask questions. A recording of the call will be available for seven days. Toaccess this call please dial the access number below and use the pin numbergiven. Access number +44 (0)20 8609 0205Pin number 566466#Recording number +44 (0)20 8609 0289Conference reference 195579# A separate call for private placement noteholders will be held in due course anddetails will be circulated soon. Notes to editors----------------- Britvic is one of the two leading branded soft drinks businesses in the UK andthe Republic of Ireland. The Company is the largest supplier of still softdrinks, the faster growing category in the soft drinks market, and the numbertwo supplier of carbonates. Britvic's broad portfolio of leading brands includes established names with highbrand recognition such as Robinsons, Tango, J20 and Fruit Shoot. Included withinthe portfolio are the Pepsi and 7UP brands, which Britvic produces, markets,sells and distributes under its exclusive appointment from PepsiCo which runsuntil December 2023 in Great Britain and 2019 in Ireland. This brand and productportfolio enables Britvic to target and satisfy a wide range of consumer demandsin all major soft drinks categories, via all available routes to market. 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 andother factors which may cause the actual results, performance or achievements ofthe Company to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements. Except asrequired by the Listing Rules and applicable law, Britvic undertakes noobligation to update or change any forward-looking statements to reflect eventsoccurring after the date such statements are published. Operating and Financial Review============================== Chief executive's review======================== In the 52 weeks ended 30 September 2007 Britvic's brands have performed well,actively growing market share in key categories, despite the poor summer weatherwhich presented extremely difficult trading conditions for the soft drinksmarket as a whole. The out-performance of the market has delivered strongrevenue growth of 5.7% to £716.3m including a 5 week contribution of £13.8m fromBritvic Ireland. We have continued to deliver on our strategy of improvingaverage realised price (ARP) as we drive effective and efficient promotionalactivity, improving operating margins, and proactively managing the cost base.As a result operating profit is up 8.5%, profit after tax (PAT) up 11.1% andearnings per share (EPS) up 10.9% all before exceptional items, but includingthe 5 week contribution from Britvic Ireland. This has been achieved against thebackdrop of the poor summer weather and challenging second half 2006comparatives, which benefited from an above average summer and a high level ofpromotional activity based around the football World Cup. Free cashflow, before the acquisition of Britvic Ireland, was £75.1m, £26.2mahead of the prior year driven by a continued focus on working capital andcapital expenditure management. Return on Invested Capital (ROIC) has increasedby 370 bps to 20.7% reflecting the continued focus on costs, cashflow and theproactive management of the group's asset base. The Board is proposing a finaldividend per share of 7.7p bringing the full year dividend per share to 11.0p,an increase of 10% on the prior year. This reflects the Board's confidence inthe future prospects of the business and the underlying cash generative natureof its activities. The soft drinks market---------------------- The soft drinks market volumes were down 2.6% over the period due entirely tothe poor summer weather and challenging second half 2006 comparatives. Howeverthe fundamentals of the soft drinks market continue to show growth. During the first half of 2006 there was a general move by consumers towardshealthier and better for you food and beverage which was reflected in a swingaway from full sugar carbonates to stills and non-added sugar carbonates. In2007, as the year developed, there was some reversal to a more balanced positionacross both categories. Inevitably, the poor summer weather in the second halfof the year has illustrated the market susceptibility to extreme conditions.Importantly, the distribution of volume over the full year reflects thehistorical trends with the exception of the summer period. Experience shows thatmarket growth tends to recover more slowly after a weak summer as consumptiontrends remain lower. The market experienced this during 2007, where the weakmarket during the summer has impacted the autumn market performance. Against this general market background, Britvic has out-performed the market inall of its key categories during the period: • The cola market was down 0.8%, while Pepsi outperformed this with a 6.7% volume increase resulting in a 1.6 percentage point increase in market share. • The squash market was down 2.5%, particularly impacted by the summer. Robinsons squash outperformed the market with 0.7% volume growth, increasing market share by 1.3 percentage points, led by our emphasis on our large pack promotional programme. During the period stills market volumes were down 3.4% against Britvic stillsvolumes up 3.8%, and carbonates market volumes were down 1.6% against Britviccarbonates volumes up 2.0%. Britvic's strategy------------------ Management action has focused on three main areas: Supporting and growing our core brands We continue to invest in our strong portfolio of brands through both innovationand media, to ensure that they are preferred by consumers. The Pepsi brand has continued its share gains of the cola market, an increase of1.6 percentage points on last year. The success enjoyed by the brand in theperiod reflects strong promotional execution across all key customers and amajor brand Pepsi redesign that capitalised on the trend for personalcustomisation with multiple designs for each variant being available - thedesigns change on a regular basis to ensure that the most contemporary themesare reflected on the packs. The growth in market share was also achieved againsta background of continued, heavy competitor activity and with no adverse impacton ARP despite our growing presence in the discounters sector. Our close workingrelationship with the brand owner, Pepsi-Cola has been instrumental in achievingthis performance. During the year, Pepsi Max has had considerable success from ataste campaign which has driven trial and frequency in all sales channels.Supporting this has been the upgrade and re-launch of the Pepsi Max website. Robinsons squash has consolidated its number one position in its categorydespite the challenging environment this year for squash. This has been achievedpartly as a consequence of the new large pack production facility which hasunlocked our ability to drive large-pack performance through increasedpromotional competitiveness, and has allowed us to grow our two-litre volumeshare. Also during the year we have launched the re-designed "no artificialcolours and flavours" family squash range with the "Raise them on Robinsons"campaign, aimed at ensuring that the brand retains its authoritative categoryleading position. This year the brand will sponsor the BBC Sports Personality ofthe Year event. This is the first headline sponsorship of the event and willinclude the "Robinsons Unsung Hero Award". The sponsorship will be supported byan on-pack promotion across everyday squash in the first quarter of the year. Fruit Shoot, the number one kids' juice drink has once again grown its marketshare and is now in more households than any other kids' juice drink. The "noartificial colours or flavours" radio campaign has driven penetration to itshighest levels since October 2005. In the adult category, J20 continues to lead and drive the growth in itscategory, with 7% year on year growth helped by its strongest ever Christmas.This success has been partly driven by flavour and format innovationinitiatives, including the continued rollout of the PET pack; the successfulre-launch of Orange and Pomegranate as the sixth flavour addition to the corerange; and the introduction of large packs for at home entertaining. Our brandcommunications including the "If H20 were J20" campaign across TV, cinema anddigital platforms have helped to reinforce the brand's position with its coreconsumers. Next year, we plan to continue to communicate with consumers in keyperiods such as the run up to Christmas; to expand the brand into more sociableoccasions with new pack formats from early Summer 2008; and to introduce a newvariant "Apple and Blueberry" in the Spring. In water, Fruit Shoot H20 has consolidated its position as the number one kidswater brand, with an average twelve-weekly rate of sales some three times higherthan any other kids water brand. It has very strong distribution at 77%,excellent repeat rates at 41% and its cannibalisation of other Fruit Shootvariants is low with half of the brand's consumers being new to the Fruit Shootbrand. Drench has been refocused on the take-home market, with a successfulre-launch in a new packaging format in the convenience and impulse channels inthe spring. This was supported by the "your brain is 75% water" advertisingcampaign which successfully grew brand awareness. Pennine Spring has beeneffectively refocused on the licenced and food service sectors with volumegrowth of 8.8% against last year and is now the third largest and one of thefastest growing brands in managed licenced outlets. Our International business has achieved improved results, with furtherdistribution gains for Robinsons squash in the recent launch markets of Swedenand Denmark and impressive growth from Fruit Shoot in the Netherlands. In theNetherlands we have developed a brand new TV campaign which made Fruit Shoot thesecond most recognised kids' drink advertised this summer. The great earlysuccess from Robinsons in Denmark and Sweden has led to the launch of RobinsonsHigh Juice in Finland, designed to further build the scale of our business inthe Nordic region. Distribution of 65% was achieved within the first 8 weeks oflaunch and with a full launch campaign, including TV advertising and in-storesampling, the brand achieved a 4% market share after just 12 weeks. Innovating / Developing new products A number of new brands, brand extensions and new packaging concepts werelaunched in the year, with the aim of establishing Britvic in the growthsegments of the market. All were launched as planned and all are performing inline with our expectation. The launches are focused around the four key themesof naturalness, health and well-being, occasionality and indulgence. The two major new innovation launches this year were Robinsons Smooth Juice andFruit Shoot 100% Juice, both playing to the natural agenda with no artificialcolours and flavours or preservatives. There is no doubt that the weak summerhad a detrimental effect on the scale and speed of consumer pick-up on these twolaunches, but considering this impact, both have performed in line withexpectations. Robinsons Smooth Juice has built its distribution rapidly, through a £2.6mmarketing investment in TV and in-store execution, followed by a £2.5minvestment in consumer sampling, radio and press in the first half of FY08.Fruit Shoot 100% Juice has achieved the highest value share for a branded kids'juice after just 12 weeks in the market with a rapid distribution build thanksto a £1.5m marketing investment in TV and outdoor media. We remain confident inthe future success of these brands as they are entirely relevant to the targetconsumer; they reflect the increased emphasis on natural foods and are supportedby the tenth largest grocery brand in the country, Robinsons. Britvic mixer and juices continue to strengthen their overall position, beingthe leaders in the juice category and level with our main competitor in themixers category. The key initiatives during this period have been the launch innon-returnable bottles; various range extensions including the launch ofCranberry and Pomegranate juices; and the re-launch of the not-from-concentrate100% juice range in November 2007, which is now branded OJ and AJ with a moremodern brand image. Managing efficiency - improving margins and free cash flow Our Business Transformation Programme, which we described at the time offlotation as being focused on driving improved efficiency and buildingcapability, is delivering against both objectives with £11m of annualisedsavings having been made prior to the start of this year. Such has been thesuccess of the Business Transformation Programme, that we have delivered anincremental £5m savings in FY07, being £1m ahead of the £4m originally plannedfor FY07, and are on course to deliver a further £2m in FY08. We continue to drive our Product Value Optimisation (PVO) programme and havedelivered £2m of savings in the year as a result of the introduction of in-houselarge pack PET squash bottles at our Norwich factory and other verticalintegration projects. In addition to this, as previously announced, we expect to see incrementalannualised savings of £5-6m by FY09 as a consequence of the outsourcing of thesecondary distribution network and vending and chiller re-manufacturingoperations, at a one-off exceptional cost of c.£3m incurred during the period.This will also reduce capital expenditure requirements by £2-3m from FY08. As aconsequence of this transaction, we have disposed of our depot in Tamworth, theonly remaining freehold site within the secondary retail distribution network,at a net cash consideration of £9m. Expansion into Europe - acquisition of the soft drinks & related businesses of C&C plc ("Britvic Ireland") During the period we acquired the soft drinks and distribution businesses of C&CGroup plc for €249.2m (£169.5m) in cash. The acquisition of Britvic Ireland hasprovided us with the opportunity to accelerate our growth as well as a leadingposition in both the Republic of Ireland and Northern Ireland. There ispotential for annual pre-tax synergies of €14m; brand & product expansion andinnovation. It has also provided us with an experienced senior management teamand opportunities to further develop the owned brands and the Pepsi and 7UPbrands in these markets. It is only three months since the completion of thedeal and we have found nothing to dampen our enthusiasm. The transaction included the following operational structure: two factories inDublin and Cork; the Ballygowan water source in Limerick; the distribution andwholesale business which gives us the opportunity to a key route in adynamically different licensed market; the Logistics Centre in Dublin withadditional warehouses in Belfast and Cork; and a number of small regional depotsin the north west and south east of Ireland. The business is a good fit forBritvic - it's a brand-based business, and also has the Pepsi franchise inIreland. The brands include the water brand Ballygowan - the number one waterbrand in Ireland, 7UP, Club (including Club Energise and Club Mixers) as well asthe Britvic brand for mixers and juices in the Republic. The transition process is progressing well. As we said when we announced thedeal our plans for integration centred on the retention of the experiencedsenior management team in Ireland. This has been achieved with the business setup to run as a commercially autonomous unit but with natural support from GB.Transitional service agreements were put in place for IT, Finance and C&C inNorthern Ireland. We have now completed separation of the Finance operation withIT separation on target to be completed in late November. The Irish businessthat has historically been included within Britvic International, predominantlyRobinsons and Fruit Shoot is in the process of being integrated into the BritvicIreland infrastructure and we are on target for full integration by 31 January2008. Finally the group function previously carried out by C&C Group has beensuccessfully filled. We remain confident in the previously announced annual pre-tax synergies of €14mand the following progress has been made: • On procurement we have identified cost savings, and have started to align certain contracts - for example our PET and can procurement where Britvic GB terms are superior; and sugar where Britvic Ireland's terms are superior. • Production harmonisation project is underway. • Overhead and Logistics synergies have also been identified on the integration of Britvic International (Ireland). Summary------- We have grown market share across all of our key categories with a strongperformance from our brands despite difficult trading conditions in the secondhalf of the year. The installation of our first aseptic line facilitated themajor innovation launches of the year, namely Robinsons Smooth Juice and FruitShoot 100% Juice and all innovation was delivered on time and as planned. Our focus on managing costs and driving efficiency has been relentless, and inaddition to the positive contributions from our business transformation andproduct value optimisation programmes, the outsourcing of our secondary retaildistribution network has been implemented in line with our plan andexpectations. Consequently, after adjusting for the five week contribution fromBritvic Ireland, we have delivered a 40 basis point increase in operating profitmargin, some way ahead of our ten to fifteen basis point ambition. While it isonly three months since the completion of the Britvic Ireland acquisition we aremost encouraged by the performance of the team and the business and energised bythe opportunities that lie ahead. Current trading and outlook=========================== The conditions in the soft drink market continued to be challenging at thebeginning of our new financial year, reflecting the normal residual impact of apoor summer. However the fundamentals of the market remain strong and the markethas shown modest growth in recent weeks. Against this background, Britvic hascontinued to grow its top line in the period since its year end, and we remainconfident that we are well positioned for the year ahead, building on the recentacquisition of Britvic Ireland, further cost saving opportunities and acontinued focus on the innovation pipeline. Financial and business review============================= The following discussion is based on Britvic's results for the 52 weeks ended 30September 2007 ('the period') compared with the same period last year. Key performance indicators-------------------------- The principal key performance indicators that Management uses to assess theperformance of the Group in addition to income statement measures of performanceare as follows: •Volume growth - increase in number of litres sold by the Group relative to prior period. •Average Realised Price (ARP) - average revenue per litre sold. •Revenue growth - increase in sales achieved by the Group relative to prior period. •Brand contribution margin - revenue less material costs and all other marginal costs that Management considers to be directly attributable to the sale of a given product, divided by revenue. Such costs include brand specific advertising and promotion costs, raw materials, and marginal production and distribution costs. Management uses the brand contribution margin to analyse Britvic's financial performance, because it provides a measure of contribution at brand level. •Operating profit margin - operating profit before exceptional items and before the deduction of interest and taxation divided by revenue. •Free cash flow - net cash flow excluding movements in borrowings, dividend payments and non cash exceptional items. •Return on invested capital (ROIC) - ROIC is a performance indicator used by Management and defined as operating profit after tax before exceptional items as a percentage of invested capital. Invested capital is defined as non-current assets plus current assets less current liabilities, excluding all balances relating to interest bearing liabilities and all other assets or liabilities associated with the financing and capital structure of the Group and excluding any deferred tax balances. Overview-------- In the period Britvic out-performed the soft drinks market in all of its keycategories with strong revenue growth up 5.7% to £716.3m, including the 5 weekcontribution from Britvic Ireland. Adjusting for the £13.8m contribution fromBritvic Ireland revenue growth was 3.7% to £702.5m with total volumes up 2.7%. Operating profit before exceptional items for the period was up 8.5% to £80.0mwith operating profit margin also showing improvement at 11.2% up 30 basispoints. Excluding the £0.8m contribution from Britvic Ireland operating profitwas up 7.5% at £79.2m with operating profit margin up strongly by 40 basispoints to 11.3%. PAT for the period was £44.0m up 11.1% on the prior period,with EPS up 10.9%. The following narrative on Stills, Carbonates and ourInternational business does not include the 5 week contribution from BritvicIreland. Stills 52 weeks 52 weeks --------- ended 30 ended 1 Sep 2007 Oct 2006 £m £m % change -------- -------- -------Volume (millions litres) 463.4 446.5 3.8ARP per litre 72.1p 72.1p 0.0Revenue 334.3 321.7 3.9Brand contribution 154.7 152.0 1.8Brand contribution 46.3% 47.2% (0.9)%pts margin In stills we have seen a continued solid out-performance against the marketacross all key categories during the period with revenue growth of 3.9% to£334.3m. Volumes were up 3.8% against a market which was down 3.4%, having beenseverely impacted by the exceptionally poor weather in the second half. This strong performance was driven by: • J20, core Fruit Shoot and Robinsons squash consolidating their positions as market leading brands, with Robinsons large pack performing particularly well; • H20, our kids' water brand continuing to grow strongly; • the relaunch of Drench as our take home water brand showing promising signs; and • Pennine Spring displaying good growth, now being the third largest on premise water brand. ARP was flat on the year with the second half impacted by the growth in watervolumes and Robinsons large pack. The ARP for water is more in line with thecompany average which is lower than the stills ARP. Although Robinsons largepack ARP is lower than the one-litre packs the brand contribution margin is nowvery similar following our investment in this area earlier in the year. Brand contribution margin is down 0.9%pts at 46.3%. Stills have been affected byincreasing input costs such as juice, although this has been mitigated to someextent by our PVO programme. The margin decline also reflects the focus of anincreasing proportion of our Advertising & Promotional (A&P) spend on our stillsbrands. Carbonates 52 weeks 52 weeks ------------ ended 30 ended 1 Sep 2007 Oct 2006 % £m £m change -------- -------- -------Volume (millions litres) 865.3 848.3 2.0ARP per litre 39.6p 39.2p 1.0Revenue 342.6 332.5 3.0Brand contribution 136.4 130.1 4.8Brand contribution margin 39.8% 39.1% 0.7%pts Carbonates have delivered a solid performance over the period with revenuegrowth of 3.0% to £342.6m. This performance has been driven by further marketshare gains by Pepsi and a strong performance from 7UP. Revenue also benefitedfrom the distribution gains in the increasingly important discounters sectormade in the period which shows a similar ARP and margin profile to the rest ofthe business. A continued focus on promotional effectiveness, especially over the poor summerwhere we backed away from chasing volumes that weren't there, combined withimproved price mix led to ARP being up 1.0% over the period. Direct product costs are slightly up over the year although this is more aboutfirst half FY06 costs being low due to pack mix than an actual price increase inthe products themselves. Costs were in fact fairly constant at 22.8 pence perlitre throughout this year. Brand contribution margin increased by 0.7%pts due to less A&P spend, as spendhas been redirected to the stills brands which has more than offset anyincreases in direct product costs and hence margin continues to trend upwards. International------------- 52 weeks 52 weeks ended 30 ended 1 Sep 2007 Oct 2006 £m £m % change -------- -------- -------Volume (millions litres) 37.7 35.8 5.3ARP per litre 68.0p 65.6p 3.7Revenue 25.7 23.5 9.4Brand contribution 8.3 7.0 18.6Brand contribution margin 32.3% 29.8% 2.5%pts Our International business continues to deliver a strong performance withrevenue growth of 9.4% to £25.7m. This has been driven by the consolidation ofour strong market position in the Netherlands, Denmark and Sweden, as well asour entry into the Finnish market with Robinsons dilutes. The increase in brand contribution margin of 2.5%pts can be explained by thegrowing contribution from major country launches in FY06 which attracted highlaunch costs that year. Direct product cost increases of 4.9% are a direct result of juice costincreases which were not mitigated here with PVO savings (as there are few largePET sales compared to GB) and also the cost of exporting growing volumes to thenew Scandinavian markets. Costs and overheads------------------- 52 weeks 52 weeks ended 30 ended 1 Sep 2007 Oct 2006 £m £m % change -------- -------- -------Non brand A&P (7.0) (6.1) (14.8)Fixed supplychain (66.2) (68.0) 2.6Selling costs (85.7) (86.0) 0.3Overheads and other (61.3) (55.3) (10.8)Total (220.2) (215.4) (2.2) Total A&P spend (46.7) (44.6) (4.7)A&P as a % of net revenue 6.6% 6.6% 0.0 Overall, we have maintained our investment in total A&P in line with FY06 tocontinue our long term brand building programme. However spend continues to bebelow our stated aim of c.7% as we modified our A&P programme in the second halfof the year in response to the poor summer market conditions. Fixed supply chain costs are down by c.£2m due to the benefit of our businesstransformation cost savings programme. The slight decrease in selling costs despite increased revenue can be explainedby strong management action to reduce costs in response to the poor summerweather. Some of these costs will clearly need to be reinstated in FY08. The increase in overheads and other of c.£6m is due to a £8m short term bonusprovision reflecting the strong revenue and profit performance over the periodand a £2m decrease in costs due to a sharp focus on costs again in response tothe poor summer trading conditions. Exceptional items----------------- During the period, Britvic incurred exceptional operating costs and profitswhich net to £5.7m in total. The main elements of this comprised: • Re-structuring costs of £8.1m: • c.£2m resulting from the £5m Business Transformation Programme overhead cost savings achieved during FY07 and relating principally to redundancy costs and advisor fees. • c.£3m relates to the outsourcing of the distribution network announced during the year. This was initially identified as an exceptional cost for FY08 but the acceleration of the project has brought it forward into FY07. • c.£3m relates to the costs associated with the sale of our Tamworth Depot. • A £1.2m cost relates to the acquisition of Britvic Ireland and represents those items involved in getting the sale and purchase agreement signed that cannot be capitalised onto the balance sheet. • A £3.1m cost relates to transitional award shares vesting under the Performance Share Plan (PSP). • A £2.1m returnable bottle impairment. . £3.4m relates to the profit on disposal from the sale of our Tamworth Depot. . £5.6m relates to a pension curtailment gain relating to employees who transferred to KN Drinks Logistics due to the outsourcing of our secondary distribution network. Interest-------- The net finance charge before exceptional items for the period for the group was£18.7m compared with £17.8m in the same period in the prior year. Adjusting forthe impact of Britvic Ireland of approximately £0.8m, interest is broadly inline with last year at £17.9m. Taxation-------- The tax charge of £17.3m before exceptional items represents an effective taxcharge of 28.2%. The effective tax rate as reported in the accounts for theprevious year was 29.2%. Including the effect of exceptional items, theeffective tax rate was 23.6%, which is lower than last year's rate of 33.7% dueto the non taxable profits made on the sale of our Tamworth depot and areduction in the UK corporation tax rate for FY08 affecting the deferred tax. Earnings per share------------------ Basic EPS for the period, excluding exceptional items, was 20.4p, up 10.9% onEPS for the same period last year of 18.4p. Basic EPS (after exceptional items)for the period was 19.7p compared with 11.2p for the same period last year. Dividends--------- The Board is recommending a final dividend for 2007 of 7.7 pence per share.Together with the interim dividend of 3.3 pence per share paid on 29 June 2007,this gives a total dividend for the year of 11.0 pence per share an increase of10.0% on the dividend paid last year. Subject to approval at the AGM, the totalcost of the dividend for the year will be £22.2m and the final dividend will bepaid on 15 February 2008 to shareholders on record as at 7 December 2007. Cash flow and net debt---------------------- Free cash flow was £75.1m, before adjusting for Britvic Ireland, £26.2m ahead ofthe prior year driven by a continued focus on working capital and capitalexpenditure management. Including Britvic Ireland, there was a cash out flow of£92.6m compared to a cash in flow of £48.9m in the prior year, driven by thepurchase itself. Additional contributions were made to the defined benefit pension scheme of £10min the year (2006: £30m ). At the 1 October 2007, the Group's net debt was£403.6m compared to £282.6m at 1 October 2006. The increase in borrowings of£121.0m was principally due to the acquisition of Britvic Ireland. Capital employed---------------- Non current assets increased in the year from £316.0m to £487.3m due in the mainto the acquisition of Britvic Ireland. Depreciation decreased in the year by £1.5m to £36.8m. The reduction on theprior year reflects the level of disposals made in the year, the sale of theTamworth depot being the primary contributor. Current assets also increased from £151.1m to £202.5m, again reflecting theacquisition of Britvic Ireland. Comparing prior year like for like numbers,inventories have remained at the same level and receivables have reducedslightly. At the same time current liabilities increased from £171.4m to £223.2m drivenprincipally by an increase in trade and other payables. The acquisition ofBritvic Ireland has contributed to this increase. ROIC, excluding Britvic Ireland, has improved to 20.7% from 17.0% in FY06reflecting the continued focus on costs, cash flow and the proactive managementof the Group's asset base. Share price and market capitalisation------------------------------------- At 30 September 2007 the closing share price for Britvic plc was 323p. The Groupis a member of the FTSE 250 index with a market capitalisation of approximately£843m at the period end. Treasury management-------------------- The financial risks faced by the Group are identified and managed by a centralTreasury department. The activities of the Treasury department are carried outin accordance with Board approved policies and are subject to regular audit andTreasury Committee scrutiny. The department does not operate as a profit centre. Key financial risks faced by the group include exposures to movement in: •Interest rates •Foreign exchange •Commodity prices. The Treasury department is also responsible for the management of the group'sdebt liquidity, currency requirements and cash. A key activity in the period wasto replace around £229m of bank-based borrowings with the proceeds of a privateplacement. The issue of the placement, largely in the US, had the followingfeatures: •a maturity ranging from 7 to 12 years; •sterling and US dollar proceeds (the latter swapped to sterling); •all proceeds on an effective fixed-interest rate basis after taking into account the effects of the interest rate swap arrangements. At 30 September 2007, the Group's net debt of £403.6m consisted of £195.3m drawnunder the group's committed bank facility, £13.1m of drawings under uncommittedbank facilities and £223.7m of private placement notes. This was netted off with£27.3m of surplus cash and £1.2m of issue costs of loans. Pensions-------- The group operates a pension scheme, which has both a defined benefit fund and adefined contribution fund. The defined benefit section of the scheme was closedon 1 August 2002, and since this date new employees have been eligible to jointhe defined contribution section of the scheme. As a result of the fullactuarial valuation carried out as at 31 March 2004, further contributions of£30m were made in March and December 2005 and an additional £10m in December2006. Additional contributions of £10m per annum will be made in December 2007to 2010 (total of £40m) in order to further reduce the funding deficit in thescheme. The Group IAS 19 deficit at the full year was£5.6m. Excluding Britvic Irelandthere is an IAS 19 surplus at the full year of £9.1m (£65.8m deficit at 1October 2006). The change from a deficit to a surplus is mainly due to changesin actuarial assumptions applied as at 30 September 2007. It should be notedthat this is an accounting valuation and is subject to high volatility. Business Resources================== Britvic is one of the two leading branded soft drinks businesses in GreatBritain and Ireland. It is one of the top two soft drinks businesses in the GBtake-home channel, is the leading soft drinks supplier to the GB licensedon-trade and is a significant player with a growing presence in the leisure andcatering channel. The main resources the Group uses to achieve its results are: •an extensive and balanced portfolio of stills and carbonates brands, including Robinsons, Pepsi, 7UP, Tango, J2O, Britvic, Fruit Shoot, R Whites and Pennine Spring. The breadth and depth of Britvic's portfolio enables it to target consumer demand across a wide range of consumption occasions, in all the major soft drinks categories and across all relevant routes to market. The strength of Britvic's brand portfolio is underpinned by its consumer insight and product development capability which has consistently enabled it to produce innovative products, packaging formats and promotional activity designed to meet evolving consumer tastes and preferences. During the period we acquired the soft drinks and distribution businesses of C&C Group plc for €249.2m (£169.5m) in cash ("Britvic Ireland"). Britvic Ireland owns a number of leading brands in the Republic of Ireland and Northern Ireland, including Club, Ballygowan water, Britvic, Cidona, MiWadi, and Energise Sport, as well as the rights to the Pepsi and 7Up brands. •a successful long-standing relationship with PepsiCo that resulted in the Exclusive Bottling Agreement (EBA) being renewed in Great Britain in 2004 for a further 15 years, with an extension to 2023 on Admission to the London Stock Exchange. The acquisition of Britvic Ireland has further strengthened this relationship with the EBA for Ireland lasting until 2019. This relationship gives Britvic the exclusive right to distribute the Pepsi and 7UP brands in Great Britain and Ireland, access to all new carbonated drinks developed by PepsiCo for distribution in Great Britain and Ireland and, to support the development of its carbonates offering, access to PepsiCo's consumer and customer insight, competitor intelligence, marketing best practice, brand and product development expertise and technological know-how. •a strong customer base. In take-home, Britvic's customers include the "Big 4" supermarkets (Tesco, J Sainsbury, Asda and Wm Morrison) together with a number of other important grocery retailers. The Group has significant supply arrangements with a number of key players in the GB pub sector and leisure and catering channels. Through Britvic International, the Group has built on the success of the Robinsons and Fruit Shoot brands by introducing these products into markets outside Great Britain. •Britvic also has a well-invested and flexible production capability and a recently outsourced distribution network that, according to AC Nielsen, enabled its soft drinks to be made available to consumers at over 96% of the points of sale (on a sterling-weighted value basis) in the GB take-home and over 94% of the points of sale of the licensed on-trade channels in 2007. Risks and Uncertainties======================= The Group's results of operations could be materially adversely affected by: Risks relating to the Group--------------------------- •a decline in certain key brands; •a termination or variation of its bottling and distribution arrangements with PepsiCo or an adverse development in the PepsiCo relationship; •a further consolidation in its customer base; •any interruption in, or change in the terms of, the Group's supply of packaging and raw materials; •any failure in the processes or the IT systems implemented as part of the Business Transformation Programme; •any inability to protect the intellectual property rights associated with its current and future brands; •contamination of its raw materials or finished products; •litigation, complaints or adverse publicity in relation to its products; •loss of key employees; •any increase in the Group's funding needs or obligations in respect of its pension scheme; •any failure or unavailability of the Group's operational infrastructure; and •changes in accounting principles or standards. Risks relating to the market---------------------------- •a change in consumer preferences, perception and/or spending; •poor economic conditions and weather; •potential impact of the smoking ban or other regulatory developments; •actions taken by competition authorities or private actions in respect of supply or customer arrangements; and •actions by the Group's competitors. Risks relating to the Ordinary Shares-------------------------------------- There are risks arising out of an investment in Ordinary Shares because of: •US Holders potentially not being able to exercise pre-emptive rights; •potential share price volatility; •sterling dividend payments giving rise to currency exposure for investors whose principal currency is not sterling; and •PepsiCo's right to terminate the EBAs on a change of control which may affect the ability of a third party to make a general offer for the Ordinary Shares. Consolidated income statement=============================For the 52 weeks ended 30 September 2007 52 Weeks 52 Weeks Ended 30 September 2007 Ended 1 October 2006 ------------------ ------------------ Before Exceptional Total Before Exceptional Total Exceptional Items Exceptional Items Items Items Note £m £m £m £m £m £m----------------- ----- -------- -------- ------- ------- ------- -------Revenue 716.3 - 716.3 677.9 - 677.9Cost of Sales (286.0) - (286.0) (263.5) - (263.5)----------------- ----- -------- -------- ------- ------- ------- ------- Gross Profit 430.3 - 430.3 414.4 - 414.4Selling and Distribution Costs (241.4) - (241.4) (231.0) - (231.0)Administration Expenses 5 (108.9) (5.7) (114.6) (109.7) (19.1) (128.8)----------------- ----- -------- -------- ------- ------- ------- ------- Operating Profit 6 80.0 (5.7) 74.3 73.7 (19.1) 54.6----------------- ----- -------- -------- ------- ------- ------- -------Finance Income 9 0.9 - 0.9 0.2 - 0.2Finance Costs 5,9 (19.6) - (19.6) (18.0) (0.3) (18.3)----------------- ----- -------- -------- ------- ------- ------- -------Profit/(loss)before Tax 61.3 (5.7) 55.6 55.9 (19.4) 36.5Taxation 10 (17.3) 4.2 (13.1) (16.3) 4.0 (12.3)----------------- ----- -------- -------- ------- ------- ------- -------Profit/(loss)for the periodattributable to the equityshareholders 44.0 (1.5) 42.5 39.6 (15.4) 24.2----------------- ----- -------- -------- ------- ------- ------- ------- Earnings Per Share 11Basic earnings per share 20.4p (0.7p) 19.7p 18.4p (7.2p) 11.2p -------- -------- ------- ------- ------- -------Diluted earnings per share 20.2p (0.7p) 19.5p 18.3p (7.1p) 11.2p -------- -------- ------- ------- ------- ------- Consolidated balance sheet==========================At 30 September 2007 Note 2007 2006---------------------------- ------- -------- -------- £m £mAssetsNon-current AssetsProperty, plant and equipment 13 225.2 218.2Intangible assets 14 247.4 95.4Operating lease premiums 17 2.4 2.4Pension surplus 25 9.1 -Deferred tax assets 10d 3.2 ------------------------------ ------- -------- -------- 487.3 316.0----------------------------- ------- -------- --------Current AssetsInventories 18 45.3 31.7Trade and other receivables 19 129.8 99.6Other financial assets 27 0.1 0.6Cash and cash equivalents 20 27.3 19.2----------------------------- ------- -------- -------- 202.5 151.1----------------------------- ------- -------- --------Assets held for sale 21 4.8 ------------------------------ ------- -------- --------Total Assets 694.6 467.1----------------------------- ------- -------- -------- Equity and LiabilitiesIssued capital 22 (43.2) (43.2)Share premium 23 (2.5) (2.5)Own shares 23 10.3 0.5Share scheme reserve 23 (5.3) (4.5)Hedging reserve 23 (1.9) 0.4Translation reserve 23 (2.9) -Retained earnings 23 41.2 107.0----------------------------- ------- -------- --------Total Equity (4.3) 57.7----------------------------- ------- -------- --------Non-current LiabilitiesInterest bearing loans and borrowings 24 (417.8) (284.3)Deferred tax liabilities 10d (30.0) (3.3)Pension liability 25 (14.7) (65.8)Other financial liabilities 27 (3.4) -Other non-current liabilities 28 (1.2) ------------------------------ ------- -------- -------- (467.1) (353.4)----------------------------- ------- -------- --------Current LiabilitiesTrade and other payables 26 (203.2) (147.7)Interest bearing loans and borrowings 24 (13.1) (17.5)Other financial liabilities 27 (0.3) (1.0)Income tax payable (6.6) (5.2)----------------------------- ------- -------- -------- (223.2) (171.4)----------------------------- ------- -------- --------Total Liabilities (690.3) (524.8)----------------------------- ------- -------- --------Total Equity and Liabilities (694.6) (467.1)----------------------------- ------- -------- -------- The financial statements were approved by the Board of Directors and authorisedfor issue on 28 November 2007. They were signed on its behalf by: Consolidated statement of cash flows====================================For the 52 weeks ended 30 September 2007 2007 2006 Note £m £m--------------------------------- ------ ------- -------Cash flows from operating activitiesProfit from continuing operations before tax 55.6 36.5Net finance charge 18.7 18.1Depreciation 36.8 38.3Amortisation 5.7 4.7Share based compensation less cash paid 4.7 7.8Net pension charge less contributions (14.9) (29.6)Decrease in inventory 0.6 6.2Decrease in debtors 1.3 2.2Increase in creditors 9.1 3.8Loss on disposal of tangible assets 0.4 4.0Loss on disposal of intangible assets - 0.4Income tax paid (11.8) (3.8)--------------------------------- ------ ------- -------Net cash flows from operating activities 106.2 88.6--------------------------------- ------ ------- ------- Cash flows from investing activitiesProceeds from sale of property, plant and 9.9 0.2equipmentInterest received 0.9 0.2Purchases of property, plant and equipment (20.7) (29.4)Purchases of intangible assets (5.5) (3.8)Acquisition of subsidiary net of cash acquired (160.6) ---------------------------------- ------ ------- -------Net cash flows used in investing activities (176.0) (32.8)--------------------------------- ------ ------- ------- Cash flows from financing activitiesFinance costs (0.7) (0.2)Interest paid (21.2) (16.4)Interest bearing loans received 551.6 667.0Interest bearing loans repaid (419.4) (598.4)Repayment of non-interest bearing borrowings - (2.8)Purchase of own shares (10.2) (0.5)Increase in share capital - 0.3Dividends paid to equity shareholders (22.2) (53.3)Dividends paid to previous shareholders - (51.7)--------------------------------- ------ ------- -------Net cash flows used in financing activities 77.9 (56.0)--------------------------------- ------ ------- ------- Net increase/(decrease) in cash and cash 8.1 (0.2)equivalentsCash and cash equivalents at beginning of period 19.2 19.4--------------------------------- ------ ------- -------Cash and cash equivalents at the end of the period 20 27.3 19.2--------------------------------- ------ ------- ------- Consolidated statement of recognised income and expense=======================================================For the 52 weeks ended 30 September 2007 2007 2006 Note £m £m--------------------------------- ------ ------- -------Actuarial gains / (losses) on defined benefit 25 61.3 (10.8)pension schemeCurrent tax on additional pension contributions 3.0 9.0Deferred tax on pension liabilities (21.4) (5.7)Net movement in cash flow hedges 2.3 0.6Deferred tax on share options granted to employees 1.1 0.1Current tax on share options exercised 1.6 1.1Exchange differences on translation of foreign 2.9 -operations ------ ------- ----------------------------------------Net income / (expense) recognised directly inequity attributable to equity shareholders 50.8 (5.7)Profit for the period 42.5 24.2--------------------------------- ------ ------- -------Total recognised income for the period 93.3 18.5--------------------------------- ------ ------- ------- To view the full text of this press release, paste the following link into your web browser: http://www.rns-pdf.londonstockexchange.com/rns/6404i_-2007-11-29.pdf This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Britvic