30th Mar 2005 07:00
Barr(A.G.) PLC30 March 2005 30 March 2005 A.G.BARR p.l.c. PRELIMINARY RESULTS FOR THE YEAR ENDED 29th JANUARY 2005 A.G.BARR p.l.c. the Scottish based manufacturer of soft drinks including thepopular Irn-Bru, Tizer and Orangina brands, announces its preliminary resultstoday for the 12 months to 29th January 2005. Key Points • Profit on ordinary activities before tax increased by 13% to £15.6 million (2004 - £13.8 million). • Turnover of £127.2 million. An increase on a like for like 52 week basis of 3%. • An increased final dividend of 19.5p per share to give a total dividend for the year of 28.75p, an increase of 12.7% over the previous year. • Core brands perform strongly in a difficult market. • Cash flow remaining strong with £35 million cash at bank. • Major investment programme in Scottish operations planned to facilitate future growth and efficiency. • Portfolio development continues with strong performances from new Simply products and further exciting development planned for 2005/06. Commenting on the results Chairman, Robin Barr, said: "I am delighted to report continued strong growth in profits at A.G.Barr,further demonstrating the good progress the business is making. Thisperformance is all the more pleasing against a backdrop of difficult tradingconditions relating largely to the poor weather of 2004." Commenting Roger White, the Chief Executive, said: "The progress we have made across the last 12 months is reflected in ourexcellent financial performance. The resilience and flexibility of the business has been tested in what has beena difficult year for many - I am pleased to report we have continued to build onour previous year's performance across all areas of the business. The announcement today of our development and investment plans for the businessin Scotland signal the strong belief we have in the opportunity to develop ourbusiness further in the short, medium and long term. Business performance for the first 8 weeks of the current financial year is inline with our plans." For further information, please contact: A.G.Barr Tel : 0141 554 1899Roger White, Chief ExecutiveIain Greenock, Finance Director Buchanan Communications Tel : 020 7466 5000Tim Thompson / Nicola Cronk CHAIRMAN'S STATEMENT Review of results I am pleased to report that profit on ordinary activities before tax was £15.6million for the 52 weeks to January 2005 - an increase of 13% over the previous53 week period. Turnover for the year to January 2005 was £127.2 million, anincrease of 1.5% over the turnover achieved in the previous financial year butthe increase was 3% if adjustment is made for the extra week last year. On theback of an earnings per share rise from 49.90p to 56.56p, your directors havebeen able to recommend a final dividend of 19.5p per share to give a total forthe year of 28.75p, an increase of nearly 13%. These figures are all the morepleasing as they have been achieved despite the poor summer weather of 2004which contributed to a particularly competitive market place later in the year. Our people Our strong performance, particularly during the second half of the year, wouldnot have been possible without the continuing contributions from our employeesand I would like to thank them all, on behalf of our external shareholders, forthe excellent results. I am pleased to record that we have completed the move in January this year ofour regional headquarters staff from traditional office facilities within ourlong-standing Atherton factory to a purpose-built open plan environment withinleasehold offices at a nearby Bolton development. Already we are seeingimproved efficiencies resulting from these enhanced working conditions. The A.G.BARR p.l.c. 1995 Savings Related Share Option Scheme reached the end ofits ten year life in March this year. Under the scheme we have made four offersto employees. Almost half of our employees currently participate in one or moreof the offers. The scheme has therefore proved to be a very successful vehiclethrough which to encourage employees to increase their shareholdings in thecompany and thereby align their ambitions more closely with externalshareholders. Your directors are keen to continue this incentive and you willtherefore see the proposal for a renewal of the scheme for a further ten yearsas part of the agenda for this year's Annual General Meeting. Corporate governance This Annual Report & Accounts contains the appropriate additional informationrequired in terms of the 2003 revised Combined Code on Corporate Governance. Subsequent to the end of the financial year we have standardised the contractsof all executive directors by introducing a basic one year's notice ontermination by the company. Full details of the changes are contained in thedirectors' remuneration report. Relative to the proposal at the forthcoming Annual General Meeting to re-electJames Espey for a third term of three years as a non-executive director, I ampleased to confirm that his contribution to board discussions and overallcommitment to the company's affairs continue to be highly valued by both myselfand other board members. Prospects Cash flow was particularly strong last year and our balance sheet shows £35million cash at bank at January 2005. Next year will however see the start of aperiod of higher investment as we develop facilities which will both deliverincreased efficiencies and provide structures within which to achieve futuregrowth. Despite the UK volume decline caused by last year's poor summer weather, it isstill anticipated that the soft drinks industry will show long-term growth -albeit across a wider portfolio of products than hitherto. We will require tocontinue to adjust, as appropriate, our own range to remain competitive but Ibelieve that we will have the brands, the facilities and the people to enable usto continue as a successful independent company. Robin Barr, Chairman CHIEF EXECUTIVE'S STATEMENT Business performance figures for the year to January 2005, as highlighted by thechairman, reflect the continuing strong overall progress of the company. Thissuccess is the result of a simple and clear strategy, focusing on the basics,coupled to strong execution across the business as a whole. The sales growth andprofit improvement were achieved in a difficult market. They reflect theimplementation of the strategic agenda set in previous years for evolutionarychange in the areas of core brand, market and portfolio development andinnovation, route to market, partnerships and improvement of operationalefficiency. These results provide the company with a solid platform for futuregrowth and success. Opportunities for growing our business remain plentiful. Incremental growth,including the development of a more diverse range of products, extensions ofexisting brands and investment in the efficiency of our operations, will improveour ability to increase sales and future profits. At the same time as deliveringthis organic growth strategy we remain alive to the opportunity for acquisitionof the right brands and businesses, but only when they offer true long-termvalue and enhance the prospects of our company. The continued strong generationof cash and management's control of costs ensure that we have the financialability to act decisively when the right openings occur to grow our businessthrough either investment or acquisition. Principal aim We have successfully maintained our principal aim of building long-term valuerather than going for short-term gain. The investment in our key brands has notonly delivered a 3% increase in comparable sales revenue over the last year, buthas also put us on a strong footing for future growth. Lacklustre consumerdemand in the soft drinks category across the year created competitive tradingconditions, leading many in the industry to focus increasingly on pricepromotion as their main source of sales growth. During this period we haveimproved our promotional efficiency while maintaining competitive pricing. Wehave also considerably increased our spending on marketing across our corebrands, in particular the exciting Irn-Bru Phenomenal campaign. Our salesperformance in the year saw uniform growth across all channels, furtherhighlighting the strength in and the diversity of our various customer sectorsand routes to market. I am pleased to report that our core brands have gainedmarket share over the course of the year, particularly in Scotland, reflectingour decision to invest disproportionately in the Scottish market. Irn-Bru hasdelivered strong growth in Scotland with market share by value as recorded byNielsen Scantrak showing Irn-Bru for the first time with a market share inexcess of 20% of total carbonates in Scotland. This further strengthens ournumber position in our key market. Ongoing and fundamental changes in consumer attitudes and preferences relatingto health and well-being have increased the demand for diet drinks, water andhealth-based products. Having recognised these changes at an early stage, wehave been able to offer people what they want, namely choice. Our productportfolio and the strength of our brands has to date left us undamaged by theshifts in consumer requirements, but we are acutely aware of the need to broadenour portfolio further to ensure future growth. We realise this can only beachieved by meeting the changing demands of consumers. Value over volume This was a tough year in soft drinks. In the year to January 2005 the UKcarbonates market, as measured by Nielsen, experienced in total a 7% volumedecline and a 5% value decline with our most relevant sector, other flavouredcarbonates, performing even more poorly at a 10% year on year decline in bothvolume and value. This performance was due largely to the poor summer weatherand resulted in increased competition, mostly in the form of aggressive pricepromotion. However, we have adhered to our objective of continuing to drivevalue, even at the expense of volume. Our margins have continued to improve as aconsequence of the combination of this strategy and our strong management ofoperating costs across the whole business. The relentless consolidation of the retail market has proved as challenging aswe had expected. We have endeavoured to ensure that all changes, no matter howsignificant, had a minimal effect on our overall business. Once again ourcustomer mix and diverse routes to market helped to safeguard our businessagainst the potentially significant negative short-term effects of retailerconsolidation or under-performance. Furthermore, our brands are proving strongenough to compete in this consolidated market and the quality of our serviceoffering is acknowledged as second to none throughout our customer base. Cost inflation has been severe in recent months, particularly in oil-basedcommodities and utilities. While last year we actively managed much of the riskassociated with this issue, the prospects for the new financial year remainchallenging. Sustained increases of many of our input costs will have anegative cost impact on our operations. Therefore, to ensure our margins arestabilised, we need to improve cost control measures and efficiencies, alongsideachieving price inflation in the category as a whole. Plans to deliver thismargin stabilisation are well progressed. Investment planning While we have sought to maximise the use of all our assets, our capitalexpenditure has remained modest. However, as the chairman has commented in hisstatement, we are now in a position to launch a significant asset developmentprogramme. Plans have been drawn up to invest in our sales, distribution and storageactivities in Scotland. These plans include the centralisation of ourwarehousing from multiple off-site storage facilities to a single consolidatedmanufacturing and storage facility at our existing Cumbernauld factory site.Subsequently we will also improve our sales execution and efficiency with thecentralisation of our direct-to-store sales, distribution and administrationteams from the existing five locations across Scotland to the new facility atCumbernauld. Our Head Office, currently based at Parkhead, will also berelocated to new offices on the Cumbernauld site. These proposals will, ofcourse, be subject to full consultation with all affected employees and, at thetime of writing, are subject to receipt of planning approvals. The capital expenditure programme is expected to be of the order of £17 millionover a period of 3 years. Receipts from property sales will offset some of thiscapital spend. Once the investment is completed, efficiency improvements areexpected to be of the order of £2.5 million annually. This exciting investment programme in our core market is the outcome of rigorousplanning and would herald a 2-3 year period of development which will providethe company with a modern, flexible and efficient selling, administration andsupply chain operation, capable of sustained growth. Core brands Last year we set out to improve the already strong market position of Irn-Bru,focusing much of our efforts on our key market in Scotland. Having developed thenew brand positioning and associated campaigns, we significantly increased ourmedia spend on Irn-Bru. The Phenomenal campaign has delivered well in Scotland,improving all our key brand indicators of penetration, frequency and loyalty andwith our planned activities in 2005-06 we look forward to making real progressin the significantly bigger but more challenging UK market outside Scotland. Diet Irn-Bru has performed strongly over the last year showing value growth of5%. This year the brand will receive a full makeover, including exciting newpackaging and new consumer communication activity. Diet Irn-Bru has now for thefirst time been entirely separated from Irn-Bru in terms of marketing execution.New dedicated Diet Irn-Bru TV, radio and outdoor advertising campaigns are justsome of the activities designed to improve the market potential and performanceof this key brand. Following the relaunch of Tizer and the subsequent introduction of the TizerColourz range we realised significant revenue improvements in the course of lastyear. Not only has the Colourz range introduced some sparkle into a somewhatuninspired market but it has also reinvigorated Tizer, a traditional brand,giving it a more contemporary personality and appeal across the whole UK market. The Orangina brand changed owners in the UK during the course of 2004. CadburySchweppes' purchase of Orangina in October 2004 now provides this brand with abrighter future outlook. Orangina's volume and value performance during thecourse of 2004/05 suffered a significant decrease as the promotional andmarketing plans were altered considerably prior to the change in ownership. Weare now working with Cadbury Schweppes to determine the long-term positioning ofthe brand and we foresee the potential development of a long term partnershipwith Cadbury Schweppes. Findlays Natural Mineral Water has shown itself capable of occupying a premiumposition at the higher end of the water market while generating good growthregardless of poor weather and strong competitor activity. Meanwhile the homeoffice delivery (HOD) business in water coolers continues to make steadyprogress despite aggressive competition from multinational competitors. The HODmarket, whilst price sensitive, is largely a service-driven market and we havemade real progress in acquiring new business based on our service offering.Following exploratory drilling we have established a further potential supply ofsignificant quantities of natural mineral water for our Findlays business andare now considering our long-term investment options in this sector. Lipton Ice Tea continued to perform well however volumes were impacted as aconsequence of the poor weather. Having worked closely with Unilever during theearly years of introducing Lipton Ice Tea into the UK market, we are now movingforward to a new, simpler relationship with Unilever, more suited to the productlife cycle as it moves from the successful introduction phase into earlymaturity. Our regional brands, which include KA, Red Kola, D n B and the Barr flavoursrange, continue to be among the most popular in their specific home territories- sometimes even outperforming global brands. These quality products match thetastes and preferences of regional consumers and have a strong future role toplay in our business. The Barr returnable glass bottle range, which consists of typically impulsepurchases and is therefore heavily dependent on the weather, started the yearwell but suffered as impulse consumption fell because of the poor summerweather. However, returnable glass is an environmentally sound and high qualitypackaging format which consumers continue to enjoy, and this range remains anintegral part of our business. We will persist in our aim to stabilise themarket for returnable glass bottles by improving marketing and sales executionwith our key retail customers. Portfolio development The incremental development of our core brands has been complemented bydevelopment of new products such as the Simply range. These single serveproducts have been created specifically for the educational market and areavailable in a wide variety of different flavours and formats, all developed tomeet the health requirements of this sector and to provide school children withexciting and tasty drinks. The Simply range proved extremely successful in arelatively short space of time, growing sales revenue by over 50%, and webelieve that it has the potential of becoming a much larger part of ourportfolio. During the course of the coming year we plan to launch furtherproducts in this range, add to our portfolio with more products in the watermarket sector and establish a presence in the areas of sports and energy drinks. Through product innovation A.G. Barr will also make further ground in the areaof adult soft drinks or the "Good for You" sector. Over the course of 2005 wehave planned several new product launches and we will invest in developing morebrands for this growing market. Route to market As noted earlier, our route to market diversity helped to insulate us from theshort-term impact of consolidation in the retail market. With our businessspread across all of the major multiple retailers and with strong tradingrelationships in the independent and wholesale trade, coupled with our extensivedirect sales coverage in the impulse channel, we are achieving our plannedbalanced growth profile in each of these different trade channels. Having reviewed our execution support for the different routes to market andchannels, we have reorganised much of our commercial operation over the lasttwelve months. Commercial resources have been upgraded and the focus on specificchannels has been improved. For example, we have developed a specialist foodservice and catering sales team to speed up our penetration of this importantand growing market. We continue to serve some 32,000 customers every week with our direct deliveryservice. We are constantly evaluating the service and the overall efficiency ofthe direct delivery operation. Over the course of the last year we have madefurther investments in new technology, improved in-store execution and increasedpeople capabilities. Our capability in providing in-full, on-time delivery toall customers has been improved over the course of the last year, aidedprimarily by better forecasting, which has allowed us to ensure that all ourcustomers receive the best possible service and that our products are always instock and thereby available to consumers. Partnerships First and foremost we work in partnership with all our customers. Throughout ourbusiness we also aim at steadily improving our working relationships with allour other key partners, whether they are material or services suppliers,franchise or execution partners, or marketing and sales partners. All theserelationships have improved, but we firmly believe we can better our business bycontinuing to focus on this objective. Our partnership with the Pepsi Bottling Group in Russia has made firm progresswith the Irn-Bru brand receiving further investment over the course of the lasttwelve months. Performance in the Russian market sees Irn-Bru continuing tomaintain a market share of around 1%. On a more disappointing note, the progress of Irn-Bru in other new markets hasbeen frustratingly slow. However, there have been some positive market testresults in a number of Eastern European countries and we hope that the Irn-Brupresence will be extended during the course of the current year. Operational and supply chain efficiency We have again improved our operational efficiency. Every employee is engaged inwell established processes of continuous improvement which we intend toreinforce with an increasing emphasis on asset and technology driven change. Over the past year we have continued to invest in our supply chain and furtheropportunities exist to upgrade and improve in this area to drive efficiencyacross our total business. The company is now beginning to reap the rewards ofits investment in technology, in particular in terms of better operationalplanning, forecasting and increased flexibility. However, we are only scratchingthe surface of what technology can do for our company and it will play a majorrole in our future plans. The recent rise in energy costs has given another impetus to making better useof energy - something we do as a matter of course from an environmentalstandpoint. We have made some important steps forward in this area over the pasttwelve months, increasing both our spending and our efforts to meet ourenvironmental objectives and ensure we remain fully compliant with theconstantly changing legislation in this area. Our people Last but not least, the people of A.G. Barr are what makes our company sosuccessful. They are experienced, well-motivated and highly knowledgeableindividuals. Many have been with the company for more than 15 years. As thechairman has stated, we are actively working to encourage increased shareownership among all employees with the development of our Employee ShareSchemes. Across the business we are also strengthening the link between employeeperformance and reward, as we roll out new performance management systems overthe course of the current year. In addition, we aim to assist our people inother aspects of their work and create the best possible work-life balance, forexample through the introduction of a child care voucher scheme last year. So that our people reach their full potential, we are improving their skills andknowledge through training. More than ever before, the company offers NVQlearning opportunities in almost all areas of our business, from the productionline and administration to marketing and sales. Last year we saw an increase inuptake of practical and professional qualification courses across the business.Ultimately business success depends on people. With our blend of experience,skills and training, A.G. Barr is in a strong position to continue on the pathof stable growth driven by our people. Roger White, Chief Executive A.G.BARR p.l.c. Consolidated profit and loss account for the year ended 29 January, 2005 The following are the unaudited results for the year to 29 January, 2005. TheBoard recommends the payment of a final dividend of 19.50p per share which ifapproved by the shareholders will be posted on 08 June, 2005. The totaldistribution proposed for the year amounts to 28.75p per share (2004 - 25.50p) Year ended Year ended 29.01.05 31.01.04 £000 £000Turnover 127,222 125,235 Profit on ordinary activities before interest 14,323 13,198 Interest received 1,285 599Profit on ordinary activities before tax 15,608 13,797 Tax on profit on ordinary activities 4,600 4,085Profit on ordinary activities after tax 11,008 9,712 Earnings per share on issued share capital 56.56 p 49.90 pBasic earnings per share 58.89 p 51.98 pFully diluted earnings per share 55.65 p 49.33 pDividend per share 28.75 p 25.50 pDividend (£000) 5,595 4,963 Record date: 06 May, 2005 Ex-div date: 04 May, 2005 The financial information set out in this announcement does not constitutestatutory accounts. The financial information for the year ended 31 January,2004 is derived from the statutory accounts for that year which have beendelivered to the Registrar of Companies. The auditors have reported on thoseaccounts and their report was unqualified and did not contain a statement underS237 Companies Act 1985. Balance Sheetsas at 29 January, 2005 GROUP COMPANY Restated Restated 2005 2004 2005 2004 £000 £000 £000 £000Fixed assetsTangible assets 37,264 39,545 36,743 39,018Investment in subsidiaries - - 205 205 37,264 39,545 36,948 39,223 Current assetsStocks 9,172 10,418 9,069 10,285Debtors 20,991 20,126 20,405 19,720Cash at bank 34,958 24,937 34,796 24,824 65,121 55,481 64,270 54,829 Creditors: Due within one year 29,177 27,225 29,361 27,522Net current assets 35,944 28,256 34,909 27,307 Total assets less current liabilities 73,208 67,801 71,857 66,530 Provisions for liabilities and chargesDeferred credit 619 628 619 628Deferred taxation 4,819 4,757 4,804 4,745 5,438 5,385 5,423 5,373 67,770 62,416 66,434 61,157Capital and reserves Called up share capital 4,865 4,865 4,865 4,865Share premium account 905 905 905 905Own shares held (2,809) (2,750) (2,809) (2,750)Profit and loss account 64,809 59,396 63,473 58,137 67,770 62,416 66,434 61,157 The 2004 figures have been restated to reflect the adoption this year of UITF38,Accounting for ESOP trusts. This has not affected profit. Cash Flow Statement For the year ended 29 January, 2005 2005 2004 £000 £000 £000 £000Net cash inflow from operating activities 21,038 20,417 Returns on investments and servicing of financeInterest received 1,288 603Interest paid (3) (4)Net cash inflow from returns on investments andservicing of finance 1,285 599 TaxCorporation tax paid (4,433) (3,873) Capital expenditure and financial investmentPurchase of tangible fixed assets (2,959) (3,306)Sale of tangible fixed assets 215 274 (2,744) (3,032) 15,146 14,111 Dividends paid (5,108) (4,720)Increase in cash 10,038 9,391 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Barr (A.G.)