21st May 2007 07:02
Britvic plc21 May 2007 Britvic plc ('Britvic') ----------------------- Interim Results --------------- Britvic today announces its Interim Results for the 28 weeks ended 15 April 2007('the period'). 28 weeks ended 28 weeks ended 15 April 2007 16 April 2006 % change ------------------------------------------ £m £m Total Branded Revenue 353.6 323.5 9.3 Stills Revenue 166.8 153.7 8.5Carbonates Revenue 175.2 159.8 9.6 EBITDA* 48.2 43.4 11.1 Operating Profit 24.2 18.6 30.1Operating Profit Margin 6.8% 5.7% 1.1%pts Free cashflow** (12.2) (42.3)Net Debt (309.8) (362.5)Profit after tax 10.9 6.5 67.7 Basic earnings per share 5.0p 3.0p 66.7Interim dividend per share 3.3p 3.0p 10.0 Note regarding those numbers in this announcement other than those includedwithin the Statutory Accounts: all numbers (other than revenue and dividend pershare) are disclosed before exceptional items. * EBITDA is defined as operating profit before exceptional items, depreciation,amortisation and any gain or loss on disposal of fixed assets **Free cash flow is defined as net cash flow excluding movements in borrowings,dividend payments and non cash exceptional items • Britvic out-performed the soft drinks market in both stills and carbonates during the period with strong total branded revenue growth, up 9.3% to £353.6m • Stills showed continued good growth with revenues up 8.5%, driven by a strong performance from Britvic's leading brands: • The success of Fruit Shoot H2O, which further strengthened its position as the number one kid's water brand; • Continuing growth in Robinsons squash, with the new large pack facilities enabling us to compete effectively with own label; • J2O continues to strengthen its category leadership with the recently launched PET pack performing well. • Carbonates saw strong revenue growth of 9.6% in the period driven by: • A growing presence in the increasingly important discounters sector; • The strength of the Pepsi brand proposition which continues to deliver further market share gains despite an increasingly competitive sector. • Operating profit up 30.1% at £24.2m with operating profit margin up 1.1%pts to 6.8% • Strong top line growth with a continued focus on Average Realised Price (ARP) has helped drive margin improvements; • Progress on Product Value Optimisation (PVO) savings mitigating input cost pressures. • Profit after tax up 67.7% at £10.9m, with a reduction in the effective tax rate from last year. • Significantly improved free cash flow, up £30.1m on last year, underpins the Board's confidence in proposing an interim dividend per share of 3.3p up 10.0% on prior year. Paul Moody, Chief Executive, commented: "Britvic's improved performance has been achieved through exploiting our brandstrength in the stills category, sustaining core brand activity in carbonatesand by further driving revenue through innovation and international expansion.These actions, together with a sharp focus on improving efficiency, optimisingworking capital and increasing operating margins mean we are very well placed tocapture the benefits of the attractive future growth and large size of the softdrinks market. We have continued to build market share in stills and carbonates and lookforward to a second half where we will benefit from several new innovativeproduct launches, such as Robinsons Smooth Juice and Fruit Shoot 100% Juice. The encouraging trading trends seen over the period have continued through theearly weeks of the second half and as a result, we remain confident with regardto the full year outcome. However, as we enter this more important and typicallymore volatile period, the soft drinks market as a whole will face much strongercomparatives. The agreement to acquire the soft drinks and distribution businesses of C&CGroup plc provides us with a leading position in the soft drinks market inIreland and a great opportunity to accelerate earnings growth. Additionally,there is exciting potential for anticipated synergies of €14m, brand and productexpansion and innovation. This important acquisition for Britvic allows us togrow the business both within the UK and by selective international expansion." For further information please contact:--------------------------------------- Investors:John Gibney +44 (0)1245 504 330Jo GuanoCraig Marks Media:Britvic - main switchboard +44 (0)1245 261 871Julian Mears +44 (0)7834 962542 A presentation for analysts and investors will be held at 9.30am on 21 May 2007in the Auditorium at Linklaters, 1 Silk Street, EC2Y 8HQ. A live webcast of thepresentation including Q&A will be available on Britvic's websitewww.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 542386#Redial number +44 (0)20 8609 0289Conference reference 172873# Notes to editors---------------- Britvic is one of the two leading soft drinks businesses in Great Britain. TheCompany is the largest supplier of still soft drinks, the faster growingcategory in the soft drinks market, and the number two supplier of carbonates. Britvic's broad portfolio of leading brands includes established names with highbrand recognition such as Robinsons and Tango and highly successful innovationssuch as J2O and Fruit Shoot. Included within the portfolio are the Pepsi and 7UPbrands, which Britvic produces, markets, sells and distributes under itsexclusive appointment from PepsiCo which runs until December 2023. This brandand product portfolio enables Britvic to target and satisfy a wide range ofconsumer demands in all major soft drinks categories, via all available routesto 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 28 weeks ended 15 April 2007 Britvic has delivered a strong performancewith revenue increasing by 9.3% due to its out-performance of the market in bothstills and carbonates. The strong volume growth has been allied with a sharpfocus on growing average realised price (ARP) as we continue to drive effectiveand efficient promotional activity improving operating margins. These combinedfactors have resulted in operating profit before exceptional items up 30.1%.This flows through to profit after tax (PAT) up 67.7% and earnings per share(EPS) up 66.7% both before exceptional items. This performance has been acheivedagainst the backdrop of an improving soft drinks market and some easiercomparatives, with Britvic's brands growing market share in both stills andcarbonates. The strong and improving free cash flow, £30.1m better than the sameperiod last year, has underpinned the Board's decision to propose an interimdividend of 3.3p up 10% on the prior year. The soft drinks market---------------------- The total soft drinks market continued to perform well with market volumes up1.7%. However the second half of the year is typically much more volatile,influenced last year by both exceptional weather and key events such as theWorld Cup. There are no major events that are likely to influence the softdrinks market in the summer of 2007, but the weather remains a key factor. The stills market showed continued growth, with total volumes up 1.7% for theperiod. Although this is a lower rate than last year we continue to believe thatin both the short and long term the stills category will provide the majority ofthe growth in the total market. Britvic out-performed the stills market withstrong volume growth of 7.5%. The slower market growth rate compared to lastyear is a result of the consumer trend towards health and well-being settlingdown as consumers have adapted their product repertoire and are consuming acrossa wider range of categories. Last year we saw a market step change increase instills volumes that was unlikely to be repeated as we moved into this year.Stills growth continues to marginally outperform carbonates against much toughercomparatives, providing evidence that new consumers are coming into stills butat a slower rate than seen last year. To a degree, we have seen a pendulumeffect as consumers switched into stills but have now reverted to a morebalanced position across carbonates and stills. The stills market has also beenaffected by some short term one-off factors such as in pure juice where anincrease in raw material cost has in turn been passed on to the consumer and hassubsequently supressed volume growth which was nonetheless positive. The carbonates market showed a marked improvement on the unprecedented volumedecline that we experienced in the first half of last year, growing 1.7% overthe period. Whilst the pattern of trading over the period is clearly consistentwith prior years, the post-Christmas decline was much milder than last year. Thecategory is appearing to show a rebound after the pronounced movement towards'better for you' stills. Consumers have begun to realise that the no added sugar(NAS) variants of carbonates, all of which other than fruit carbonates areshowing growth, are an acceptable 'healthy' proposition. Although an improvedperformance, the market is not back to the levels of 2004/05, though there was avery strong Easter peak associated with a reasonably prolonged spell of goodweather. Against this background, Britvic's total carbonates volumes grew by 8.1% in theperiod. Just over half of this performance has been driven by our strategicdecision to enter the increasingly important discounters sector of the market.This is a growing sector, stocking leading brands as well as generic and ownlabel ranges, where customer appeal is growing. As a result, we have enjoyed astrong performance that will continue into the second half of the year inabsolute terms but will not exhibit the same level of year on year growth. Britvic's strategy------------------ The strategy has remained focused on the following elements: Supporting and growing our core brands We continue to invest in our strong portfolio of brands through both innovationand media promotion, to ensure that they are preferred by consumers. The Pepsi brand has made further market share gains, attaining a 23.5% share ofthe cola market for the period, an increase of 1.8%pts on the same period lastyear. The success enjoyed by the brand in the period reflects strong promotionalexecution across all key customers. This growth in market share combined with agrowing presence of the brand in the discounters sector was achieved without anyadverse impact on ARP. We have invested to further reinforce Robinsons' number one position in theincreasingly important squash category. We now have the capability for in-housebottle-blowing for all our large packs leading to a significant cost reductionenabling us to increase our promotional competitiveness. Large pack value shareis 3.5%pts ahead of last year in the last 12 weeks driving the overall brandvalue share by 1.2%pts. Later in the year we will see the launch of theRobinsons squash brand featuring a pack re-design and product improvementcentred on no artificial colours or flavours to ensure that the brand maintainsits authoritative, category leading position. Over the important summer tradingmonths around £12.5m of marketing support will be given across the Robinsonsrange behind the new 'Raise them on Robinsons' campaign and this year'sWimbledon on-pack promotion marking the 71st year on the umpire's chair. FruitShoot in its "natural" formulation with no artificial flavours and colouringshas performed well with its value share rising to 33% in the last 12 weeks,4.4%pts ahead of last year. The performance of J20 continues to strengthen its category leadership both intake-home and on-premise with 7% growth against the prior year. The brandenjoyed a strong Christmas performance driving success for both Britvic and ourcustomers. The PET pack launched in June 2006 has broadened the brand'sfootprint outside the on-premise heartland and into the take-home channels,gaining new listings. After a successful limited edition period the Orange andPomegranate flavour has now become the sixth permanent flavour for the product.Our TV advertising campaign 'If H2O were J2O', aimed at further growingdistribution was well received by consumers. Our International business continues to achieve 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, where wehave developed a brand new TV campaign which airs at the end of May. The successfrom Robinsons in Denmark and Sweden led to the decision to launch RobinsonsHigh Juice into Finland in May to further build the scale of our business in theNordic region. Listings have been secured in all major grocery chains and weexpect to achieve distribution of around 70% during the summer. A fullpromotional campaign, including TV advertising, is accompanying the launch. Innovating / Developing new products Central to our future success is the ability to innovate further into the largeand growing segments of the market. At flotation we outlined our plans focusedon the four key themes of naturalness, health and well-being, occasionality andindulgence. Our three new water brands launched last year, (Fruit Shoot H2O, Pennine Springand Drench) have established themselves in a relatively short period. H2O isperfoming very strongly and now has a market share of nearly 50% with repeatrates of sale at 41%, well ahead of new product benchmarks and relatively lowlevels of cannibalisation of the core Fruit Shoot brand. For Drench and PennineSpring, as for most new brand launches, it has been necessary to effect somechanges to the proposition in order to optimise their performance. PennineSpring will be focused solely on the licensed and food service sectors, buildingon the fact that in the former it is the third largest and fastest growing waterbrand, with Drench undergoing a packaging re-design and re-positioning to widenits appeal and strengthen its differentiated proposition as a take-home product.From May activity will focus on driving distribution in the convenience andimpulse channels and a new advertising campaign will run for 12 weeks from Julyto September to introduce a compelling new message for the water category andDrench brand. The 2007 innovation programme is well underway with the re-launch of Fruit Shootin its "natural" formulation with no artificial flavours and colourings; thelaunch of the "Really Wild Drinks Company" a range of six natural juice drinksin response to changing guidelines with regard to soft drinks in schools; theintroduction of a more modern and premium position for the Britvic mixer andjuice range in non-returnable, recyclable bottles; and finally a major brandre-design of brand Pepsi that capitalises upon the trend for personalcustomisation with multiple designs for each variant being available - thedesigns will change on a regular basis to ensure that the most contemporarythemes are reflected on our packs. All four initiatives are performing well andevidence our expertise in developing products that help us manage the changinglegislative framework at the same time as giving consumers relevant choices. In the remainder of our financial year, we will launch the following: • Two products manufactured on our new aseptic line, that enables us to deliver great tasting preservative free products that have no artificial ingredients: • Robinsons Smooth Juice- a 100% fruit juice blended with barley in 1L PET bottles. • Fruit Shoot 100% - a pure juice specifically designed for children. • The re-designed and re-positioned Drench. • The re-formulated and re-designed Robinsons squash. Driving 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 financial year 2007 (FY07). Suchhas been the success of the Business Transformation Programme, that we are ontarget to deliver an incremental £4m savings in FY07 and £3m in FY08, aspreviously announced. In addition to this we expect to see incremental annualised savings of £5-6m byFY09 as a consequence of the proposed outsourcing of the secondary distributionnetwork and vending and chiller re-manufacturing operations, at a one-offexceptional cost of £3-4m in FY08. The proposals would also reduce capitalexpenditure requirements by £2-3m from FY08. Related to this proposal, we havedisposed of our depot in Tamworth, the only freehold site within the secondaryretail distribution network, at a net cash consideration of £9m. We continue to drive our Product Value Optimisation (PVO) programme and are ontrack to deliver £2m of savings in FY07 with the introduction of in-house largepack PET squash bottles at our Norwich factory and other vertical integrationopportunities. Acquisition of the soft drinks and related businesses of C&C Group plc---------------------------------------------------------------------- We have agreed to acquire the soft drinks and distribution businesses ("CCSD")of C&C Group plc for €249.2m (£169.5m) in cash. CCSD owns a number of leadingbrands in the Republic of Ireland and Northern Ireland ("the territory"),including Club, Ballygowan water, Britvic, Cidona, MiWadi, and Energise Sport,as well as the rights to Pepsi and 7Up brands in the territory through itsbottling agreements with PepsiCo. This is a great opportunity to accelerate earnings growth and provides us with aleading position in the soft drinks markets in the territory. Additionally,there is exciting potential for anticipated synergies of €14m, as well as brandand product expansion and innovation. This is an important acquisition for Britvic as we seek to grow the businessboth within the UK and by selective international expansion. We are very pleasedto welcome an experienced and highly capable CCSD senior management team andtheir colleagues. We believe we have many opportunities to further develop bothCCSD's own brands and the Pepsi and 7Up brands in these markets. Completion isexpected before 31 August 2007. Current trading and outlook--------------------------- The encouraging trading trends seen over the period have continued through theearly weeks of the second half and as a result, Management remain confident withregard to the full year outcome. However as we enter this more important andtypically more volatile period, the soft drinks market as a whole will face muchstronger comparatives. Financial and business review============================= The following discussion is based on Britvic's results for the 28 weeks ended 15April 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 - number of litres sold by the Group relative to prior period. Average Realised Price (ARP) - average revenue per litre sold. Revenue growth - sales achieved by the Group relative to prior period. Brand contribution margin - revenue less material costs and all other marginalcosts that Management considers to be directly attributable to the sale of agiven product, divided by revenue. Such costs include brand specific advertisingand promotion costs, raw materials, and marginal production and distributioncosts. Management uses the brand contribution margin to analyse Britvic'sfinancial performance, because it provides a measure of contribution at brandlevel. Operating profit margin - operating profit before exceptional items and beforethe deduction of interest and taxation divided by revenue. Free cash flow - net cash flow excluding movements in borrowings, dividendpayments and non cash exceptional items. Return on invested capital (ROIC) - ROIC is a performance indicator used byManagement and defined as operating profit after tax before exceptional items asa percentage of invested capital. Invested capital is defined as non-currentassets plus current assets less current liabilities, excluding all balancesrelating to interest bearing liabilities and all other assets or liabilitiesassociated with the financing and capital structure of the Group and excludingany deferred tax balances. Overview-------- In the period total volumes were up 7.9% on the prior year with total revenuesup 9.3% at £353.6m. Operating profit before exceptional items for the period wasup 30.1% to £24.2m with operating profit margin also showing improvement at6.8%, up 1.1%pts. PAT for the period was £10.9m up 67.7% on the prior period,with EPS up 66.7%. Stills 28 weeks 28 weeks ------ ended 15 ended 16 April 2007 April 2006 % change £m £m -------- ---------- --------Volume (millions litres) 229.9 213.8 7.5ARP per litre 72.6p 71.9p 1.0Revenue 166.8 153.7 8.5Brand contribution 76.9 69.9 10.0Brand contribution margin 46.1% 45.5% 0.6%pts In stills we have seen continued strong growth with revenue up 8.5% driven bythe success of Fruit Shoot H20 which further strengthened its position as thenumber one kid's water; the continuing growth in Robinsons squash with the newlarge pack facilities enabling us to compete effectively with own label; andJ20's strong performance. Britvic has out-performed the market over the period with Britvic volumes up7.5% against a market up 1.7%. Stills have also seen a continued improving ARPup 1% for the period. The brand contribution margin up 0.6%pts at 46.1% has been impacted by thecontinued strategic decision to focus an increasing proportion of advertisingand promotional (A&P) spend on stills, although this has been mitigated by ourPVO programme again predominantly focused on stills with the impact of the newin-house bottling facilities at Norwich. Carbonates 28 weeks 28 weeks ---------- ended 15 ended 16 April 2007 April 2006 % change £m £m -------- ---------- --------Volume (millions litres) 449.1 415.6 8.1ARP per litre 39.0p 38.5p 1.3Revenue 175.2 159.8 9.6Brand contribution 68.0 60.6 12.2Brand contribution margin 38.8% 37.9% 0.9%pts In carbonates we have delivered a strong performance with volumes up 8.1% in theperiod driven by a growing presence in the increasingly important discounterssector which accounts for just over half of the growth in the period and shows asimilar ARP and margin profile to the rest of the business, and by the strengthof the Pepsi brand proposition which continues to deliver further market sharegains despite an increasingly competitive sector. Neilson data excludes the discounters but even after taking out the growthassociated with this sector our underlying carbonates growth of around 4% stillout-performed the market which grew 1.7% year on year. Allied with the strongvolume growth was an increase in ARP which generated strong revenue growth ofnearly 10%. Direct product cost increases below inflation were more than offset by thereduction in A&P spend, which, as already explained, was focused on stills, andhence carbonates brand contribution continues to trend upwards International 28 weeks 28 weeks ------------- ended 15 ended 16 April 2007 April 2006 % change £m £m -------- --------- --------Volume(millions litres) 17.2 15.9 8.2ARP per litre 67.4p 62.3p 8.2Revenue 11.6 9.9 17.2Brand contribution 3.1 2.8 10.7Brand contribution margin 26.7% 28.3% (1.6)%pts The International business continues to achieve improved results with bothvolume and ARP growth of 8.2%, and revenue growth of 17.2% driven by furtherdistribution gains for Robinsons squash in the recent launch markets of Swedenand Denmark. The Fruit Shoot business in the Netherlands is continuing toperform strongly with volumes doubling versus the same period last yearresulting in Fruit Shoot being the fastest growing brand in the category. The decrease in the brand contribution margin can be explained by an increase inA&P spend as we continued our launch campaign into the Nordic countries, and theeffect of the increase in direct product costs up 4.5% reflecting the highervolume and value of stills products sold. Costs and overheads 28 weeks 28 weeks ------------------- ended 15 ended 16 April 2007 April 2006 % change £m £m -------- --------- --------Non brand A&P* (4.4) (3.5) (25.7)Fixed supply chain** (34.2) (36.1) 5.3Selling costs** (46.5) (44.2) (5.2)Overheads and other* (38.7) (30.8) (25.6)Total (123.8) (114.6) (8.0) Total A&P spend (24.3) (23.3) (4.3)A&P as a % of net revenue 6.9% 7.2% * contained within Administration Expenses** contained within Selling and Distribution Costs Overall, we have maintained our investment in total A&P at circa 7% of netrevenue to continue our long term brand building programme. We continue ourstrategy of a more selective focus on A&P spend in those areas where we believewe will get the best results. Fixed supply chain costs are down by circa £2m due in part to the benefit ofcost savings from our Business Transformation Programme. The increase in sellingcosts is a reflection of the strong revenue performance and the correlationbetween that and the higher investment made in customer space for promotionalactivity etc; and the fact that last year the phasing of spend wasproportionately higher in the second half. The increase in overheads and otherof circa £8m reflects an increase of £5.7m in the employee bonus provisionreflecting the strong revenue and profit performance over the period and a £0.8mbuy as you earn share scheme cost which only commenced in April 2006. Exceptional items----------------- During the period, Britvic incurred exceptional operating costs totalling £4.8m.These comprised: • Restructuring costs of £1.8m resulting from the £4m Business Transformation Programme overhead cost savings identified for FY07 and relate principally to redundancy costs and advisor fees. • The £1.7m cost of transitional award shares vesting under the Performance Share Plan (PSP). As we announced last year, in addition to the annual PSP awards, a one-off transitional award was made to approximately 90 of the most senior managers within the business. The award vests in three tranches over the three financial years 2005/6, 2006/7 and 2007/8. It is designed to aid the transition from Long Term Incentive plans which terminated on separation from IHG, whilst also serving as a retention and incentive plan measured by ROIC and is paid in shares, which forms part of a shareholding requirement for senior executives. The charge of £1.7m for the period is in line with guidance given in November for a full year charge of between £2-4m. • A non cash charge of £0.2m relating to IHG share options held by Britvic employees which is purely an accounting entry. • A £1.1m returnable bottle impairment relates to an impairment made for returnable glass bottle stocks held in inventory which are redundant due to the strategic move to a more profitable programme of non-returnable bottles. Exceptional operating costs are £9.8m lower than the same period last year. Thisis primarily due to the following costs incurred in the prior year: listingcosts of £5.4m; £1.9m one-off cost of the all-employee share award announced atthe time of flotation; and higher restructuring costs incurred. All exceptional costs in the period are tax deductible. The share incentivescheme costs will attract deductions but on a basis different to the accountingtreatment. Interest-------- The net finance charge before exceptional items for the period for the Group was£9.0m compared with £9.2m in same period in the prior year. Taxation-------- The tax charge of £4.3m before exceptional items represents an effective taxrate of 28.2%, a rate lower than the UK statutory rate of 30% due to a greaterfocus on the management of taxation as an independent plc. The effective taxrate as reported in the accounts for the same period last year was 30.9%.Including the effect of exceptional items, the effective tax rate was 33.0% forthe period. Earnings per share------------------ EPS for the period, adjusted for exceptional items, was 5.0p, up 66.7% on EPSfor the same period last year of 3.0p. Basic EPS (after exceptional items) forthe period was 3.2p compared with a loss per share of 2.6p for the same periodlast year. Dividends--------- The Board is recommending an Interim dividend for 2007 of 3.3p per share, anincrease of 10% on the dividend last year with a total value of £7.1m. TheInterim dividend will be paid on 29 June 2007 to shareholders on record as at 1June 2007. Cash flow and net debt---------------------- There has been a £30.1m pre-exceptional free cash flow improvement on the sameperiod last year. This improvement has been principally driven by the following: •Lower net capital expenditure in the period (£14.3m) than the same period last year (£27.4m). •An additional pension contribution of £10m in the period compared to £30m last year. Net debt defined as current and non-current borrowings less cash, was £309.8m at15 April 2007 compared to £362.5m at 16 April 2006. This is due in the main to aspecial dividend of £98.5m paid out in the prior year compared to £15.1m (finalfor FY06) paid in the period. Capital employed---------------- Non-current assets have reduced from £329.9m at 16 April 2006 to £305.9m at 15April 2007 due in part to more tightly controlled capital expenditure which isdown £13.1m compared to the same period last year. Depreciation has decreased by£1.3m compared to the same period last year. Share price and market capitalisation------------------------------------- At 15 April 2007 the closing share price for Britvic plc was 339.5p. The Groupis a member of the FTSE 250 index with a market capitalisation of approximately£733m at the period end. Treasury management------------------- A key activity in the period was to replace around £229m of bank-basedborrowings with the proceeds of a private placement. The issue of the placement,largely in the US, had the following features: • 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. 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 annual contributions of £10m will be made in December 2007 to2010 (total of £40m) in order to further reduce the deficit in the scheme. Afull actuarial valuation is currently being prepared in line with the normalthree year cycle as at 31 March 2007, the results of which will be reflected inthe year end financial statements. The results of this valuation are not yetavailable. The Group IAS 19 deficit at the half year was £16.8m (£65.8m at 1 October 2006).The decrease in the deficit is due to changes in actuarial assumptions appliedas at 15 April 2007. It should be noted that this is an accounting valuation andsubject to high volatility. BRITVIC PLCCompany number: 5604923 INTERIM FINANCIAL STATEMENTSFor the 28 weeks to 15 April 2007 ================================= INDEPENDENT REVIEW REPORT TO BRITVIC PLC======================================== We have been instructed by the company to review the financial information forthe 28 weeks ended 15 April 2007 which comprises consolidated income statement,consolidated balance sheet, consolidated cash flow statement, consolidatedstatement of recognised income and expense, and the related notes 1 to 8. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the company, for our work,for this report, or for the conclusions we have formed. Directors' responsibilities--------------------------- The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed--------------------- We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data, and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied, unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards on Auditing (UK and Ireland) and therefore provides alower level of assurance than an audit. Accordingly we do not express an auditopinion on the financial information. Review conclusion----------------- On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the 28 weeks ended15 April 2007. Ernst & Young LLPNottingham18 May 2007 CONSOLIDATED INCOME STATEMENTFor the 28 weeks ended 15 April 2007==================================== (Unaudited) (Unaudited) (Audited) 28 Weeks Ended 28 Weeks Ended 52 Weeks Ended Note 15 April 2007 16 April 2006 1 October 2006 ---- --------------- --------------- --------------- Before Exceptional Total Before Exceptional Total Before Exceptional Total Exceptional items Exceptional items Exceptional items items items items £m £m £m £m £m £m £m £m £m-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------Revenue 353.6 - 353.6 323.6 - 323.6 677.9 - 677.9Cost of sales (139.9) - (139.9) (127.4) - (127.4) (263.5) - (263.5)-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------Gross profit 213.7 - 213.7 196.2 - 196.2 414.4 - 414.4Selling and distribution costs (126.5) - (126.5) (118.0) - (118.0) (231.0) - (231.0)Administration expenses 3 (63.0) (4.8) (67.8) (59.6) (14.6) (74.2) (109.7) (19.1) (128.8)-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------Operating profit 24.2 (4.8) 19.4 18.6 (14.6) 4.0 73.7 (19.1) 54.6-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------Finance income 0.8 - 0.8 - - - 0.2 - 0.2Finance costs (9.8) (0.1) (9.9) (9.2) (0.1) (9.3) (18.0) (0.3) (18.3)-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------Profit/(loss)before tax 15.2 (4.9) 10.3 9.4 (14.7) (5.3) 55.9 (19.4) 36.5Taxation 5 (4.3) 0.9 (3.4) (2.9) 2.7 (0.2) (16.3) 4.0 (12.3)-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------Profit/(loss) for the period attributable to the equity shareholders 10.9 (4.0) 6.9 6.5 (12.0) (5.5) 39.6 (15.4) 24.2-------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Earnings per share 6------------------Basic earnings per share 5.0p (1.8p) 3.2p 3.0p (5.6p) (2.6p) 18.4p (7.2p) 11.2p ------ ------ ------ ------ ------ ------ ------ ------ ------Diluted earnings per share 5.0p (1.8p) 3.2p 3.0p (5.6p) (2.6p) 18.3p (7.1p) 11.2p ------ ------ ------ ------ ------ ------ ------ ------ ------ Dividends---------Paid in the periodDividend per share (pence) 7.0 45.9 48.9 ------ ------ ------Total dividend (£m) 15.1 98.5 105.0 ------ ------ ------ Proposed after the balance sheet dateDividend per share (pence) 3.3 3.0 7.0 ------ ------ ------Total dividend (£m) 7.1 6.5 15.1 ------ ------ ------ CONSOLIDATED BALANCE SHEETAt 15 April 2007================ (Unaudited) (Unaudited) (Audited) 15 April 16 April 1 October 2007 2006 2006 Note £m £m £m---------------------------- ----- -------- -------- --------AssetsNon-current assetsProperty, plant and equipment 207.6 232.4 218.2Intangible assets 95.9 95.1 95.4Trade and other receivables - lease premiums 2.4 2.4 2.4---------------------------- -------- -------- -------- 305.9 329.9 316.0---------------------------- -------- -------- --------Current assetsInventories 35.5 37.3 31.7Trade and other receivables 132.3 115.7 99.6Other financial assets 0.3 0.2 0.6Income tax receivable 1.1 5.7 -Cash and cash equivalents 9.1 1.2 19.2---------------------------- -------- -------- -------- 178.3 160.1 151.1---------------------------- -------- -------- --------Total assets 484.2 490.0 467.1---------------------------- -------- -------- -------- Equity and liabilitiesIssued capital 7 (43.2) (43.2) (43.2)Share premium 7 (2.5) - (2.5)Own shares 7 0.3 0.5 0.5Share scheme reserve 7 (4.9) (5.7) (4.5)Hedging reserve 7 0.5 - 0.4Retained earnings 7 87.3 116.6 107.0---------------------------- -------- -------- --------Total equity 7 37.5 68.2 57.7---------------------------- -------- -------- -------- Non-current liabilitiesInterest-bearing loans and borrowings 4 (297.8) (354.2) (284.3)Deferred tax liabilities (17.5) (7.1) (3.3)Pension liability (16.8) (48.9) (65.8)---------------------------- -------- -------- -------- (332.1) (410.2) (353.4)---------------------------- -------- -------- --------Current liabilitiesTrade and other payables (166.5) (138.3) (147.7)Interest-bearing loans and borrowings 4 (21.1) (9.5) (17.5)Other financial liabilities (2.0) (0.2) (1.0)Income tax payable - - (5.2)---------------------------- -------- -------- -------- (189.6) (148.0) (171.4)---------------------------- -------- -------- --------Total liabilities (521.7) (558.2) (524.8)---------------------------- -------- -------- --------Total equity and liabilities (484.2) (490.0) (467.1)---------------------------- -------- -------- -------- CONSOLIDATED CASH FLOW STATEMENTFor the 28 weeks ended 15 April 2007==================================== (Unaudited) (Unaudited) (Audited) 28 Weeks 28 Weeks 52 Weeks Ended Ended Ended 15 April 16 April 1 October 2007 2006 2006 £m £m £m------------------------- --------- ---------- ----------Cash flows from operating activities Profit from continuing operations before tax and net finance costs 19.4 4.0 54.6 Depreciation 19.2 20.5 38.3 Amortisation 2.0 2.5 4.7 Share based payments 3.7 7.8 7.8 Net pension charge less contributions (9.4) (29.4) (29.6) (Increase)/decrease in inventory (3.8) 0.6 6.2 (Increase)/decrease in trade and other receivables (32.7) (11.9) 2.2 Increase/(decrease) in trade and other payables 21.1 (6.0) 3.8 Loss on disposal of property, plant and equipment 2.8 1.8 4.0 Loss on disposal of intangible assets - - 0.4 Income tax paid (7.1) (3.7) (3.8)------------------------- --------- ---------- ----------Net cash flows from operating activities 15.2 (13.8) 88.6------------------------- --------- ---------- ---------- Cash flows from investing activities Proceeds from sale of property, plant and equipment - 0.2 0.2 Interest received 0.8 - 0.2 Purchase of property, plant and equipment (11.8) (26.7) (29.4) Purchase of intangible assets (2.5) (0.9) (3.8)------------------------- --------- ---------- ----------Net cash flows used in investing activities (13.5) (27.4) (32.8)------------------------- --------- ---------- ---------- Cash flows from financing activities Issue costs paid (0.8) (0.1) (0.2) Interest paid (11.8) (5.8) (16.4) Interest-bearing loans received 321.6 364.4 667.0 Interest-bearing loans repaid (302.5) (233.9) (598.4) Repayment of borrowings - (2.8) (2.8) Purchase of own shares (3.2) (0.5) (0.5) Increase in share capital - 0.2 0.3 Dividends paid to equity shareholders (15.1) (98.5) (53.3) Dividends paid to previous shareholders - - (51.7)------------------------- --------- ---------- ----------Net cash flows from financing activities (11.8) 23.0 (56.0)------------------------- --------- ---------- ---------- Net decrease in cash and cash equivalents (10.1) (18.2) (0.2) Cash and cash equivalents at beginning of period 19.2 19.4 19.4------------------------- --------- ---------- ----------Cash and cash equivalents at end of period 9.1 1.2 19.2------------------------- --------- ---------- ---------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFor the 28 weeks ended 15 April 2007==================================== (Unaudited) (Unaudited) (Audited) 28 Weeks 28 Weeks 52 Weeks Ended Ended Ended 15 April 16 April 1 October 2007 2006 2006 £m £m £m------------------------- --------- --------- ---------Actuarial gain/(loss)on defined benefit pension scheme 39.6 6.7 (10.8)Current tax on additional pension contributions 3.0 9.0 9.0Deferred tax on pension liability (14.9) (11.0) (5.7)Movement in cash flow hedges 0.1 1.0 0.6Deferred tax on share options granted to employees (0.3) 1.1 0.1Current tax on share options exercised 0.4 0.6 1.1------------------------- --------- --------- ---------Net income/(expense)recognised directly in equity attributable to equity shareholders 27.9 7.4 (5.7)Profit/(loss) for the period 6.9 (5.5) 24.2------------------------- --------- --------- ---------Total recognised income for the period 34.8 1.9 18.5------------------------- --------- --------- --------- NOTES TO THE FINANCIAL INFORMATIONFor the period ended 15 April 2007================================== 1. Basis of preparation----------------------- This interim financial information comprises the consolidated balance sheet asat 15 April 2007 and 16 April 2006 and related consolidated income statement,consolidated cash flow statement and consolidated statement of recognised incomeand expense for the 28 weeks then ended and for the 52 weeks ended 1 October2006 of Britvic plc ('financial information'). This financial information hasbeen prepared in accordance with the Listing Rules of the Financial ServicesAuthority. This financial information has been prepared using the principalaccounting policies as set out in pages 43 - 50 of the Group's annual financialstatements for the 52 weeks ended 1 October 2006. In preparing these interimfinancial statements the Group has chosen not to apply IAS 34 'Interim FinancialReporting'. This interim report does not constitute statutory accounts as defined by Section240 of the Companies Act 1985. It has been reviewed but not audited by theGroup's auditors. The statutory accounts for Britvic plc for the 52 weeks ended1 October 2006, which were prepared under IFRS, have been delivered to theRegistrar of Companies. The auditors' opinion on those accounts was unqualifiedand did not contain a statement made under section 237 (2) or (3) of theCompanies Act 1985. 2. Segmental reporting---------------------- The directors consider that the Group has only one reportable geographicsegment, being the UK, and one business segment being the manufacture and saleof soft drinks. The directors consider that the risks and returns of the Group'sproducts are similar in nature. 3. Exceptional items before interest and taxation------------------------------------------------- Exceptional items are those items of financial performance that Britvic plcbelieves should be separately disclosed by virtue of the nature and infrequencyof the events giving rise to them to allow shareholders to understand better theelements of financial performance in the period so as to facilitate comparisonwith prior periods and to assess trends in financial performance more readily. 28 Weeks 28 Weeks 52 Weeks Ended Ended Ended 15 April 16 April 1 October 2007 2006 2006 £m £m £m----------------------- --------- ---------- ----------Listing costs - (5.4) (5.5)Incentive schemes directly associated with the flotation (1.9) (6.6) (6.6)Restructuring costs (1.8) (2.6) (7.0)Returnable bottle impairment (1.1) - ------------------------ --------- ---------- ----------Exceptional costs (4.8) (14.6) (19.1)----------------------- --------- ---------- ---------- "Listing costs" relates to various costs incurred in pursuit of the listing onthe London Stock Exchange which include advisors' fees. "Incentive schemes directly associated with the flotation" include all-employeeshare schemes and management incentives. The cost in the 28 weeks ended 15 April2007 relates to a transitional award granted to members of both the seniorleadership team and the senior management team shortly after flotation, thepurpose of which is to compensate these individuals for the loss of existinglong-term incentive bonuses which were discontinued upon flotation. "Restructuring costs" includes the costs of the major restructuring programmes.These costs relate principally to redundancy costs and advisors' fees. "Returnable bottle impairment" relates to an impairment made for returnableglass bottle stocks, held in inventory, which are redundant due to the move tonon-returnable bottles. 4. Analysis of changes in interest-bearing loans and borrowings--------------------------------------------------------------- 28 Weeks 28 Weeks 52 Weeks Ended Ended Ended 15 April 2007 16 April 2006 1 October 2006 £m £m £m------------------- ---------- ---------- ----------Non-current liabilities 284.3 219.3 219.3Current liabilities 17.5 13.9 13.9------------------- ---------- ---------- ----------At the beginning of the period 301.8 233.2 233.2Issue of US$ Notes 228.5 - -New unsecured loans 93.1 364.4 667.0Issue costs of new loans/US$ Notes (0.8) (0.1) (0.1)Amortisation of issue costs 0.2 0.1 0.1Borrowings repaid (302.5) (233.9) (598.4)Translation gain on US$ Notes (1.4) - -------------------- ---------- ---------- ----------At the end of the period 318.9 363.7 301.8------------------- ---------- ---------- ----------Non-current liabilities 297.8 354.2 284.3Current liabilities 21.1 9.5 17.5------------------- ---------- ---------- ---------- On 20 February 2007, Britvic plc issued US$450m of Senior Notes ('the Notes') inthe United States Private Placement market. The proceeds of the issue were usedto repay a £150m term loan, with the remainder being used to repay the amountsdrawn on the Group's revolving credit facility. The amount, maturity and interest terms of the Notes are shown in the tablebelow: Series Tranche Maturity date Amount Interest ------- --------- ------------- --------- terms ----------A 7 year 20 February 2014 US$87m Fixed at 5.80%B 7 year 20 February 2014 US$15m US$ LIBOR + 0.5%C 7 year 20 February 2014 £25m(US$49m) Fixed at 6.11% D 10 year 20 February 2017 US$147m Fixed at 5.90%E 12 year 20 February 2019 US$126m Fixed at 6.00%F 12 year 20 February 2019 £13m(US$26m) Fixed at 5.94%------- --------- ------------- --------- ---------- Britvic plc will make semi-annual interest payments in US dollars, other thanthe interest due on series B which is payable quarterly, with the first paymentbeing on 21 May 2007. The Notes are unsecured and rank pari passu in right ofrepayment with other senior unsecured indebtedness of the Company. In order tomanage the risk of foreign currency and interest rate fluctuations, the Grouphas entered into currency swaps whereby fixed / floating US dollar interest isswapped for fixed sterling interest. The swap contracts have the same durationand other critical terms as the borrowings which they hedge. As a result of applying hedge accounting, the translation gain shown above of£1.4m has been offset by an equivalent change in the fair value of the swaparrangements. 5. Taxation----------- The tax charge on profit before tax, excluding the impact of exceptional itemshas been calculated using an estimated effective annual rate of 28.2% (2006:30.9%). Including tax on exceptional items, this leaves an estimated tax chargeof £3.4m for the 28 weeks ended 15 April 2007 (£0.2m for the 28 weeks ended 16April 2006). The tax charge before exceptional items of £4.3m includes £2.1m offoreign tax. 6. Earnings per share--------------------- 28 Weeks 28 Weeks 52 Weeks Ended Ended Ended 15 April 16 April 1 October 2007 2006 2006 £m £m £m---------------------------- -------- -------- --------Basic earnings per share for reported earningsNet profit/(loss) for the period attributable to ordinary shareholders 6.9 (5.5) 24.2---------------------------- -------- -------- --------Weighted average number of ordinary shares in issue for basic earnings per share 215.5 214.9 215.4---------------------------- -------- -------- --------Basic earnings per share for profit/(loss) for the period 3.2p (2.6p) 11.2p---------------------------- -------- -------- -------- Diluted earnings per share for reported earningsNet profit/(loss) for the period attributable to ordinary shareholders 6.9 (5.5) 24.2---------------------------- -------- -------- --------Weighted average number of ordinary shares in issue for diluted earnings per share 218.1 214.9 216.7---------------------------- -------- -------- --------Diluted earnings per share for profit/(loss) for the period 3.2p (2.6p) 11.2p---------------------------- -------- -------- -------- Basic earnings per share for pre-exceptional earningsNet profit/(loss) for the period attributable to ordinary shareholders 6.9 (5.5) 24.2Add: Net impact of exceptional items 4.0 12.0 15.4---------------------------- -------- -------- --------Net profit for the period attributable to ordinary shareholders (before exceptional items) 10.9 6.5 39.6---------------------------- -------- -------- --------Weighted average number of ordinary shares in issue for basic earnings per share 215.5 214.9 215.4---------------------------- -------- -------- --------Basic earnings per share for pre-exceptional earnings 5.0p 3.0p 18.4p---------------------------- -------- -------- -------- Diluted earnings per share for pre-exceptional earningsNet profit for the period attributable to ordinary shareholders (before exceptional items) 10.9 6.5 39.6---------------------------- -------- -------- --------Weighted average number of ordinary shares in issue for diluted earnings per share 218.1 218.4 216.7---------------------------- -------- -------- --------Diluted earnings per share for pre-exceptional earnings 5.0p 3.0p 18.3p---------------------------- -------- -------- -------- 7. Reconciliation of movements in equity---------------------------------------- Issued Share Own Share Hedging Retained Total capital premium shares scheme reserve earnings reserve £m £m £m £m £m £m £m---------------------- ------ ------ ------ ------ ------ ------ ------At 2 October 2006 (43.2) (2.5) 0.5 (4.5) 0.4 107.0 57.7Total recognised (income)/ expense for the period - - - - 0.1 (34.9) (34.8)Own shares purchased for share schemes - - 3.2 - - - 3.2Own shares awarded for share schemes - - (3.4) - - 3.4 -Movement in share schemes - - - (0.4) - (3.3) (3.7)Payment of dividend - - - - - 15.1 15.1---------------------- ------ ------ ------ ------ ------ ------ ------At 15 April 2007 (43.2) (2.5) 0.3 (4.9) 0.5 87.3 37.5---------------------- ------ ------ ------ ------ ------ ------ ------ 8. Post balance sheet events---------------------------- On 30 April 2007 a sale and leaseback transaction with regard to one of theGroup's depots completed. On 14 May 2007 the Group reached an agreement to buy the soft drinks anddistribution businesses, CCSD, of C&C Group plc. The transaction will now bereviewed by the competition authorities, as defined by Irish competition law,and it is expected that completion of the transaction will occur by 31 August2007. Please refer to the Chief Executive's Review where further details of these postbalance sheet events are given. -END- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Britvic