26th Sep 2006 07:01
Barr(A.G.) PLC26 September 2006 For Immediate Release 26 September 2006 A.G.BARR p.l.c. INTERIM RESULTS A.G.BARR p.l.c. the soft drinks group announces its interim results today forthe 6 months ended 29th July 2006. Key Points • Profit on ordinary activities before tax and exceptional items increased by 8.2% to £9.4 million (2005 - £8.7 million). • Total turnover versus the comparable period was up 8.9% at £72.2 million (2005 - £66.3). • Strathmore water business acquired on 1st June 2006 has been successfully integrated into the Barr business. • Total IRN-BRU brand revenue increases by 3%. • Interim dividend increased by 0.50p to 10.25p per share (2005 - 9.75p). • Initial warehouse operations now commenced at Cumbernauld. Commenting on the results Chief Executive, Roger White, said: "The sustained drive to develop and broaden our portfolio alongside the aboveaverage summer weather has delivered improved top line performance despitecontinued competitive market conditions. Operationally we are now nearing completion of our major capital investmentprogramme at Cumbernauld and additionally we have successfully integrated theStrathmore business into our operating structure. Trading is forecast to remain competitive; however our underlying businessperformance remains strong and we anticipate meeting our expectations for thefull year" For more information, please contact: A.G.Barr Tel: 0141 554 1899 Buchanan Communications Tel: 020 7466 5000 Roger White, Chief Executive Tim Thomson / Nicola Cronk Iain Greenock, Finance Director Notes to Editors: A.G.Barr p.l.c. A.G.BARR p.l.c. is a long established national soft drinks business with itshead office in Glasgow. As a broad based specialist soft drinks business, thecompany manages a wide portfolio of soft drinks, including Irn-Bru, DietIrn-Bru, Irn-Bru 32, Findlays Water, Orangina, Tizer, D&B and the Simply Range.The latest acquisition is the Strathmore Mineral Water Company one of the UK'sleading bottled water brands, which manufactures still, sparkling and flavouredspring water products. Strathmore has a market leading position in the"on-trade". Interim Statement Profit on ordinary activities before taxation for the six months to 29th July,2006 was, excluding exceptional items, up 8.2% at £9.4m. Turnover versus thesame period last year increased by 8.9% to £72.2m, including £3.2m of salesrevenue from the Strathmore water business purchased on 1st June, 2006.Underlying sales, excluding Strathmore, increased by 4.1% in the period. Theexceptional item in the period relates to the forecast net gains associated withthe completion of the re-organisation in our Scottish sales and logisticsoperations. Exceptional charges are expected to arise in the second halfrelating to costs associated with the planned closure of our Atherton site. The business continues to make good progress towards delivering its operationaland financial goals. The overall soft drinks market in the period grew in value terms by 9% (asmeasured by Nielsen) assisted by better than average weather, especially inJuly. Total carbonates performance continued to be sluggish with value growth of1% and volume decline of 3%. This total carbonates position masked somesignificant competitor carbonate brand declines which has led to a furtherincrease in competition in the market place. We have continued to successfullyfollow our value based strategy albeit in the face of increased promotionalactivity and cost particularly in the multiple retailer channel. Total IRN-BRU brand sales revenue for the period was up by 3% assisted by thesuccessful launch of IRN-BRU 32, aimed at the energy drinks sector. Sales ofIRN-BRU 32, launched in March 2006, have exceeded initial expectations with over5 million cans sold by July 2006. Core IRN-BRU and Diet IRN-BRU also performedsolidly recording important market share gains in England and Wales. Product innovation has played an important role in further developing ourportfolio and improving our revenue performance so far this year. IRN-BRU 32 hasmoved IRN-BRU into the fast growing but competitive energy sector; St ClementsFruits - still fruit drinks - have helped the St Clements brand to grow by 250%in the period and in conjunction with our Simply brand should deliver full yearbrand revenue of £5.0m. Orangina, following its re-launch earlier this year andfurther investment in marketing, has grown by 14% in value in the six months.Continued innovation has been necessary to keep pace with changes in legislationrelated to soft drinks supply to schools. An updated schools' range has beendeveloped to meet legislative changes in England and was launched early inSeptember. The acquisition of the Strathmore water business from Constellation Brands meetstwo strategic priorities. First to strengthen our position in the water categoryand secondly to help our development in the on-trade sector where the brandholds a market leading position. Integration of the Strathmore business into ouroperating and commercial structures has now been successfully completed. Salesof Strathmore products through our impulse route to market will commenceshortly. Across the business, rising input costs, particularly utilities, continue to putpressure on gross margins. However, current gross margins have been protected bya combination of increases in sales prices and sustained on-going cost reductionactions. Further input cost increases are anticipated in the second half butactions taken in tandem with our purchasing position should see gross marginsheld through the balance of the financial year. We are nearing completion of our logistics and sales infrastructure project inScotland. Progress towards our completion date has, however, been hampered bythe unexpected loss of our main contractor who went into receivership in midMay. Whilst we have recovered the position well and are planning to have theproject completed by December 2006, we have lost some eight weeks as aconsequence and may incur additional one off double running costs of up to£0.5m. Projected annual operating savings on completion remain as previouslyforecast at £2.5m. Good progress has been made in relation to the plannedclosure of our Atherton site in spring 2007. The triennial valuation of our defined benefit pension schemes at 1st November,2005 has now been completed and shows a gross deficit of £19.8m. Followingreceipt of this valuation, consultation was carried out with active members ofthe schemes on both future benefits and appropriate contribution rates. Theresults of this exercise are currently being assessed and your directors willsubsequently agree with the trustees of the schemes the total level ofcontribution calculated to achieve full funding within the next ten years. Given the increase in underlying profit and the continued satisfactory financialposition of the company your directors have declared an interim dividend of10.25p per share, payable on 27th October, 2006. This is a 5.1% increase on theinterim dividend paid last year. Turnover to date during the second half of the year is in line with our businessplan. The second half will be a period of intense operational change with allthe encumbent risks associated therewith. Market conditions are also expected toremain highly competitive across the soft drinks category. Despite thesechallenges we remain confident that, in the period, our plans and actions shouldallow us to meet our expectations for the full year. Robin Barr CHAIRMAN Roger White CHIEF EXECUTIVE 26th September, 2006 A.G.BARR p.l.c. Consolidated Income Statement 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 Notes £000 £000 £000 ------- ------- ------- Revenue 72,184 66,290 128,760Cost of sales 33,584 31,130 63,398 ------- ------- -------Gross profit 38,600 35,160 65,362Net operatingexpenses 29,736 26,998 48,422 ------- ------- -------Operating profitbefore exceptionalitem 8,864 8,162 16,940Exceptional item 4 (819) 677 533 ------- ------- -------Operating profit 9,683 7,485 16,407 Finance income 669 797 1,557Finance costs (154) (291) (583) ------- ------- -------Profit on ordinaryactivities beforetax 10,198 7,991 17,381Tax on profit onordinary activities 5 3,059 2,359 5,128 ------- ------- -------Profit attributableto equityshareholders 7,139 5,632 12,253 ------- ------- -------Basic earnings pershare 37.70 p 30.22 p 65.06 p ------- ------- -------Fully dilutedearnings per share 36.68 p 28.72 p 63.87 p ------- ------- ------- Dividend per sharepaid 22.00 p 19.50 p 29.25 p ------- ------- -------Dividend paid(£'000) 4,143 3,795 5,628 ------- ------- -------Dividend per shareproposed 10 10.25 p 9.75 p 22.00 p ------- ------- -------Dividend proposed(£'000) 10 1,995 1,897 4,282 ------- ------- ------- A.G.BARR p.l.c. Consolidated Statement of Recognised Income and Expense 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 ------- ------- ------- Actuarial cost recognised ondefined benefit pension plans - - (2,235)Deferred tax relating todefined benefit pension plans - - 671 ------- ------- -------Net income recognised directlyin equity - - (1,564)Profit for the period 7,139 5,632 12,253 ------- ------- ------- Total recognised income andexpense for the period 7,139 5,632 10,689 ------- ------- ------- Attributable to equityshareholders 7,139 5,632 10,689 ------- ------- ------- A.G.BARR p.l.c. Consolidated Balance Sheet Restated Restated As at As at As at 29.07.06 30.07.05 28.01.06 Notes £000 £000 £000 -------- ------- ------- Non-current assetsIntangible assets 6 9,951 - -Property, plant and equipment 7 46,373 38,326 42,335Deferred tax assets 5,873 5,852 5,777 -------- ------- ------- 62,197 44,178 48,112 -------- ------- ------- Current assetsInventories 9,521 8,414 8,274Trade and other receivables 34,912 28,682 22,143Cash at bank 23,079 33,845 31,412Assets available for sale - - 937 -------- ------- ------- 67,512 70,941 62,766 -------- ------- ------- Total assets 129,709 115,119 110,878 -------- ------- ------- Current liabilitiesTrade and other payables 37,146 28,041 22,083Current tax 2,912 2,707 1,962 -------- ------- ------- 40,058 30,748 24,045 -------- ------- ------- Non-current liabilitiesDeferred income 74 615 611Deferred tax liabilities 5,216 4,850 5,030Retirement benefit obligations 16,025 17,044 16,248 -------- ------- ------- 21,315 22,509 21,889 -------- ------- ------- Capital and reserves attributable toequity shareholdersCalled up share capital 4,865 4,865 4,865Share premium account 905 905 905Own shares held 8 (3,976) (4,010) (4,298)Share options reserve 1,645 1,147 1,416Retained earnings 64,897 58,955 62,056 -------- ------- ------- 68,336 61,862 64,944 -------- ------- ------- Total equity and liabilities 129,709 115,119 110,878 -------- ------- ------- A.G.BARR p.l.c. Consolidated Cash Flow Statement Restated 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 -------- ------- ------- Operating activitiesProfit on ordinary activitiesbefore tax 10,198 7,991 17,381Interest receivable (669) (797) (1,557)Interest payable 154 291 583Depreciation of property, plantand equipment 2,705 2,901 5,756Share options costs 181 115 299Gain on sale of property, plantand equipment (1,761) (7) (215)Government grants written back (537) (4) (8) -------- ------- -------Operating cash flows beforemovements in working capital 10,271 10,490 22,239 (Increase) / decrease ininventories (1,247) 758 898Increase in receivables (12,769) (8,012) (1,473)Increase in payables 14,540 5,805 255Decrease in retirement benefitobligations (223) - (3,031) -------- ------- -------Cash generated by operations 10,572 9,041 18,888 Tax on profit paid (1,667) (2,373) (4,876) -------- ------- -------Net cash from operatingactivities 8,905 6,668 14,012 -------- ------- ------- Investing activitiesAcquisition of Strathmore (15,347) - -Proceeds on sale of property,plant and equipment 6,597 81 514Purchase of property, plant andequipment (4,865) (3,595) (12,029)Interest received 669 797 1,557Interest paid (154) (291) (583) -------- ------- -------Net cash used in investingactivities (13,100) (3,008) (10,541) -------- ------- ------- Financing activitiesPurchase of own shares (523) (2,718) (3,149)Sale of own shares 528 1,740 1,760Dividends paid (4,143) (3,795) (5,628) -------- ------- -------Net cash used in financingactivities (4,138) (4,773) (7,017) -------- ------- ------- Net decrease in cash and cashequivalents (8,333) (1,113) (3,546) -------- ------- ------- Cash and cash equivalents atbeginning of period 31,412 34,958 34,958 Cash and cash equivalents atend of period 23,079 33,845 31,412 -------- ------- ------- Notes to the Accounts 1. Basis of preparation These interim financial statements do not constitute statutory accounts and areunaudited. A copy of this report is distributed to all registered shareholders of thecompany and is available for members of the public upon application to the Company Secretary at1306 Gallowgate, Glasgow G31 4DS and on our corporate website atwww.agbarr.co.uk. 2. Accounting policies The interim financial statements have been prepared under the historical costconvention. The accounting policies adopted are consistent with those followed in thepreparation of the group's annual financial statements for the year ended 28th January, 2006 with theexception noted below. The statutory financial statements for the year to 28th January, 2006 have beenfiled with the Registrar of Companies and a copy may be obtained from CompaniesHouse. These have been audited and contain an unqualified audit opinion and didnot contain a statement under Section 237(2) or Section 237(3) of the CompaniesAct 1985. Change of accounting policy In the six months to 29th July, 2006 the group changed its accounting policy forassets under construction. Previously the policy was to include assets underconstruction as capital work in progress included within trade and otherreceivables. The cost is now included within property, plant and equipment. The impact on the balance sheet has been as follows: July 2005 January 2006 £000 £000 Increase to property, plant and equipment 1,252 7,403 Reduction in trade and other receivables (1,252) (7,403) This change in policy has had no impact on the income statement. 3. Segment information The group's primary basis of segmentation is by geography. For managementpurposes, the group is currently organised into one business segment being themanufacture, sale and distribution of soft drinks. The group operates predominantly in the U.K., with some worldwide operations.The directors are of the opinion that the group has two reportable geographicsegments as defined by IAS 14 Segment Reporting. Geographic segments Total revenue Inter-segment External Profit revenue revenue attributable to equity shareholders £000 £000 £000 £000 £000 £000 ------- ------- -------- ------- -------- -------29th July, 2006U.K. 71,854 153 71,701 14,092 - -Worldwide 483 - 483 124 - - ------- ------- -------- ------- -------- -------Consolidated 72,337 153 72,184 14,216 - - ------- ------- -------- ------- -------- ------- 30th July, 2005U.K. 66,044 124 65,920 - 13,704 -Worldwide 370 - 370 - 85 - ------- ------- -------- ------- -------- -------Consolidated 66,414 124 66,290 - 13,789 - ------- ------- -------- ------- -------- ------- 28th January, 2006U.K. 128,373 235 128,138 - - 27,953Worldwide 622 - 622 - - 99 ------- ------- -------- ------- -------- -------Consolidated 128,995 235 128,760 - - 28,052 ------- ------- -------- ------- -------- ------- Result 14,216 13,789 28,052 Unallocatedcorporateexpenses 5,352 5,627 11,112Exceptionalitem (819) 677 533 ------- ------- -------- ------- -------- -------Operatingprofit 9,683 7,485 16,407 Finance income 669 797 1,557Finance costs (154) (291) (583) ------- ------- -------- ------- -------- -------Profit beforetax 10,198 7,991 17,381 Tax 3,059 2,359 5,128 ------- ------- -------- ------- -------- -------Profit for theperiod 7,139 5,632 12,253 ------- ------- -------- ------- -------- ------- 4. Exceptional item During the period the group continued with the re-organisation of its sales andlogistics facilities in Scotland which will ultimately lead to a consolidatedfacility at its existing Cumbernauld factory site. This has led to exceptionalgains and costs arising in the six months to July 2006. The sale of the Scottish distribution sites resulted in a gain of £1,738,000which included property at Irvine and Wishaw. These two properties were classedas assets available for sale in the financial statements for the year to 28thJanuary, 2006. Government grants received at the time of the initial property purchases by the group have now been released to the incomestatement with £536,000 of a credit being recognised as an exceptional item.Previously the grants were released over the expected lifetime of theproperties. Reducing the above are redundancy costs of £1,455,000 relating to the siteclosures and re-organisation of the sales and logistics facilities. 5. Tax charge The interim period tax charge is accrued based on the estimated average annualeffective income tax rate of 30% (6 months ended 30th July, 2005: 30%). 6. Acquisition of Strathmore On 1st June, 2006 the group acquired for cash the trade and assets of theStrathmore mineral water business which bottles, distributes and sells springwater and flavoured water products. In the two months to 29th July, 2006 thebusiness contributed operating profit of 0.5m. If the acquisition had occurredon 29th January, 2006, the board estimates that group revenue would have been£76.9m and operating profit thereon before the exceptional item would have been£9.1m for the six months ended 29th July, 2006. The net assets acquired in the transaction and the goodwill arising are asfollows: Recognised Fair value Fair value values on acquisition adjustments £000 £000 £000 ----------- -------- -------- Property, plant and equipment 4,993 262 5,255Intangible assets - 8,000 8,000Inventories 1,222 - 1,222Trade receivables 1,370 - 1,370Trade and other payables (2,264) - (2,264) ----------- -------- -------- 5,321 8,262 13,583 Goodwill arising onacquisition 1,951 ----------- -------- -------- Total consideration,satisfied by cash 15,534 ----------- -------- -------- The consideration included £351,000 of fees relating to the acquisition. The intangible assets recognised are the Strathmore brand with a value of £7.0mand the Strathmore customer relationship valued at £1.0m. The goodwill arisingon the acquisition of the business is attributable to the anticipatedprofitability through the distribution of the products in new markets. Due tothe short time between the acquisition and the preparation of these financialstatements the figures relating to the fair value adjustments and relatedgoodwill are provisional. 7. Property, plant and equipment Restated Restated 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 -------- ------- ------- At 28th January, 2006 42,335 37,636 37,636Additions 5,388 3,665 11,691Assets acquired throughacquisition 5,255 - -Transfers to non-current assetsheld for sale - - (937)Disposals (3,900) (74) (299)Depreciation (2,705) (2,901) (5,756) -------- ------- -------At 29th July, 2006 46,373 38,326 42,335 -------- ------- ------- The closing balance includes £11,359,000 (July 2005: £1,252,000 ; January 2006:£7,403,000) of assets under construction. 8. Own shares held 6 months ended 6 months ended Year ended 29.07.06 30.07.05 28.01.06 £000 £000 £000 --------- -------- -------- At 28th January, 2006 4,298 3,100 3,100Shares purchased 523 2,718 3,149Proceeds of options exercised (528) (1,740) (1,760)Transfer to retained earningson option exercise (317) (68) (191) --------- -------- --------At 29th July, 2006 3,976 4,010 4,298 --------- -------- -------- The shares held in the company were purchased to meet future requirements of thecompany's employee share schemes. These shares are held at cost. 9. Contingencies and commitments As at As at As at 29.07.06 30.07.05 28.01.06 £000 £000 £000 --------- -------- -------- Commitments for the acquisition of property,plant and equipment 5,155 12,643 5,930 --------- -------- -------- 10. Post balance sheet events The interim dividend of 10.25p per share was approved by the board on 26thSeptember, 2006 and will be paid to shareholders on 27th October, 2006. Theex-div and record dates will be 4th October, 2006 and 6th October, 2006respectively. 11. Related party disclosures Transactions between the company and its subsidiaries, which are relatedcompanies, have been eliminated on consolidation. INDEPENDENT REVIEW REPORT Introduction We have been instructed by the company to review the financial information forthe six months ended 29th July, 2006 which comprises consolidated incomestatement, consolidated balance sheet, consolidated cash flow statement andconsolidated statement of recognised income and expense. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, therefore in producing this report, acceptor assume responsibility for any other purpose or to any other person to whomthis report is shown or into whose hands it may come save where expressly agreedby our prior consent in writing. 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. The accounting policies are consistent with those that the directors intend touse in the next annual financial statements. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the U.K.. A review consistsprincipally of making enquiries of group management and applying analyticalprocedures to the financial information and underlying financial data and basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly, we do notexpress an audit opinion 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 six monthsended 29th July, 2006. Baker Tilly Chartered Accountants Breckenridge House 274 Sauchiehall Street Glasgow G2 3EH 21st September, 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Barr (A.G.)