27 March 2018
A.G. BARR p.l.c.
FINAL RESULTS for the year ended 27 January 2018
A.G. BARR p.l.c., ("A.G. BARR"), which produces and markets some of the UK's leading drinks brands, including IRN-BRU, Rubicon, Strathmore and Funkin, announces its final results for the 52 weeks ended 27 January 2018.
Financial headlines
● Statutory profit before tax increased by 4.2% to £44.9m (2017: £43.1m) on revenue up 8.0% to £277.7m (2017: £257.1m)
● Profit before tax and exceptional items* increased by 4.0% to £44.1m (2017: £42.4m)
● Gross margin* increased by 20bps to 47.1%
● Operating margin before exceptional items* decreased by 60bps to 16.2%
● Basic earnings per share before exceptional items* increased by 3.4% to 31.30p (2017: 30.26p)
● Basic earnings per share increased by 4.8% to 32.25p (2017: 30.78p)
● Net cash position at year end of £15.0m (2017: £9.7m)
● Proposed final dividend of 11.84p per share (2017: 10.87p) to give a proposed total dividend for the year of 15.55p per share, an increase of 8.0% over the prior year
Strategic highlights
● Strong core brand trading and the continued successful innovation accelerated growth across our soft drinks portfolio, significantly outperforming the market
● Funkin revenue growth of 25% reflecting growth across all product segments
● 99% of portfolio now out of scope of the soft drinks industry levy
● A new long term strategic partnership agreement completed with Bundaberg Brewed Drinks effective April 2018, in addition to the San Benedetto partnership disclosed earlier in the year
● PET investment at Milton Keynes delivered successfully
● Share repurchase programme progressing to plan
● Strong innovation pipeline for 2018
Roger White, Chief Executive, commented:
"Over the past 12 months we have delivered consistent broad-based sales growth across our portfolio, well ahead of the soft drinks market performance throughout the year, supported by successful innovation, strong core brands and further development of our partnerships.
The UK economic landscape is expected to remain uncertain for business as a whole, with regulation, changing customer dynamics and consumer preferences adding further volatility for the soft drinks industry. We have a strong and flexible business model and a growing portfolio of brands, both established and nascent, which reflect the requirements of today's changing consumers. We remain confident in our ability to capitalise on the opportunities to grow our business and deliver long-term value to shareholders".
For more information, please contact:
A.G. BARR |
01236 852400 |
Roger White, Chief Executive |
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Stuart Lorimer, Finance Director |
|
|
|
Instinctif Partners |
020 7457 2020 |
Justine Warren |
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Matthew Smallwood |
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Next trading update - July 2018
Items marked with an asterisk are non-GAAP measures. Definitions and relevant reconciliations are provided in the Glossary at the end of this announcement.
Note: Where stated, brand sales growth is based on invoiced revenue* for the 52 weeks to 27 January 2018.
Chairman's Introduction
I am pleased to report a year of excellent business performance across the Group. Revenue grew by 8.0%, well ahead of the total soft drinks market performance, and profit before tax increased by 4.2% (profit before tax and exceptional items increased by 4.0%). These strong results reflect the benefits of a clear and well executed strategy, fantastic brands and a committed, talented and decisive team.
The external headwinds faced by many UK businesses, including economic volatility and Brexit uncertainty, have not abated, yet our business has faced into these challenges with positivity and determination. Margins have been negatively impacted by the continued weakness in sterling, affecting our input costs, particularly sugar and packaging which are priced in Euros, however we understand the importance of investing for long-term growth, as demonstrated by our ongoing investment behind our assets, infrastructure, brands and people. All our core brands are in growth and the exciting new products we launched last year have gained momentum, contributing to market share gains across our UK markets.
In response to changing consumer requirements we have extended our innovation and reformulation programme such that we have exceeded our original commitment on sugar reduction. These actions have been taken in advance of the implementation of the soft drinks industry levy in April this year. The effort required across the whole business to deliver this commitment should not be underestimated and is testament to both the skill and commitment of our people, as well as the agility and effectiveness of our business model.
Partnerships remain a key strategic priority and we are delighted to have agreed new long-term relationships with San Benedetto and more recently Bundaberg Brewed Drinks. These partnerships will strengthen and complement our portfolio of Company owned and franchise brands.
Dividend
The Board is pleased to continue with its progressive dividend policy and recommend a final dividend of 11.84p per share to give a total dividend for the full year of 15.55p per share, a full year increase of 8.0% on the prior year. The final dividend is payable on 8 June 2018 to shareholders on the Register of Members at the close of business on 11 May 2018. The ex-dividend date is 10 May 2018.
People
We are fortunate to have a great team of committed and talented individuals who bring our business strategy to life each and every day across all areas of the business. I would like to recognise the commitment and contribution from all our employees, and thank them on behalf of the Board for delivering such a strong set of financial results.
Board
We were delighted to welcome Susan Barratt to our Board on 28 January 2018. Susan brings a wealth of valuable experience in the UK customer and retail space and will support the continued development of our Board capabilities.
Prospects
The long-term prospects of the business remain positive and our appetite for improvement and growth is as strong as ever. While mindful of both continued economic volatility and the uncertainties created by the upcoming soft drinks industry levy across the market, we enter this new financial year with confidence and clear focus.
John Nicolson
CHAIRMAN
Chief Executive's Review
Over the past 12 months we have delivered consistent broad-based sales growth across our portfolio, well ahead of the soft drinks market performance throughout the year, supported by successful innovation, strong core brands and further development of our partnerships.
Our revenue growth in the 12 months to 27 January 2018 was 8.0%, significantly outperforming the UK soft drinks market in both volume and value terms.
The markets in which we operate have continued to experience significant levels of change - we have consistently highlighted both the challenges and opportunities we face and I am pleased to report we have risen to the challenges placed before us and seized many of the opportunities that have come our way.
● We grew our market share within UK soft drinks with a total Group revenue of £277.7m, an increase of 8.0% on the previous year
● Profit before tax increased by 4.2% to £44.9m while profit before tax and exceptional items* rose to £44.1m, an increase of 4.0% on the prior year
● Operating margin before exceptional items* fell by 60bps to 16.2%, reflecting both external cost pressures and our continued investment across our business
● Our balance sheet remains strong with a net cash position of £15.0m - during the course of the year we purchased £8.2m of shares under our share repurchase programme
● We are pleased to recommend a final dividend of 11.84p per share to give a total dividend for the full year of 15.55p per share, a full year increase of 8.0% on the prior year.
Soft drinks market performance
The UK soft drinks market has performed reasonably well across the past 12 months with value growth of 2.9% and volume increasing 0.5%, reflecting the underlying inflationary environment and individual brand pricing dynamics.
The key driver of value growth in the market has been branded carbonates, where some significant reductions in promotional investment have led to higher average realised prices, however this has meant lower overall volumes. The water category continues to drive volume growth, generally at the expense of value.
Against this backdrop we have made significant market share gains, with year on year value up 8.7% and volume up 7.7% driven by our trading strategy of sustaining promotional activity, building product distribution and driving innovation. Our market share growth has been balanced across sales channels and across Scotland and the rest of the UK.
Source: IRI Marketplace 52 weeks to 28 January 2018
Strategy
As a UK based branded consumer goods business focused on growth we have made good progress in the execution and development of our strategy to create long-term shareholder value.
The acceleration of our growth has been driven by a combination of strong trading execution across our core brands, the continued success of our innovation and the progress and development of our brand partnerships.
Supported by strong commercial plans, all of our core brands grew in both value and volume terms across the year with highlights being:
● IRN-BRU sales up 8.0% - the biggest ever year of sales for the IRN-BRU brand
● Rubicon sales up 5.3%
● Funkin sales up 25%
Across our franchise brands Rockstar had an exceptional year, with sales up 14.3% as a result of exciting innovation, continued product distribution growth in the UK and growth in new territories outside the UK. Snapple, however, lost ground in the reporting period as a result of retailer range rationalisation in a small number of European markets and some supply issues across the second and third quarters.
International sales increased by a modest 3.8%, reflecting the complexity our reformulation programme created in our export led international model and some local distributor changes which impacted our in market execution.
Innovation has remained central to our strategy and last year's new product launches have enjoyed continued success. IRN-BRU XTRA sold the equivalent of 60 million cans across the UK last year and is now a third of the size of IRN-BRU Sugar Free, while Rubicon Spring has also gained distribution with 17 million bottles sold across 2017 on a national basis.
Our innovation pipeline continues to be an important focus and we have some exciting new products being launched in the first few months of 2018.
We were delighted to announce a new long-term partnership agreement with Italy's leading soft drinks producer, San Benedetto. Effective from January 2018 we became the exclusive UK and Ireland distributor of San Benedetto's Prima Spremitura sparkling citrus fruit drinks, enhancing our portfolio with an authentic and premium brand.
The "food-to-go" and eating out sector continues to play an important role in the food and drink space and authentic craft brands offer incremental growth opportunities that align well with our strategy. As such, we are pleased to welcome a new brand partner to our portfolio - Bundaberg Brewed Drinks. Commencing April 2018 we have entered into an exclusive long term agreement in relation to the Bundaberg brand in the UK. Best known for its Ginger Beer, the fourth largest carbonated soft drink in Australia, and increasingly for its complementary range of brewed beverages, the family-owned business based in Queensland, Australia, enjoys an increasingly global footprint. We are proud to join forces with such a successful business that shares our values and growth aspirations. The brand is already established in the UK and we are excited about the opportunities this new relationship offers.
We have maintained tight cost control across the business, taking the necessary steps to mitigate as far as possible the impact of increased input costs arising from weakened sterling. Despite these external cost pressures we have been intentional in our strategy of maintaining investment in support of our brands, innovation launches, and infrastructure. Over the past 12 months we have added further production capacity with the successful installation of a new PET production line at Milton Keynes, a project that has reached practical completion both on time and on budget, with a capital investment of £10m.
Portfolio
Since our announcement in March 2017 that over 90% of our portfolio would be moving to lower or no sugar, we have extended our innovation and reformulation programme such that we now expect that up to 99% of our portfolio will contain less than 5g of total sugars per 100ml before the implementation of the soft drinks industry levy in April this year. An unprecedented number of new recipes have been developed and delivered to achieve our commitment, with some products reducing their sugar content by up to 70%.
As anticipated, the sugar reduction in regular IRN-BRU in early January 2018 was met with widespread media interest. Our extensive research and testing gave us confidence that we had an excellent taste match and, whilst it is still early days, the consumer response to the new product has so far been encouraging.
Transforming our portfolio to align more closely with changing consumer preferences has been a significant strategic priority over recent years, drawing on the skills and experience of many individuals across our workforce whose efforts are highly valued and appreciated. As the implementation of the soft drinks sugar levy now approaches we will ensure that we remain focused on the consumer and responsive to the changes we anticipate in the soft drinks market dynamics.
Summary
The UK economic landscape is expected to remain uncertain for business as a whole, with regulation, changing customer dynamics and consumer preferences adding further volatility for the soft drinks industry. We have a strong and flexible business model and a growing portfolio of brands, both established and nascent, which reflect the requirements of today's changing consumers. We remain confident in our ability to capitalise on the opportunities to grow our business and deliver long-term value to shareholders.
Roger White
CHIEF EXECUTIVE
Financial Review
The following is based on results for the 52 weeks ended 27 January 2018. Comparatives, unless otherwise stated, are for the 52 weeks ended 28 January 2017.
Overview
We measure performance across a range of financial and non financial measures and are pleased to report significant progress across a broad range of these metrics:
|
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up 8.0% to £277.7m |
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up 20bps to 47.1% |
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up 4.2% to £44.9m |
- Profit before tax and exceptional items*
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up 4.0% to £44.1m |
- Operating margin before exceptional items*
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down 60bps to 16.2% |
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down 50bps to 16.5% |
- Net cash from operating activities
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down £6.6m to £42.2m |
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|
up £5.3m to £15.0m |
- Basic earnings per share before exceptionals (EPS)*
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up 3.4% to 31.30p |
- Basic earnings per share (EPS)
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up 4.8% to 32.25p |
- Proposed final dividend of 11.84p per share (2017 : 10.87p) to give a proposed total dividend for the year of 15.55p per share, an increase of 8.0% over the prior year.
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This is a good set of results in a challenging environment that reflects the benefits of strong brands, an agile organisation and a talented team. The combined benefit of core brand revenue growth, exciting innovation and supply chain cost management have enabled both top and bottom line gains and gross margin improvement. We have made significant investment in our brands, new products, marketing and people, all of which reinforce our confidence that the business can deliver future value creation.
Reported revenue grew 8.0% to £277.7m. Our revenue growth was broad-based, driven by innovation underpinned by both core brand distribution gains and the achievement of some price increases following a period of category price deflation.
The year was not without challenge. The level of change and uncertainty from regulation, customer consolidation and consumer trends has been considerable, and has necessitated significant management focus. Our strong volume growth, driven in part by higher levels of innovation, put pressure on our supply chain in the first half of the year and led to some supply disruption, particularly impacting our export sales. These temporary supply issues were quickly resolved and we enter 2018/19 with confidence and positive momentum.
Segmental performance
We have successfully grown market share through price and distribution gains on our core portfolio with additional support from our new products initially launched in 2016.
Our core carbonates business has performed well, with both our IRN-BRU and Rubicon brands in growth. IRN-BRU XTRA has continued to establish itself as a key component of the IRN-BRU range and it is therefore especially pleasing to report that regular IRN-BRU grew in both volume and value terms despite an element of cannibalisation from XTRA. The overall IRN-BRU brand was up 5.7% in volume and 8.0% in revenue.
Rubicon Spring continues to grow at pace, building distribution and adding new formats.
Barr Flavours, KA, Sun Exotic and OMJ! have all delivered volume growth and, with the exception of Barr Flavours, have all achieved value growth. The Rockstar brand had a particularly strong year delivering double digit volume gains while successfully maintaining pricing, through a combination of new product introduction and distribution successes, in the face of strong price competition.
Our stills and water business performed well, despite some supply driven constraints for Snapple in the earlier part of the year, in what was a mixed market environment, where fruit drinks in particular were challenged. While overall revenue was down 2.3%, our continued focus on value improved margins by 270bps.
After several years of double digit revenue growth, our International business grew revenue by 3.8% in the year ended January 2018, as a result of the continued export drive by the Funkin business, tempered by complexities created by our reformulation programme and some local distributor changes.
Our Funkin business (reported within our "Other" segment) continues to perform very strongly. With sales growth of 25%, the business is now more than 50% bigger than when we acquired it in 2015. The key on-trade business has grown volume and margins in each of its product segments (syrups, mixers and pureés) benefiting from continued cocktail growth. Our drive into take-home with the Funkin brand has commenced with the launch of the "shaker pack" in both supermarkets and a limited number of impulse outlets. We expect to drive further distribution growth across 2018. As previously disclosed, and following the achievement of certain post acquisition targets, a £4.5m cash "earn-out", which was accrued at the time of the acquisition, was paid to the previous Funkin shareholders during the financial year.
Margins
Disciplined revenue management has delivered gross margin* gains despite rising input costs. Sterling weakness led to higher input costs across a number of core commodities in the period.
A robust procurement strategy combined with lower overall sugar costs alongside some operational improvements have led to a gross margin* improvement of 20bps at 47.1%. We remain focused on risk mitigation through our procurement, commodity and treasury policies.
Operating margin before exceptional items* was down 60bps to 16.2% (reported operated margin* was down 50bps to 16.5%) despite the benefits of our reorganisation programme coming through. This reflects the decision to invest heavily behind our already successful innovation launches and to support the growth of our core brands in a year of significant reformulation activity. In addition, we have continued to refresh and refocus talent and resources to build our capabilities in growth areas including out of home consumption, e-commerce and Funkin. The 4.0% increase to £44.1m in profit before tax and exceptional items*, and our strong market share gains, give us confidence that this committed approach to growth will provide a robust platform for the future and sustainable value creation for shareholders.
Interest
Net finance charges, totalling £1.0m, largely comprised finance costs associated with the pension deficit. Debt facility charges remain minimal, reflecting our net cash position which has continued to improve this year.
The constituent elements of the interest charge comprised:
|
2017/18 |
2016/17 |
|
£m |
£m |
Finance income |
- |
- |
Finance costs |
(0.3) |
(0.2) |
Interest related to Group borrowings |
(0.3) |
(0.2) |
Finance costs related to pension |
(0.7) |
(0.5) |
Net finance costs |
(1.0) |
(0.7) |
Taxation
Excluding the exceptional items, the tax charge for the year of £8.0m is £0.6m higher than the corresponding prior year charge, due to increased profits subject to tax. The effective tax rate of 17.2% (2017 : 17.4%) (after exceptional items) has decreased by 20bps from the prior year. This primarily reflects the impact of the reduction in the corporation tax rate from 20% to 19% during the year.
Balance sheet, cash flow and net debt
The Group's balance sheet continues to strengthen, with net asset growth* of £21.7m to £201.9m across the financial year. This represents a combination of a £12.2m reduction in the pension deficit under IAS19, our continued investment in our asset base, some phasing impacts within working capital and the continued profitable and cash generative growth of the business.
The key balance sheet highlights can be summarised as:
● Non-current assets increased slightly to £198.8m (up £3.4m) after several years of sustained investment in assets and infrastructure. Our major capital programme in 2018 was the installation of a new flexible PET line at our Milton Keynes facility. In addition to delivering key capacity to support our innovation agenda, the new line provides us with production risk mitigation and logistical savings from dual site PET production capability.
● Trade and other receivables at £56.6m (2016/17 : £51.4m) were up £5.2m (10.1%). The increase is driven both by the overall growth in sales and by the impact of our reformulation programme. The challenging economic environment has put some customers under pressure and, while the aging profile of trade debt has improved, we have had only minimal impact from bad debt in the period. We currently have selective trade insurance in place and are monitoring commercial activity closely.
● ROCE* improved marginally from 20.2% in 2016/17 to 20.4% in 2017/18 as profit delivery was partially offset by working capital phasing and the reduced IAS19 pension deficit.
Cash flow
The improved net cash position of £15.0m (2017: £9.7m) highlights the strong cash generative nature of our business. It has been delivered in addition to the payment of the Funkin "earn-out" (£4.5m) and the commencement of the share repurchase programme (£8.2m).
We are committed to efficient, sustainable and flexible production at the highest quality standards and have continued to invest behind our infrastructure in support of this goal. Our major expenditure in the year has been on our newly commissioned £10m PET bottling line at Milton Keynes and the commencement of a replacement/upgrade to our syrup room in Cumbernauld. Capital expenditure* in 2018/19 is anticipated to be at a slightly higher level than in 2017/18, primarily driven by phasing of the last payment on the new PET line, the continuation of the syrup room upgrade and our ongoing maintenance and optimisation programmes.
We renegotiated our banking facilities during the year to provide a broader base of relationship banks and higher facility headroom. A strong balance sheet and accessibility to cost effective and flexible debt facilities provide us with optionality and we are confident that we have the ability and the funding to take advantage of any opportunities that we may identify in the future.
We believe that EBITDA* and Free Cash Flow* offer a further meaningful analysis of the underlying performance of the Group. EBITDA* increased to £53.3m (up 3.1%), representing an EBITDA margin* of 19.2% and delivering a strong cash generating performance, with EBITDA to free cash flow conversion* of 74.9%. Free cash flow, at £39.9m, was £3.3m below last year, a creditable performance as the prior year recognised a significant one-off phasing benefit within payables of £7.2m.
Free cash flow statement |
2017/18 |
2016/17 |
|
£m |
£m |
Operating profit before exceptional items* |
45.1 |
43.1 |
Depreciation and amortisation |
8.2 |
8.6 |
EBITDA* |
53.3 |
51.7 |
|
|
|
Increase in inventories |
(1.0) |
(1.7) |
(Increase) / decrease in receivables |
(5.2) |
1.3 |
Increase in payables |
4.4 |
10.2 |
Movement in pension liability |
(2.1) |
(2.2) |
Share-based payment costs |
1.0 |
0.9 |
Exceptional cash items |
2.2 |
(4.2) |
Net operating cash flow |
52.6 |
56.0 |
|
|
|
Net interest |
(0.1) |
(0.2) |
Taxation |
(6.6) |
(7.2) |
Cash flow from operations after interest |
45.9 |
48.6 |
|
|
|
Maintenance capex |
(6.4) |
(5.5) |
Capex proceeds |
0.4 |
0.1 |
|
|
|
Free cash flow* |
39.9 |
43.2 |
|
|
|
Expansionary capex* |
(4.4) |
(6.9) |
Dividends |
(16.9) |
(15.6) |
Finance lease payments |
(0.1) |
- |
Acquisition of subsidiary |
(4.5) |
- |
Net (purchases) / sales of shares by employee benefit trusts |
(0.3) |
0.3 |
Repurchase of own shares |
(8.2) |
- |
Loans repaid (incl arrangement fees) |
(0.2) |
(17.5) |
Cash flow from financing |
(34.6) |
(39.7) |
|
|
|
Net increase in cash |
5.3 |
3.5 |
|
|
|
Opening cash and cash equivalents |
9.7 |
6.2 |
Closing cash and cash equivalents |
15.0 |
9.7 |
Closing net cash |
15.0 |
9.7 |
Strong cash generation and our robust balance sheet have enabled the Group to return significant cash to shareholders in the form of £16.9m of dividends and also supported the repurchase of £8.2m of shares.
Shares with a net value of £0.3m were purchased on behalf of various employee benefit trusts to satisfy the ongoing requirements of the Group's employee share schemes.
Given the current net cash position, the relatively benign outlook for short-term interest rates and the expectation of continued strong free cash generation, no interest rate hedging activity has taken place during the year.
Exceptional items
An exceptional operating credit of £0.8m has been recorded in the year ended 27 January 2018 (2016/17: £0.7m). As a result of receiving a significant offer, we sold our Walthamstow depot during the year and are undertaking a managed exit of the site. The size and one-off nature of the gain on sale of the site makes it appropriate that it is taken as an exceptional item. During the year the business has undertaken significant technical development activity to create and commercialise new reduced sugar products across our portfolio. While R&D is a normal part of our business, the breadth and scale of this activity is unprecedented and therefore it is appropriate that the related costs be recognised as exceptional items for reporting purposes. We believe that this treatment of these gains and costs permits a more meaningful analysis of the underlying performance of the Group.
A net credit of £0.8m pre-tax (£1.1m post tax) for exceptional items included:
Gain on sale of distribution site £(2.5)m
Reformulation programme £1.4m
Reorganisation and capability refresh programme £0.3m
Net exceptional credit £(0.8)m
In the prior year an exceptional credit of £0.7m (£0.6m post tax) was recognised, comprising primarily the net impact of the closure to future accrual of our defined benefit pension scheme and the cost of our Company wide reorganisation and talent refresh programme.
UK referendum and exit from the European Union
While the impact of Brexit to date remains unclear, we have conducted several planning workshops to consider and prepare for possible outcomes. Given the largely UK focus of our commercial activities, our current assessment is that the specific issue of the UK's future exit from the European Union will not have a significant impact on our business other than through its effects on foreign exchange and increased administration/documentation. The current value of sterling has created inflationary pressure on our commodity cost base, primarily Euro or US dollar denominated. We have a well developed risk management framework in place at both functional and corporate levels of the business and we will continue to closely monitor political and commercial developments and react accordingly to these.
Share repurchase programme
The Board approved a share repurchase programme of up to £30m in March 2017, as part of the Group's approach to capital allocation and under the authority to repurchase up to 10% of its own shares granted at the AGM in May 2017. This programme commenced in May 2017 and remains on schedule to complete by May 2019. During the year ended 27 January 2018 the Company purchased 1.3m shares at a total cost of £8.2m. The repurchase activity has continued since the year end. Between the balance sheet date and the last practical date before release of this announcement (23 March 2018) a further 744,135 shares have been repurchased at a cost of £4.8m. Shareholders at the forthcoming AGM in May 2018 will be requested to approve the renewal of the authority for the Board to repurchase up to 10% of the Company's own shares to enable the repurchase programme to continue to its conclusion.
Pensions
The Group continues to operate two pension plans, the A.G. BARR p.l.c. (2005) Defined Contribution Pension Scheme and the A.G. BARR p.l.c. (2008) Pension and Life Assurance Scheme. The latter is a defined benefit scheme based on final salary, which also includes a defined contribution section for pension provision to senior managers.
The defined benefit scheme ("the scheme") has been closed to new entrants since 5 April 2002 (and to new executive entrants since 14 August 2003) and closed to future accrual for members in May 2016. Existing and new employees have been invited to join the Company wide defined contribution scheme.
The scheme triennial actuarial valuation (as at April 2017) was approved by the Trustees on 8 March 2018. This valuation identified a £4.8m deficit based on an agreed range of demographic and financial assumptions. Since the year end, the Company and pension trustees have agreed a funding programme that would eliminate this deficit within 4 years. This plan has been submitted to the Pension Regulator.
On an IAS19 valuation basis the deficit reduced from £27.4m at the end of 2016/17 to £15.2m at the balance sheet date. The deficit reduction in the current financial year is primarily as a result of a higher net discount rate used to value the scheme's liabilities in the year, and an updating of other assumptions. The Company continues to work proactively with the Pension Trustee to de-risk the pension liabilities and secure the commitments to employee benefits as part of the Group's ongoing strategic risk management. The Group is comfortable that the overall pension deficit is supportable.
Implementation of IFRS 15: Revenue from contracts with customers
IFRS 15 establishes a new framework for determining and recognising revenue as well as requiring new additional disclosures. The new standard is effective for A.G. BARR p.l.c. for the year ending 26 January 2019 and we will be implementing its requirements in our interim Report for the 6 months ending 28 July 2018.
The primary impact will be a reclassification of certain payments and customer incentives. These are currently recognised as selling and distribution costs and going forward will be set against revenue. The adoption of the standard is not expected to impact profit before tax. Had the standard been adopted in the current year the impact would have been a reduction in revenue in the range of £10m to £13m and a decrease of selling and distribution costs of the same amount. Profit before tax would be unchanged and gross margin would have been between 2.0% and 2.6% lower.
Share price and market capitalisation
At 27 January 2018, the closing share price for A.G. BARR p.l.c. was £6.29, an increase of 25.3% on the closing January 2017 position. The Group is a member of the FTSE 250, with a market capitalisation* of £726m at the year end.
Stuart Lorimer
FINANCE DIRECTOR
Consolidated Income Statement for the year ended 27 January 2018 |
|
2018 |
2017 |
|
Before exceptional items |
Exceptional items* |
Total |
Before exceptional items |
Exceptional items* |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
Revenue |
277.7 |
- |
277.7 |
257.1 |
- |
257.1 |
Cost of sales |
(146.5) |
(0.5) |
(147.0) |
(136.4) |
- |
(136.4) |
|
|
|
|
|
|
|
Gross profit |
131.2 |
(0.5) |
130.7 |
120.7 |
- |
120.7 |
|
|
|
|
|
|
|
Other income |
- |
- |
- |
0.7 |
- |
0.7 |
Operating expenses |
(86.1) |
1.3 |
(84.8) |
(78.3) |
0.7 |
(77.6) |
Operating profit |
45.1 |
0.8 |
45.9 |
43.1 |
0.7 |
43.8 |
|
|
|
|
|
|
|
Finance costs |
(1.0) |
- |
(1.0) |
(0.7) |
- |
(0.7) |
Profit before tax |
44.1 |
0.8 |
44.9 |
42.4 |
0.7 |
43.1 |
|
|
|
|
|
|
|
Tax on profit |
(8.0) |
0.3 |
(7.7) |
(7.4) |
(0.1) |
(7.5) |
|
|
|
|
|
|
|
Profit attributable to equity holders |
36.1 |
1.1 |
37.2 |
35.0 |
0.6 |
35.6 |
|
|
|
|
|
|
|
Earnings per share (p) |
|
|
|
|
|
|
Basic earnings per share |
|
|
32.25 |
|
|
30.78 |
Diluted earnings per share |
|
|
32.24 |
|
|
30.57 |
Basic earnings per share before exceptional items |
|
|
31.30 |
|
|
30.26 |
|
|
|
|
|
|
|
*An explanation of exceptional items is provided in Note 3. |
|
Consolidated Statement of Comprehensive Income for the year ended 27 January 2018 |
|
|
|
|
2018 |
2017 |
|
£m |
£m |
|
|
|
Profit for the year |
37.2 |
35.6 |
|
|
|
Other comprehensive income |
|
|
Items that will not be reclassified to profit or loss |
|
|
Remeasurements on defined benefit pension plans |
10.8 |
(21.9) |
Deferred tax movements on items above |
(1.9) |
2.7 |
Current tax movements on items above |
- |
1.0 |
|
|
|
Items that will be or have been reclassified to profit or loss |
|
|
Cash flow hedges: |
|
|
Losses arising during the period |
(0.4) |
(0.2) |
Less: reclassification adjustments for gains/(losses) included in profit or loss |
0.2 |
(1.2) |
Deferred tax movements on items above |
0.1 |
0.2 |
Other comprehensive income/(expense) for the year, net of tax |
8.8 |
(19.4) |
|
|
|
Total comprehensive income attributable to equity holders of the parent |
46.0 |
16.2 |
|
|
|
Consolidated Statement of Changes in Equity for the year ended 27 January 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Restated* |
|
|
Share capital |
Share premium account |
Share options reserve |
Other reserves |
Retained earnings |
Total |
|
£m |
£m |
£m |
£m |
£m |
£m |
At 28 January 2017 |
4.9 |
0.9 |
1.8 |
(0.2) |
172.8 |
180.2 |
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
37.2 |
37.2 |
Other comprehensive income |
- |
- |
- |
(0.1) |
8.9 |
8.8 |
Total comprehensive income for the year |
- |
- |
- |
(0.1) |
46.1 |
46.0 |
|
|
|
|
|
|
|
Company shares purchased for use by employee benefit trusts |
- |
- |
- |
- |
(3.2) |
(3.2) |
Proceeds on disposal of shares by employee benefit trusts |
- |
- |
- |
- |
2.9 |
2.9 |
Recognition of share-based payment costs |
- |
- |
1.0 |
- |
- |
1.0 |
Transfer of reserve on share award |
- |
- |
(1.3) |
- |
1.3 |
- |
Deferred tax on items taken direct to reserves |
- |
- |
(0.1) |
- |
- |
(0.1) |
Current tax on items taken direct to reserves |
- |
- |
0.2 |
- |
- |
0.2 |
Repurchase and cancellation of shares |
(0.1) |
- |
- |
0.1 |
(8.2) |
(8.2) |
Dividends paid |
- |
- |
- |
- |
(16.9) |
(16.9) |
At 27 January 2018 |
4.8 |
0.9 |
1.6 |
(0.2) |
194.8 |
201.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 January 2016 |
4.9 |
0.9 |
1.4 |
1.0 |
170.3 |
178.5 |
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
35.6 |
35.6 |
Other comprehensive income |
- |
- |
- |
(1.2) |
(18.2) |
(19.4) |
Total comprehensive income/(expense) for the year |
- |
- |
- |
(1.2) |
17.4 |
16.2 |
|
|
|
|
|
|
|
Company shares purchased for use by employee benefit trusts |
- |
- |
- |
- |
(1.0) |
(1.0) |
Proceeds on disposal of shares by employee benefit trusts |
- |
- |
- |
- |
1.3 |
1.3 |
Recognition of share-based payment costs |
- |
- |
0.9 |
- |
- |
0.9 |
Transfer of reserve on share award |
- |
- |
(0.4) |
- |
0.4 |
- |
Deferred tax on items taken direct to reserves |
- |
- |
(0.1) |
- |
- |
(0.1) |
Dividends paid |
- |
- |
- |
- |
(15.6) |
(15.6) |
At 28 January 2017 |
4.9 |
0.9 |
1.8 |
(0.2) |
172.8 |
180.2 |
*The Consolidated Statement of Changes in Equity for the year ended 28 January 2017 has been restated to reflect the change in treatment of deferred tax on the recovery of the carrying value of property.
Consolidated Statement of Financial Position as at 27 January 2018 |
|
|
|
|
*Restated |
|
2018 |
2017 |
|
£m |
£m |
|
|
|
Non-current assets |
|
|
Intangible assets |
104.5 |
106.0 |
Property, plant and equipment |
94.3 |
89.4 |
|
198.8 |
195.4 |
|
|
|
Current assets |
|
|
Inventories |
17.8 |
17.3 |
Trade and other receivables |
56.6 |
51.4 |
Derivative financial instruments |
- |
0.1 |
Assets classified as held for sale |
- |
1.3 |
Cash and cash equivalents |
15.0 |
10.1 |
|
89.4 |
80.2 |
|
|
|
Total assets |
288.2 |
275.6 |
|
|
|
Current liabilities |
|
|
Loans and other borrowings |
0.1 |
0.5 |
Trade and other payables |
53.5 |
52.3 |
Derivative financial instruments |
0.4 |
0.3 |
Provisions |
0.4 |
0.9 |
Current tax liabilities |
3.6 |
2.7 |
|
58.0 |
56.7 |
|
|
|
Non-current liabilities |
|
|
Loans and other borrowings |
- |
0.1 |
Deferred tax liabilities |
13.1 |
11.2 |
Retirement benefit obligations |
15.2 |
27.4 |
|
28.3 |
38.7 |
|
|
|
Capital and reserves attributable to equity holders |
|
|
Share capital |
4.8 |
4.9 |
Share premium account |
0.9 |
0.9 |
Share options reserve |
1.6 |
1.8 |
Other reserves |
(0.2) |
(0.2) |
Retained earnings |
194.8 |
172.8 |
|
201.9 |
180.2 |
|
|
|
Total equity and liabilities |
288.2 |
275.6 |
*The Consolidated Statement of Financial Position for the year ended 28 January 2017 has been restated to reflect the change in treatment of deferred tax on the recovery of the carrying value of property.
Consolidated Cash Flow Statement for the year ended 27 January 2018 |
|
2018 |
2017 |
|
£m |
£m |
Operating activities |
|
|
Profit before tax |
44.9 |
43.1 |
Adjustments for: |
|
|
Interest payable |
1.0 |
0.7 |
Depreciation of property, plant and equipment |
6.7 |
7.1 |
Amortisation of intangible assets |
1.5 |
1.5 |
Share-based payment costs |
1.0 |
0.9 |
Gain on sale of property, plant and equipment |
(2.5) |
- |
Operating cash flows before movements in working capital |
52.6 |
53.3 |
|
|
|
Increase in inventories |
(0.5) |
(1.7) |
(Increase) / decrease in receivables |
(5.2) |
1.3 |
Increase in payables |
4.0 |
11.0 |
Difference between employer pension contributions and amounts recognised in the income statement |
(2.1) |
(7.9) |
Cash generated by operations |
48.8 |
56.0 |
|
|
|
Tax paid |
(6.6) |
(7.2) |
Net cash from operating activities |
42.2 |
48.8 |
|
|
|
Investing activities |
|
|
Acquisition of subsidiary |
(4.5) |
- |
Purchase of property, plant and equipment |
(10.8) |
(12.4) |
Proceeds on sale of property, plant and equipment |
4.2 |
0.1 |
Net cash used in investing activities |
(11.1) |
(12.3) |
|
|
|
Financing activities |
|
|
New loans received |
15.0 |
25.5 |
Loans repaid |
(15.0) |
(43.0) |
Bank arrangement fees paid |
(0.2) |
- |
Finance lease payments |
(0.1) |
- |
Purchase of Company shares by employee benefit trusts |
(3.2) |
(1.0) |
Proceeds from disposal of Company shares by employee benefit trusts |
2.9 |
1.3 |
Repurchase of own shares |
(8.2) |
- |
Dividends paid |
(16.9) |
(15.6) |
Interest paid |
(0.1) |
(0.2) |
Net cash used in financing activities |
(25.8) |
(33.0) |
|
|
|
Net increase in cash and cash equivalents |
5.3 |
3.5 |
|
|
|
Cash and cash equivalents at beginning of year |
9.7 |
6.2 |
Cash and cash equivalents at end of year |
15.0 |
9.7 |
1. General information
A.G. BARR p.l.c. ('the Company') and its subsidiaries (together 'the Group') manufacture, distribute and sell soft drinks. The Group has manufacturing sites in the UK and sells mainly to customers in the UK with some international sales.
The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in Scotland. The address of its registered office is Westfield House, 4 Mollins Road, Cumbernauld, G68 9HD.
The financial year represents the 52 weeks ended 27 January 2018 (prior financial year 52 weeks ended 28 January 2017).
Basis of preparation
The financial information for the year ended 27 January 2018 contained in this News Release was approved by the Board on 27 March 2018. This announcement does not constitute statutory financial statements within the meaning of Section 435 of the Companies Act 2006, but is derived from those financial statements, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed and adopted for use by the European Union.
This information has been prepared under the historical cost method except where other measurement bases are required to be applied under IFRS, using all standards and interpretations required for financial periods beginning 29 January 2017. No standards or interpretations have been adopted before the required implementation date. Whilst the financial information included within this announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, it does not comply with all disclosure requirements.
Statutory financial statements for the year ended 28 January 2017 have been delivered to the Registrar of Companies. Statutory financial statements for the year ended 27 January 2018, which have been prepared on a going concern basis, will be delivered to the Registrar of Companies following the Group's Annual General Meeting.
The auditors have reported on those financial statements. Their reports were not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
2. Segment reporting
The Group's management committee has been identified as the chief operating decision maker. The management committee reviews the Group's internal reporting in order to assess performance and allocate resources. The management committee has determined the operating segments based on these reports.
The management committee considers the business from a product perspective. This has led to the operating segments identified in the table below: there has been no change to the segments during the year (after aggregation). The performance of the operating segments is assessed by reference to their gross profit before exceptional items.
The operating segments disclosed have been aggregated by the nature of the products and the production processes that they share in addition to similar long-term average gross margins for the operating segments.
Year ended 27 January 2018 |
|
|
|
|
|
Carbonates |
Still drinks and water |
Other |
Total |
|
£m |
£m |
£m |
£m |
|
|
|
|
|
Total revenue |
206.4 |
54.7 |
16.6 |
277.7 |
Gross profit before exceptional items |
104.3 |
18.1 |
8.8 |
131.2 |
|
|
|
|
|
|
|
|
|
|
Year ended 28 January 2017 |
|
|
|
|
|
Carbonates |
Still drinks and water |
Other |
Total |
|
£m |
£m |
£m |
£m |
|
|
|
|
|
Total revenue |
188.3 |
56.0 |
12.8 |
257.1 |
Gross profit before exceptional items |
97.3 |
17.0 |
6.4 |
120.7 |
There are no intersegment sales. All revenue is from external customers.
"Other" segments represent income from the sale of Funkin cocktail solutions and other soft drink related items.
The gross profit from the segment reporting is stated before exceptional costs.
The gross profit before exceptional items from the segment reporting is reconciled to the total profit before income tax, as shown in the consolidated income statement.
All of the assets and liabilities of the Group are managed by the management committee on a central basis rather than at a segment level. As a result no reconciliation of segment assets and liabilities to the statement of financial position has been disclosed for either of the periods presented.
All of the segments included within "Carbonates" and "Still drinks and water" meet the aggregation criteria set out in IFRS 8 Operating Segments.
Geographical information
The Group operates predominantly in the UK with some worldwide sales. All of the operations of the Group are based in the UK.
|
|
|
2018 |
2017 |
Revenue |
|
|
£m |
£m |
|
|
|
|
|
UK |
|
|
266.8 |
246.6 |
Rest of the world |
|
|
10.9 |
10.5 |
|
|
|
277.7 |
257.1 |
The Rest of the world revenue includes sales to Ireland and wholesale export houses.
All of the assets of the Group are located in the UK.
Major customers
No single customer accounted for 10% or more of the Group's revenue in either of the years presented.
3. Exceptional items
During the period several items have been classified as exceptional. The Group identifies items as exceptional where the nature or scale of the item requires to be separately presented in order to better understand trading performance.
The items that have been included in exceptional items have been analysed in the table below:
|
2018 |
2017 |
|
£m |
£m |
|
|
|
Gain on sale of distribution site |
(2.5) |
- |
Sugar reduction and reformulation programme costs |
1.4 |
- |
Redundancy costs for business reorganisation |
0.1 |
2.7 |
Other costs relating to business reorganisation |
0.2 |
0.6 |
Abortive acquisition costs |
- |
0.4 |
Investigation of online sales capabilities |
- |
0.5 |
Redundancy costs - reorganisation of direct sales routes |
- |
0.6 |
Curtailment gain on closure of pension scheme to future accrual |
- |
(7.0) |
Other costs relating to pension scheme closure to future accrual |
- |
1.5 |
Total exceptional net credit |
(0.8) |
(0.7) |
|
|
|
|
|
|
|
2018 |
2017 |
|
£m |
£m |
Items included in cost of sales |
|
|
Sugar reduction and reformulation programme costs |
0.5 |
- |
Total included in cost of sales |
0.5 |
- |
|
|
|
|
2018 |
2017 |
|
£m |
£m |
Items included in selling and distribution costs |
|
|
Sugar reduction and reformulation programme costs |
0.9 |
- |
Redundancy costs - reorganisation of direct sales routes |
- |
0.6 |
Costs relating to closure of pension scheme to future accrual |
- |
0.2 |
Redundancy costs for business reorganisation |
- |
1.2 |
Other costs relating to business reorganisation |
- |
0.3 |
Total included in selling and distribution costs |
0.9 |
2.3 |
|
|
|
Items included in administration costs |
|
|
Gain on sale of distribution site |
(2.5) |
- |
Abortive acquisition costs |
- |
0.4 |
Investigation of online sales capabilities |
- |
0.5 |
Curtailment gain |
- |
(7.0) |
Other costs relating to pension scheme closure to future accrual |
- |
1.3 |
Redundancy costs for business reorganisation |
0.1 |
1.5 |
Other costs relating to business reorganisation |
0.2 |
0.3 |
Total included in administration costs |
(2.2) |
(3.0) |
|
|
|
Total exceptional net credit included in operating expenses |
(1.3) |
(0.7) |
|
|
|
Total exceptional net credit |
(0.8) |
(0.7) |
During the period, a £2.5m gain on sale was made on disposal of the Walthamstow distribution site. This asset was classified as an asset held for sale as at 28 January 2017 and the sale was completed on 1 February 2017. Due to its scale, management believes that this requires to be separately presented from trading performance so as not to mislead the users of the financial statements.
£1.4m of costs have been incurred as part of the ongoing sugar reduction and reformulation programme, through which the business committed to ensuring that 90% of Company owned brands contain less than 5g of total sugars per 100ml by the end of the financial year ended 27 January 2018. Costs in relation to the sugar reduction and reformulation programme have significantly exceeded the level of expenditure that would ordinarily be incurred in the course of new product development or reformulation. Costs of this level are not expected to recur in future periods, therefore these are considered to be exceptional.
In September 2016 a Company-wide restructure was announced. This was largely complete by the end of the financial year to 28 January 2017, during which £2.7m of redundancy costs were incurred, plus a further £0.6m of other costs, being mainly recruitment costs, accrual for unpaid holiday entitlement, business development consultancy fees, legal fees and termination costs for employee vehicles and mobile phone contracts. During the year ended 27 January 2018 a further £0.3m of costs have been incurred, primarily being an increase in the required redundancy provision and further recruitment costs.
The items discussed below all relate to significant, non-recurring items that have taken place in the preceding period. These have not been incurred in the course of normal trade and are therefore classified as exceptional items.
In the year ended 28 January 2017, £0.4m of acquisition fees were incurred in relation to an unsuccessful acquisition. These costs included advisory and legal fees. £0.5m of advisory costs were also incurred as part of a strategic review of the market threats posed by new and emerging digital trading models. £0.6m of redundancy costs were also incurred in relation to a reorganisation of direct sales routes.
The Group's defined benefit pension scheme closed to future accrual in May 2016. This resulted in a £7.0m curtailment gain, which was recognised as exceptional in the year ended 28 January 2017. Offsetting the curtailment gain was a further £1.5m of costs incurred in relation to the closure of the scheme, including the cost of £1.3m past service cost for one year's additional service negotiated with the active members of the scheme.
4. Earnings per share
Basic earnings per share has been calculated by dividing the earnings attributable to equity holders of the parent by the weighted average number of shares in issue during the year, excluding shares held by the employee share scheme trusts.
|
2018 |
2017 |
|
|
|
Profit attributable to equity holders of the Company (£m) |
37.2 |
35.6 |
Weighted average number of ordinary shares in issue |
115,336,186 |
115,664,757 |
Basic earnings per share (pence) |
32.25 |
30.78 |
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
|
2018 |
2017 |
Profit attributable to equity holders of the Company (£m) |
37.2 |
35.6 |
Weighted average number of ordinary shares in issue |
115,336,186 |
115,664,757 |
Adjustment for dilutive effect of share options |
63,028 |
781,074 |
Diluted weighted average number of ordinary shares in issue |
115,399,214 |
116,445,831 |
Diluted earnings per share (pence) |
32.24 |
30.57 |
The EPS figure before exceptional items is calculated by using Profit attributable to equity holders before exceptional items:
|
2018 |
2017 |
Profit attributable to equity holders of the Company before exceptional items (£m) |
36.1 |
35.0 |
Weighted average number of ordinary shares in issue |
115,336,186 |
115,664,757 |
Basic earnings per share before exceptional items (pence) |
31.30 |
30.26 |
This measure has been included in the financial statements as it provides a closer guide to the underlying financial performance as the calculation excludes the effect of exceptional items.
5. Dividends
|
2018 |
|
2017 |
|
2018 |
2017 |
|
per share |
|
per share |
|
£m |
£m |
|
|
|
|
|
|
|
Final dividend |
10.87 |
p |
9.97 |
p |
12.6 |
11.5 |
Interim dividend paid |
3.71 |
p |
3.53 |
p |
4.3 |
4.1 |
|
14.58 |
p |
13.50 |
p |
16.9 |
15.6 |
The directors have proposed a final dividend in respect of the year ended 27 January 2018 of 11.84p per share. It will be paid on 8 June 2018 to all shareholders who are on the Register of Members on 11 May 2018.
Dividends payable in respect of the financial year were as follows:
|
2018 |
|
2017 |
|
|
per share |
|
per share |
|
Final dividend proposed in respect of financial year |
11.84 |
p |
10.87 |
p |
Interim dividend paid |
3.71 |
p |
3.53 |
p |
|
15.55 |
p |
14.40 |
p |
6. Cash and cash equivalents
|
2018 |
2017 |
|
£m |
£m |
Cash and cash equivalents |
15.0 |
10.1 |
Cash and cash equivalents include the following for the purposes of the cash flow statements:
|
2018 |
2017 |
|
£m |
£m |
Cash and cash equivalents |
15.0 |
10.1 |
Bank overdrafts |
- |
(0.4) |
|
15.0 |
9.7 |
Annual General Meeting
The Annual General Meeting will be held at 11:00am on 30 May 2018 at the offices of Ernst & Young LLP, 5 George Square, Glasgow, G2 1DY.
GLOSSARY
Non-GAAP measures are provided because they are tracked by management to assess the Group's operating performance and to inform financial, strategic and operating decisions.
Definitions of the non-GAAP measures used are provided below:
Invoiced revenue is a non-GAAP measure calculated as the sales price per the invoice less any on-invoice discounts.
Full year dividend per share is a non-GAAP measure calculated as the sum of all interim dividends declared during the reporting period plus any proposed dividend payable in respect of that reporting period.
Revenue growth is a non-GAAP measure calculated as the difference in revenue between two reporting periods divided by the revenue of the earlier reporting period.
Gross margin is a non-GAAP measure calculated by dividing gross profit by revenue.
Gross margin before exceptional items is a non-GAAP measure calculated by dividing gross profit before exceptional items by revenue. This has been included as a non-GAAP measure for the first time in the year ended 27 January 2018 as exceptional items have been included in gross profit. There were no exceptional items in gross profit for the year ended 28 January 2017.
Operating margin is a non-GAAP measure calculated by dividing operating profit by revenue.
Operating margin before exceptional items is a non-GAAP measure calculated by dividing operating profit before exceptional items by revenue.
Operating profit before exceptional items is a non-GAAP measure calculated as operating profit less any exceptional items. This figure appears on the income statement.
Profit before tax and exceptional items is a non-GAAP measure calculated as profit before tax less any exceptional items. This figure appears on the income statement.
EBITDA is a non-GAAP measure defined as operating profit before exceptional items, depreciation and amortisation. It is reconciled in the free cash flow statement.
EBITDA margin is a non-GAAP measure and is calculated as EBITDA divided by revenue.
EBITDA to free cash flow conversion is a non-GAAP measure and is calculated as free cash flow divided by EBITDA.
Free cash flow is a non-GAAP measure and is defined as the net cash flow as per the cash flow statement excluding the movements in borrowings, expansionary capex, the net cash flow on the purchase and sale of shares by employee benefit trusts, dividend payments and non-cash exceptional items.
Expansionary capex is a non-GAAP measure and is defined as the purchase of property, plant and equipment that is not the normal replacement of property, plant and equipment that has come to the end of its useful life. Maintenance capex is a non-GAAP measure and is defined as the purchase of property, plant and equipment that is the normal replacement of property, plant and equipment that has come to the end of its useful life. Expansionary capex and maintenance capex add together to the value of purchase of property, plant and equipment that appears in the consolidated cash flow statement.
Net asset growth is a non-GAAP measure and is defined as the increase in net assets from one reporting period to another. Net assets is a non-GAAP measure and defined as total assets less current liabilities less non-current liabilities.
ROCE is a non-GAAP measure and is defined as operating profit before exceptional items as a percentage of invested capital. Invested capital is a non-GAAP measure defined as period end non-current plus current assets less current liabilities excluding all balances relating to any provisions, financial instruments, interest-bearing liabilities and cash or cash equivalents.
Capital expenditure is a non-GAAP measure and is defined as the cash purchases of property, plant and equipment as disclosed in the consolidated cash flow statement.
Market capitalisation is a non-GAAP measure and is defined as the closing share price at the end of a reporting period multiplied by the number of issued and fully paid shares of the Company.
Reconciliations of non-GAAP measures
Gross margin
|
2017/18 |
2016/17 |
|
£m |
£m |
Revenue |
277.7 |
257.1 |
Reported gross profit |
130.7 |
120.7 |
Gross margin |
47.1% |
46.9% |
Gross margin before exceptional items
|
2017/18 |
2016/17 |
|
£m |
£m |
Revenue |
277.7 |
257.1 |
Gross profit before exceptional items |
131.2 |
120.7 |
Gross margin before exceptional items |
47.2% |
46.9% |
Operating margin
|
2017/18 |
2016/17 |
|
£m |
£m |
Revenue |
277.7 |
257.1 |
Reported operating profit |
45.9 |
43.8 |
Operating margin |
16.5% |
17.0% |
Operating margin before exceptional items
|
2017/18 |
2016/17 |
|
£m |
£m |
Revenue |
277.7 |
257.1 |
Operating profit before exceptional items |
45.1 |
43.1 |
Operating margin before exceptional items |
16.2% |
16.8% |
EBITDA
|
2017/18 |
2016/17 |
|
£m |
£m |
Operating profit before exceptional items |
45.1 |
43.1 |
Depreciation and amortisation |
8.2 |
8.6 |
EBITDA |
53.3 |
51.7 |
EBITDA margin
|
2017/18 |
2016/17 |
|
£m |
£m |
Revenue |
277.7 |
257.1 |
EBITDA |
53.3 |
51.7 |
EBITDA margin |
19.2% |
20.1% |
EBITDA to free cash flow conversion
|
2017/18 |
2016/17 |
|
£m |
£m |
Free cash flow |
39.9 |
43.2 |
EBITDA |
53.3 |
51.7 |
EBITDA to free cash flow conversion |
74.9% |
83.6% |
Free cash flow
|
2017/18 |
2016/17 |
|
£m |
£m |
Net increase in cash and cash equivalents |
5.3 |
3.5 |
Expansionary capex* |
4.4 |
6.9 |
Dividends |
16.9 |
15.6 |
Finance lease payments |
0.1 |
- |
Acquisition of subsidiary |
4.5 |
- |
Purchase of Company shares by employee benefit trusts |
3.2 |
1.0 |
Proceeds from disposal of Company shares by employee benefit trusts |
(2.9) |
(1.3) |
Repurchase of own shares |
8.2 |
- |
New loans received |
(15.0) |
(25.5) |
Loans repaid |
15.0 |
43.0 |
Bank arrangement fees paid |
0.2 |
- |
Free cash flow |
39.9 |
43.2 |
Expansionary capex
|
2017/18 |
2016/17 |
|
£m |
£m |
Expansionary capex |
4.4 |
6.9 |
Maintenance capex |
6.4 |
5.5 |
Capex per cash flow statement |
10.8 |
12.4 |
ROCE |
|
|
|
2017/18 |
2016/17 |
|
£m |
£m |
Profit before tax |
44.9 |
43.1 |
Exceptional items |
(0.8) |
(0.7) |
Profit before tax and exceptional items |
44.1 |
42.4 |
|
|
|
Intangible assets |
104.5 |
106.0 |
Property, plant and equipment |
94.3 |
89.4 |
Inventories |
17.8 |
17.3 |
Trade and other receivables |
56.6 |
51.4 |
Current tax |
(3.6) |
(2.7) |
Assets held for sale |
- |
1.3 |
Trade and other payables |
(53.5) |
(52.3) |
Invested capital |
216.1 |
210.4 |
|
|
|
ROCE |
20.4% |
20.2% |
