2013 Annual Financial Report TABLE of CONTENTS
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29MAR201412211912 2013 Annual Financial Report TABLE OF CONTENTS INTRODUCTION ........................................................ 6 Information about this report ................................................ 6 Special note regarding forward-looking statements ................................. 6 Presentation of financial and other information ................................... 7 Exchange rate information .................................................. 8 PERFORMANCE SUMMARY .............................................. 9 Selected financial data ..................................................... 9 Chairman’s statement ...................................................... 12 CEO statement .......................................................... 14 INFORMATION ON THE CCHBC GROUP .................................... 17 Historical information ...................................................... 17 Share Exchange Offer ...................................................... 18 Other recent transactions ................................................... 19 Organisational structure .................................................... 21 Business overview ......................................................... 23 Business and products .................................................... 23 Markets ............................................................... 24 Strengths .............................................................. 25 Strategy ............................................................... 26 Distribution ............................................................. 30 Production .............................................................. 32 Property, plant and equipment ............................................... 33 Products ............................................................... 37 The CCHBC Group’s operations .............................................. 39 Established Markets ...................................................... 41 Developing Markets ...................................................... 45 Emerging Markets ....................................................... 46 Sales and marketing ....................................................... 49 Seasonality .............................................................. 52 Raw and packaging materials ................................................ 52 Competition ............................................................. 54 Regulation .............................................................. 54 Information technology ..................................................... 56 Employees .............................................................. 58 Employee benefit obligations ................................................. 60 Risk factors ............................................................. 60 OPERATING AND FINANCIAL REVIEW AND PROSPECTS ...................... 85 Overview ............................................................... 85 The CCHBC Group’s business ............................................... 85 Key financial results ....................................................... 86 Critical accounting judgements and estimates ..................................... 89 Principal factors affecting the CCHBC Group’s results of operations .................... 90 CCHBC Group operating results .............................................. 97 Year ended 31 December 2013 compared to the year ended 31 December 2012 ............. 97 Year ended 31 December 2012 compared to the year ended 31 December 2011 ............. 102 2 Reporting segments ....................................................... 106 Year ended 31 December 2013 compared to the year ended 31 December 2012 ............. 106 Year ended 31 December 2012 compared to year ended 31 December 2011 ................ 109 Liquidity and capital resources ............................................... 112 Cash flows from operating activities ........................................... 113 Cash flows used in investing activities .......................................... 113 Cash flows used in financing activities ......................................... 115 Working capital ......................................................... 116 Holding company structure ................................................. 117 Borrowings and funding sources .............................................. 117 Financial risk management .................................................. 124 Outlook ................................................................ 128 Future development plans ................................................... 129 Off-balance sheet arrangements ............................................... 129 Tabular disclosure of contractual obligations ...................................... 130 CORPORATE GOVERNANCE .............................................. 131 Chairman’s Letter ........................................................ 131 Application of Corporate Governance Codes ..................................... 132 UK Corporate Governance Code ............................................. 132 Certain differences between CCHBC’s corporate governance practices and the UK Corporate Governance Code ...................................................... 132 Certain differences between the Group’s corporate governance practices and the NYSE listing standards ............................................................ 133 NYSE Corporate Governance Statement ........................................ 133 Director Independence .................................................... 133 Board Committees ....................................................... 133 Corporate Governance Guidelines ............................................ 133 Code of Ethics .......................................................... 134 Shareholder Approval of Equity-compensation Plans ............................... 134 Other corporate governance codes ............................................ 134 Leadership and Effectiveness ................................................ 135 The Board of Directors ..................................................... 135 Composition ........................................................... 135 Listing rules ............................................................ 140 Independence ........................................................... 140 Succession planning ...................................................... 141 How the Board operates ................................................... 142 Board meetings and attendance ............................................... 142 Operation of the Board .................................................... 142 Matters reserved to the Board ............................................... 145 Roles of Chairman, CEO, Vice-Chairman, Senior Independent Director, non-executive Directors and Company Secretary .................................................. 145 Outside appointments ..................................................... 148 Conflicts of interest ....................................................... 149 Information and training .................................................... 149 Board, committee and Director performance evaluation ............................. 149 Operating Committee ...................................................... 150 Operating Committee Functions .............................................. 153 Board committees ......................................................... 153 Audit Committee ......................................................... 153 3 Role and responsibilities ................................................... 153 Composition ........................................................... 154 Work and activities ....................................................... 154 External auditors ........................................................ 157 The provision of non-audit services by the external auditors ........................... 158 Audit Fees and All Other Fees ............................................... 158 Audit fees ............................................................. 158 Audit related fees ........................................................ 158 Tax fees ............................................................... 159 All other fees ........................................................... 159 Controls and procedures .................................................... 159 Code of ethics ........................................................... 159 Risk management ......................................................... 160 Internal control ......................................................... 160 Internal audit ............................................................ 161 Whistleblowing measures ................................................... 161 Disclosure Committee ..................................................... 162 Performance reporting ..................................................... 162 Nomination Committee ..................................................... 162 Composition ........................................................... 162 Role and responsibilities ................................................... 162 Work and activities ....................................................... 163 Remuneration Committee ................................................... 164 Social Responsibility Committee .............................................