Annual Report 2016 making life’s everyday moments more enjoyable Contents Strategic report 2 Chairman’s introduction 4 Britvic at a glance 6 Our brands 8 Our business model 10 Trends 11 Our geographies 12 Our strategy 14 Key performance indicators 16 Chief Executive Officer’s review 19 Chief Financial Officer’s review 24 Sustainable business review 28 Our risks 32 Viability statement Governance 34 Corporate governance report 36 Board of directors 47 Nomination committee 50 Audit Committee 58 Remuneration Committee 59 Directors’ remuneration report 61 At a glance 67 Annual Report on Remuneration 76 Directors’ Remuneration Policy 85 Directors’ report 88 Statement of directors’ responsibilities Financial statements 90 Independent Auditor’s Report to the members of Britvic plc 96 Consolidated income statement 97 Consolidated statement of comprehensive income/(expense) 98 Consolidated balance sheet 99 Consolidated statement of cash flows 100 Consolidated statement of changes in equity 101 Notes to the consolidated financial statements 148 Company balance sheet 149 Company cash flow statement 150 Company statement of changes in equity 151 Notes to the company financial statements Other information 160 Shareholder information 162 Glossary 163 Non-GAAP reconciliations Cautionary note regarding forward-looking statements This announcement includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the group to be materially different from any future results, Britvic takes care of the environment by choosing pureprint® environmental print performance or achievements expressed or implied by such forward-looking technology. All the electricity used in the production of this report was generated from renewable sources and vegetable oil based inks were used throughout. The printer is a statements. Except as required by the Listing Rules and applicable law, Britvic CarbonNeutral® company and certificated to Environmental Management System, ISO undertakes no obligation to update or change any forward- looking statements 14001 and registered to EMAS, the Eco Management and Audit Scheme. to reflect events occurring after the date such statements are published. Designed by SG Design [sg-design.co.uk] 177534_Cover.indd 4-6 13/12/2016 18:50 Strategic report Responding to the growing Welcome to trend for premium adult drinking experiences Britvic has been building on its history to combine heritage with innovation to Britvic’s 2016 build our presence in the premium adult soft drinks category. We re-launched three new premium low calorie fl avours in the R Whites range, alongside a full annual report heritage-focused rebrand centred on Robert and Mary White who fi rst sold R White’s Lemonade in 1845 from a wheelbarrow in London. Simultaneously, for the fi nancial Britvic-backed incubator company Wisehead Productions launched Thomas & Evans, a premium zero proof year ended drink designed for adults who may not want an alcoholic drink but who want to drink something 2 October 2016 sophisticated when socialising. This year, Britvic continued to deliver on the strategy laid out in May 2013 to drive growth in Kids, Family and Adult soft drinks through our market leading brands. Despite a challenging external environment, we made signifi cant progress in executing Growing internationally our strategy and have delivered Robinson’s Fruit Shoot continued to a third successive year of profi t grow in the United States and Brazil. growth. In the USA we have continued to make good progress in single serve and Delivering against multi-pack Fruit Shoot, which we have successfully launched into grocery. We consumer needs: maintained our share of the market and Leading on low/no sugar distribution is up by 10%. We continue Britvic continued to lead the GB market to use our strong relationship with in ‘No Added Sugar’ (NAS) drinks as Pepsi to sell Fruit Shoot single bottles a proportion of our portfolio through in convenience and leisure, including reformulation, innovation, and responsible a listing in Pizza Hut. With our partner, marketing. We have taken bold steps to Advantage Sales and Marketing, help consumers make healthier choices we have established an eff ective and currently, 68% of our GB portfolio route to market for Fruit Shoot and 65% of our ROI portfolio is below or multipack and have achieved exempt from the proposed sugar tax. listings with major retailers including Walmart, Kroger and HEB. In Brazil, we have successfully combined the strength of the local team with group capability, to deliver Maguary Fruit Shoot onto the shelves in Sao Paulo with four fl avours developed for the local market in under 12 months. Britvic plc Annual Report 2016 1 Strategic report Chairman’s introduction The UK’s decision to leave Performance review The announcement of a proposed sugar tax in the UK was disappointing. Whilst we Simon Litherland has now been Chief the EU and the proposed recognise the need to tackle obesity, given Executive Officer for three years and in the choice that the soft drinks category sugar tax on soft drinks that time has overseen the delivery of offers compared to other categories, the record profits each year. His team have were momentous external focus is frustrating. No other company has continued to make good progress on done as much work to remove calories events for Britvic in an delivering the strategic priorities he set out from its products reducing calories by in 2013. Mathew Dunn has now been in already challenged market 19 billion annually since 2012. We are well place as Chief Financial Officer for a year, positioned to respond and are working place with price deflation. he brings a new energy and has been constructively with Government to ensure relentless in his pursuit of improving Despite this Britvic has, the best outcome for the business. once again, delivered a performance. Outside of Europe our team in the US has Trading conditions in our European launched the Fruit Shoot multi-pack, building record pre-exceptional markets have not improved over the last on the success of our single serve business. EBITA* of £186.1m, up 12 months with structural challenges in The focus now for the team is to build brand the GB market and the consolidation of 8.4%. Profit after tax of awareness and encourage consumers to buying groups in France. GB stills try the brand. The scale of the opportunity £114.5m has translated performance during the year was is huge but we are under no illusions of the disappointing but was compensated for into adjusted earnings challenges and levels of investment that we by the performance of our carbonates face to succeed in this market. In Brazil, we per share* of 49.3p. The portfolio. In Ireland performance has been are now one year on from our acquisition of particularly encouraging with both the board is declaring a final Ebba, and the early signs are promising. branded and Counterpoint business João Caetano has joined the PLC Executive dividend of 17.5p, bringing performing well. The investment in our team we are all impressed by the contribution supply chain in GB is now entering its the full year dividend to the local management team have made second year and tangible progress in over this first year as part of Britvic. 24.5p, a 6.5% increase efficiency and flexibility is being made on 2015. These results across the network which should provide reflect the resilience of our a solid platform for future profitability. brands and the strength of the company. 2 Britvic plc Annual Report 2016 177534_BRITVIC_TEXT-p001-037.indd 2 13/12/2016 18:57 Strategic report Chairman’s introduction continued The board Capital allocation As announced, Bob Ivell has now stepped The board remains committed to its down from the board. I would like to take this progressive dividend policy with a target of opportunity to thank him for the significant paying out 50% of earnings in dividends. contribution he made over the last 9 years Since flotation in 2005 the dividend has risen as our Senior Independent Director and from 10p per share to 24.5p this year and Chairman of the Remuneration Committee. has returned over £448m to shareholders. We wish him well for the future. Our adjusted earnings per share* has more than doubled from 18.4p to 49.3p. This year we have welcomed two new non-executive directors onto the board. A strong balance sheet is a key part of Firstly, Euan Sutherland, CEO of Supergroup, any company’s success and the board is joined us in February. He has over 23 years confident that the structure we have in of experience in both retail and FMCG having place puts Britvic in a strong position to held leadership roles with Kingfisher, B&Q, overcome any short term headwinds that AS Watson and more recently as CEO of may prevail and remain agile and flexible to The Co-operative Group. Sue Clark also take advantage of any opportunities that joined us in February. Sue, until recently, may come our way. was Managing Director of SAB Miller in The board continues to be supportive of Europe and sat on their executive committee the management team’s ambition to grow until the merger with Anheuser-Busch. internationally through selective M&A and Both Sue and Euan bring with them to invest in the fabric of the business, with extensive multinational experience and I the three-year supply chain investment am delighted to have them on the board. and the acquisition in Brazil evidence of The new board has settled in well, the its support. results are good and the Company is in good shape, notwithstanding the AGM challenges we face.