TIDMCCEP
RNS Number : 4709K
Coca-Cola Europacific Partners plc
02 September 2021
COCA-COLA EUROPACIFIC PARTNERS
Results for the six months ended 2 July 2021
Strong first-half performance, driven by strong Q2 reflecting
the easing of pandemic restrictions and ongoing solid in-market
execution
H1 2021 As Comparable Change vs H1 2020 Pro forma Change vs H1
Metric([1]) Reported ([1]) Comparable 2020
([3])
============ ======== ========== --------------------------------------- ========== -------------------------------
As Reported Comparable Comparable Pro forma Pro forma
([1]) Fx-Neutral Comparable Comparable
([1]) ([3]) Fx-Neutral([3])
============ ======== ========== =========== ============ ============ ========== ============ =================
Total Volume (M
CCEP UC)([2]) 1,227 1,227 18.0% 15.5% 1,442 6.0%
Revenue (EURM) 5,918 5,918 22.5% 22.5% 21.5% 6,974 13.0% 11.5%
Cost of sales
(EURM) 3,840 3,791 21.0% 19.5% 19.0% 4,409 11.0% 10.0%
-------------------- -------- ---------- ------ ------- ------- ---------- ------- -------- ------
Operating expenses
(EURM) 1,558 1,436 11.0% 13.0% 12.5% 1,763 3.0% 2.0%
-------------------- -------- ---------- ------ ------- ------- ---------- ------- -------- ------
Operating profit
(EURM) 520 691 94.0% 73.5% 71.0% 802 61.0% 58.0%
-------------------- -------- ---------- ------ ------- ------- ---------- ------- -------- ------
Profit after
taxes (EURM) 246 500 95.0% 93.0% 90.5%
-------------------- -------- ---------- ------ ------- -------
Diluted EPS
(EUR) 0.53 1.09 89.5% 91.0% 87.5%
-------------------- -------- ---------- ------ ------- ------- ---------- ------------ -----------------
Revenue per
UC (EUR) 4.78 3.0% 4.78 3.0%
-------------------- -------- ---------- ----------- ------------ ------- ---------- ------------ -------- ------
Cost of sales
per UC (EUR) 3.07 0.5% 3.02 1.5%
-------------------- -------- ---------- ----------- ------------ ------- ---------- ------------ -------- ------
Free cash flow
(EURM) 648
-------------------- -------- ---------- ----------- ------------ ------------
Volume (M UC)([2]) 1,121 1,121 8.0% 5.5% 1,121 5.5%
-------------------- -------- ---------- ------ ------- ------------ ---------- ------- -----------------
Revenue (EURM) 5,385 5,385 11.5% 11.5% 10.5% 5,385 11.5% 10.5%
-------------------- -------- ---------- ------ ------- ------- ---------- ------- -------- ------
Operating profit
(EURM) 505 631 88.5% 58.5% 57.0% 631 58.5% 57.0%
-------------------- -------- ---------- ------ ------- ------- ---------- ------- -------- ------
Revenue per
Europe UC (EUR) 4.77 2.5% 4.77 2.5%
------------ -------- ---------- ----------- ------------ ------- ---------- ------------ -------- ------
Volume (M
API UC)([2]) 106 106 321 8.0%
Revenue (EURM) 533 533 1,589 19.0% 15.5%
-------------------- -------- ---------- ---------- ------- -------- ------
Operating profit
(EURM) 15 60 171 71.0% 63.0%
-------------------- ======== ========== ========== ------- -------- ------
Revenue per
UC (EUR) 4.89 4.80 4.0%
-------------------- -------- ---------- ---------- ------------ -------- ------
DAMIAN GAMMELL, CHIEF EXECUTIVE OFFICER, SAID:
"We are pleased to report a strong H1 performance, as we
confidently navigate the varied impact of the pandemic across our
markets, with our focus remaining on supporting our people,
customers and communities. Top-line growth, operating margin
improvement and stronger free cash flow generation demonstrate the
strength of our business and the successful integration of
Coca-Cola Amatil. We continue to be excited by this opportunity,
being unlocked through the great collaboration and sharing across
all our European markets and API. I would also like to highlight
the extraordinary efforts and high engagement of all our
colleagues, to whom I am extremely grateful.
"Together with The Coca-Cola Company and our other franchise
partners, our collective focus on our core brands alongside solid
in-market execution has served us well, growing share(7) both
instore and online. We are resolved in our determination to move
further and faster towards a stronger and even more sustainable
future. We continue to protect our business for the short-term
whilst engaging in ongoing transformational programmes. We are
taking meaningful actions to adjust our cost base to be fit and
competitive for the longer-term, and we continue to invest for
future growth, particularly in digital, sustainability, our
portfolio and our people. Our digital business is on track for
record revenues this year. We are progressing towards our 2040 net
zero carbon ambition, recently announcing plans to accelerate our
use of recycled plastic (rPET), saving an additional 43,000 tonnes
of virgin plastic each year. I am also extremely proud that two of
our manufacturing sites have recently been certified carbon
neutral. And we are driving future revenue streams like Costa and
Topo Chico, with exciting portfolio plans for the balance of the
year.
"Whilst we are reassured by the pace of recovery and are
cautiously optimistic, our strong H1 performance and full-year
guidance for 2021 demonstrate our confidence in the future of our
business. We will go further together, creating greater, more
sustainable value for all stakeholders."
___________________________
1. Refer to 'Note Regarding the Presentation of Pro forma
financial information and Alternative Performance Measures' for
further details and to 'Supplementary Financial Information' for a
reconciliation of reported to comparable and reported to pro forma
comparable results; Change percentages against prior year
equivalent period unless stated otherwise
2. A unit case equals approximately 5.678 litres or 24 8-ounce servings
3. Pro forma figures as if the acquisition of Coca-Cola Amatil
Limited occurred at the beginning of the period presented for
illustrative purposes only, it is not intended to estimate or
predict future financial performance or what actual results would
have been. Acquisition completed on 10 May 2021. Prepared on a
basis consistent with CCEP accounting policies and include
transaction accounting adjustments for the period 1 January to 10
May. Refer to 'Note Regarding the Presentation of Pro forma
financial information and Alternative Performance Measures' for
further details.
Note: All footnotes included after the 'About CCEP' section
Q2 & H1 HIGHLIGHTS([1],[3])
Q2 Pro forma revenue (+29.0%)([4])
(Reported revenue +53.5%)
-- Pro forma comparable volume +22.0%([5]) driven by the
reopening of Away from Home (AFH) given the easing of restrictions
across most of our markets & the cycling of soft comparables
(volumes Q2 2020 -22.0% vs 2019; Q2 2021 -5.0% vs 2019)
volumes by channel: AFH +54.0% reflecting reopenings (-14.5% vs
2019) & recovery of immediate consumption (IC) packs; Home
+8.0% (+2.0% vs 2019) supported by recovery of IC & continued
growth in future consumption packs (e.g. multipack cans +3.5%([6])
vs 2020; +19.0%([6]) vs 2019)
-- Recent trading impacted by renewed restrictions in API, soft
international tourism & tougher comparables in other markets
with July & August combined pro forma comparable volume
slightly down (volumes Q3 2020 -4.0% vs 2019)
-- Pro forma revenue per unit case +6.0%([2],[4]) reflecting
positive pack & channel mix driven by the improvement in AFH
volumes & growth in IC packs alongside favourable price &
brand mix
H1 Pro forma revenue (+11.5%)([4])
(Reported revenue +22.5%)
-- NARTD value share growth([7]) across measured channels both
in store (+60bps) & online (+100bps)
-- Pro forma comparable volume +6.0%([5]) driven by Q2 (see
above) & the cycling of soft comparables (volumes H1 2020
-13.0% vs 2019; H1 2021 -7.5% vs 2019)
-- Pro forma revenue per unit case +3.0%([2],[4]) (+0.5%([8]) vs
2019) reflecting favourable brand mix alongside positive pack &
channel mix driven by the improvement in AFH volumes in Q2 &
favourable underlying price
H1 Pro forma comparable operating profit +58.0%([4])
(Reported operating profit +94.0%)
-- Pro forma cost of sales per unit case +1.5%([2],[4])
reflecting increased revenue per unit case driving higher
concentrate costs, emerging commodity inflation & adverse mix,
partially offset by the favourable recovery of fixed manufacturing
costs given higher volumes
-- Pro forma comparable operating profit of EUR802m, +58.0%([4])
reflecting the increased revenue, the benefit of ongoing efficiency
programmes & our continuous efforts on discretionary spend
optimisation
H1 EPS
-- Comparable diluted EPS of EUR1.09, +87.5%([4]) (reported +89.5%)
Other
-- Coca-Cola Amatil acquisition completed 10 May 2021,
integration well underway and on trac k
-- Sustainability highlights:
rPET: Belgium & Luxembourg to become a 100% market & GB
moving all on-the-go packs to 100%. Announced industry partnerships
to build new PET recycling facilities in Australia &
Indonesia
Signed up to the EU Code of Conduct on Responsible Business
& Marketing Practices
Two manufacturing sites in Spain & Sweden certified carbon
neutral
-- Today, CCEP announces that it is transferring its US stock
exchange listing to The NASDAQ Global Select Market from The New
York Stock Exchange. CCEP's shares are expected to begin trading as
a NASDAQ-listed security on 13 September 2021, and will continue to
trade under the ticker symbol CCEP. All other listings will remain
unchanged
-- Dividend: as previously stated, full-year dividend to be
announced at Q3 to reflect the earnings of the enlarged
business([10])
FY21 GUIDANCE
The outlook for FY21 reflects our current assessment of the
scale and magnitude of the COVID-19 pandemic, which is subject to
change as we continue to monitor ongoing developments. Guidance is
on a comparable basis, reflecting the timing impact of the
acquisition of API which completed on 10 May 2021, and based on
actual FX rates.
-- Revenue: comparable growth of 26-28%([9])
-- Operating profit: comparable growth of 40-44%([9])
-- Comparable effective tax rate: 20%([9])
-- Dividend payout ratio: c.50%([9],[10])
Second-quarter & First-half Revenue Performance by Geography([1])
All values are unaudited, changes versus equivalent 2020
period
Second-quarter First-half
------------------------------------- -------------------------------------
Fx-Neutral Fx-Neutral
EUR million % change % change EUR million % change % change
============================ =========== ========== ============ =========== ========== ============
Great Britain 694 30.5% 27.5% 1,192 16.0% 15.0%
---------------------------- ----------- ------ ------- ----------- ------ -------
France([12]) 485 23.0% 23.0% 896 11.0% 11.0%
---------------------------- ----------- ------ ------- ----------- ------ -------
Germany 624 25.5% 25.5% 1,091 7.5% 7.5%
============================ =========== ====== ======= =========== ====== =======
Iberia([13]) 649 67.5% 67.5% 1,069 16.5% 16.5%
============================ =========== ====== ======= =========== ====== =======
Northern Europe([14]) 640 17.0% 14.0% 1,137 6.0% 4.0%
============================ =========== ====== ======= =========== ====== =======
Total Europe 3,092 31.0% 29.5% 5,385 11.5% 10.5%
API([11]) (Pro forma)([3]) 792 32.5% 27.0% 1,589 19.0% 15.5%
============================ =========== ====== ======= =========== ====== =======
Total CCEP (Pro forma)([3]) 3,884 31.5% 29.0% 6,974 13.0% 11.5%
API
-- Cycling the strongest pandemic impact in Q2, volumes reflect
minimal restrictions in Australia & NZ & a strong Ramadan
period in Indonesia (ahead of renewed restrictions). Strong growth
in the Home channel in Australia. Coca-Cola No Sugar outperformed
in Australia & Monster continued to grow in all markets in both
Q2 & H1. Sparkling outperformed in Indonesia during the festive
period led by Fanta.
-- Revenue/UC([15]) growth supported by positive pack &
channel mix given the lifting of restrictions & underlying
favourable price.
France
-- Volumes reflect the reopening of AFH given easing
restrictions & cycling soft comparables. Continued growth in
the Home channel led by IC pack formats. Coca-Cola Zero Sugar,
Monster & Capri-Sun all outperformed in both Q2 & H1.
-- Revenue/UC([15]) broadly flat due to positive pack &
brand mix offset by normalised promotional activity &
frequency.
Germany
-- Volume growth driven by the reopening of AFH given easing of
restrictions & cycling soft comparables & customer
disruptions last year. Continued momentum in the Home channel
helped by the border trade business. Coca-Cola Zero Sugar, Monster
& Fuze Tea all outperformed.
-- Revenue/UC([15]) growth supported by positive brand mix
driven by Monster & the proactive delisting of some PET waters,
alongside positive pack mix & favourable underlying price.
Great Britain
-- Volumes reflect strong AFH rebound & restocking following
the easing of restrictions, increased domestic tourism &
cycling soft comparables. Continued growth in the Home channel led
by IC pack formats. During both Q2
& H1, Coca-Cola Zero Sugar & Monster continued to outperform, with volumes up vs 2019.
-- Revenue/UC([15]) growth supported by positive brand mix led
by Monster & positive pack mix driven by increased
mobility.
Iberia
-- Volumes driven by the reopening of AFH given easing
restrictions, particularly in Spain which over-indexes in its
exposure to HoReCa([16]) . Weaker Home volumes reflect the
increased Spanish VAT rate within this channel. Strong recovery of
glass & Monster outperformed in all channels during both Q2
& H1.
-- Revenue/UC([15]) growth supported by improving pack &
channel mix driven by the reopening of HoReCa([16]) outlets &
positive underlying price.
Northern Europe
-- Volumes reflect the reopening of AFH given easing of
restrictions, increased domestic tourism & cycling soft
comparables. Continued growth in the Home channel led by cans e.g.
small cans Q2:+41.5% & H1:+52.5%. Coca-Cola Zero Sugar, Monster
& Capri-Sun all outperformed in both Q2 & H1, with volumes
up vs 2019.
-- Revenue/UC([15]) (excluding soft drinks taxes([17]) ) growth
driven by underlying price & positive pack mix as demand for IC
packs increased. Channel mix & brand mix were also favourable
during the quarter.
___________________________
Note: All values are unaudited and all references to volumes are
on a comparable basis
Second-quarter & First-half Pro forma Volume Performance by Category([1],[3])
Comparable volumes, changes versus equivalent 2020 period.
Second-quarter First-half
% of Total % Change % of Total % Change([5])
============================================ ============ ========== ============ ===============
Sparkling 84.5% 18.5% 84.5% 6.0%
Coca-Cola(TM) 58.5% 16.0% 59.0% 4.5%
Flavours, Mixers & Energy 26.0% 24.5% 25.5% 10.0%
Stills 15.5% 45.0% 15.5% 5.5%
Hydration 7.5% 45.0% 7.5% (1.0)%
RTD Tea, RTD Coffee, Juices & Other([18]) 8.0% 45.0% 8.0% 13.0%
Total 100.0% 21.5% 100.0% 6.0%
Coca-Cola(TM)
-- H1 Classic +3.0%; Lights +7.5% driven by reopening of AFH
following the easing of restrictions & strong performance by
the reformulated & rebranded Coca-Cola Zero Sugar (+11.0%)
-- H1 Coca-Cola Zero Sugar in growth vs 2019 (+10.0%)
Flavours, Mixers & Energy
-- Q2 Fanta +24.5%; H1 +8.0% driven by the reopening of AFH
following the easing of restrictions & a strong Ramadan period
in Indonesia
-- H1 Energy +36.5% reflecting continued growth across all
markets led by Monster from strong innovation, distribution &
value share growth([7]) (+170bps)
Hydration
-- H1 water -5.5% reflecting continued impact of the pandemic
& its exposure to IC across both channels, partially offset by
Sports (+15.5%)
-- Q2 Sparkling Water delivered solid growth in Australia
(+37.0% vs 2019) driven by the launch of new flavours & new
multi-pack can formats
RTD Tea, RTD Coffee, Juices & Other([18])
-- Q2 Juice drinks +46.5%; H1 +15.5% driven by increased
on-the-go occasions following the easing of restrictions &
solid growth in Capri Sun (H1:+16.5% vs 2019)
-- H1 Fuze Tea in growth vs 2019 (8.5%([6]) ) & continuing to grow value share in Europe([7])
-- H1 Alcohol delivered strong growth in Australia (+5.0% vs 2019) driven by Spirits & RTD
___________________________
Note: All references to volumes are on a comparable basis
Conference Call (with presentation)
-- 2 September 2021 at 12:30 BST, 13:30 CEST & 7:30 a.m. EDT; via www.cocacolaep.com
-- Replay & transcript will be available at www.cocacolaep.com as soon as possible
Financial Calendar
-- Third-quarter 2021 trading update: 9 November 2021
-- Financial calendar available here: https://ir.cocacolaep.com/financial-calendar/
Contacts
Investor Relations
Sarah Willett Joe Collins Claire Copps
+44 7970 145 218 +44 7583 903 560 +44 7980 775 889
Media Relations
Shanna Wendt Nick Carter
+44 7976 595 168 +44 7979 595 275
About CCEP
Coca-Cola Europacific Partners is one of the world's leading
consumer goods companies. We make, move and sell some of the
world's most loved brands - serving 600 million consumers and
helping 1.75 million customers across 29 countries grow.
We combine the strength and scale of a large, multi-national
business with an expert, local knowledge of the customers we serve
and communities we support.
The Company is currently listed on Euronext Amsterdam, the New
York Stock Exchange, London Stock Exchange and on the Spanish Stock
Exchanges, trading under the symbol CCEP. On 2 September 2021 CCEP
announced that it is transferring its US stock exchange listing to
The NASDAQ Global Select Market from The New York Stock Exchange.
CCEP's shares are expected to begin trading as a NASDAQ-listed
security on 13 September 2021, and will continue to trade under the
ticker symbol CCEP.
For more information about CCEP, please visit www.cocacolaep.com
& follow CCEP on Twitter at @CocaColaEP.
___________________________
1. Refer to 'Note Regarding the Presentation of Pro forma
financial information and Alternative Performance Measures' for
further details and to 'Supplementary Financial Information' for a
reconciliation of reported to comparable and reported to pro forma
comparable results; Change percentages against prior year
equivalent period unless stated otherwise
2. A unit case equals approximately 5.678 litres or 24 8-ounce servings
3. Pro forma figures as if the acquisition of Coca-Cola Amatil
Limited occurred at the beginning of the period presented for
illustrative purposes only, it is not intended to estimate or
predict future financial performance or what actual results would
have been. Acquisition completed on 10 May 2021. Prepared on a
basis consistent with CCEP accounting policies and include
transaction accounting adjustments for the period 1 January to 10
May. Refer to 'Note Regarding the Presentation of Pro forma
financial information and Alternative Performance Measures' for
further details
4. Comparable & FX-neutral
5. Adjusted for 3 extra selling days in Q1; no selling day shift
in Q2; CCEP H1 pro forma volume +8.5% vs 2020
6. Europe only
7. NARTD (non-alcoholic ready to drink) Nielsen Global Track YTD
Data to w/e IS 20.Jun.21, GB 03.Jul.21, AUS ES PT DE FR BE NL NZ SE
& NO 04.Jul.21; Energy = Energy category. Online Data is for
available markets YTD to GB 03.Jul.21 (Retailer EPOS+Nielsen), ES
FR & NL 04.Jul.21 (Nielsen)
8. Management's best estimate
9. Reflects the timing impact of the acquisition of API which
completed on 10 May 2021; based on actual FX rates as at 26 August
2021
10. Dividends subject to Board approval
11. Includes Australia, New Zealand & the Pacific Islands, Indonesia & Papua New Guinea
12. Includes France & Monaco
13. Includes Spain, Portugal & Andorra
14. Includes Belgium, Luxembourg, the Netherlands, Norway, Sweden & Iceland
15. Revenue per unit case
16. HoReCa = Hotels, Restaurants & Cafes
17. Northern Europe revenue per unit case declined in Q2 &
H1 as a result of changes to Norwegian Soft Drink Taxes
18. RTD refers to Ready to Drink; Other includes Alcohol & Coffee
Forward-Looking Statements
This document contains statements, estimates or projections that
constitute "forward-looking statements" concerning the financial
condition, performance, results, strategy and objectives of
Coca-Cola Europacific Partners plc and its subsidiaries (together
"CCEP" or the "Group"). Generally, the words "believe," "expect,"
"intend," "estimate," "anticipate," "project," "plan," "seek,"
"may," "could," "would," "should," "might," "will, " "forecast,"
"outlook," "guidance," "possible," "potential," "predict,"
"objective" and similar expressions identify forward-looking
statements, which generally are not historical in nature.
Forward-looking statements are subject to certain risks that
could cause actual results to differ materially from CCEP's
historical experience and present expectations or projections,
including with respect to the acquisition of Coca-Cola Amatil
Limited and its subsidiaries (together "CCL" or "API") completed on
10 May 2021 (the "Acquisition"). As a result, undue reliance should
not be placed on forward-looking statements, which speak only as of
the date on which they are made. These risks include but are not
limited to:
1. those set forth in the "Risk Factors" section of CCEP's 2020
Annual Report on Form 20-F filed with the SEC on 12 March 2021,
including the statements under the following headings: Business
continuity and resilience (such as the adverse impact that the
COVID-19 pandemic and related government restrictions and social
distancing measures implemented in many of our markets, and any
associated economic downturn, global supply chain pressure,
availability of key materials, may have on our financial results,
operations, workforce and demand for our products); Packaging (such
as refillables and the increased footprint of our packaging in
developing markets with limited plastic waste collection and
recycling infrastructure); Cyber and social engineering attacks and
IT infrastructure; Economic and political conditions (such as the
UK's exit from the EU, the EU-UK Trade and Cooperation Agreement,
uncertainty about the future relationship between the UK and EU and
ongoing economic instability in Papua New Guinea); Market (such as
disruption due to customer negotiations, customer consolidation and
route to market); Legal, regulatory and tax (such as the
development of regulations regarding packaging, taxes and deposit
return schemes);Climate change and water (such as net zero emission
legislation and regulation, resource scarcity and physical
manifestations of climate change in the Australia, Pacific and
Indonesia region such as increased temperatures, altered rainfall
patterns, more frequent or intense extreme events such as
heatwaves, drought, storms and increased frequency of natural
disasters); Perceived health impact of our beverages and
ingredients, and changing consumer buying trends (such as sugar
alternatives and other ingredients); Competitiveness, business
transformation and integration (such as reduction of total debt
outstanding for the funding of the acquisition); People and
wellbeing (such as the risk of serious injury through industrial
and traffic accidents, particularly in Indonesia); Relationship
with The Coca-Cola Company ("TCCC") and other franchisors; Product
quality; and Other risks as updated and supplemented with the
additional information set forth in the "Principal Risks and Risk
Factors" section of this document (such as in relation to the
impacts of the Acquisition, COVID-19, the potential for fraudulent
activity to create negative reputational and cultural impacts and
the existence of corruption risks, particularly in developing
markets such as Indonesia, Papua New Guinea and the Pacific
Islands);
2. those set forth in the "Business and Sustainability Risks"
section of CCL's 2020 Financial and Statutory Reports including the
statements under the following headings: COVID-19 related risks;
TCCC and other brand partners relationship risk; Economic and
political risks; Cyber risk; Foreign exchange risk; Key personnel
risk; Beverage industry risk; Regulatory risk; Corporate social
responsibility risk; Climate change risk; Supply chain risk;
Litigation and legal disputes risk; Malicious product tampering
risk; Workplace Health & Safety ("WHS") risk; Business
interruption risk; Product quality risk; Fraud risk; and
3. risks and uncertainties relating to the Acquisition,
including the risk that the businesses will not be integrated
successfully or such integration may be more difficult, time
consuming or costly than expected, which could result in additional
demands on CCEP's resources, systems, procedures and controls,
disruption of its ongoing business and diversion of management's
attention from other business concerns; the possibility that
certain assumptions with respect to API or the Acquisition could
prove to be inaccurate; burdensome conditions imposed in connection
with any regulatory approvals; ability to raise financing; the
potential that the Acquisition may involve unexpected liabilities
for which there is no indemnity; the potential failure to retain
key employees as a result of the Acquisition or during integration
of the businesses and disruptions resulting from the Acquisition,
making it more difficult to maintain business relationships; the
potential for (i) negative reaction from financial markets,
customers, regulators, employees and other stakeholders, (ii)
litigation related to the Acquisition.
The full extent to which the COVID-19 pandemic will negatively
affect CCEP and the results of its operations, financial condition
and cash flows will depend on future developments that are highly
uncertain and cannot be predicted, including the scope and duration
of the pandemic and actions taken by governmental authorities and
other third parties in response to the pandemic.
Due to these risks, CCEP's actual future results, dividend
payments, capital and leverage ratios, growth, market share, tax
rate, efficiency savings, and the results of the integration of the
businesses following the Acquisition, including expected efficiency
and combination savings, may differ materially from the plans,
goals, expectations and guidance set out in forward-looking
statements (including those issued by CCL prior to the
Acquisition). These risks may also adversely affect CCEP's share
price. Additional risks that may impact CCEP's future financial
condition and performance are identified in filings with the SEC
which are available on the SEC's website at www.sec.gov. CCEP does
not undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events, or otherwise, except as required under applicable
rules, laws and regulations. Furthermore, CCEP assumes no
responsibility for the accuracy and completeness of any
forward-looking statements. Any or all of the forward-looking
statements contained in this filing and in any other of CCEP's or
CCL's public statements (whether prior or subsequent to the
Acquisition) may prove to be incorrect. CCEP does not undertake any
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise, except as required under applicable rules, laws and
regulations. Furthermore, CCEP assumes no responsibility for the
accuracy and completeness of any forward-looking statements. Any or
all of the forward-looking statements contained in this filing and
in any other of CCEP's or CCL's public statements (whether prior or
subsequent to the Acquisition) may prove to be incorrect.
Note Regarding the Presentation of Pro forma financial information
and Alternative Performance Measures
Pro forma financial information
Pro forma financial information has been provided in order to
illustrate the effects of the acquisition of Coca-Cola Amatil
Limited (CCL or API) on the results of operations of CCEP and allow
for greater comparability of the results of the combined group
between periods. The Pro forma financial information has been
prepared for illustrative purposes only and because of its nature,
addresses a hypothetical situation. It is based on information and
assumptions that CCEP believes are reasonable, including
assumptions as at 1 January 2021 and 1 January 2020 relating to
acquisition accounting provisional fair values of API assets and
liabilities which are assumed to be equivalent to those that have
been provisionally determined as of the acquisition date, on a
constant currency basis. The Pro forma information also assumes the
interest impact of additional debt financing reflecting the actual
weighted average interest rate for Acquisition financing of c.0.40%
for all periods presented. Acquisition costs included in 2020 Pro
forma financial information are assumed to be equivalent to those
incurred in 2021.
The Pro forma financial information does not intend to represent
what CCEP's results of operations actually would have been if the
acquisition had been completed on the dates indicated, nor does it
intend to represent, predict or estimate the results of operations
for any future period or financial position at any future date. In
addition, it does not reflect ongoing cost savings that CCEP
expects to achieve as a result of the acquisition or the costs
necessary to achieve these cost savings or synergies. As pro forma
information is prepared to illustrate retrospectively the effects
of future transactions, there are limitations that are inherent to
the nature of pro forma information. As such, had the acquisition
taken place on the dates assumed, the actual effects would not
necessarily have been the same as those presented in the Pro Forma
financial information contained herein .
Alternative Performance Measures
We use certain alternative performance measures (non-GAAP
performance measures) to make financial, operating and planning
decisions and to evaluate and report performance. We believe these
measures provide useful information to investors and as such, where
clearly identified, we have included certain alternative
performance measures in this document to allow investors to better
analyse our business performance and allow for greater
comparability. To do so, we have excluded items affecting the
comparability of period-over-period financial performance as
described below. The alternative performance measures included
herein should be read in conjunction with and do not replace the
directly reconcilable GAAP measures.
For purposes of this document, the following terms are
defined:
"As reported" are results extracted from our condensed
consolidated interim financial statements.
"Pro forma " includes the results of CCEP and API as if the
Acquisition had occurred at the beginning of the period presented,
including acquisition accounting adjustments relating to
provisional fair values. Pro forma also includes impact of the
additional debt financing costs incurred by CCEP in connection with
the Acquisition for all periods presented.
"Comparable" is defined as results excluding items impacting
comparability, which include restructuring charges, acquisition and
integration related costs, inventory fair value step up related to
acquisition accounting, the impact of the closure of the GB defined
benefit benefit pension scheme and net tax items relating to rate
and law changes. Comparable volume is also adjusted for selling
days.
"Pro forma Comparable" is defined as the pro forma results
excluding items impacting comparability, as described above.
"Fx-neutral" is defined as period results excluding the impact
of foreign exchange rate changes. Foreign exchange impact is
calculated by recasting current year results at prior year exchange
rates.
"Capex" or "Capital expenditures" is defined as purchases of
property, plant and equipment and capitalised software, plus
payments of principal on lease obligations, less proceeds from
disposals of property, plant and equipment. Capex is used as a
measure to ensure that cash spending on capital investment is in
line with the Group's overall strategy for the use of cash.
"Free cash flow" is defined as net cash flows from operating
activities less capital expenditures (as defined above) and
interest paid. Free cash flow is used as a measure of the Group's
cash generation from operating activities, taking into account
investments in property, plant and equipment and non-discretionary
lease and interest payments. Free cash flow is not intended to
represent residual cash flow available for discretionary
expenditures.
"Adjusted EBITDA" is calculated as Earnings Before Interest,
Tax, Depreciation and Amortisation (EBITDA), after adding back
items impacting the comparability of period over period financial
performance. Adjusted EBITDA does not reflect cash expenditures, or
future requirements for capital expenditures or contractual
commitments. Further, adjusted EBITDA does not reflect changes in,
or cash requirements for, working capital needs, and although
depreciation and amortisation are non-cash charges, the assets
being depreciated and amortised are likely to be replaced in the
future and adjusted EBITDA does not reflect cash requirements for
such replacements.
"Net Debt" is defined as the net of cash and cash equivalents
less borrowings and adjusted for the fair value of hedging
instruments related to borrowings and other financial
assets/liabilities related to borrowings. We believe that reporting
net debt is useful as it reflects a metric used by the Group to
assess cash management and leverage. In addition, the ratio of net
debt to adjusted EBITDA is used by investors, analysts and credit
rating agencies to analyse our operating performance in the context
of targeted financial leverage.
"Dividend payout ratio" is defined as dividends as a proportion
of comparable profit after tax.
Additionally, within this document, we provide certain
forward-looking non-GAAP financial Information, which management
uses for planning and measuring performance. We are not able to
reconcile forward-looking non-GAAP measures to reported measures
without unreasonable efforts because it is not possible to predict
with a reasonable degree of certainty the actual impact or exact
timing of items that may impact comparability throughout year.
Unless otherwise stated, percent amounts are rounded to the
nearest 0.5%.
Supplementary Financial Information - Income Statement - Reported
to Comparable
The following provides a summary reconciliation of CCEP's
reported and comparable results for the first six months ended 2
July 2021 and 26 June 2020:
First Six Months As Reported Items impacting Comparability Comparable
2021
=========== ============
Unaudited, in CCEP Restructuring Defined Acquisition Inventory Net Tax CCEP
millions Charges benefit and step up ([5])
of EUR except ([1]) plan Integration costs
per closure([2]) related ([4])
share data which costs
is calculated ([3])
prior
to rounding
================ =========== ============= ============ =========== ========= ======= ============
Revenue 5,918 - - - - - 5,918
Cost of sales 3,840 (4) 3 - (48) - 3,791
================ =========== ============= ============ =========== ========= ======= ==========
Gross profit 2,078 4 (3) - 48 - 2,127
Operating
expenses 1,558 (88) 6 (40) - - 1,436
================ =========== ============= ============ =========== ========= ======= ==========
Operating profit 520 92 (9) 40 48 - 691
Total finance
costs,
net 64 - - (3) - - 61
Non-operating
items 1 - - - - - 1
================ =========== ============= ============ =========== ========= ======= ==========
Profit before
taxes 455 92 (9) 43 48 - 629
Taxes 209 28 4 1 5 (118) 129
================ =========== ============= ============ =========== ========= ======= ==========
Profit after
taxes 246 64 (13) 42 43 118 500
================ =========== ============= ============ =========== ========= ======= ==========
Attributable to:
Shareholders 244 64 (13) 42 42 118 497
Non-controlling
interest 2 - - - 1 - 3
================ =========== ============= ============ =========== ========= ======= ==========
Profit after
taxes 246 64 (13) 42 43 118 500
---------------- ----------- ------------- ------------ ----------- --------- ------- ----------
Diluted earnings
per share (EUR) 0.53 0.14 (0.03) 0.10 0.09 0.26 1.09
---------------- ----------- ------------- ------------ ----------- --------- ------- ----------
First Six Months 2020 As Reported Items impacting Comparability Comparable
=========== ============
Unaudited, in millions of CCEP Mark-to-market Restructuring Net Tax CCEP
EUR except share data which effects Charges ([5])
is calculated prior to rounding ([6]) ([1])
================================ =========== ================== ============= ======= ============
Revenue 4,837 - - - 4,837
Cost of sales 3,168 - - - 3,168
================================= =========== ================== ============= ======= ==========
Gross profit 1,669 - - - 1,669
Operating expenses 1,401 (6) (124) - 1,271
================================= =========== ================== ============= ======= ==========
Operating profit 268 6 124 - 398
Total finance costs, net 55 - - - 55
Non-operating items 2 - - - 2
================================= =========== ================== ============= ======= ==========
Profit before taxes 211 6 124 - 341
Taxes 85 1 33 (37) 82
================================= =========== ================== ============= ======= ==========
Profit after taxes 126 5 91 37 259
================================= =========== ================== ============= ======= ==========
Attributable to:
Shareholders 126 5 91 37 259
Non-controlling interest - - - - -
================================ =========== ================== ============= ======= ==========
Profit after taxes 126 5 91 37 259
--------------------------------- ----------- ------------------ ------------- ------- ----------
Diluted earnings per share
(EUR) 0.28 0.01 0.20 0.08 0.57
--------------------------------- ----------- ------------------ ------------- ------- ----------
_ _________________________
([1]) Amounts represent restructuring charges related to
business transformation activities.
([2]) Amounts represent the impact of the closure of the GB
defined benefit pension scheme to future benefits accrual on 31
March 2021.
([3]) Amounts represent cost associated with the acquisition and
integration of API.
([4]) Amounts represent the non-recurring impact of provisional
fair value step-up of API finished goods.
([5]) Amounts include the deferred tax impact related to income
tax rate and law changes.
([6]) Amounts represent the net out of period mark-to-market
impact of non-designated commodity hedges.
Supplementary Financial Information - Income Statement - Reported
to Pro forma Comparable
The following provides a summary reconciliation of CCEP's
reported and pro forma comparable results for the first six months
ended 2 July 2021 and 26 June 2020:
Transaction Items impacting
Pro forma accounting Comparability
adjustments adjustments Pro forma ([E]) Pro forma
First Six Months 2021 As Reported API ([A]) ([B]) Combined Comparable
=========== ============ ============ ========= =============== =============
Unaudited, in millions CCEP CCEP CCEP
of EUR except share
data which is calculated
prior to rounding
======================== =========== ============ ============ ========= =============== =============
Revenue 5,918 1,056 - 6,974 - 6,974
Cost of sales 3,840 616 2 4,458 (49) 4,409
======================== =========== ============ ============ ========= =============== ===========
Gross profit 2,078 440 (2) 2,516 49 2,565
Operating expenses 1,558 323 68 1,949 (186) 1,763
======================== =========== ============ ============ ========= =============== ===========
Operating profit 520 117 (70) 567 235 802
Total finance costs,
net 64 12 13 89 (3) 86
Non-operating items 1 (1) - - - -
======================== =========== ============ ============ ========= =============== ===========
Profit before taxes 455 106 (83) 478 238 716
Taxes 209 28 (23) 214 (61) 153
======================== =========== ============ ============ ========= =============== ===========
Profit after taxes 246 78 (60) 264 299 563
======================== =========== ============ ============ ========= =============== ===========
Attributable to:
Shareholders 244 75 (61) 258 298 556
Non-controlling interest 2 3 1 6 1 7
======================== =========== ============ ============ ========= =============== ===========
Profit after taxes 246 78 (60) 264 299 563
======================== =========== ============ ============ ========= =============== ===========
Diluted earnings per
share (EUR) 0.53 0.16 (0.13) 0.56 0.66 1.22
======================== =========== ============ ============ ========= =============== ===========
_ _________________________
([A]) Amounts represent adjustments to include API financial
results prepared on a basis consistent with CCEP accounting
policies, as if the Acquisition had occurred on 1 January 2021 and
excludes API acquisition and integration related costs.
([B]) Amounts represent transaction accounting adjustments for
the period 1 January to 10 May as if the Acquisition had occurred
on 1 January 2021. These include the depreciation and amortisation
impact relating to provisional fair values for intangibles and
property plant and equipment, the interest impact of additional
debt financing reflecting the actual weighted average interest rate
for Acquisition financing of c.0.40% and the inclusion of
acquisition and integration related costs incurred by API prior to
the Acquisition.
Transaction Pro forma Items impacting
Historical accounting Combined Comparability
adjusted adjustments ([E]) Pro forma
First Six Months 2020 As Reported API ([C]) ([D]) Comparable
=========== ========== ============ ========= =============== =============
Unaudited, in millions CCEP CCEP CCEP
of EUR except share
data which is calculated
prior to rounding
========================== =========== ========== ============ ========= =============== =============
Revenue 4,837 1,335 - 6,172 - 6,172
Cost of sales 3,168 794 52 4,014 (48) 3,966
========================== =========== ========== ============ ========= =============== ===========
Gross profit 1,669 541 (52) 2,158 48 2,206
Operating expenses 1,401 546 111 2,058 (350) 1,708
========================== =========== ========== ============ ========= =============== ===========
Operating profit 268 (5) (163) 100 398 498
Total finance costs,
net 55 19 21 95 (3) 92
Non-operating items 2 7 - 9 (7) 2
========================== =========== ========== ============ ========= =============== ===========
Profit before taxes 211 (31) (184) (4) 408 404
Taxes 85 (3) (35) 47 52 99
========================== =========== ========== ============ ========= =============== ===========
Profit after taxes 126 (28) (149) (51) 356 305
========================== =========== ========== ============ ========= =============== ===========
Attributable to:
Shareholders 126 (5) (149) (28) 330 302
Non-controlling interest - (23) - (23) 26 3
========================== =========== ========== ============ ========= =============== ===========
Profit after taxes 126 (28) (149) (51) 356 305
========================== =========== ========== ============ ========= =============== ===========
Diluted earnings per
share (EUR) 0.28 (0.01) (0.33) (0.06) 0.72 0.66
========================== ----------- ---------- ------------ --------- --------------- -----------
__________________________
([C]) Amounts represent adjustments to reflect API financial
results as if the Acquisition had occurred on 1 January 2020. The
impact of adjustments made to API's historical financial statements
in order to present them on a basis consistent with CCEP's
accounting policies is provided in Note 1.
([D]) Amounts represent transaction accounting adjustments for
the period 1 January to 26 June as if the Acquisition had occurred
on 1 January 2020. These include the depreciation and amortisation
impact relating to provisional fair values for intangibles and
property plant and equipment, the non-recurring impact of the
provisional fair value step-up of API finished goods, the interest
impact of additional debt financing reflecting the actual weighted
average interest rate for Acquisition financing of c.0.40% and the
inclusion of acquisition related costs.
([E]) Items impacting comparability represents amounts included
within Pro forma Combined CCEP affecting the comparability of
CCEP's year-over-year financial performance and are set out in the
corresponding table below:
First Six Months Items impacting Comparability
2021
===============
Unaudited, in Restructuring Defined Acquisition Inventory Net Tax Other Total
millions Charges benefit and step up ([5]) ([6]) items
of EUR except ([1]) plan Integration costs impacting
share closure([2]) related ([4]) Comparability
data which is costs
calculated ([3])
prior to
rounding
================ ============= ============= ============= ========= ======= ====== ===============
Revenue - - - - - - -
Cost of sales (4) 3 - (48) - - (49)
================ ============= ============= ============= ========= ======= ====== =============
Gross profit 4 (3) - 48 - - 49
Operating
expenses (88) 6 (100) - - (4) (186)
================ ============= ============= ============= ========= ======= ====== =============
Operating profit 92 (9) 100 48 - 4 235
Total finance
costs,
net - - (3) - - - (3)
Non-operating
items - - - - - - -
================ ============= ============= ============= ========= ======= ====== =============
Profit before
taxes 92 (9) 103 48 - 4 238
Taxes 28 4 19 5 (118) 1 (61)
================ ============= ============= ============= ========= ======= ====== =============
Profit after
taxes 64 (13) 84 43 118 3 299
================ ============= ============= ============= ========= ======= ====== =============
Attributable to:
Shareholders 64 (13) 84 42 118 3 298
Non-controlling
interest - - - 1 - - 1
================ ============= ============= ============= ========= ======= ====== =============
Profit after
taxes 64 (13) 84 43 118 3 299
================ ============= ============= ============= ========= ======= ====== =============
Diluted earnings
per share (EUR) 0.14 (0.03) 0.19 0.09 0.26 0.01 0.66
================ ============= ============= ============= ========= ======= ====== =============
First Six Months Items impacting Comparability
2020
===============
Unaudited, in Restructuring Acquisition Inventory Mark-to-market Net Tax Impairment Other Total
millions of EUR Charges and step up effects ([5]) ([8]) ([6]) items
except share ([1]) Integration costs ([7]) impacting
data which is related ([4]) Comparability
calculated prior costs
to rounding ([3])
================ ============= =========== ========= ============== ======= ========== ====== ===============
Revenue - - - - - - - -
Cost of sales - - (48) - - - - (48)
================ ============= =========== ========= ============== ======= ========== ====== =============
Gross profit - - 48 - - - - 48
Operating
expenses (124) (100) - (6) - (116) (4) (350)
================ ============= =========== ========= ============== ======= ========== ====== =============
Operating profit 124 100 48 6 - 116 4 398
Total finance
costs, net - (3) - - - - - (3)
Non-operating
items - - - - - - (7) (7)
================ ============= =========== ========= ============== ======= ========== ====== =============
Profit before
taxes 124 103 48 6 - 116 11 408
Taxes 33 19 5 1 (37) 29 2 52
================ ============= =========== ========= ============== ======= ========== ====== =============
Profit after
taxes 91 84 43 5 37 87 9 356
================ ============= =========== ========= ============== ======= ========== ====== =============
Attributable
to:
Shareholders 91 84 42 5 37 62 9 330
Non-controlling
interest - - 1 - - 25 - 26
================ ============= =========== ========= ============== ======= ========== ====== =============
Profit after
taxes 91 84 43 5 37 87 9 356
================ ============= =========== ========= ============== ======= ========== ====== =============
Diluted earnings
per share (EUR) 0.20 0.18 0.09 0.01 0.08 0.14 0.02 0.72
================ ------------- ----------- --------- -------------- ------- ---------- ------ -------------
__________________________
([1]) Amounts represent restructuring charges related to
business transformation activities.
([2]) Amounts represent the impact of the closure of the GB
defined benefit pension scheme to future benefits accrual on 31
March 2021.
([3]) Amounts represent cost associated with the acquisition and
integration of API.
([4]) Amounts represent the non-recurring impact of the
provisional fair value step-up of API finished goods. For 2021,
these charges are included within the As Reported results. For
2020, these charges are included within Transaction accounting
adjustments.
([5]) Amounts include the deferred tax impact related to income
tax rate and law changes.
([6]) Amounts represent charges incurred prior to Acquisition
classified as non-trading items by API which are not expected to
recur.
([7]) Amounts represent the net out of period mark-to-market
impact of non-designated commodity hedges.
([8]) Amounts represent the charges recognised by API relating
to the impairment of Indonesia and Fiji during H1 2020.
Note 1: Adjustments to API's financial statements
The financial statements below illustrate the impact of
adjustments made to API's financial statements in order to present
them on a basis consistent with CCEP's accounting policies.
Historical Reclassifications Adjusted Historical
API ([1]) ([2]) API Adjusted
First Six Months 2020 API ([3])
========== ================= ======== ============
Unaudited, in millions of AUD (A$) AUD (A$) AUD (A$) EUR (EUR)
EUR
========================== ========== ================= ======== ============
Revenue - 2,231 2,231 1,335
Trading revenue 2,186 (2,186) - -
Cost of sales - (1,327) (1,327) (794)
Cost of goods sold (1,329) 1,329 - -
Delivery (107) 107 - -
========================== ========== ================= ======== ==========
Gross profit 750 154 904 541
Other revenues 19 (19) - -
Operating expenses (789) (122) (911) (546)
========================== ========== ================= ======== ==========
Operating profit (20) 13 (7) (5)
Finance income 17 - 17 10
Finance costs (50) - (50) (29)
========================== ========== ================= ======== ==========
Total finance costs, net (33) - (33) (19)
Non-operating items - (13) (13) (7)
========================== ========== ================= ======== ==========
Profit before taxes (53) - (53) (31)
Taxes - 5 5 3
Income tax expense 5 (5) - -
========================== ========== ================= ======== ==========
Profit after taxes (48) - (48) (28)
========================== ========== ================= ======== ==========
Attributable to:
Shareholders (9) - (9) (5)
Non-controlling interest (39) - (39) (23)
========================== ========== ================= ======== ==========
Profit after taxes (48) - (48) (28)
========================== ---------- ----------------- -------- ----------
__________________________
([1]) Historical income statement previously published by API
for the period 1 January 2020 to 26 June 2020.
([2]) Accounting policy and classification adjustments made to
API's income statement in order to present on a basis consistent
with CCEP.
([3]) API income statement has been translated from Australian
Dollars to Euros using the average exchange rate for the period of
0.5985.
Supplemental Financial Information - Operating Profit - Reported
to Comparable
Revenue
Second-Quarter Ended Six Months Ended
======================
Revenue CCEP 2 July 26 June % Change 2 July 26 June % Change
In millions of 2021 2020 2021 2020
EUR, except per
case data which
is calculated
prior to rounding.
FX impact calculated
by recasting current
year results at
prior year rates.
====================== ======== ======= ========== ====== ======= ==========
As reported 3,625 2,359 53.5% 5,918 4,837 22.5%
Adjust: Impact
of fx changes (48) n/a n/a (47) n/a n/a
Fx-neutral 3,577 2,359 51.5% 5,871 4,837 21.5%
Revenue per unit
case 4.84 4.55 6.5% 4.78 4.65 3.0%
Second-Quarter Ended Six Months Ended
======================
Revenue Europe 2 July 26 June % Change 2 July 26 June % Change
In millions of 2021 2020 2021 2020
EUR, except per
case data which
is calculated
prior to rounding.
FX impact calculated
by recasting current
year results at
prior year rates.
====================== ======== ======= ========== ====== ======= ==========
As reported 3,092 2,359 31.0% 5,385 4,837 11.5%
Adjust: Impact
of fx changes (34) n/a n/a (33) n/a n/a
Fx-neutral 3,058 2,359 29.5% 5,352 4,837 10.5%
Revenue per unit
case 4.84 4.55 6.5% 4.77 4.65 2.5%
Second-Quarter Ended Six Months Ended
======================
Revenue API 2 July 2021 26 June 2020 2 July 2021 26 June 2020
In millions of
EUR, except per
case data which
is calculated
prior to rounding.
FX impact calculated
by recasting current
year results at
prior year rates.
====================== =================== ============ =============== ==============
As reported 533 - 533 -
Adjust: Impact
of fx changes (14) n/a (14) n/a
Fx-neutral 519 - 519 -
Revenue per unit
case 4.89 - 4.89 -
Six Months Ended 2 July 2021
================================
Revenue by Geography As reported Reported Fx-Neutral
In millions of EUR % change % change
================================ ============= =========== ============
Great Britain 1,192 16.0% 15.0%
--------------------------------- ------------- ------ --------
Germany 1,091 7.5% 7.5%
--------------------------------- ------------- ------ --------
Iberia([1]) 1,069 16.5% 16.5%
--------------------------------- ------------- ------ --------
France([2]) 896 11.0% 11.0%
================================= ============= ====== ========
Belgium/Luxembourg 454 6.5% 6.5%
--------------------------------- ------------- ------ --------
Netherlands 266 6.5% 6.5%
================================= ============= ====== ========
Norway 200 0.5% (5.0)%
--------------------------------- ------------- ------ --------
Sweden 179 10.5% 5.0%
--------------------------------- ------------- ------ --------
Iceland 38 8.5% 8.5%
Total Europe 5,385 11.5% 10.5%
--------------------------------- ------------- ------ --------
Australia 328 n/a n/a
-------------------------------- ------------- ----------- ------------
New Zealand and Pacific Islands 85 n/a n/a
-------------------------------- ------------- ----------- ------------
Indonesia and Papua New Guinea 120 n/a n/a
-------------------------------- ------------- ----------- ------------
Total API 533 n/a n/a
Total CCEP 5,918 22.5% 21.5%
([1]) Iberia refers to Spain, Portugal & Andorra. ([2])
France refers to continental France & Monaco.
Volume
Second-Quarter Ended Six Months Ended
====================== ------------------------------ ---------------------------
Comparable Volume 2 July 26 June % Change 2 July 26 June % Change
- Selling Day 2021 2020 2021 2020
Shift CCEP
In millions of
unit cases, prior
period volume
recast using current
year selling days
====================== ========= ======= ========== ====== ======= ==========
Volume 738 519 42.0% 1,227 1,040 18.0%
Impact of selling
day shift n/a - n/a n/a 23 n/a
Comparable volume
- Selling Day
Shift adjusted 738 519 42.0% 1,227 1,063 15.5%
Second-Quarter Ended Six Months Ended
------------------------------ ---------------------------
Comparable Volume 2 July 26 June % Change 2 July 26 June % Change
- Selling Day 2021 2020 2021 2020
Shift Europe
In millions of
unit cases, prior
period volume
recast using current
year selling days
========= ======= ========== ====== ======= ==========
Volume 632 519 22.0% 1,121 1,040 8.0%
Impact of selling
day shift n/a - n/a n/a 23 n/a
Comparable volume
- Selling Day
Shift adjusted 632 519 22.0% 1,121 1,063 5.5%
Second-Quarter Ended Six Months Ended
====================== ------------------------------ --------------------------
Comparable Volume 2 July 26 June % Change 2 July 26 June % Change
- Selling Day 2021 2020 2021 2020
Shift API
In millions of
unit cases, prior
period volume
recast using current
year selling days
====================== ========= ======= ========== ======= ======= ========
Volume 106 - n/a 106 - n/a
Impact of selling
day shift n/a - n/a n/a - n/a
Comparable volume
- Selling Day
Shift adjusted 106 - n/a 106 - n/a
Cost of Sales
Six Months Ended
---------------------------
Cost of Sales 2 July 26 June % Change
In millions of EUR, except per case data 2021 2020
which is calculated prior to rounding.
FX impact calculated by recasting current
year results at prior year rates.
====== ======= ==========
As reported 3,840 3,168 21.0%
Adjust: Total items impacting comparability (49) - n/a
Comparable 3,791 3,168 19.5%
Adjust: Impact of fx changes (29) n/a n/a
Comparable & fx-neutral 3,762 3,168 19.0%
Cost of sales per unit case 3.07 3.05 0.5%
For the six months ending 2 July 2021, reported cost of sales
were EUR3,840 million, up 21.0% versus 2020, and include the impact
of a EUR48 million acquisition accounting fair value step up to API
finished goods at the time of the Acquisition that were sold during
May and June.
Comparable cost of sales for the same period were EUR3,791
million, up 19.5% versus 2020. Cost of sales per unit case
increased by 0.5% on a comparable and fx-neutral basis, reflecting
the impact of the newly acquired API operations, increased revenue
per unit case driving higher concentrate costs, emerging commodity
inflation and adverse mix, partially offset by the favourable
recovery of fixed manufacturing costs given higher volumes.
Operating expenses
Six Months Ended
---------------------------
Operating Expenses 2 July 26 June % Change
In millions of EUR. FX impact calculated 2021 2020
by recasting current year results at prior
year rates.
====== ======= ==========
As reported 1,558 1,401 11.0%
Adjust: Total items impacting comparability (122) (130) n/a
Comparable 1,436 1,271 13.0%
Adjust: Impact of fx changes (8) n/a n/a
Comparable & fx-neutral 1,428 1,271 12.5%
For the six months ending 2 July 2021, reported operating
expenses were EUR1,558 million, up 11.0% versus 2020.
Comparable operating expenses were EUR1,436 million for the same
period, up 13.0% versus 2020, reflecting the impact of the newly
acquired API operations and higher volumes, partially offset by the
benefit of on-going efficiency programmes & our continuous
efforts on discretionary spend optimisation.
Restructuring charges of EUR92 million were incurred in the six
month period ending 2 July 2021, which principally relate to
proposals announced in Iberia relating to productivity initiatives
for which EUR50 million of severance costs have been recorded. This
compares to restructuring charges of EUR124 million incurred in the
six month period ending 26 June 2020, related to the closure of
German distribution centres and a commerical restructuring
initiative related to vending operations and sales functions.
Acquisition and integration related costs of EUR43 million were
incurred in the six month period ending 2 July 2021 associated with
the acquisition of API, primarily related to brokerage and advisory
fees.
Operating profit
Six Months Ended
----------------------------
Operating Profit CCEP 2 July 26 June % Change
In millions of EUR. FX impact calculated 2021 2020
by recasting current year results at prior
year rates.
======= ======= ==========
As reported 520 268 94.0%
Adjust: Total items impacting comparability 171 130 n/a
Comparable 691 398 73.5%
Adjust: Impact of fx changes (10) n/a n/a
Comparable & fx-neutral 681 398 71.0%
Six Months Ended
----------------------------
Operating Profit Europe 2 July 26 June % Change
In millions of EUR. FX impact calculated 2021 2020
by recasting current year results at prior
year rates.
======= ======= ==========
As reported 505 268 88.5 %
Adjust: Total items impacting comparability 126 130 n/a
Comparable 631 398 58.5%
Adjust: Impact of fx changes (7) n/a n/a
Comparable & fx-neutral 624 398 57.0%
Six Months Ended
--------------------------
Operating Profit API 2 July 2021 26 June
In millions of EUR. FX impact calculated by recasting 2020
current year results at prior year rates.
=============== =========
As reported 15 -
Adjust: Total items impacting comparability 45 -
Comparable 60 -
Adjust: Impact of fx changes (3) -
Comparable & fx-neutral 57 -
Supplemental Financial Information - Operating Profit - Reported
to Pro forma Comparable
Revenue
Second-Quarter Ended Six Months Ended
====================== ----------------------------- ---------------------------
Pro forma Revenue 2 July 26 June % Change 2 July 26 June % Change
CCEP 2021 2020 2021 2020
In millions of
EUR, except per
case data which
is calculated
prior to rounding.
FX impact calculated
by recasting current
year results at
prior year rates.
====================== ======== ======= ========== ====== ======= ==========
As reported and
comparable 3,625 2,359 53.5% 5,918 4,837 22.5%
Add: Pro forma
adjustments 259 597 n/a 1,056 1,335 n/a
Pro forma Comparable 3,884 2,956 31.5% 6,974 6,172 13.0%
Adjust: Impact
of fx changes (67) n/a n/a (81) n/a n/a
Pro forma Comparable
and fx-neutral 3,817 2,956 29.0% 6,893 6,172 11.5%
Pro forma Revenue
per unit case 4.81 4.54 6.0% 4.78 4.64 3.0%
Second-Quarter Ended Six Months Ended
======================
Pro forma Revenue 2 July 26 June % Change 2 July 26 June % Change
API 2021 2020 2021 2020
In millions of
EUR, except per
case data which
is calculated
prior to rounding.
FX impact calculated
by recasting current
year results at
prior year rates.
====================== ======== ======= ========== ====== ======= ==========
As reported and
comparable 533 - n/a 533 - n/a
Add: Pro forma
adjustments 259 597 n/a 1,056 1,335 n/a
Pro forma Comparable 792 597 32.5% 1,589 1,335 19.0%
Adjust: Impact
of fx changes (33) n/a n/a (48) n/a n/a
Pro forma Comparable
and fx-neutral 759 597 27.0% 1,541 1,335 15.5%
Pro forma Revenue
per unit case 4.69 4.50 4.5% 4.80 4.61 4.0%
Second-Quarter Ended 2 July Six Months Ended 2 July
2021 2021
-----------------------------------------
Pro forma revenue Pro forma Pro forma Pro forma Pro forma Pro forma Pro forma
by Geography comparable comparable Fx-Neutral comparable comparable Fx-Neutral
In millions of % change % change % change % change
EUR
Europe 3,092 31.0% 29.5% 5,385 11.5% 10.5%
Australia 481 37.5% 27.5% 997 24.0% 16.5%
-------------------- ------------- ------- --- -------- ----------- -------- --------
New Zealand and
Pacific Islands 124 32.0% 24.5% 263 21.0% 17.0%
-------------------- ------------- ------- --- -------- ----------- -------- --------
Indonesia and Papua
New Guinea 187 22.0% 28.0% 329 4.5% 12.0%
Total API 792 32.5% 27.0% 1,589 19.0% 15.5%
Total CCEP 3,884 31.5% 29.0% 6,974 13.0% 11.5%
Volume
Second-Quarter Ended Six Months Ended
====================== ------------------------------ ---------------------------
Comparable Volume 2 July 26 June % Change 2 July 26 June % Change
- Selling Day 2021 2020 2021 2020
Shift CCEP
In millions of
unit cases, prior
period volume
recast using current
year selling days
====================== ========= ======= ========== ====== ======= ==========
Volume 738 519 42.0% 1,227 1,040 18.0%
Impact of selling
day shift n/a - n/a n/a 23 n/a
Comparable volume
- Selling Day
Shift adjusted 738 519 42.0% 1,227 1,063 15.5%
Pro forma impact([1]) 55 133 n/a 215 297 n/a
Pro forma comparable
volume 793 652 21.5% 1,442 1,360 6.0%
Second-Quarter Ended Six Months Ended
====================== ------------------------------ ----------------------------
Comparable Volume 2 July 26 June % Change 2 July 26 June % Change
- Selling Day 2021 2020 2021 2020
Shift API
In millions of
unit cases, prior
period volume
recast using current
year selling days
====================== ========= ======= ========== ======= ======= ==========
Volume 106 - n/a 106 - n/a
Impact of selling
day shift n/a - n/a n/a - n/a
Comparable volume
- Selling Day
Shift adjusted 106 - n/a 106 - n/a
Pro forma impact([1]) 55 133 n/a 215 297 n/a
Pro forma comparable
volume 161 133 21.0% 321 297 8.0%
([1]) Pro forma API volume for the six months ended 26 June 2020
is 289 million unit cases. Including the impact of the Q1 selling
day shift (8 million unit cases), pro forma comparable API volume
is 297 million unit cases.
Second-Quarter Ended Six Months Ended
======================= --------------------------------------- ---------------------------------------
2 July 2021 26 June % Change 2 July 2021 26 June % Change
2020 2020
Pro forma Comparable % of Total % of Total % of Total % of Total
Volume by Brand
Category CCEP
Adjusted for selling
day shift
======================= ============= ============ ============= ============
Sparkling 84.5% 87.0% 18.5% 84.5% 84.5% 6.0%
Coca-Cola(TM) 58.5% 61.5% 16.0% 59.0% 60.0% 4.5%
Flavours, Mixers
& Energy 26.0% 25.5% 24.5% 25.5% 24.5% 10.0%
Stills 15.5% 13.0% 45.0% 15.5% 15.5% 5.5%
Hydration 7.5% 6.5% 45.0% 7.5% 8.0% (1.0)%
RTD Tea, RTD Coffee,
Juices & Other([1]) 8.0% 6.5% 45.0% 8.0% 7.5% 13.0%
Total 100.0% 100.0% 21.5% 100.0% 100.0% 6.0%
________________________
([1]) RTD refers to Ready-To-Drink.
Cost of Sales
Six Months Ended
---------------------------
Pro forma Cost of Sales 2 July 26 June % Change
In millions of EUR, except per case data 2021 2020
which is calculated prior to rounding.
FX impact calculated by recasting current
year results at prior year rates.
====== ======= ==========
As reported 3,840 3,168 21.0%
Add: Pro forma adjustments 616 794 n/a
Adjust: Acquisition accounting 2 52
Adjust: Total items impacting comparability (49) (48)
Pro forma Comparable 4,409 3,966 11.0%
Adjust: Impact of fx changes (47) n/a n/a
Pro forma Comparable & fx-neutral 4,362 3,966 10.0%
Cost of sales per unit case 3.02 2.98 1.5%
Pro forma Comparable cost of sales for the six months ending 2
July 2021 were EUR4,409 million, up 11.0% versus 2020. Cost of
sales per unit case increased by 1.5% on a comparable and
fx-neutral basis, driven by an increase in concentrate in line with
our incidence model reflecting the improvement in revenue per unit
case. There was also upward pressure on commodities and adverse
mix, partially offset by the favourable recovery of fixed
manufacturing costs given higher volumes.
Operating Expenses
Six Months Ended
---------------------------
Pro forma Operating Expenses 2 July 26 June % Change
In millions of EUR. FX impact calculated 2021 2020
by recasting current year results at prior
year rates.
====== ======= ==========
As reported 1,558 1,401 11.0%
Add: Pro forma adjustments 323 546 n/a
Adjust: Acquisition accounting 68 111
Adjust: Total items impacting comparability (186) (350)
Pro forma Comparable 1,763 1,708 3.0%
Adjust: Impact of fx changes (19) n/a n/a
Pro forma Comparable & fx-neutral 1,744 1,708 2.0%
Pro forma Comparable operating expenses for the six months
ending 2 July 2021 were EUR1,763 million, up 3.0% versus 2020,
reflecting higher volumes, partially offset by the benefit of
on-going efficiency programmes & further supported by a
reduction in discretionary spend, implemented to protect the
business in response to the pandemic in areas such as trade
marketing, procurement, travel & meetings.
Operating Profit
Six Months Ended
---------------------------
Pro forma Operating Profit CCEP 2 July 26 June % Change
In millions of EUR. FX impact calculated 2021 2020
by recasting current year results at prior
year rates.
====== ======= ==========
As reported 520 268 94.0%
Add: Pro forma adjustments 117 (5) n/a
Adjust: Acquisition accounting (70) (163)
Adjust: Total items impacting comparability 235 398
Pro forma Comparable 802 498 61.0%
Adjust: Impact of fx changes (15) n/a n/a
Pro forma Comparable & fx-neutral 787 498 58.0%
Six Months Ended
---------------------------
Pro forma Operating Profit API 2 July 26 June % Change
In millions of EUR. FX impact calculated 2021 2020
by recasting current year results at prior
year rates.
====== ======= ==========
As reported 15 - n/a
Add: Pro forma adjustments 117 (5) n/a
Adjust: Acquisition accounting (70) (163)
Adjust: Total items impacting comparability 109 268
Pro forma Comparable 171 100 71.0%
Adjust: Impact of fx changes (8) n/a n/a
Pro forma Comparable & fx-neutral 163 100 63.0%
Supplemental Financial Information - Effective Tax Rate
The effective tax rate was 46% and 40% for the six months ended
2 July 2021 and 26 June 2020, respectively, and 28% for the years
ended 31 December 2020.
For the six months ending 2 July 2021, the effective tax rate
includes a EUR118 million impact related to the revaluation of
deferred tax positions due to an increase in the UK statutory
income tax rate from 19% to 25% effective from 1 April 2023 that
was enacted during the first half of 2021.
We expect our full year 2021 comparable effective tax rate to be
approximately 20% (2020: 24%). The expected reduction from 2020 is
largely due to the utilisation of previously unrecognised losses
and reassessment of uncertain tax positions.
Supplemental Financial Information - Free Cash Flow
Six Months Ended
================================================= --------------------
Free Cash Flow 2 July 26 June
In millions of EUR 2021 2020
================================================= ========= =========
Net cash flows from operating activities 908 353
Less: Purchases of property, plant and equipment (115) (241)
Less: Purchases of capitalised software (42) (33)
Less: Interest paid, net (58) (59)
Add: Proceeds from sales of property, plant and
equipment 20 35
Less: Payments of principal on lease obligations (65) (60)
Free Cash Flow 648 (5)
Supplemental Financial Information - Borrowings
As at
================================= --------------------
2 July 31 December Credit Ratings Moody's Fitch Ratings
2021 2020 As of 1
Net Debt September
In millions of EUR 2021
================================= ======= =========== ======= =============
Long-term
Total borrowings 13,558 7,187 rating Baa1 BBB+
Fair value asset/liability
of hedges related
to borrowings ([1]) 20 36 Outlook Stable Stable
Note: Our credit ratings can
be materially influenced by
a number of factors including,
but not limited to, acquisitions,
investment decisions and working
capital management activities
of TCCC and/or changes in the
credit rating of TCCC. A credit
rating is not a recommendation
to buy, sell or hold securities
and may be subject to revision
Other financial liabilities([1]) 39 - or withdrawal at any time.
Adjusted total borrowings 13,617 7,223
Less: cash and cash
equivalents([2]) (1,824) (1,523)
Net debt 11,793 5,700
______________________
([1]) Following the acquisition of CCL, Net Debt includes
adjustments for the fair value of derivative instruments used to
hedge both currency and interest rate risk on the Group's
borrowings. As at 31 December 2020, the Group did not hold interest
rate hedging instruments and adjusted Net Debt only for currency
impacts. In addition, Net Debt also includes other financial
liabilities relating to cash collateral pledged by external parties
on hedging instruments related to borrowings.
([2]) The cash and cash equivalents as at 2 July 2021 includes
EUR82 million of cash assets in Papua New Guinea Kina, Presently,
there are government-imposed currency controls which impact the
extent to which the cash held in Papua New Guinea can be converted
into foreign currency and remitted for use elsewhere in the
Group.
Supplemental Financial Information - Adjusted EBITDA
Six Months Ended
=============================================== -----------------------------
Adjusted EBITDA 2 July 2021 26 June 2020
In millions of EUR
=============================================== ============= ==============
Reported profit after tax 246 126
Taxes 209 85
Finance costs, net 64 55
Non-operating items 1 2
Reported operating profit 520 268
Depreciation and amortisation([1]) 342 332
Reported EBITDA 862 600
Items impacting comparability
Mark-to-market effects([2]) - 6
Restructuring charges([3]) 71 95
Defined benefit plan closure([4]) (9) -
Acquisition and Integration related costs([5]) 40 -
Inventory step up costs([6]) 48 -
Adjusted EBITDA 1,012 701
______________________
([1]) Includes the depreciation and amortisation impact relating
to provisional fair values for intangibles and property plant and
equipment.
([2]) Amounts represent the net out of period mark-to-market
impact of non-designated commodity hedges.
([3]) Amounts represent restructuring charges related to
business transformation activities, excluding accelerated
depreciation included in the depreciation and amortisation
line.
([4]) Amounts represent the impact of the closure of the GB
defined benefit pension scheme to future benefits accrual on 31
March 2021.
([5]) Amounts represent cost associated with the acquisition and
integration of API.
([6]) Amounts represent the non-recurring impact of the
provisional fair value step-up of API finished goods.
Six Months Ended
=============================================== ---------------------------
Pro forma Adjusted EBITDA 2 July 2021 26 June 2020
In millions of EUR
=============================================== =========== ==============
Reported profit after tax 246 126
Taxes 209 85
Finance costs, net 64 55
Non-operating items 1 2
Reported operating profit 520 268
Pro forma adjustments API([1]) 117 -
Historical adjusted API([2]) - (5)
Transaction accounting adjustments([3]) (70) (163)
Pro forma Combined operating profit 567 100
Depreciation and amortisation([4]) 418 454
Pro forma EBITDA 985 554
Items impacting comparability
Mark-to-market effects([5]) - 6
Restructuring charges([6]) 71 95
Defined benefit plan closure ([7]) (9) -
Acquisition and Integration related costs([8]) 100 100
Inventory step up costs([9]) 48 48
Impairment([10]) - 116
Other([11]) 4 4
Pro forma adjusted EBITDA 1,199 923
______________________
([1]) Amounts represent adjustments to include API financial
results prepared on a basis consistent with CCEP accounting
policies, as if the Acquisition had occurred on 1 January 2021 and
excludes API acquisition and integration related costs.
([2]) Amounts represent adjustments to reflect API financial
results as if the Acquisition had occurred on 1 January 2020. The
impact of adjustments made to API's historical financial statements
in order to present them on a basis consistent with CCEP's
accounting policies is provided in Note 1.
([3]) Amounts represent transaction accounting adjustments for
the period 1 January to 10 May as if the Acquisition had occurred
on 1 January 2021.
([4]) Includes the depreciation and amortisation impact relating
to provisional fair values for intangibles and property plant and
equipment.
([5]) Amounts represent the net out-of-period mark-to-market
impact of non-designated commodity hedges.
([6]) Amounts represent restructuring charges related to
business transformation activities, excluding accelerated
depreciation included in the depreciation and amortisation
line.
([7]) Amounts represent the impact of the closure of the GB
defined benefit pension scheme to future benefits accrual on 31
March 2021.
([8]) Amounts represent costs associated with the acquisition
and integration of API.
([9]) Amounts represent the non-recurring impact of the
provisional fair value step-up of API finished goods.
([10]) Amounts represent the charges recognised by API relating
to the impairment of Indonesia and Fiji during H1 2020.
([11]) Amounts represent charges incurred prior to Acquisition
classified as non-trading items by API which are not expected to
recur.
Principal Risks and Risk Factors
The principal risks and risk factors in our 2020 Integrated
Report on Form 20-F for the year ended 31 December 2020 ('2020
Integrated Report') (pages 44 to 50 and 188 to 197 respectively)
continue to represent our risks. On 10 May 2021, we completed the
acquisition of Coca-Cola Amatil, expanding our geographic footprint
into territories in Australia, Pacific and Indonesia ('API'). We
have reassessed our risk profile following the acquisition and,
while there are no changes to CCEP's Principal Risks, there are
additional Risk Factors to consider now that we operate in the API
region, including our exposure to the consequences of changing
climatic conditions, limited plastic waste collection and recycling
infrastructure in developing markets, and workplace health and
safety risks (particularly in relation to traffic accidents in
Indonesia). In addition, COVID-19 and the related response measures
continue to cause disruption in our markets, particularly in
Indonesia where confirmed infections remain high. In response to
the pandemic, our operational resilience has strengthened and we
have demonstrated our ability to continue our operations through
the pandemic. However, the reliance on the effectiveness and
take-up of vaccines to mitigate the impact of living with COVID,
including in Australia and New Zealand, and risk of further waves
or new variants of the virus remains. Accordingly, the information
and the changes to our principal risks and risk factors shown below
update and supplement the Principal Risks and Risk Factors in our
2020 Integrated Report, and any or all of the Principal Risks and
Risk Factors contained therein may be exacerbated by further
developments in the COVID-19 pandemic.
The risks described in this report and in our 2020 Integrated
Report are not the only risks facing the Group. Additional risks
and uncertainties not currently known to us or that we currently
deem to be immaterial may also materially adversely affect our
business, financial condition or future results.
Acquisition of Coca-Cola Amatil
On 10 May 2021, CCEP successfully acquired Coca-Cola Amatil. The
acquisition adds new geographic footprint to our business across
Australia, New Zealand, Indonesia, Papua New Guinea (PNG) and 12
islands in the Pacific, including Fiji and Samoa. These territories
together form the API business unit. General risks that may impact
the API business are consistent with the broader CCEP principal
risks and risk factors.
The risk factors set forth in our 2020 Integrated Report (pages
188 to 197) are updated and supplemented with the additional
information set forth below. The risks described herein should be
carefully considered together with the risks described in our 2020
Integrated Report.
1. Packaging
Waste and pollution, and the legal and regulatory responses to
these issues, could adversely impact our business.
New recycling technologies may not work or may not be developed
quickly enough
Reducing the impact our packaging has on the environment is at
the heart of our packaging strategy. CCEP now operates in
developing markets with limited plastic waste collection and
recycling infrastructure which has the potential to increase the
footprint of our packaging in those markets, which could result in
higher packaging costs, damage to corporate reputation or investor
confidence and a reduction of consumer acceptance of our products
and packaging.
2. Economic and political conditions
The deterioration of global and local economic conditions could
adversely affect CCEP's business performance and share price.
Political instability could negatively impact our operations and
profits.
Ongoing economic instability in PNG has the potential to impact
both (i) CCEP's ability to access funds held in PNG, where foreign
currency availability may inhibit CCEP's ability to access these
funds promptly, and (ii) the valuation of those funds. In the event
that circumstances lead to the PNG government requiring assistance
from the International Monetary Fund for the funding of its budget
deficit, the Papua New Guinean Kina may be devalued, which could
impact CCEP's financial position.
3. Climate change and water`
Global issues such as climate change, resource and water
scarcity, and the legal and regulatory responses to these issues,
could adversely impact our business.
The physical manifestations of climate change relating to
changing climatic conditions have the potential to impact CCEP in
the API region. Climate change effects that have the potential to
impact API include changes in weather patterns, such as increased
temperatures, altered rainfall patterns, and more frequent or
intense extreme events such as heatwaves, drought, storms and
increased frequency of natural disasters. These may cause major
business disruption, increased energy costs, and key input scarcity
(such as water, sugar, and other agricultural ingredients), which
could adversely affect our financial condition, results of
operations, or brand reputation.
4. People and wellbeing
Our people could be injured in the course of their work relating
to our operations, exposing us to the risk of lost-time injuries
and litigation.
While CCEP has historically experienced low levels of lost-time
injuries, the risk of serious injury through industrial and traffic
accidents, particularly in Indonesia, remains in all markets due to
the nature of the manufacturing and distribution business. Serious
or numerous injuries experienced by our employees or as a result of
our operations could result in increased costs, including costs
resulting from lost time as well as potential litigation and
regulatory compliance costs, and reputational harm.
5. Competitiveness and Business Transformation
We may not be able to reduce our total net debt within the
timeframe to which we have committed following the acquisition of
Coca-Cola Amatil, or at all.
We funded the acquisition cost of Coca-Cola Amatil through bond
issuances, which has increased our debt leverage from approximately
3 times net debt to adjusted EBITDA at 31 December 2020 to
approximately 5 times on closure of the transaction. CCEP may be
downgraded by the ratings agencies, Moody's and Fitch, if its
operating performance does not show improvement in 2021, and/or if
it deviates from its deleveraging commitment and does not return to
its medium term target leverage range of 2.5 to 3 times within 3
years. In the event that our debt rating is downgraded, we may not
be able to access capital on acceptable terms or at all.
6. Other risks
Fraud, bribery and corruption have the potential to harm our
reputation and culture.
Fraudulent activity in our business and operations has the
potential to create negative reputational and cultural impacts.
While the company believes its management and compliance framework
is vigilant in discouraging and preventing fraudulent activity,
bribery and corruption risks exist in all CCEP's markets, and
particularly in our developing markets (Indonesia and PNG). If we
are unsuccessful in detecting and preventing fraudulent activity,
we may face increased costs, including compliance and legal costs,
and reputational harm.
COVID-19 Pandemic
The impacts of the COVID-19 pandemic and related response
measures have had and may continue to have an adverse effect on
global economic conditions, as well as on our business, results of
operations, cash flows and financial condition. While some
restrictions have eased in certain of our markets, vaccination
programmes are in place, and certain of our markets have started to
open, we still see volatility in many of our territories,
particularly in relation to the imposition of further lockdowns and
outlet restrictions. It also has negatively impacted and may
continue to impact our suppliers and customers.
Since the onset of the COVID-19 pandemic in March 2020, the
scale and magnitude of the pandemic and related response measures
have decreased but remain subject to change, often on short notice,
and differ significantly among our markets. To date, the impacts on
our business from the COVID-19 pandemic and related response
measures have included, and continue to include, but are not
limited to, social distancing measures (including the closure of
away from home channels such as hotels, bars and restaurants, and
restrictions on large events or gatherings) having been introduced
in most of our markets in 2020 and reintroduced at various times
since, leading to a negative impact on sales; travel restrictions
imposed by many countries resulting in a steep drop in passenger
numbers and a significant decline in tourism; regulatory
restrictions, safety protocols and heightened sanitation measures
resulting in reductions in levels of activity at certain of our
production sites and offices; and disruptions in supply chains and
routes to market, or those of our suppliers and/or distributors,
which could result in an increase in our costs of production and
distribution.
Regions that are beginning to experience business recovery or
the scaling back of response measures may experience further
impacts from COVID-19 or suffer a resurgence of COVID-19 cases,
including due to the increasing prevalence of new variants of
COVID-19, and economic activity in those regions may not recover
quickly or at all, which may materially adversely impact our
business. This could in turn lead to a further decline in
discretionary spending by consumers. The impacts of the COVID-19
pandemic and related response measures, in particular with respect
to expectations of future cash flows, may result in our recognition
of material write-downs or impairments in future periods.
The impact of the COVID-19 pandemic on global economic
conditions has impacted and may continue to impact the proper
functioning of financial and capital markets, as well as foreign
currency exchange rates, commodity and energy prices and interest
rates. Responses to the COVID-19 pandemic may also result in both
short-term and long-term changes to fiscal and monetary policies in
impacted jurisdictions, including increases in tax rates. Although
our cash position is strong at the end of the first half of 2021
after successful bond issuances of approximately EUR6 billion
relating to the acquisition of Coca-Cola Amatil, with a committed
bank facility of EUR1.95 billion and access to other funding
resources to enhance our liquidity (including commercial paper,
bilateral bank facilities and accessing the bond market), there is
no guarantee that our existing arrangements or any future
arrangements will provide sufficient liquidity to support our
operations and business plan over the course of the COVID-19
pandemic. We may take other actions to enhance our liquidity,
including entering into new committed bank facilities, but there is
no guarantee that our existing arrangements or any future
arrangements will provide sufficient liquidity over the course of
the COVID-19 pandemic to support our operations and business plan.
As a result, the impacts of the COVID-19 pandemic and related
response measures may adversely impact our liquidity or financial
position. In particular, a continuation or worsening of the levels
of market disruption and volatility seen early in the pandemic
could have an adverse effect on our ability to access, or costs of,
capital or borrowings, our liquidity, and our financial
position.
Normal business operations after the disruptions caused by the
COVID-19 pandemic may be delayed or constrained by its lingering
effects on our business, customers, consumers, suppliers and
third-party service providers. COVID-19 has also caused significant
stress on the global supply chain, which has placed increased
pressure on CCEP's ability to source key goods and services at
advantageous prices and on a timely basis. In addition, we may
experience reputational harm as a result of our response to the
COVID-19 pandemic, including with respect to our ability to fulfill
contractual obligations.
Any of these negative impacts, alone or in combination with
others, may have a material adverse effect on our results of
operations, financial condition and cash flows. The full extent to
which the COVID-19 pandemic will affect our results of operations,
financial condition and cash flows will depend on future
developments that are highly uncertain and cannot be predicted,
including the scope and duration of the pandemic and actions taken
by governmental authorities and other third parties in response to
the pandemic.
SUMMARY OF OUR PRINCIPAL RISKS
The following is a summary of the Group's updated Principal
Risks in alphabetical order:
Risk change legend: Increased Decreased -> Stayed the
same
Principal Definition and impact Key Mitigation Change
Risk vs 2020
Integrated
Report
=================== =================================== ======================================= ===========
Business Our business is vulnerable -- Continually updating ->
continuity to a range of risks that our response to the situation
and resilience may materialise and cause and our people's needs
disruption. These include -- Customers: working closely
threats and risks such with suppliers, partners
as physical attacks (e.g. and The Coca-Cola Company
terrorism) and cyber attacks, (TCCC) to ensure we best
IT system outages and serve our customers and
supplier failure as well respond to their needs
as natural hazards such -- Communities: working
as fire, flood, severe closely with TCCC to support
weather and pandemics. our communities
Working with teams across -- Governance: strong frameworks,
the business, we develop business continuity plans,
business continuity plans incident management teams,
and resilience arrangements strategic business continuity
to ensure the delivery scenario testing, risk reassessments
of our products and services used in business planning,
no matter what the cause increased frequency of reviews
of disruption. This is with country leadership
to protect our people, teams, Board and TCCC incorporating
our environment, our reputation learnings from the Coca-Cola
and our overall financial system
condition. In some cases, -- Effective management
such as the current COVID-19 of liquidity, costs and
pandemic, health, economic discretionary spend
and legal effects could -- Operational, technology
have a direct or indirect and strategic resilience
impact on our ability towers developed as part
to operate of our newly created business
continuity and resilience
strategy to enable further
resilience and risk mitigation
for CCEP
-- Training and awareness
to build Business Continuity
and Resilience (BCR) capabilities
throughout CCEP to improve
buy in and skills when it
comes to preparing for and
responding to incidents
-- Business impact analysis
(BIA) to analyse and identify
critical people (roles),
property, technology, equipment
and suppliers (value chain)
across CCEP and their associated
maximum acceptable outages,
recovery time objectives
and recovery point objectives
-- Scenario planning exercise
with stakeholders across
facilities and functions
to determine scenarios that
could lead to the unavailability
of critical dependencies
identified in the BIA and
the associated impacts if
the scenarios were to occur
-- Business Continuity Plan(BCP)
development with colleagues
across the business to mitigate
risks identified during
the BIA, scenario planning
and risk assessment and
having them available to
use in following waves
-- Risk assessments to identify
the likelihood and impact
of identified scenarios
occurring, enabling BCPs
to be developed in a targeted,
meaningful way
-- Testing and exercising
to validate BCPs are effective,
giving teams capabilities
to respond to incidents
that may occur, through
table top and live simulated
exercises with stakeholders
across CCEP, within sites
and functions
=================== =================================== ======================================= ===========
Climate change Political and scientific -- Set science based carbon ->
and water consensus indicates that reduction targets for our
increased concentrations core business operations
of carbon dioxide and and our value chain
other Greenhouse Gases -- Carbon reduction plans
(GHGs) are causing climate for our production facilities,
change and exacerbating distribution and Cold Drink
water scarcity. Such GHG Equipment (CDE)
emissions occur across -- Supplier carbon footprint
our entire value chain reduction programme launched
including our production in support of CCEP's 2040
facilities, cold drink net zero ambition with focus
equipment and transportation. on suppliers setting Science
GHG emissions also occur Based Targets initiative
as a result of the packaging (Science Based Targets initiative
we use and ingredients SBTi) targets and using
we rely on. Our ingredients 100% renewable electricity
and production facilities by 2023
also rely heavily on the -- Transition to 100% renewable
availability of water. electricity
This exposes us to the -- External policy leadership
risk of negative impacts and advocacy to support
related to our ability a transition to a low-carbon
to produce or distribute economy
our products, or the availability -- Life cycle analysis to
and price of agricultural assess carbon footprint
ingredients and raw materials of packaging formats
as a result of increased -- Use of recycled materials
water scarcity. for our packaging, which
Failure to address these have a lower carbon footprint
risks may cause damage -- Source Vulnerability
to our corporate reputation Assessments (SVAs) to protect
or investor confidence, future sustainability of
a reduction in consumer local water sources and
acceptance of our products Facility Water Vulnerability
and potential disruption Assessments (FAWVA) and
to our operations. water management plans
-- Supplier engagement on
carbon reduction and sustainable
water use
-- Assessment on climate
related risks and future
climate scenario planning
-- Comprehensive disclosure
of GHG emissions across
our value chain in line
with GHG Protocol
=================== =================================== ======================================= ===========
Competitiveness We are continuing our -- Regular competitiveness ->
business strategy of assessing reviews ensuring effective
transformation potential opportunities steering, high visibility
and integration for continuous improvements and quick decision making
that would enable us to -- Dedicated programme management
stay competitive in the office and effective project
future. The impact of management methodology
COVID-19 has accelerated -- Continuation and strengthening
the urgency for assessing of governance routines
potential opportunities -- Regular Executive Leadership
and taking appropriate Team (ELT) and Board reviews
action. This includes and approvals of progress
technology transformation, and issue resolution
including to support increased -- Analysis and review of
working from home, continuous acquisition related activities
supply chain improvements such as integration and
and improvements in the business performance risk
way we work with our partners indicators and capital allocation
and franchisors, and more risk reviews
recently our acquisition -- Support our employees
of CCL. This exposes us with wellbeing initiatives
to the risk of ineffective to manage change fatigue
coordination between BUs
and central functions,
change fatigue in our
people and social unrest.
As a result, we may not
create the expected value
from these initiatives
or execute our business
plans effectively. We
may also experience damage
to our corporate reputation,
a decline in our share
price, industrial action
and disruption to our
operations
=================== =================================== ======================================= ===========
Cyber and We rely on a complex IT -- Proactive monitoring ->
social engineering landscape, using both of cyber threats and implementing
attacks and internal and external preventive measures
IT infrastructure systems, including some -- Business awareness and
systems that are outside training on information
our direct control where security and data privacy
employees work from home. -- Business continuity and
These systems are potentially disaster recovery programmes
vulnerable to adversarial -- A programme to identify
and accidental security and resolve vulnerabilities
and cyber threats, as -- Third party risk assessments
well as user behaviour. -- Corporate security business
This threat profile is intelligence
dynamically changing, -- Appropriate investment
including as a result in updating system
of the COVID-19 pandemic, -- Hardware lifecycle process
as potential attackers' in place
skills and tools advance.
This exposes us to the
risk of unauthorised data
access, compromised data
accuracy and confidentiality,
the loss of system operation
or fraud. As a result,
we could experience disruption
to operations, financial
loss, regulatory intervention,
or damage to our reputation.
=================== =================================== ======================================= ===========
Economic Our industry is sensitive -- Diversified product portfolio
and political to economic conditions and the geographic diversity
conditions such as commodity and of our operations assist
currency price volatility, in mitigating our exposure
inflation, political instability to any localised economic
(for example, Brexit), risk
lack of liquidity and -- Our flexible business
funding resources, widening model allows us to adapt
of credit risk premiums, our portfolio to suit our
unemployment and furlough, customers' changing needs
and consumer confidence during economic downturns
or the impact of the widespread -- We regularly review our
outbreak of infectious business results and cash
disease such as COVID-19. flows and, where necessary,
This exposes us to the rebalance capital investments
risk of an adverse impact -- Following the Brexit
on CCEP and our consumers, deal on the 24 December
driving a reduction of 2020, which took effect
spend within our category from 11pm GMT on 31 December
or a change in consumption 2020, we continue to monitor
channels and packs. As developments to ensure the
a result, we could experience business is prepared to
reduced demand for our manage emerging situations
products, fail to meet -- Monitoring of societal
our growth priorities developments
and our reputation could -- Hedging programmes
be adversely impacted.
Adverse economic conditions
could also lead to increased
customer and supplier
delinquencies and bankruptcies,
while restrictions on
the movement of goods
in response to economic,
political or other conditions,
such as COVID-19, could
affect our supply chain.
=================== =================================== ======================================= ===========
Legal, regulatory Our daily operations are -- Continuous monitoring
and tax change subject to a broad range of new changing regulations
of regulations at EU and and appropriate implementation
national level. These of adequate mitigations
include regulations covering -- Dialogue with government
manufacturing, the use representatives and input
of certain ingredients, to public consultations
packaging, labelling requirements, on new or changing regulations
and the distribution and -- Effective compliance
sale of our products. programmes and training
This exposes us to the for employees
risk of legal, regulatory -- Measures set out elsewhere
or tax changes that may in this table in relation
adversely impact our business. to legal, regulatory and
As a result, we could tax changes with respect
face new or higher taxes, to any of the other principal
higher labour and other risks, and in particular
costs, stricter sales in relation to packaging,
and marketing controls, perceived health impact
or punitive or other actions of our beverages and ingredients,
from regulators or legislative and changing consumer preferences
bodies that negatively -- Increasing recycled content
impact our financial results, level in specific countries
business performance or to mitigate tax impact
licence to operate. COVID-19
has resulted in both short-term
and long-term changes
to legislation and regulation.
It may also lead to future
increases in taxes to
finance the cost of government
responses to COVID-19.
In addition to the changes
that took immediate effect
from 11pm GMT on 31 December
2020, we expect Brexit
could, over time, lead
to increased diversity
of regulation and consequent
costs of compliance including
inability to or difficulties
in standardising product
and process between the
UK and CCEP's other markets.
=================== =================================== ======================================= ===========
Market Our success in the market -- Shopper insights and ->
depends on a number of price elasticity assessments
factors. These include -- Pack and product innovation
actions taken by our competitors, -- Promotional strategy
route to market, our ability -- Commercial policy
to build strong customer -- Collaborative category
relationships and create planning with customers
value together (which -- Growth centric customer
could be affected by customer investment policies
consolidation, buying -- Business development
groups, and the changing plans aligned with our customers
customer landscape) and -- Diversification of portfolio
government actions, including and customer base
those introduced as a -- Realistic budgeting routines
result of COVID-19 such and targets
as social distancing, -- Investment in key account
the forced closure of development and category
some of our customer channels, planning
restricted tourism and -- Continuous evaluation
restrictions on large and updating of mitigation
gatherings. This exposes Plans
us to the risk that market -- Responded to COVID-19
forces may limit our ability by developing and investing
to execute our business in new routes to market,
plans effectively. As for example, online channel,
a result, it may be more so our products remain available
challenging to expand to consumers
margins, increase market
share, or negotiate with
customers effectively,
and COVID-19 may also
further adversely impact
the market in previously
unforeseen ways.
=================== =================================== ======================================= ===========
Packaging Due to concerns, and those -- Continued sustainability ->
of our stakeholders about action plan focused on packaging,
the environmental impacts including our commitments
of litter and GHG emissions, to:
our packaging (especially - Ensure that 100% of our
single use plastic packaging) primary packaging is recyclable
is under increasing scrutiny or refillable
from regulators, consumers, - Drive higher collection
customers, and Non-Governmental rates, aiming to ensure
Organisations (NGOs). that 100% of our packaging
As a result, we may have is collected for reuse or
to change our packaging recycling
strategy and mix over - Ensure that by 2023 at
both the short and long least half of the material
term. This could result we use for our PET bottles
in a reduction in the comes from recycled plastic,
use of single use plastic achieving 100% by 2030
packaging and the introduction -- Work with TCCC to explore
of new pack formats such alternative sources of rPET
as dispensed and refillable and innovative new packaging
packaging, and we may materials
be liable for increased -- Work with TCCC to encourage
costs related to the design, consumers to recycle their
collection, recycling packaging using existing
and littering of our packaging. collection infrastructure
We may be unable to respond -- Cross functional Sustainable
in a cost effective manner Packaging Office (SPO) with
and our reputation may a dedicated focus on packaging
be adversely impacted. collection and to ensure
all sustainable packaging
strategies are implemented
on time
-- Support for well-designed
Deposit Return Scheme (DRS)
across our markets as a
route to 100% collection
and increased availability
of rPET
-- Work to expand delivery
mechanisms that do not rely
on single use packaging,
for example refillable packaging
and dispensed delivery
-- Investment in enhanced
recycling technology
-- We continue to develop
the business models for
packaging-less solutions
(such as Freestyle) to provide
an alternative offering
for customers who do not
want to use packaging
-- We also continue to develop
the business models for
refillable packaging to
provide an alternative offering
for customers who want fully
circular alternatives to
single use packaging
-- Increase use of recycled
content in films
-- Moving from hard to recycle
plastic shrink to sustainable
board for multi packs
=================== =================================== ======================================= ===========
People and The direct and indirect -- CCEP Code of Conduct ->
wellbeing effects of the nature (CoC)
our business operations -- Regular communication
and COVID-19 may impact -- Employee Assistance Programme
our people, their health (EAP)
and wellbeing and working -- Flexible working
conditions. Our response -- Working from home
may affect the perception -- Safety measures
of CCEP as an employer -- Appropriate incentivisation
and our ability to attract, -- Talent reviews
retain and motivate existing -- Tools for employees to
and future employees, take ownership of careers
which exposes us to the -- People related training
risk of not having the and reskilling, risk assessments,
right talent, required action plans and compliance
technical skillset, or -- Manager training to help
expected levels of productivity. identify stress
As a result, we could -- Wellbeing material available
fail to achieve our strategic to managers and employees
objectives and could experience via CCEP platforms to support
a decline in employee our employees
engagement, industrial -- Human rights policy
action, suffer from reputational
damage or litigation.
CCEP is committed to ensuring
that everyone working
throughout our operations
and within our supply
chain is treated with
dignity and respect.
=================== =================================== ======================================= ===========
Perceived We make and distribute -- Reducing the sugar content ->
health impact products containing sugar of our soft drinks, through:
of our beverages and alternative sweeteners. - Product and pack innovation
and ingredients, Healthy lifestyle campaigns, and reformulation
and changing increased media scrutiny - Managing our product mix
consumer and social media have to increase low and no calorie
buying trends led to an increasingly products
negative perception of -- Making it easier for
these ingredients among consumers to cut down on
consumers. This exposes sugar by providing straightforward
us to the risk that we product information and
will be unable to evolve smaller pack sizes
our product and packaging -- EU wide soft drink industry
choices quickly enough calorie reduction commitment
to satisfy changes in with the Union of European
consumer preferences. Soft Drinks Associations
We will also face new (UNESDA)
pressure from the EU Commission -- Adopting calorie and
with the Farm to Fork sugar reduction commitments
Strategy, at the heart at country level
of the European Green -- Dialogue with government
Deal, aiming to make food representatives, NGOs, local
systems fair, healthy communities and customers
and environmentally friendly. -- Employee communication
As a result, we could and education
experience sustained decline -- Responsible sales and
in sales volume, which marketing codes
could impact our financial -- Proactive introduction
results and business performance. of colour coded front of
pack guideline daily amount
labelling as a fact based
and non-discriminatory way
of informing consumers in
an understandable way
-- Provide a serious alternative
to other labelling schemes,
including the French NutriScore
scheme, encouraging the
European Commission to evaluate
and develop EU harmonised
guidance, to address potential
unfair targeting of the
sparkling soft drinks industry
-- Work with International
Sweeteners Association to
promote and protect the
reputation of alternative
sweeteners and, through
UNESDA, working with the
European food safety authority
on their opinions that will
inform EU and national government
action
=================== =================================== ======================================= ===========
Product We produce a wide range -- TCCC standards and audits ->
quality of products, all of which -- Hygiene regimes at production
must adhere to strict facilities
food safety requirements. -- Total quality management
This exposes us to the programme
risk of failing to meet, -- Robust management systems
or being perceived as -- ISO certification
failing to meet, the necessary -- Internal governance audits
standards, which could -- Quality monitoring programme
lead to compromised product -- Customer and consumer
quality. As a result, monitoring and feedback
our brand reputation could -- Incident management and
be damaged and our products crisis resolution
could become less popular -- Every CCEP production
with consumers. facility has:
- a hazard analysis critical
control points assessment
and mitigation plan in place
- a quality monitoring plan
based on risk and requirements
- a food fraud vulnerability
assessment and mitigation
plan based on risk and requirements
- a food defence threat
assessment and mitigation
plan based on risk and requirement
=================== =================================== ======================================= ===========
Relationships We conduct our business -- Clear agreements govern ->
with TCCC primarily under agreements the relationships
and other with TCCC and other franchisors. -- Incidence pricing agreement
franchisors This exposes us to the with TCCC
risk of misaligned incentives -- Aligned long-range planning
or strategy, particularly and annual business planning
during periods of low processes
category growth or crisis -- Ongoing pan-European
such as COVID-19. As a and local routines between
result, TCCC or other CCEP and franchise partners
franchisors could act -- Increased frequency of
adversely to our interests meetings and maintenance
with respect to our business of positive relationships
relationship. at all levels
-- Regular contact and best
practice sharing across
the Coca-Cola System
-- Improve visibility and
ways of working with TCCC
*Change vs 2020 Integrated Report may be as a result of a change
in likelihood or impact.
Related Parties
Related party disclosures are presented in Note 10 of the Notes
to the condensed consolidated interim financial statements
contained in this interim management report.
Going Concern
As part of the Directors' consideration of the appropriateness
of adopting the going concern basis in preparing the condensed
consolidated interim financial statements, a review was performed
on a range of potential COVID-19 scenarios. The Directors also
considered the Group's response to the COVID-19 disruption and the
ability to continue to generate strong operating cashflows. The
Directors have taken into account the Group's current cash
position, its access to a EUR1.95 billion undrawn committed credit
facility and also considered the range of mitigation actions
available to the Group if required, such as reducing discretionary
spend. On the basis of these reviews, the Directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for a period of 12 months from
the date of signing these accounts. Accordingly, the condensed
consolidated interim financial statements have been prepared on a
going concern basis and the Directors do not believe there are any
material uncertainties to disclose in relation to the Group's
ability to continue as a going concern.
Responsibility Statement
The Directors of the Company confirm that to the best of their
knowledge:
-- The Condensed Consolidated Interim Financial Statements for
the six months ended 2 July 2021 have been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as issued by the International Accounting Standards
Board, UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority (DTR).
-- The interim management report includes a fair review of the
information required by the DTR 4.2.7 R and DTR 4.2.8 R as
follows:
-- DTR 4.2.7 R: (1) an indication of important events that have
occurred during the first six months of the financial year, and
their impact on the condensed set of financial statements, and (2)
a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- DTR 4.2.8 R: (1) related parties transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or the
performance of the Group during that period, and (2) any changes in
the related parties transactions described in the last annual
report that could have a material effect on the financial position
or performance of the Group in the first six months of the current
financial year.
The Directors of the Company are shown on pages 66-70 in the
2020 Integrated Report and Form 20-F for the year ended 31 December
2020, save for the following changes:
-- Irial Finan stepped down as a Director at the end of the AGM on 26 May 2021
-- Manuel "Manolo" Arroyo was appointed as a Director with
effect from the end of the AGM on 26 May 2021
A list of current directors is maintained on CCEP's website:
www.cocacolaep.com/about-us/governance/board-of-directors/.
On behalf of the Board
Damian Gammell Manik Jhangiani
Chief Executive Officer Chief Financial Officer
2 September 2021
Independent Review Report to Coca-Cola Europacific Partners
plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 2 July 2021 which comprises the condensed
consolidated interim income statement, condensed consolidated
interim statement of comprehensive income, condensed consolidated
interim statement of financial position, condensed consolidated
interim statement of cash flows, condensed consolidated interim
statement of changes in equity and the related explanatory notes 1
- 13. We have read the other information contained in the half
yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 2 July
2021 is not prepared, in all material respects, in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", as issued by the International Accounting Standards
Board, UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with IFRS as issued by the
International Accounting Standards Board and UK adopted
International Accounting Standards. The condensed set of financial
statements included in this half-yearly financial report has been
prepared in accordance with International Accounting Standard 34,
"Interim Financial Reporting", as issued by the International
Accounting Standards Board and UK adopted International Accounting
Standard 34, "Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
2 September 2021
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Income Statement (Unaudited)
Six Months Ended
--------------------------
2 July 26 June
2021 2020
Note EUR million EUR million
------------------------------------------------- ---- ----------- -------------
Revenue 5,918 4,837
Cost of sales (3,840) (3,168)
----------- -----------
Gross profit 2,078 1,669
Selling and distribution expenses (1,033) (961)
Administrative expenses (525) (440)
----------- -----------
Operating profit 520 268
Finance income 14 17
Finance costs (78) (72)
----------- -----------
Total finance costs, net (64) (55)
Non-operating items (1) (2)
----------- -----------
Profit before taxes 455 211
Taxes (209) (85)
----------- -----------
Profit after taxes 246 126
=========== ===========
Profit attributable to shareholders 244 126
Profit attributable to non-controlling interests 2 -
----------- -----------
Profit after taxes 246 126
=========== ===========
Basic earnings per share (EUR) 4 0.54 0.28
Diluted earnings per share (EUR) 4 0.53 0.28
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Comprehensive Income
(Unaudited)
Six Months Ended
--------------------------
2 July 26 June
2021 2020
EUR million EUR million
----------------------------------------------------- ----------- -------------
Profit after taxes 246 126
----------- -----------
Components of other comprehensive income/(loss):
Items that may be subsequently reclassified to the
income statement:
Foreign currency translations:
Pretax activity, net 58 (159)
Tax effect - -
----------- -----------
Foreign currency translation, net of tax 58 (159)
Cash flow hedges:
Pretax activity, net 223 (54)
Tax effect (48) 15
----------- -----------
Cash flow hedges, net of tax 175 (39)
Other reserves:
Pretax activity, net 6 -
Tax effect (1) -
----------- -----------
Other reserves, net of tax 5 -
----------- -----------
238 (198)
----------- -----------
Items that will not be subsequently reclassified
to the income statement:
Pension plan adjustments:
Pretax activity, net 149 (162)
Tax effect (24) 36
----------- -----------
Pension plan adjustments, net of tax 125 (126)
----------- -----------
125 (126)
----------- -----------
Other comprehensive income/(loss) for the period,
net of tax 363 (324)
----------- -----------
Comprehensive income for the period 609 (198)
=========== ===========
Comprehensive income attributable to shareholders 604 (198)
Comprehensive income attributable to non-controlling
interests 5 -
----------- -----------
Comprehensive income for the period 609 (198)
=========== ===========
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Financial Position
(Unaudited)
2 July 31 December 26 June
2021 2020 2020
Note EUR million EUR million EUR million
---------------------------------------- ---- ----------- ----------- -------------
ASSETS
Non-current:
Intangible assets 5 12,706 8,414 8,395
Goodwill 5 4,579 2,517 2,514
Property, plant and equipment 6 5,315 3,860 4,030
Non-current derivative assets 139 6 4
Deferred tax assets 22 27 10
Other non-current assets 399 337 313
----------- ----------- -----------
Total non-current assets 23,160 15,161 15,266
----------- ----------- -----------
Current:
Current derivative assets 121 40 9
Current tax assets 22 19 13
Inventories 1,236 681 795
Amounts receivable from related parties 10 109 150 95
Trade accounts receivable 2,457 1,439 1,776
Other current assets 241 224 216
Cash and cash equivalents 1,824 1,523 893
----------- ----------- -----------
Total current assets 6,010 4,076 3,797
----------- ----------- -----------
Total assets 29,170 19,237 19,063
=========== =========== ===========
LIABILITIES
Non-current:
Borrowings, less current portion 8 11,806 6,382 6,343
Employee benefit liabilities 156 283 350
Non-current provisions 12 56 83 54
Non-current derivative liabilities 63 15 34
Deferred tax liabilities 3,507 2,134 2,122
Non-current tax liabilities 128 131 261
Other non-current liabilities 38 44 45
----------- ----------- -----------
Total non-current liabilities 15,754 9,072 9,209
----------- ----------- -----------
Current:
Current portion of borrowings 8 1,752 805 762
Current portion of employee benefit
liabilities 12 13 15
Current provisions 12 157 154 172
Current derivative liabilities 32 62 63
Current tax liabilities 230 171 81
Amounts payable to related parties 10 307 181 232
Trade and other payables 4,131 2,754 2,697
----------- ----------- -----------
Total current liabilities 6,621 4,140 4,022
----------- ----------- -----------
Total liabilities 22,375 13,212 13,231
=========== =========== ===========
EQUITY
Share capital 5 5 5
Share premium 210 192 184
Merger reserves 287 287 287
Other reserves (386) (537) (647)
Retained earnings 6,454 6,078 6,003
Equity attributable to shareholders 6,570 6,025 5,832
Non-controlling interest 9 225 - -
----------- ----------- -----------
Total equity 6,795 6,025 5,832
----------- ----------- -----------
Total equity and liabilities 29,170 19,237 19,063
=========== =========== ===========
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Cash Flows
(Unaudited)
Six Months Ended
2 July 26 June
2021 2020
Note EUR million EUR million
--------------------------------------------------------- ---- ----------- -------------
Cash flows from operating activities:
Profit before taxes 455 211
Adjustments to reconcile profit before tax to
net cash flows from operating activities:
Depreciation 6 300 303
Amortisation of intangible assets 5 42 29
Share-based payment expense 4 -
Finance costs, net 64 55
Income taxes paid (58) (79)
Changes in assets and liabilities:
(Increase) in trade and other receivables (384) (144)
(Increase) in inventories (144) (83)
Increase in trade and other payables 503 41
Increase/(decrease) in net payable receivable
from related parties 121 (5)
(Decrease)/increase in provisions (23) 32
Change in other operating assets and liabilities 28 (7)
----------- -----------
Net cash flows from operating activities 908 353
----------- -----------
Cash flows from investing activities:
Acquisition of bottling operations, net of cash
acquired (5,145) -
Purchases of property, plant and equipment (115) (241)
Purchases of capitalised software (42) (33)
Proceeds from sales of property, plant and equipment 20 35
Investments in equity instruments - (3)
Other investing activity, net 16 -
----------- -----------
Net cash flows used in investing activities (5,266) (242)
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings, net 8 4,877 855
Proceeds from short-term borrowings 8 305 94
Repayments on third party borrowings 8 (468) (227)
Payments of principal on lease obligations (65) (60)
Interest paid, net (58) (59)
Purchase of own shares under share buyback programme - (129)
Exercise of employee share options 18 6
Other financing activities, net 4 (1)
----------- -----------
Net cash flows from financing activities 4,613 479
----------- -----------
Net change in cash and cash equivalents 255 590
----------- -----------
Net effect of currency exchange rate changes on
cash and cash equivalents 46 (13)
Cash and cash equivalents at beginning of period 1,523 316
----------- -----------
Cash and cash equivalents at end of period 1,824 893
=========== ===========
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Coca-Cola Europacific Partners plc
Condensed Consolidated Interim Statement of Changes in Equity
(Unaudited)
Share Share Merger Other Retained Non-controlling Total
capital premium reserves reserves earnings Total interest equity
------- ------- -------- -------- -------- ------- --------------- ----------
EUR EUR EUR EUR EUR EUR EUR
million million million million million million EUR million million
---------------- ------- ------- -------- -------- -------- ------- --------------- ----------
Balance as at 31
December
2019 5 178 287 (449) 6,135 6,156 - 6,156
Profit after
taxes - - - - 126 126 - 126
Other
comprehensive
expense - - - (198) (126) (324) - (324)
------- ------- -------- -------- -------- ------- --------------- --------
Total
comprehensive
income - - - (198) - (198) - (198)
Issue of shares
during
the period - 6 - - - 6 - 6
Share-based
payment tax
effects - - - - (3) (3) - (3)
Own shares
purchased under
share buyback
programme - - - - (129) (129) - (129)
------- ------- -------- -------- -------- ------- --------------- --------
Balance as at 26
June 2020 5 184 287 (647) 6,003 5,832 - 5,832
======= ======= ======== ======== ======== ======= =============== ========
Balance as at 31
December
2020 5 192 287 (537) 6,078 6,025 - 6,025
Profit after
taxes - - - - 244 244 2 246
Other
comprehensive
income - - - 235 125 360 3 363
------- ------- -------- -------- -------- ------- --------------- --------
Total
comprehensive
income - - - 235 369 604 5 609
Non-controlling
interests
recognised
relating to
business
combination - - - - - - 220 220
Cash flow hedge
gains
transferred
to goodwill
relating to
business
combination - - - (84) - (84) - (84)
Issue of shares
during
the period - 18 - - - 18 - 18
Equity-settled
share-based
payment expense - - - - 4 4 - 4
Share-based
payment tax
effects - - - - 3 3 - 3
Balance as at 2
July 2021 5 210 287 (386) 6,454 6,570 225 6,795
======= ======= ======== ======== ======== ======= =============== ========
The accompanying notes are an integral part of these condensed
consolidated interim financial statements.
Notes to the Condensed Consolidated Interim Financial
Statements
Note 1
GENERAL INFORMATION AND BASIS OF PREPARATION
On 10 May 2021, Coca-Cola European Partners plc acquired
Coca-Cola Amatil Limited (CCL or API), and subsequently changed its
name to Coca-Cola Europacific Partners plc (the Company, or Parent
Company). The Company and its subsidiaries (together CCEP, or the
Group) are a leading consumer goods group in Western Europe and the
Asia Pacific region, making, selling and distributing an extensive
range of primarily non-alcoholic ready to drink beverages.
Refer to Note 2 for further details about the acquisition of
API.
The Company has ordinary shares with a nominal value of EUR0.01
per share (Shares). CCEP is a public company limited by shares,
incorporated under the laws of England and Wales with the
registered number in England of 09717350. The Group's Shares are
listed and traded on Euronext Amsterdam, the New York Stock
Exchange, London Stock Exchange and on the Spanish Stock Exchanges.
The address of the Company's registered office is Pemberton House,
Bakers Road, Uxbridge, UB8 1EZ, United Kingdom.
These condensed consolidated interim financial statements do not
constitute statutory accounts as defined by Section 434 of the
Companies Act 2006. They have been reviewed but not audited by the
Group's auditor. The statutory accounts for the Company for the
year ended 31 December 2020, which were prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB), IFRS as adopted
pursuant to Regulation (EC) No 1606/2002 as it applies within the
European Union (EU) and in accordance with international accounting
standards in conformity with the provisions of the UK Companies Act
2006, have been delivered to the Registrar of Companies. The
auditor's opinion on those accounts was unqualified and did not
contain a statement made under section 498 (2) or (3) of the
Companies Act 2006.
Impact of COVID-19 pandemic
The COVID-19 pandemic and related response measures have had and
may continue to have an adverse effect on global economic
conditions, as well as our business, results of operations, cash
flows and financial condition. At this time, we cannot predict the
degree to which, or the time period over which, our business will
continue to be affected by COVID-19 and the related response
measures. These impacts limit the comparability of these condensed
consolidated interim financial statements with prior periods.
In addition, as part of the preparation of these condensed
consolidated interim financial statements, we have considered the
impact of Covid-19 on our accounting policies and judgements and
estimates. The key accounting impacts and considerations for the
Group are included in the relevant notes herein.
Basis of Preparation and Accounting Policies
The condensed consolidated interim financial statements of the
Group have been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as issued by
the International Accounting Standards Board, UK adopted
International Accounting Standard 34 and the Disclosure Guidance
and Transparency Rules of the United Kingdom's Financial Conduct
Authority and should be read in conjunction with our 2020
Consolidated Financial Statements. The annual financial statements
of the group for the year-ended 31 December 2021 will be prepared
in accordance with IFRS as issued by the International Accounting
Standards Board and UK adopted International Accounting
Standards.
The 2020 Consolidated Financial Statements include a full
description of the Group's accounting policies. The same accounting
policies and methods of computation have been used as described in
the 2020 Consolidated Financial Statements, with the exception of
taxes on income. Taxes on income in interim periods are accrued
using the tax rate that would be applicable to expected total
annual profit or loss.
During the period, we performed an interim review and
revaluation of certain pension schemes and recorded a pension
remeasurement adjustment, primarily relating to changes in certain
financial assumptions for our GB Scheme. These changes resulted in
a EUR129 million reduction to the employment benefit liability and
a corresponding credit to Other Comprehensive Income.
Several amendments and interpretations apply for the first time
in 2021, but do not have a material impact on the condensed
consolidated interim financial statements of the Group.
Reporting periods
Results are presented for the interim period from 1 January 2021
to 2 July 2021.
The Group's financial year ends on 31 December. For half-yearly
reporting convenience, the first six month period closes on the
Friday closest to the end of the interim calendar period. There
were three more selling days in the six months ended 2 July 2021
versus the six months ended 26 June 2020, and there will be four
fewer selling days in the second six months of 2021 versus the
second six months of 2020 (based upon a standard five-day selling
week).
The following table summarises the number of selling days, for
the years ended 31 December 2021 and 31 December 2020 (based on a
standard five-day selling week):
Half year Full year
------- --------- ---------
2021 131 261
2020 128 262
--------- ---------
Change 3 -1
========= =========
Trading seasonality
In addition to the impact of the COVID-19 pandemic outlined
above, operating results for the first half of 2021 may not be
indicative of the results expected for the year ended 31 December
2021 as sales of the Group's products are seasonal. In Europe, the
second and third quarters typically account for higher unit sales
of the Group's products than the first and fourth quarters. In the
Group's Asia Pacific territories, the fourth quarter would
typically reflect higher sales volumes in the year. The seasonality
of the Group's sales volume, combined with the accounting for fixed
costs such as depreciation, amortisation, rent and interest
expense, impacts the Group's results for the first half of the
year. Additionally, year-over-year shifts in holidays, selling days
and weather patterns can impact the Group's results on an annual or
half-yearly basis.
Exchange rates
The Group's reporting currency is the Euro. CCEP translates the
income statements of non-Euro functional currency subsidiary
operations to the Euro at average exchange rates and the balance
sheets at the closing exchange rate as at the end of the
period.
The principal exchange rates used for translation purposes in
respect of one Euro were:
Average for the period
ended([1]) Closing as at
------------------------------- ----------------------------------------
31 December
2 July 2021 26 June 2020 2 July 2021 2020 26 June 2020
----------------------- ----------------- ------------ ----------- ----------- --------------
UK Sterling 1.15 1.15 1.16 1.11 1.10
US Dollar 0.83 0.91 0.84 0.81 0.89
Norwegian Krone 0.10 0.09 0.10 0.10 0.09
Swedish Krone 0.10 0.09 0.10 0.10 0.10
Icelandic Krone 0.01 0.01 0.01 0.01 0.01
Australian Dollar 0.64 n/a 0.63 n/a n/a
Indonesian Rupiah([2]) 0.06 n/a 0.06 n/a n/a
New Zealand
Dollar 0.59 n/a 0.59 n/a n/a
Papua New Guinean
Kina 0.24 n/a 0.24 n/a n/a
([1]) For current year period European rates and US dollar are
calculated as average for the period 1 January 2021 to 2 July 2021.
Asia Pacific rates are calculated as average for the period from 10
May 2021 to 2 July 2021.
([2]) Indonesian Rupiah is shown as 1000 IDR versus 1 EUR.
Note 2
BUSINESS COMBINATIONS
API was one of the largest bottlers and distributors of ready to
drink non-alcoholic and alcoholic beverages and coffee in the Asia
Pacific region and was the authorised bottler and distributor of
The Coca-Cola Company's (TCCC) beverage brands in Australia, New
Zealand and Pacific Islands, Indonesia and Papua New Guinea.
In November 2020, CCEP and API entered into a binding Scheme
Implementation Deed (the Scheme) for the acquisition of 69.2% of
the entire existing issued share capital of API, which was held by
shareholders other than TCCC. CCEP also entered into a Co-operation
and Sale Deed with TCCC with respect to the acquisition of TCCC's
30.8% interest in API (the Co-operation agreement), conditional
upon the implementation of the Scheme. During H1 2021, the required
shareholder, regulatory and court approvals were obtained and on,
10 May 2021 the Company acquired 100% of the issued and outstanding
shares of API (the Acquisition).
Shareholders other than TCCC received A$13.32 per share in cash,
totalling cash consideration paid of A$6,673 million. TCCC received
A$9.39 and A$10.57 per share for 10.8% and 20%, respectively, of
the remaining API shares held by TCCC. Cash consideration paid to
TCCC was A$893 million and USD1,046 million. The fair value of the
consideration transferred at the acquisition date was EUR5,752
million.
The business combination is being accounted for under IFRS 3,
"Business Combinations", using the acquisition method, with CCEP
considered as the accounting acquirer. The operations of the
acquired businesses are extensive and complex, and the initial
accounting for the Acquisition is provisional at the end of the
current reporting period. The Company is in the process of
finalising the fair values for certain acquired assets, including
intangible assets, property, plant and equipment, right of use
assets, and inventory. In addition, the Company is still gathering
information about income taxes, deferred taxes, liabilities and
provisions based on facts that existed as at the date of the
Acquisition. Accordingly, the Company has recognised provisional
amounts for these items. During the measurement period, which will
not extend beyond 9 May 2022, the Company will adjust the
provisional amounts recognised at the acquisition date to reflect
new information obtained about facts and circumstances that existed
as at the acquisition date that, if known, would have affected the
measurement of the amounts recognised as at that date.
The following table details the Euro equivalent consideration
and provisional fair values of assets and liabilities acquired:
EUR million
Intangible assets 4,302
Property, plant and equipment 1,620
Non-current derivative assets 70
Deferred tax assets 5
Other non-current assets 56
Current derivative assets 24
Current tax assets 19
Inventories 457
Amounts receivable from related parties 34
Trade accounts receivable 603
Other current assets 54
Cash and cash equivalents 523
Borrowings, less current portion (1,253)
Employee benefit liabilities (37)
Non-current derivative liabilities (72)
Deferred tax liabilities (1,228)
Non-current tax liabilities (6)
Current portion of borrowings (384)
Current portion of employee benefit liabilities (45)
Current provisions (9)
Current derivative liabilities (35)
Current tax liabilities (12)
Amounts payable to related parties (77)
Trade and other payables (804)
----------------------------------------------------------- -----------
Net identifiable assets acquired 3,805
Non-controlling interest (220)
Cash flow hedge gains transferred to goodwill relating to
business combination 84
Goodwill 2,083
----------------------------------------------------------- -----------
Fair value of consideration 5,752
Intangible assets include both indefinite life and definite life
intangible assets. Indefinite life intangible assets mainly include
bottling agreements with TCCC, which provide the Company with the
exclusive rights to prepare, package, distribute and sell TCCC
branded products in the territories in which it operates. Definite
life intangible assets include distribution agreements with other
brand partners, customer relationships and capitalised
software.
Bottling agreements with TCCC, distribution agreements with
other brand partners and customer relationships have been
provisionally valued using a multi-period excess earnings model,
whereby the value of a specific intangible asset is estimated from
the excess earnings after fair returns on all other assets employed
have been deducted from the business's after-tax operating
earnings. Brand assets have been provisionally valued based on a
payment relief method, estimating the value of future foregone
payments to a brand owner over the life of the asset by virtue of
owning the asset. Capitalised software has been valued using a
replacement cost approach, representing the current cost to replace
the existing asset in its current state.
Whilst the bottling agreements with TCCC contain no automatic
right of renewal, the Company believes that the interdependent
relationship with TCCC and the substantial cost and disruption to
TCCC that would be caused by non-renewals ensures that these
agreements will continue to be renewed and, therefore, are
essentially perpetual. After evaluating the contractual provisions
of the bottling agreements, the mutually beneficial relationship
with TCCC and history of renewals, the Company has assigned
indefinite lives to all such intangible assets. Refer to Note 5 for
further details about the Company's intangible assets and
goodwill.
Goodwill of EUR2,083 million has been recognised in connection
with the Acquisition, representing the excess of consideration
transferred over the provisional fair values of the net
identifiable assets acquired and non-controlling interests, less
the cash flow hedge gains of EUR84 million. The cash flow hedge
gains relate to the deal contingent foreign currency forwards which
were reclassified from the cash flow hedge reserves and included in
goodwill upon settlement.
The goodwill is attributable to new growth opportunities,
workforce and synergies of the combined business operations, and it
is not expected to be deductible for tax purposes.
Property, plant and equipment has been provisionally valued
using a variety of valuation techniques depending on the local
market and the highest and best use of each asset. These techniques
include capitalisation of comparable net market income, depreciated
replacement cost and sales comparison approach. Included within
Property, plant and equipment are right of use assets which have
been provisionally valued at EUR315 million. A corresponding lease
liability of EUR310 million is included within Borrowings.
Inventory has been provisionally valued based on estimated sales
value less cost of disposal. The Company recorded a fair value
adjustment to increase the carrying value of finished goods on hand
at the time of the Acquisition by EUR48 million. This adjustment is
included within cost of sales in the Condensed Consolidated Interim
Income Statement for the six months ended 2 July 2021 as the
inventory was sold during the period.
The fair value of acquired trade accounts receivable, net is
EUR603 million. The gross contractual amount related to these
receivables is EUR618 million, of which EUR15 million is expected
to be uncollectible.
Included within Cash and cash equivalents at the acquisition
date are Papua New Guinea cash assets of EUR79 million denominated
in local currency (Kina). Government-imposed currency controls
impact the extent to which the cash held in Papua New Guinea can be
converted into foreign currency and remitted for use elsewhere in
the Group. As at 2 July 2021, EUR82 million remains subject to
these restrictions.
At the acquisition date, the Group has elected to measure
components of non-controlling interests in API at fair value. The
fair value of non-controlling interests represents the fair value
of TCCC's 29.4% ownership interest in PT Coca-Cola Bottling
Indonesia, plus non-controlling interests with respect to Paradise
Beverages (Fiji) Group and Samoa Breweries Limited. Fair value has
been derived primarily using applicable enterprise value based on
discounted future cash flow projections.
From acquisition, API contributed revenue of EUR533 million and
profit before tax of EUR9 million to the Group for the period to 2
July 2021. If the Acquisition had taken place at the beginning of
the year, pro forma revenue and profit before tax for CCEP for the
six months ended 2 July 2021 would have been EUR7.0 billion and
EUR478 million, respectively.
Acquisition-related costs of EUR40 million and EUR3 million are
included in administrative expenses and finance costs,
respectively, in the Condensed Consolidated Interim Income
Statement for the six months ended 2 July 2021. Cash payments for
acquisition-related exceptional costs are included in operating
cash flows in the Condensed Consolidated Interim Statement of Cash
Flows.
Note 3
OPERATING SEGMENTS
Description of segments and principal activities
Following the acquisition of API, the Group reevaluated its
segment reporting under IFRS 8, "Operating Segments". The Group
continues to derive its revenues through a single business
activity, which is making, moving and selling ready to drink
beverages, primarily non-alcoholic beverages. The acquisition of
API has broadened the Group's geographic footprint which now
includes Australia, New Zealand and Pacific Islands, Indonesia and
Papua New Guinea. These territories collectively make up the
Australia, Pacific and Indonesia (API) segment. Based on the
governance structure of the Group, including decision making
authority and oversight, the Group's Board continues to be its
Chief Operating Decision Maker (CODM), and the Group now has two
operating segments, Europe, representing the pre-acquisition
territories of CCEP, and API. The Board, as the CODM, allocates
resources and evaluates performance of its operating segments based
on volume, revenue and comparable operating profit. Comparable
operating profit excludes items impacting the comparability of
period over period financial performance.
Six Months Ended 2 July Six Months Ended 26 June
2021 2020
Europe API Total Europe API Total
EUR million EUR million EUR million EUR million EUR million EUR million
------------------- ------------- ----------- ----------- ---------------- ----------- -------------
Revenue([1]) 5,385 533 5,918 4,837 - 4,837
Operating profit
(comparable)([1]) 631 60 691 398 - 398
Including
depreciation
and
amortisation
(comparable) (285) (36) (321) (303) - (303)
Items impacting
comparability([2]) (171) (130)
----------- -----------
Total reported
operating
profit 520 268
Total finance
costs,
net (64) (55)
Non-operating items (1) (2)
----------- -----------
Profit before Tax 455 211
=========== ===========
([1]) If the acquisition of API had taken place at the beginning
of the year, pro forma revenue and operating profit (comparable)
for API for the six months ended 2 July 2021 would have been
EUR1,589 million and EUR171 million, respectively.
([2]) Items affecting the comparability of period-over-period
financial performance including restructuring charges, acquisition
and integration related costs, inventory fair value step up related
to acquisition accounting and impact of the closure of the GB
defined benefit pension scheme. Refer to pages 7-9 for further
detail.
No single customer accounted for more than 10% of the Group's
revenue during the six months ended 2 July 2021 and 26 June
2020.
Revenue by geography
The following table summarises revenue from external customers
by geography, which is based on the origin of the sale:
Six Months Ended
2 July 26 June
2021 2020
Revenue EUR million EUR million
-------------------------------- ----------- -------------
Great Britain 1,192 1,026
Germany 1,091 1,014
Iberia([1]) 1,069 917
France([2]) 896 808
Belgium/Luxembourg 454 426
Netherlands 266 250
Norway 200 199
Sweden 179 162
Iceland 38 35
Australia 328 -
New Zealand and Pacific Islands 85 -
Indonesia and Papua New Guinea 120 -
----------- -----------
Total revenue 5,918 4,837
=========== ===========
([1]) Iberia refers to Spain, Portugal & Andorra.
([2]) France refers to continental France & Monaco.
Note 4
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing profit after
taxes attributable to equity shareholders by the weighted average
number of Shares in issue and outstanding during the period.
Diluted earnings per share is calculated in a similar manner, but
includes the effect of dilutive securities, principally share
options, restricted stock units and performance share units.
Share-based payment awards that are contingently issuable upon the
achievement of specified market and/or performance conditions are
included in the diluted earnings per share calculation based on the
number of Shares that would be issuable if the end of the period
was the end of the contingency period.
The following table summarises basic and diluted earnings per
share calculations for the periods presented:
Six Months Ended
2 July 26 June
2021 2020
-------------------------------------------------------- ---------- ---------
Profit after taxes attributable to equity shareholders
(EUR million) 244 126
Basic weighted average number of Shares in issue([1])
(million) 455 455
Effect of dilutive potential Shares([2]) (million) 2 2
Diluted weighted average number of Shares in issue([1])
(million) 457 457
Basic earnings per share (EUR) 0.54 0.28
Diluted earnings per share (EUR) 0.53 0.28
([1]) As at 2 July 2021 and 26 June 2020, the Group had
455,853,051 and 454,163,561 Shares, respectively, in issue and
outstanding.
([2]) For the six months ended 2 July 2021 and 26 June 2020,
there were no outstanding options to purchase Shares excluded from
the diluted earnings per share calculation. The dilutive impact of
the remaining options outstanding, unvested restricted stock units
and unvested performance share units was included in the effect of
dilutive securities.
Note 5
INTANGIBLE ASSETS AND GOODWILL
The following table summarises the movement in net book value
for intangible assets and goodwill during the six months ended 2
July 2021:
Intangible
assets Goodwill
EUR million EUR million
-------------------------------------- ----------- -------------
Net book value as at 31 December 2020 8,414 2,517
Acquisition of API 4,302 2,083
Additions 42 -
Amortisation expense (42) -
Currency translation adjustments (10) (21)
----------- -----------
Net book value as at 2 July 2021 12,706 4,579
=========== ===========
For the Group's Iberia CGU, the headroom in the 2020 impairment
analysis was approximately 25%. Whilst the Iberian business has
continued to be impacted by COVID-19 during 2021, trading is in
line with the projections used in the 2020 impairment analysis. We
continue to expect the impact of COVID-19 to be temporary and for
the Iberia CGU to return to pre COVID-19 profitability levels in
the near term.
Note 6
PROPERTY, PLANT AND EQUIPMENT
The following table summarises the movement in net book value
for property, plant and equipment during the six months ended 2
July 2021:
Total
--------------------------------------
EUR million
-------------------------------------- -------------
Net book value as at 31 December 2020 3,860
Acquisition of API 1,620
Additions 148
Disposals (22)
Depreciation expense (300)
Currency translation adjustments 9
-----------
Net book value as at 2 July 2021([1]) 5,315
===========
([1]) The net book value of property, plant and equipment
includes right of use assets of EUR661 million, of which EUR315
million was acquired as part of the Acquisition.
Note 7
FAIR VALUES AND FINANCIAL RISK MANAGEMENT
Fair Value Measurements
All assets and liabilities for which fair value is measured or
disclosed in the condensed consolidated interim financial
statements are categorised in the fair value hierarchy as described
in our 2020 Consolidated Financial Statements.
The fair values of the Group's cash and cash equivalents, trade
accounts receivable, amounts receivable from related parties, trade
and other payables, and amounts payable to related parties
approximate their carrying amounts due to their short-term
nature.
The fair values of the Group's borrowings are estimated based on
borrowings with similar maturities and credit quality and current
market interest rates. These are categorised in Level 2 of the fair
value hierarchy as the Group uses certain pricing models and quoted
prices for similar liabilities in active markets in assessing their
fair values. The total fair value of borrowings as at 2 July 2021
and 31 December 2020, was EUR13.9 billion and EUR7.6 billion,
respectively. This compared to the carrying value of total
borrowings as at 2 July 2021 and 31 December 2020 of EUR13.6
billion and EUR7.2 billion, respectively. Refer to Note 8 for
further details regarding the Group's borrowings.
The Group's derivative assets and liabilities are carried at
fair value, which is determined using a variety of valuation
techniques, depending on the specific characteristics of the
hedging instrument taking into account credit risk. The fair value
of our derivative contracts (including forwards, options,
cross-currency swaps and interest rate swaps) are determined using
standard valuation models. The significant inputs used in these
models are readily available in public markets or can be derived
from observable market transactions and, therefore, the derivative
contracts have been classified as Level 2. Inputs used in these
standard valuation models include the applicable spot, forward, and
discount rates. The standard valuation model for the option
contracts also includes implied volatility, which is specific to
individual options and is based on rates quoted from a widely used
third-party resource. As at 2 July 2021 and 31 December 2020, the
total value of derivative assets was EUR260 million and EUR46
million, respectively. As at 2 July 2021 and 31 December 2020, the
total value of derivative liabilities was EUR95 million and EUR77
million, respectively. During the period, EUR139 million of gains
have been recorded within Other Comprehensive Income, primarily
related to increases in fair value on commodity related hedging
instruments.
For assets and liabilities that are recognised in the condensed
consolidated interim financial statements on a recurring basis, the
Group determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation at the end of each
reporting period. There have been no transfers between Level 1 and
Level 2 during the periods presented.
Financial Instruments Risk Management Objectives and
Policies
The Group's activities expose it to several financial risks
including market risk, credit risk, and liquidity risk. Financial
risk activities are governed by appropriate policies and procedures
to minimise the uncertainties these risks create over the Group's
future cash flows. Such policies are developed and approved by the
Group's Treasury and Commodities Risk Committee through the
authority provided to it by the Group's Board of Directors. There
have been no changes in the risk management policies since the year
end.
Note 8
BORROWINGS AND LEASES
Borrowings Outstanding
The following table summarises the Group's borrowings as at the
dates presented:
31 December
2 July 2021 2020
EUR million EUR million
------------------------------------------------ ----------- -------------
Non-current:
Euro denominated bonds 8,643 6,113
Foreign currency bonds (swapped into Euro)([1]) 1,674 -
Australian dollar denominated bonds([2]) 530 -
Foreign currency bonds (swapped into Australian
Dollar)([1,2]) 436 -
Lease obligations 523 269
----------- -----------
Total non-current borrowings 11,806 6,382
=========== ===========
Current:
Commercial paper 305 -
Euro denominated bonds 1,051 350
Foreign currency bonds (swapped into Euro)([1]) - 359
Australian dollar denominated bonds([2]) 242 -
Foreign currency bonds (swapped into Australian
Dollar)([1,2]) 23 -
Bank overdrafts 2 -
Lease obligations 129 96
----------- -----------
Total current borrowings 1,752 805
=========== ===========
([1]) Cross currency swaps are used by the Group to swap foreign
currency bonds into the required local currency.
([2]) Included within the Group's borrowings as at 2 July 2021
are the bonds acquired as part of the acquisition of API. These
bonds are either denominated in A$ or swapped back to A$ using
cross currency swaps.
During the period, and in connection with the Acquisition, the
Group received net proceeds from new borrowings in the period of
EUR4,877 million. The proceeds are included within Euro denominated
bonds and Foreign currency bonds (swapped into Euro) as follows:
EUR800 million 0% Notes due 2025, EUR700 million 0.5% Notes due
2029, EUR1,000 million 0.875% Notes due 2033, EUR750 million 1.5%
Notes due 2041 and $850 million 0.5% Notes due 2023, $650 million
0.8% Notes due 2024, $500 million 1.5% Notes due 2027,
respectively.
Separately, during the period, the Group repaid prior to
maturity the following Foreign currency bonds: $248 million 4.5%
Notes due September 2021 and $192 million 3.25% Notes due August
2021.
During the period, and in connection with the Acquisition, the
amount available under the Group's multi currency credit facility
was increased from EUR1.5 billion to EUR1.95 billion. The facility
was undrawn at 2 July 2021.
The Group's borrowings as at 2 July 2021 include borrowings
issued by Coca-Cola Amatil Limited, Coca-Cola Amatil (NZ) Limited
and Coca-Cola Amatil (Aust) Pty Ltd prior to the Acquisition. All
borrowings issued by Coca-Cola Amatil Limited, Coca-Cola Amatil
(NZ) Limited and Coca-Cola Amatil (Aust) Pty Ltd have been fully
and unconditionally guaranteed on an unsecured basis by Coca-Cola
Europacific Partners plc.
Note 9
EQUITY
Share Capital
As at 2 July 2021, the Company had issued and fully paid
455,853,051 Shares. Shares in issue have one voting right each and
no restrictions related to dividends or return of capital. The
share capital increased during the six months ended 2 July 2021
from the issue of 1,207,541 Shares, following the exercise of
share-based payment awards.
Dividends
No dividends were declared or paid in the first six months of
both 2021 and 2020.
Non-controlling interests
As part of the Acquisition, non-controlling interests (NCI) of
EUR220 million have been recognised at fair value at the
acquisition date with respect to PT Coca-Cola Bottling Indonesia,
Paradise Beverages (Fiji) Group and Samoa Breweries Limited, of
which EUR216 million relates to TCCC's 29.4% ownership interest in
PT Coca-Cola Bottling Indonesia. The Group will record changes in
NCI based upon post-Acquisition results for the year and movements
in reserves.
As at 2 July 2021, Paradise Beverages (Fiji) Group and Samoa
Breweries Limited have numerous investors as non-controlling
interest shareholders owning 9.9% and 6.1%, respectively. TCCC's
29.4% ownership interest in PT Coca-Cola Bottling Indonesia remains
unchanged.
Note 10
RELATED PARTY TRANSACTIONS
For the purpose of these condensed consolidated interim
financial statements, transactions with related parties mainly
comprise transactions between subsidiaries of the Group and the
related parties of the Group.
Transactions with The Coca-Cola Company (TCCC)
During the period, CCEP entered into a Co-operation and Sale
Deed with TCCC with respect to the acquisition of TCCC's 30.8%
interest in API. Refer to Note 2 for further detail on the
acquisition of API.
TCCC exhibits significant influence over the Group, as defined
by IAS 24, "Related Party Disclosures". As at 2 July 2021, 19.3% of
the total outstanding Shares in the Group were owned by European
Refreshments, a wholly owned subsidiary of TCCC. The Group is a key
bottler of TCCC products and has entered into bottling agreements
with TCCC to sell, make and distribute products of TCCC in the
Group's territories. The Group purchases concentrate from TCCC and
also receives marketing funding to help promote the sale of TCCC
products. Bottling agreements with TCCC for each of the Group's
territories extend through 28 May 2026, with terms of 10 years,
with each containing the right for the Group to request a 10-ear
renewal. Additionally, two of the Group's 17 Directors were
nominated by TCCC, one of whom is also an employee of TCCC.
The principal transactions with TCCC are for the purchase of
concentrate, syrup and finished goods. The following table
summarises the transactions with TCCC that directly impacted the
Condensed Consolidated Interim Income Statement for the periods
presented:
Six Months Ended
2 July 2021 26 June 2020
EUR million EUR million
-------------------------------------------- ----------- --------------
Amounts affecting revenue([1]) 22 22
Amounts affecting cost of sales([2]) (1,438) (1,240)
Amounts affecting operating expenses([3]) 4 (2)
----------- ------------
Total net amount affecting the Consolidated
Income Statement (1,412) (1,220)
=========== ============
([1]) Amounts principally relate to fountain syrup and packaged
product sales.
([2]) Amounts principally relate to the purchase of concentrate,
syrup, mineral water and juice as well as funding for marketing
programmes.
([3]) Amounts principally relate to costs associated with new
product development initiatives and support funding.
The following table summarises the transactions with TCCC that
impacted the Consolidated Statement of Financial Position as at the
dates presented:
31 December
2 July 2021 2020
EUR million EUR million
----------------------- ----------- -------------
Amount due from TCCC 90 146
Amount payable to TCCC 282 167
As part of the Acquisition of API, non-controlling interests of
EUR216 million have been recognised which relates to TCCC's 29.4%
ownership interest in PT Coca-Cola Bottling Indonesia (refer to
Note 9).
Transactions with Cobega companies
Cobega exhibits significant influence over the Group, as defined
by IAS 24, "Related Party Disclosures". Cobega S.A. indirectly
owned 36.4% of the total outstanding Shares of the Group as at 2
July 2021 through its ownership interest in Olive Partners S.A.
Additionally, five of the Group's 17 Directors, including the
Chairman, were nominated by Olive Partners S.A., three of whom are
affiliated with Cobega S.A.
The principal transactions with Cobega are for the purchase of
juice concentrate and packaging materials. The following table
summarises the transactions with Cobega that directly impacted the
Condensed Consolidated Interim Income Statement for the periods
presented:
Six Months Ended
2 July 2021 26 June 2020
EUR million EUR million
Amounts affecting cost of sales([1]) (21) (21)
Amounts affecting operating expenses([2]) (5) (4)
------------ ------------
Total net amount affecting the Consolidated
Income Statement (26) (25)
============ ============
([1]) Amounts principally relate to the purchase of packaging
materials.
([2]) Amounts principally relate to certain costs associated
with maintenance, repair services and rent.
The following table summarises the transactions with Cobega that
impacted the Consolidated Statement of Financial Position as at the
dates presented:
31 December
2 July 2021 2020
EUR million EUR million
------------------------- ----------- -------------
Amount due from Cobega 5 4
Amount payable to Cobega 17 14
Transactions with Other Related Parties
In connection with the Acquisition, a number of API investments
in joint ventures, associates and other related parties were
acquired. The fair value of these investments at acquisition date
has been provisionally valued at EUR35 million and included within
other non-current assets.
The joint venture investments relate to interests in Australian
Beer Company Pty Ltd, a manufacturer of alcoholic beverages,
Container Exchange (Services) Pty Ltd, a service provider
supporting the operation of container refund schemes in certain
Australian states and Mahija Parahita Nusantara Foundation & PT
Amandina Bumi Nusantara, a PET recycling plant in Indonesia.
The associate investments relate to interests in Exchange for
Change (NSW) Pty Ltd, Exchange for Change (ACT) Pty Ltd and
Exchange for Change (Australia) Pty Ltd, scheme coordinators and a
holding company of container deposit schemes in certain Australian
states and territories.
The other related parties relate to Container Exchange (Qld) Ltd
and WA Return Recycle Renew Ltd, scheme coordinators of container
despot schemes in certain Australian states over which significant
influence is held.
Charges in the period of EUR28 million relating to joint
ventures, associates and other related parties were recorded in
cost of sales and principally related to the purchase of finished
product and container deposit scheme charges in Australia.
A 45% ownership interest in each of Made (Aust) Pty Ltd, Made
Manufacturing Pty Ltd and Made Brands Pty Ltd, included as part of
the Acquisition, was sold during the period to the controlling
shareholders for total cash consideration of EUR21 million. No gain
or loss was recognised on the transaction.
All transactions with these related parties are conducted under
normal commercial terms and conditions. Receivable and payable
balances at period end are unsecured and settlement occurs in
cash.
Note 11
TAXES
The same accounting policies and methods of computation have
been applied as described in the 2020 Consolidated Financial
Statements, with the exception of taxes on income. Taxes on income
in interim periods are accrued using the tax rate that would be
applicable to the expected total annual profit or loss.
The effective tax rate (ETR) was 46% and 40% for the six months
ended 2 July 2021 and 26 June 2020, respectively, and 28% for the
year ended 31 December 2020. The ETR has been calculated by
applying the weighted average annual ETR excluding discrete items
of 22% and 24% to the profit before tax for the six months ended 2
July 2021 and 26 June 2020, respectively. The weighted average
annual ETR includes utilisation of previously unrecognised losses
and reassessment of uncertain tax positions.
For the six months ended 2 July 2021, the effective tax rate
includes a EUR118 million impact related to the revaluation of
deferred tax liabilities due to an increase in the UK statutory
income tax rate from 19% to 25% effective from 1 April 2023 that
was enacted during the first half of 2021. The revaluation
increased the tax rate by 26%.
The following table summarises the major components of income
tax expense for the periods presented:
2 July 26 June
2021 2020
EUR million EUR million
------------------------------------------------------------ ----------- -------------
Current income tax:
Current income tax charge 125 74
Adjustment in respect of current income tax from
prior periods (13) 5
----------- -----------
Total current tax 112 79
Deferred tax:
Relating to the origination and reversal of temporary
differences (25) (24)
Adjustment in respect of deferred income tax from
prior periods 4 (7)
Relating to changes in tax rates or the imposition
of new taxes 118 37
----------- -----------
Total deferred tax 97 6
----------- -----------
Income tax charge per the Consolidated Income Statement 209 85
=========== ===========
Tax Provisions
The Group is routinely under audit by taxing authorities in the
ordinary course of business. Due to their nature, such proceedings
and tax matters involve inherent uncertainties including, but not
limited to, court rulings, settlements between affected parties
and/or governmental actions. The probability of outcome is assessed
and accrued as a liability and/or disclosed, as appropriate. The
Group maintains provisions for uncertain tax positions that it
believes appropriately reflect its risk. As at 2 July 2021, EUR139
million of these provisions are included in current tax liabilities
and the remainder is included in non-current tax liabilities. There
has been no material change in tax provisions since 31 December
2020.
The Group reviews the adequacy of these provisions at the end of
each reporting period and adjusts them based on changing facts and
circumstances. Due to the uncertainty associated with tax matters,
it is possible that at some future date, liabilities resulting from
audits or litigation could vary significantly from the Group's
provisions.When an uncertain tax liability is regarded as probable,
it is measured on the basis of the Group's best estimate.
The Group has received tax assessments in certain jurisdictions
for potential tax related to the Group's purchases of concentrate.
The value of the Group's concentrate purchases is significant, and
therefore, the tax assessments are substantial. The Group strongly
believes the application of tax has no technical merit based on
applicable tax law, and its tax position would be sustained.
Accordingly, the Group has not recorded a tax liability for these
assessments and is vigorously defending its position against these
assessments.
Note 12
PROVISIONS, COMMITMENTS AND CONTINGENCIES
The following table summarises the movement of provisions for
the periods presented:
Restructuring Other
Provision Provisions([1]) Total
EUR million EUR million EUR million
-------------------------------------- ------------- ---------------- -------------
Balance as at 31 December 2020 208 29 237
Acquisition of API 9 - 9
Charged/(credited) to profit or loss:
Additional provisions recognised 73 3 76
Unused amounts reversed (9) - (9)
Utilised during the period (102) - (102)
Translation 1 1 2
------------- ---------------- -----------
Balance as at 2 July 2021 180 33 213
============= ================ ===========
______________________
([1]) Other provisions primarily relate to decommissioning
provisions, property tax assessment provisions and legal
reserves.
As part of the Accelerate Competitiveness programme, the Group
announced further proposals during the first half of 2021,
including certain productivity initiatives in Iberia. Restructuring
charges of EUR50 million associated with these initiatives have
been recorded during the six months ended 2 July 2021 related to
expected severance costs.
Commitments
Other than additional commitments of EUR0.1 billion related to
API, as at 2 July 2021, there have been no significant changes in
the commitments of the Group since 31 December 2020. Refer to Note
22 of the 2020 Consolidated Financial Statements for further
details about the Group's commitments.
Contingencies
Other than disclosed below, there have been no significant
changes in contingencies since 31 December 2020. Refer to Note 22
of the 2020 Consolidated Financial Statements for further details
about the Group's contingencies.
In relation to API, on 24 July 2020, a subsidiary 'Associated
Products & Distribution Proprietary Limited' (APD), was joined
to proceedings in the Supreme Court of Queensland between a
Glencore joint venture and the State of Queensland, whereby APD's
entitlement to royalties, from its sub-surface strata and
associated mineral rights, has been challenged by the State of
Queensland. Since 2014, the Group has received approximately EUR50
million in royalties. Since the proceedings commenced in 2020,
royalty payments have been paid directly to court.
The proceedings remain ongoing and the Group intends to defend
the matter robustly.
Note 13
EVENTS AFTER THE REPORTING PERIOD
During July 2021, heavy rainfall and flash flooding in Belgium
and Germany caused significant damage to our manufacturing
facilities in Chaudfontaine and Bad Neuenahr. The Group has
incurred, and expects to continue to incur, incremental costs
related to these severe weather events as well as lost revenues
from business interruption, particularly in Chaudfontaine. The
Group's insurance policies provide coverage for such events, and we
are currently working with our insurer on the related claims. At
this point, the Group does not expect the net impact of the
flooding and related insurance claims to have a material impact on
its financial position or results from operations.
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