Earnings Transcript for BVIC.L - Q4 Fiscal Year 2019

Simon Litherland: Okay. Good morning, everybody, and welcome to our 2019 full year results presentation. Before I kick off, I'd just like to especially welcome Joanne, who joins us from a long and successful career at Tesco, and prior to that, at KPMG. So she joined us in September and settled really quickly into the business and into the team. So welcome, Joanne. I'm going to start today's presentation by sharing some of the strategic highlights from 2019. Joanne will then cover the financial performance. And I'll come back and conclude with some thoughts on how we are evolving our successful strategy to ensure we're well placed for the future. So we launched our strategy in 2013, and I'm sure you'll now all be very familiar with the four pillars on this slide. Through this strategy, we've delivered excellent returns for shareholders. Over the last six years, our revenue CAGR has been 3.7%. Margin has improved by an impressive 350 basis points. This has translated into an adjusted earnings per share of 9.2% CAGR and a dividend per share CAGR of 8.5%. When you include some of the share price growth, this translates into a total shareholder return of just over 116%. This represents outstanding value, especially given the amount of change we've been through and the turbulence we've faced in the external world over this time. Few consumer goods companies have achieved this kind of consistency and value creation, and we're proud of our track record so far. We've also made great progress in sustainability, especially in reducing calories. In 2013, we announced our 2020 target to reduce calories per serve by 20% across our portfolio. And I'm proud to say we've hit this target one year early, leveraging our average calories -- reducing our average calories per serve to 27.5. Importantly, too, 94% of our GB portfolio is now below the soft drinks levy. I'm delighted, too, that our scores in our annual employee satisfaction survey, Great Place to Work, have once again increased this year. Engagement scores are at 84%, putting us firmly in the top quartile of employers. We've also seen a further improvement in the percentage of women in leadership roles up to 38%. At Britvic, we fully recognize the role we play in contributing to a healthier planet. Single-use plastics continues to attract headlines. And later on, I'll set out the breadth of our response, including our increased use of recycled PET as we move forward. And finally, we've joined leading companies from around the world in signing to science-based targets to reduce carbon emissions as well as the task force for climate-related financial disclosures. Now in 2019, we have delivered another strong financial performance. Despite the backdrop of a challenging and uncertain external environment, we've delivered further growth across revenue, margin and adjusted earnings, increasing earnings by over 6% and enabling us to increase our dividend once again by a similar amount. I'd just like to add that I'm really proud of the Britvic team whose commitment and energy forms the bedrock of our continued success. Joanne will expand on the financial detail behind these results shortly. But first, I wanted to call out some of the strategic highlights from the year. Firstly, in GB, where the soft drinks category has continued to grow post the introduction of the soft drinks levy. Britvic has once again outperformed the market, thanks to our broad portfolio of brands and our leadership in low- and no-sugar variants. You may recall from our interims in May that we're about to relaunch Tango. I'm delighted to report that stellar performance in the second half has translated into a very successful year. Tango's RSV is the highest for five years. The brand attracted nearly 1 million new shoppers and grew revenue in double digits and gained 100 basis points of market share. Pepsi MAX has had another great year, taking 260 basis points of value share. And in volume terms, as measured by Nielsen, Pepsi MAX is now the number one cola in GB, which is a fantastic achievement. This year, we launched MAX Raspberry, which was the biggest soft drinks launch in 2019. And once again, MAX won the Taste Challenge with 65% of consumers preferring it to any other cola. 7UP Free is now the number one lemon and lime variant, attracting new shoppers, recording double-digit revenue growth and market share gains. And on Robinsons, we made significant progress following the launch of Creations and Cordials premium variants in 2018, and both continued to grow this year. Along with strong price realization on our core variants, this contributed to another year of growth for the brand and further market share gains. Alongside our scale brands, we continued to explore and access new growth segments. Robinsons Refresh'd was launched into the water plus category in 2017 and is already the number three brand in the segment, approaching £10 million of retail sales value. Lipton Ice Tea is the clear leader in the fastest-growing segment in the U.K. with RSV approaching £30 million and nearly 21% value growth in 2019. You remember we relaunched Purdey's two years ago, repositioning it in the natural energy segment, with increasing awareness and penetration that recorded £14 million of retail sales value this year and a growth of nearly 24%. And finally, in premium adult soft drinks, we continue to build London Essence. While it remains small, we have continued to make progress both in GB and internationally. For example, it's now listed in over 1,200 outlets in GB and in 78 cities across 29 countries around the world. Our GB innovation feeds into our group innovation performance, which, as you see on this slide, continues to be an important growth driver across the group. Britvic's innovation track record is outstanding. And since 2013, we've consistently invested in two broad areas

Joanne Wilson: Thank you, Simon, and good morning, everyone. I'm delighted to be here for my first set of results with Britvic. And as you know, I joined in September. And I'm pleased to say I've had a very positive start working alongside Simon and the very energetic Britvic team. As you will have seen from our RNS this morning, we have delivered robust performance across all our key financial metrics

Simon Litherland: Thanks, Joanne. Moving on now to speak more broadly about the evolution of our strategy. As I said earlier, this strategy has delivered consistent returns over an extended period of time, so we start from a position of strength. It's important to remember that soft drinks remains an attractive category, offering consistent growth in per capita consumption. It is actually becoming more attractive as adult consumers are increasingly choosing nonalcoholic beverages over alcohol. At the same time, the world moves on, and we are continuing to evolve our strategy along with it. We are well placed to capitalize on industry trends. We are clear on the role that each part of our business will play, and we remain passionately committed to our sustainability agenda. In today's fast-changing world, consumers are evolving their drinking habits in four main areas. Firstly, consumers are more health-conscious and are making informed choices to achieve a healthier diet. Secondly, they are seeking differentiated and more personalized experiences which are often more premium. And thirdly, consumers are increasingly channel agnostic in where they buy their drinks, where they shop, whether it be online or visiting more convenient stores or outlets. And finally, they're looking for simple ways that they can do the right thing to help protect the planet, and they are expecting brands to do likewise. We recognize all these trends and have evolved our strategy to capitalize on the exciting future opportunities that they offer. First and foremost, we are focused on stretching and growing our core brands, which are predominantly low or no sugar, are one or number two in their categories and we believe are well positioned for future growth. Beyond these core brands, we see a number of further growth opportunities, as set out on this slide. We will continue to innovate on our core brands or with new ones to access new growth spaces, whether it be emerging consumer needs, blurring retail channels or different drinking occasions. In response to healthier lifestyles, we are leaning into our unrivaled ability to flavor water and other liquids for consumers wherever they may be. And we know we can do so at a very low average calories per serve without ever compromising on taste. And in response to the desire for more elevated experiences, we continue to build our adult premium soft drinks portfolio in every market where we compete. And we're also building on strong sustainability credentials for all our production, packaging and dispense solutions as people start to look for ways to consume soft drinks that go beyond traditional packaging. As well as being the right thing to do in society and for the environment, it's a very interesting growth area for us. We're also very clear on the precise role of each part of our business. We see GB as a growth market, and we intend to continue to take share by leveraging our strong multichannel route to market and the breadth and strength of our low- and no-sugar portfolio. We have deep category and customer partnerships, and we will also continue our successful track record of innovating into new growth spaces. Our International business is increasingly focused on premium brands, such as Mathieu Teisseire and London Essence, which have the right value chain to allow for asset-light expansion around the world. In Europe, as demonstrated by the proposed transaction in France, we will focus our business on stretching and growing our core brands and align our business models as efficiently as possible to achieving this. And finally, in Brazil, we have a well-developed route to market in the modern trade in the most populous areas down the East Coast. However, our limited category footprint means that we are currently only present in around 10% of the total market. We plan to expand into further segments through a combination of innovation, partnership or acquisition. Here, we've summarized our geographic and strategic growth drivers on one slide. Critical to our ability to invest in these growth drivers is a continued focus on unlocking efficiency. Following the completion of the Business Capability Programme, we moved to a continuous improvement mindset, both to increase margins and also to fuel reinvestment in our brands and other growth initiatives. We continue to build the organization-wide capabilities and culture that will increasingly set us apart. Selective M&A will continue to form an important part of our strategy where it can accelerate progress into attractive new markets, categories or capabilities. And we'll focus more than ever on creating a better tomorrow through our increased commitment to healthier people and to a healthier planet. I'll conclude by explaining this critical part of our strategy in a little more detail. Our healthier people agenda is focused on promoting good health and well-being, which is one of the UN's Sustainable Development Goals. As you know, we led the industry in product reformulation well ahead of the introduction of the soft drinks levy in GB and Ireland, and we reached our 2020 goal on total calorie reduction one year earlier. Going forward, we have set a target not to exceed 30 calories per serve across our total portfolio. While it will always remain important that we offer choice, we will continue to focus our marketing efforts on promoting the healthier alternative. Our stance on sugar is one of the key reasons our strategic partnership with Diabetes UK worked so well. In the first year of our partnership, Britvic employees have raised over £190,000 for the charity, money which is funding a program to help schools understand and support children who are suffering from type 1 diabetes. We also take the good health and well-being of our employees very seriously. And we recently launched a new global well-being program, My Life, which offers instant free access to well-being support for our employees and focus -- this is on mental as well as physical health and well-being. We are also more committed than ever to a healthier planet. As you know, we were an early signatory to the U.K. Plastics Pact, which means that we are committed to the very stringent standards that are expressed in that. This year, we've taken a number of steps to further reduce our use of plastic and to promote recycling. These efforts have been helped by our successful BCP program, which also enables us to harness the environmental benefits of reduced road miles and more energy-efficient equipment. We've successfully removed over 1,500 tons of plastic since 2017 through lightweighting, and we have significantly increased our Recycle Me messaging to encourage consumers to recycle more. Critical to achieving our sustainability goals is our ability to source and manufacture in the U.K. sufficient food-grade recycled PET or rPET. Today, I'm delighted to announce that we have provided £5 million of investment support to one of our strategic suppliers, Esterform, who will use it for a new returnable PET factory in Leeds. This deal provides Britvic with secure access to U.K.-sourced rPET and enables Esterform to invest in a major capital project that will enhance the U.K.'s efforts to create a circular economy for plastics. It means we are well on course to meet our U.K. plastics packaging target, not only next year, but also for the next few years. We also are supportive of a well-designed Deposit Return Scheme. And we are actively engaged in working with both the government and industry to establish it. And finally, we've just signed up to the Science Based Targets initiative, which seeks to limit climate change to within 1.5 degree Celsius. Britvic commitments here include reducing by 50% our carbon emissions -- our direct carbon emissions over the next five years. This is a very stretching target, but we're determined to make a real and lasting difference. So to summarize. 2019 continued our long-established track record of strong performance and meeting market expectations. While 2020 will bring further external uncertainty, we have repeatedly demonstrated the resilience of both our category and our business in the face of significant headwinds. We consider Britvic well placed to take advantage of the future trends and to play a full part in creating a better tomorrow. I therefore remain confident in making further progress and delivering increasing value to all our stakeholders in this on future years. So thank you for listening, and we'll now be delighted to take your questions. As ever, if you wouldn't mind stating your name when you get the mic just for the purposes of the webcast and transcript. Thank you.

Q - Fintan Ryan: Fintan Ryan here from JPMorgan. Just two questions, please. Firstly, on France, could you give us an indication of what the continuing or the run rate business growth was for sales and EBIT in FY '19? As well as, could you give us an indication of -- would you expect that business to return to growth, the continuing French business return to growth in FY '20? And just you gave an ambition to improve your profitability within Europe. Could you give us a sense of -- do you have a specific margin or a specific EBIT in mind with that target?

Simon Litherland: Okay. Thank you. I'll take the first. And do you want to pick up the second? So yes, on France, I think -- remember, we bought this business nine years ago, and the key reason for it was the Teisseire brand, and along with it came our own-label juice business. Teisseire actually over that time has performed incredibly well. When we bought it, it was outside of the top 10 soft drinks in France, and today, it's within the top three. And likewise, we're delighted with the growth we've seen out of Fruit Shoot to become the number one kids brand and Pressade to become the number one organic juice brand. So historically, I think the performance has been great. But we're also delighted to have -- kind of have the opportunity to exit a scale business that we can't compete effectively in with the own-label juice disposal to Refresco. The challenges that we've had I think in the last 18 months or so and certainly in the last year, 2019, I think are driven by a number of factors. First of all, we're lapping a very hot summer. And secondly, we've talked about the introduction of this EGAlim Law, which comes alongside what is quite a challenging consumer and customer environment. Looking forward, the first half will certainly be challenging. We had a 9% revenue decline last year. And I think we'll see a continuation of that sort of order in the first half as we lap into the EGAlim Law in February, March of next year. And secondly, most of our activity, certainly behind Teisseire, will start to be activated in the second half. It's the 300-year anniversary of that brand, and we've got a full marketing program from them. Clearly, we also have a lot of work to do to establish our service agreements with Refresco and the transition to that business. So I see 2019 very much as a year of transition for France and I see a continual challenge in the -- certainly in the first half, and you'll start to see some improvement in that business in the second half. Do you want to pick up on the second part?

Joanne Wilson: Yes. So just looking at profitability in Europe. As Simon said, our proposed transaction in France will leave us with a smaller, more profitable business in that market in FY '20. As Simon said, it will be a transitional year as we set the business up for success and really drive that profitability in '21 and '22. In the other markets outside of Europe, we've talked about our growth opportunities in the top line, and we are confident about those. The difference in Europe is while we still want to grow our top line, our focus and priority will be how do we drive much more profitable growth than we have seen historically. If I take Ireland, we know our margins are not where we would like them to be, and we believe that there are further efficiencies that we can drive from our business model.

Andrea Pistacchi: Andrea Pistacchi from Deutsche Bank. Two questions, please. First, based on what you're saying earlier in the prepared remarks, it seems that there's a slightly different tone of -- on M&A. So if it's probably slightly moved up on your priority agenda. Could you confirm whether that is the case? And if it is, what has driven this? And whether from an M&A point of view, you'd be looking at markets where you are already present? And you alluded to Brazil. Or would you still consider entering new markets? And then if I could please go back to France and the top line growth there that you aspire to. Leaving aside the comp issues, leaving aside the impact of EGAlim Law, what are the sort of key planks to address this top line growth and how, over the next few years, that should improve? Obviously, disposing private label is one step.

Simon Litherland: Okay. Thanks, Andrea. Yes. I'm not sure my tone is any different. I need to be careful of how I sound. But I think the message is the same. We will look at selective M&A when we can. The key point is that we don't believe we need M&A. We can see significant -- or plenty of growth opportunities without it, as hopefully the articulation of the strategy shows. But the reason why we would participate in M&A is the same as in the past, either entering new markets where we can see attractive local brands with a strong route to market or indeed, as you've suggested. We might fill in into our portfolio in existing markets and categories that we have a small or no presence. And that would include Brazil but just as likely or possible in GB or any of our other markets. So I don't think it's really any different to what we've said in the past. And as I say, we see plenty of opportunities for growth without it. But we'll obviously look on a selective basis if we find something that is attractive on those lines at the right sort of price. And secondly, in terms of the key drivers for France. Look, I think this transition is difficult. It's actually not a massive transaction, but it's quite complicated with a service agreement, setting up third-party manufacturing, all that sort of stuff. So the first half of the year, as I say, will be challenging and then we get down to the business on focusing on the growth of our core brands, and that is through traditional A&P investment. We've got a great opportunity this year with the 300-year anniversary behind Teisseire. We've got some interesting innovation in the marketplace with Fraicheur de Fruit, for example, which is an 85% fruit-based syrup, so a more healthy alternative. Likewise, with Fruit Shoot, we are expanding the distribution and growth of Fruit Shoot Hydro and Fruit Shoot Au Jus in that marketplace. So the plans I think are robust. But as I say, I think, to expect them to turn around in the first half will be challenging, particularly as we lap a lack of promotion in store. And the margin determination for the retailers has meant that grenadine and some of our core Teisseire variants have gone beyond key price points. So that will remain challenging for the short term.

Nico Von Stackelberg: Nico Von Stackelberg from Liberum Capital. I just want to ask you a quick question on trying to find an estimate of the proceeds from the Refresco deal. So I see that the value of the assets have been written down to £13.7 million. Is that roughly what we should be expecting in terms of proceeds? It would seem plausible given that the auditors wrote that value down. And secondly, I'm trying to get a feel for the degree of promotional activity within London Essence as you enter into new outlets. I'm not sure if you could provide me with maybe the gross profit per unit case or maybe some indication of how many of those outlets you are, let's say, temporarily offering favorable trade terms in order to get into the outlets. And if you have a view over whether it's three to five years of when those sort of favorable promotional activities roll off in time.

Joanne Wilson: Okay. Well, let me take the first one. So as we announced, we have signed a put option and we are in consultation with our employees in France. What I can say about that proposed transaction is that we do expect to receive cash proceeds for the sale. And we have also entered into a long-term supply arrangement with Refresco for supply of some of our products, including Fruit Shoot. And that forms part of the transaction.

Simon Litherland: Yes. Secondly, on LEC, so yes, look, what we're trying to do is build a premium brand, and therefore, it is at a premium price point. And I'm not that aware of a whole amount of promotional activity or not. So where you've seen that, let me know, and I'll have a look. But generally speaking, we are selling the brand on its credentials, on the quality of the liquid, the quality of the packaging and the taste. And the reception to the brand is very positive. We're starting in more premium outlets at the top of the triangle, if you like, and then we'll start to drift down further. Where we are active, as we do work alongside certain spirits brands in the off-trade, in customers like Tesco or Sainsbury's, for example, or Waitrose, where we may see promotions alongside spirits brands, which are specifically designed to drive trial and build the brand that way, so yes, it's not -- the core is to go relatively slow and build a sustainable platform in the future. Three years in, we're really pleased with the progress we've made. Some markets are getting traction faster than others. But on the whole, I think we've made great progress. We're building some great third-party distributor relationships, and we're quite encouraged about where we might go with this in the future. And it is across the range. So obviously, it's a tonics but also a premium adult sodas. And in some instances, we might not get listed as a tonic because there are existing contracts with some of our competitors, the barmen are very attracted by our soda range, so we're going to get a listing on one or two of our sodas for specific cocktails. So it's the breadth of the range, and the premium and the quality liquid and packaging that's allowing us to win through. Better come over this side, I think. Thanks, Chris.

Simon Hales: It's Simon Hales from Citi. I wonder if you could just perhaps start by giving us a little bit of color on current trading. I didn't need my umbrella this morning, but it's one of the first in many. Secondly, the BCP savings you flagged in the statement come to an end at the end of 2020. What were the savings in 2019? And what's left to really come through there? And then just finally, do you have an aspirational target as a percentage of revenue that you'd like to see coming from innovation on a rolling basis?

Simon Litherland: Okay. I'll take one and three. And then you do two. So yes, I mean current trading, the year started reasonably well. I think we've got -- what's quite exciting is we've got some good momentum on our core brands, particularly in GB. And you can see that in the presentation. And that has continued into the first couple of months. Likewise, Brazil has started well. France is challenged, as I've said. And our international business is very much on track. And like -- and Ireland is kind of there or thereabouts. So I mean the way I see the year ahead, I think it's -- there's a lot of uncertainty around. I think consumer confidence has dipped again or a bit. So there is some sort of recessionary behavior taking place. But as I say, this category is resilient. It's an affordable consumer staple. And we've kind of seen recessions before and we've continued to make progress through those, and indeed, through some more crisis-type events. So I fully anticipate that 2020 will be a year of further progress. And the BCP savings?

Joanne Wilson: Yes. So on the BCP, look, first of all, I'd say, really successful completion of that program on time. It was a huge transformation for our business and supply chain. And many of you will have seen that firsthand. We're also pleased that we are delivering on the benefits that we guided to, which totaled £21 million in FY '19. That was a £5 million benefit. And we expect to see the final £5 million coming through in FY '20. Of course, it now gives us an opportunity that we have completed it to focus on continuous improvement through a business-as-usual lens, and that will absolutely be a priority. But for now, we're not in a position to change the guidance that we give on the 15% return from that program.

Simon Litherland: And on innovation, we don't actually set a percentage revenue target. And you'll remember that the percentage on that slide is a percentage of Britvic innovation over total revenue, so it's quite a harsh measure, and excludes, for example, some of the Pepsi innovation like Pepsi MAX Raspberry, for example. And indeed, we've just recently launched Arto LIFEWTR, which is kind of tiny but just another example. I think the key message is, four, five years ago, we felt we were under indexed in terms of the amount of innovation we're bringing to market. We've significantly increased that. And I think there's the opportunity to, yes, bring interesting new stuff into new growth categories. But at the same time, it's important to be able to scale what we have in market, and so delighted to see the likes of Purdey's and Natural Energy growing at 25%. Robinsons Refresh'd in water plus, over £10 million of retail sales value and still growing. Aqua Libra is small, but very high-growth potential in a new category. So we have quite a lot out there, and it's important to kind of take some of these and see if they'll scale. And of course, with new brands, and small brands and new categories, that doesn't happen overnight and will take a number of years, and we kind of marry our investment with the growth that we see. Whereas innovating off our core like Cordials or Creations, you tend to get a faster payback, and that's absolutely what we've seen. So no specific target. We're up at the right level. We've got the R&D and the marketing capability to innovate. And I think it's a balance between putting new stuff into the market because there's an awful lot of new stuff that goes into these markets. There's very few that actually scale. So it's a balance between those two things.

Chris Wickham: Chris Wickham, Equity Development. Three things. First, I mean, segueing on from Simon's question. I mean if we look at that chart which shows your NPD rate, and we just sort of stick a trend line through that, would that be roughly the right way to go about it? And then secondly, what scope is there for markets outside the core, your nondomestic markets, to be a source for innovations? And obviously, you're showing us some quite interesting stuff you're doing in Brazil. Does that then find its way back into the center and then just get adopted as a source of innovation? And then thirdly, you're just talking a bit about consumer confidence. I mean obviously where consumer confidence is most likely to show early signs of a wobble is in the on-trade relative to the off. Are you seeing any material divergences in terms of those sort of performances when you're looking outwards rather than looking to the year you just completed?

Simon Litherland: Okay. Yes, but on the first one, I actually don't think it's correct to put a trend line because the way that currently works is after three years, it drops off from innovation. So just be careful, just be careful of how you look at that. Yes, Brazil is a good example. We've got some strong brands in a couple of categories, but those categories are actually quite small relative to the total soft drinks category in that marketplace. So there, we do absolutely see opportunity to participate in new categories. And I gave a few examples today

Ewan Mitchell: Ewan Mitchell from Barclays. I was wondering if you could talk a bit more about your plastic announcement this morning. Can you give us an idea of what percentage plastic is on your COGS bill and an idea of what RPET will be as a percentage increase in kind of cost of plastic? And then secondly, just some of the one-offs. You mentioned a Brazil tax benefit. Could you just give us a little bit more color on that? And then the overheads around Brexit this year. And without going into the full scenario analysis of what we see next year, what might we expect on Brexit?

Simon Litherland: Okay?

Joanne Wilson: Okay. Yes. Just starting with the partnership that we announced this morning with Esterform. This partnership will be critical to delivering our objectives in increasing the recycled PET that we're using across our portfolio and also supporting investment in the general recycling infrastructure in the U.K. because that is an area that needs further investment. In terms of the impact of recycled PET on the overall cost of PET, look today, it's a small proportion of our overall spend on PET, but we expect that to increase going forward. Our rPET versus virgin PET is trading at approximately 30% higher on average. The Esterform deal will, over the medium term, hopefully, enable us to close some of that impact or mitigate some of that inflation that we see in the market today. In terms of your second question on Brazil and the taxes. So this is a widespread reclaim in Brazil of local taxes akin to I guess a VAT. In Brazil, the term is PIS and COFINS, if you want to go and read about them. We have seen historically, and as I said, the impact is about £1 million in Brazil this year. And going forward, there will be a small reduction in those PIS and COFINS versus historic levels in our numbers. Your final question, on overheads on Brexit, as I said, we did see a drag in our overheads from costs relating to Brexit planning in 2019. And we continue to make appropriate contingencies, as you'd expect us to into FY '20. I don't expect to see -- well, depending on the outcome I guess, I don't expect to see a significant increase on that in FY '20. And we have done all the things that you'd expect, additional warehousing space, we've brought forward a little bit of raw material stock. And we will continue to watch with eager anticipation.

Ed Mundy: I'm Ed Mundy from Jefferies. I've got three. The first is on the Be Ingredient within Brazil. I was wondering whether you could perhaps provide a bit more color on that, what the opportunity is with that -- using that for the wider group. The second question is on Slide 25, where you're showing your evolved strategy. As you execute that evolved strategy, what are the key things that you'd look for in the group over the next three to five years that might look different relative to today? And then the third question is when you look at some of the bullets there, innovating into new spaces, flavoring billions of water occasions, sustainable packaging, what is the opportunity to do more with Pepsi and with their SodaStream product?

Joanne Wilson: Okay. I'll cover off Be Ingredient. So as Simon said, when we bought that business in Brazil, the Be Ingredient's fruit processing business was part of it then, is an opportunity, first and foremost, for us to take the opportunity to buy fruit for our local Brazilian business. And in the past year, we have also taken the opportunity to buy fruit raw materials for the wider Britvic business. For example, we've done that with orange juice and with passion fruit. And where they have excess fruit, they have sold some of that to third parties, and that's generated some growth for that business in FY '19. But I think the appropriate way to look at that business is, it's an opportunity for us to get secure and stable pricing for some of our raw materials, both in Brazil and increasingly across the group.

Simon Litherland: Okay. Thanks, Joanne. I think on the second one, what's different? I think we have been more specific, Ed, in the role, in defining the role of each business I think more clearly than in the past. So France, Ireland, Netherlands, Belgium, our European markets, we really are saying, we're going to focus those business on our core brands, and we want to do it in an efficient way. We want to drive margin probably more than top line growth in those marketplaces. But clearly, profitable growth is what we're after. I think you'll also see continuation of our focus on concentrates and flavoring water and other liquids. We really do see that as an opportunity for us. There's over 50 billion water occasions in GB in a year alone, and water -- consumption of tap water is growing really fast. And we are the best and the biggest in the world at flavoring water at low calories. So how do we exploit that opportunity further and how do we grow with it is an example. Innovation. We've talked quite a bit about that. That will continue to be a focus. I think consumers are evolving the way they drink, how they drink, where they drink, some of the trends I highlighted earlier, I do think we have a track record that says we can participate in new occasions and channels. But it's not just with brands, it's also formats. So if you think of the whole sustainability agenda. We have a big dispense business, with thousands upon thousands of outlets. We've got vehicles and technicians who service those outlets. And that's a very environmentally-friendly way to serve soft drinks. So how do we build on that capability, for example? So there's just some examples of how you might see the business evolving. And of course, we've got a fantastic partner in Pepsi. The performance on their core brands continues. As you guys know, we've taken share in Pepsi MAX for a large number of years. Last year was no exception, 260 basis points on Pepsi MAX. 7UP Free is now the number one lemon and lime variant as well and growing really fast. Tea, as we've said, is also a really fast driver. So the performance really helps that relationship, and we really do have a strong relationship with them. And that enables us also to access their thinking, their innovation and their pipeline. So Arto LIFEWTR is an example, which we've just -- we're kind of trying that out in GB, and their acquisition of SodaStream, some of the logic behind that is consistent with some of what I've said. That's completely independent from the relationship we have with them at the moment. But as they grow and develop their business and the kind of partnership that we have, I can only see that as beneficial over time.

Patrick Higgins: Patrick Higgins from Goodbody. Just a question on the U.S. Obviously, you flagged this morning moving away from the multiserve with Fruit Shoot. Could you just give us an idea of the impact that will have from a top line perspective, firstly? And then, I believe that international business was about £5 million loss-making on the EBIT line this time last year. Could you just give us an idea of the impact this will have then on that basis as well?

Simon Litherland: So Joanne, talk about the future. I mean the -- I think it wasn't quite £5 million. It was low single digits, I think, in the past and actually was profitable in 2019, our international business.

Joanne Wilson: Yes. So just on U.S., if you stripped multipack Fruit Shoot out of the base, we reported 10.2%. It would have been a couple of percentage points higher than that. So it gives you a sense of the scale. In terms of -- as Simon said, the impact on the bottom line, we expect to be negligible as we -- this really allows us to refocus some of our resources and efforts in international to some of the brands that we believe will deliver higher growth.

Patrick Higgins: On the U.S. as well, what exactly went wrong with the multipack format? Was it an issue of scale or was it more a higher competition within that format? And how is that making you look at the rest of the U.S. business and the future of it?

Simon Litherland: Okay. Thank you. Yes, I mean I think both of those actually. So as you know, our single-serve Fruit Shoot business does very well. We're the number two kids fruit drink in the U.S. with that business, which is profitable. And it has good consumer liking and traction. But when we went into grocery, which is, as you know, in the U.S., very competitive and the category is quite low-priced, and in fact, quite challenged, we recognize that with a mainstream brand like Fruit Shoot, you struggle to make the margin. And the way you make the margin is by getting scale. And so for a number of years, we gave ourselves a chance of getting scale and turning this opportunity into a more scalable piece of business for ourselves. But I think we've called time on it because we did make some significant progress with Walmart 12, 18 months ago, where we had some fantastic feature and display on shelf way beyond the size of the brand, and the pickup just didn't give us confidence that we could get to scale fast enough and that the extent of the margin was going to be there for the long term. So I think calling it is the right thing to do. We can take our resources elsewhere. And as Joanne articulated, we are -- part of our international strategy behind premium adult soft drinks. There are some of the resources that we're focused on the multipack are now kind of redirected towards the premium adult soft drinks opportunity.

Fintan Ryan: And Fintan Ryan again from JPMorgan. Just a question on working capital, please. So you saw an outflow of around £20 million in FY '19. Wondering if you can you give us an outlook -- a view on the outlook for working capital into FY '20. And should we start to see any of the benefits from BCP come through in terms of working capital and inventories? I believe there's about £100 million investment in working capital at the beginning of the program. Should that start to unwind?

Joanne Wilson: Thanks, Fintan. Yes, look, just in terms of the working capital, as I explained, the drivers of that outflow was some of our phasing in '19 with very high sales levels in August and September, plus the increase in stock, and that was primarily in GB and Brazil. Now in Brazil, the driver of that was -- we took the opportunity to buy some raw materials, for example, coconuts, at good prices. And that resulted in an increase in our year-on-year stock. In GB, through the BCP program, you rightly said that we did build up buffer stock to make sure that we were able to deliver the right service levels to all of our customers. And there's a little bit of that in '19 still. There's a small amount of Brexit contingency stock as well, but it's small and primarily around raw materials. As we look to '20, we do expect to see an improvement in working capital and we do expect to see a reduction in stock. And we will be pushing that across each of our business units. And on other working capital, it is driven quite a lot by the phasing of our sales. So with our biggest quarter being Q4, that is a dependency, but we are focused on driving an improvement in '20.

Simon Litherland: Very good. Okay. I think should we do the last one or... Steve. Okay, Steve. Thanks.

Doriana Russo: Doriana Russo from HSBC. I would like to come back to the margin opportunity that you see within the group. Obviously, you have made a lot of investments behind your capabilities in GB, which are now come to end. A little bit was delivered in the current year. You mentioned another £5 million, if I'm not wrong, for next year expected. But what do you think is actually the opportunity for you to deliver much more in, say, five years? How much do you see your operating margin improving as a result of what you've invested? And number two, can we expect another BCP being announced soon, perhaps not focused on the U.K., perhaps focused on some other of your territories?

Simon Litherland: Yes. So let me just talk -- probably you can build on it, Joanne. Yes, the margin, I think we had made great progress, I think 350 basis points over the last six years. And margin continues to be important for us. We don't give specific guidance, but I think we've demonstrated our ability to manage revenue, which is a big, big driver of margin. So our promotional and price effectiveness, our pack price strategy and architecture. Innovation tends to be margin accretive. It's one of the criteria we judge our choices behind in that regard. And we have invested a lot, and while you quite rightly say we'll get the £5 million from BCP in 2020, but we've still got work to do to kind of get these machines kind of humming, if you like. And the shift is to kind of focus on that continuous improvement. Of course, as we generate cost savings, we also need to fund growth and brands in the future. So it will be a balance between how much we drive to the EBIT and how much we put behind our brands. But profitable growth is the journey that we're on. I don't know if you want to add anything. Okay.

Joanne Wilson: BCP 2, BCP 2.

Simon Litherland: Oh BCP 2. Yes, sorry. So yes, there's nothing of any of that scale at all. We will, of course, continue to look to improve our businesses, and that applies to our manufacturing efficiencies as well as any other part of our business, but we're not looking to have another major investment program like that. I mean as Joanne guided this morning, a capital expenditure, sort of range of £70 million to £80 million. There is some flexibility around that. If we need to invest in a new line for growth, we may go just beyond that. But that's kind of the order of what we're talking about.

Damian McNeela: Damian McNeela from Numis. Just a sort of broader one. If we look at the sort of soft drinks and sort of wider beverage category, there seems to be a blurring of lines between sort of alcohol drinks and adult drinks. It's -- we've seen some of your competitors move into the sort of adult alcohol space. Is that something that you would consider in time given current trends?

Simon Litherland: So if I've heard you correctly, you said adult alcohol space. So I don't think alcohol is part of the strategy. But if you're talking about nonalcoholic soft drinks that meet adult consumer occasions, then possibly. So I think certainly, premium adult soft drinks, I think, is an area that's underserviced. So the likes of the London Essence tonics and sodas would play into that. Mathieu Teisseire is a premium adult mixer, if you like. And I do think there's a space for us to kind of evolve our business into. At the moment, it's tiny, but as you rightly point out, there's a slow but -- and sort of relatively consistent trend to more healthy options. So it's an interesting space, and you can see it in the circle of our strategic areas of focus, yes. Okay. I think we're all done. Listen, thanks very much for coming, and good to see you all. Thank you.