NOTES

Forming part of the financial statements

 

1. SEGMENTAL REPORTING

The Group’s business activity is the manufacturing, marketing and distribution of alcoholic drinks and five reporting segments have been identified in the current period; Republic of Ireland (‘ROI’), Cider United Kingdom (‘Cider UK’), Tennent’s United Kingdom (‘Tennent’s UK’), International, and Third Party Brands United Kingdom (‘Third Party Brands UK’).

The Group continually reviews and updates the manner in which it monitors and controls its financial operations resulting in changes in the manner in which information is classified and reported to the Chief Operating Decision Maker (‘CODM’). As a result, the basis of segmentation differs from that presented in the prior year however it corresponds with the current year nature of reporting lines to the CODM (as defined in IFRS 8 Operating Segments), and the Group’s internal reporting for the purpose of managing the business, assessing performance and allocating resources.

The CODM, identified as the executive directors comprising Stephen Glancey, Kenny Neison and, from 23 October 2012, Joris Brams, assesses and monitors the operating results of segments separately via internal management reports in order to effectively manage the business and allocate resources.

During the current financial year, the CODM reviewed the basis on which they received financial information to manage the business and concluded that it was no longer wholly appropriate and consequently implemented a number of changes as outlined in the paragraphs below. In all instances the changes were deemed necessary to better enable the CODM to evaluate the results of the business and the economic environment in which the business operates. The operating segments that have been aggregated all have similar economic characteristics and are similar in terms of product, production and distribution processes, and customers. All comparative amounts have been restated to reflect the new basis of segmentation. The reclassification has no impact on the Revenue, Net revenue or Operating profit reported by the Group.

The identified reporting segments are as follows:-

(i) ROI

This segment includes the financial results from sale of all products in the Republic of Ireland (‘ROI’), principally Bulmers, Tennent’s, Caledonia Smooth and third party brands as permitted under the terms of a distribution agreement with AB InBev.

The continued challenging economic climate within which the ROI business operates changed the focus of the CODM from the financial performance of cider in ROI to that of the total financial performance of the portfolio derived from the ROI market. Previously the financial results from the sale of Tennent’s and third party brands in ROI were reported within the Tennent’s and Third Party Brands segments.

(ii) Cider UK

This segment includes the results from sale of the Group’s cider products in the UK, with Magners, Gaymers and Blackthorn the principal brands. Previously the results from the sale of the Group’s cider products in the UK were shown within two segments, Cider GB (cider sales in Great Britain (‘GB’)) and Cider NI (cider sales in Northern Ireland (‘NI’)).

As permitted under IFRS 8 Operating Segments, the Group has aggregated the Cider NI operating segment with the Cider GB operating segment as the nature of the products are identical, profit margins are aligned, both operating segments are managed by the same segment manager, the strategic objectives and the type of customers in both jurisdictions are similar as is the method of distribution, the market in which they operate, and the regulatory environment.

In addition, in updating the manner in which the CODM wished to monitor and assess financial performance of the Group, a decision was taken that the financial performance of the element of the Group’s business concerned with the production and sale of ‘private-label’ cider products in the UK was better managed and controlled as part of the operating segment Third Party Brands UK. This decision was taken on the basis that the operating margins of this business component are similar to those earned from other third party brands; the strategic objectives are more aligned with those of the Group’s third party distribution business and the inclusion of this business within the operating segment Cider UK distorts the financial information which the CODM uses to decide on the allocation of resources.

(iii) Tennent’s UK

This segment includes the results from sale of the Group’s ‘owned’ beer brand – Tennent’s in the UK and sales of Caledonia Best in the UK. This differs from that previously presented where the financial results from sale of Tennent’s across all territories was disclosed within the Tennent’s segment.

(iv) International

This segment includes the results from sale of the Group’s cider and beer products, principally Magners, Blackthorn, Hornsby’s, Woodchuck and Tennent’s in all territories outside of the ROI and the UK. This differs from that previously presented where the financial results from sale of Tennent’s across all territories was previously disclosed within the Tennent’s segment. Accordingly, the Group renamed the segment ‘International’ from ‘Cider Export’; this aligns with the internal structure where a segment manager was appointed during the year with responsibility for the new International segment.

(v) Third Party Brands UK

This segment relates to the distribution of third party brands and the production and distribution of private label products in the UK. Previously, results from the sale of third party brands in ROI were included within the operating segment Third Party Brands but for reasons outlined above are now included in the ROI segment.

Information regarding the results of each reportable segment is disclosed below for the Group’s continuing business while the relevant information in relation to the prior year disposal of the Group’s wholesaling business in Northern Ireland (Quinns of Cookstown) is disclosed in (note 8).

The analysis by segment includes both items directly attributable to a segment and those, including central overheads, which are allocated on a reasonable basis in presenting information to the CODM.

Inter-segmental revenue is not material and thus not subject to separate disclosure.

Segment capital expenditure is the total amount incurred during the year to acquire segment assets, excluding those assets acquired in business combinations that are expected to be used for more than one accounting period.

(a) Reporting segment disclosures

2013 2012
(restated)
Net Operating Net Operating
Revenue revenue profit Revenue revenue profit
€m €m €m €m €m €m

ROI

133.8 92.2 38.5 142.5 101.4 44.4

Cider UK

195.8 137.8 30.9 218.6 162.1 35.2

Tennent’s UK

229.3 108.9 30.3 209.9 95.8 21.2

International

48.5 47.8 9.1 30.7 30.6 6.8

Third party brands UK

116.7 90.2 5.1 115.0 90.9 3.6
     

Continuing operations

724.1 476.9 113.9 716.7 480.8 111.2

Discontinued operations (note 8)

- - - 5.2 5.2 (0.1)
     

Total before unallocated items

724.1 476.9 113.9 721.9 486.0 111.1

Unallocated items:

     

Exceptional items (note 5)

- - (4.6)* - - 4.9**
     

Total

724.1 476.9 109.3 721.9 486.0 116.0

* Of the exceptional loss in the current year, €1.3m gain relates to ROI, €0.8m loss to Cider UK, €2.6m loss to International, €0.5m loss to Tennent’s UK, and €2.0m loss remains unallocated.

** Of the exceptional items in the prior year, €4.8m gain relates to ROI, €1.4 m gain to Cider UK, €1.3m gain to International, a €2.7m loss to Tennent’s and a €0.1m gain to discontinued operations.

In the prior year, the unallocated exceptional items excluded the loss on disposal of discontinued activities of €1.1m and a loss of €0.7m on the recycling of a foreign currency reserve to the income statement following the disposal of the Group’s NI wholesaling business.

The impact of the reclassification of the FY2012 financial results as previously described is outlined below. This reclassification has no impact on the Revenue, Net revenue or Operating profit reported by the Group:-

Revenue Net revenue Operating
profit
€m €m €m

ROI

Previously reported - Cider ROI

126.8 91.5 42.2

Impact of change

15.7 9.9 2.2
     

Current classification

142.5 101.4 44.4
     

Cider UK

     

Previously reported - Cider GB

249.8 172.8 29.5

Impact of change

(31.2) (10.7) 5.7
     

Current classification

218.6 162.1 35.2
     

Tennent’s UK

     

Previously reported - Tennent’s

216.8 100.1 22.3

Impact of change

(6.9) (4.3) (1.1)
     

Current classification

209.9 95.8 21.2
     

International

     

Previously reported - Cider Export

30.3 30.2 6.6

Impact of change

0.4 0.4 0.2
     

Current classification

30.7 30.6 6.8
     

Third party brands UK

     

Previously reported - Third party brands

77.9 74.0 7.1

Impact of change

37.1 16.9 (3.5)
     

Current classification

115.0 90.9 3.6
     

Cider NI

     

Previously reported

15.1 12.2 3.5

Impact of change

(15.1) (12.2) (3.5)
     

Current classification

- - -

(b) Other operating segment information

2013 2012
(restated)
Capital Capital
expenditure Depreciation expenditure Depreciation
€m €m €m €m
       

ROI

2.2 3.3 1.4 3.8

Cider UK

10.3 8.6 8.8 8.3

Tennent’s UK

8.7 8.3 7.4 7.2

International

3.1 1.2 0.6 0.6

Third party brands UK

- 0.2 0.4 0.3
       

Total

24.3 21.6 18.6 20.2
       

(c) Geographical analysis of revenue and net revenue (continuing operations)

Revenue Net revenue
2013 2012 2013 2012
€m €m €m €m
       

Republic of Ireland

133.8 142.5 92.2 101.4

United Kingdom

541.8 543.5 336.9 348.8

Rest of Europe

14.2 10.4 14.2 10.4

North America

29.9 14.5 29.2 14.4

Rest of World

4.4 5.8 4.4 5.8
       

Total

724.1 716.7 476.9 480.8

The geographical analysis of revenue and net revenue is based on the location of the third party customers.

(d) Geographical analysis of non-current assets

Rest of North Rest of
ROI UK Europe America World Total
€m €m €m €m €m €m

28 February 2013

           

Property, plant & equipment

54.1 123.9 - 5.6 - 183.6

Goodwill & intangible assets

120.3 322.8 7.1 251.4 5.6 707.2

Equity-accounted investees

- 2.4 - - - 2.4

Retirement benefit obligations

- 0.5 - - - 0.5

Deferred tax assets

5.2 - - 1.0 - 6.2

Derivative financial instruments

- 1.4 - - - 1.4

Trade & other receivables

0.5 30.8 - - - 31.3
           

Total

180.1 481.8 7.1 258.0 5.6 932.6
Rest of North Rest of
ROI UK Europe America World Total
€m €m €m €m €m €m

29 February 2012

           

Property, plant & equipment

56.6 124.6 - 0.6 - 181.8

Goodwill & intangible assets

120.3 325.8 7.1 26.1 5.6 484.9

Retirement benefit obligations

- 0.2 - - - 0.2

Deferred tax assets

6.5 - - - - 6.5

Trade & other receivables

- 19.5 - - - 19.5
           

Total

183.4 470.1 7.1 26.7 5.6 692.9

The geographical analysis of non-current assets, with the exception of Goodwill & intangible assets, is based on the geographical location of the assets. The geographical analysis of Goodwill & intangible assets is allocated based on the country of destination of sales at date of application of IFRS 8 Operating Segments or date of acquisition, if later.

2. OPERATING COSTS
2013 2012
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 5) Total items (note 5) Total
€m €m €m €m €m €m
           

Raw material cost of goods sold

177.5 - 177.5 176.2 - 176.2

Inventory write-down/(recovered) (note 15)

0.8 (1.0) (0.2) 0.3 (0.7) (0.4)

Employee remuneration (note 3)

62.1 1.2 63.3 70.3 (10.2) 60.1

Direct brand marketing

37.8 - 37.8 48.2 - 48.2

Other operating, selling and administration costs

55.9 4.4 60.3 53.2 4.0 57.2

Depreciation

21.6 - 21.6 20.2 - 20.2

Amortisation

0.1 - 0.1 0.1 - 0.1

Research and development costs

0.3 - 0.3 0.5 - 0.5

Revaluation of property, plant & machinery (note 12)

- - - - 2.0 2.0

Auditors remuneration (note a)

0.8 - 0.8 0.6 - 0.6

Operating lease rentals:

     

- land & buildings

4.4 - 4.4 4.0 - 4.0

- plant & machinery

0.8 - 0.8 0.4 - 0.4

- other

0.9 - 0.9 0.9 - 0.9
     

Total

363.0 4.6 367.6 374.9 (4.9) 370.0

Relating to discontinued operations (note 8)

- - - (5.3) 0.1 (5.2)
     

Relating to continuing operations

363.0 4.6 367.6 369.6 (4.8) 364.8

(a) Auditor remuneration: The remuneration of the Group’s statutory auditor, being the Irish firm of the principal auditor of the Group, KPMG, Chartered Accountants is as follows:

2013 2012
€m €m
   

Audit of the Group financial statements

0.4 0.3

Other assurance services

- 0.1

Tax advisory services

0.4 0.2
   

Total

0.8 0.6

The audit fee for the audit of the financial statements of the Company was less than €0.1m in the current and prior financial year.

3. EMPLOYEE NUMBERS & REMUNERATION COSTS

The average number of persons employed by the Group (including executive Directors) during the year, analysed by category, was as follows:-

2013 2012
Number Number
   

Sales & marketing

300 295

Production & distribution

529 524

Administration

121 135
   

Total

950 954

The actual number of persons employed by the Group as at 28 February 2013 was 1,001 (29 February 2012: 926).

The aggregate remuneration costs of these employees can be analysed as follows:-

2013 2012
€m €m
   

Wages, salaries and other short term employee benefits

47.5 54.8

Restructuring costs (note 5)

1.2 4.6

Social welfare costs

5.3 5.6

Retirement benefit obligations – defined benefit schemes (note 22)

1.3 (13.3)

Retirement benefit obligations – defined contribution schemes

4.5 5.7

Equity settled share-based payments (note 4)

3.0 2.6

Cash settled share-based payments (note 4)

0.2 -

Partnership & matching share schemes (note 4)

0.3 0.1
   

Charged to the income statement

63.3 60.1
   

Actuarial loss on retirement benefit obligations recognised in other comprehensive income (note 22)

12.3 19.0
   

Total employee benefits

75.6 79.1
4. SHARE-BASED PAYMENTS

Equity settled awards

In April 2004, the Group established an equity settled Executive Share Option Scheme (ESOS) under which options to purchase shares in C&C Group plc are granted to certain executive Directors and members of management. Under the terms of the scheme, the options are exercisable at the market price prevailing at the date of the grant of the option. The maximum grant that can normally be made to any individual in any one year is an award of 150% of base salary in that year. Options have been granted under this scheme in each year since 2004.

Under this scheme, options will not normally be exercisable until three years after the date of grant and are subject to meeting a specific performance target relating to growth in earnings per share (EPS). EPS is calculated using earnings per share before exceptional items, as disclosed in the Company’s financial statements, adjusted for any other adjustments approved by the Remuneration Committee. This performance target requires that the Group’s aggregate EPS in the three financial years to be not less than the aggregate that would have been achieved had base-year earnings per share grown by 5% per annum in excess of the change in the Irish Consumer Price Index (Irish CPI) during the period, in order for options to vest. If after the relevant three-year period (i.e. 3 years from date of grant) the performance target is not met, the options lapse.

In April 2004, the Group established a Long Term Incentive Plan (LTIP (Part I)) under the terms of which options to purchase shares in C&C Group plc are granted at nil cost to certain executive Directors and members of management. Under this plan, awards of up to 100% of base salary may normally be granted and up to 200% of base salary in exceptional circumstances.

Options under this scheme were granted in January 2006, in June of each year from 2006 through to 2008, in June 2011, February 2012 and in May 2012. All awards granted prior to 2011 were forfeited, lapsed or did not vest. The Remuneration Committee has adopted performance conditions for the options awarded during FY2012 and FY2013 as follows:

  • With regard to 50% of the award, a performance condition relating to total shareholder return (TSR) applies with an underpin as mentioned below. 30% of this part of the award vests if the Group’s TSR over a three-year period equals the median TSR of a comparator group; 100% of this part of the award vests if the Group’s TSR over a three-year period equals or exceeds the TSR of the upper quartile of the comparator group; for performance between the median and the upper quartile there is straight-line pro-rating between 30% and 100%. None of this part of the award vests if the Group’s TSR over a three-year period is less than the median TSR of a comparator group. In respect of the TSR condition, an underpin applies; the growth in the Group’s earnings per share (EPS) over the three-year period must be 5% or more per annum in real terms (compared with Irish CPI) over the same period; alternatively the Remuneration Committee must be satisfied that the Group’s underlying financial performance warrants that level of vesting; otherwise the award lapses. EPS is calculated using the adjusted earnings per share as disclosed in the Company’s financial statements, subject to any further adjustments approved by the Remuneration Committee.
  • With regard to the remaining 50% of the award, a performance condition relating to growth in EPS applies. 30% of this part of the award vests if the Group’s aggregate EPS in a three year period achieves 4% per annum compound growth in real terms (compared with Irish CPI). 100% of this part of the award vests if the Group’s aggregate EPS in a three year period achieves 10% per annum compound growth in real terms. There is straight-line pro-rating between 30% and 100% for performance between 4% and 10% per annum. None of this part of the award vests if the real growth in the Group’s aggregate EPS in a three-year period is less than 4% per annum.

In December 2008, the Group established a Joint Share Ownership Plan (JSOP) whereby certain executive Directors and members of management were eligible to participate in the Plan at the discretion of the Remuneration Committee. Under this plan, Interests in the form of a restricted interest in ordinary shares in the Company were awarded to executive Directors and key members of senior management on payment upfront to the Company of an amount equal to 10% of the initial issue price of the shares on the acquisition of the Interest. The participants are also required to pay a further amount if the tax value of their interest exceeds the price paid. When the further amount is paid, the Company compensates the participant for the obligation to pay this further amount by paying him an equivalent amount, which is, however, subject to income tax in the hands of the participant.

The vesting of Interests granted was subject to the following conditions. All of the Interests were subject to a time vesting condition with one-third of the Interest in the shares vesting on each of the first, second and third anniversary of acquisition. In addition, half of the Interests in the shares were subject to a pre-vesting share price target. In order to benefit from those Interests the Company’s share price must be greater than €2.50 for 13,800,000 of the Interests initially awarded, and €4.00 for 2,200,000 of the Interests initially awarded, for at least 20 days out of 40 consecutive dealing days during the five-year period commencing on the date of acquisition of the Interest. All the Interests currently outstanding have now vested.

When an Interest vests, the trustees may, at the request of the participant and on payment of the further amount, if relevant, transfer shares to the participant of equal value to the participant’s Interest or the shares may be sold by the trustees, who will account to the participant for the difference between the sale proceeds (less expenses) and the Hurdle Value (balancing 90% of the acquisition price on the acquisition of the Interest).

In February 2010, the Group established a Restricted Share Award Scheme under the terms of which options to purchase shares in C&C Group plc at nil or nominal cost were granted to certain members of management, excluding Directors. The vesting conditions for these awards were similar to those for the JSOP award.

In June 2010, the Group established a Recruitment and Retention Plan under the terms of which options to purchase shares in C&C Group plc at nil or nominal cost are granted to certain members of management, excluding Directors.

The performance conditions and/or other terms and conditions for awards granted under this plan are specifically approved by the Board of Directors at the time of each individual award, following a recommendation by the Remuneration Committee. The Board approved the award of 81,000 options under this plan in June 2010 and an award of 33,166 options in August 2011, in each case subject to time vesting conditions only so as to normally vest in three equal tranches, on the first, second and third anniversaries of grant and a further award of 31,791 options granted in August 2011 are also subject to time vesting conditions only, so as to normally vest on the third anniversary of grant. In the current financial year an award of 1,036,255 was granted in May 2012. The vesting of awards for grants made in 2012 under the Recruitment and Retention Plan are subject to the performance condition that the Company’s total shareholder return (“TSR”) must grow by not less than 25% between 17 May 2012 and 16 May 2014. Awards vest in full if the growth in TSR is at least 50% over that period. Where TSR growth is between 25% and 50% the percentage of the award that vests is calculated on a straight line basis between 25% and 100% subject to continued employment and the achievement of the performance conditions, awards will rest in two equal tranches in May 2014 and May 2015.

Obligations arising under the Restricted Share Award Scheme and the Recruitment and Retention Plan will be satisfied by the purchase of existing shares on the open market. On settlement any difference between the amount included in the Share-based payment reserve account and the cash paid to purchase the shares is recognised in retained income via the statement of changes in equity.

In May 2011, the Group established a deferred equity settled share bonus scheme, Long Term Incentive Plan (LTIP (Part II)), under which shares are awarded to certain employees (excluding executive directors and senior management) at nil cost, at the end of the financial year in which the award is granted, if the performance conditions set by the Remuneration Committee are achieved and subject to a two year time vesting period post the end of the relevant financial year. In the prior financial year, the Remuneration Committee agreed three levels of award linked to operating profit targets. Based on the actual results to 29 February 2012, a right to receive shares at nil cost equating to 23% of salary was granted to certain employees and a right to receive shares at a cost equating to 5% of salary was granted to other employees. The maximum number of shares over which awards were granted under the LTIP (Part II) in the financial year ended 29 February 2012 was set by reference to a share price of €3.55, being the closing share price on 18 May 2011, the date the results for the financial year ended 28 February 2011 were announced. Awards will vest in May 2014 subject to continued employment only. Obligations will be satisfied by the purchase of existing shares on the open market.

In November 2011, the Group set up Partnership and Matching Share Schemes for all ROI and UK based employees of the Group under the approved profit sharing schemes referred to below. Under these schemes, employees can invest in shares in C&C Group plc (“contributory/partnership” shares) that will be matched on a 1:1 basis by the Company (“matching shares”) subject to Revenue approved limits. Both the contributory and matching shares are held on behalf of the employee by the Scheme trustee, Capita Corporate Trustees Limited. The shares are purchased on the open market on a monthly basis at the market price prevailing at the date of purchase with any remaining cash amounts carried forward and used in the next share purchase. The shares are held in trust for the participating employee, who has full voting rights and dividend entitlements on both partnership and matching shares. Matching shares may be forfeited and/or tax penalties may apply if the employee leaves the Group or removes their contributory shares within the Revenue-stipulated vesting period. The Revenue stipulated vesting period for matching shares awarded under the ROI scheme is three years and under the UK scheme is five years.

The Group held 125,563 matching shares (251,126 partnership and matching) in Trust at 28 February 2013 (2012: 33,047 matching shares and 66,094 partnership and matching shares held).

In December 2011 the Group set up a discretionary Share Matching Plan under which invitations to participate were made to certain international (non ROI and UK) employees. Awards of shares (being a right to acquire shares at nil cost) were made in February 2012, conditional on the participant agreeing to buy in advance and hold an equivalent number of ordinary shares in the Company (investment shares) in accordance with the plan. The maximum award was 325 shares per participant. Each award will vest on the second anniversary of the grant date provided that the participant remains employed in the Group and retains his investment shares acquired in relation to the matching award. Matching share awards are not entitled to dividends during the vesting period. Qualifying leavers remain entitled to their matching awards, which vest either on the date of cessation or on the normal vesting date, as the Company may decide. Awards made to other leavers are forfeited.

The Group held 1,625 matching shares (3,250 partnership and matching) in Trust at 28 February 2013 (2012: nil).

In 2001, the Group entered into an agreement with trade unions representing the majority of its then employees, which provided for the establishment of an approved profit sharing schemes (APSS) in ROI and the UK and an approved save as you earn share option scheme (SAYE scheme). A discretionary APSS scheme was put in place for the year ended 28 February 2007. Under this scheme 189,061 shares were purchased at a cost of €2.5m and placed in Irish/UK Revenue approved employee trusts where they were held in trust on behalf of each employee. The relevant vesting period has now expired, all remaining shares have now been transferred out of the employee trusts and into the participants’ individual names. The SAYE scheme has been established but not implemented.

Cash-settled awards

In May 2012 the Group granted 114,522 cash-settled awards on terms equivalent to the LTIP (Part I). The awards, on vesting will be settled by way of a cash payment calculated based on the Group’s closing share price on the dealing day before the settlement date.

In January 2012, the Group granted 98,600 cash-settled awards on terms equivalent to the rules of the Recruitment and Retention Plan and subject to time vesting conditions only so as to normally vest on the third anniversary of date of grant. The award, on vesting will be settled by way of cash payment, calculated based on the closing price of the Group’s shares on the dealing day before the settlement date.

In December 2012, the Group granted 150,786 cash-settled awards on terms equivalent to the rules of the Recruitment and Retention Plan. The awards are subject to the following vesting conditions, namely: (a) continued employment; and (b) performance conditions as follows: 25% of the award will vest if the business unit related to the participant achieves a pre-approved operating profit target in FY2014; 25% will vest on the achievement of a pre-approved operating profit target in FY2015; with the remaining 50% vesting on the achievement of a pre-approved operating profit target in FY2016. Each award, on vesting will be settled by way of a cash payment calculated based on the Group’s closing share price on the dealing day before the settlement date.

Award valuation

The fair values assigned to the ESOS options granted were computed in accordance with a binomial valuation methodology; the fair value of options awarded under the LTIP (Part I) were computed in accordance with the stochastic model for the TSR element and the binomial model for the EPS element; the fair value of options awarded under the Recruitment and Retention Plan and LTIP (Part II) were computed in accordance with a binomial model; and the fair value of the Interests awarded under the Joint Share Ownership Plan and the Restricted Share Award Plan were computed using a Monte Carlo simulation model. As per IFRS 2 Share-based Payment, market based vesting conditions, such as the LTIP (Part I) TSR condition and the share price target conditions in the Joint Share Ownership Plan and the Restricted Share Award Plan, have been taken into account in establishing the fair value of equity instruments granted. Non-market or performance related conditions were not taken into account in establishing the fair value of equity instruments granted, instead these non-market vesting conditions are taken into account by adjusting the number of equity instruments included in the measurement of the transaction amount so that, ultimately the amount recognised for time and services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest, unless the failure to vest is due to failure to meet a market condition.

The main assumptions used in the valuations for equity settled share based payment awards were as follows:-

Recruitment LTIP (Part I) ESOS LTIP (Part I) Recruitment LTIP (Part I) ESOS LTIP (Part II)
& Retention options options options & Retention options options options
plan granted granted granted plan granted granted granted
May 2012 May 2012 May 2012 Feb 2012 August 2011 June 2011 May 2011 May 2011
               

Exercise price

- - €3.525 - - - €3.61 -
               

Risk free interest rate

0.06%-0.14% 0.14% 0.46% 0.27% - 1.66% 2.37% -

Expected volatility

24.0% 30.2% 53.5% 26.0% - 51.1% 55.1% -

Expected life

2-3 years 3 years 5 years 3 years 1-3 years 3 years 5 years 3 years

Dividend yield

2.35% 2.35% 2.35% 1.90% 2.16% 1.87% 1.82% 1.86%

The main assumptions used in the valuations of cash-settled share based payment awards were as follows:-

Granted Granted Granted
December 2012 May 2012 January 2012

Exercise price

- - -

Expected life

3 years 3 years 3 years

Dividend yield

1.88% 2.35% 1.90%

Details of the share entitlements and share options granted under these schemes together with the share option expense are
as follows:

Number of
options/ Market Expense in
equity Outstanding value at Fair value Income
Vesting Interests at 28 Grant date of at date statement
Grant date period granted February 13 price grant grant 2013 2012
€m €m

Executive Share Option Scheme (ESOS)

               

15 June 2006

3 years 846,900 38,300 6.52 6.52 1.24 - -

13 June 2007

3 years 318,500 - 11.53 11.53 2.76 - -

13 June 2008

3 years 1,013,700 - 5.11 5.11 0.98 - -

13 May 2009

3 years 4,336,300 1,060,820 1.94 1.94 0.72 0.1 0.5

26 May 2010

3 years 803,900 374,600 3.21 3.21 1.21 0.2 -

2 June 2010

3 years 127,200 127,200 3.21 3.21 1.14 - -

21 July 2010

3 years 2,944,400 1,930,100 3.32 3.32 1.16 0.8 1.1

24 May 2011

3 years 658,930 386,908 3.61 3.61 1.56 0.2 0.2

17 May 2012

3 years 534,239 534,239 3.525 3.525 1.30 0.2 -
               

Long Term Incentive Plan (Part I)

               

29 June 2011

3 years 192,662 169,588 - 3.53 2.18 - 3.34 0.2 0.1

29 February 2012

3 years 328,448 328,448 - 3.61 1.84 - 3.46 0.3 -

17 May 2012

3 years 614,360 614,360 - 3.525 1.97 - 3.24 0.4 -
               

Long Term Incentive Plan (Part II)

               

18 May 2011

3 years 154,993 129,938 - 3.55 3.36 0.1 0.1
               

Joint Share Ownership Plan (JSOP)

               

18 December 2008

1-3 years 12,800,000 5,973,334 1.15 1.315 0.16 - 0.21 - 0.2

03 June 2009

1-3 years 1,000,000 1,000,000 1.15 2.32 1.01 - 1.09 - 0.2

17 December 2009

1-3 years 2,200,000 750,000 2.47 2.76 0.11 - 0.16 - -
               

Restricted Share
Award Scheme

               

26 February 2010

1-3 years 429,148 71,525 - 2.70 2.26 0.1 0.1
               

Recruitment &
Retention Plan

               

29 June 2010

1-3 years 81,000 27,000 - 3.20 2.94 0.1 0.1

31 August 2011

1-3 years 64,957 64,957 - 3.05 2.89 - 2.99 0.1 -

17 May 2012

1-3 years 1,036,255 976,681 - 3.525 0.58 - 0.59 0.2 -
               
  30,485,892 14,557,998       3.0 2.6
               

Cash-settled awards

               

30 January 2012

3 years 98,600 98,600 - 3.67 3.47 0.1 -

17 May 2012

3 years 114,522 114,522 - 3.525 1.97 - 3.24 0.1 -

21 December 2012

1-3 years 150,786 150,786 - 4.52 4.24 - -
               

Partnership and Matching Share Schemes

254,376* 254,376* 0.3 0.1
                 
31,104,176 15,176,282 3.5 2.7

* includes both partnership and matching shares

The amount charged to the income statement in respect of the above award grants assumes that all outstanding options granted during FY2012 and FY2013 will vest and all qualifying conditions will be achieved. Options granted under the ESOS during FY2007 and FY2008 did not achieve the related performance condition and consequently all outstanding options lapsed. As the Directors considered the likelihood of achieving the non-market vesting conditions remote no charge had been taken to the income statement in prior years in respect of these awards.

The amount charged to the income statement includes an accelerated charge of €0.1m (2012: €0.5m), in relation to employees leaving the Group as part of a restructuring programme, for share options granted under the executive share option scheme where the underlying conditions were deemed to have been met at the date of departure. These employees were deemed ‘qualifying leavers’ under the terms of the scheme, with all share options granted deemed to have vested and the exercise period reduced from 4 years to 6 months.

A summary of activity under the Group’s equity settled share option schemes and Joint Share Ownership Plan together with the weighted average exercise price of the share options is as follows:

2013 2012
Weighted Weighted
Number of average Number of average
options/ exercise options/ exercise
equity price equity price
Interests Interests

Outstanding at beginning of year

18,244,324 1.73 20,342,023 1.79

Granted

2,184,854 0.85 1,399,990 1.71

Exercised

(5,159,221) 1.38 (952,143) 2.02

Forfeited/lapsed

(711,959) 2.63 (2,545,546) 3.53
       

Outstanding at end of year

14,557,998 1.54 18,244,324 1.73

The aggregate number of share options/equity Interests exercisable at 28 February 2013 was 8,939,835 (2012: 10,663,116).

The unvested share options/equity Interests outstanding at 28 February 2013 have a weighted average vesting period outstanding of 1.2 years (2012: 1.0 years). The weighted average contractual life of vested and unvested share options/equity Interests is 3.6 years (4.2 years).

The weighted average market share price at date of exercise of all share options/equity Interests exercised during the year was €3.64 (2012: €3.22); the average share price for the year was €3.86 (2012: €3.22); and the market share price as at 28 February 2013 was €4.895 (29 February 2012: €3.665).

5. EXCEPTIONAL ITEMS
2013 2012
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
€m €m €m €m €m €m
           

Restructuring costs

1.2 - 1.2 4.6 - 4.6

Acquisition costs

3.3 - 3.3 - - -

Recovery of previously impaired inventory

(1.0) - (1.0) (0.7) - (0.7)

IT systems implementation and integration costs

1.1 - 1.1 4.0 - 4.0

Retirement benefit obligations

- - - (14.7) (0.1) (14.8)

Revaluation of property, plant & equipment (note 12)

- - - 2.0 - 2.0

Loss from discontinued operations (note 8)

- - - - 1.1 1.1

Foreign currency reserve recycled to the income statement on disposal

- - - - 0.7 0.7
     

Total loss/(profit) before tax

4.6 - 4.6 (4.8) 1.7 (3.1)

Income tax credit

(0.3) - (0.3) (0.4) - (0.4)
     

Total loss/(profit) after tax

4.3 - 4.3 (5.2) 1.7 (3.5)

(a) Restructuring costs

Restructuring costs, comprising severance and other initiatives arising from cost cutting initiatives and the consolidation of the Group’s offices in the UK and the US, resulted in an exceptional charge before taxation of €1.2m (2012: €4.6m).

(b) Acquisition costs

During the current financial year, the Group completed the acquisition of the Vermont Hard Cider Company, LLC (VHCC) in the US and had entered into a contractual arrangement to acquire M. & J. Gleeson (Investments) Limited and its subsidiaries (the Gleeson Group), which had not completed at year-end. Costs incurred that were directly attributable to these acquisitions of €3.3m were charged to the Income Statement in the period.

(c) Recovery of previously impaired inventory

During the financial year ended 28 February 2009, the Group’s stock holding of apple juice at circa 36 months of forecasted future sales was deemed excessive in light of anticipated future needs, forward purchase commitments and useful life of the stock on hand. Accordingly the Group recorded an impairment charge in relation to excess apple juice stocks. During the current and previous financial year, some of the previously impaired juice stocks were recovered and used by the Group. As a result this stock was written back to operating profit at its recoverable value resulting in a gain of €1.0m (2012: €0.7m). The Group has recovered total juice inventory of €1.9m for which an impairment charge was recognised in FY2009.

(d) IT systems implementation and integration costs

During the current financial year, the Group incurred external consultant fees and other costs associated with the integration of the previously acquired Hornsby’s brand with the Group’s existing business.

In the prior year the Group had commenced the process of integrating the acquired Hornsby’s brand and also had incurred costs associated with the completion of the second phase of the IT systems implementation project with respect to the migration of the Gaymers cider business onto a new IT system, allowing the business to fully integrate with the existing Magners business. These costs primarily related to external consultant fees and other costs associated with the implementation of the new IT systems platform and which, in accordance with IAS 16 Property, Plant and Equipment, were not appropriate for capitalisation within Property, plant & equipment in the balance sheet.

(e) Retirement benefit obligations

In the prior financial year the Group recognised an exceptional gain of €14.8m relating to:

  • the recognition of a past service gain, net of expenses, of €14.7m following the conclusion of the Group’s pension reform programme and the receipt of a Pensions Board direction under Section 50 of the Pensions Act 1990, removing guaranteed pension increases and replacing them with a reduced level of guaranteed increase for three years commencing 2012 and thereafter for all future pension increases to be on a discretionary basis, resulting in a positive impact on the valuation of the Group’s retirement benefit obligations; and,
  • a curtailment gain of €0.1m arising from the Group’s disposal of the Northern Ireland wholesale business and the reclassification of these employees from active to deferred members.

The past service gain referred to above represents the difference between liabilities valued using a pension increase assumption of 3% per annum versus 2.25% per annum, assumed to be the average discretionary increase rate.

(f) Revaluation of property, plant & machinery

Property (comprising land and buildings) and plant & machinery are valued at fair value on the balance sheet and reviewed for impairment on an annual basis. During the prior financial year, the Group engaged external valuers Ronan Diamond BSc (Hons) MSCSI MRICS and Brian Gilson, BSc (Surv) MSCSI MRICS MCI Arb - Lisney to value its freehold properties in the Republic of Ireland; David Fawcett, FRICS RICS Registered Valuer - Sanderson Weatherall to value its plant & machinery in the Republic of Ireland, and, Timothy Smith BSc MRICS RICS Registered Valuer and Joseph ML Funtek BSc MRICS RICS Registered Valuer - Gerald Eve to value both its freehold properties and plant & machinery in the United Kingdom. Using the valuation methodologies outlined in note 12, this resulted in a net revaluation loss of €2.0m accounted for in the income statement and a further net loss of €1.7m accounted for within other comprehensive income on the basis that it reduced a revaluation surplus previously recognised in respect of an asset in Clonmel and created a revaluation surplus in respect of the Group’s Scottish buildings. The current year valuations, carried out by management, did not result in a material variation to the valuation at 29 February 2012.

(g) Loss from discontinued operations, net of tax/Recycling of Foreign Currency Reserve on disposal

The loss on discontinued operations in the prior financial year of €1.1m relates to a €0.1m profit arising on the disposal of the Group’s Northern Ireland wholesaling business (Quinns of Cookstown) to Britvic Northern Ireland Limited on 30 June 2011 for a gross consideration of €4.8m (£4.3m) and a loss of €1.2m in relation to a working capital settlement to reflect ‘normalised working capital’ as set out in the Sale and Purchase Agreement following the FY2011 disposal of the Group’s Spirits & Liqueurs business. The Group also recognised a loss of €0.7m on the recycling of a foreign currency reserve to the income statement following the disposal of the Group’s NI wholesaling business.

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