Annual Report 2014

NOTES

Forming part of the financial statements

21. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
22. RETIREMENT BENEFIT OBLIGATIONS
23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
24. SHARE CAPITAL AND RESERVES Share capital
25. COMMITMENTS

21. RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES

 

2014

2013

 

 

Net assets/

Net assets/

 

Assets

Liabilities

(liabilities)

Assets

Liabilities

(liabilities)

 

€m

€m

€m

€m

€m

€m

 

Group

Property, plant & equipment

0.3

(3.4)

(3.1)

2.3

(5.0)

(2.7)

Intangible assets

-

(3.0)

(3.0)

-

(2.5)

(2.5)

Retirement benefit obligations

2.8

(0.2)

2.6

2.8

(0.1)

2.7

Derivative financial instruments

-

-

-

-

(0.2)

(0.2)

Trade related items & losses

1.6

-

1.6

1.1

-

1.1

 

4.7

(6.6)

(1.9)

6.2

(7.8)

(1.6)

The Group has not recognised deferred tax in relation to temporary differences applicable to investments in subsidiaries on the basis that the Group can control the timing and the realisation of these temporary differences and it is unlikely that the temporary differences will reverse in the foreseeable future. The aggregate amount of temporary differences applicable to investments in subsidiaries and equity accounted investees in respect of which deferred tax liabilities have not been recognised is immaterial on the basis that the participation exemptions and foreign tax credits should be available such that no material temporary differences arise. There are no other unrecognised deferred tax liabilities.

In addition, no deferred tax asset has been recognised in respect of certain tax losses incurred by the Group on the basis that the recovery is considered unlikely in the foreseeable future. The value of such tax losses is €1.7m in the current financial year (2013: nil). In the event that sufficient taxable profits arise in the relevant jurisdictions in future years, these losses may be utilised. The vast majority of these losses are due to expire in 2034.

Company

The Company had no deferred tax assets or liabilities at 28 February 2014 or at 28 February 2013.

Analysis of movement in net deferred tax assets/(liabilities)

 

Recognised

 

Recognised

Recognised

in other

 

1 March

in income

on

Translation

comprehensive

28 February

 

2013

statement

acquisition

adjustment

income

2014

 

€m

€m

€m

€m

€m

€m

 

Group

Property, plant & equipment: ROI

2.3

(2.3)

0.3

-

-

0.3

Property, plant and equipment: other

(5.0)

2.0

(0.2)

(0.2)

-

(3.4)

Provision for trade related items

1.1

(0.1)

0.6

-

-

1.6

Intangible assets

(2.5)

(0.4)

-

(0.1)

-

(3.0)

Retirement benefit obligations

2.7

(0.8)

-

-

0.7

2.6

Derivative financial instruments

(0.2)

-

-

-

0.2

-

 

(1.6)

(1.6)

0.7

(0.3)

0.9

(1.9)

 

Recognised

 

Recognised

Recognised

in other

1 March

in income

on

Translation

comprehensive

28 February

 

2012

Statement

acquisition

adjustment

income

2013

 

€m

€m

€m

€m

€m

€m

 

Group

Property, plant & equipment: ROI

4.5

(2.2)

-

-

-

2.3

Property, plant and equipment: other

(6.0)

1.1

(0.2)

0.1

-

(5.0)

Provision for trade related items

-

1.1

-

-

-

1.1

Intangible assets

(1.2)

(1.4)

-

0.1

-

(2.5)

Retirement benefit obligations

1.9

(0.8)

-

-

1.6

2.7

Derivative financial instruments

0.1

-

-

-

(0.3)

(0.2)

(0.7)

(2.2)

(0.2)

0.2

1.3

(1.6)

 

22. RETIREMENT BENEFIT OBLIGATIONS

The Group operates a number of defined benefit pension schemes for certain employees, past and present, in the Republic of Ireland (ROI) and in the United Kingdom (UK), all of which provide pension benefits based on final salary and the assets of which are held in separate trustee administered funds. The Group closed its defined benefit pension schemes to new members in April 2007 and provides only defined contribution pension schemes for employees joining the Group since that date. The Group provides permanent health insurance cover for the benefit of certain employees and separately charges this to the income statement.

The defined benefit pension scheme assets are held in separate trustee administered funds to meet long-term pension liabilities to past and present employees. The trustees of the funds are required to act in the best interest of the funds’ beneficiaries. The appointment of trustees to the funds is determined by the schemes’ trust documentation. The Group has a policy in relation to its principal staff pension fund that members of the fund should nominate half of all fund trustees.

There are no active members remaining in the Executive defined benefit pension scheme (2013: no active members). There are 80 active members, representing < 10% of total membership, in the ROI Staff defined benefit pension scheme (2013: 106 active members) and 5 active members in the UK scheme (2013: 8 active members). The Group’s ROI defined benefit pension reform programme concluded during the financial year ended 29 February 2012 with the Pensions Board issuing a directive under Section 50 of the Pensions Act 1990 to remove the mandatory pension increase rule, which guaranteed 3% per annum increase to certain pensions in payment, and to replace it with guaranteed pension increases of 2% per annum for each year 2012 to 2014 and thereafter for all future pension increases to be awarded on a discretionary basis.

Actuarial valuations – funding requirements

Independent actuarial valuations of the defined benefit pension schemes are carried out on a triennial basis using the attained age method. The most recent actuarial valuations of the ROI schemes were carried out with an effective date of 1 January 2012 while the date of the most recent actuarial valuation of the UK scheme was 31 December 2011. The actuarial valuations are not available for public inspection; however the results of the valuations are advised to members of the various schemes.

The funding requirements in relation to the Group’s ROI defined benefit pension schemes are assessed at each valuation date and are implemented in accordance with the advice of the actuaries. Arising from the formal actuarial valuations of the main schemes on 1 January 2009 the schemes’ independent actuary, Mercer (Ireland) Limited, submitted Actuarial Funding Certificates to the Pensions Board confirming that the Schemes did not satisfy the Minimum Funding Standard at that date. Given that the removal of guaranteed pension increases would not correct this situation, Funding Proposals including an updated actuarial valuation were submitted to, and approved by the Pensions Board on 23 February 2012, which the Directors believe will enable the schemes to meet the Minimum Funding Standard by 31 December 2016. The Funding Proposals commit the Group to contributions of 14% of Pensionable Salaries to fund future pension accrual of benefits (previously 38.1% of Pensionable Salaries), a deficit contribution of €3.4m and an additional supplementary deficit contribution of €1.9m which the Group reserves the right to reduce or terminate on consultation with the Trustees, if the Scheme Actuary advises that it is no longer required due to a correction in market conditions. Funding Proposals cover the period to 31 December 2016. However, they will cease at an earlier date if the scheme funding target is met before then. The actuaries advised that as at 31 December 2013 the schemes were on track to meet the minimum funding standard and risk reserve by 31 December 2016, the end of the Funding Proposal period.

Following the 2011 actuarial valuation of the UK defined benefit pension scheme, a Schedule of Contributions and Recovery Plan was agreed committing the Group to annual contributions of £0.4m which the Directors believe will enable the scheme to meet the Statutory Funding Objective by June 2015.

The Group is exposed to a number of risks in relation to the funding position of these schemes, namely:-

Asset volatility: It is the Group’s intention to pursue a long term investment policy that emphasises investment in secure monetary assets to provide for the contractual benefits payable to members. The investment portfolio has exposure to equities, other growth assets and fixed interest investments the returns from which are uncertain and may fluctuate significantly in line with market movements. Assets held are valued at fair value using bid prices where relevant.

Discount rate: The discount rate is the rate of interest used to discount post-employment benefit obligations and is determined by reference to market yields at the balance sheet date on high quality corporate bonds with a currency and term consistent with the currency and estimated term of the Group’s post employment benefit obligations. Movements in discount rates have a significant impact on the value of the schemes’ liabilities.

Longevity: The value of the defined benefit obligations is influenced by demographic factors such as mortality experience and retirement patterns. Changes to life expectancy have a significant impact on the value of schemes’ liabilities.

Method and assumptions

The schemes’ independent actuary, Mercer (Ireland) Limited, has employed the projected unit credit method to determine the present value of the defined benefit obligations arising and the related current service cost.

The financial assumptions that have the most significant impact on the results of the actuarial valuations are those relating to the discount rate used to convert future pension liabilities to current values and the rate of inflation/salary increase. These and other assumptions used to determine the retirement benefit obligations and current service cost under IAS19 Employee Benefits are set out below.

Mortality rates also have a significant impact on the actuarial valuations, as the number of deaths within the scheme have been too small to analyse and produce any meaningful scheme-specific estimates of future levels of mortality, the rates used have been based on the most up-to-date mortality tables, (the PNL00 62% (males) and PNL00 70% (females) for the ROI schemes and S1NA year of birth tables with CMI 2011 projections for the UK scheme) with age ratings and loading factors to allow for future mortality improvements. These tables conform to best practice. The growing trend for people to live longer and the expectation that this will continue has been reflected in the mortality assumptions used for this valuation as indicated below. This assumption will continue to be monitored in light of general trends in mortality experience. Based on these tables, the assumed life expectations on retirement are:

 

 

ROI

UK

 

 

2014

2013

2014

2013

Future life expectations at age 65

 

No of years

No of years

No of years

No of years

 

 

Current retirees – no allowance for future improvements

Male

23.5

23.3

22.9

22.8

Female

24.9

24.7

25.4

25.3

 

 

Future retirees – with allowance for future improvements

Male

24.9

24.8

25.7

25.6

Female

26.0

25.9

28.3

28.1

Scheme liabilities:

The average age of active members is 45 and 51 years for the ROI Staff and the UK defined benefit pension schemes respectively (the executive defined benefit pension scheme has no active members), while the average duration of liabilities ranges from 16 to 27 years.

The principal long-term financial assumptions used by the Group’s actuaries in the computation of the defined benefit liabilities arising on pension schemes as at 28 February 2014 and 28 February 2013 are as follows:

 

2014

2013

 

ROI

UK

ROI

UK

 

Salary increases

0.0%-2.5%

3.7%

0.0% - 3.0%

3.7%

Increases to pensions in payment

2.0%

2.5%

2.0%

2.5%

Discount rate

3.4% - 3.6%

4.4%

3.8% - 4.25%

4.4%

Inflation rate

2.0%

3.3%

2.0%

3.3%

During the prior year, the Group’s actuary expanded the population of corporate bonds used in recommending an appropriate discount rate for the ROI schemes as a result of changes in the corporate bond market. This was treated as a change in accounting estimate in that year.

A reduction in discount rate used to value the schemes’ liabilities by ¼% would increase the valuation of liabilities by €9.4m while an increase in inflation/salary increase expectations of ¼% would increase the valuation of liabilities by €3.3m. The sensitivity is calculated by changing the individual assumption while holding all other assumptions constant.

Scheme assets:

The revised IAS19 Employee Benefits accounting standard came into effect for accounting periods commencing on or after 1 January 2013. Under IAS19R Employee Benefits, the net interest charge for funded defined benefit plans is calculated by reference to the liability discount rate at the beginning of the period, rather than a separate expected return on assets assumption.

The pension assets and liabilities on the following pages have been prepared in accordance with IAS19R Employee Benefits.

a. Impact on Group income statement

 

2014

2013 (restated)

 

ROI

UK

Total

ROI

UK

Total

 

€m

€m

€m

€m

€m

€m

 

Analysis of defined benefit pension expense:

Current service cost

0.7

0.1

0.8

0.7

0.1

0.8

Past service gain

(1.1)

-

(1.1)

(0.5)

-

(0.5)

Interest cost on scheme liabilities

7.2

0.2

7.4

7.3

0.3

7.6

Interest income on scheme assets

(6.4)

(0.2)

(6.6)

(7.0)

(0.3)

(7.3)

 

Total expense recognised in income statement

0.4

0.1

0.5

0.5

0.1

0.6

 

Analysis of amount recognised in other comprehensive income

 

2014

2013 (restated)

 

ROI

UK

Total

ROI

UK

Total

€m

€m

€m

€m

€m

€m

Actual interest income on scheme assets

8.9

0.4

9.3

11.4

0.5

11.9

Expected interest income on scheme assets

(6.4)

(0.2)

(6.6)

(7.0)

(0.3)

(7.3)

Experience gains and losses on scheme liabilities

8.4

-

8.4

0.7

0.4

1.1

Effect of changes in assumptions on scheme liabilities

(17.5)

-

(17.5)

(17.9)

(0.8)

(18.7)

 

Total

(6.6)

0.2

(6.4)

(12.8)

(0.2)

(13.0)

 

Scheme assets

163.8

7.6

171.4

155.2

6.2

161.4

Scheme liabilities

(186.6)

(6.2)

(192.8)

(177.2)

(5.7)

(182.9)

Deficit in scheme

(22.8)

-

(22.8)

(22.0)

-

(22.0)

Surplus in scheme

-

1.4

1.4

-

0.5

0.5

b. Impact on Group balance sheet

The retirement benefit obligations surplus / (deficit) at 28 February 2014 and 28 February 2013 is analysed as follows:

Analysis of net pension deficit

 

2014

2013

 

ROI

UK

Total

ROI

UK

Total

 

€m

€m

€m

€m

€m

€m

Bid value of assets at end of year:

Equity(i)

45.1

3.8

48.9

36.6

3.1

39.7

Bonds

74.6

3.8

78.4

67.3

3.1

70.4

Property

4.5

-

4.5

4.1

-

4.1

Cash

14.6

-

14.6

27.7

-

27.7

Alternatives

25.0

-

25.0

19.5

-

19.5

 

 

163.8

7.6

171.4

155.2

6.2

161.4

 

Actuarial value of scheme liabilities

(186.6)

(6.2)

(192.8)

(177.2)

(5.7)

(182.9)

 

(Deficit)/surplus in the scheme

(22.8)

1.4

(21.4)

(22.0)

0.5

(21.5)

Related deferred tax asset /(liability)

2.8

(0.2)

2.6

2.8

(0.1)

2.7

 

Net pension (deficit)/surplus

(20.0)

1.2

(18.8)

(19.2)

0.4

(18.8)

(i) The defined benefit pension schemes have a passive self investment in C&C Group plc of €nil (2013: €nil).

The alternative investment category includes investments in various asset classes including equities, commodities, currencies and funds. The investments are managed by fund managers.

Reconciliation of scheme assets

 

2014

2013 (restated)

 

ROI

UK

Total

ROI

UK

Total

 

€m

€m

€m

€m

€m

€m

 

Assets at beginning of year

155.2

6.2

161.4

142.9

5.3

148.2

 

Movement in year:

Translation adjustment

-

0.5

0.5

-

(0.1)

(0.1)

Expected interest income on scheme assets, net of pension levy

6.4

0.2

6.6

7.0

0.3

7.3

Actual expected interest income less interest income on scheme assets

2.5

0.2

2.7

4.4

0.2

4.6

Employer contributions

6.2

0.6

6.8

6.6

0.6

7.2

Member contributions

0.3

-

0.3

0.3

-

0.3

Benefit payments

(6.8)

(0.1)

(6.9)

(6.0)

(0.1)

(6.1)

 

Assets at end of year

163.8

7.6

171.4

155.2

6.2

161.4

 

The expected employer contributions to fund defined benefit scheme obligations for year ending 28 February 2015 is €6.3m.

The scheme assets had the following investment profile at the year-end:

2014

2013

ROI

UK

ROI

UK

Equities

28%

50%

24%

50%

Bonds

45%

50%

43%

50%

Property

3%

-

3%

-

Cash

9%

-

18%

-

Alternatives

15%

-

12%

-

100%

100%

100%

100%

Reconciliation of actuarial value of scheme liabilities

2014

2013

ROI

UK

Total

ROI

UK

Total

€m

€m

€m

€m

€m

€m

Liabilities at beginning of year

177.2

5.7

182.9

158.2

5.1

163.3

Movement in year

Translation adjustment

-

0.3

0.3

-

(0.1)

(0.1)

Current service cost

0.7

0.1

0.8

0.7

0.1

0.8

Past service gain

(1.1)

-

(1.1)

(0.5)

-

(0.5)

Interest cost on scheme liabilities

7.2

0.2

7.4

7.3

0.3

7.6

Member contributions

0.3

-

0.3

0.3

-

0.3

Actuarial loss immediately recognised in equity

9.1

-

9.1

17.2

0.4

17.6

Benefit payments

(6.8)

(0.1)

(6.9)

(6.0)

(0.1)

(6.1)

Liabilities at end of year

186.6

6.2

192.8

177.2

5.7

182.9

23. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Group’s multinational operations expose it to various financial risks in the ordinary course of business that include credit risk, liquidity risk, commodity price risk, currency risk and interest rate risk. This note discusses the Group’s exposure to each of these financial risks, summarises the risk management strategy for managing these risks and details the accounting treatment applied to the Group’s derivative financial instruments and hedging activities. The note is presented as follows:-

(a) Overview of the Group’s risk exposures and management strategy

(b) Financial assets and liabilities as at 28 February 2014 / 28 February 2013 and determination of fair value

(c) Market risk

(d) Credit risk

(e) Liquidity risk

(f) Accounting for derivative financial instruments and hedging activities

(a) Overview of the Group’s risk exposures and management strategy

The most significant financial market risks that the Group is exposed to include foreign currency exchange rate risk, commodity price fluctuations, interest rate risk and financial counterparty creditworthiness. There has been no significant change during the financial year to either the financial risks faced by the Group or the Board’s approach to the management of these risks.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. This is executed through various committees to which the Board has delegated appropriate levels of authority. An essential part of this framework is the role undertaken by the Audit Committee, supported by the internal audit function, and the Group Chief Financial Officer. The Board, through its Committees, has reviewed the internal control environment and the risk management systems and process for identifying and evaluating the significant risks affecting the business and the policies and procedures by which these risks will be managed effectively. The Board has embedded these structures and procedures throughout the Group and considers these to be a robust and efficient mechanism for creating a culture of risk awareness at every level of management. 


The Group’s risk management programme seeks to minimise the potential adverse effects, arising from fluctuations in financial markets, on the Group’s financial performance in a non speculative manner at a reasonable cost when economically viable to do so. The Group achieves the management of these risks in part, where appropriate, through the use of derivative financial instruments. All derivative financial contracts entered into in this regard are in liquid markets with credit rated parties. Treasury activities are performed within strict terms of reference that have been approved by the Board.

(b) Financial assets and liabilities

The carrying and fair values of financial assets and liabilities by measurement category were as follows:

 

Derivative

Other

Other

 

financial

financial

financial

Carrying

Fair

 

instruments

assets

liabilities

value

value

Group

€m

€m

€m

€m

€m

28 February 2014

Financial assets:

Cash & cash equivalents

-

162.8

-

162.8

162.8

Derivative financial instruments

3.1

-

-

3.1

3.1

Trade receivables

-

118.8

-

118.8

118.8

Advances to customers

-

49.3

-

49.3

49.3

 

Financial liabilities:

Interest bearing loans & borrowings

-

-

(308.0)

(308.0)

(302.8)

Derivative financial instruments

(2.5)

-

-

(2.5)

(2.5)

Trade & other payables

-

-

(171.3)

(171.3)

(171.3)

Provisions

-

-

(11.5)

(11.5)

(11.5)

0.6

330.9

(490.8)

(159.3)

(154.1)

 

Derivative

Other

Other

 

financial

financial

financial

Carrying

Fair

 

instruments

assets

liabilities

value

value

Group

€m

€m

€m

€m

€m

28 February 2013

Financial assets:

Cash & cash equivalents

-

121.0

-

121.0

121.0

Derivative financial instruments - foreign currency contracts

1.7

-

-

1.7

1.7

Other derivative financial instruments

1.4

-

-

1.4

1.4

Trade receivables

-

78.0

-

78.0

78.0

Advances to customers

-

38.2

-

38.2

38.2

 

Financial liabilities:

Interest bearing loans & borrowings

-

-

(244.4)

(244.4)

(244.4)

Other derivative financial instruments

(1.2)

-

-

(1.2)

(1.2)

Trade payables & accruals

-

-

(124.1)

(124.1)

(124.1)

Provisions

-

-

(12.2)

(12.2)

(12.2)

 

1.9

237.2

(380.7)

(141.6)

(141.6)

 

Derivative

Other

Other

 

financial

financial

financial

Carrying

Fair

 

instruments

assets

liabilities

value

value

Company

€m

€m

€m

€m

€m

 

28 February 2014

Financial assets:

Cash & cash equivalents

-

0.2

-

0.2

0.2

Amounts due from Group undertakings

-

50.5

-

50.5

50.5

 

Financial liabilities:

Amounts due to Group undertakings

-

-

(129.2)

(129.2)

(129.2)

Trade payables & accruals

-

-

(0.9)

(0.9)

(0.9)

-

50.7

(130.1)

(79.4)

(79.4)

 

 

Derivative

Other

Other

 

financial

financial

financial

Carrying

Fair

 

instruments

assets

liabilities

value

value

Company

€m

€m

€m

€m

€m

28 February 2013

Financial assets:

Cash & cash equivalents

-

0.1

-

0.1

0.1

Amounts due from Group undertakings

-

47.8

-

47.8

47.8

 

Financial liabilities:

Amounts due to Group undertakings

-

-

(98.7)

(98.7)

(98.7)

Trade payables & accruals

-

-

(0.7)

(0.7)

(0.7)

 

-

47.9

(99.4)

(51.5)

(51.5)

Determination of Fair Value

Set out below are the major methods and assumptions used in estimating the fair values of the Group’s financial assets and liabilities. There is no material difference between the fair value of financial assets and liabilities falling due within one year and their carrying amount as due to the short term maturity of these financial assets and liabilities their carrying amount is deemed to approximate fair value.

Short term bank deposits and cash & cash equivalents

The nominal amount of all short-term bank deposits and cash & cash equivalents is deemed to reflect fair value at the balance sheet date.

Advances to customers

The nominal amount of all advances to customers, after provision for impairment, is considered to reflect fair value.

Trade & other receivables/payables

The nominal amount of all trade & other receivables/payables after provision for impairment is deemed to reflect fair value at the balance sheet date with the exception of provisions and amounts due from Group undertakings after more than one year which are discounted to fair value.

Derivatives (forward currency contracts, put/call options in equity accounted investees)

The fair values of forward currency contracts, put/call options and interest rate swaps are based on market price calculations using financial models.

The Group has adopted the following fair value measurement hierarchy for financial instruments that are measured in the balance sheet at fair value:

  • Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities.

    The fair value of financial instruments that are not traded in an active market (e.g. over the counter derivatives) are determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.
  • Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

    The carrying values of all forward currency contracts held by the Group at 28 February 2013 were based on fair values arrived at using Level 2 inputs. There were no outstanding forward currency contracts held by the Group as at 28 February 2014.
  • Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

The carrying value of the call option acquired as part of the acquisition of Biofun during the current financial year was valued based on Level 3 inputs. The option enables the Group to purchase trees and orchard maintenance equipment at a nominal price on the tenth anniversary of the acquisition. The fair value of the call option was valued based on the present value of produce generated from the orchards having as reference the corresponding value at the end of the tenth year, not considering the land value, and using an appropriate discount rate.

As set out further in note 14, as part of the Group’s equity investment in Wallaces during the current financial year, the Group entered into a call option arrangement enabling it to serve notice on the sellers to acquire the remaining 50% of Wallaces on or before 20 March 2015. This option was valued at €1.2m at date of acquisition and at the year end date. The Group also entered into a put option arrangement with Wallaces’ shareholders enabling them to serve notice on the Group to acquire the remaining 50% in the period January 2015 to March 2015. This derivative financial liability was valued at a negative €1.2m at transaction and year end date. The carrying values of the derivative financial instruments were valued based on Level 3 inputs, with the fair values being arrived at through the use of a Black- Scholes model.

As set out further in note 14, as part of the Group’s equity investment during the year ended 28 February 2013, in Maclay Group plc, the Group entered into;

I. a put option agreement enabling it to sell the equity stake to Maclay Group plc at a predetermined price at any time after the fifteenth anniversary of the acquisition, resulting in the recognition of a derivative asset of €1.4m; and

II. a call option agreement with Maclay Group plc enabling the latter to re-acquire the Group’s equity interest at a predetermined price at any time in the first fifteen years after the acquisition date, resulting in the recognition of a derivative liability of €1.0m.

The carrying value of the put and call options acquired were valued based on Level 3 inputs, with the fair values being arrived at through the use of a Black-Scholes model. The movement in the fair value of these derivatives to 28 February 2014 was a loss of €0.1m (note 7).

As set out further in note 14, as part of the Group’s joint venture agreement in Thistle Pub Company Limited with Maclay Group plc during the financial year ended 28 February 2013, the Group granted Thistle Pub Company Limited and Maclay Group plc a call option enabling either of them to purchase the Group’s share of equity at a fixed price at any time in the first 15 years after the date the joint venture was formed, resulting in the recognition of a €0.2m financial liability. The carrying value of the option was valued based on Level 3 inputs, with the fair value being arrived at through the use of a Black-Scholes model. The movement in the fair value of this derivative to 28 February 2014 was less than €0.1m.

Applying sensitivities to the key input assumptions used in valuing the above derivative financial instruments would not have a material impact on the carrying value of the derivative financial instruments or on the income statement.

Interest bearing loans & borrowings

The fair value of all interest bearing loans & borrowings has been calculated by discounting all future cash flows to their present value using a market rate reflecting the Group’s cost of borrowing at the balance sheet date. All loans bear interest at floating rates.

(c) Market risk

Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group enters into derivative financial contracts, when deemed economically viable to do so, to mitigate risks arising in the ordinary course of business from foreign exchange rate and interest rate movements, and also incurs financial liabilities, in order to manage these market risks. The Group carries out all such transactions within the Treasury policy as set down by the Board of Directors. Generally the Group seeks to apply hedge accounting in order to manage volatility in the income statement.

Commodity price risk

The Group is exposed to variability in the price of commodities used in the production or in the packaging of finished products, such as barley, sugar, apple concentrate and aluminium. Commodity price risk is managed, where economically viable, through fixed price contracts with suppliers incorporating appropriate commodity hedging and pricing mechanisms. The Group does not directly enter into commodity hedge contracts. The cost of production is also sensitive to variability in the price of energy, primarily gas and electricity. It is Group policy to fix the cost of a certain level of its energy requirement through fixed price contractual arrangements directly with its energy suppliers. The value of contracts placed for future expenditure is set out in note 25.

Currency risk

The Company’s functional and reporting currency and that of its share capital is euro. The euro is also the Group’s reporting currency and the currency used for all planning and budgetary purposes. The Group is exposed to currency risk in relation to sales and purchase transactions by Group companies in currencies other than their functional currency (transaction risk), and fluctuations in the euro value of the Group’s net investment in foreign currency (sterling and US dollar) denominated subsidiary undertakings (translation risk). Currency exposures for the entire Group are managed and controlled centrally.

The Group seeks to minimise its foreign currency transaction exposure when economically viable by maximising the value of its foreign currency input costs and creating a natural hedge. Group policy is to manage its remaining net exposure by hedging a portion of the projected non-euro forecast sales revenue up to a maximum of two years ahead. Forward foreign currency contracts are used to manage this risk. The Group does not enter into such derivative financial instruments for speculative purposes. All such derivative contracts entered into are in liquid markets with credit-approved counterparties. Treasury operations are controlled within strict terms of reference that have been approved by the Board.

The Group seeks to partially manage foreign currency translation risk through borrowings denominated in US dollar. Part of the Group’s multi-currency debt facility (note 19), was designated as a net investment hedge of its US dollar subsidiaries. In addition, the Group has a number of long term US dollar and sterling intra group loans for which settlement is neither planned nor likely to happen in the foreseeable future, and as a consequence of which are deemed quasi equity in nature and are therefore part of the Group’s net investment in its foreign operations. The Group does not hedge the translation exposure arising on the translation of the profits of foreign currency subsidiaries.

The net currency gains and losses on transactional currency exposures are recognised in the income statement and the changes arising from fluctuations in the euro value of the Group’s net investment in foreign operations are reported separately within other comprehensive income.

The currency profile of the Group and Company’s financial instruments subject to transactional exposure as at 28 February 2014 is as follows:-

 

Euro

Sterling

USD

CAD/AUD

Not at risk

Total

Group

€m

€m

€m

€m

€m

€m

 

Cash & cash equivalents

1.6

3.5

2.9

5.0

149.8

162.8

Trade receivables

-

0.9

0.2

3.0

114.7

118.8

Advances to customers

-

-

-

-

49.3

49.3

Other derivative financial assets and liabilities

-

-

-

-

0.6

0.6

Interest bearing loans & borrowings

-

-

(221.9)

-

(86.1)

(308.0)

Trade payables & accruals

(0.6)

(4.4)

-

(0.5)

(165.8)

(171.3)

Provisions

-

-

-

-

(11.5)

(11.5)

 

Gross currency exposure

1.0

-

(218.8)

7.5

51.0

(159.3)

 

Designated as a net investment hedge

-

-

43.1

-

(43.1)

-

Designated as part of the Group’s net investment in foreign operations

-

-

178.8

-

(178.8)

-

 

Net currency exposure

1.0

-

3.1

7.5

(170.9)

(159.3)

The Group had no outstanding forward foreign currency contracts in place at 28 February 2014.

Sterling

Not at risk

Total

Company

€m

€m

€m

Cash & cash equivalents

-

0.2

0.2

Net amounts due to Group undertakings

(17.0)

(61.7)

(78.7)

Accruals

-

(0.9)

(0.9)

Total

(17.0)

(62.4)

(79.4)

The currency profile of the Group and Company’s financial instruments subject to transactional exposure as at 28 February 2013 is as follows:-

Euro

Sterling

USD/CAD

Not at risk

Total

Group

€m

€m

€m

€m

€m

Cash & cash equivalents

1.0

0.7

3.1

116.2

121.0

Trade & other receivables

-

0.7

3.1

74.2

78.0

Advances to customers

-

-

-

38.2

38.2

Derivative financial instruments - foreign currency contracts

-

1.7

-

-

1.7

Other derivative financial assets and liabilities

-

-

-

0.2

0.2

Interest bearing loans & borrowings

-

-

(224.4)

(20.0)

(244.4)

Trade & other payables

(0.4)

(4.2)

(0.8)

(118.7)

(124.1)

Provisions

-

-

-

(12.2)

(12.2)

Gross currency exposure

0.6

(1.1)

(219.0)

77.9

(141.6)

Designated as a net investment hedge

-

-

44.9

(44.9)

-

Designated as part of the Group’s net investment in foreign operations

-

-

179.5

(179.5)

-

Net currency exposure

0.6

(1.1)

5.4

(146.5)

(141.6)

Sterling

Not at risk

Total

Company

€m

€m

€m

Cash & cash equivalents

0.1

-

0.1

Net amounts due to Group undertakings

(16.1)

(34.8)

(50.9)

Accruals

-

(0.7)

(0.7)

Total

(16.0)

(35.5)

(51.5)

A 10% strengthening in the euro against sterling and the Australian, Canadian and US dollars, based on outstanding financial assets and liabilities at 28 February 2014, would have a €1.1m negative impact on the income statement. A 10% weakening in the euro against sterling, and the Australian, Canadian and US dollars would have a €1.3m positive effect on the income statement. This analysis assumes that all other variables, in particular interest rates, remain constant.

Interest rate risk

The interest rate profile of the Group and Company’s interest-bearing financial instruments at the reporting date is summarised as follows:

 

Group

Company

 

2014

2013

2014

2013

 

€m

€m

€m

€m

 

Variable rate instruments

Interest bearing loans & borrowings

(309.7)

(246.6)

-

-

Cash & cash equivalents

162.8

121.0

0.2

0.1

 

(146.9)

(125.6)

0.2

0.1

The Group and Company’s exposure to interest rate risk arises principally from its long-term debt obligations. It is Group policy to manage interest cost and exposure to market risk centrally by using interest rate swaps, where deemed appropriate, to give the desired mix of fixed and floating rate debt. The Group has no outstanding interest rate swap contracts at 28 February 2014 or 28 February 2013.

Financial instruments: Cash flow hedges

All outstanding forward exchange contracts as at 28 February 2013 matured during the current financial year and were settled. No new contracts were entered into. The following table indicates the periods in which cash flows associated with derivatives outstanding as at 28 February 2013 that were cash flow hedges were expected to occur.

Group

Carrying

Expected

6 months

6-12

1-2

More than

 

amount

cash flows

or less

months

years

2 years

 

€m

€m

€m

€m

€m

€m

28 February 2013

Forward exchange contracts

- assets

1.7

1.7

1.2

0.5

-

-

 

1.7

1.7

1.2

0.5

-

-

 

The following table indicates the periods in which cash flows associated with derivatives outstanding as at 28 February 2013 that were cash flow hedges were expected to impact the income statement:-

Group

Carrying

Expected

6 months

6-12

1-2

More than

 

amount

cash flows

or less

months

years

2 years

 

€m

€m

€m

€m

€m

€m

28 February 2013

Forward exchange contracts

- assets

1.7

1.5

1.1

0.4

-

-

 

1.7

1.5

1.1

0.4

-

-

The Company had no outstanding derivatives as at 28 February 2014 or 28 February 2013.

(d) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s trade receivables, its cash advances to customers, cash & cash equivalents including deposits with banks and derivative financial instruments contracted with banks. The Group has an indirect exposure to European Sovereigns via its defined benefit pension scheme investment portfolio. In the context of the Group’s operations, credit risk is mainly influenced by the individual characteristics of individual counterparties and is not considered particularly concentrated as it primarily arises from a wide and varied customer base; there are no material dependencies or concentrations of individual customers which would warrant disclosure under IFRS 8 Operating segments.

The Group has detailed procedures for monitoring and managing the credit risk related to its trade receivables and advances to customers based on experience, customer track records and historic default rates. Generally, individual ‘risk limits’ are set by customer and risk is only accepted above such limits in defined circumstances. A strict credit assessment is made of all new applicants who request credit-trading terms. The utilisation and revision, where appropriate, of credit limits is regularly monitored. Impairment provision accounts are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the amount is considered irrecoverable and is written off directly against the trade receivable.

Advances to customers are generally secured by, amongst others, rights over property or intangible assets, such as the right to take possession of the premises of the customer. Interest rates calculated on repayment/annuity advances are generally based on the risk-free rate plus a margin, which takes into account the risk profile of the customer and value of security given. The Group establishes an allowance for impairment of customers advances that represents its estimate of potential future losses.

From time to time, the Group holds significant cash balances, which are invested on a short-term basis and disclosed under cash & cash equivalents in the balance sheet. Risk of counterparty default arising on short term cash deposits is controlled within a framework of dealing primarily with banks who are members of the Group’s banking syndicate, and by limiting the credit exposure to any one of these banks or institutions. Management does not expect any counterparty to fail to meet its obligations.

The Company also bears credit risk in relation to amounts owed by Group undertakings and from guarantees provided in respect of the liabilities of wholly owned subsidiaries as disclosed in note 28.

The carrying amount of financial assets, net of impairment provisions represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:-

 

Group

Company

 

2014

2013

2014

2013

 

€m

€m

€m

€m

 

Trade receivables

118.8

78.0

-

-

Advances to customers

49.3

38.2

-

-

Amounts due from Group undertakings

-

-

50.5

47.8

Cash & cash equivalents

162.8

121.0

0.2

0.1

Derivative financial assets - foreign currency contracts

-

1.7

-

-

Other derivative financial instruments

3.1

1.4

-

-

 

334.0

240.3

50.7

47.9

The ageing of trade receivables and advances to customers together with an analysis of movement in the Group impairment provisions against these receivables are disclosed in note 16. The Group does not have any significant concentrations of risk.

(e) Liquidity risk

Liquidity risk is the risk that the Group or Company will not be able to meet its financial obligations as they fall due. Liquid resources are defined as the total of cash & cash equivalents. The Group finances its operations through cash generated by the business and medium term bank credit facilities; the Group does not use off-balance sheet special purpose entities as a source of liquidity or financing.

The Group’s policy is to ensure that sufficient resources are available either from cash balances, cash flows or committed bank facilities to meet all debt obligations as they fall due. To achieve this, the Group (a) maintains adequate cash or cash equivalent balances; (b) prepares detailed 3 year cash projections; and (c) keeps refinancing options under review. In addition, the Group maintains an overdraft facility that is unsecured.

In February 2012, the Group entered into a committed €250.0m multi-currency five year syndicated revolving loan facility with seven banks, including Bank of Ireland, Bank of Scotland, Barclays Bank, Danske Bank, HSBC, Rabobank and Ulster Bank, repayable in a single instalment on 28 February 2017. The facility agreement provides for a further €100.0m in the form of an uncommitted accordion facility which was successfully negotiated with the banks as committed in December 2012. The Group can also avail of further financial indebtedness, excluding working capital and guarantee facilities, to a maximum value of €150.0m. Consequently, the Group is permitted, under the terms of the agreement, to have debt capacity of €500.0m. At the year-end the Group had drawn down €309.6m (2013: €246.6m) of these facilities.

The Group’s debt facility incorporates two financial covenants:

  • Interest cover: The ratio of EBITDA to net interest for a period of 12 months ending on each half year date will not be less than 3.5:1
  • Net debt/EBITDA: The ratio of net debt on each half year date to EBITDA for a period of 12 months ending on a half year date will not exceed 3.5:1

Compliance with these debt covenants is monitored continuously.

The Group’s main liquidity risk relates to maturing debt. The strong cash generative nature of the business significantly reduces this risk. The Directors consider the risk low at the year-end date as the Group ended the year reporting cash of €162.8m and, has a committed €350.0m five year multi-currency syndicated facility, as set out in note 19, of which €309.6m was drawn down at 28 February 2014. At the year-end the Group had net debt, net of unamortised issue costs, of €145.2m, with a Net debt/ EBITDA ratio of 0.99:1 calculated in accordance with the terms of the Group’s revolving credit facility agreement.

The following are the contractual maturities of financial liabilities, including interest payments and derivatives and excluding the impact of netting arrangements:-

Group

Carrying

Contractual

6 mths

6-12

 

amount

cash flows

or less

months

1-2 years

>2 years

2014

€m

€m

€m

€m

€m

€m

 

Interest bearing loans & borrowings

(308.0)

(335.0)

(3.9)

(4.2)

(8.2)

(318.7)

Trade & other payables

(171.3)

(171.3)

(171.3)

-

-

-

Provisions

(11.5)

(16.6)

(2.5)

(1.0)

(2.0)

(11.1)

Derivative financial instruments

(2.5)

-

-

-

-

-

 

Total contracted outflows

(493.3)

(522.9)

(177.7)

(5.2)

(10.2)

(329.8)

 

2013

 

Interest bearing loans & borrowings

(244.4)

(276.2)

(3.7)

(3.7)

(7.4)

(261.4)

Trade payables & accruals

(124.1)

(124.1)

(124.1)

-

-

-

Provisions

(12.2)

(18.0)

(2.2)

(1.5)

(1.9)

(12.4)

Other derivative contracts

(1.2)

-

-

-

-

-

 

Total contracted outflows

(381.9)

(418.3)

(130.0)

(5.2)

(9.3)

(273.8)

 

 

 

Company

Carrying

Contractual

6 mths

6-12

 

amount

cash flows

or less

months

1-2 years

>2 years

2014

€m

€m

€m

€m

€m

€m

 

Amounts due to Group undertakings

(129.2)

(129.2)

(129.2)

-

-

-

Trade payables & accruals

(0.9)

(0.9)

(0.9)

-

-

-

Total contracted outflows

(130.1)

(130.1)

(130.1)

-

-

-

 

2013

 

Amounts due to Group undertakings

(98.7)

(98.7)

(98.7)

-

-

-

Trade payables & accruals

(0.7)

(0.7)

(0.7)

-

-

-

 

Total contracted outflows

(99.4)

(99.4)

(99.4)

-

-

-

(f) Accounting for derivative financial instruments and hedging activities

 

Group

Company

 

2014

2013

2014

2013

Group

€m

€m

€m

€m

 

Financial assets: current

Other derivative financial instruments

1.2

-

-

-

Forward exchange contracts

-

1.7

-

-

 

1.2

1.7

-

-

 

Financial assets: non-current

Other derivative financial instruments

1.9

1.4

-

-

 

1.9

1.4

-

-

Financial liability: current

Other derivative financial instruments

(1.2)

-

-

-

 

(1.2)

-

-

-

 

Financial liabilities: non-current

Other derivative financial instruments

(1.3)

(1.2)

-

-

 

(1.3)

(1.2)

-

-

Derivatives are initially recorded at fair value on the date the contract is entered into and subsequently re-measured to fair value at reporting dates. The gain or loss arising on re-measurement is recognised in the income statement except where the instrument is a designated hedging instrument under the cash flow hedging model.

Cash flow hedges

The Group, when appropriate, also enters into forward exchange contracts designated as cash flow hedges to manage short term foreign currency exposures to expected future sales. There were no outstanding contracts as at 28 February 2014, (the notional amount of outstanding contracts as at 28 February 2013: Stg£20.0m and US$1.0m).

In order to qualify for hedge accounting, the Group is required to document the relationship between the item being hedged and the hedging instrument and demonstrate, at inception, that the hedge relationship will be highly effective on an ongoing basis. The hedge relationship must also be tested for effectiveness retrospectively and prospectively on subsequent reporting dates.

Gains and losses on cash flow hedges that are determined to be highly effective are recognised in other comprehensive income and then reflected in a cash flow hedging reserve within equity to the extent that they are actually effective. When the related forecasted transaction occurs, the deferred gains or losses are reclassified from other comprehensive income to the income statement. Ineffective portions of the gain or loss on the hedging instrument are recognised immediately in the income statement.

The Group ordinarily seeks to apply the hedge accounting model to all forward currency contracts.

At 28 February 2013, the effective portion of gains and losses arising on derivative financial contracts had been deferred in other comprehensive income only to the extent that they related to highly probable forecast transactions and where all the hedge accounting criteria in IAS 39 Financial Instruments: Recognition and Measurement were met.

24. SHARE CAPITAL AND RESERVES Share capital

 

Allotted and

Allotted and

 

Authorised

called up

Authorised

called up

 

Number

Number

€m

€m

 

At 28 February 2014

Ordinary shares of €0.01 each

800,000,000

346,840,406*

8.0

3.5

 

At 28 February 2013

Ordinary shares of €0.01 each

800,000,000

344,331,716**

8.0

3.4

 

At 29 February 2012

Ordinary shares of €0.01 each

800,000,000

339,274,722***

8.0

3.4

* inclusive of 7.6m treasury shares.

** inclusive of 8.3m treasury shares.

*** inclusive of 12.4m treasury shares.

All shares in issue carry equal voting and dividend rights.

Following shareholder approval at the Annual General Meeting on 27 June 2012, where Interests under the Joint Share Ownership Plan have vested and if the participant is a continuing employee and so agrees, the participant is entitled to dividends on the relevant Plan Shares in proportion to his economic interest. The Trustees of the Employee Trust are entitled to the dividends otherwise but have waived their entitlement. In the year to 28 February 2014, dividends of €0.5m were paid to Plan participants (2013: €0.4m).

Reserves

Group

 

Allotted and called up Ordinary Shares

Ordinary Shares held by the Trustee of the Employee Trust*

 

 

2014

2013

2014

2013

 

‘000

‘000

‘000

‘000

 

As at 1 March

344,332

339,275

8,310

12,363

Shares issued in lieu of dividend

664

1,934

-

-

Shares issued in respect of options exercised

1,844

1,701

-

-

Shares issued following acquisition of subsidiary

-

1,422

-

-

Shares disposed of or transferred to Participants

-

-

(727)

(4,053)

As at 28 February

346,840

344,332

7,583

8,310

* 359,507 (2013: 587,082) shares are held in the sole name of the Trustee of the Employee Trust.

Movements in the year ended 28 February 2014

In July 2013, 250,883 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €4.72 per share, instead of part or all the cash element of their final dividend entitlement for the year ended 28 February 2013. In December 2013, 413,931 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €4.41 per share, instead of part or all the cash element of their interim dividend entitlement for the year ended 28 February 2014. Also during the financial year, 1,843,876 ordinary shares were issued on the exercise of share options for a net consideration of €5.0m.

During the financial year, 227,398 vested Interests awarded under the Joint Share Ownership Plan and held by a participant who had left the Group were acquired by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Trust and held in trust. 727,575 shares were either sold by the Trustees or transferred to participants on the vesting of Interests and are no longer accounted for as treasury shares. All shares held by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Trust which were neither cancelled nor disposed of by the Trust at 28 February 2014 continue to be included in the treasury share reserve.

Movements in the year ended 28 February 2013

In July 2012, 686,404 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €3.44 per share, instead of part or all the cash element of their final dividend entitlement for the year ended 29 February 2012. In December 2012, 1,247,485 ordinary shares were issued to the holders of ordinary shares who elected to receive additional ordinary shares at a price of €3.78 per share, instead of part or all the cash element of their interim dividend entitlement for the year ended 28 February 2013. Also during the financial year, 1,701,006 ordinary shares were issued on the exercise of share options for a net consideration of €3.5m. Following the acquisition of Vermont Hard Cider Company, LLC a total of 1,422,099 ordinary shares were issued to two of the sellers, being continuing members of its management team, at 28 February 2013, for a total consideration of €5.3m ($7.0m). The subscribers had undertaken to retain these shares until 7 July 2013.

During the financial year ended 28 February 2013, 760,413 vested Interests awarded under the Joint Share Ownership Plan and held by a participant who had left the Group were acquired by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Trust and held in trust. 4,052,921 shares were either sold by the Trustees or transferred to participants on the vesting of Interests and are no longer accounted for as treasury shares. All shares held by Kleinwort Benson (Guernsey) Trustees Limited as trustees of the C&C Employee Trust which were neither cancelled nor disposed of by the Trust at 28 February 2013 continue to be included in the treasury share reserve.

Share premium - Group

The change in legal parent of the Group on 30 April 2004, as disclosed in detail in that year’s annual report, was accounted for as a reverse acquisition. This transaction gave rise to a reverse acquisition reserve debit of €703.9m, which, for presentation purposes in the Group financial statements, has been netted against the share premium in the consolidated balance sheet.

Share premium - Company

The share premium, as stated in the Company balance sheet, represents the premium recognised on shares issued and amounts to €817.7m as at 28 February 2014 (2013: €809.8m). The current year movement relates to the exercise of share options and the issuance of a scrip dividend to those who elected to receive additional ordinary shares in place of a cash dividend. The prior year movement also includes the issue of 1,422,099 ordinary shares following the Group’s acquisition of Vermont Hard Cider Company, LLC, as described above.

Capital redemption reserve and capital reserve

These reserves initially arose on the conversion of preference shares into share capital of the Company and other changes and reorganisations of the Group’s capital structure. These reserves are not distributable.

Cash flow hedging reserve

The hedging reserve includes the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred as set out in note 23, together with any deferred gains or losses on hedging contracts where hedge accounting was discontinued but the forecast transaction was still anticipated to occur.

Share-based payment reserve

The reserve relates to amounts expensed in the income statement in connection with share option grants falling within the scope of IFRS 2 Share-Based Payment, plus amounts received from participants on award of Interests under the Group’s Joint Share Ownership Plan, less reclassifications to retained income following exercise/forfeit post vesting or lapse of such share options and Interests, as set out in note 5.

Currency translation reserve

The translation reserve comprises all foreign exchange differences from 1 March 2004, arising from the translation of the Group’s net investment in its non-euro denominated operations, including the translation of the profits of such operations from the average exchange rate for the year to the exchange rate at the balance sheet date, as adjusted for the translation of foreign currency borrowings designated as net investment hedges and long term intra group loans for which settlement is neither planned nor likely to happen in the foreseeable future, and as a consequence are deemed quasi equity in nature and are therefore part of the Group’s net investment in foreign operations.

Revaluation reserve

This reserve originally comprised the gain which arose on the revaluation of land by external valuers during the financial year ended 28 February 2009. A subsequent external valuation of freehold properties and plant & machinery was completed as at 29 February 2012. The carrying value of land was reduced by €3.4m as a result of the revaluation; of which €3.0m was debited directly to this revaluation reserve to the extent that it reduced a previously recognised gain on the same asset and €0.4m to the income statement as there were no previously recognised gains in this revaluation reserve by which to offset. In addition, an increase in the carrying value of buildings in Glasgow of €1.3m was credited directly to the revaluation reserve as a result of this external valuation.

Treasury shares

This reserve arises when the Company issues equity share capital under its Joint Share Ownership Plan, which is held in trust by the Group’s Employee Trust. The consideration paid, 90% by a Group company and 10% by the participants, in respect of these shares is deducted from total shareholders’ equity and classified as treasury shares on consolidation until such time as the Interests vest and the participant acquires the shares from the Trust or the Interests lapse and the shares are cancelled or disposed of by the Trust.

Capital management

The Board’s policy is to maintain a strong capital base so as to safeguard the Group’s ability: to continue as a going concern for the benefit of shareholders and stakeholders; to maintain investor, creditor and market confidence; and, to sustain the future development of the business through the optimisation of the value of its debt and equity shareholding balance.

The Board considers capital to comprise long-term debt and equity. There are no externally imposed requirements with respect to capital with the exception of a financial covenant in the Group’s debt facilities which limits the net debt:EBITDA ratio to a maximum of 3.5 times. This financial covenant was complied with throughout the year.

The Board periodically reviews the capital structure of the Group, considering the cost of capital and the risks associated with each class of capital. The Board approves any material adjustments to the capital structure in terms of the relative proportions of debt and equity. In order to maintain or adjust the capital structure, the Group may issue new shares, dispose of assets to reduce debt, alter dividend policy by increasing or reducing the dividend paid to shareholders, return capital to shareholders and/or buy back shares. In respect of the financial year ended 28 February 2014, the Company paid an interim dividend on ordinary shares of 4.3c per share (2013: 4.0c per share) and the Directors propose, subject to shareholder approval, that a final dividend of 5.7c per share (2013: 4.75c per share) be paid, bringing the total dividend for the year to 10.0c per share (2013: 8.75c per share).

The Group monitors debt capital on the basis of interest cover and by the ratio of Net debt:EBITDA before exceptional items. In February 2012, the Group entered into a committed €250.0m multi-currency 5 year syndicated revolving facility with 7 banks which is repayable in a single instalment on 28 February 2017. The facility provided for a further €100.0m in the form of an uncommitted accordion facility which the Group successfully negotiated with the banks as committed in December 2012.

Company income statement

In accordance with Section 148(8) of the Companies (Amendment) Act, 1963, the income statement of the Company has not been presented separately in these consolidated financial statements. A loss of €4.9m (2013: €3.4m loss) was recognised in the individual Company income statement of C&C Group plc.

25. COMMITMENTS

(a) Capital commitments

At the year-end, the following capital commitments authorised by the Board had not been provided for in the financial statements:-

 

2014

2013

 

€m

€m

 

Contracted

5.3

1.5

Not contracted

17.9

17.7

 

23.2

19.2

The contracted capital commitments at 28 February 2014 and 28 February 2013 primarily relate to the expansion of the Group’s cider facility in Vermont, US.

(b) Commitments under operating leases

Future minimum rentals payable under non-cancellable operating leases at the year-end are as follows:

 

2014

2013

 

Land &

Plant &

Land &

Plant &

 

buildings

machinery

Other

Total

buildings

machinery

Other

Total

 

€m

€m

€m

€m

€m

€m

€m

€m

 

Payable in less than one year

5.1

1.7

1.2

8.0

4.0

0.6

0.8

5.4

Payable between 1 and 5 years

13.5

3.2

3.7

20.4

12.4

1.2

1.5

15.1

Payable greater than 5 years

12.6

0.3

-

12.9

13.5

0.3

-

13.8

 

31.2

5.2

4.9

41.3

29.9

2.1

2.3

34.3

The land & buildings operating lease commitments primarily relate to two leases of warehousing facilities in the UK acquired as part of the acquisition of the Gaymers cider business in 2010. These leases are due to expire in 2017 and 2026 respectively. A related onerous lease provision is included in Provisions – note 18.

(c) Other commitments

At the year-end, the value of contracts placed for future expenditure was:-

 

2014

 

Apple Concentrate

Glass

Marketing

Barley

Aluminium

Distribution

Polymer

Wheat

Total

 

€m

€m

€m

€m

€m

€m

€m

€m

€m

 

Payable in less than one year

3.0

6.9

2.8

4.4

7.2

4.9

2.4

0.7

32.3

Payable between 1 and 5 years

-

-

3.1

9.5

-

2.9

-

0.2

15.7

 

3.0

6.9

5.9

13.9

7.2

7.8

2.4

0.9

48.0

 

2013

 

Apple Concentrate

Glass

Marketing

Barley

Aluminium

Distribution

Total

 

€m

€m

€m

€m

€m

€m

€m

 

Payable in less than one year

3.0

9.6

3.7

3.8

6.5

4.7

31.3

Payable between 1 and 5 years

-

-

5.7

11.4

2.2

7.4

26.7

 

3.0

9.6

9.4

15.2

8.7

12.1

58.0

The commitments are principally due within a period of twenty four months with the exception of Barley commitments of €4.7m as at 28 February 2014 which extend to 36 months.