united biscuits luxco s.c.a. · lon32072863/12 103993-0039 united biscuits luxco s.c.a. 2014 page 3...

LON32072863/12 103993-0039

UNITED BISCUITS LUXCO S.C.A.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE 53 WEEK

PERIOD ENDING 3 JANUARY 2015

LON32072863/12 103993-0039

United Biscuits Luxco S.C.A. 2014

MANAGEMENT REPORT

The General Partner presents their strategic report and accounts for the 53 week period ended 3 January 2015.

Principal activity, review of the business, future developments and going concern

On 3 November 2014 the entire share capital of United Biscuits Luxco S.C.A. (“the Company”) and its

subsidiaries (“the Group”) was acquired by Yildiz Holdings AS, a Turkish based company.

The Group’s key financial and other performance indicators from operations during the period were as follows:

2014

£m

2013

£m

Revenue 1,187.0 1,096.1

Adjusted EBITDA 186.1 164.1

(Loss)/profit before tax (35.6) 6.5

Net current assets 61.0 100.6

Shareholder’s equity (70.8) 48.5

Number Number

Average number of employees 9,055 7,411

The principal activity of the Group is the manufacture and sale of a range of food products, principally biscuits

and savoury snacks.

The Group is the leading manufacturer and marketer of biscuits in the United Kingdom and holds a prominent

market position in a number of other jurisdictions. Among the Group’s popular core product brands are:

McVitie’s Digestives, Jacobs Cream Crackers, Penguin, go ahead!, McVitie’s Jaffa Cakes, BN, Verkade and

Delacre.

On 4 December 2012, the Group accepted an offer from Intersnack for the sale of the assets comprising its bagged

snacks business (“KP Snacks”). The disposal was completed on 25 January 2013.

Revenue in 2014 was £1,187.0 million compared with £1,096.1 million in 2013, an increase of £90.9 million, or

8.3%. Revenue comprises sales of platinum brands, drive brands, commercial brands and private label products.

Platinum brands are the Group’s most strategic and popular brands which receive priority marketing and

innovation support. Drive and commercial brands receive more limited marketing and innovation support. Private

label products are sold by multiple retailers under their own brands and are considered non-core to the Group’s

business.

Adjusted EBITDA is the primary measure by which management measures business performance and is used by

management for the purpose of business decision-making and resource allocation. Adjusted EBITDA represents

the operating profit or loss from operations before share of results of joint venture, taxes, financing, exceptional

items and depreciation and amortisation expense.

Adjusted EBITDA for 2014 was £186.1 million compared with £164.1 million in 2013, an increase of £22.0

million, or 14%. This increase is mainly due to the acquisition of A&P Foods in Nigeria and overhead cost

reductions.

The consolidated financial statements have been prepared on a going concern basis as the directors are satisfied

that the Company has adequate financial resources to continue its operations for the foreseeable future. In making

this statement, the Company’s directors have reviewed the Company’s budget and available facilities and have

made such other enquiries as they considered appropriate.

LON32072863/12 103993-0039


Principal risks and uncertainties

The Group has established a Risk Oversight Committee that meets to evaluate key risks to the Group. The

Company is exposed to financial risk. This is summarised, together with the actions taken by the Group to

mitigate any significant exposures, in Note 16 to the Consolidated Financial Statements. In addition, the Company

is subject to a number of significant business risks, which it takes all possible actions to mitigate. The Risk

Oversight Committee ensures that mitigation plans are adequately developed and tested.

These risks include the following:

Substantial leverage and ability to service debt

The wider Group, including the parent company, UMV Global Foods Company Limited (“UMV”) which holds

the external debt, has a high level of debt which requires it to dedicate a substantial portion of its cash flow from

operations to its debt service obligations. Its leveraged status could increase its vulnerability to adverse general

economic and industry conditions or to a significant business continuity issue, limit its ability to obtain additional

financing for working capital, capital expenditures, acquisitions or other purposes, place it at a disadvantage

relative to its competitors that have less debt and limit its flexibility in planning for or reacting to changes in its

business or industry.

Business strategy implementation

The Group’s strategy is to increase its cash flow and profitability by implementing initiatives aimed at achieving

cost savings and generating profitable branded growth. If it is unsuccessful at implementing its strategy it may be

unable to comply with the financial covenants under the senior facilities agreement, held by UMV.

SIGNIFICANT COMPETITION

The Group operates in highly competitive markets, and its failure to compete effectively might adversely affect

the results of its operations. It competes primarily on the strength of its brands, the quality of its products, product

innovation and price. The Group’s ability to compete effectively requires continuous efforts in sales and

marketing of its existing products, developing new products and cost rationalisation.

Dependence on raw materials

The Group’s ability to pass increases in raw materials and energy costs on to its customers could adversely affect

the results of its operations. Many of its raw materials and energy costs are volatile and supplies are affected by

government policies, the actions of its suppliers, currency movements, political upheavals and acts of God.

Consequently, unexpected increases in raw material and energy costs or a material or prolonged supply disruption

could adversely affect the results of its operations.

CONTINUAL EVOLUTION OF RETAILERS

The ongoing evolution of the retail food industry in the United Kingdom and continental Western Europe could

adversely affect UB’s operating results. Such evolution involves the consolidation of sales channels, strong

bargaining power of the major grocery retailers, intensified price competition among these retailers and the rapid

growth of the discount retail channel.

SUPPLY AND MANUFACTURING PROCESSES

Product quality and safety issues may result in damage to the reputation of the Group’s brands and the termination

of agreements or licences to operate one or more of its brands and may affect its relationship with the company’s

customers.

CHALLENGES TO BRANDS AND INTELLECTUAL PROPERTY RIGHTS

Some of the Group’s intellectual property rights could be challenged or lapse. As approximately 88% of its sales

are from branded products this could adversely affect the Group’s results.

LON32072863/12 103993-0039


RESTRICTIONS ON OPERATIONS

UB’s debt agreements contain significant restrictions limiting its flexibility in operating its business including,

among other things, to: borrow money; pay dividends or make other distributions and make asset dispositions.

These covenants could materially and adversely affect the Group’s ability to finance its future operations or

capital needs or to engage in other business activities that may be in the Group’s best interest.

FUNDING DEFINED BENEFIT PENSION SCHEMES

UB operate defined benefit pension arrangements in the U.K. that have significant liabilities to current, previous

and retired employees. In order to take advantage of the higher returns that equities and certain other investments

have historically generated, a proportion of the pension plan funds are invested in such assets. This investment

strategy carries the risk that a decline in values could increase the Group’s funding deficit, which may require it to

increase its contributions.

CHANGES TO TAXATION OR OTHER GOVERNMENT REGULATION

Changes in fiscal legislation and regulation in the various jurisdictions in which UB operates may affect the taxes

that it pays. In addition, Government bodies in the Group’s markets have been pursuing various initiatives aimed

at increasing health and reducing the incidence of diseases that are seen to be linked to diet. The actions that

government bodies may take could have an adverse effect on consumer demand for UB products.

Additional risks not presently known to the Group, or that management currently deem immaterial, may also

impair future business operations. The directors who were members of the board at the time of approving the

directors’ report are listed on page 5.

FINANCIAL RISK MANAGEMENT OBJECTIVES

In the ordinary course of business, the Group is exposed to a variety of financial risks arising from fluctuations in

foreign currency exchange rates, interest rates and commodity prices. To manage these risks effectively, the

Group enters into hedging transactions and uses derivative financial instruments, under established internal

guidelines and policies, to mitigate the adverse effects of these risks. The Group does not enter into financial

instruments for trading or speculative purposes.

The Treasury Management Committee establishes the Group’s financial risk strategy. The strategy is implemented

by a central treasury department (Group Treasury), which identifies, evaluates and hedges financial risks, working

closely with the Group’s operating units. The Treasury Management Committee ensures that critical controls exist

and are operating correctly within Group Treasury. Written policies, approved by the Treasury Management

Committee, provide the framework for the management of the Group’s financial risks, and provide specific

guidance on areas such as foreign exchange risk, interest rate risk and liquidity risk.

Foreign Exchange risk.

The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to

the US dollar, the Euro, Canadian dollar and Australian dollar. Foreign exchange risk arises as follows:

Although the majority of the Group’s operations are in the United Kingdom, its sales destinations are

geographically diverse. During the period, the Group had sales in approximately 100 countries. As a result, the

Group’s financial position and results of operations are subject to both currency transaction risk and currency

translation risk.

Group Treasury is responsible for managing foreign exchange risk arising from future commercial and financing

transactions and recognised assets and liabilities, usually by using forward currency contracts. The Group’s risk

management policy is to hedge a proportion of its net currency exposure.

Due to the Group’s geographically diversified customer base, it generates a portion of its revenues from sales in

currencies other than those in which it regularly operates and incurs expenses. The Group hedges against currency

transaction risk by matching cash inflows in a particular currency with its costs. The Group enters into forward

foreign currency contracts to hedge against its exposure to foreign currency exchange rate fluctuations in, among

other things, the purchase of raw materials, sales in Eire and sales in the International Sales business. The Group

also purchases forward foreign currency contracts to hedge against expected net exposure to foreign currency

exchange rate fluctuations with particular contractual commitments.

LON32072863/12 103993-0039


Restructuring programs

During 2014, the Group continued the implementation of its cost-reduction initiatives. Costs incurred were

associated with factory restructuring programs and continued reductions in overheads. Costs associated with the

separation and disposal of KP Snacks are included in profit on disposal in 2013.

Research and development

Research and development expenditure plays an essential part in the Group’s commitment to product innovation,

health and nutrition, and the development of more effective production and packaging technology.

Suppliers

The Group requires management staff responsible for procurement to negotiate appropriate terms and conditions

of trade as competitively as it negotiates prices and other commercial matters.

Employees are bound by the terms of the Group's Code of Business Behaviour and Ethics which sets out

expectations regarding trading relationships with suppliers.

At 3 January 2015, the Group had an average of 97 days purchases (2013: 104 days) outstanding in trade

creditors.

On behalf of the General Partner

John Sutherland Cem Karakas

Director Director

LON32072863/12 103993-0039


INDEPENDENT AUDITOR’S REPORT

To the Shareholder of

United Biscuits LuxCo S.C.A.

2-4 rue Eugène Ruppert

L-2453 Luxembourg

We have audited the accompanying consolidated financial statements of United Biscuits LuxCo S.C.A., which

comprise the consolidated statement of financial position as at 3 January 2015, the consolidated statement of

profit or loss, the consolidated statement of other comprehensive income, the consolidated statement of changes

in equity, the consolidated cash flow statement for the period from 29 December 2013 to 3 January 2015, and a

summary of significant accounting policies and other explanatory information.

General Partner’s responsibility for the consolidated financial statements

The General Partner is responsible for the preparation and fair presentation of these consolidated financial

statements in accordance with International Financial Reporting Standards as adopted by the European Union and

for such internal control as the General Partner determines is necessary to enable the preparation and presentation

of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Responsibility of the “réviseur d’entreprises agréé”

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We

conducted our audit in accordance with International Standards on Auditing as adopted for Luxembourg by the

“Commission de Surveillance du Secteur Financier”. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the

consolidated financial statements. The procedures selected depend on the judgement of the “réviseur

d’entreprises agréé”, including the assessment of the risks of material misstatement of the consolidated financial

statements, whether due to fraud or error. In making those risk assessments, the “réviseur d’entreprises agréé”

considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial

statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by the General

Partner, as well as evaluating the overall presentation of the consolidated financial statements.

LON32072863/12 103993-0039


We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the financial position of United

Biscuits LuxCo S.C.A. as of 3 January 2015, and of its financial performance and its cash flows for the period

from 29 December 2013 to 3 January 2015 in accordance with International Financial Reporting Standards as

adopted by the European Union.

Report on other legal and regulatory requirements

The management report, which is the responsibility of the General Partner, is consistent with the consolidated

financial statements.

Other Matter

The consolidated financial statements of United Biscuits LuxCo S.C.A. for the period ended 28 December 2013

and 29 December 2012 are unaudited.

Ernst & Young

Société anonyme

Cabinet de révision agréé

Olivier JORDANT

Luxembourg, 18 May 2015

LON32072863/12 103993-0039


Consolidated statement of profit or loss

Notes 53 weeks

ending 3

January

2015

£m

52 weeks

ending 28

December

2013

£m

(unaudited)

Revenue 1,187.0 1,096.1

Cost of goods sold (782.0) (735.0)

Gross profit 405.0 361.1

Marketing expenses (82.0) (61.1)

Other operating expenses (184.2) (181.2)

Operating profit before exceptional operating expenses 138.8 118.8

Operating profit before exceptional operating expenses is

comprised as follows:

Adjusted EBITDA 186.1 164.1

Depreciation and amortisation expense 3 (42.6) (41.0)

Pension administration charges 19 (4.7) (4.3)

Exceptional operating expense 2 (68.8) (15.3)

Operating profit 3 70.0 103.5

Financial income 4 0.5

1.7

Financial costs 5 (98.3) (88.3)

Other finance expense – pensions 19 (7.8) (10.4)

(Loss)/profit from continuing operations before taxes (35.6) 6.5

Income tax expense 6 (4.0) (6.9)

Loss from continuing operations (39.6) (0.4)

(Loss)/profit after tax from discontinued operations 7 (2.0) 211.7

(Loss)/profit for the period (41.6) 211.3

Attributable to:

Equity holders of the parent (43.8) 211.4

Non-controlling interests 2.2 (0.1)

(41.6) 211.3

The accompanying notes will form part of these consolidated financial statements.

LON32072863/12 103993-0039


Consolidated statement of other comprehensive income

Notes 53 weeks

ending 3

January

2015

£m

52 weeks

ending 28

December

2013

£m

(unaudited)

(Loss)/profit for the period (41.6) 211.3

Other comprehensive income

Items not to be reclassified subsequently to profit or loss

Actuarial (loss)/gain on defined benefit pension plans 19 (87.7) 59.0

Tax on items not to be reclassified subsequently to profit or loss 6 17.8 (11.7)

Total items not to be reclassified subsequently to profit or loss (69.9) 47.3

Items that may be reclassified to profit or loss

(Loss)/gain on cash flow hedges taken to equity (5.4) 3.5

Gain/(loss) on cash flow hedges transferred to the Consolidated

statement of profit or loss

2.8 (4.6)

Exchange differences on translation of foreign operation (13.8) 3.2

Tax on items that may be reclassified to profit or loss 6 3.2 (0.5)

Total items that may be reclassified to profit or loss (13.2) 1.6

Other comprehensive (loss)/profit for the period after tax (83.1) 48.9

Total comprehensive (loss)/profit for the period after tax (124.7) 260.2

Attributable to:

Equity holders of the parent (126.9) 260.3

Non-controlling interest 2.2 (0.1)

(124.7) 260.2

The accompanying notes form part of these consolidated financial statements.

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Consolidated statement of financial position

Notes At 3 Jan

2015

£m

At 28 Dec

2013

£m

(unaudited)

At 29 Dec

2012

£m

(unaudited)

ASSETS

Non-current assets Intangible assets 8 996.7 958.2 952.7

Property, plant and equipment 9 348.0 305.7 283.7

Retirement benefit asset 19 1.3 1.0 1.0 Deferred tax 6 57.8 41.6 59.4

Derivative financial instruments 16 - - 0.1

Total non current assets 1,403.8 1,306.5 1,296.9

Current assets

Inventories 11 67.3 62.3 53.8

Trade and other receivables 12 223.8 222.9 225.7

Derivative financial instruments 16 1.0 2.9 1.5

Cash and cash equivalents 13 75.5 103.1 186.8

Total current assets 367.6 391.2 467.8

Assets classified as held for sale 7 - - 343.5

TOTAL ASSETS 1,771.4 1,697.7 2,108.2

EQUITY AND LIABILITIES

Shareholder’s equity Share capital and share premium 18 2.0 2.0 1.7

Treasury shares - (2.1) (0.3)

Other reserves (3.8) 9.4 7.8 Retained earnings (72.4) 35.7 (225.4)

Equity attributable to equity holders of the parent (74.2) 45.0 (216.2)

Non controlling interests 3.4 3.5 -

Total equity (70.8) 48.5 (216.2)

Non current liabilities

Borrowings 15 - 635.7 1,183.7 Shareholder debt 16 & 22 1,217.7 525.3 489.7

Retirement benefit liability 19 259.0 187.0 259.5

Provisions 17 0.3 0.3 1.8 Other non current liabilities 7 36.8 0.3 0.3

Deferred tax 6 21.8 10.0 10.0

Total non current liabilities 1,535.6 1,358.6 1,945.0

Current liabilities

Borrowings 15 - - 27.9 Trade and other payables 14 291.3 282.5 273.0

Derivative financial instruments 16 5.5 3.1 2.1

Provisions 17 9.8 5.0 3.5

Total current liabilities 306.6 290.6 306.5

Liabilities directly associated with assets classified as

held for sale

7

-

-

72.9

Total liabilities 1,842.2 1,649.2 2,324.4

TOTAL EQUITY AND LIABILITIES 1,771.4 1,697.7 2,108.2

The accompanying notes form part of these consolidated financial statements.

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Consolidated statement of changes in equity

Share

Capital

& Share

Premium

Currency

Translation

Reserve

Hedging

Reserves

Treasury

shares

Retained

Earnings Total

Non-

Controlling

Interests

Total

Equity

£m

£m

£m

£m

£m

£m

£m

£m

At 29 December 2012 (unaudited) 1.7

6.3

1.5

(0.3)

(225.4)

(216.2)

(216.2)

Profit for the period -

-

-

-

211.4

211.4

(0.1)

211.3

Actuarial profits on defined benefit plans net

of tax -

-

-

-

47.3

47.3

-

47.3

Net exchange difference on translation of

foreign operations -

2.6

-

-

-

2.6

-

2.6

Net loss on cash flow hedges -

-

(1.0)

-

-

(1.0)

-

(1.0)

Total comprehensive income in the period -

2.6

(1.0)

-

258.7

260.3

(0.1)

260.2

Share based payments (Note 21) -

-

-

-

2.4

2.4

-

2.4

Issue of shares 0.3

-

-

-

-

0.3

-

0.3

Purchase of own shares -

-

-

(1.8)

-

(1.8)

-

(1.8)

Non controlling interests arising on a

business combination (Note 7) -

-

-

-

-

-

3.6

3.6


8.9

0.5

(2.1)

35.7

45.0

3.5

48.5

(Loss)/profit for the period -

-

-

-

(43.8)

(43.8)

2.2

(41.6)

Actuarial losses on defined benefit plans net

of tax -

-

-

-

(69.9)

(69.9)

-

(69.9)

Net exchange difference on translation of

foreign operations -

(10.9)

-

-

(10.9)

-

(10.9)

Net loss on cash flow hedges -

-

(2.3)

-

-

(2.3)

-

(2.3)

Total comprehensive income in the period -

(10.9)

(2.3)

-

(113.7)

(126.9)

2.2

(124.7)

Share based payments (Note 21) -

-

-

-

8.0

8.0

-

8.0

Purchase of own shares -

-

-

(0.6)

(0.6)

-

(0.6)

Disposal of treasury shares -

-

-

2.7

(2.4)

0.3

-

0.3

Contributed capital -

-

-

-

20.3

20.3

-

20.3

Non-controlling interests arising on the

acquisition of a subsidiary (Note 7) -

-

-

-

-

-

14.2

14.2

Valuation of put option (Note 7) -

-

-

-

(20.3)

(20.3)

(16.5)

(36.8)

At 3 January 2015 2.0

(2.0)

(1.8)

-

(72.4)

(74.2)

3.4

(70.8)

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Consolidated cash flow statement

53 weeks

ending 3

January

52 weeks

ending 28

December

Notes

2015

2013

£m

£m

(unaudited)

Operating activities

Operating profit from continuing operations

70.0

103.5

Operating (loss)/ profit from discontinued operations 7

(2.0)

0.5

Adjustments for:

Depreciation and amortisation 3, 8 & 9

42.6

41.5

Exceptional operating expense 2 & 7

68.8

15.3

Decrease/(increase) in inventory

0.5

(6.8)

Increase in receivables

(24.0)

(3.6)

Increase in payables

24.9

14.8

Cash flows relating to financial instruments

(0.3)

(0.2)

Cash flows relating to restructuring and other

provisions

(58.1)

(14.2)

Difference between pension contribution paid and

amounts recognised in operating profit (21.5)

(22.9)

Cash generated from operations

100.9

127.9

Interest paid

(33.8)

(50.0)

Interest received

0.1

1.7

Income taxes (paid)/refunded

(2.7)

(1.9)

Net cash inflow from operating activities

64.5

77.7

Investing activities

Capital expenditure and purchases of intangible

assets 8 & 9

(73.4)

(53.5)

Acquisitions 7

(39.0)

(9.8)

Disposals 7

-

482.1

Net cash inflow from investing activities

(112.4)

418.8

Financing activities

Purchase of own shares

(0.6)

(2.1)

Proceeds from disposal of shares

0.3

-

Debt repayment received

5.4

-

Purchase of own debt

-

(4.3)

Increase in shareholder debt

659.0

-

Repayment of debt 15

(642.5)

(574.6)

Net cash used in financing activities

21.6

(581.0)

Decrease in cash and cash equivalents in the period

(26.3)

(84.5)

Currency translation differences

(1.3)

0.8

Cash and cash equivalents at beginning of period

103.1

186.8

Cash and cash equivalents at end of period 13

75.5

103.1

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1. ACCOUNTING POLICIES

Compliance with International Financial Reporting Standards

The consolidated financial statements have been prepared in accordance with International Financial

Reporting Standards (“IFRS”) as adopted by the European Union.

For all periods up to and including the period ending 28 December 2013 United Biscuits Luxco S.C.A.

(“UB Luxco” and together with its subsidiaries the “Group”) prepared standalone financial statements

only under Luxembourg Generally Acceptable Accounting Practice. Consolidated financial statements

for the group were historically prepared at the United Biscuits Topco Limited level (United Biscuits

Topco Limited is the direct subsidiary undertaking of UB Luxco) under IFRS.

This is the Group’s first set of consolidated financial statements under IFRS. However, as the Group

has not previously prepared consolidated financial statements and as its direct subsidiary prepared such

statements under IFRS no restatements are required and no exemptions have been applied.

The date of transition to IFRS for the Group is 30 December 2012.

Basis of preparation

UB Luxco was incorporated under the Luxembourg Companies Law on 24 November 2006 as a

“société en commandite par actions” for an unlimited period of time. The registered office of UB

Luxco is 2-4 rue Eugene Ruppert, L-2453 Luxembourg.

The Group’s business is that of biscuit and baked snacks manufacturing, marketing and selling.

The consolidated financial statements presented here are for the 53-week period ended 3 January 2015

together with its comparatives, being for the 52-week period ended 28 December 2013. The Group

generally presents its consolidated financial statements based on 13 periods of four calendar weeks. As

a result, a normal fiscal year consists of 52 weeks, a first fiscal quarter of four periods (16 weeks) and

three fiscal quarters each comprising of three periods (12 weeks). Every five or six years, the final

period is lengthened to five weeks, in which case, the fourth quarter consists of 13 weeks and the fiscal

year consists of 53 weeks.

Unless the context indicates otherwise “2014” means the 53-week period ended 3 January 2015, or the

consolidated financial position as at 3 January 2015, “2013” means the 52-week period ended 28

December 2013 or the financial position as at 28 December 2013. The consolidated financial

statements have been prepared on the historical cost basis, except for derivative financial instruments,

pension assets and share based payments that have been measured at their fair value.

The accounting policies set out below have been applied consistently to all periods presented within

the financial statements and have been applied consistently by all subsidiaries.

The consolidated financial statements are presented in pounds sterling and all references to “sterling”

or “£” are to the lawful currency of the United Kingdom. The functional currency of UB Luxco is

pounds sterling. All values are rounded to the nearest one hundred thousand pounds, except where

otherwise indicated.

Basis of preparation – going concern

The Board of Directors of the General Partner (the “Directors”) are satisfied that the Group has

sufficient resources to continue in operation for the foreseeable future. The Directors reviewed detailed

financial forecasts covering the period to December 2015 and summary financial forecasts for the

following twelve months.

As at 3 January 2015, the Group held cash and cash equivalents of £75.5 million and had total external

borrowings of £nil million. Borrowings are instead represented by non current shareholder debt of

circa £1.2 billion.

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Basis of consolidation

The consolidated financial statements consolidate the results of all companies in the Group.

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power,

directly or indirectly, to govern the financial and operating policies of an entity to obtain benefits from

its activities. In assessing control, potential voting rights that are currently exercisable or convertible

are taken into account. Subsidiaries are fully consolidated from the date of acquisition, being the date

on which the Group obtained control, and continue to be consolidated until the date that such control

ceases. Intra-group balances, income and expenses and unrealised gains and losses resulting from

intra-group transactions are eliminated on consolidation. UB Luxco’s principal subsidiaries are listed

in Note 10.

Significant accounting judgements, estimates, and assumptions

The preparation of consolidated financial statements requires the use of judgements, estimates and

assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent

assets and liabilities at the date of the consolidated financial statements and the reported revenues and

expenses during the reporting period. Although these estimates are based on management’s best

knowledge of current events and actions, ultimately actual results may differ from those estimates.

The key assumptions concerning the future and other key sources of estimation uncertainty at the

balance sheet date that have a significant risk of causing material adjustment to the carrying amounts

of assets and liabilities arise in connection with the possible impairment of goodwill and intangible

assets and the measurement of defined benefit pension obligations, promotional accruals and share

based payments.

Goodwill and intangible assets impairment review – The Group determines whether goodwill and

indefinite life intangible assets are impaired on at least an annual basis and this requires an estimation

of the value in use or fair value less costs to sell of the cash generating units to which the intangible

assets are allocated. Considerable management judgement is necessary to identify cash generating

units, estimate discounted future cash flows and apply a suitable discount rate. Further details are

given in Note 8.

Defined benefit pension obligations – The cost of pension benefit plans and post-retirement healthcare

benefits is determined using actuarial valuations. This involves making assumptions about future

changes in salaries, future pension increases, mortality rates and discount rates. Due to the long term

nature of these plans, considerable management judgement is necessary and estimates are subject to

significant uncertainty. Further details about the assumptions used are given in Note 19.

Promotional accruals – The Group accrues for trade discounts and other allowances against agreed

promotional activity. Such accruals are subject to a number of variables, e.g. redemption rates and

anticipated volumes, and are sensitive to small changes in these variables. These costs are accrued on

best estimates. The actual costs may not be known until subsequent years when negotiations with

customers are concluded. Such adjustments are recognised in the year when the liability becomes

probable. Management considers this to be an area of judgement that is significant due to the volume

of such transactions.

Share based payments – The cost of incentive programmes which are linked to the Group’s equity is

determined using certain valuation models and other assumptions which require management

judgement. In particular assumptions on the timing of the exit, which triggers the awards to be

exercised, can have a material impact on the charge each period. Further details are given in Note 21.

For all periods presented all amounts relating to the operation and disposal of the Snacks business have

been classified as discontinued operations in the Consolidated statement of profit or loss.

Revenue

Revenue comprises sales of products to third parties at amounts invoiced net of trade discounts and

rebates, excluding sales related taxes and sales between Group companies. Trade discounts include

sales incentives, up-front payments and other non-discretionary payments. Revenue is recognised

based on confirmed deliveries to customers, when the risks and rewards associated with the underlying

LON32072863/12 103993-0039


products have been substantially transferred. At each balance sheet date any expenditure incurred, but

not yet invoiced in relation to trade discounts and other allowances, is estimated and accrued.

Adjusted EBITDA

Adjusted EBITDA is the primary measure by which the Group’s management measures business

performance and is used by the Group’s management for the purpose of business decision-making and

resource allocation. Adjusted EBITDA represents the profit or loss before taxes, interest, exceptional

operating income and expense and depreciation, amortisation expense and pension administrative

charges.

Exceptional operating income and expense

The Group presents as exceptional operating items those items of income and expense which, in the

opinion of the Directors, merit separate presentation to enable users of the consolidated financial

statements to better understand the elements of financial performance in the year, to facilitate

comparison with prior periods and to assess trends in financial performance more easily. Exceptional

operating items include restructuring and other non-recurring expenses, charges for impairment of

tangible and intangible assets and profits and losses on the disposal of property, plant and equipment.

Restructuring and other non-recurring expenses are one-off costs that are incremental to costs the

Group would otherwise incur in relation to its normal operations. Principally, they are costs associated

with projects implemented to improve efficiency of the Group’s operations, integrate acquisitions,

restructure departments or reduce the cost base of the business. For example, redundancy costs

resulting from the closure or integration of a business or part of a business; costs directly associated

with implementing improved ways of working and costs of product recalls. Costs associated with an

activity that meets the definition of restructuring and other non-recurring expenses are charged to the

consolidated statement of profit or loss at the point the Group is effectively committed to incurring

those costs.

A proportion of the costs incurred for the separation and sale of the bagged snacks business unit were

included within exceptional operating expenses as these were borne by the continuing business.

Costs associated with the sale of the Group to Yildiz Holdings on 3 November 2014 are also included

within exceptional operating expenses.

Foreign currencies

Transactions in foreign currencies are initially recorded by the Group’s entities at their respective

functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional

currency spot rates of exchange at the reporting date. Differences arising on settlement or translation of

monetary items are recognised in profit or loss with the exception of monetary items that are

designated as part of the hedge of the Group’s net investment of a foreign operation. These are

recognised in the consolidated statement of other comprehensive income until the net investment is

disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and

credits attributable to exchange differences on those monetary items are also recorded in the

consolidated statement of other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated

using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair

value in a foreign currency are translated using the exchange rates at the date when the fair value is

determined. The gain or loss arising on translation of non-monetary items measured at fair value is

treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation

differences on items whose fair value gain or loss is recognised in the consolidated statement of other

comprehensive income or profit or loss are also recognised in the consolidated statement of other

comprehensive income or profit or loss, respectively). Any goodwill arising on the acquisition of a

foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities

arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at

the spot rate of exchange at the reporting date.

LON32072863/12 103993-0039


On consolidation, assets and liabilities of foreign operations are translated into sterling at the exchange

rate prevailing at the balance sheet date. Income and expense items are translated into sterling at the

average rates for the year.

Exchange differences arising on the translation of opening net assets of Group companies, together

with differences arising from the translation of the net results at average or actual rates to the exchange

rate prevailing at the balance sheet date, are recognised in the statement of comprehensive income

under the currency exchange reserve. On disposal of a foreign entity, the deferred accumulated amount

recognised in other comprehensive income relating to that particular foreign operation is recognised in

the consolidated statement of profit or loss.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is

measured as the aggregate of the consideration transferred, measured at the acquisition date fair value,

and the amount of any non-controlling interest in the acquiree. The choice of measurement of non-

controlling interest, either at fair value or at the proportionate share of the acquiree’s identifiable net

assets is determined on a transaction by transaction basis. Acquisition costs are expensed when

incurred.

Goodwill is initially measured at cost being the excess of the aggregate of the acquisition date fair

value of the consideration transferred and the amount recognised for the non-controlling interest over

the net identifiable amounts of the assets acquired and liabilities assumed in exchange of the business

combination. Goodwill represents consideration paid by the Group in anticipation of future economic

benefits from assets that are not capable of being individually identified and separately recognised.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is subject to an annual impairment review or more frequently when events or changes in

circumstances indicate an impairment may exist. Any impairment is charged to the consolidated

statement of profit or loss in the period in which it arises.

Other intangible assets

On acquisition, the Group recognises any separately identifiable intangible assets separately from

goodwill, initially measuring the intangible assets at fair value at the date of acquisition. Following

initial recognition, intangible assets are carried at cost less any accumulated amortisation and any

accumulated impairment losses.

The useful lives of intangible assets are assessed to be either indefinite or finite. Intangible assets with

indefinite useful lives, as determined by the Directors, are not amortised but are subject to an

impairment review on an annual basis or more frequently when events or changes in circumstances

indicate an impairment may exist. Purchased brands are deemed to have indefinite lives when there is

proven longevity of the brand and continued marketing support is envisaged.

Intangible assets with finite useful lives are amortised over their useful lives and assessed for

impairment whenever there is an indication that the intangible asset may be impaired. The Group

capitalises computer software at cost and also capitalises internally generated software based on costs

incurred where certain specific criteria are met. Computer software is amortised on a straight-line basis

over its estimated useful life, up to 5 years. The carrying value of intangible assets with a finite life is

reviewed for impairment whenever events or changes in circumstances indicate that the carrying value

may not be recoverable. Any impairment is charged to the consolidated statement of profit or loss in

the period it arises.

Marketing costs

Direct marketing costs including advertising are charged to the consolidated statement of profit or loss

in the period in which the service was received or the Group had the right to access the related goods.

Non-current assets held for sale and discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts

will be recovered principally through a sale transaction rather than through continuing use. Non-

current assets and disposal groups classified as held for sale are measured at the lower of their carrying

LON32072863/12 103993-0039


amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met

only when the sale is highly probable and the asset or disposal group is available for immediate sale in

its present condition. Management must be committed to the sale, which should be expected to qualify

for recognition as a completed sale within one year from the date of classification. Discontinued

operations are excluded from the results of continuing operations and are presented as a single amount

as profit or loss after tax from discontinued operations in the consolidated statement of profit or loss.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as

held for sale.

Property, plant and equipment

Property, plant and equipment is stated at cost less depreciation and provision for impairment where

appropriate. Freehold land is not depreciated.

Depreciation is provided on a straight-line basis based on the expected useful lives of assets. Rates of

depreciation applied are as follows:

Freehold buildings and long leaseholds 1.5% p.a.

Leasehold improvements Shorter of the lease term and useful life of

asset

Plant, machinery and vehicles 3 – 20% p.a.

Fixtures and fittings 10 – 33% p.a.

Assets under construction are capitalised but are not depreciated until such time as they are available

for use.

Technical stores consist of spare parts and other items for the repair and maintenance of plant and

equipment. Major spare parts (costing more than £1,000) are recorded as assets under construction

until such time as they are brought into use. All other purchases are expensed.

Property, plant and equipment is reviewed for impairment when events or changes in circumstances

indicate the carrying value may be impaired. Any impairment is charged to the consolidated statement

of profit or loss in the period in which it arises. Useful lives and residual values of assets are reviewed

annually.

Impairment of assets

Goodwill arising on business combinations is allocated to the groups of cash–generating units

(equivalent to the Group’s business units as described in Note 8). The recoverable amount of the

operating segments to which goodwill has been allocated is tested for impairment annually or more

frequently when events or changes in circumstances indicate that it might be impaired. Previous

impairments of goodwill are not reversed at a later date.

The carrying values of property, plant and equipment and intangible assets with finite lives are

reviewed for impairment when events or changes in circumstances indicate the carrying value may be

impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to

determine the extent of impairment loss.

Where purchased intangible assets are considered by the General Partner to have an indefinite useful

life, they are not amortised but are subject to an impairment review on an annual basis or more

frequently if necessary. Intangible assets not yet available for use, for example, computer software

under development, are tested for impairment annually.

An impairment review is performed by comparing the carrying value of the property, plant and

equipment or intangible asset or goodwill with its recoverable amount, the recoverable amount being

the higher of the fair value of the asset less costs to sell and the asset’s value in use. An asset’s fair

value less costs to sell is the amount that could be obtained on disposal of the asset. The value in use is

determined by discounting, using a pre-tax discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset, the expected future cash flows resulting from

LON32072863/12 103993-0039


its continued use, including those on final disposal. Impairment losses are recognised in the

consolidated statement of profit or loss immediately.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates

the recoverable amount of the cash-generating unit to which it belongs. Considerable management

judgement is necessary to estimate discounted future cash flows. Accordingly, actual cash flows could

vary considerably from forecasted cash flows.

Impairment reversals are permitted to property, plant and equipment or intangible assets (but not to

goodwill) only to the extent that the new carrying value does not exceed the amount it would have

been had no impairment loss been previously recognised.

Leasing commitments

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the

risks and rewards of ownership to the Group. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group and capitalised at their fair

value at the date of commencement of the lease or, if lower, at the present value of the minimum lease

payments within property, plant and equipment and depreciated over the shorter of the lease term and

estimated useful life. The corresponding liability to the lessor is included in the balance sheet as a

finance lease obligation. Lease payments are apportioned between finance charges and a reduction of

the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Finance charges are charged directly to the consolidated statement of profit or loss.

Lease payments relating to operating leases are charged to the consolidated statement of profit or loss

on a straight-line basis over the term of the relevant lease, or over the period between rent reviews

where these exist.

Inventories

Inventories are valued at the lower of cost and estimated net realisable value. The cost of products

manufactured by the Group comprises direct material and labour costs together with appropriate

factory overheads. The cost of raw materials and goods for resale is determined on a first-in, first-out

basis. Net realisable value is based on estimated selling price less any further costs expected to be

incurred to completion and disposal.

Inventory held as consignment stock is recognised as an asset in the balance sheet at cost, as the risks

and rewards of ownership have been transferred to the Group. A corresponding liability is also

recognised in the consolidated statement of financial position.

Trade and other receivables

Trade and other receivables are recognised and carried at original invoice amount less an allowance for

any amounts that are not collectable. An estimate for doubtful debts is made when collection of the full

amount is no longer probable. Bad debts are written off when identified.

Cash and cash equivalents

Cash includes cash in hand and deposits repayable on demand with any qualifying financial

institutions, less overdrafts from any qualifying institution repayable on demand. Cash equivalents are

bank deposits which mature in three months or less at the date of acquisition.

Borrowings

Borrowings are initially recognised at fair value, which is represented by the amount of net proceeds

received including any premium on issue and after deduction of issue costs. Borrowings are

subsequently stated at amortised cost. Any difference between proceeds (net of transaction costs) and

the redemption value is recognised in the consolidated statement of profit or loss over the period of the

borrowings using the effective interest method.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts

through the expected life of the financial instrument, or where appropriate a shorter period, to the net

carrying amount of the financial asset or financial liability.

LON32072863/12 103993-0039


Taxes

Current tax is based on the results for the year as adjusted for non-assessable or disallowed items. It is

calculated using tax rates and tax laws that have been enacted or substantively enacted by the balance

sheet date.

Deferred tax is accounted for in respect of temporary differences between the carrying amount of

assets and liabilities in the consolidated financial statements and the corresponding tax bases used in

the computation of taxable profit or loss.

Deferred tax liabilities are recognised for all taxable temporary differences except in respect of

investments in subsidiaries and interests in joint ventures where the Group is able to control the timing

of the reversal of the temporary difference and it is probable that the temporary difference will not

reverse in the foreseeable future. Additionally, where the temporary difference arises from the initial

recognition of goodwill or initial recognition of an asset or liability in a transaction that is not a

business combination and at the time of the transaction affects neither accounting profit nor taxable

profit (or loss), deferred tax is not recognised.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be

available against which the deductible temporary differences can be utilised. Their carrying amount is

reviewed at each balance sheet date.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the

periods in which the asset or liability is realised based on tax rates and laws enacted or substantively

enacted at the balance sheet date. It is recognised in the consolidated statement of profit or loss except

when it relates to items recorded directly in equity.

Pensions and other post-retirement benefits

The Group’s main post-retirement arrangements are in the United Kingdom and are of the defined

benefit type, for which contributions are paid into separately administered funds. The Group’s U.K.

defined benefit plans are closed to new members and membership of defined contribution plans is

available for new employees. The Group also provides additional post-retirement benefits to certain

senior managers in the United Kingdom and post-retirement healthcare benefits in the Netherlands,

both of which are unfunded. The cost of providing benefits under the defined benefit plans is

determined separately for each plan using the projected unit credit method, which attributes

entitlement to benefits to the current period (to determine the current service cost) and to the current

and prior periods (to determine the present value of the defined benefit obligation) and is based on

actuarial advice. When a settlement (eliminating all obligations for benefits already accrued) or a

curtailment (reducing future obligations as a result of a material reduction in the scheme membership

or a reduction in future entitlement) occurs the obligation and related plan assets are re-measured using

current actuarial assumptions and the resultant gain or loss is recognised in the Consolidated statement

of profit or loss during the period in which the settlement or curtailment occurs. Actuarial gains and

losses are recognised in full in the consolidated statement of other comprehensive income in the period

in which they occur.

The Group recognises a surplus in schemes only through a reduction in future contributions or where a

right to a refund exists. Where the payment in relation to a minimum funding requirement creates a

surplus (on an IAS 19R basis) which will be recognised on the basis of a potential refund, the tax on

this refund is deemed to be an income tax and consequently no provision is recognised.

Contributions to defined contribution plans are recognised in the consolidated statement of profit or

loss in the period in which they are payable.

Contingencies and provisions

In the normal course of business the Group is involved in certain disputes. Provision for contingent

liabilities is made when it is deemed probable that an adverse outcome will occur and the amount of

the loss can be reasonably estimated. Where the Group is the plaintiff in pursuing claims against third

parties, legal and associated expenses are charged to the consolidated statement of profit or loss as

incurred. Contingent assets are not recognised in the consolidated financial statements.

LON32072863/12 103993-0039


When either a legal or constructive obligation, as a result of a past event, exists at the balance sheet

date and where the amount of the obligation can be reasonably estimated a provision is recognised. If

the effect is material, expected future cash flows are discounted using a current pre-tax rate that

reflects, where appropriate, the risks specific to the liability.

Derivative financial instruments and hedging

The Group uses certain derivative financial instruments for the purpose of hedging foreign exchange,

interest rate and commodity price risks.

Under IAS 39 Financial Instruments: Recognition and Measurement, hedging relationships must meet

strict criteria to qualify for hedge accounting. For those derivative financial instruments designated as

hedges, the hedging relationship is documented at its inception. This documentation identifies the

hedging instruments, the hedged items or transactions, the nature of the risks being hedged and how

effectiveness will be measured throughout the instruments’ duration. Such hedges are expected at

inception to be highly effective.

The carrying values of recognised assets and liabilities that are designated as hedged items in fair value

hedges that would otherwise be carried at amortised cost, are adjusted to record changes in the fair

values attributable to the risks that are being hedged in effective hedge relationships.

Hedge accounting is applied where derivative financial instruments are measured to have been highly

effective in offsetting the changes in fair value or cash flows of the hedged items. Derivatives outside a

hedging relationship are recorded at fair value at the balance sheet date with any gains or losses being

recognised in the consolidated statement of profit or loss.

Where a hedging instrument fails to meet the criteria for hedge accounting, or where a portion of a

qualifying hedging relationship is ineffective, the movement in the fair value of the hedging instrument

relating to hedge ineffectiveness is recognised in the consolidated statement of profit or loss

immediately.

(a) Cash flow hedges

Changes in the fair value of derivative financial instruments that are designated and effective as cash

flow hedges of highly probable forecast transactions or firm commitments in foreign currency are

recognised in the hedging reserve. Amounts deferred in this way are recognised in the consolidated

statement of profit or loss in the same period in which the hedged forecast transaction or firm

commitment is recognised in the consolidated statement of profit or loss. Any ineffective portion of the

changes in the fair value of designated cash flow hedges is recognised immediately in the consolidated

statement of profit or loss.

The Group discontinues cash flow hedging when a forecast transaction is no longer expected to occur

and amounts previously recognised in equity are transferred to the consolidated statement of profit or

loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or

rollover, or if its designation as a hedge is revoked, amounts previously recognised in equity remain in

equity until the forecast transaction occurs and are then recognised in the consolidated statement of

profit or loss.

(b) Fair value hedges

For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses

attributable to the risk being hedged; the derivative is re-measured at fair value and gains and losses

from both are taken to profit or loss. For hedged items carried at amortised cost, the adjustment is

amortised through the consolidated statement of profit or loss, such that, it is fully amortised at

maturity. When an unrecognised firm commitment is designated as a hedged item, this gives rise to an

asset or liability in the balance sheet, representing the cumulative change in the fair value of the firm

commitment attributable to the hedged risk.

The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold,

terminated or exercised, the hedge no longer meets the criteria for hedge accounting or the Group

revokes the designation.

LON32072863/12 103993-0039


(c) Hedges of net investment

Where foreign currency loans are designated as hedges of net investments in foreign operations the

portion of the foreign exchange gain or loss on the borrowing that is determined to be an effective

hedge is recognised directly in the currency translation reserve. On disposal of a foreign operation, the

cumulative translation differences are transferred to the consolidated statement of profit or loss as part

of the gain or loss on disposal.

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of fair values,

for both financial assets and liabilities and non-financial assets acquired in a business combination

(See Note 16).

The Group enters into derivative financial instruments with various counterparties, principally

financial institutions with investment grade credit ratings. Derivatives valued using valuation

techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward

contracts and commodity forward contracts. The most frequently applied valuation techniques include

forward pricing and swap models, using present value calculations. The models incorporate various

inputs including foreign exchange spot and forward rates, interest rate curves and forward rate curves

of the underlying commodity. The credit quality of the counterparties and the Group’s own credit

quality are also considered and adjusted for when deemed necessary.

Share based payments

Equity-settled share based payments

The Group has issued equity-settled share based payment schemes for which they receive services

from employees in consideration for the equity instrument. Equity-settled share based payment

schemes are measured at fair value at the grant date by an external valuer using an appropriate pricing

model. In valuing equity-settled transactions, no account is taken of any service and non-market

performance (vesting conditions), other than performance conditions linked to the price of the shares

of the Group (market conditions). Any other conditions which are required to be met in order for an

employee to become fully entitled to an award are considered to be non-vesting conditions. Like

market performance conditions, non-vesting conditions are taken into account in determining the grant

date fair value.

The cost of equity settled transactions with employees is measured by reference to the fair value and is

recognised as an expense over the vesting period, which ends on the date on which the relevant

employees became fully entitled to the award (i.e. on exit). At each balance sheet date before vesting,

the cumulative expense is calculated, representing the extent to which the vesting period has expired

and management’s best estimate of the number of equity instruments that will ultimately vest. The

movement in cumulative expense since the previous balance sheet date is recognised in the

consolidated statement of profit or loss, with a corresponding entry in equity.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is

conditional upon a market or non-vesting condition, which are treated as vesting irrespective of

whether or not the market or non-vesting condition is satisfied, provided that all other performance or

service conditions are satisfied. Where an equity-settled award is cancelled (including when a

non-vesting condition within the control of the entity or employee is not met), it is treated as if it had

vested on the date of cancellation, and any cost not yet recognised in the consolidated statement of

profit or loss for the award is expensed immediately.

Cash-settled share based payments

The cost of cash-settled transactions is measured initially at fair value at the grant date by an external

valuer using an appropriate pricing model, further details of which are given in Note 21. This fair

value is expensed, within exceptional operating expenses, over the period until the vesting date with

recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date

up to, and including the settlement date.

LON32072863/12 103993-0039


New Standards and Interpretations

The IASB and the International Financial Reporting Interpretations Committee (“IFRIC”) have issued the

following standards, amendments and interpretations which will be effective for future accounting periods of the

Group. Some of these standards, amendments and interpretations are not yet endorsed by the European Union.

The Group intends to adopt the following standards, amendments and interpretations, which it considers are

applicable, when they become effective and endorsed by the European Union:

Effective for

accounting periods

beginning on or

after

European Union

endorsement status

IFRS

IAS 1 Disclosure Initiative - Amendments to IAS 1 1 January 2016 Not yet endorsed

IAS 19 Defined Benefit Plans: Employee

Contributions - Amendments to IAS 19

1 July 2014 Endorsed

IFRS 9 Financial Instruments 1 January 2018 Not yet endorsed

IFRS 10 and IAS

28

Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture -

Amendments to IFRS 10 and IAS 28

1 January 2016 Not yet endorsed

IFRS 10, IFRS 12

and IAS 28

Investment Entities: Applying the

Consolidation Exception - Amendments to

IFRS 10, IFRS 12 and IAS 28


IAS 27 Equity Method in Separate Financial

Statements - Amendments to IAS 27


IFRS 11 Accounting for Acquisitions of Interests in

Joint Operations - Amendments to IFRS 11


IAS 16 and IAS

38

Clarification of Acceptable Methods of

Depreciation and Amortisation -

Amendments to IAS 16 and IAS 38


IFRS 15 Revenue from contracts with customers 1 January 2017 Not yet endorsed

The IASB has issued the Annual Improvements to IFRSs 2010 – 2012 Cycle, IFRSs 2011 – 2013 Cycle and

IFRSs 2012 – 2014 Cycle which are collection of amendments to IFRSs. The Group intends to adopt the

amendments, which it considers are applicable, when they become effective and endorsed by the European Union:

Effective for

accounting periods

beginning on or

after

European Union

endorsement status

Annual Improvements to IFRSs 2010 – 2012 Cycle

IFRS 2 Share-based Payment – Definitions of vesting

conditions


IFRS 3 Business combinations – Accounting for

contingent consideration in a business

combination


IAS 16 and IAS

38

Property Plant & Equipment – Revaluation

method – proportionate restatement of

accumulated depreciation/amortisation


IAS 24 IAS 24 Related Party Disclosures – Key

management personnel


LON32072863/12 103993-0039



IFRS 3 Business Combinations – Scope exceptions

for joint ventures


IFRS 13 Short term receivables and payables 1 July 2014 Endorsed

IFRS 13 Scope of paragraph 52 (portfolio exemption) 1 July 2014 Endorsed


IFRS 5 Non-current Assets Held for Sale and

Discontinued Operations - Changes in

methods of disposal


IFRS 7 Financial Instruments: Disclosures - Servicing

contracts


IAS 19 Employee Benefits - Discount rate: regional

market issue


Management does not anticipate that the adoption of the above standards and interpretations will have a material

impact on the Group’s financial statements in the initial period of application.

Proposals to issue new or revised IFRSs, as yet unpublished, on leases and other topics may change existing

standards, and may therefore affect the accounting policies applied by the Group in future periods.

LON32072863/12 103993-0039


2014 £m

Restructuring and other non-recurring expenses (1) (18.9)

Disposal costs (5) (38.5) Share based payments cost (4) (11.4)

Exceptional operating expense (68.8)

2013

Exceptional costs (1) (11.7)

Exceptional gains (2) 1.8

Share based payments cost (4) (2.6) Costs relating to the disposal of KP Snacks (3) (2.8)

Exceptional operating expense (15.3)

(1) Restructuring and other non-recurring expenses represent costs incremental to the costs that would otherwise be incurred in relation to normal operations. This includes costs of £12.0 million (2013: £3.8 million) in relation to the

modernisation programmes being rolled out in the Group’s UK factories, including new terms and conditions for employees and rationalisation of shift patterns. It also includes costs associated with restructuring head office

functions including sales, following the sale of KP Snacks during 2013, and integration and advisor fees of circa £2.0

million (2013: £1.5 million) in relation to newly acquired businesses in Saudi and Nigeria as well as costs incurred on smaller scale, localised efficiency projects in Northern Europe. No analysis of these expenses by function exists.

However, they relate to cost of goods sold, distribution, selling and marketing and general administration expenses.

(2) The gain relates to a £1.8m curtailment gain in respect of the defined benefit pension scheme arising from the sale of KP Snacks. (See Note 19)

(3) These costs relate to a rationalisation programme arising as a consequence of the disposal of KP Snacks

(4) Share based payment costs (£11.4m) (2013: £2.6m) are treated as exceptional expenses as the relevant awards vested on the sale of the Group and are therefore not deemed to be part of normal operations.

(5) Costs associated with the sale of the Group to Yildiz Holdings include legal and consultancy fees, fees in connection

with the aborted IPO process and incremental staff costs.

2014

£m

2013

£m

(unaudited)

Operating profit is stated after charging:

Other operating expenses:

Distribution expenses 50.3 50.7

Selling and general administration expenses 133.9 130.5

184.2 181.2

The depreciation and amortisation expense by function was as

follows: Cost of goods sold 37.2 35.1

Distribution, selling and marketing expenses 1.5 1.5

General and administrative expenses 3.9 4.4

Continued operations 42.6 41.0

Discontinued operations - 0.5

42.6 41.5

Operating lease rentals:

Property 5.2 4.9

Plant and equipment 4.8 5 4

10.0 10.3

Net foreign exchange (gain)/loss (0.2) 2.4

LON32072863/12 103993-0039


Shareholder fees 1.6 2.0

Research and development 5.1 4.5

Staff costs and directors' emoluments (including KP Snacks

to 25 January 2013)

Gross wages and salaries, holiday pay and sick pay 222.6 225.0 Social security costs 35.2 35.0

Pension 19.6 11.1

Share based payments 11.4 2.6

288.8 273.7

The average monthly number of employees during the year was as follows:

2014

2013

(unaudited)

Manufacturing and production 7,084 5,674

Logistics and site services 843 694

Sales, marketing and administration 1,127 1,043

9,054 7,411

The Group paid the following amounts to its auditors in respect of their audit of the Group's

consolidated financial statements and for other services provided to the Group:

2014 2013

£'000

£'000

(unaudited)

Fees payable to the company's auditor for the audit of the company's annual accounts 455 206

Fees payable to the company's auditor for other services:

Auditing of accounts of subsidiaries 604 535

1,059 741

Audit related assurance services 14 14

Tax compliance services 2 1 Tax advisory services 3 -

Corporate finance services 3,149 -

Non audit services - -

4,227 756

Fees relating to the auditing of accounts for subsidiaries include £45,000 related to the audit of the

Group's pension scheme (2013: £45,000).

4.

2014 2013

£m

£m

(unaudited)

Interest income on bank deposits 0.5 1.7

0.5 1.7

LON32072863/12 103993-0039


5.

2014 2013

£m

£m

(unaudited)

Bank credit facility 46.6 47.4

Interest payable on shareholder loan 50.3 39.0

Other financial charges 1.4 1.9

98.3 88.3

6.

Tax on profit on ordinary activities:

Tax is charged in the consolidated statement of profit or loss as follows:

2014 2013

£m

£m

(unaudited)

Current income tax UK corporation tax - -

Foreign tax 1.5 1.4

Current income tax charge 1.5 1.4

Adjustment relating to prior years - (0.1)

Total current income tax 1.5 1.3

Deferred tax Origination and reversal of temporary differences 0.5 1.3

Changes in the corporation tax rate - 5.0

Adjustments relating to prior years 2.0 (0.7)

Total deferred tax 2.5 5.6

Tax charge in the consolidated statement of profit or loss on

continuing operations 4.0 6.9

Deferred tax on discontinued operations - -

Tax charge in the consolidated statement of profit or loss 4.0 6.9

Tax relating to items charged or credited to equity is as follows:

Deferred tax Actuarial (loss)/gain on defined benefit plan (17.8) 12.5

Translation differences on foreign currency net investments (2.6) 0.7

Revaluation of cash flow hedges (0.6) (0.2)

Changes in the corporation tax rate - (0.8)

Tax (credit)/debit in the statement of other comprehensive income (21.0) 12.2

Reconciliation of the total tax charge

The current tax charge on the profit on ordinary activities for the year is higher than the average rate of

corporation tax of 29.22% (2013: lower than the average rate of corporation tax of 29.22%).

2014

2013

£m

£m

(unaudited)

(Loss)/profit from continuing operations before taxation

(35.6)

6.5 Profit from discontinued operations before taxation

(2.0)

211.7

LON32072863/12 103993-0039


Total profit before taxation

(37.6)

218.2

Tax charge on ordinary activities at the statutory rate

(11.0)

63.8

Expenses not deductible for tax purposes/(non-taxable

income)

9.3

(48.0) Reversal of deferred tax liabilities on intangibles

-

-

Reversal of deferred tax assets on capital losses utilised

-

-

Prior year adjustments

2.0

(0.8) Effect of overseas tax rates

3.8

(18.6)

Loss carried forward for which no DTA was recognised

1.0

6.9

Tax losses utilised for which no DTA was recognised

(1.1)

(1.4) Changes in the tax rate

-

5.0

Tax charge in the consolidated statement of profit or

loss

4.0

6.9

The Dutch Tax Authorities have indicated they intend to raise an assessment in respect of the 2011

results that would disallow interest deductions on an intra-group loan to United Biscuits BV, a

potential tax liability of €2.2 million. No tax provision has been made in respect of this as, based on

advice received, the Group believes this interest to be deductible and intends to defend its position.

Unrecognised tax losses

A deferred tax asset has not been recognised on tax losses of approximately £22 million arising in

India at 3 January 2015 (2013: £19 million), as it is not anticipated that any of these losses will be able

to be offset against profits arising in the foreseeable future.

Temporary differences associated with group investments

At 3 January 2015, there was no recognised deferred tax liability (2013: nil) for taxes that would be

payable on the unremitted earnings of the Group’s subsidiaries as the Group has determined that these

undistributed profits will not be distributed in the near future. Overseas dividends received are exempt

from UK corporation tax, but may be subject to withholding tax. There are no temporary differences

associated with investments in subsidiaries, for which a deferred tax liability has not been recognised

but for which a tax liability may arise.

Deferred Tax

2014 2013

£m £m

Deferred tax assets (unaudited)

Decelerated capital allowances 41.7 38.5

Pensions and other healthcare benefits 52.2 37.4 Other short-term temporary differences 3.1 2.0

Losses carried forward 63.7 67.5

160.7 145.4

Deferred tax liabilities

Accelerated capital allowances 2.5 2.9 Intangible assets 118.4 106.2

Other short-term temporary differences 3.8 4.7

124.7 113.8

Net deferred tax asset 36.0 31.6

Disclosed in the balance sheet as follows:

Deferred tax asset 57.8 41.6

Deferred tax liability (21.8) (10.0)

36.0 31.6

LON32072863/12 103993-0039


Retirement

benefit

obligation

(Accelerated)/

Decelerated

capital

allowances

Losses

Intangible

assets

Other

Total

£m £m £m £m £m £m

At 29 December 2012 (unaudited) 59.4 37.5 72.1 (119.3) (0.3) 49.4

Movement in consolidated statement of profit or

loss - current year (9.3)

(2.6)

(4.6)

13.1

(2.9)

(6.3)


loss - prior years -

0.7

-

-

-

0.7

Movement in other comprehensive income (12.7) - - - 0.5 (12.2)

At 28 December 2013 (unaudited) 37.4 35.6 67.5 (106.2) (2.7) 31.6

Movement in consolidated statement of profit or loss - current year (3.0)

5.6

(3.8)

-

0.7

(0.5)


loss - prior years -

(2.0)

-

-

-

(2.0)

Business combination - - - (14.1) - (14.1)

Movement in other comprehensive income 17.8 - - 1.9 1.3 21.0

At 3 January 2015 52.2 39.2 63.7 (118.4) (0.7) 36.0

Acquisition of A&P Foods Limited

On 8 February 2014, the Group acquired a controlling interest in A&P Foods Limited (“A&P”), one of

Nigeria’s largest biscuit and confectionery manufacturers. Combined with its existing strong business

in Nigeria, A&P provides the Group with a platform for growth of the McVitie’s brand, enabling a

significant acceleration of the Group’s affordability strategy, of introducing locally relevant products

in flexible formats and pack sizes.

A&P operate three modern factories from two sites in Lagos. The factories manufacture nearly 60,000

tonnes of product each year including sweet and savoury biscuits and confectionery sold under the

Haansbro brand.

The Group paid cash consideration of 9 billion Naira (c.£37.9m) to acquire a 70% interest in A&P.

A fair value exercise was carried out at the point of acquisition and the identifiable assets and

liabilities were as follows:

£m

Brands 47.0 Tangible assets 16.7

Other non-current assets 0.3

Current assets 9.7

Deferred Tax (14.1)

Non-current liabilities (2.0)

Current liabilities (10.4) Non-controlling interest (30% of net assets) (14.2)

Net assets acquired 33.0

Purchase price (37.9)

Goodwill 4.9

Goodwill represents the premium paid to acquire an established, profitable business.

During the period since acquisition, A&P contributed revenue of £47.0 million and profit after tax of

£6.9 million.

LON32072863/12 103993-0039


Non controlling interest is measured to be the proportionate share of identifiable assets. The non-

controlling interest holds a put option over the remaining 30% of A&P, therefore a non current liability

of £36.8 million has been recognised as the fair value of this put option. The put option can be

exercised at stipulated times in line with the sales agreement. If a change of control occurs prior to 1

January 2016, however, the non-controlling interest can exercise its put option within 13 months

following the change of control and no later than December 2016. The fair value of this put option has

been determined by using the earnings valuation model based on anticipated earnings at the earliest

time the put option can be exercised. The Group holds a call option over the remaining 30% of A&P

which can be exercised at any time following the second anniversary of acquisition of its majority

holding. The sale of the Group to Yildiz Holdings AS constituted a change of control for this purpose

but the put option has not yet been exercised.

The non-controlling interest’s share of net assets, together with its share of profits to date, has been

recorded as a liability as at the date of acquisition. The difference between this amount and the fair

value of the put option has been recognised in reserves, as will any re-measurements thereafter.

Acquisition of Rana

On 30 October 2013, the Group acquired a controlling interest in a manufacturing site and other assets

from Rana Confectionary Products Establishment (“Rana”), a major biscuits manufacturer in the Saudi

peninsula.

This acquisition gives the Group production capabilities and access to growing markets in the Middle

East. The Group, via its subsidiary International Biscuits Limited, paid cash consideration of Saudi

Riyals of 66m (c.£10.9m) to acquire a 65% interest. Management has determined that there is no

material change to the provisional fair values as set out below:

£m

(unaudited)

Tangible fixed assets 9.8

Raw materials and consumables 0.6

Non controlling interest (35% of net assets) (3.6)

6.8

Net assets acquired

Purchase price on completion (9.8)

Final instalment 28 March 2014 (1.1)

Goodwill 4.1

Goodwill represents the premium paid to facilitate direct entry into the Middle East Region.

Non controlling interest is measured as the proportionate share of identifiable assets.

LON32072863/12 103993-0039


Disposal of KP Snacks

On 25 January 2013 the Group disposed of the trade and assets comprising its bagged snacks business

unit (“KP Snacks”). The Group recognised a gain on disposal of £211.3 million, net of disposal costs.

In 2012 KP Snacks was classified as a disposal group held for sale and as a discontinued operation in

2011 and 2012. The results of KP Snacks for 2013 through to the disposal date (2012: year to 29

December 2012 and 2011: year to 31 December 2011) are presented below:

2014

2013

£m

£m

Revenues

-

18.0

Cost of goods sold

-

(12.3) Gross profit

-

5.7

Distribution, selling and marketing expenses

-

(3.5) General and administrative expenses

-

(1.7)

Operating profit before exceptional operating items

-

0.5

Exceptional operating items (3)

(2.0)

(0.1)

Gain on the disposal of KP Snacks(2)

-

211.3

Share of results of joint venture

-

-

Profit before taxes

(2.0)

211.7

Taxes(1)

-

-

Profit from discontinued operations

(2.0)

211.7

(1) For tax purposes, the gain on disposal was recognised in 2012 and resulted in a current tax charge of £87.7m.

Sufficient brought forward capital losses were available to offset the taxable gain.

(2) Gain on disposal comprises:

2013

£m

(unaudited)

Proceeds 494.3

Less: disposal costs including legal fees, bank consent fees and

other costs directly attributable to the sale of KP Snacks (14.3)

Less: assets disposed of:

Intangibles (223.7)

Property, plant and equipment (53.7)

Inventories (10.6)

Trade and other receivables (57.1)

Add: liabilities disposed of:

Trade and other payables 76.4

Gain on disposal 211.3

(3) The exceptional operating item of £2 million in 2014 relates to unrecovered debts in relation to KP Snacks.

The major classes of assets and liabilities of KP Snacks classified as held for sale as at 29 December

2012 were as follow:

2012

£m

(unaudited)

Intangible assets 223.7

Investment in JV 0.6

Property, plant and equipment 53.4 Inventories 10.6

Trade and other receivables 55.2

Assets classified as held for sale 343.5

Trade and other payables 72.9

Liabilities directly associated with the assets classified as held for sale 72.9

LON32072863/12 103993-0039


The net cashflows of KP Snacks in 2013 were as follows:

2013

£m

Operating profit before depreciation

1.0

Investing

(2.8) Net cash outflow

(1.8)

LON32072863/12 103993-0039


Purchased

Computer

Total

Goodwill

Brands

Software

£m

£m

£m

£m

Cost

At 31 December 2011(unaudited) 531.0

642.7

17.6

1,191.3

Additions -

-

1.0

1.0 Additions from business combinations -

-

-

-

Disposals -

-

(1.0)

(1.0)

Transfer from assets under construction (Note 9) -

-

1.4

1.4 Transfer to disposal group held for sale (Note 7) (106.7)

(117.0)

-

(223.7)

Exchange differences (1.5)

(1.1)

(0.1)

(2.7)


524.6

18.9

966.3

Additions -

-

1.0

1.0

Additions from business combinations 4.1

-

-

4.1 Disposals -

-

(0.1)

(0.1)

Transfer from assets under construction (Note 7) -

-

0.7

0.7

Exchange differences 1.4

1.0

0.1

2.5 At 28 December 2013 (unaudited) 428.3

525.6

20.6

974.5

Additions

1.6

1.6 Additions from acquisition of subsidiary (Note 7) 4.9

47.0

-

51.9

Disposals -

-

(0.5)

(0.5)

Transfer to fixed assets (Note 9) -

-

(1.8)

(1.8) Exchange differences (6.5)

(6.4)

(0.1)

(13.0)

At 3 January 2015 426.7

566.2

19.8

1,012.7

Amortisation

At 31 December 2011 (unaudited) -

-

11.6

11.6

Charge for the period -

-

3.2

3.2 Disposals -

-

(1.0)

(1.0)

Exchange differences -

-

(0.2)

(0.2) At 29 December 2012 (unaudited) -

-

13.6

13.6


-

2.8

2.8

Disposals -

-

(0.1)

(0.1) At 28 December 2013 (unaudited) -

-

16.3

16.3


-

0.2

0.2 Disposals -

-

(0.5)

(0.5)

At 3 January 2015 -

-

16.0

16.0

Carrying amount

At 3 January 2015 426.7

566.2

3.8

996.7


525.6

4.3

958.2


524.6

5.3

952.7

The Group manufactures and markets a wide range of products in under well-recognised brands

including McVitie's, Penguin, go ahead!, McVitie's Jaffa Cakes, Jacob's, Jacob's Cream Crackers,

Carr's, Twiglets, BN, Delacre, Verkade, Sultana and Mini Cheddars. With the acquisition of A&P

Foods Limited, the Group has acquired the Haansbro brand.

All purchased brands have been deemed to have indefinite useful lives as the Group believes that the

value of these brands is maintained indefinitely. The factors that result in indefinite useful lives are:

The Group expects to hold and support these brands for an indefinite period.

The Group supports these brands through spending on consumer marketing and

makes significant investment in promotional support.

The brands operate in stable, large and profitable market sectors in which they have

established market shares.

There are also no material legal, regulatory, contractual, competitive, economic or other factors that

limit the useful life of these intangibles.

LON32072863/12 103993-0039


Purchased brands are therefore not subject to amortisation but are tested at least annually for

impairment.

Impairment of goodwill and intangible assets with indefinite lives

Goodwill and brands acquired through business combinations have been allocated for impairment

purposes to the following three business units:

U.K.

International Sales

Northern Europe

These operating segments represent the lowest level within the Group at which goodwill and other

intangible assets are monitored for internal management purposes. The goodwill related to the Rana

and A&P acquisitions has been allocated to the International Sales business unit.

The carrying amounts of goodwill and brands allocated to the Group’s cash-generating units were as

follows:

2014

2013

2012

£m

£m

(unaudited)

£m

(unaudited)

Goodwill

UK

313.2

313.2

313.2 Northern Europe

67.9

72.4

71.0

International Sales

45.6

42.7

38.6

Total

426.7

428.3

422.8

Brands

UK

466.7

466.7

466.7

Northern Europe

48.9

52.0

51.0

International Sales

50.6

6.9

6.9

Total

566.2

525.6

524.6

UK

The recoverable amount of the U.K. business unit has been determined based on a value in use

calculation using cash flow projections based on financial budgets and forecasts approved by

management covering a five-year period. The pre-tax discount rate applied to the cash flow

projections was 6.9% (8.1% in 2013 and 7.9% in 2012). Short-term EBITDA growth rates applied

ranged from 4.2% to 7.1% (4.0% to 7.1% in 2013 and 1.1% to 4.0% in 2012). A long-term EBITDA

growth rate assumption of 1.0% (1.0% in 2013 and 2012) was applied in perpetuity.

International Sales

The recoverable amount of the Group's International Sales business unit has been determined based on

a value in use calculation using cash flow projections based on financial budgets and forecasts

approved by management covering a five-year period. The pre-tax discount rate applied to the cash

flow projections was 8.4% (8.1% in 2013 and 7.9% in 2012). Short-term EBITDA growth rates

applied ranged from 14.2% to 27.1% (10.0% to 18.6% in 2013 and 0.0% to 3.0% in 2012). A long-

term EBITDA growth rate assumption of 1.0% (1.0% in 2013 and 2012) was applied in perpetuity.

Northern Europe

The recoverable amount of the Group's Northern Europe business unit has been determined based on a

value in use calculation using cash flow projections based on financial budgets and forecasts approved

by management covering a five-year period. The pre-tax discount rate applied to the cash flow

projections was 7.5% (9.2% in 2013 and 9.0% in 2012). Short-term EBITDA growth rates applied

ranged from -0.3% to 1.3% (3.0% to 13% in 2013 and 3.0 to 4.5% in 2012). A long-term EBITDA

growth rate assumption of 1.0% (1.0% in 2013 and 2012) was applied in perpetuity.

LON32072863/12 103993-0039


Key assumptions applied to value in use calculations

Assumptions regarding future cash flows are based upon actual results in prior periods, adjusted to

reflect management’s view of expected developments based upon market conditions. In particular, the

following year’s cash flows, which form the basis for future year forecasts, were developed assuming a

sustained profitability in Northern Europe and growth in both U.K. and International Sales. The cash

flows used are pre-tax cash flows and include all income and costs as well as an estimate of

maintenance capital expenditure required to support these cash flows.

The calculation of value in use for the U.K., Northern Europe and International Sales business units is

most sensitive to the following assumptions:

Discount rates – these reflect management’s assessment of the time value of money and the risks

specific to the unit’s assets, based on an appropriate Weighted Average Cost of Capital

(WACC) anticipated for a market participant investing in the Group and determined using the

Capital Asset Pricing Model, reflecting management’s estimate of the specific risk profile

associated with the cash flow projections.

EBITDA growth rates – estimates are based on conservative industry expectations of growth in the

market where each cash-generating unit is located. The business units operate predominantly

in stable, large and profitable market sectors where the Group’s brands have proven

longevity. Short term forecasts are adjusted to reflect the Group’s relative weight in faster, or

slower, growing market categories.

Sensitivity to changes in assumptions

Management believes that no reasonably possible change in any of the above key assumptions would

cause the recoverable amount to be less than the carrying value for any of the business units.

LON32072863/12 103993-0039


Leasehold

Plant, Machinery

Fixtures &

Assets under

Freehold

Improvement

& Vehicles

Fittings

Construction

Total

£m

£m

£m

£m

£m

£m

Cost


8.5

373.7

8.7

37.4

533.5


-

(2.2)

-

(0.1)

(3.0)

Additions 4.1

0.4

27.7

2.3

23.9

58.4

Reclassifications 3.0

0.2

20.8

0.8

(24.8)

-

Transfer to software (Note 8) -

-

-

-

(1.4)

(1.4)

Transfer to disposal group held for sale (17.7)

(0.3)

(60.4)

(1.1)

(6.2)

(85.7)

Disposals -

-

(0.3)

-

-

(0.3)

At 29 December 2012 (unaudited) 93.9 8.8 359.3 10.7 28.8

501.5


-

2.1

-

-

2.4 Additions 3.0

0.1

24.1

1.5

21.0

49.7

Additions from business combinations -

2.7

7.1

-

-

9.8


0.1

17.2

0.1

(19.3)

- Transfer to software (Note 8) -

-

-

-

(0.7)

(0.7)


11.7

409.8

12.3

29.8

562.7


-

(3.9)

(0.2)

(0.3)

(5.6) Additions 5.5

0.5

30.8

1.1

33.9

71.8

Acquired with subsidiary (Note 7)

16.7

16.7


15.9

(16.1)

- Transfer from software (Note 8)

1.8

-

1.8

At 3 January 2015 103.6

12.2

471.1

13.2

47.3

647.4

Depreciation


3.8

176.5

4.2

-

208.3


-

(0.6)

-

-

(0.7)

Charge for the period 4.7

0.6

35.0

2.2

-

42.5 Reclassifications -

-

-

-

-

-

Transfer to disposal group held for sale (2.4)

(0.2)

(29.6)

(0.1)

-

(32.3)

Disposals -

-

-

-

-

-


4.2

181.3

6.3

-

217.8


-

0.9

-

-

1.0

Charge for the period 3.9

0.5

31.5

2.3

-

38.2

Reclassifications -

-

-

-

-

-


4.7

213.7

8.6

-

257.0

Exchange differences

-

- Charge for the period 3.0

0.7

37.4

1.3

-

42.4

Reclassifications -

-

-

-

-

-


5.4

251.1

9.9

-

299.4

Net book value


6.8

220.0

3.3

47.3

348.0


7.0

196.1

3.7

29.8

305.7


4.6

178.0

4.4

28.8

283.7

The net book value of leasehold improvements of £6.8 million (2013: £7.0 million; 2012: £4.6 million)

is in respect of properties held under operating leases with remaining lease terms of under 50 years

(2013 and 2012: 50 years).

The net book value of assets acquired under finance lease arrangements, all of which are either plant,

machinery or vehicles, is £nil million (2013: £0.1 million; 2012: £0.2 million).

LON32072863/12 103993-0039


Details of the Group’s undertakings

The Group has the following principal investments in subsidiaries:

The only directly owned subsidiary of UB Luxco is United Biscuits Topco Limited. All subsidiaries

are 100% owned with the exception of A&P Foods Limited and International Biscuits Company.

Subsidiary undertaking

Country of

incorporation Class of share held 3 January 2015 28 December 2013

United Biscuits Topco Limited England Ordinary 100.0% 100.0%

United Biscuits Bondco Limited England Ordinary 100.0% 100.0%

United Biscuits VLNCo Limited England Ordinary 100.0% 100.0%

United Biscuits Holdco Limited (*) England Ordinary 100.0% 100.0%

United Biscuits Holdco 2 Limited (*) England Ordinary 100.0% 100.0%

United Biscuits Bidco Limited (*) England Ordinary 100.0% 100.0%

Regentrealm Limited (*) England Ordinary 100.0% 100.0%

Finalrealm Limited (*) England Ordinary 100.0% 100.0%

United Biscuits (Holdings) Ltd (*) Scotland Ordinary 100.0% 100.0%

United Biscuits Group (Investments) Ltd England Ordinary 100.0% 100.0%

Deluxestar Ltd England Ordinary 100.0% 100.0%

Solvecorp Ltd England Ordinary 100.0% 100.0%

Runecorp Ltd England Ordinary 100.0% 100.0%

United Biscuits Finance Ltd England Ordinary 100.0% 100.0%

United Biscuits Dutchco B.V. (*) Netherlands Ordinary 100.0% 100.0%

Koninklijke Verkade N.V. (*) Netherlands Ordinary 100.0% 100.0%

UB Biscuits B.V. Netherlands Ordinary 100.0% 100.0%

NV Biscuits Delacre S.A. Belgium Ordinary 100.0% 100.0%

United Biscuits (Pension Trustees) Limited Scotland Ordinary 100.0% 100.0%

UB Foods US Limited (*) England Ordinary 100.0% 100.0%

UB Investments plc Scotland Ordinary 100.0% 100.0%

McVitie & Price Ltd (*) Scotland Ordinary 100.0% 100.0%

UB International Sales Ltd England Ordinary 100.0% 100.0%

UB Overseas Limited England Ordinary 100.0% 100.0%

United Biscuits (UK) Limited (*) England Ordinary 100.0% 100.0%

UB Snackfoods Ireland Ltd Ireland Ordinary 100.0% 100.0%

United Biscuits Italy SRL Italy Ordinary 100.0% 100.0%

United Biscuits Germany GmbH Germany Ordinary 100.0% 100.0%

UB Group Ltd Scotland Ordinary 100.0% 100.0%

Ross Young's Holdings Limited England Ordinary 100.0% 100.0%

United Biscuits Nigeria Limited Nigeria Ordinary 100.0% 100.0%

International Biscuits Company Saudi Arabia Ordinary 65.0% 65.0%

United Biscuits Cyprus Limited Cyprus Ordinary 100.0% 100.0%

United Biscuits Private Limited India Ordinary 100.0% 100.0%

A&P Foods Limited Nigeria Ordinary 70.0% -

UB Humber Limited (*) England Ordinary 100.0% 100.0%

United Biscuits France SAS (*) France Ordinary 100.0% 100.0%

United Biscuits Industries SAS (*) France Ordinary 100.0% 100.0%

W. & R. Jacob & Co Ltd N. Ireland Ordinary 100.0% 100.0%

Irish Biscuits Ltd N. Ireland Ordinary 100.0% 100.0%

(*) Obligors (See note 15).

LON32072863/12 103993-0039


2014

2013 2012

£m

£m

(unaudited)

£m

(unaudited)

Raw materials and consumables

22.7

15.6 12.4

Work in progress

3.7

3.4 3.5

Finished goods

40.9

43.3 37.9

67.3

62.3 53.8

Raw materials and consumables at 3 January 2015 included £0.8 million (2013: £0.7 million; 2012:

£0.7 million) in respect of consignment stock.

Inventories recognised as an expense during 2014 amounted to £620.2 (2013: £590.1 million; 2012:

696.2 million). The amount of inventories written down and recognised as an expense within operating

profit during 2014 was £nil million (2013: £nil million).

2014

2013 2012

£m

£m

(unaudited)

£m

(unaudited)

Net trade receivables

194.5

197.2 205.8 Other receivables

5.6

4.2 4.9

Prepayments and accrued income

15.9

15.2 13.4

Other taxes and social security

7.8

6.3 1.6

223.8

222.9 225.7

Trade receivables are stated net of provisions for bad and doubtful debts of £2.9 million (2013: £1.2

million; 2012: £1.0 million).

Trade and other receivables are all expected to be settled within one year. Trade receivables are non-

interest bearing and represent an average of 57 days sales (2013: 60 days; 2012: 58 days).

Details of the Group’s credit risk are set out in Note 16.

2014

2013 2012

£m

£m

(unaudited)

£m

(unaudited)

Cash at bank and in hand

24.2

45.2 56.5 Short term deposits

51.3

57.9 130.3

75.5

103.1 186.8

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are

made for varying periods of between two days and two weeks depending on the immediate cash

requirements of the Group, and earn interest at the respective short-term deposit rates. The fair value of

cash and cash equivalents at 3 January 2015 was £75.5 million (2013: £103.1 million; 2012: £186.8

million).

As at 3 January 2015, £1.1 million of cash has been provided to RBS plc as collateral towards bank

guarantees which were previously secured against the Senior Facilities.

LON32072863/12 103993-0039


2014

2013 2012

£m

£m

(unaudited)

£m

(unaudited)

Trade payables

223.8

217.6 218.4

Other payables

6.2

5.1 4.4

Other taxes and social security costs

7.4

6.8 11.2 Accruals and deferred income

53.9

53.0 39.0

291.3

282.5 273.0

Trade and other payables are non-interest bearing and are settled in accordance with contractual

payment terms.

Senior Facilities

There were no borrowings outside of the wider group as at 3 January 2015. Borrowings as at 28

December 2013 and 29 December 2012 were:

2013

2012

£m

(unaudited)

£m

(unaudited)

Current

Senior facilities

-

27.9

Non-current

Senior facilities

635.7

1,183.7

Other loans and finance lease obligations

-

-

Total senior facilities

635.7

1,211.6

Amortised

Debt

Principal

£m

£m

Margin %

Type

Maturity

At 28 December 2013 (unaudited)

Non current

Term Loan B 540.6

550.0

LIBOR +4.50

Bullet

29 July 2020

Term Loan B(€) 95.1

96.8

EURIBOR +4.00

Bullet

29 July 2020

Total Term Loans 635.7

646.8


Non current

Term Loan B 755.8 762.0 LIBOR +2.25 Bullet 15 December 2014

Term Loan B(€) 48.7 49.1 EURIBOR +2.25 Bullet 15 December 2014

Second lien 158.7 160.0 LIBOR +4.0 Bullet 15 June 2016

Mezzanine 220.5 222.3 LIBOR +3.75 Cash Bullet 15 December 2016

And +4.0PIK

1,183.7 1,193.4

Current

Capex Facility 27.9 28.0 LIBOR +1.75 2 equal 15 December 2013

instalments

1,211.6 1,221.4 From 15.6.13

LON32072863/12 103993-0039


2014

On 3 November 2014 UMV Global Foods Company Limited (“UMV”), a subsidiary of Yildiz

Holdings AS, acquired the whole of the issued share capital of the Group.

At the point of acquisition the borrowings of the Group totalled £642.5m comprising of senior bank

debt and accrued interest. All of this debt was repaid upon acquisition of the Group.

The external debt is now held by UMV, the parent company of the Group. The new Senior facilities

agreement, entered into by UMV, requires the wider Group to comply with certain financial and non-

financial covenants on a quarterly basis. The financial covenants require the maintenance of a

maximum net debt to EBITDA ratio.

Revolving credit facility of £75 million

The Group has access to a £75.0 million revolving credit facility under the new Senior facilities, which

is held by the parent company. This facility may be used for general corporate purposes to finance

working capital requirements, to refinance indebtedness of the Group and to pay associated fees, costs

and expenses. The facility allows for revolving advances, the provision of ancillary facilities to cover

the day to day banking requirements of subsidiary companies, and the issuance of letters of credit and

bank guarantees up to an aggregate amount of £75 million (2013: £75 million; 2012: £50 million, both

under the previous Senior Facilities) outstanding at any time. Each advance made under the revolving

facility must be repaid on the last day of the interest period relating to it, although amounts are

available to be re-borrowed immediately, subject to the maximum limit available under the facility.

At 3 January 2015, an amount of £nil million (2013: £6.0 million 2012: £8.4 million) had been drawn

down as ancillary facilities under the revolving facility to cover day to day requirements of the UK

business, £nil million (2013: £4.9 million; 2012: £7.3 million) of this being for the provision of

overdraft facilities and £nil million (2013 and 2012: £1.1 million) for bank guarantees, of which £nil

million were utilised at 3 January 2015 (2013: £0.7 million; 2012: nil). There were no drawings under

any of the overdraft facilities at 3 January 2015 (2013 and 2012: nil).

The new Senior facilities, held by the parent company, are secured by fixed and floating charges over

all the assets of the Company and the Group’s principal UK subsidiaries. The obligors to these

facilities are indicated in Note 10.

Capital management

The Group’s objectives when managing capital are to maximise shareholder value while safeguarding

the Group’s ability to continue as a going concern. The Group intends to continue proactively

managing its capital structure whilst maintaining flexibility to take advantage of opportunities, which

arise, to grow its business.

In common with many other privately owned companies, the wider Group, including UMV which

holds the external debt, carries a high level of net debt compared to equity. Total capital is calculated

as total equity, as shown in the consolidated balance sheet, plus net debt. Net debt is calculated as total

borrowings, as shown in the consolidated balance sheet, less cash and cash equivalents. The

shareholder loan, discussed in Note 22, is excluded from the definition of net debt since it will be

settled in the event of change of ownership of the business.

As explained above, the Senior Facilities require the Group to comply with certain financial and non-

financial covenants. Throughout 2012, 2013 and 2014 the Group operated within such covenants.

At 3 January 2015, A&P Foods Ltd had borrowing facilities available from Standard Chartered Bank,

Citigroup, Guaranty Trust Bank and First City Monument Bank of NGN 5,357.2 million (£19.2

million). These facilities may be used for general corporate purposes to finance working capital, to

acquire capital equipment, the issuance of letters of credit and bank guarantees. The facilities are

secured by mortgage over the company’s fixed property, by general fixed and floating charges over the

assets of the company and by the provision of personal guarantees from the minority shareholder. As

at 3 January 2015, the company had not drawn on any of these facilities.

LON32072863/12 103993-0039


2013

On 25 January 2013, the Group completed the sale of the KP Snacks business and, from the net

disposal proceeds, repaid the following borrowings:

Term Loan B £310 million;

Mezzanine £85 million; and

Capex facility £28 million.

On 29 July 2013, the Group completed an amendment and extension to its Senior facilities. The

refinancing package included a 7 year £550 million Term Loan B, a 7 year €116 million Term Loan B

and an unfunded 5 year £75 million Revolving Credit Facility. For the purpose of IAS 39 this was

treated as an extinguishment of the previous debt.

This simplified the debt structure of the Group by facilitating the repayment of the Second Lien and

Mezzanine debt and extended the maturity of the senior Term Loan B to 29 July 2020. £154m of cash

held by the Group was applied to debt repayment.

The Senior Facilities agreement required the Group to comply with certain financial and non-financial

covenants on a quarterly basis. The financial covenants required the maintenance of a minimum ratio

of earnings before interest, taxes, depreciation and amortisation to interest payable and adherence to a

maximum leverage ratio.

Financial risk management

The Group is exposed to a variety of financial risks through its activities. The Treasury Management

Committee establishes the Group’s financial risk strategy. The strategy is implemented by a central

treasury department (Group Treasury), which identifies, evaluates and hedges financial risks, working

closely with the Group’s operating units. The Treasury Management Committee ensures that critical

controls exist and are operating correctly within Group Treasury. Written policies, approved by the

Treasury Management Committee, provide the framework for the management of the Group’s

financial risks, and provide specific guidance on areas such as foreign exchange risk, interest rate risk

and liquidity risk.

All derivative financial instruments are initially recognised at fair value on the date on which a

derivative contract is entered into and are subsequently re-measured at fair value. At the period ends,

the fair value of foreign exchange forward contracts is calculated using forward exchange market rates

at the balance sheet dates. The fair value of interest rate swaps is determined by reference to market

values for similar instruments. The fair value of commodity hedges is determined by reference to the

market values of the commodities traded on the London International Financial Futures Exchange

(“LIFFE”) and Marché à Terme International de France (MATIF) at the balance sheet date.

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of fair values,

for both financial assets and liabilities and non-financial assets acquired in a business combination

(See Note 7).

When measuring the fair value of an asset or liability, the Group uses market observable data as far as

possible. Fair values are categorised into different levels in the fair value hierarchy based on the inputs

used in the valuation techniques as follows: Level 1: quoted prices (unadjusted) in active markets for

identical assets or liabilities; Level 2: inputs other than quoted prices included in Level 1 that are

LON32072863/12 103993-0039


observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from

prices); Level 3: inputs for the asset or liability that are not based on observable data (unobservable

inputs).

The Group enters into derivative financial instruments with various counterparties, principally

financial institutions with investment grade credit ratings. Derivatives valued using valuation

techniques with market observable inputs are mainly interest rate swaps, foreign exchange forward

contracts and commodity forward contracts. The most frequently applied valuation techniques include

forward pricing and swap models, using present value calculations. The models incorporate various

inputs including foreign exchange spot and forward rates, interest rate curves and forward rate curves

of the underlying commodity. The credit quality of the counterparties and the Group’s own credit

quality are also considered and adjusted for when deemed necessary. The changes in credit risk had no

material effect on the hedge effectiveness assessment for derivatives designated in hedge relationships

and other financial instruments recognised at fair value.

The fair value of forward foreign exchange contracts is calculated by reference to quoted market

forward exchange rates for contracts with similar maturity profiles. The fair value of currency swaps is

determined by reference to quoted market spot rates. As a result forward foreign exchange contracts

and currency swaps are classified as level 2 within the fair value hierarchy.

As at 2012, 2013 2014, the fair value of derivatives is net of a debit and credit valuation adjustment

attributable to the Group’s own credit default risk together with derivative counterparty default risk.

The changes in counterparty credit risk had no material effect on the hedge effectiveness for

derivatives designated in hedge relationships and other financial instruments recognised at fair value.

There were no transfers between level 1, 2, and 3 during 2012, 2013 and 2014.

For cash and cash equivalents, short-term loans and receivables, overdrafts and other short term

liabilities which have a maturity of less than three months the book values approximate the fair values

because of their short term nature.

For loans and borrowings, the fair value represents the gross borrowings before taking into account

unamortised finance costs.

For shareholder debt, the fair value has been determined by valuing the debt to maturity and then

applying a discount. The valuation to maturity has been based on the following:

a) Interest will be capitalised throughout the life of the loan;

b) Interest will also accrue on these capitalised amounts; and

c) The debt will be fully repaid on maturity.

There are no material differences between fair value and book value on any other financial instruments

except for loans and borrowings, where carrying value includes deferred finance costs and shareholder

debt.

The following table shows the carrying amounts and fair values of financial assets and financial

liabilities, including the levels in the fair value hierarchy. It does not include fair value information for

financial assets and financial liabilities not measured at fair value if the carrying amount is a

reasonable approximation of the value.

LON32072863/12 103993-0039


2014

Carrying value

Fair value

Total

USD

Euro

GBP

Other

Level 1 Level 2

Total

£m

£m

£m

£m

£m

£m

£m

£m

Derivative assets

measured at fair value

Cash flow hedges

Forward currency contracts 1.0 0.5 0.2 - 0.3 - 1.0 1.0

Non cash flow hedges

Forward currency contracts - - - - - - - -

1.0 0.5 0.2 - 0.3 -

1.0 1.0

Of which:

Current assets 1.0

Non current assets -

1.0

Derivative liabilities


Cash flow hedges

Forward currency contracts 2.8 1.8 1.0 - - - 2.8 2.8


Forward currency contracts 2.7 0.7 1.9 - 0.1 - 2.7 2.7

5.5 2.5 2.9 - 0.1 -

5.5 5.5

Of which:

Current liabilities 5.5

Non current liabilities -

5.5

Financial assets not


Cash and short term deposit 75.5 2.4 45.0 21.1 7.0 -

- -

Trade receivables 194.5 13.7 30.7 138.6 11.5 - - -

Other receivables 5.6 - 3.3 1.5 0.8 - - -

275.6 16.1 79.0 161.2 19.3 - - -

LON32072863/12 103993-0039


Financial liabilities not


Trade payables 223.8

2.0

36.9

176.2

8.7

- -

-

Other payables 6.2

-

4.5

1.7

-

- -

-

Shareholder loans 1,217.7

-

90.8

1,126.9

-

- 2,418.4

2,418.4

Loans and borrowings -

-

-

-

-

- - -

1,447.7

2.0

132.2

1,304.8

8.7

-

2,418.4 2,418.4

Carrying value

Fair value

2013 (unaudited) Total

USD

Euro

GBP

Other

Level 1

Level 2

Total

£m

£m

£m

£m

£m

£m

£m

£m

Derivative assets


Cash flow hedges

Forward currency contracts 1.6

0.6

0.2

-

0.8

- 1.6

1.6

Interest rate swaps 0.5

-

-

0.5

-

- 0.5

0.5

Fair value hedges


-

0.6

-

0.2

- 0.8

0.8

2.9

0.6

0.8

0.5

1.0

-

2.9

2.9

Of which:

Current assets 2.9

Non current assets -

2.9



Cash flow hedges


0.8

1.8

-

-

- 2.6

2.6

Interest rate swaps -

-

-

-

-

- -

-

Fair value hedges


0.1

0.4

-

-

- 0.5

0.5

3.1

0.9

2.2

-

-

-

3.1

3.1

Of which:



3.1



Cash and short term

deposit 103.1

2.4

53.9

43.0

3.8

-

-

-

Trade receivables 197.2

13.0

39.2

138.6

6.4

- -

-

Other receivables 4.2

-

2.6

0.5

1.1

- -

-

304.5

15.4

95.7

182.1

11.3

-

-

-

LON32072863/12 103993-0039




Trade payables 217.6

1.1

38.7

177.1

0.7

- -

--

Other payables 31.6

-

4.3

24.4

2.9

- -

Shareholder loans 525.3

-

-

525.3

-

- 1,497.1

1.497.1

Loans and borrowings 635.7

-

95.1

540.6

-

646.8 -

646.8

1,410.2

1.1

138.1

1,267.4

3.6

646.8

1,497.1

2,143.9

Carrying

Value

Fair Value

2012 (unaudited) Total USD Euro GBP Other

Level 1 Level 2 Total Euro GBP Other Level 1

Level 2 Total

£m

£m

£m

£m

£m

£m

£m

£m

Derivative assets


Cash flow hedges

Forward currency contracts 1.3 - 1.2 - 0.1 - 1.3 1.3

Interest rate swaps 0.1 - - 0.1 - - 0.1 0.1

Fair value hedges

Forward currency contracts 0.2 - 0.2 - - - 0.2 0.2

1.6 - 1.4 0.1 0.1 - 1.6 1.6

Of which:

Current assets 1.5

Non current assets 0.1

1.6


Measured at fair value

Cash flow hedges


Interest rate swaps 0.3 - - 0.3 - - 0.3 0.3

Fair value hedges


2.1 1.0 0.8 0.3 - - 2.1 2.1

Of which:



2.1


Measured at fair value

Cash and short term

deposit 186.8 2.6 56.8 123.8 3.6 -

- -

Trade receivables 205.8 10.7 45.7 144.1 5.3 - - -

Other receivables 4.9 - 3.1 1.0 0.8 - - -

397.5 13.3 105.6 268.9 9.7 - - -


Measures at fair value

Trade payables 218.4 18.3 53.7 145.8 0.6 - - -

Other payables 22.7 - 3.3 18.4 1.0 - - -

Shareholder loans 489.7 - - 489.7 - - 1,608.9 1,608.9

Loans and borrowings 1,211.6 - 48.7 1,162.9 - 1,221.4 - 1,221.4

1,942.4 18.3 105.7 1,816.8 1.6 1,221.4 1.608.9 2,830.3

LON32072863/12 103993-0039


Foreign exchange risk

Foreign currency risk arises from future commercial and financing transactions, recognising assets and

liabilities denominated in a currency that is not the functional currency of the Group entity undertaking

the transaction and from net investments in overseas entities. The Group operates internationally and is

exposed to foreign exchange risk arising from various currency exposures primarily with respect to the

US dollar, the Euro, the Canadian dollar and the Australian dollar.

The Group’s foreign exchange risk management policy is to hedge a proportion of its net currency

exposure. Group Treasury is responsible for managing foreign exchange risk arising from future

commercial and financing transactions and recognised assets and liabilities usually by forward

contracts.

The Group has a number of overseas subsidiaries whose net assets are subject to currency translation

risk. The Group borrows in local currencies where appropriate to minimise the impact of this risk on

the balance sheet.

Group policy requires the Group companies to manage their foreign exchange risk against their

functional currency. Group companies are required to hedge their foreign exchange exposure with

Group Treasury. Group Treasury reviews these exposure reports on a regular basis. To manage foreign

exchange risk arising from future commercial transactions and recognised assets and liabilities, entities

in the Group use forward contracts, transacted by Group Treasury.

Cash flow hedges

At 3 January 2015, 28 December 2013 and 29 December 2012, the Group held a number of forward

foreign exchange contracts designated as hedges of highly probable forecast transactions. Forward

foreign exchange contracts were accounted for as cash flow hedges. The forward contracts are

typically taken out with twelve-month maturity dates at regular intervals throughout the year. Gains

and losses recognised in the hedging reserve as equity will be released to the consolidated statement of

profit or loss at various dates within one year of the balance sheet date.

LON32072863/12 103993-0039


Committed

outstanding

Average

Average

Average Average

FX contracts

Rates

Rates

Rates Rates

£m

USD

EUR

CAD AUD

2014

Euro 35.3

- 1.22

- -

US Dollar 8.8

1.63 -

- -

Other currencies 8.3

-

- 1.81 1.86

52.4

-

-

- -

2013 (unaudited)

Euro 78.2

-

1.171

- -

US Dollar 5.0

1.516

-

- -


-

-

1.619 1.724

92.5

2012 (unaudited)

Euro 73.6 - 1.229 - -

US Dollar 53.0 1.596 - - -

Other Currencies 5.6 - - 1.593 -

132.2


At 3 January 2015, 28 December 2013 and 29 December 2012 the Group held a number of forward

foreign exchange contracts which are accounted for as fair value instruments in the consolidated

statement of profit or loss. All such contracts mature within one year.

Committed

outstanding

Average

Average

Average

FX contracts

Rates

Rates

Rates

£m

USD

EUR

CAD

2014

Euro 43.1

- 1.22

-

US Dollar 9.4

1.64 -

-


-

- 1.84

54.1

2013 (unaudited)

Euro 43.0

-

1.201

-

US Dollar 2.6

1.550

-

-


-

-

1.640

48.0

2012 (unaudited)

Euro 11.3

-

1.244

-

US Dollar -

-

-

-

Other currencies -

-

-

-

11.3

LON32072863/12 103993-0039


Sensitivity analysis

Hedges of net investment in foreign entities

Included in borrowings at 3 January 2015 were loans of €nil million (2013: €116 million), which were

designated as hedges of net investments in overseas subsidiaries, used to reduce exposure to foreign

exchange risk. Gains or losses on re-translation of these borrowings are transferred to equity to offset

any gains or losses on translation of the net investments in the overseas subsidiaries with the exception

of any hedge ineffectiveness which is taken to the consolidated statement of profit or loss if applicable.

The table below presents a sensitivity analysis of the changes in carrying values of the Group’s

monetary assets and liability to reasonably possible weakening in market rates of foreign exchange.

Impact on the consolidated


arising from:

Impact on reserves arising from:

10%

10%

10%

10%

weakening

weakening

weakening

weakening

against US

Dollar

against

EURO

against US

Dollar

against

EURO

£m

£m

£m

£m

2014

Cash and cash equivalents 0.3

5.1

-

-


3.4

-

-

Trade payables (0.2)

(4.1)

-

-

Shareholder debt -

(10.1)

-

-

Currency exchange contracts (assets) -

-

0.3

(1.4)

Currency exchange contracts (liabilities) (1.0)

4.8

(1.1)

5.3

0.6

(0.9)

(0.8)

3.9

2013 (unaudited)

Cash and cash equivalents 0.3

6.0

-

-


4.4

-

-

Trade payables (0.1)

(4.3)

-

-


-

-

(10.8)


2.1

(0.9)

(0.4)

Currency exchange contracts (liabilities) 0.3

2.7

1.6

8.9

1.9

10.9

0.7

(2.3)

Derivative contracts are used for hedging trade balances and future currency flows and therefore there

is no impact due to currency movement.

The table below presents a sensitivity analysis of the changes in carrying values of the Group’s

monetary assets and liability to reasonably possible strengthening in market rates of foreign exchange.

LON32072863/12 103993-0039


Impact on the consolidated

statement of profit or loss arising

from:

Impact on reserves arising from:

10%

10%

10%

10%

strengthening

strengthening

strengthening

strengthening

against US

Dollar

against

EURO

against US

Dollar

against

EURO

£m

£m

£m

£m

2014

Cash and cash equivalents (0.2) (4.2) - -

Trade receivables (1.2)

(2.8)

-

-

Trade payables 0.2

3.4

-

-

Shareholder debt

8.3 Currency exchange contracts (assets) -

-

(0.2)

1.2


(3.9)

0.9

(4.4)

(2.1)

0.8

0.7

(3.2)

2013 (unaudited)

Cash and cash equivalents (0.2)

(4.9)

-

-

Trade receivables (1.2)

(3.6)

-

-

Trade payables 0.1

3.5

-

-


-

-

8.8


(1.7)

(0.8)

0.3


(2.2)

(1.3)

(7.3)

(1.5)

(8.9)

(2.1)

1.8

Interest rate risk

The Group is exposed to movements in interest rates from borrowings at variable rates. It is the

Group’s policy to maintain an appropriate balance between fixed and floating interest rates on

borrowings in order to provide a level of certainty to interest expense and to reduce the impact of

interest rate fluctuations. To achieve this, the Group had entered into a series of interest rate swaps that

have the effect of converting floating rate debt to fixed rate debt. During 2014 the Group had

maintained a 70% proportion of Group net debt at fixed rates up to the date of acquisition by Yildiz

Holdings AS. On the acquisition date, the existing Senior facilities was repaid and all outstanding

interest rate swaps were terminated. Under the new Senior facilities held by UMV, the wider Group

will be required to implement a minimum hedging of 66.66% of wider Group debt for a period of at

least 3 years.

The table below shows the effect of these on the total nominal fixed rate borrowings.

Interest rate risk

Fixed rate

borrowings

Effect of interest

rate swaps

Effective fixed

rate borrowings

Swap rate

2014 £m

£m

£m

%

Sterling – shareholder loans 1,126.9

-

1,126.9

-

Euro – shareholder loans 90.8

-

90.8

-

1,217.7

-

1,217.7

LON32072863/12 103993-0039


2013 (unaudited) Fixed rate

borrowings

Effect of interest

rate swaps

Effective fixed

rate borrowings

Swap rate

£m

£m

£m

%

Sterling – shareholder loans 525.3

-

525.3

-

Sterling - third parties -

400.0

400.0

0.512

Euro -

50.1

50.1

0.266

525.3

450.1

975.4

The following table presents a sensitivity analysis of the changes in fair values of the Group’s interest

rate swaps and changes to the interest expense on unhedged borrowings from a 1% movement in

interest rates. The effect of a 1% movement in interest rates on cash or cash equivalent would not be

material.

During 2014, an unrealised gain on revaluation of interest rate swaps of £nil million was recognised

directly in equity (2013: £0.7 million loss).

Credit risk

Credit risk may arise because of non-performance by a counterparty. The Group is exposed to credit

risk on its financial instruments including derivative assets and trade receivables. The Group’s policy

is for trade receivables to be subject to credit limits, close monitoring and approval procedures. The

Group’s policy to manage credit risk on derivative assets is to limit all derivative counterparties and

cash transactions to high credit quality financial institutions. The Group is not exposed to

concentration of credit risk on its derivative assets as these are spread over several financial

institutions.

Due to its geographical base and the number and quality of customers, the Group is not exposed to

material concentrations of credit risk on its trade receivables. In addition, the Group carries credit

insurance to mitigate its exposure to loss.

Increase in interest rates

Decrease in interest rates

2014

£m

2013

£m

(unaudited)

2014

£m

2013

£m

20

£m

(unaudited)

Interest rate swaps (liabilities)1

-

3.1

- (3.1)

Unhedged borrowings2

-

(2.0)

- 2.0

1 Impact on reserves 2 Impact on the Consolidated


LON32072863/12 103993-0039


Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure, therefore, the

maximum credit exposure at the reporting date was:

2014

2013

£m

£m

(unaudited)

Trade receivables

194.5

197.2

Total

194.5

197.2

The maximum exposure to credit risk for trade receivables at the reporting date by geographic region

was:

2014

2013

£m

£m

(unaudited)

UK

134.2

130.8

Europe

30.0

43.0

Rest of the World

30.3

23.4

Total

194.5

197.2

The ageing analysis of trade receivables at the reporting date was:

2014

2013

£m

£m

(unaudited)

Not past due or impaired

151.3

178.8

Past due 0-30 days but not impaired

32.6

7.4

Past due more than 30 days but not impaired

10.6

11.0

Individually impaired

2.9

1.2

Total

197.4

198.4

The movement in the allowance for impairment in respect of trade receivables during the year was as

follows:

2014

2013

£m

£m

(unaudited)

Balance at start of period

1.2

1.0

Charge for the period

2.0

0.3

Unused amounts reversed

(0.2) (0.1)

Currency translation

(0.1)

-

Balance at end of period

2.9

1.2

Based on the historic trend and expected performance of the customers, the Group believes that the

above allowance for doubtful receivables sufficiently covers the risk of default.

The charge for the period of £2 million (2013: £0.3 million) reflects an increase in the doubtful trade

receivables in the period. The Group has no collateral in this respect.

Liquidity risk

Liquidity risk arises when the Group encounters difficulties to meet commitments associated with

liabilities and other payment obligations. Such risk may result from inadequate market depth or

disruption or refinancing problems.

LON32072863/12 103993-0039


The Group’s objective is to manage liquidity risk through the availability of committed credit facilities

and compliance with related financial covenants and by maintaining sufficient cash to meet obligations

as they fall due.

Contractual maturities

Details of the contractual maturities and associated undiscounted value at maturity of external

borrowings, including estimated interest payments, are set out below:

Senior

Facilities

Trade

Payables

Other

Payables

Total

£m

£m

£m

£m

2014

Within one year or on demand -

223.8

6.2

230.0

Between one and two years -

-

-

-

Between two and three years -

-

-

-

Between three and four years -

-

-

-

Between four and five years -

-

-

-

After five years -

-

-

-

-

223.8

6.2

230.0

2013 (unaudited)

Within one year or on demand 34.4

217.6

31.6

283.6

Between one and two years 33.1

-

-

33.1

Between two and three years 36.4

-

-

36.4

Between three and four years 40.6

-

-

40.6

Between four and five years 43.9

-

-

43.9

After five years 693.8

-

-

693.8

882.2

217.6

31.6

1,131.4

Details of the contractual maturities and associated value at maturity of the shareholder debt are set out

below:

Shareholder debt

£m

8.0% Notes due 2036 and 2038 3,321.2

Amount due to UMV 657.5

The interest on the shareholder debt compounds annually in arrears on 15 December each year.

Interest is being charged by UMV at 8.0% and the loan is repayable in 2023.

The following tables indicate the periods in which the cash flows associated with derivatives that are

cash flow hedges are expected to occur:

LON32072863/12 103993-0039


Interest rate swaps

Forward exchange contracts

Assets

Liabilities

Assets

Liabilities

£m

£m

£m

£m

2014

Within one year or on demand

-

-

-


-

-

-

More than two years -

-

-

-

-

-

-

-

2013 (unaudited)

Within one year or on demand 0.5

-

93.6

(95.1)


-

-

-

More than two years -

-

-

-

0.5

-

93.6

(95.1)

(e) Commodity risk

The Group’s activities expose it to the risk of changes in commodity prices. The Group’s objective is

to minimise the impact of volatility in commodity prices and seeks to cover its raw material

requirements by taking out forward contracts to secure supplies at agreed prices.

Forward cover is taken in physical markets for periods of at least three months and typically would not

exceed 12 months, although, in certain circumstances, this may be extended.

In the most volatile of the Group’s commodity markets, fluctuating prices are hedged through the use

of futures. Unrealised gains or losses at the year-end may not crystallise as they depend upon market

movements between the year-end and the maturity dates of outstanding contracts. Providing a

successful hedge relationship can be demonstrated, gains or losses that do materialise are charged to

the Group’s operating results when the raw ingredients which these contracts hedge are used.

Contracts are settled immediately.

From time to time the Group also uses financial derivatives to protect future raw material prices by

taking out options.

Cash flow hedges

The Group’s cash flow hedges relate to commodity contracts, forward foreign exchange contracts and

interest rate swaps.

An aggregate loss of £5.2 million (2013: £3.5 million gain; 2012: £0.1 million gain) was recognised

directly in equity during the period 29 December 2013 to 3 January 2015, of which a loss of £0.1

million related to commodity contracts (2013: £0.1million gain; 2012: £3.9 million gain), a loss of

£4.8 million related to forward foreign exchange contracts (2013: £2.7 million gain; 2012: £5.3 million

loss) and a loss of £0.5 million related to interest rate swaps (2013: £0.7 million gain; 2012: £1.5

million gain).

A gain of £2.9 million (2013: £4.6 million loss; 2012: £6.7 million loss) was recognised in the

consolidated statement of profit or loss in relation to cash flow hedges of which a gain of £4.0 million

related to commodity contracts was recognised in cost of goods sold and a loss of £1.2 million related

to forward foreign exchange contracts was recognised in operating profit.

LON32072863/12 103993-0039


17.

Early Retirement

Rationalisation

Onerous

Provision

Provisions

Contracts

Total

£m

£m

£m

£m


2.2

2.8

5.3 Consolidated statement of profit or

loss charge -

5.2

-

5.2

Unused amounts reversed during the reporting period -

-

-

-

Amounts utilised (0.3)

(2.3)

(2.6)

(5.2)


-

-

-

At 28 December 2013 (unaudited) -

5.1

0.2

5.3

Consolidated statement of profit or

loss charge -

16.1

-

16.1

Unused amounts reversed during the reporting period -

-

-

-

Amounts utilised -

(11.3)

-

(11.3)


-

-

-

At 3 January 2015 -

9.9

0.2

10.1

At 3 January 2015

Current -

9.6

0.2

9.8

Non-current -

0.3

-

0.3

-

9.9

0.2

10.1


Current -

4.8

0.2

5.0

Non-current -

0.3

-

0.3

-

5.1

0.2

5.3


Current -

0.8

2.7

3.5

Non-current 0.3

1.4

0.1

1.8

0.3

2.2

2.8

5.3

Provisions are recorded only where there is a legal or constructive obligation.

The early retirement provision comprised of an early retirement scheme operated for employees in the

Group’s Northern Europe business unit.

Rationalisation provisions principally comprised obligations in relation to overhead reduction and

manufacturing-efficiency programs across the Group. Overhead reduction programmes were

announced to the relevant employees during 2014 and are expected to be completed during 2015.

The provision for onerous contracts relates to the cost of surplus leasehold properties, where

unavoidable costs exceed anticipated income. The associated lease commitments are due to expire in

2015.

The amount and timing of the utilisation of provisions is subject to considerable uncertainty and the

above analysis represents management’s estimate.

18.

Share capital and Share premium

As at 2014 and 2013, the subscribed capital of the Company is represented as follows:

4 unlimited ordinary shares;

Ordinary shares:

174,826 class A shares, 174,826 class B shares, 174,826 class C shares, 174,826 class D shares,

174,826 class E shares, 174,826 class F shares, 174,826 class G shares, 174,826 class H shares,

174,826 class I shares, 174,826 class J shares.

LON32072863/12 103993-0039


All shares are fully paid-up of £1.00 each and carry the same rights.

Share premium

In order to comply with Luxembourg regulations, a share premium reserve was created in 2013 by the

cancellation of a proportion of the shareholder debt.

As at 3 January 2015 and 28 December 2013 the share premium reserve totalled £0.3m.

Own shares

Own shares comprise shares in the Company held by an Employee Benefit Trust, repurchased from

management leavers and held as Treasury shares.

Number of shares

Held by EBT Held to satisfy

‘exit only’ option grants

2013 40,770 34,020 2014 - -

As a result of the sale of the Group no treasury shares are now held.

Currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the

translation of the financial statements of foreign subsidiaries. It is also used to record the effect of

hedging net investments in foreign operations. As at 3 January 2015 the balance on the reserve

amounted to £(1.6) million (2013: £8.9 million; 2012: £6.3 million).

Hedging reserve

The hedging reserve records the portion of the gain or loss on a hedging instrument in a cash flow

hedge that is deemed to be effective. As at 3 January 2015 the balance on the reserve amounted to

£(2.2) million (2013: £0.5 million; 2012: £1.5 million).

LON32072863/12 103993-0039


19.

The Group has defined benefit type post-retirement arrangements in the United Kingdom, for which

contributions are paid into separately administered funds. All of the Group’s defined benefit plans are

closed to new members and membership of defined contribution plans is available for new employees.

The Group also has unfunded arrangements as follows: additional UK post-retirement benefits for

certain senior managers; post-retirement healthcare benefits for certain employees in the Netherlands,

and employees in France are entitled to a lump sum payment on retirement, indemnite de depart en

retraite (“IDR”).

The Group’s retirement benefit assets/(liabilities), comprised the following:

2014

2013 2012

£m

£m

(unaudited)

£m

(unaudited)

UK

Pension - Funded

UBUK

(194.0)

(145.4) (220.0) Jacob's Bakery

(38.4)

(18.1) (16.8)

Other

1.3

1.0 1.0

Pension - Unfunded

(19.9)

(17.0) (16.0)

France

IDR - Unfunded

(4.7)

(4.5) (4.3)

(255.7)

(184.0) (256.1)

Netherlands

Post-retirement healthcare scheme - unfunded

(2.0)

(2.0) (2.4)

Net post retirement benefit liability

(257.7)

(186.0) (258.5)

Balance sheet presentation:

Post retirement benefit asset

1.3

1.0 1.0

Post retirement benefit liability

(259.0)

(187.0) (259.5)

(257.7)

(186.0) (258.5)

The total amount relating to pensions recognised in operating profit for the period from 29 December

2013 to 3 January 2015 was £19.6 million (2013: £15.4 million; 2012: £14.9 million), of which £3.6

million; (2013: £2.6 million; 2012: £1.7 million) related to defined contribution plans.

On 25 January 2013, following the disposal of KP Snacks, 687 active members of the UB UK pension

plan became deferred members. A curtailment gain of £1.8m arising from this was recognised within

exceptional income (Note 2).

During the 52-week period ended 28 December 2013, as a result of the new automatic enrolment

regulations in the UK, approximately 1,300 employees joined the Group’s defined contribution plans.

The total amount relating to IDR recognised in operating profit for the period from 29 December 2013

to 3 January 2015 was £0.2 million (2013: £0.4 million; 2012: £0.1 million).

The Netherlands post-retirement benefit healthcare scheme is closed to current employees, therefore

no annual service cost is charged in the Consolidated statement of profit or loss.

The defined benefit plans operate under trust law and responsibility for their governance lies with

Boards of Trustees. Trustee Boards are comprised of representatives appointed by the sponsoring

employer and plan participants who act on behalf of members in accordance with the terms of the

Trust Deed and Rules and relevant legislation. The Plans assets are held on Trust. Annual increases for

benefits in payment are dependent on inflation. The main uncertainties affecting the level of benefits

payable are future inflation levels and the actual longevity of the membership.

LON32072863/12 103993-0039


The amounts recognised in the consolidated statement of profit or loss and in the consolidated

statement of comprehensive income in respect of defined benefit pensions and post retirement

healthcare are analysed below:

Pension

IDR

Healthcare

Total

£m

£m

£m

£m

2014


Current service cost(1) (11.1)

(0.2)

-

(11.3)

Administration charges (4.7)

-

-

(4.7)

Operating profit (15.8)

(0.2)

-

(16.0)

Interest charges (7.6)

(0.1)

(0.1)

(7.8)

Other finance expense – pensions (7.6)

(0.1)

(0.1)

(7.8)

Statement of other comprehensive income

Return on plan on assets excluding amounts

included in interest expense 142.3

-

-

142.3

Experience gains on scheme liabilities (8.7)

-

-

(8.7) Actuarial losses due to changes in financial

assumptions (222.0)

(0.8)

(0.2)

(223.0)

Actuarial gains due to changes in demographic assumptions 1.7

-

-

1.7

Amount recognised in other comprehensive

income (86.7)

(0.8)

(0.2)

(87.7)

2013 (unaudited)


Current service cost (1) (8.5)

(0.4)

-

(8.9)

Administration charges (4.3)

-

-

(4.3)

Operating profit (12.8)

(0.4)

-

(13.2)

Curtailment gain (Note 2) 1.8

-

-

1.8

Interest charges (10.4)

(0.1)

0.1

(10.4)

Other finance expense - pensions (10.4)

(0.1)

0.1

(10.4)

Statement of other comprehensive income

Return on plan assets excluding amounts

included in interest expense 90.8

-

-

90.8

Experience gains/(losses) on scheme liabilities 1.5

-

-

1.5 Actuarial losses due to changes in financial

assumptions (39.4)

0.1

0.4

(38.9)

Actuarial losses due to changes in demographic assumptions 5.6

-

-

5.6

Amount recognised in other comprehensive

income 58.5

0.1

0.4

59.0

(1) Costs are recognised in cost of goods sold and other operating costs.

The assets and liabilities in the schemes and the net post retirement obligations were:

Pension

IDR

Healthcare

Total

£m

£m

£m

£m

At 3 January 2015

Assets with a quoted market price: Equities 644.4 - - 644.4

Bonds 715.1 - - 715.1

Hedge funds 51.7 - - 51.7 Cash and currency 7.6 - - 7.6

Assets not quoted in an active market:

Property, infrastructure and hedge funds 299.2 - - 299.2

Market value of assets 1,718.0 - - 1,718.0 Present value of scheme liabilities (1,969.0) (4.7) (2.0) (1,975.7)

Deficit in the scheme (251.0) (4.7) (2.0) (257.7)

LON32072863/12 103993-0039



Assets with a quoted market price: Equities 607.5 - - 607.5

Bonds 637.8 - - 637.8

Hedge funds 10.9 - - 10.9 Cash and currency 16.9 - - 16.9

Assets not quoted in an active market:

Property, infrastructure and hedge funds 284.0 - - 284.0

Market value of assets 1,557.1 - - 1,557.1

Present value of scheme liabilities (1,736.6) (4.5) (2.0) (1,743.1)


At 29 December 2012 (unaudited) Assets with a quoted market price:

Equities 535.8 - - 535.8

Bonds 623.5 - - 623.5 Hedge funds 21.9 - - 21.9

Cash and currency - - -

Assets not quoted in an active market: Property, infrastructure and hedge funds 264.9 - - 264.9

Market value of assets 1,446.1 - - 1,446.1

Present value of scheme liabilities (1,697.9) (4.3) (2.4) (1,704.6)


The Group’s schemes have not invested in any of its own financial instruments nor in properties or

other assets used by the Group.

Changes in the defined benefit pension obligations are analysed as follows:

Pension

IDR

Healthcare

Total

£m

£m

£m

£m

As at 1 January 2012 (unaudited) 1,584.8

3.1

2.4

1,590.3

Consolidated statement of profit or loss expense: Current service costs and administration charges (*) 13.1

0.1

-

13.2

Interest expense 71.8

0.1

0.1

72.0

Costs recognised in the Consolidated statement of profit or loss 84.9

0.2

0.1

85.2

Re-measurements: Actuarial loss due to financial assumptions change 74.7

1.1

0.2

76.0

Actuarial loss due to demographic assumptions 33.8

-

-

33.8 Experience gains (9.8)

-

-

(9.8)

Total amount recognised in OCI 98.7

1.1

0.2

100.0

Cash:

Employee contributions 6.3

-

-

6.3 Payments from the plans:

Benefit payments (73.9)

(0.2)

(0.2)

(74.3)

Administration costs (2.9)

-

-

- Foreign currency differences -

0.1

(0.1)

-

As at 29 December 2012 (unaudited) 1,697.9

4.3

2.4

1,704.6


4.3

2.4

1,704.6

Consolidated statement of profit or loss expense:

Current service costs and administration charges (*) 11.4

0.4

-

11.8

Interest expense 71.6

0.1

(0.1)

71.6

Curtailment gain (1.8)

(1.8)


0.5

(0.1)

81.6 Re-measurements:

Actuarial loss due to financial

assumptions change 39.4

(0.1)

(0.3)

39.0 Actuarial gain due to demographic

assumptions (5.6)

-

-

(5.6)

Experience gains (1.5)

-

-

(1.5)


(0.1)

(0.3)

31.9 Cash:


-

-

5.1

Payments from the plans: Benefit payments (76.7)

(0.3)

(0.1)

(77.1)


-

-

(3.2) Foreign currency differences -

0.1

0.1

0.2


4.5

2.0

1,743.1

LON32072863/12 103993-0039



4.5

2.0

1,743.1

Consolidated statement of profit or loss expense:

Current service costs and administration charges (*) 14.2

0.2

14.4 Interest expense 76.0

0.2

0.1

76.3


0.4

0.1

90.7

Re-measurements: Actuarial loss due to financial

assumptions change 222.0

0.8

0.2

223.0

Actuarial loss due to demographic assumptions (1.7)

-

-

(1.7)

Experience gains losses 8.7

-

-

8.7


0.8

0.2

230.0 Cash:


1.5

Payments from the plans: Benefit payments (85.2)

(0.6)

(0.2)

(86.0)


-

-

(3.1)

Foreign currency differences

(0.4)

(0.1)

(0.5)

As at 3 January 2015 1,969.0

4.7

2.0

1,975.7

(*): Excludes company administration costs.

The defined benefit obligation comprises £1,949.1 million (2013: £1,719.6 million; 2012: £1,681.8)

arising from funded plans and £26.6 million (2013: £23.5 million; 2012: £22.8 million) from plans or

arrangement that are unfunded.

Changes in the value of the defined benefit pension assets are analysed as follows:

£m

As at 1 January 2012 (unaudited) 1,374.5

Interest income 63.6

Income recognised in the Consolidated statement of profit or loss 63.6 Re-measurements:

Return on plan assets greater than discount rate 45.8

Total amount recognised in OCI 45.8 Cash:

Employer contributions 32.7

Employee contributions 6.3 Payments from the plans:

Benefits payments (73.9)




Interest income 61.2

Income recognised in the Consolidated statement of profit or loss 61.2

Re-measurements: Return on plan assets greater than discount rate 90.8


Cash: Employer contributions 33.8


Payments from the plans: Benefits payments (76.7)



As at 29 December 2013 (unaudited) 1,557.1 Interest income 68.6

Income recognised in the Consolidated statement of profit or loss 68.6

Re-measurements: Return on plan assets greater than discount rate 142.3


Cash:

LON32072863/12 103993-0039


Employer contributions 36.8


Payments from the plans:

Benefits payments (85.2) Administration costs (3.1)

As at 3 January 2015 1,718.0

Valuation

The calculation of the defined benefit obligation is performed annually by external actuaries using the

projected unit credit method. Re-measurements arising from defined benefit plans comprise actuarial

gains and losses and the return on the plan assets net of costs of managing the plan assets. The Group

recognises these immediately in other comprehensive income (OCI) and all other expenses, such as

service costs, net interest cost and administration expenses are recognised in the consolidated

statement of profit or loss. Service costs and administration expenses are recognised within operating

profit whilst interest is included within interest expenses.

The following key assumptions are made when calculating the fair value of the Group’s defined

benefit pension plans:

Key assumptions

(a) Pensions

2014

2013 2012

%

% %

Rate of salary increases

Final salary

3.25

3.45 3.05 CARE

2.90

3.00 2.70

Rate of increase of pensions in payment

2.90

3.00 2.70

Discount rate

3.50

4.40 4.30

Inflation

3.00

3.20 2.80

years years

years

Average life expectancies:

Current male pensioner 21.6 21.6 21.8 Current female pensioner 22.9 22.8 23.0

Male pensioner aged 65 in 2034/2033 22.5 22.5 22.7

Female pensioner aged 65 in 2034/2033 24.0 23.9 24.2

Acting on the advice of the Group’s actuaries, future contributions payable are set at levels that take

account of surpluses and deficits.

Contributions of approximately £26.0 million per annum in addition to the employer’s regular

contribution are being made in order to eliminate the deficit in the UK defined benefit plans on a

funding basis and the Group is obliged to make such payments until 2022 in order to eliminate the

Plan Deficit. The total contributions to the Group’s defined benefit plans in 2015 are expected to be

approximately £40.0 million (2014: £34.9 million; 2013: £32.7 million). The weighted average

duration of the defined benefit obligation is 15 years.

(b) Post-retirement healthcare

2014

2013

2012

Discount rate

1.00

2.80

1.80

Inflation 2.00

2.00

2.00

Rate of increase in healthcare costs 2.00

2.00

2.00

LON32072863/12 103993-0039


(c) IDR

Discount rate 3.00

3.00

2.80

Salary increase 2.50

2.50

2.50

Risk

The pension plans expose the Group to the following risks:

Interest rate risk

Volatility in financial markets can change the calculation of the defined benefit obligation dramatically

as the calculation of the obligation is linked to yields on AA-rated corporate bonds. A decrease in the

bond yield will increase the measure of plan liabilities, although this will be partly offset by increases

in the value of matching plan assets such as bonds.

Inflation risk

The UK Plan is linked to inflation. A high rate of inflation will lead to a higher liability. This risk is

partially managed by holding inflation-linked bonds in respect of some of the obligation.

Investment risk

If the return on plan assets is below the discount rate, all else being equal, there will be an increase in

the plan deficit.

Longevity risk

The present value of the plans defined benefit liability is calculated by reference to the best estimate of

the mortality of the plan participants both during and after their employment. An increase in the life

expectancy of plan participants above that assumed will increase the benefit obligation.

Sensitivity Analysis

The sensitivity of the defined benefit obligation to changes in the principal assumptions is as follows

(relating to the UK schemes):

Change in

assumption

Impact on defined

benefit obligation

%

£'m

2013

Discount rate (0.1)

25.3

Discount rate 0.1

(22.3) RPI inflation 0.1

22.7

RPI inflation (0.1)

(23.0)

Demographic change 1 yr

65.8

Demographic change -1 yr

(66.4)

2014

Discount rate (0.1)

30.9

Discount rate 0.1

(30.3) RPI inflation 0.1

22.0

RPI inflation (0.1)

(22.4)

Demographic change 1 yr

78.1 Demographic change -1 yr

(78.6)

The sensitivities analyses above have been determined based on a method that extrapolates the impact

on the defined obligation as a result of reasonable changes in key assumptions occurring at the end of

the reporting periods. Whilst the impact of all sensitivities is assessed in isolation, this may not be

reflective if a change had an impact across a number of assumptions.

LON32072863/12 103993-0039


20.

The Group's financial commitments in respect of finance lease and hire purchase obligations and in

respect of retirement benefits are set out in Notes 9 and 21. The Group's financial commitments in

respect of capital expenditure and commitments are summarised below.

Group capital expenditure relating to plant and equipment contracted, but not provided for at 3 January

2015 amounted to £8.5 million (2013: £2.9 million; 2012: £3.1 million).

Future minimum commitments for property, plant and equipment under non-cancellable operating

leases are as follows:

2014

2013

2012

£m

£m

(unaudited)

£m

(unaudited)

Not later than one year 8.0

9.3

10.6 Later than one year but not later than five years 33.2

36.0

28.9

Later than five years 19.2

18.9

26.3

60.4

64.2

65.8

The future minimum sub-lease payments which the Group expects to receive under non-cancellable

sub-leases at 3 January 2015 were £0.1 million (2013: £0.2 million; 2012: £0.3 million). Sub-lease

rents received in the period from 29 December 2013 to 3 January 2015 were £0.1 million (2013: £0.1

million; 2012: £0.2 million).

21.

Prior to the acquisition of the Group by Yildiz Holdings AS, a number of the Group's senior managers

held ordinary shares of United Biscuits Luxco S.C.A. These were acquired by the relevant senior

managers at estimated market value between December 2006 and December 2010, therefore, no

additional share-based payment expense has been recognised. There are no mandatory repurchase

requirements in the event that these senior management leave the Group. Since 2011, alternative share-

based arrangements have been implemented as follows:

Equity-settled share based payments

In 2011, an unapproved share option plan was established by the Group. The options have an exercise

price of £1 and are able to be exercised by the employee to whom they have been granted only on an

"Exit Event" and provided the individual remains in service as at the date of the Exit Event. An Exit

Event occurs when United Biscuits Luxco S.C.A. is either sold to a third party, is liquidated or its

shares are listed on a stock exchange (each of these is referred to as an Exit Event).

In 2011, four members of senior management were granted options over a total of 6,860 ordinary

shares in United Biscuits Luxco S.C.A. The options have an exercise price of £1. During this period no

options were exercised, forfeited or expired. The weighted average fair value of the options granted

during the period was £169.60 with an average remaining contractual life of 10 years.

In 2012, one member of senior management was granted options over a total of 580 ordinary shares in

United Biscuits Luxco S.C.A. The options have an exercise price of £1. During this period no options

were exercised, forfeited or expired. As such, the total amount of options outstanding at the end of the

period totalled 7,440. The weighted average fair value of the options granted during the period was

£112.40 with an average remaining contractual maturity of 9.1 years.

In 2013, 4 members of senior management were granted options over a total of 27,420 ordinary shares

in United Biscuits Luxco S.C.A. The options have an exercise price of £1. During this period, no

options were exercised and 840 options expired. As such, the total amount of options outstanding at

the end of the period totalled 34,020. The weighted average fair value of the options granted during the

period was £226.80 with an average remaining contractual maturity of 9.6 years.

LON32072863/12 103993-0039


In 2014, no members of the senior management were granted options and no options expired. 11,920

bonus awards (cash-settled share based payments) were, however, converted to equity settled options.

For these options which were modified to equity based the expense charged in the period has been

calculated with reference to the fair value of the option at the modification date. The weighted average

fair value of the options granted during the period was £249.00.

On 3 November 2014, the Group was acquired by Yildiz Holdings AS. This qualified as a vesting

event under the scheme rules and, as a result, share options granting rights over 45,940 ordinary shares

in the Group became vested which resulted in a share based payment charge of £8million being

recognised for the period (2013: £2.5m).

Cash-settled share based payments

In 2013, the Group agreed to make bonus payments to 9 senior managers on the occurrence of an Exit

Event. The bonus amount is equivalent to the senior managers being granted options over 18,090

shares in accordance with the Group's unapproved share option plan. The weighted average fair value

of the options granted was £226.80.

In 2014, the Group agreed to make further bonus payments and as such a further 3 senior managers

were given bonus amounts equivalent to being granted options over 2,490 shares. The weighted

average fair value of the options was £249.0, based on an external valuation of the Group for the

purpose of a Listing.

The acquisition of the Group by Yildiz Holdings, as mentioned above, triggered an exit event under

the scheme rules. As a result 8,220 options became vested at an average share price of £417.18. A cash

settled share based payment charge of £3.4million has been recognised for the period ended 3 January

2015 (2013: £0.1million). The liability associated with these payments was cleared before the end of

the period.

The weighted average fair value of the equity and cash settled options in each period is based on an

equity valuation of the Group. The results each year have been tested to The Black-Scholes option

pricing model and it has been demonstrated that there is no material difference between the equity

valuations and this model.

The assumptions below have been used for the Black-Scholes model comparison in 2012 and 2013.

2012 2013

Term 3-7yrs 3-7yrs

Volatility (1)

36-40% 28-32%

Risk-free rate 0.28-1.12% 0.85-2.13%

Weighted average share price 113.41 227.83

Expected dividend yield 0% 0%

(1) Based on a comparative group.

LON32072863/12 103993-0039


22.

Except as otherwise disclosed in these financial statements, there have been no transactions with the

Group’s related parties, which were material either to the Group or the counterparty and which are

required to be disclosed under the provisions of IAS 24 “Related Party Disclosures”.

Shareholder Debt

Shareholder loans consist of Preferred Equity Certificates (PECs). UB Luxco issued PECs in

December 2006 and December 2008 totalling £330.4 million, these are redeemable in 2036 and 2038

respectively. The PECs are not secured and carry interest at 8% per annum compounded annually in

arrears on 15 December each year, which commenced on 15 December 2007 and 15 December 2009

respectively. (See Note 16 for the carrying value).

Following the sale of the Group on 3 November 2014, the existing PECs remain in place. Shareholder

debt has, however, increased by circa £657m, predominantly relating to repayment of existing bank

debt.

Other

Employee benefits paid to key management personnel, including directors, for the period 29 December

2013 to 3 January 2015 totalled £25.1 million (2013: £6.6 million), of which £21.0 million (2013: £nil

million) related to share based payments arising on the sale of the Group to Yildiz Holding AS.

At 3 January 2015 £nil million of loans (2013: £0.7 million) were outstanding to employees in relation

to the purchase of shares in UB Luxco at market value.

Fees totalling £1.6 million were payable by the Group to Blackstone and PAI under the terms of the

shareholder agreement for the period from 29 December 2013 to 3 January 2015 (2013: £2.0 million).

There were no outstanding balances due to Blackstone or PAI as at 3 January 2015.

23. EVENTS AFTER BALANCE SHEET DATE

No events of significance have taken place between 3 January 2015 and the signing of these accounts.

24. ULTIMATE PARENT COMPANY

From 3 November 2014 UB Luxco is owned by Yildiz Holdings AS. For the period from 3 November

to 3 January 2015 the consolidated accounts of Yildiz Holdings AS include the Group’s results. For

the period from 29 December 2013 to 2 November 2013 the Group was owned jointly by Blackstone

and PAI but there are no group accounts above the UB Luxco level that include UB Luxco and its

subsidiaries.

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