ANNUAL REPORT 2018 - Carlsberg Group
ANNUALREPORT2018
MANAGEMENTREVIEWFINANCIALSTATEMENTSLetter from the Chairman& the CEO . 32019 earnings expectations . 5CONSOLIDATED FINANCIAL STATEMENTS2018 HIGHLIGHTSPARENT COMPANY FINANCIALSTATEMENTSStrategic priorities . 6Our brands . 8Regional priorities . 9Golden triangle . 10Financial highlights . 11Key figures . 13CARLSBERG GROUP ANNUAL REPORT 2018 LETTER FROM THE CHAIRMAN & THE CEOStatements .57Notes .61Statements . 125Notes . 128REPORTSManagement statement . 135Auditor’s report . 136REGIONAL REVIEWWestern Europe . 14Asia . 17Eastern Europe . 20OUR STRATEGYBeer trends . 23Business model . 24SAIL’22 . 25GOVERNANCERisk management . 35Corporate governance . 37Remuneration . 43Supervisory Board. 49Executive Committee . 52Share information . 54Forward-looking statements . 55GROW IN upCarlsberg GroupFront page: A strategic growth priority is tocontinue to grow in Asia, where a key growthdriver is continued premiumisation in Chinathrough growing sales of our internationalbrands Tuborg, Carlsberg and 1664 Blanc.Supported by our targeted expansion into bigcities outside our core western Chinaprovinces, our international brand portfolio inChina grew by 13% in 2018.2
Letter from the Chairman & the CEOCARLSBERG GROUP ANNUAL REPORT 2018 LETTER FROM THE CHAIRMAN & THE CEO3LETTER FROM THE CHAIRMAN & THE CEOSHIFTING GEARSTO GROWTH“Our strong performance in 2018will result in a considerable cashreturn to shareholders, with theaggregated value of dividendsand share buy-back for the yeartotalling DKK 7.2bn.”Flemming BesenbacherChairman of the Supervisory Board2018 was a good year for theCarlsberg Group, with strong netrevenue, operating profit andcash flow. The benefits fromFunding the Journey werepartly reinvested to supportour strategic priorities.As a result, we are pleased to report improvedfinancial, strategic and organisational health ofour business.FINANCIAL HEALTH: A YEAR OF STRONGDELIVERYWith respect to our financial health, the firstresults of the SAIL’22 growth prioritiesmanifested themselves in organic net revenuegrowth of 6.5%, driven by solid price/mix of 2% and volume growth of 4.8%, although thelatter was helped by the warm summer inseveral European markets and the timing ofthe festive season in Asia.Funding the Journey, which was a three-yearprofit improvement programme initiated inNovember 2015, came to an end in 2018. Ithas been very successful, delivering significantlymore benefits than initially anticipated, andallowing us to invest more than DKK 1bn in ourSAIL’22 priorities. Going forward, the mindsetof the programme will prevail. Now embeddedin operations across the Group, the focus onefficiency, costs and cash will remain animportant driver of future value creation.During the year, we adjusted our earningsexpectations twice. In August, we increased thefull-year guidance from mid- to high-singledigit percentage organic growth, and inOctober we further increased expectations to10-11% organic growth in operating profit.Thanks to the higher benefits from Funding theJourney, good growth of our SAIL’22 prioritiesand higher volumes due to the aforementionedwarm weather, operating profit greworganically by 11% and the operating marginimproved by 30bp to 14.9%.Net profit was DKK 5,309m and adjusted EPSwas DKK 35.2, up 9% on 2017.The earnings delivery was an important driverof the ROIC improvement of 120bp and thefree cash flow of DKK 6.2bn. The free cashflow was also supported by a solid contributionfrom trade working capital of DKK 1.9bn.During the year, we engaged in several M&Atransactions, increasing our stakes in theCambodian and Greek businesses to 75% and100% respectively, and acquiring a stake in thecontrolling shareholder of the Portuguesebusiness, bringing our total direct and indirectholding in Super Bock Group to 60%. Despitethese investments, the net interest-bearingdebt/EBITDA ratio at year-end was 1.29x, stillwell below our target of below 2.0x.On the back of the strong results, theSupervisory Board will propose to the AnnualGeneral Meeting that the payout ratio ofaround 50% be maintained, resulting in a 13%increase in the ordinary dividend to DKK 18.0per share. In addition, the Board has initiated aDKK 4.5bn share buy-back programme,leading to cash returns to shareholders of DKK7.2bn for the year. You can read more aboutthis on page 34.STRATEGIC HEALTH: PROGRESS ONSAIL’22Our strategic health also improved during2018. Our strategy, SAIL’22, which waslaunched in March 2016, is now wellestablished and understood across the Group.Among a number of positive achievements, wewould like to highlight the growth rates of ourcraft & speciality portfolio ( 26%) and alcoholfree brews in Western Europe ( 33%).Our international brands and local powerbrands had a very good year, and in Asia wegrew further in India and China, the lattersupported by our “big city” approach.You can read about our SAIL’22 initiatives in2018 on pages 25-34.Part of our strategy is our ambitioussustainability programme Together TowardsZERO, based on our purpose of brewing for abetter today and tomorrow. We are workinghard to meet the programme’s targets withincarbon, water, responsible drinking and health& safety, and our actions and achievements in2018 are outlined on pages 31-33 and
CARLSBERG GROUP ANNUAL REPORT 2018 LETTER FROM THE CHAIRMAN & THE CEOdiscussed in more detail in our SustainabilityReport.In September, we were excited to launch aseries of ground-breaking sustainabilityinnovations for the Carlsberg brand, includingthe new Snap Pack, which, when fully rolledout, will reduce plastic usage by up to 76%,equivalent to 1,200 tonnes of plastic – or 60million plastic bags – per year. Less plasticmeans less reliance on fossil fuel-basedpackaging, thereby reducing carbon emissions.ORGANISATIONAL HEALTH: A WINNINGORGANISATIONDuring the past three years, there have beenseveral changes in the top-200 managementteam. Today, we have a strong group ofleaders across the Group’s functions andmarkets. In 2018, we also welcomed our headof Group Commercial, Jessica Spence, to theExecutive Committee.In many areas, such as commercial, finance,supply chain, digital and data we furtherprofessionalised our ways of working. In digital,we accelerated our digital agenda with theestablishment of a digital transformation team.We also changed the incentive structure toachieve better alignment with our objectives,Overall, our winning culture has become muchdeeper embedded across the Group, and ourpeople are characterised by a winning spirit.EXCEL IN EXECUTIONChairman Flemming Besenbacher (left) andCEO Cees ’t Hart in front of a showcase of ourDraughtMaster system. This patented oneway 20-litre PET keg system with no added CO2and a 31-day shelf life enhances the freshnessand beer experience for consumers and allowsoutlets to have greater on-tap variety and amore user-friendly draught beer installation.the Annual General Meeting in 2019. Inaddition, Nancy Cruickshank stepped downfrom the Board in May to join the Group asSenior Vice President Digital BusinessTransformation. The Supervisory Board willpropose the election of Lars FruergaardJørgensen, Domitille Doat-Le Bigot, LilianFossum Biner and Majken Schultz as newmembers.THANK YOUWe would like to thank our shareholders fortheir support. We would also like to express ourappreciation to everyone in the CarlsbergGroup for their cooperation, dedication andenthusiasm in bringing SAIL’22 to life andsecuring the successful delivery of Funding theJourney. Finally, we would like to acknowledgethe excellent relationships that we have withour customers and suppliers, and to state ourgratitude to our consumers around the world.CHANGES TO THE SUPERVISORY BOARDLars Rebien Sørensen, Donna Cordner andNina Smith have notified the Supervisory Boardthat they are not standing for re-election atFlemming BesenbacherChairmanCees ’t HartCEO4
2019 Earnings expectationsCARLSBERG GROUP ANNUAL REPORT 2018 2019 EARNINGS EXPECTATIONSEXPECTATIONS2019 EARNINGSEXPECTATIONSIn 2019, we will continue toexecute on our SAIL’22 strategicpriorities in support of top- andbottom-line growth.Our regional priorities will be to increase netrevenue and the operating margin in WesternEurope, drive growth in Asia throughpremiumisation, and strengthen marketleadership in Eastern Europe.Driving growth of craft & speciality andalcohol-free brews and continuing volumeand value growth in Asia will remain our keygrowth accelerators. Additionally, we willsupport and further develop our core beerportfolio, which includes our local powerbrands and our international brands Tuborgand Carlsberg. For the Carlsberg brand inparticular, an important priority for 2019 isthe roll-out of the new brand design andpackaging innovations.Based on these priorities, the Group expects todeliver:During the course of the three-year profitimprovement programme – Funding theJourney – its focus on efficiencies, costs andcash has become an integral part of our dayto-day operations, and this will remain animportant driver of future value creation.Financial expenses, excluding currency lossesor gains, are expected to be DKK 700-750m.Consequently, we will continue to enforce strictcash and cost discipline to optimise processesand drive efficiencies throughout the supplychain, and to streamline SG&A costs throughoperating cost management (OCM). Mid-single-digit percentage organic growthin operating profit.FORWARD-LOOKING STATEMENTSThis Annual Report contains forward-lookingstatements. Any such statements are subject torisks and uncertainties that could cause theGroup’s actual results to differ materially fromthe results discussed in such forward-lookingstatements. Accordingly, forward-lookingstatements should not be relied on as predictionof the actual results. Please see page 55 forthe full forward-looking statement disclaimer.Based on the spot rates as at 5 February, weassume a DKK translation impact of aroundzero for 2019.Other relevant assumptions are as follows:The effective tax rate is expected to be below28%.Capital expenditure at constant currencies isexpected to be around DKK 4.5bn.CARLSBERGIn 2018, we unveiled a new Carlsberg branddesign alongside packaging innovations that willreduce plastic waste and increase recyclability.The innovations included the pioneering SnapPack solution, a new coating on refillable glassbottles to extend their lifespan, new caps thatremove oxygen to make the beer taste fresherfor longer, and a new Cradle to Cradle Certified green ink to improve recyclability.REVITALISE CORE BEER5
CARLSBERG GROUP ANNUAL REPORT 2018 2018 HIGHLIGHTSSTRATEGIC PRIORITIES6SAIL'22 DELIVERINGTOP-LINE GROWTH.Our 2018 results served as proof points for our strategic choices.Funding the Journey delivered above initial expectations and ourinvestments in SAIL’22 supported organic top-line growth of 6.5%.CONTINUEDGROWTH OF CRAFT& SPECIALITYVOLUME GROWTH OF 26%Our craft & speciality portfolio hadanother year of strong growth, supportedby 1664 Blanc, which grew by 49%, andGrimbergen, which grew by 14%.GROW CRAFT & SPECIALITYSTRONG PROGRESS OFALCOHOL-FREE BREWSPREMIUMISINGIN ASIAVOLUME GROWTH OF 33%Our premiumisation efforts in Asiacontributed to a strong price/mix of 4%.Our international brands continued their strongperformance, growing volumes by 14%. Indiaand China delivered particularly strong results.An important initiative in 2018 was thesuccessful expansion of our internationalportfolio into big cities in China.Our alcohol-free brews delivered strong resultsin Western Europe, growing by 33%. Throughoutthe region, we successfully supported alcoholfree line extensions of our local power brands.In Russia, Baltika 0 grew by 35%. We launchedBirell, a global stand-alone alcohol-free beer.ACTIVELY SHAPEALCOHOL-FREE BREWSGROW IN ASIASTRONG DELIVERYOF FUNDINGTHE JOURNEYFunding the Journey as a specific programmecame to an end in 2018, delivering around DKK3bn, well above initial expectations. More thanDKK 1bn has been reinvested in support of ourSAIL’22 priorities. The focus on efficiencies,costs and cash will continue.FUNDING THE JOURNEYREAD MORE ABOUT OUR STRATEGYAND KPIs ON PAGES 25-34
CARLSBERG GROUP ANNUAL REPORT 2018 2018 HIGHLIGHTSSTRATEGIC PRIORITIES. AND PROGRESSTOWARDS ZEROZEROCARBONFOOTPRINT20%reduction in relative carbon emissions since2015, using 46% renewable electricity in2018. Since 2015, our coal usage has beenreduced by 78%.ZEROWATERWASTE9%improvement in water efficiency sinceour 2015 baseline. We aim to halve waterusage at our breweries by 2030. Withsteady performance in 2018, we still havea long way to go to achieve this target.7In 2018, we continued to work hard to deliver on ourambitious sustainability programme, Together TowardsZERO, with its clear priorities within the areas of carbon,water, responsible drinking and health & safety.ZEROIRRESPONSIBLEDRINKING96%of our products now carry responsible drinkingmessages advising consumers not to drinkdrive and not to drink when underage orpregnant. In Western Europe, we includedinformation on ingredients and nutritionalvalues per 100 ml on 86% of products.ZEROACCIDENTSCULTURE35%reduction in lost-time accident rate since 2015.In 2018, we rolled out our Life Saving Rulesprogramme, focusing on the specific areaswhere we have learned that people’s lives canbe endangered if rules are not followed.READ MORE ON PAGES 31-33 ANDIN OUR SUSTAINABILITY REPORT
CARLSBERG GROUP ANNUAL REPORT 2018 2018 HIGHLIGHTSOUR BRANDSA COMPLETE ANDATTRACTIVE PORTFOLIO10%volumegrowthin 20185%volumegrowthin 2018Our core beer portfolio spans the internationalbeer brands Tuborg and Carlsberg and local powerbrands. Alongside our core beer, we have greatcraft & speciality beers and alcohol-free brews.CORE BEERGROWING CATEGORIES14%volumegrowthin 201849%volumegrowthin 201893%7%of own beervolumesof own beervolumes87%13%of own beernet revenueINTERNATIONAL BRANDSof own beernet revenueLOCAL POWER BRANDSCRAFT & SPECIALITYALCOHOL-FREE BREWSSOLID PROGRESS OF CORE BEERSTRONG RESULTS FOR OUR GROWING CATEGORIESMainstream lager beer enjoys high penetration and frequency in most markets. Core beer is thebackbone of our business, representing our largest volume and profit pool. Our core beer portfolioconsists of strong local power brands in combination with our international brands Tuborg andCarlsberg. Improving the brand fundamentals within core beer is an important priority of SAIL’22,and in 2018 we revealed a series of betterments and a new look & feel for the Carlsberg brand.Important priorities of SAIL’22 are to strengthen our position within craft & speciality andalcohol-free brews. The popularity of these categories is on the rise in many markets, drivenby consumers’ desire for premium brands with varied tastes and styles as well as the interestin healthier lifestyles. Both categories offer superior margin opportunities. In 2018,we launched Birell – our first stand-alone alcohol-free brew – in Poland and Bulgaria.REVITALISE CORE BEER8WIN IN GROWING CATEGORIES
CARLSBERG GROUP ANNUAL REPORT 2018 CHAPTERREGIONAL PRIORITIES 11.3%Organic operatingprofit growthSTRONG RESULTSACROSS OUR REGIONS 7.0%The Carlsberg Group has a well-diversified geographic footprintwith strong no. 1 or 2 positions in 25 markets across WesternEurope, Asia and Eastern Europe. Around 75% of volumes aresold in these markets and no market accounts for more than16% of Group volumes.WESTERN EUROPEASIA 60bp 13.3%IMPROVE MARGINS ANDGROW OPERATING PROFITORGANICALLYOperatingmargin expansionWestern Europe delivered organic growth in net revenueof 3.0% and in operating profit of 7.0%. Reported operatingmargin was 15.0% ( 60bp). These results were driven by goodprogress on our SAIL’22 priorities, including craft & specialityand alcohol-free brews, value management and Funding theJourney, and by the warm summer in some markets.47%Share of Groupvolume50%Share of GroupoperatingprofitOrganic operatingprofit growth 15.8%Organic operatingprofit growthACCELERATE ORGANICGROWTH THROUGHPREMIUMISATIONOrganic growthin net revenueGrowing in Asia is a key SAIL’22 priority on which we deliveredstrongly in 2018. Organic net revenue growth was driven bystrong volume growth of 8.6% and price/mix of 4%. Ourinternational brands – Tuborg, Carlsberg and 1664 Blanc – weresignificant contributors, but we also saw good results for ourlocal power brands. Operating profit grew organically by 15.8%.29%Share of Groupvolume29%Share of GroupoperatingprofitEASTERN EUROPEREBALANCE THE GOLDENTRIANGLE TOWARDSTOP-LINE GROWTH 9.3%Organic growthin net revenueIn 2018, Eastern Europe rebalanced the Golden Triangletowards volume and top-line. Organic net revenue growthwas driven by volume growth of 3.1% and price/mix of 6%.In Russia, price/mix was positive, driven by price increases.The other markets in the region achieved solid revenueand earnings growth.24%Share of Groupvolume21%Share of Groupoperatingprofit000
CARLSBERG GROUP ANNUAL REPORT 2018 2018 HIGHLIGHTSGOLDEN TRIANGLEWELL-BALANCEDGOLDEN TRIANGLEThe Golden Triangle is an important KPI in our performancemanagement at Group, regional and market level. Byfocusing on our SAIL’22 priorities, we aim to optimisethe balance between market share/volumes, gross profitafter logistics (GPaL) margin, operating profit and cashgeneration, thereby creating sustainable value growth.VOLUMESOPERATING PROFITTotal volumes grew organically by 4.8%.Volumes in Asia were up organically by 8.6%,with strong results achieved in most marketsin the region. In Western Europe, the organicvolume growth of 3.6% was impressive,supported by warm weather during thesummer. In Eastern Europe, all marketscontributed to the organic growth of 3.1%.Operating profit grew organically by 11% as aresult of volume growth, positive price/mix andthe benefits from Funding the Journey. 2018was the last year of Funding the Journey,which has delivered benefits of around DKK3bn. The sharp focus on efficiencies, costs andcash has been embedded in our daily businessprocesses and systems, and will continue in theyears to come.GROSS PROFIT AFTER LOGISTICSMARGINThe gross profit after logistics (GPaL) margindeveloped favourably in 2018, growingorganically by 100bp. The improvement wasthe result of the positive price/mix and supplychain efficiencies. All three regions saw positivedevelopment of their GPaL margins.FREE CASH FLOWFree cash flow amounted to DKK 6.2bn,positively impacted by strict financial disciplineand the change in trade working capital of DKK 1.9bn. During the year, we increased ourownership share in a number of subsidiariesand associates, with net investmentsamounting to a total of around DKK 2.8bn.10
CARLSBERG GROUP ANNUAL REPORT 2018 2018 HIGHLIGHTSFINANCIAL HIGHLIGHTSDELIVERING ONOUR PRIORITIESNet revenue¹ (DKKbn)65Operating profit (DKKbn)10Net profit (DKKbn)ROIC (%)2016NIBD/EBITDA (x)20172018Divid
CARLSBERG GROUP ANNUAL REPORT 2018 LETTER FROM THE CHAIRMAN & THE CEO 3 2018 was a good year for the Carlsberg Group, with strong net revenue, operating profit and cash flow. The benefits from Funding the Journey were partly reinvested to support our strategic priorities. efficiency, costs and As a result, we are pleased to report improved
2015 Highlights In mid-June 2015, Cees 't Hart was appointed new CEO of the Carlsberg Group. Read Cees' letter to shareholders on page 12 and see his CV on page 54. In August, a strategic revie
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a large international portfolio of beer and other beverage brands. Carlsberg is upgrading its Yibin facility in Sichuan Province, Western China to meet increasing market demand. PM PROjEN are delighted to have been awarded a sixth RoSPA Order of Distinction in recognition of a consistent and diligent approach to Health & Safety. It follows 20
our end-to-end supply chain by ensuring best practice implementation Following multiple pilots and trials completed during SAIL'22, we have identified industrial best practices applicable to our supply chain. These practices are being consolidated into an updated and refined Carlsberg Excellence programme, covering end-to-end supply chain
ANNUAL REPORT 2018/19 ANNUAL REPORT 2018/19. FOUNDED IN 1856, BURBERRY IS A GLOBAL LUXURY BRAND WITH A DISTINCTLY BRITISH ATTITUDE. CONTENTS STRATEGIC . Report to the Members of Burberry Group plc 160 Group Income Statement 161 Group Statement of Comprehensive Income 162 Group Balance Sheet 163 Group Statement
THE LEGO GROUP - ANNUAL REPORT 2014 1 THE LEGO GROUP ANNUAL REPORT 2014 The LEGO Group CVR: 54 56 25 19. THE LEGO GROUP - ANNUAL REPORT 2014 2 FINANCIAL HIGHLIGHTS THE LEGO GROUP (mDKK) 2014 2013 2012 2011 2010 Consolidated Income Statement: Revenue 28,578 25,294 23,095 18,731 16,014
British Association of Social Workers (2014) The Code of Ethics for Social Work. Birmingham: BASW First published: January 2012 Updated: October 2014 Typographically reset: 2018 . 3 The Code is binding on all social workers who are BASW members in all roles, sectors and settings in the UK. Social workers have a responsibility to promote and work to the Code of Ethics in carrying out their .
